American Realty Capital Properties, Inc. (Form: 10-Q, Received: 03/02/2015 06:40:16)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35263

AMERICAN REALTY CAPITAL PROPERTIES, INC.

ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

(Exact name of registrant as specified in its charter)


Maryland		45-2482685
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2325 E. Camelback Road, Suite 1100, Phoenix, AZ		85016
(Address of principal executive offices)		(Zip Code)

(800) 606-3610

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of outstanding shares of the registrant’s common stock on February 27, 2015 was 905,338,684 shares.

Explanatory Note

This report combines the Quarterly Reports on Form 10-Q for the period ended September 30, 2014 of American Realty Capital Properties, Inc. and ARC Properties Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to the “General Partner” or “ARCP” mean American Realty Capital Properties, Inc. and its consolidated subsidiaries, and references to the “Operating Partnership” or the “OP” mean ARC Properties Operating Partnership, L.P. and its consolidated subsidiaries. The terms the “Company”, “we”, “our”, and “us” mean the General Partner and the Operating Partnership collectively.

We believe combining the Quarterly Reports on Form 10-Q of ARCP and the Operating Partnership into this single report results in the following benefits:

•

enhances investors’ understanding of ARCP and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company’s disclosure applies to both ARCP and the Operating Partnership; and

•

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the differences between ARCP and the Operating Partnership, this report presents the following separate sections for each of ARCP and the Operating Partnership:

•

consolidated financial statements;

•

the following notes to the consolidated financial statements;

•

Income per Common Share of ARCP and Income per Common Unit of the Operating Partnership

Additionally, this report amends and restates ARCP’s previously-issued unaudited consolidated financial statements for the comparable period ended September 30, 2013. Certain sections of this report contain information that has been amended where necessary to reflect the restatement of the previously-issued unaudited consolidated financial statements for the period ended September 30, 2013. Refer to the Explanatory Note and Note 2 - Restatement of Previously Reported Financial Statements to the audited consolidated financial statements contained in Amendment No. 2 to ARCP’s Annual Report on Form 10-K/A (the “Amended 10-K”) filed with the U.S. Securities and Exchange Commission on March 2, 2015 for further information about the restatements.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FORM 10-Q

September 30, 2014


	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements		1

Consolidated Balance Sheets of American Realty Capital Properties, Inc. as of September 30, 2014 and December 31, 2013 (Unaudited)		1

Consolidated Statements of Operations of American Realty Capital Properties, Inc. for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)		2

Consolidated Statements of Comprehensive Loss of American Realty Capital Properties, Inc. for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)		3

Consolidated Statement of Changes in Equity of American Realty Capital Properties, Inc. for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)		5

Consolidated Statements of Cash Flows of American Realty Capital Properties, Inc. for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)		6

Consolidated Balance Sheets of ARC Properties Operating Partnership, L.P. as of September 30, 2014 and December 31, 2013 (Unaudited)		7

Consolidated Statements of Operations of ARC Properties Operating Partnership, L.P. for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)		8

Consolidated Statements of Comprehensive Loss of ARC Properties Operating Partnership, L.P. for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)		9

Consolidated Statement of Changes in Equity of ARC Properties Operating Partnership, L.P. for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)		10

Consolidated Statements of Cash Flows of ARC Properties Operating Partnership, L.P. for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)		12

Notes to Consolidated Financial Statements as of September 30, 2014 (Unaudited)		13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		85

Item 3. Quantitative and Qualitative Disclosures About Market Risk		107

Item 4. Controls and Procedures		107

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		112

Item 1A. Risk Factors		112

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		112

Item 3. Defaults Upon Senior Securities		112

Item 4. Mine Safety Disclosures		112

Item 5. Other Information		112

Item 6. Exhibits		112

Signatures		113

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) (Unaudited)


	September 30, 2014			December 31, 2013 (As Restated) ⁽¹⁾
ASSETS
Real estate investments, at cost:
Land	$	3,487,824		$	1,380,308
Buildings, fixtures and improvements		12,355,029			5,297,400
Land and construction in progress		86,973			21,839
Acquired intangible lease assets		2,424,076			759,595

Total real estate investments, at cost		18,353,902			7,459,142
Less: accumulated depreciation and amortization		(828,624	)		(267,278	)

Total real estate investments, net		17,525,278			7,191,864
Investment in unconsolidated entities		100,762			—
Investment in direct financing leases, net		57,441			66,112
Investment securities, at fair value		59,131			62,067
Loans held for investment, net		96,981			26,279
Cash and cash equivalents		145,310			52,725
Restricted cash		72,754			35,921
Intangible assets, net		323,332			—
Deferred costs and other assets, net		446,606			280,661
Goodwill		2,096,450			92,789
Due from affiliates		55,666			—
Assets held for sale		1,887,872			665

Total assets	$	22,867,583		$	7,809,083


LIABILITIES AND EQUITY
Mortgage notes payable, net	$	3,782,407		$	1,301,114
Corporate bonds, net		2,546,294			—
Convertible debt, net		976,251			972,490
Credit facilities		4,259,000			1,969,800
Other debt, net		48,587			104,804
Below-market lease liabilities, net		318,494			77,169
Accounts payable and accrued expenses		180,338			730,571
Deferred rent, derivative and other liabilities		195,256			40,271
Distributions payable		9,927			10,903
Due to affiliates		2,757			103,434
Liabilities associated with assets held for sale		545,382			—

Total liabilities		12,864,693			5,310,556


Series D preferred stock, $0.01 par value, zero and 21,735,008 shares (part of 100,000,000 aggregate preferred shares authorized) issued and outstanding at September 30, 2014 and December 31, 2013, respectively		—			269,299


Preferred stock (excluding Series D Preferred Stock), $0.01 par value, 100,000,000 shares authorized and 42,822,383 and 42,199,547 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		428			422
Common stock, $0.01 par value, 1,500,000,000 shares authorized and 907,964,521 and 239,234,725 issued and outstanding at September 30, 2014 and December 31, 2013, respectively		9,080			2,392
Additional paid-in capital		11,905,338			2,940,907
Accumulated other comprehensive income		8,600			7,666
Accumulated deficit		(2,182,731	)		(877,957	)

Total stockholders’ equity		9,740,715			2,073,430
Non-controlling interests		262,175			155,798

Total equity		10,002,890			2,229,228

Total liabilities and equity	$	22,867,583		$	7,809,083

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated) ⁽¹⁾			2014			2013 (As Restated) ⁽¹⁾
Revenues:
Rental income	$	365,712		$	89,729		$	924,646		$	183,251
Direct financing lease income		625			1,201			2,812			1,201
Operating expense reimbursements		30,984			4,325			81,716			8,516
Cole Capital revenue		59,797			—			151,276			—

Total revenues		457,118			95,255			1,160,450			192,968

Operating expenses:
Cole Capital reallowed fees and commissions		15,398			—			56,902			—
Acquisition related ⁽²⁾		13,998			26,948			34,616			74,541
Merger and other non-routine transactions ⁽³⁾		7,632			4,301			175,352			133,734
Property operating		40,977			5,430			110,018			11,065
Management fees to affiliates		—			—			13,888			12,493
General and administrative ⁽⁴⁾		32,207			9,866			128,711			23,921
Depreciation and amortization		265,150			62,136			689,731			122,484
Impairment of real estate		2,299			2,074			3,855			2,074

Total operating expenses		377,661			110,755			1,213,073			380,312

Operating income (loss)		79,457			(15,500	)		(52,623	)		(187,344	)

Other (expense) income:
Interest expense, net		(101,643	)		(27,189	)		(326,491	)		(45,414	)
Extinguishment of debt, net		(5,396	)		—			(21,264	)		—
Other income, net		7,556			136			29,702			2,658
Loss on derivative instruments, net		(17,484	)		(38,651	)		(10,398	)		(69,830	)
Loss on held for sale assets and disposition of properties, net		(256,894	)		—			(275,768	)		—
Gain (loss) on sale of investments		6,357			(2,246	)		6,357			(1,795	)

Total other expenses, net		(367,504	)		(67,950	)		(597,862	)		(114,381	)

Net loss from continuing operations		(288,047	)		(83,450	)		(650,485	)		(301,725	)

Discontinued operations:
Income from operations of held for sale assets		—			96			—			159

Net income from discontinued operations		—			96			—			159

Net loss		(288,047	)		(83,354	)		(650,485	)		(301,566	)
Net loss attributable to non-controlling interests		7,649			3,153			23,923			7,882

Net loss attributable to the Company	$	(280,398	)	$	(80,201	)	$	(626,562	)	$	(293,684	)


Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(0.35	)	$	(0.36	)	$	(0.94	)	$	(1.50	)
Basic and diluted net loss per share from discontinued operations attributable to common stockholders	$	—		$	—		$	—		$	—

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

(2)	Includes $1.7 million to affiliates for the nine months ended September 30, 2014, and $10.1 million and $36.9 million to affiliates for the three and nine months ended September 30, 2013, respectively.

(3)	Includes $137.8 million to affiliates for the nine months ended September 30, 2014, and $2.3 million and $109.2 million to affiliates for the three and nine months ended September 30, 2013, respectively.

(4)	Includes $0.1 million and $16.1 million to affiliates for the three and nine months ended September 30, 2014, respectively, and $7.0 million and $16.3 million to affiliates for the three and nine months ended September 30, 2013, respectively.

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated) ⁽¹⁾			2014			2013 (As Restated) ⁽¹⁾
Net loss		(288,047	)		(83,354	)		(650,485	)		(301,566	)

Other comprehensive income:
Designated derivatives, fair value adjustments		8,469			(3,635	)		(1,112	)		9,246
Unrealized gain (loss) on investment securities, net		725			938			9,698			(427	)
Reclassification of previous unrealized gains on investment securities into net loss		(7,652	)		—			(7,652	)		—

Total other comprehensive income (loss)		1,542			(2,697	)		934			8,819

Total comprehensive loss		(286,505	)		(86,051	)		(649,551	)		(292,747	)
Net loss attributable to non-controlling interests		7,649			3,153			23,923			7,882

Total comprehensive loss attributable to the Company	$	(278,856	)	$	(82,898	)	$	(625,628	)	$	(284,865	)

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands, except for share data)

(Unaudited)

(As restated as of December 31, 2013)


	Preferred Stock				Common Stock							Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stock- holders’ Equity			Non- Controlling Interests			Total Equity
	Number of Shares		Par Value		Number of Shares		Par Value		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stock- holders’ Equity			Non- Controlling Interests			Total Equity
Balance, December 31, 2013 (As Restated)		42,199,547	$	422		239,234,725	$	2,392	$	2,940,907		$	7,666	$	(877,957	)	$	2,073,430		$	155,798		$	2,229,228
Issuance of common stock, net ⁽¹⁾		—		—		662,305,318		6,623		8,916,830			—		—			8,923,453			—			8,923,453
Conversion of Common OP Units to common stock		—		—		1,098,074		11		16,264			—		—			16,275			(16,275	)		—
Conversion of Preferred OP Units to Series F Preferred Stock		622,836		6		—		—		12,464			—		—			12,470			(12,470	)		—
Issuance of restricted share awards, net		—		—		5,326,404		54		(4,310	)		—		—			(4,256	)		—			(4,256	)
Equity-based compensation		—		—		—		—		23,183			—		—			23,183			9,622			32,805
Distributions declared on common stock		—		—		—		—		—			—		(593,846	)		(593,846	)		—			(593,846	)
Issuance of OP Units		—		—		—		—		—			—		—			—			152,484			152,484
Distributions to non-controlling interest holders		—		—		—		—		—			—		—			—			(28,809	)		(28,809	)
Distributions to participating securities		—		—		—		—		—			—		(3,617	)		(3,617	)		—			(3,617	)
Distributions to preferred shareholders		—		—		—		—		—			—		(80,749	)		(80,749	)		—			(80,749	)
Contributions from non-controlling interest holders		—		—		—		—		—			—		—			—			982			982
Non-controlling interests retained in Cole Merger		—		—		—		—		—			—		—			—			24,766			24,766
Net loss		—		—		—		—		—			—		(626,562	)		(626,562	)		(23,923	)		(650,485	)
Other comprehensive income		—		—		—		—		—			934		—			934			—			934

Balance, September 30, 2014		42,822,383	$	428		907,964,521	$	9,080	$	11,905,338		$	8,600	$	(2,182,731	)	$	9,740,715		$	262,175		$	10,002,890

(1)	Includes $2.2 million to affiliates for the nine months ended September 30, 2014.

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands, except for share data)

(Unaudited)

(As restated for the nine months ended September 30, 2013) ⁽¹⁾


	Preferred Stock						Common Stock									Accumulated Other Comprehensive Income			Accumulated Deficit			Total Stock- holders’ Equity			Non- Controlling Interests			Total Equity
	Number of Shares			Par Value			Number of Shares			Par Value			Additional Paid-In Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Stock- holders’ Equity			Non- Controlling Interests			Total Equity
Balance, December 31, 2012 (As Restated)		6,990,328		$	70			184,553,676		$	1,846		$	1,778,883		$	(3,934	)	$	(124,286	)	$	1,652,579		$	16,181		$	1,668,760
Issuances of preferred stock		36,053,490			360			—			—			—			—			—			360			—			360
Issuances of common stock, net		—			—			63,055,919			631			1,967,250			—			—			1,967,881			—			1,967,881
Excess of ARCT IV Merger considerations over historical cost		—			—			—			—			(557,545	)		—			—			(557,545	)		—			(557,545	)
Offering costs, commissions and dealer manager fees, including $159,323 to affiliates		—			—			—			—			(164,831	)		—			—			(164,831	)		—			(164,831	)
Common stock issued through dividend reinvestment plan		—			—			940,737			9			25,554			—			—			25,563			—			25,563
Common stock repurchases		—			—			(28,272,905	)		(283	)		(357,634	)		—			—			(357,917	)		—			(357,917	)
Conversion of Convertible Preferred Stock Series A and B to common stock		(828,472	)		(8	)		829,629			8			—			—			—			—			—			—
Conversion of OP Units to common stock		—			—			599,233			6			5,793			—			—			5,799			(5,799	)		—
Equity based compensation		—			—			645,491			6			4,148			—			—			4,154			9,827			13,981
Equity component of convertible debt		—			—			—			—			9,372			—			—			9,372			—			9,372
Distributions declared		—			—			—			—			—			—			(181,823	)		(181,823	)		—			(181,823	)
Issuance of OP Units to affiliate		—			—			—			—			—			—			—			—			107,771			107,771
Contributions from non-controlling interest holders		—			—			—			—			—			—			—			—			29,758			29,758
Distributions to non-controlling interest holders		—			—			—			—			—			—			—			—			(6,222	)		(6,222	)
Net loss		—			—			—			—			—			—			(293,684	)		(293,684	)		(7,882	)		(301,566	)
Other comprehensive income		—			—			—			—			—			8,819			—			8,819			—			8,819

Balance, September 30, 2013 (As Restated)		42,215,346		$	422			222,351,780		$	2,223		$	2,710,990		$	4,885		$	(599,793	)	$	2,118,727		$	143,634		$	2,262,361

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2014			2013 (As Restated) ¹
Cash flows from operating activities:
Net loss	$	(650,485	)	$	(301,566	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Issuance of OP Units		92,884			107,771
Depreciation and amortization		744,545			131,605
Loss on held for sale assets and disposition of properties, net		275,768			—
Equity-based compensation		32,805			13,981
Equity in income of unconsolidated entities		(247	)		—
Distributions from unconsolidated entities		6,149			—
Loss on derivative instruments		10,398			144
Unrealized loss on investments		—			14
(Gain) loss on sale of investments, net		(6,357	)		1,795
Impairment of real estate		3,855			2,074
Loss on extinguishment of debt		(14,637	)		—
Unrealized loss on contingent value rights obligations, net of settlement payments		—			49,314
Loss on extinguishment of Series C Stock		—			4,827
Changes in assets and liabilities:
Investment in direct financing leases		1,147			148
Deferred costs, intangible and other assets, net		(116,614	)		(20,513	)
Due from affiliates		(2,365	)		(4,105	)
Accounts payable and accrued expenses		(53,434	)		10,435
Deferred rent, derivative and other liabilities		(20,748	)		5,911
Due to affiliates		(37,520	)		6,107

Net cash provided by operating activities		265,144			7,942

Cash flows from investing activities:
Investments in real estate and other assets		(3,517,290	)		(3,241,834	)
Acquisition of a real estate business, net of cash acquired		(756,232	)		—
Investment in direct financing leases		—			(75,551	)
Capital expenditures		(30,168	)		(113	)
Real estate developments		(33,610	)		—
Leasing costs		(3,210	)		—
Principal repayments received from borrowers		5,091			—
Investments in unconsolidated entities		(2,699	)		—
Proceeds from disposition of properties		129,212			—
Investment in leasehold improvements, property and equipment		(11,074	)		—
Deposits for real estate investments		(205,896	)		(31,115	)
Uses and refunds of deposits for real estate investments		278,362			—
Purchases of investment securities		—			(81,464	)
Line of credit advances to affiliates		(130,300	)		—
Line of credit repayments from affiliates		80,300			—
Proceeds from sale of investment securities		159,049			111,402
Change in restricted cash		(18,709	)		—

Net cash used in investing activities		(4,057,174	)		(3,318,675	)

Cash flows from financing activities:
Proceeds from mortgage notes payable		1,007,787			6,897
Payments on mortgage notes payable		(1,028,017	)		—
Payments on other debt		(109,312	)		—
Proceeds from credit facilities		5,689,000			1,570,000
Payments on credit facilities		(4,708,800	)		(384,604	)
Proceeds from corporate bonds		2,545,760			(53,397	)
Payments of deferred financing costs		(92,233	)		(2,165	)
Proceeds from issuance of convertible debt		—			310,000
Common stock repurchases		—			(358,093	)
Proceeds from issuances of preferred shares		—			445,000
Proceeds from issuances of common stock, net offering costs		1,593,345			1,807,197
Redemption of Series D Preferred Stock		(316,126	)		—
Contributions from non-controlling interest holders		982			29,758
Distributions to non-controlling interest holders		(22,673	)		(5,615	)
Distributions paid		(675,098	)		(157,646	)
Payments from affiliates, net		—			(376	)
Change in restricted cash		—			(572	)

Net cash provided by financing activities		3,884,615			3,206,384

Net change in cash and cash equivalents		92,585			(104,349	)
Cash and cash equivalents, beginning of period		52,725			292,575

Cash and cash equivalents, end of period	$	145,310		$	188,226

Supplemental Disclosures:
Cash paid for interest	$	248,698		$	18,774
Cash paid for income taxes		7,761			625
Non-cash investing and financing activities:
Accrued capital expenditures and real estate developments	$	12,634		$	—
Common stock issued through distribution reinvestment plan	$	—		$	25,568

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

The accompanying notes are an integral part of these statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit and per unit data)

(Unaudited)


	September 30, 2014			December 31, 2013 (As Restated) ⁽¹⁾
ASSETS
Real estate investments, at cost:
Land	$	3,487,824		$	1,380,308
Buildings, fixtures and improvements		12,355,029			5,297,400
Land and construction in progress		86,973			21,839
Acquired intangible lease assets		2,424,076			759,595

Total real estate investments, at cost		18,353,902			7,459,142
Less: accumulated depreciation and amortization		(828,624	)		(267,278	)

Total real estate investments, net		17,525,278			7,191,864
Investment in unconsolidated entities		100,762			—
Investment in direct financing leases, net		57,441			66,112
Investment securities, at fair value		59,131			62,067
Loans held for investment, net		96,981			26,279
Cash and cash equivalents		145,310			52,725
Restricted cash		72,754			35,921
Intangible assets, net		323,332			—
Deferred costs and other assets, net		446,606			280,661
Goodwill		2,096,450			92,789
Due from affiliates		55,666			—
Assets held for sale		1,887,872			665

Total assets	$	22,867,583		$	7,809,083


LIABILITIES AND EQUITY
Mortgage notes payable, net	$	3,782,407		$	1,301,114
Corporate bonds, net		2,546,294			—
Convertible debt, net		976,251			972,490
Credit facilities		4,259,000			1,969,800
Other debt, net		48,587			104,804
Below-market lease liabilities, net		318,494			77,169
Accounts payable and accrued expenses		180,338			730,571
Deferred rent, derivative and other liabilities		195,256			40,271
Distributions payable		9,927			10,903
Due to affiliates		2,757			103,434
Liabilities associated with assets held for sale		545,382			—

Total liabilities		12,864,693			5,310,556


General partner’s Series D Preferred equity - zero and 21,735,008 General Partner Preferred Units issued and outstanding at September 30, 2014 and December 31, 2013, respectively		—			269,299

General partner’s common equity - 907,978,649 and 239,248,853 General Partner OP Units issued and outstanding at September 30, 2014 and December 31, 2013, respectively		8,726,024			1,018,124
General partner’s preferred equity (excluding Series D Preferred equity) - 42,822,383 and 42,199,547 General Partner Preferred Units issued and outstanding at September 30, 2014 and December 31, 2013, respectively		1,014,339			1,054,989
Limited partners’ common equity - 35,435,194 and 17,832,274 Limited Partner OP Units issued and outstanding at September 30, 2014 and December 31, 2013, respectively		233,229			139,082
Limited Partners’ preferred equity - 98,629 and 721,465 Limited Partner Preferred Units issued and outstanding at September 30, 2014 and December 31, 2013, respectively		3,996			16,466

Total partners’ equity		9,977,588			2,228,661
Non-controlling interests		25,302			567

Total equity		10,002,890			2,229,228

Total liabilities and equity	$	22,867,583		$	7,809,083

(1)	For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per unit data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues:
Rental income	$	365,712		$	89,729		$	924,646		$	183,251
Direct financing lease income		625			1,201			2,812			1,201
Operating expense reimbursements		30,984			4,325			81,716			8,516
Cole Capital revenue		59,797			—			151,276			—

Total revenues		457,118			95,255			1,160,450			192,968

Operating expenses:
Cole Capital reallowed fees and commissions		15,398			—			56,902			—
Acquisition related		13,998			26,948			34,616			74,541
Merger and other non-routine transactions		7,632			4,301			175,352			133,734
Property operating		40,977			5,430			110,018			11,065
Management fees to affiliates		—			—			13,888			12,493
General and administrative		32,207			9,866			128,711			23,921
Depreciation and amortization		265,150			62,136			689,731			122,484
Impairment of real estate		2,299			2,074			3,855			2,074

Total operating expenses		377,661			110,755			1,213,073			380,312

Operating income (loss)		79,457			(15,500	)		(52,623	)		(187,344	)

Other (expense) income:
Interest expense, net		(101,643	)		(27,189	)		(326,491	)		(45,414	)
Extinguishment of debt, net		(5,396	)		—			(21,264	)		—
Other income, net		7,556			136			29,702			2,658
Loss on derivative instruments, net		(17,484	)		(38,651	)		(10,398	)		(69,830	)
Loss on held for sale assets and disposition of properties, net		(256,894	)		—			(275,768	)		—
Gain (loss) on sale of investments		6,357			(2,246	)		6,357			(1,795	)

Total other expenses, net		(367,504	)		(67,950	)		(597,862	)		(114,381	)

Net loss from continuing operations		(288,047	)		(83,450	)		(650,485	)		(301,725	)
Discontinued operations:
Income from operations of held for sale assets		—			96			—			159

Net income from discontinued operations		—			96			—			159

Net loss		(288,047	)		(83,354	)		(650,485	)		(301,566	)
Net income attributable to non-controlling interests		155			—			235			—

Net loss attributable to the unitholders	$	(288,202	)	$	(83,354	)	$	(650,720	)	$	(301,566	)


Basic and diluted net loss per share attributable to common unitholders	$	(0.35	)	$	(0.36	)	$	(0.94	)	$	(1.48	)

The accompanying notes are an integral part of these statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss	$	(288,047	)	$	(83,354	)	$	(650,485	)	$	(301,566	)

Other comprehensive income:
Designated derivatives, fair value adjustments		8,469			(3,635	)		(1,112	)		9,246
Unrealized gain (loss) on investment securities, net		725			938			9,698			(427	)
Reclassification of previous unrealized gains on investment securities into net loss		(7,652	)		—			(7,652	)		—

Total other comprehensive income (loss)		1,542			(2,697	)		934			8,819

Total comprehensive loss		(286,505	)		(86,051	)		(649,551	)		(292,747	)
Net income attributable to non-controlling interests		155			—			235			—

Total comprehensive loss attributable to unitholders	$	(286,660	)	$	(86,051	)	$	(649,786	)	$	(292,747	)

The accompanying notes are an integral part of these statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands, except for unit data)

(Unaudited)


	Preferred Units											Common Units
	General Partner					Limited Partner						General Partner					Limited Partner
	Number of Units		Capital			Number of Units			Capital			Number of Units		Capital			Number of Units			Capital			Total Partners’ Capital			Non- Controlling Interests			Total Capital
Balance, December 31, 2013 (As Restated)		42,199,547	$	1,054,989			721,465		$	16,466			239,248,853	$	1,018,124			17,832,274		$	139,082		$	2,228,661		$	567		$	2,229,228
Issuance of Common OP Units, net		—		—			—			—			662,305,318		8,923,453			7,956,297			152,484			9,075,937			—			9,075,937
Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units		—		—			—			—			1,098,074		16,275			(1,098,074	)		(16,275	)		—			—			—
Conversion of Limited Partners’ Preferred OP Units to General Partner’s Preferred OP units		622,836		12,470			(622,836	)		(12,470	)		—		—			—			—			—			—			—
Issuance of Common OP Units in connection with issuance of RSAs, net		—		—			—			—			5,326,404		(4,256	)		—			—			(4,256	)		—			(4,256	)
Equity-based compensation		—		—			—			—			—		23,183			10,744,697			9,622			32,805			—			32,805
Distributions to Common OP Units, LTIP, and non-controlling interests		—		—			—			—			—		(597,463	)		—			(27,561	)		(625,024	)		(1,248	)		(626,272	)
Distributions to Preferred OP Units		—		(53,120	)		—			—			—		(27,629	)		—			—			(80,749	)		—			(80,749	)
Contributions from non-controlling interest holders		—		—			—			—			—		—			—			—			—			982			982
Non-controlling interests retained in Cole Merger		—		—			—			—			—		—			—			—			—			24,766			24,766
Net (loss) income		—		—			—			—			—		(626,562	)		—			(24,158	)		(650,720	)		235			(650,485	)
Other comprehensive income		—		—			—			—			—		899			—			35			934			—			934

Balance, September 30, 2014		42,822,383	$	1,014,339			98,629		$	3,996			907,978,649	$	8,726,024			35,435,194		$	233,229		$	9,977,588		$	25,302		$	10,002,890

The accompanying notes are an integral part of these statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands, except for unit data)

(Unaudited)


	Preferred Units										Common OP Units
	General Partner						Limited Partners				General Partner						Limited Partners
	Number of Units			Capital			Number of Units		Capital		Number of Units			Capital			Number of Units			Capital			Total Partners’ Capital			Non- controlling Interests		Total Capital
Balance, December 31, 2012 (As Restated)		6,990,328		$	163,047			—	$	—		184,553,676		$	1,489,587			1,621,349		$	16,126		$	1,668,760		$	—	$	1,668,760
Issuance of Common OP Units		—			—			—		—		63,055,919			1,066,904			8,029,545			107,771			1,174,675			—		1,174,675
Issuance of Common OP Units through distribution reinvestment plan		—			—			—		—		940,737			25,563			—			—			25,563			—		25,563
Offering costs, commissions and dealer manager fees		—			—			—		—		—			(164,831	)		—			—			(164,831	)		—		(164,831	)
Repurchases of Common OP Units		—			—			—		—		(28,272,905	)		(357,917	)		—			—			(357,917	)		—		(357,917	)
Issuance of Preferred OP Units		36,053,490			901,337			721,465		15,878		—			—			630,689			13,880			931,095			—		931,095
Excess of ARCT IV Merger considerations over historical cost		—			—			—		—		—			(557,545	)		—			—			(557,545	)		—		(557,545	)
Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units		—			—			—		—		599,233			5,799			(599,233	)		(5,799	)		—			—		—
Conversion of General Partner’s Preferred Units to General Partner’s Common OP Units		(828,472	)		(8	)		—		—		829,629			8			—			—			—			—		—
Equity based compensation		—			—			—		—		645,491			4,154			8,241,100			9,827			13,981			—		13,981
Equity component of convertible debt		—			—			—		—		—			9,372			—			—			9,372			—		9,372
Distributions to Common OP Units and LTIPs		—			—			—		—		—			(181,812	)		—			(6,222	)		(188,034	)		—		(188,034	)
Net loss		—			—			—		—		—			(293,684	)		—			(7,882	)		(301,566	)		—		(301,566	)
Other comprehensive income		—		$	—			—	$	—	$	—			8,362			—			457			8,819			—		8,819

Balance, September 30, 2013 (As Restated)		42,215,346		$	1,064,376			721,465	$	15,878		222,351,780		$	1,062,739			17,923,450		$	120,466		$	2,262,372		$	—	$	2,262,372

The accompanying notes are an integral part of these statements.

ARC Properties Operating Partnership, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)


	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(650,485	)	$	(301,566	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Issuance of common units in connection with the ARCT III and ARCT IV mergers		92,884			107,771
Depreciation and amortization		744,545			131,605
Loss on held for sale assets and disposition of properties, net		275,768			—
Equity-based compensation		32,805			13,981
Equity in income of unconsolidated entities		(247	)		—
Distributions from unconsolidated entities		6,149			—
Loss on derivative instruments		10,398			144
Unrealized loss on investments		—			14
(Gain) loss on sale of investments, net		(6,357	)		1,795
Impairment of real estate		3,855			2,074
Loss on extinguishment of debt		(14,637	)		—
Unrealized loss on contingent value rights obligations, net of settlement payments		—			49,314
Loss on extinguishment of Series C Stock		—			4,827
Changes in assets and liabilities:
Investment in direct financing leases		1,147			148
Deferred costs, intangible and other assets, net		(116,614	)		(20,513	)
Due from affiliates		(2,365	)		(4,105	)
Accounts payable and accrued expenses		(53,434	)		10,435
Deferred rent, derivative and other liabilities		(20,748	)		5,911
Due to affiliates		(37,520	)		6,107

Net cash provided by operating activities		265,144			7,942

Cash flows from investing activities:
Investments in real estate and other assets		(3,517,290	)		(3,241,834	)
Acquisition of a real estate business, net of cash acquired		(756,232	)		—
Investment in direct financing leases		—			(75,551	)
Capital expenditures		(30,168	)		(113	)
Real estate developments		(33,610	)		—
Leasing costs		(3,210	)		—
Principal repayments received from borrowers		5,091			—
Investments in unconsolidated entities		(2,699	)		—
Proceeds from disposition of properties		129,212			—
Investment in leasehold improvements, property and equipment		(11,074	)		—
Deposits for real estate investments		(205,896	)		(31,115	)
Uses and refunds of deposits for real estate investments		278,362			—
Purchases of investment securities		—			(81,464	)
Line of credit advances to affiliates		(130,300	)		—
Line of credit repayments from affiliates		80,300			—
Proceeds from sale of investment securities		159,049			111,402
Change in restricted cash		(18,709	)		—

Net cash used in investing activities		(4,057,174	)		(3,318,675	)

Cash flows from financing activities:
Proceeds from mortgage notes payable		1,007,787			6,897
Payments on mortgage notes payable		(1,028,017	)		—
Payments on other debt		(109,312	)		—
Proceeds from credit facilities		5,689,000			1,570,000
Payments on credit facilities		(4,708,800	)		(384,604	)
Proceeds from corporate bonds		2,545,760			(53,397	)
Payments of deferred financing costs		(92,233	)		(2,165	)
Proceeds from issuance of convertible debt		—			310,000
Repurchases of OP units		—			(358,093	)
Proceeds from issuances of preferred units		—			445,000
Proceeds from issuances of OP units, net of offering costs		1,593,345			1,807,197
Redemption of Series D Preferred Stock		(316,126	)		—
Contributions from non-controlling interest holders		982			29,758
Distributions to non-controlling interest holders		(22,673	)		(5,615	)
Distributions paid		(675,098	)		(157,646	)
Payments from affiliates, net		—			(376	)
Change in restricted cash		—			(572	)

Net cash provided by financing activities		3,884,615			3,206,384

Net change in cash and cash equivalents		92,585			104,349
Cash and cash equivalents, beginning of period		52,725			292,575

Cash and cash equivalents, end of period	$	145,310		$	188,226

Supplemental Disclosures:
Cash paid for interest	$	248,698		$	18,774
Cash paid for income taxes		7,761			625
Non-cash investing and financing activities:
Accrued capital expenditures and real estate developments	$	12,634		$	—
Common stock issued through distribution reinvestment plan	$	—		$	25,568

The accompanying notes are an integral part of these statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited)

Note 1 — Organization

American Realty Capital Properties, Inc. (the “General Partner” or “ARCP”) is a self-managed Maryland corporation incorporated on December 2, 2010 that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. On September 6, 2011, the Company completed its initial public offering (the “IPO”). The Company’s common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “ARCP.”

ARCP is the general partner of ARC Properties Operating Partnership, L.P. (together with its subsidiaries, the “Operating Partnership” or the “OP”), a Delaware limited partnership, which was formed on January 13, 2011 to conduct the business of acquiring, owning and operating single-tenant, freestanding commercial real estate properties. The Operating Partnership is the entity through which substantially all of the General Partner’s operations are conducted. Together, the General Partner, with the Operating Partnership and their consolidated subsidiaries are known as the “Company.” The term the “Company” refers to the General Partner and the Operating Partnership collectively.

The actions of the Operating Partnership and its relationship with ARCP are governed by that certain Third Amended and Restated Agreement of Limited Partnership (the “LPA”), effective as of January 3, 2014, as amended. The General Partner does not have any significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the General Partner and the Operating Partnership are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation and continuity of existence and operation of the General Partner incurred by the General Partner on the Operating Partnership’s behalf shall be treated as expenses of the Operating Partnership. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s board of directors to date, the LPA requires the Operating Partnership to issue the General Partner equity instruments with substantially similar terms, to protect the integrity of the Company’s umbrella partnership REIT structure, pursuant to which each holder of interests in the Operating Partnership has a proportionate economic interest in the Operating Partnership reflecting its capital contributions thereto. The LPA also provides that the Operating Partnership issue debt that mirrors debt issued by ARCP. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s board of directors authorizes the issuance of any new class of equity securities.

The Company operates through two business segments, Real Estate Investment (“REI”) and private capital management, Cole Capital (“Cole Capital”), as further discussed in Note 6 — Segment Reporting. Substantially all of the Company’s REI segment is conducted through the OP. ARCP is the sole general partner and holder of 97.3% of the common equity interests in the OP as of September 30, 2014. As of September 30, 2014, certain affiliates of ARCP and certain unaffiliated investors are limited partners and owners of 1.7% and 1.0%, respectively, of the common equity interests in the OP. Under the LPA, after holding units of limited partner interests in the OP (“OP Units”) for a period of one year, unless otherwise consented to by ARCP, holders of OP Units have the right to redeem the OP Units for the cash value of a corresponding number of shares of ARCP’s common stock or, at the option of ARCP, a corresponding number of shares of ARCP’s common stock. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. Substantially all of Cole Capital’s business segment is conducted through Cole Capital Advisors, Inc. (“CCA”), an Arizona corporation and a wholly owned subsidiary of the OP. CCA is treated as a taxable REIT subsidiary (“TRS”) under Section 856 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

Prior to January 8, 2014, ARC Properties Advisors, LLC (the “Former Manager”), a wholly owned subsidiary of AR Capital, LLC (“ARC”), managed the Company’s affairs on a day-to-day basis, with the exception of certain acquisition, accounting and portfolio management services performed by employees of the Company. In August 2013, the Company’s board of directors determined that it was in its best interest and the best interest of its stockholders to become self-managed, and the Company completed its transition to self-management on January 8, 2014. In connection with becoming self-managed, ARCP terminated the management agreement with its Former Manager and ARCP and the OP entered into employment and incentive compensation arrangements with ARCP executives. See Note 20 — Related Party Transactions and Arrangements for further discussion.

The Company has advanced its investment objectives by not only growing its net lease portfolio through granular, self-originated acquisitions, but also through strategic mergers and acquisitions. See Note 3 — Mergers and Acquisitions for further discussion.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 2 — Restatement of Previously Issued Consolidated Financial Statements

The Company has restated its consolidated balance sheets as of September 30, 2013 and December 31, 2013 and its consolidated statements of operations and consolidated statements of comprehensive loss for the three and nine months ended September 30, 2013. In addition, the Company has restated its consolidated statements of changes in equity and consolidated statement of cash flows for the nine months ended September 30, 2013 along with certain restated notes to such consolidated financial statements. As disclosed in Note 3 — Mergers and Acquisitions, the financial statements have been recast in applying the carryover basis of accounting to include the effects of the Company’s merger with American Realty Capital Trust IV, Inc. (“ARCT IV”). As it pertains to Note 2 and the disclosures contained herein, the use of the reference to the “Company” means “ARCP” only when describing the restatement of the consolidated financial statements as of and for the period ended September 30, 2013.

The Company determined that the restatement was necessary after an investigation was conducted by the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) with the assistance of independent counsel and forensic accountants. The Audit Committee initiated the investigation in response to concerns regarding accounting practices and other matters that were first reported to it on September 7, 2014. The restatement corrects errors that were identified as a result of the investigation, as well as certain other errors that were identified by the Company. The Company has determined that it would be appropriate to correct such errors.

Year ended December 31, 2013

Corrections to the Company’s financial statements for the year ended December 31, 2013 are detailed within Amendment No. 2 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the U.S. Securities and Exchange Commission (“SEC”) (the “Amended 10-K”). The corrections relate primarily to bonus accruals, real estate impairments, goodwill, merger and acquisition costs, transfer tax accrual and non-controlling interests.

Nine months Ended September 30, 2013 Error Corrections

Merger and Other Non-routine Transaction Related

In light of the findings of the investigation conducted by the Audit Committee, the Company performed an internal review of all acquisition, merger and other non-routine transaction related expenses. The work resulted in the identification of the following errors:

•

The Company identified $13.0 million of management fees that were improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly classified as operating fees to affiliates in the nine months ended September 30, 2013. No such expenses were identified in the three months ended September 30, 2013.

•

Upon consummation of the Company’s merger with American Realty Capital Trust III, Inc. (“ARCT III”) (Note 3 —Mergers and Acquisitions), the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures, equipment (“FF&E”) and other assets. The Company originally capitalized $4.1 million of FF&E costs and expensed $1.7 million of FF&E costs in the nine months ended September 30, 2013. The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Company has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction related expense for the nine months ended September 30, 2013. See Note 20 — Related Party Transactions and Arrangements for further discussion. No such expenses were identified in the three months ended September 30, 2013.

•

The Company improperly classified $0.3 million and $6.1 million of expenses as “merger-related” for the three and nine months ending September 2013, respectively. As such, the amounts have been reclassified from merger and other non-routine transaction related expenses to general and administrative expenses.

•

The Company identified $1.2 million and $2.2 million of expenses that were improperly classified as merger and other transaction related expenses that should have been capitalized as deferred financing costs and amortized accordingly for the three and nine months ended September 30, 2013, respectively. As such, an adjustment to properly record and amortize the deferred financing costs has been made.

•

The Company has determined that it should have recorded a controlling interest tax liability totaling $1.1 million upon consummation of the mergers with ARCT III. The accrual and corresponding merger and other non-routine transaction related expense are recorded for the nine months ended September 30, 2013. No such expenses were identified in the three months ended September 30, 2013.

•

The Company identified net amounts of $167,000 and $254,000 of merger and other non-routine transaction related expenses that were recorded in the incorrect period. As such, the Company has decreased merger and other non-routine transaction related expenses by these amounts in the three and nine months ended September 30, 2013, respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The Company has updated the caption from “merger and other transaction related” to “merger and other non-routine transactions” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 — Summary of Significant Accounting Policies for a further breakout of the merger costs and other one-time costs.

Management Fees to Affiliate

The Company identified $0.5 million of operating fees to an affiliate that was improperly recorded in the nine months ended September 30, 2013. Therefore, the Company decreased operating fees to affiliate by this amount for the nine months ended September 30, 2013. No such expenses were identified in the three months ended September 30, 2013.

General and Administrative

The Company originally reported $7.2 million and $11.5 million during the three and nine months ended September 30, 2013, respectively, in equity-based compensation in its own line item, however it now reports such compensation as general and administrative expenses.

Impairment of Real Estate

The Company originally believed that the risk of impairment of its real estate and related assets was mitigated by the fact that substantially all of the Company’s real estate portfolio had been acquired in 2012 and 2013. As a result, the Company had failed to monitor events and changes in circumstances that could indicate that the carrying amount of its real estate and related assets may not be recoverable. The Company performed a detailed analysis of the portfolio in connection with the restatement and noted certain properties with impairment indicators. The Company assessed the recoverability of the carrying amounts as of the date in which the impairment indicators existed. Based on this assessment, the Company noted one property with a carrying amount in excess of the fair value of its expected undiscounted cash flows as of September 30, 2013. As a result, the Company reduced the carrying amount of the real estate and related net assets to their estimated fair values by recognizing an impairment loss of $2.1 million for the three and nine months ended September 30, 2013.

Net Loss Attributable to Non-Controlling Interests

The original calculation of the net loss attributable to non-controlling interest holders for the three and nine months ended September 30, 2013 excluded expenses that were improperly recorded at the Company’s level. These expenses were incurred by the OP, and therefore should have been included in the Company’s determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the 2013 restated consolidated financial statements reflect an increase of $2.9 million and $6.7 million for net loss attributable to non-controlling interest holders and corresponding decreases in net loss attributable to stockholders during the three and nine months ended September 30, 2013, respectively.

Due to Affiliates

Amounts due to affiliates of the Company of $6.1 million, previously reported in accounts payable and accrued expenses, are now reported on a separate line item on the consolidated restated balance sheet as of September 30, 2013.

Other Changes

Along with restating the consolidated financial statements to correct the errors discussed above, the Company recorded adjustments for certain previously identified immaterial accounting errors related to the three and nine months ended September 30, 2013 that arose in the normal course of business. In connection with the original financial statement issuance, the Company assessed the impact of these immaterial errors and concluded that they were not material, individually or in the aggregate, to the consolidated unaudited financial statements for the nine months ended September 30, 2013. However, in conjunction with the restatement, the Company determined that it would be appropriate to correct such errors.

The Company also recorded certain reclassifications to conform the presentation of its restated consolidated statement of operations for the three and nine months ended September 30, 2013 to the current period classification and maintain comparability.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

September 30, 2013 Restated Consolidated Balance Sheet


	September 30, 2013
	As Previously Reported ⁽¹⁾			ARCT IV Recast ⁽²⁾			Reclassifications			Restatement Adjustments			As Restated
ASSETS
Real estate investments, at cost:
Land	$	521,139		$	494,330		$	—		$	(1,581	)	$	1,013,888
Buildings, fixtures and improvements		2,121,178			1,429,122			—			(1,028	)		3,549,272
Acquired intangible lease assets		328,733			221,663			347			(85	)		550,658

Total real estate investments, at cost		2,971,050			2,145,115			347			(2,694	)		5,113,818
Less: accumulated depreciation and amortization		(148,162	)		(30,941	)		(143	)		230			(179,016	)

Total real estate investments, net		2,822,888			2,114,174			204			(2,464	)		4,934,802
Cash and cash equivalents		150,481			37,745			—			—			188,226
Investment in direct financing leases, net		57,449			17,954			—			—			75,403
Investment securities, at fair value		9,480			—			—			—			9,480
Derivative assets, at fair value		7,088			28			(7,116	)		—			—
Restricted cash		1,680			—			—			—			1,680
Prepaid expenses and other assets		48,165			15,111			(63,276	)		—			—
Receivable for Issuances of common stock		—			14,311			(14,311	)		—			—
Deferred costs, net		47,754			—			(47,754	)		—			—
Assets held for sale		6,028			—			—			(14	)		6,014
Deferred costs and other assets, net		—			—			132,253			598			132,851

Total assets	$	3,151,013		$	2,199,323		$	—		$	(1,880	)	$	5,348,456


LIABILITIES AND EQUITY
Mortgage notes payable		269,891			2,124			—			—			272,015
Convertible debt		300,975			—			—			—			300,975
Senior corporate credit facility		600,000			710,000			—			—			1,310,000
Convertible obligation to Series C Convertible Preferred stockholders, at fair value		449,827			—			—			—			449,827
Contingent value rights obligation to preferred and common investors, at fair value		49,314			—			—			—			49,314
Below-market lease liabilities, net		4,200			—			—			(620	)		3,580
Derivative liabilities, at fair value		—			—			—			—			—
Accounts payable and accrued expenses		14,740			662,432			(897	)		(5,303	)		670,972
Deferred rent and other liabilities		9,189			2,901			897			—			12,987
Distributions payable		72			9,810			—			436			10,318
Due to affiliates		—			—			—			6,107			6,107

Total liabilities		1,698,208			1,387,267			—			620			3,086,095


Convertible preferred stock, $0.01 par value, 100,000,000 shares authorized, 42,215,346 shares issued and outstanding at September 30, 2013		—			422			—			—			422
Common stock, $0.01 par value, 750,000,000 shares authorized and 222,351,780 issued and outstanding at September 30, 2013		1,848			375			—			—			2,223
Additional paid-in capital		1,803,315			904,640			—			3,035			2,710,990
Accumulated other comprehensive income		4,857			28			—			—			4,885
Accumulated deficit		(480,817	)		(121,392	)		—			2,416			(599,793	)

Total stockholders’ equity		1,329,203			784,073			—			5,451			2,118,727
Non-controlling interests		123,602			27,983			—			(7,951	)		143,634

Total equity		1,452,805			812,056			—			(2,500	)		2,262,361

Total liabilities and equity	$	3,151,013		$	2,199,323		$	—		$	(1,880	)	$	5,348,456

(1)	Certain line items have been consolidated from the original presentation in the Quarterly Report on Form 10-Q filing for the three and nine month period ended September 30, 2013.

(2)	These financial statements have been recast in applying the carryover basis of accounting to include ARCT IV.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Restated Statement of Operations (for the three months ended September 30, 2013)


	Three Months Ended
	September 30, 2013
	As Previously Reported ⁽¹⁾			ARCT IV Recast ⁽²⁾			Reclassifications			Restatement Adjustments			As Restated
Revenues:
Rental income	$	56,681		$	33,054		$	(6	)	$	—		$	89,729
Direct financing lease income		977			224			—			—			1,201
Operating expense reimbursements		3,226			1,093			6			—			4,325

Total revenues		60,884			34,371			—			—			95,255

Operating expenses:
Acquisition related		1,235			25,713			—			—			26,948
Merger and other non-routine transactions		3,791			2,122			—			(1,612	)		4,301
Property operating		4,103			1,341			—			(14	)		5,430
Management fees to affiliate		—			—			—			—			—
General and administrative		1,586			822			—			7,458			9,866
Equity-based compensation		7,180			—			—			(7,180	)		—
Depreciation and amortization		39,382			23,030			—			(276	)		62,136
Operating fees to affiliate		—			—			—			—			—
Impairment of real estate		—			—			—			2,074			2,074

Total operating expenses		57,277			53,028			—			450			110,755

Operating income		3,607			(18,657	)		—			(450	)		(15,500	)

Other (expense) income:
Interest expense		(24,135	)		(3,054	)		—			—			(27,189	)
Loss on contingent value rights		(38,542	)		—			38,542						—
Income from investment securities		—			—			—			—			—
Gain (loss) on sale of investment securities		—			(2,246	)		—			—			(2,246	)
Loss on derivative instruments		(99	)		—			(38,542	)					(38,651	)
Other income, net		45			44			—			47			136

Total other expenses, net		(62,731	)		(5,256	)		—			37			(67,950	)

Loss from continuing operations		(59,124	)		(23,913	)		—			(413	)		(83,450	)
Net (gain) loss from continuing operations attributable to non-controlling interests		(30	)		260			—			2,923			3,153

Net loss from continuing operations attributable to stockholders		(59,154	)		(23,653	)		—			2,514			(80,293	)

Discontinued operations:
Net income (loss) from operations of held for sale properties		96			—			—			—			96
(Loss) gain on held for sale properties		—			—			—			—			—

Net income (loss) from discontinued operations		96			—						—			96
Net (loss) income from discontinued operations attributable to non-controlling interests		(5	)		—			—			5			—

Net income (loss) from discontinued operations attributable to stockholders		91			—			—			5			96

Net loss		(59,028	)		(23,913	)		—			(413	)		(83,354	)
Net (income) loss attributable to non-controlling interests		(35	)		260			—			2,928			3,153

Net loss attributable to stockholders	$	(59,063	)	$	(23,653	)	$	—		$	2,515		$	(80,201	)


Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(0.32	)	$	—		$	—		$	—		$	(0.36	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.32	)	$	—		$	—		$	—		$	(0.36	)

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Restated Statement of Operations (for the nine months ended September 30, 2013)


	Nine Months Ended
	September 30, 2013
	As Previously Reported ⁽¹⁾			ARCT IV Recast ⁽²⁾			Reclassifications			Restatement Adjustments			As Restated
Revenues:
Rental income	$	138,060		$	45,102		$	89		$	—		$	183,251
Direct financing lease income		977			224			—			—			1,201
Operating expense reimbursements		6,878			1,727			(89	)		—			8,516

Total revenues		145,915			47,053			—			—			192,968

Operating expenses:
Acquisition related		21,961			52,603			—			(23	)		74,541
Merger and other non-routine transactions		146,240			3,835			—			(16,341	)		133,734
Property operating		8,972			2,107			—			(14	)		11,065
Management fees to affiliate		—			—			—			12,493			12,493
General and administrative		4,018			2,214			34			17,655			23,921
Equity-based compensation		11,510			—			—			(11,510	)		—
Depreciation and amortization		92,211			30,620			(34	)		(313	)		122,484
Operating fees to affiliate		—			—			—			—			—
Impairment of real estate		—			—			—			2,074			2,074

Total operating expenses		284,912			91,379			—			4,021			380,312

Operating income		(138,997	)		(44,326	)		—			(4,021	)		(187,344	)

Other (expense) income:
Interest expense		(41,589	)		(3,240	)		—			(585	)		(45,414	)
Loss on contingent value rights		(69,676	)		—			69,676			—			—
Income from investment securities		218			1,798			(2,016	)		—			—
Gain (loss) on sale of investment securities		451			(2,246	)		—			—			(1,795	)
Loss on derivative instruments		(144	)		—			(69,676	)		(10	)		(69,830	)
Other income, net		171			463			2,016			8			2,658

Total other expenses, net		(110,569	)		(3,225	)		—			(587	)		(114,381	)

Loss from continuing operations		(249,566	)		(47,551	)		—			(4,608	)		(301,725	)
Net (gain) loss from continuing operations attributable to non-controlling interests		726			415			—			6,741			7,882

Net loss from continuing operations attributable to stockholders		(248,840	)		(47,136	)		—			2,133			(293,843	)

Discontinued operations:
Net income (loss) from operations of held for sale properties		159			—			—			—			159
(Loss) gain on held for sale properties		14			—			—			(14	)		—

Net income (loss) from discontinued operations		173			—			—			(14	)		159
Net (loss) income from discontinued operations attributable to non-controlling interests		(9	)		—			—			9			—

Net income (loss) from discontinued operations attributable to stockholders		164			—			—			(5	)		159

Net loss		(249,393	)		(47,551	)		—			(4,622	)		(301,566	)
Net (income) loss attributable to non-controlling interests		717			415			—			6,750			7,882

Net loss attributable to stockholders	$	(248,676	)	$	(47,136	)	$	—		$	2,128		$	(293,684	)


Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(1.49	)	$	—		$	—		$	—		$	(1.50	)
Basic and diluted net loss per share attributable to common stockholders	$	(1.49	)	$	—		$	—		$	—		$	(1.50	)

(1)	Certain line items have been consolidated from the original presentation in the Quarterly Report on Form 10-Q filing for the three and nine month period ended September 30, 2013.

(2)	These financial statements have been recast in applying the carryover basis of accounting to include ARCT IV.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

2013 Restated Statement of Comprehensive Loss (for the three months ended September 30, 2013) ⁽¹⁾


	Three Months Ended September 30, 2013
	As Previously Reported ⁽²⁾			ARCT IV Recast ⁽³⁾			Restatement Adjustments			As Restated
Net loss	$	(59,028	)	$	(23,913	)	$	(413	)	$	(83,354	)

Other comprehensive loss:
Designated derivatives, fair value adjustments		(3,622	)		(13	)		—			(3,635	)

Change in unrealized gain/loss on investment securities		(440	)		—			1,378			938

Total other comprehensive loss		(4,062	)		(13	)		1,378			(2,697	)

Total comprehensive loss		(63,090	)		(23,926	)		965			(86,051	)
Net (income) loss attributable to non-controlling interests		(30	)		260			2,923			3,153

Total comprehensive loss attributable to the Company	$	(63,120	)	$	(23,666	)	$	3,888		$	(82,898	)

2013 Restated Statement of Comprehensive Loss (for the nine months ended September 30, 2013) ⁽¹⁾


	Nine Months Ended September 30, 2013
	As Previously Reported ⁽²⁾			ARCT IV Recast ⁽³⁾			Restatement Adjustments			As Restated
Net loss	$	(249,393	)	$	(47,551	)	$	(4,622	)	$	(301,566	)

Other comprehensive income:
Designated derivatives, fair value adjustments		9,218			28			—			9,246
Change in unrealized gain/loss on investment securities		(427	)		—			—			(427	)

Total other comprehensive income		8,791			28			—			8,819

Total comprehensive loss		(240,602	)		(47,523	)		(4,622	)		(292,747	)
Net loss attributable to non-controlling interests		717			415			6,750			7,882

Total comprehensive loss attributable to the Company	$	(239,885	)	$	(47,108	)	$	2,128		$	(284,865	)

(1)	The statement of comprehensive loss was originally included within the consolidated statement of operations in the recasted filing; it is now presented as a standalone financial statement.

(2)	Certain line items have been consolidated from the original presentation in the Quarterly Report on Form 10-Q filing for the three and nine month period ended September 30, 2013.

(3)	These financial statements have been recast in applying the carryover basis of accounting to include ARCT IV.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Restated Statement of Cash Flows for the Nine Months Ended September 30, 2013


	Nine Months Ended September 30, 2013
	As Previously Reported ⁽¹⁾			ARCT IV Recast ⁽²⁾			Restatement Adjustments			As Restated
Cash flows from operating activities:
Net loss	$	(249,393	)		(47,551	)	$	(4,622	)	$	(301,566	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Issuance of operating partnership units for ARCT III Merger and other transaction related expenses		108,247			—			(476	)		107,771
Depreciation		99,832			31,501			272			131,605
(Gain) loss on held for sale properties		(14	)		—			14			—
Impairment of real estate		—			—			2,074			2,074
Equity-based compensation		13,895			18			68			13,981
Loss on derivative instruments		144			—			—			144
Unrealized loss on investments		14			—			—			14
Unrealized loss on contingent value rights obligations, net of settlement payments		49,314			—			—			49,314
Convertible obligations to Series C Convertible Preferred stockholders, fair value adjustment		4,827			—			—			4,827
(Gain) loss on sale of investments		(451	)		2,246			—			1,795
Changes in assets and liabilities:
Investment in direct financing leases		102			46			—			148
Prepaid expenses and other assets		(12,081	)		(8,432	)		—			(20,513	)
Accounts payable and accrued expenses		4,464			11,251			(5,280	)		10,435

Deferred rent and other liabilities		3,068			2,843			—			5,911
Due from Affiliates		—			(4,105	)		—			(4,105	)
Due to Affiliates		—			—			6,107			6,107

Net cash provided by (used in) operating activities		21,968			(12,183	)		(1,843	)		7,942

Cash flows from investing activities:
Investments in real estate and other assets		(1,173,497	)		(2,068,337	)		—			(3,241,834	)
Investment in direct financing leases		(57,551	)		(18,000	)		—			(75,551	)
Capital expenditures		(113	)		—			—			(113	)
Purchase of assets from Manager		(1,041	)		—			1,041			—
Deposits for real estate investments		(28,836	)		(2,279	)		—			(31,115	)
Purchases of investment securities		(12,004	)		(69,460	)		—			(81,464	)
Proceeds from sale of investment securities		44,188			67,214			—			111,402

Net cash used in investing activities		(1,228,854	)		(2,090,862	)		1,041			(3,318,675	)

Cash flows from financing activities:
Proceeds from mortgage notes payable		4,773			2,124			—			6,897
Proceeds from senior corporate credit facility		860,000			710,000			—			1,570,000
Payments on senior corporate credit facility		(384,604	)		—			—			(384,604	)
Proceeds from corporate bonds		(38,221	)		(15,176	)		—			(53,397	)
Proceeds from issuance of convertible debt		310,000			—			—			310,000

Common stock repurchases		(357,916	)		(177	)		—			(358,093	)
Proceeds from issuance of convertible obligations to Series C Convertible Preferred stockholders		445,000			—			—			445,000
Proceeds from issuance of common stock, net		486,536			1,320,729			(68	)		1,807,197

The consolidated statement of cash flows continues onto the next page.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)


	Nine Months Ended September 30, 2013
	As Previously Reported ⁽¹⁾			ARCT IV Recast ⁽²⁾			Restatement Adjustments			As Restated
Payments of deferred financing costs	$	—		$	—		$	(2,165	)	$	(2,165	)
Consideration paid for assets of Manager in excess of carryover basis		(3,035	)		—			3,035			—
Contributions from non-controlling interest holders		750			29,008			—			29,758
Distributions to non-controlling interest holders		(5,170	)		(445	)		—			(5,615	)
Distributions paid		(117,047	)		(40,599	)		—			(157,646	)
Advances from affiliates, net		—			(376	)		—			(376	)
Restricted cash		(572	)		—			—			(572	)

Net cash provided by financing activities		1,200,494			2,005,088			802			3,206,384

Net change in cash and cash equivalents		(6,392	)		(97,957	)		—			(104,350	)
Cash and cash equivalents, beginning of period		156,873			135,702			—			292,575

Cash and cash equivalents, end of period	$	150,481		$	37,745		$	—		$	188,226

(1)	Certain line items have been consolidated from the original presentation in the Quarterly Report on Form 10-Q filing for the nine month period ended September 30, 2013.

(2)	These financial statements have been recast in applying the carryover basis of accounting to include ARCT IV.

Note 3 — Mergers and Acquisitions

Mergers and Significant Acquisitions

American Realty Capital Trust III, Inc. Merger

On December 14, 2012, the Company entered into an Agreement and Plan of Merger (the “ARCT III Merger Agreement”) with ARCT III and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of the Company (the “ARCT III Merger”). The ARCT III Merger was consummated on February 28, 2013.

Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares which became vested, was converted into the right to receive (i) 0.95 of a share of ARCP’s common stock (the “ARCT III Exchange Ratio”) or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of ARCT III’s operating partnership (the “ARCT III OP”) was converted into the right to receive 0.95 of the same class of unit of equity ownership in the OP.

Upon the closing of the ARCT III Merger on February 28, 2013, the Company paid an aggregate of $350 million in cash for 29.2 million shares that elected cash consideration, or 16.5% of the then outstanding shares of ARCT III’s common stock (which is equivalent to 27.7 million shares of ARCP’s common stock based on the ARCT III Exchange Ratio). In addition, 140.7 million shares of ARCP’s common stock were issued in exchange for 148.1 million shares of ARCT III’s common stock adjusted for the ARCT III Exchange Ratio. In accordance with the LPA, the OP issued a corresponding number of General Partner OP Units to ARCP when ARCP issued common stock to former common stockholders of ARCT III.

Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC (the “ARCT III Special Limited Partner”), the holder of the special limited partner interest in the ARCT III OP, was entitled to subordinated distributions of net sales proceeds from the ARCT III OP which resulted in the issuance of units of limited partner interests in the ARCT III OP which, when after applying the ARCT III Exchange Ratio, resulted in the issuance of an additional 7.3 million OP Units to affiliates of the Company’s Former Manager. The parties had agreed that such OP Units would be subject to a minimum one-year holding period from the date of issuance before being redeemable by the holder for cash or, at the option of ARCP, common stock of ARCP.

Also in connection with the ARCT III Merger, the Company entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates and pay certain merger related fees. See Note 20 — Related Party Transactions and Arrangements.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Accounting Treatment for the ARCT III Merger

The Company and ARCT III, from inception to the ARCT III Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had significant ownership interests in the Company and ARCT III through the ownership of shares of common stock and other equity interests. In addition, the advisors of the Company and ARCT III were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and continued to receive fees from the Operating Partnership, on behalf of ARCP, prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT III Merger Date. In addition, U.S. GAAP requires the Company to present historical financial information for all periods that entities were under common control. Therefore, the accompanying consolidated financial statements including the notes thereto are presented as if the ARCT III Merger had occurred at inception.

CapLease, Inc. Merger

On May 28, 2013, the Company entered into an Agreement and Plan of Merger (the “CapLease Merger Agreement”) with CapLease, a Maryland corporation, and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of the Company (the “CapLease Merger”).

On November 5, 2013, the Company completed the CapLease Merger. Pursuant to the terms of the CapLease Merger Agreement, each outstanding share of common stock of CapLease, other than shares owned by the Company, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by the Company, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of Caplease, LP with and into the OP, each outstanding unit of equity ownership of CapLease’s operating partnership, other than units owned by CapLease, the OP, or any other of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Shares of CapLease’s outstanding restricted stock was accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to CapLease’s common and preferred shareholders.

Accounting Treatment for the CapLease Merger

The CapLease Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for CapLease are included in the Company’s consolidated financial statements from the date of acquisition.

American Realty Capital Trust IV, Inc. Merger

On July 1, 2013, the Company entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013 (the “ARCT IV Merger Agreement”), with ARCT IV, and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of the OP (the “ARCT IV Merger”). The ARCT IV Merger was consummated on January 3, 2014 (the “ARCT IV Merger Date”).

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of ARCP’s common stock (the “ARCT IV Exchange Ratio”) and (iii) 0.5937 of a share of a new series of preferred stock designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) and each outstanding unit of ARCT IV’s operating partnership (each, an “ARCT IV OP Unit”), other than ARCT IV OP Units held by American Realty Capital Trust IV Special Limited Partner, LLC (the “ARCT IV Special Limited Partner”), and American Realty Capital Advisors IV, LLC (the “ARCT IV Advisor”) was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a Limited Partner OP Unit and (iii) 0.5937 of a Limited Partner OP Unit designated as Series F Preferred Units (“Limited Partner Series F OP Units”). In total, the Operating Partnership, on ARCP’s behalf, paid $651.4 million in cash, ARCP issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock to the former ARCT IV shareholders, and the Operating Partnership issued 0.7 million units of Limited Partner Series F OP units and 0.6 million Limited Partner OP Units to the former ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 Limited Partner OP Units, resulting in the Company issuing 1.2 million Limited Partner OP Units. In accordance with the LPA, the OP issued a corresponding number of General Partner OP Units and Series F Preferred Units to ARCP when shares of ARCP’s common stock and Series F Preferred Stock were issued to former common stockholders of ARCT IV, respectively.

On January 3, 2014, the OP entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, the ARCT IV Special Limited Partner and ARC Real Estate Partners, LLC (“ARC Real Estate”), an entity under common ownership with the Former Manager. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” as a result of which the ARCT IV Special Limited Partner, in connection with management’s successful attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of approximately $358.3 million in addition to their initial investment, was entitled to receive a subordinated distribution of net sales proceeds from the ARCT IV OP equal to approximately $63.2 million. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million equity units of the ARCT IV OP, based on a price per share of $22.50. The fair value of these units at date of issuance was $78.2 million and has been included in merger and other non-routine transactions in the accompanying consolidated statement of operations for the nine months ended September 30, 2014. Upon consummation of the ARCT IV Merger, these equity units were immediately converted to 6.7 million Limited Partner OP Units after application of the exchange ratio of 2.3961 per ARCT IV OP Unit. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to a minimum two-year holding period for these Limited Partner OP Units before being redeemable by the holder for cash or, at the option of the General Partner, the common stock of ARCP.

In addition, as part of the ARCT IV Contribution and Exchange Agreement, ARC Real Estate Partners, LLC, contributed $750,000 in cash to the ARCT IV OP, effective prior to the consummation of the ARCT IV Merger, in exchange for ARCT IV OP Units. Upon the consummation of the ARCT IV Merger, these equity units converted at an exchange ratio of 2.3961 Limited Partner OP Units per ARCT IV OP Unit, resulting in the Operating Partnership issuing 0.1 million Limited Partner OP Units to ARC Real Estate Partners, LLC.

Accounting Treatment for the ARCT IV Merger

The Company and ARCT IV, from inception to the ARCT IV Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in the Company and ARCT IV through the ownership of shares of common stock, OP Units and other equity interests. In addition, the advisors of both entities were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and had continued to receive fees from the OP prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger Date. In addition, U.S. GAAP requires the Company to present historical financial information for all periods that entities were under common control. Therefore, the accompanying consolidated financial statements including the notes thereto are presented as if the ARCT IV Merger, including the impact of the equity transactions entered into to consummate the merger, had occurred at inception.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Fortress Portfolio Acquisition

On July 24, 2013, ARC and another related entity, on behalf of the Company and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (“Fortress”) for the purchase of 196 properties owned by Fortress, for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to the Company based on the pro rata fair value of the properties acquired by the Company relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to the Company (the “Fortress Portfolio”). On October 1, 2013, the Company closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. During quarter ended March 31, 2014, the Company closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs.

Cole Real Estate Investments, Inc. Merger

On October 22, 2013, ARCP entered into an agreement and plan of merger (the “Cole Merger Agreement”) with Cole Real Estate Investments, Inc. (“Cole”), a Maryland corporation, and a wholly owned subsidiary of the Company. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of the Company (the “Cole Merger”). The Operating Partnership consummated the Cole Merger on February 7, 2014 (the “Cole Acquisition Date”).

Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units and performance stock units that vested in conjunction with the Cole Merger, other than shares owned by the Company, any subsidiary of the Company or any wholly owned subsidiary of Cole, was converted into the right to receive either (i) 1.0929 shares of ARCP’s common stock (the “Stock Consideration”) or (ii) $13.82 in cash (the “Cash Consideration” and together with the Stock Consideration, the “Merger Consideration”). Approximately 98% of all outstanding Cole shareholders received Stock Consideration and approximately 2% of outstanding Cole shareholders elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in ARCP issuing approximately 520.8 million shares of common stock and paying $181.8 million in cash to Cole’s shareholders based on their elections. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former common stockholders of Cole.

In addition, ARCP issued approximately 2.8 million shares of common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between the Company and such individuals, concurrently with the execution of the Cole Merger Agreement, as previously disclosed by the Company. Additionally, effective as of the Cole Acquisition Date, ARCP issued, but has not yet allocated, 365,321 shares with dividend equivalent rights commensurate with ARCP’s common stock. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former executives of Cole.

Accounting Treatment for the Cole Merger

The Cole Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for Cole are included in the Company’s consolidated financial statements subsequent to the Cole Acquisition Date.

Inland Portfolio Acquisition

On August 8, 2013, ARC and another related entity, on behalf of the Company and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (“Inland”) for the purchase of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of approximately $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the “Inland Portfolio”) were allocated to the Company for a purchase price of approximately $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to the Company based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by the Operating Partnership, on the Company’s behalf, and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of September 30, 2014, the Company had closed on 32 of the 33 properties for a total purchase price of $288.2 million, exclusive of closing costs. The Company will not close on the remaining one property.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Cole Credit Property Trust, Inc. Merger

On March 17, 2014, the Company and a wholly owned subsidiary entered into an Agreement and Plan of Merger (the “CCPT Merger Agreement”) with Cole Credit Property Trust, Inc., a Maryland corporation (“CCPT”). The CCPT Merger Agreement provided for the merger of CCPT with and into a subsidiary of the Company (the “CCPT Merger”). The Company consummated the CCPT Merger on May 19, 2014 (the “CCPT Acquisition Date”). The estimated fair value of the consideration transferred at the CCPT Acquisition Date totaled approximately $73.2 million, which was paid in cash.

Pursuant to the CCPT Merger Agreement, the Company commenced a cash tender offer to purchase all of the outstanding shares of common stock of CCPT (the “CCPT Common Stock”) (other than shares owned by CCPT, the Company or any subsidiary of the Company), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 31, 2014, and the related Letter of Transmittal (together with any amendments or supplements to the foregoing, the “Offer”), at a price of $7.25 per share (the “Offer Price”), net to the seller in cash, without interest, less any applicable withholding tax. On May 19, 2014, the Company accepted for payment and paid for all shares of CCPT Common Stock that were validly tendered in the Offer. As of the expiration of the Offer, a total of 7,735,069 shares of CCPT Common Stock were validly tendered and not withdrawn, representing approximately 77% of the shares of CCPT Common Stock outstanding.

Immediately following the acceptance for payment and payment for the shares of CCPT Common Stock that were validly tendered in the Offer, the Company exercised its option (the “Top-Up Option”), granted pursuant to the CCPT Merger Agreement, to purchase, at a price per share equal to the Offer Price, 13,457,874 newly issued shares of CCPT Common Stock (collectively, the “Top-Up Shares”). The Top-Up Shares, taken together with the shares of CCPT Common Stock owned, directly or indirectly, by the Company and its subsidiaries immediately following the acceptance for payment and payment for the shares of CCPT Common Stock that were validly tendered in the Offer, constituted one share more than 90% of the outstanding shares of CCPT Common Stock (after giving effect to the issuance of all shares subject to the Top-Up Option), the applicable threshold required to effect a short-form merger under applicable Maryland law without stockholder approval.

Following the consummation of the Offer and the exercise of the Top-Up Option, in accordance with the CCPT Merger Agreement, the Company completed its acquisition of CCPT by effecting of a short-form merger under Maryland law, pursuant to which CCPT was merged with and into a subsidiary of the Company, with the subsidiary surviving the merger as a wholly owned subsidiary of the Company. The CCPT Merger became effective following the filing of the Articles of Merger with the State Department of Assessments and Taxation of Maryland and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware with an effective date of May 19, 2014 (the “Effective Time”).

At the Effective Time, each share of CCPT Common Stock not purchased in the Offer (other than shares held by the CCPT, the Company or any subsidiary of the Company, which were automatically canceled and retired and ceased to exist) was converted into the right to receive an amount, in cash and without interest, equal to the Offer Price.

Accounting Treatment for the CCPT Merger

The CCPT Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CCPT have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for CCPT are included in the Company’s consolidated financial statements subsequent to the CCPT Acquisition Date.

Red Lobster Portfolio Acquisition

On May 15, 2014, the Operating Partnership, through a wholly owned subsidiary, entered into a master purchase agreement to acquire over 500 properties, substantially all of which are operating as Red Lobster ^® restaurants (the “Red Lobster Portfolio”) from a third party. The transaction was structured as a sale-leaseback in which the Operating Partnership agreed to purchase the Red Lobster Portfolio and would immediately lease the portfolio back to the third party pursuant to the terms of multiple master leases (the “Master Leases”). The overall sale-leaseback transaction consisted of 522 Red Lobster ^® restaurants and 20 other branded restaurant properties for a purchase price of $1.7 billion. The Company closed the Red Lobster Portfolio acquisition in the third quarter of 2014.

Abandoned Spin-off of Multi-Tenant Shopping Center Portfolio

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

spin-off was expected to be effectuated through a pro rata taxable special distribution of one share of ARCM common stock for every 10 shares of the Company’s common stock and every 10 OP Units held by third parties in the OP. On April 4, 2014, ARCM filed a Registration Statement on Form 10 to register ARCM’s common stock, par value $0.01 per share, pursuant to Section 12(b) of the Exchange Act so that, upon consummation of the spin-off, shares of ARCM received by holders of the Company’s common stock, or OP Units, as applicable, could freely trade their newly received ARCM common stock. ARCM was expected to be externally managed by the Company. On May 21, 2014, the Company announced that it had reassessed its plans for the multi-tenant shopping center portfolio and entered into a letter of intent to sell such portfolio to Blackstone, expecting to finalize pertinent documentation related thereto within 30 days of such date. The properties included in such sale were the same properties that would have been spun off into ARCM and, consequently, the Company abandoned its proposed spin-off at such time. On June 11, 2014, indirect subsidiaries of the Company entered into an Agreement of Purchase and Sale with BRE DDR Retail Holdings III LLC, an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., pursuant to which the parties definitively documented the sale of the Company’s multi-tenant shopping center portfolio. The properties to be sold pursuant to such agreement were the same properties that the Company had previously intended to spin off into an externally managed, NASDAQ traded REIT, American Realty Capital Centers, Inc. In light of the Company’s entry into such agreement, it abandoned its previously contemplated spin-off.

Note 4 — Summary of Significant Accounting Policies

The consolidated financial statements of the Company included herein include the accounts of ARCP and its consolidated subsidiaries, including the Operating Partnership. All intercompany amounts have been eliminated. The financial statements were prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2013 of the Company, which are included in the Amended 10-K. There have been no significant changes to these policies during the nine months ended September 30, 2014, other than the updates described below.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, consolidated joint venture arrangements and its subsidiaries. The portions of the consolidated joint venture arrangements not owned by the Company are presented as non-controlling interests. In addition, as described in Note 1 — Organization, certain affiliates and non-affiliated third parties have been issued OP Units. Holders of OP Units are considered to be non-controlling interest holders in the OP and their ownership interest is reflected as equity in the consolidated balance sheets. In addition, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of common shares issued and the carrying value of the OP Units converted is recorded as a component of equity. As of September 30, 2014 and December 31, 2013, there were 24,690,496 and 9,591,173 OP Units outstanding, respectively. In addition, as discussed in Note 3 —Mergers and Acquisitions, the historical information of ARCT III and ARCT IV has been presented as if the mergers had occurred as of the beginning of the earliest period presented.

The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of the qualitative and quantitative significance of fees it earns from certain of its relationships and investments. If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance, its form of ownership interest, its representation on the entity’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations and the difference between consolidating the VIE and accounting for it on the equity method would be material to the Company’s financial statements.

The Company continually evaluates the need to consolidate joint ventures and the managed investment programs based on standards set forth in GAAP as described above.

Investment in Unconsolidated Entities

Investment in Unconsolidated Joint Ventures

Investment in unconsolidated joint ventures as of September 30, 2014 consisted of the Company’s interest in six joint ventures that owned six properties (the “Unconsolidated Joint Ventures”). As of September 30, 2014, the Company owned aggregate equity investments of $96.4 million in the Unconsolidated Joint Ventures. The Company accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint ventures’ earnings and distributions. The Company records its proportionate share of net income from the Unconsolidated Joint Ventures within the Other income, net line item in the consolidated statement of operations. During the three and nine months ended September 30, 2014, the Company recognized $0.2 million and $1.6 million, respectively, of net income from the Unconsolidated Joint Ventures. The Company did not recognize any net income from the Unconsolidated Joint Ventures during the three and nine months ended September 30, 2013.

Investment in Managed REITs

As of September 30, 2014, the Company owned aggregate equity investments of $4.4 million in the following publicly registered, non-traded REITs: Cole Credit Property Trust IV, Inc. (“CCPT IV”); Cole Corporate Income Trust, Inc. (“CCIT”); Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”); Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”); and Cole Credit Property Trust V, Inc. (“CCPT V,” and collectively with CCPT IV, CCIT, INAV and CCIT II, the “Managed REITs”). Prior to the CCPT Acquisition Date, CCPT was a Managed REIT and accounted for using the equity method. As of the CCPT Acquisition Date, the Company had an approximate $5,000 equity investment in CCPT. The Company accounts for these investments using the equity method of accounting which requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the respective Managed REIT’s earnings and distributions. The Company records its proportionate share of net income from the Managed REITs within the Other income, net line item in the consolidated statement of operations. During the three and nine months ended September 30, 2014, the Company recognized $0.4 million of net income and $1.4 million of net loss, respectively, from the Managed REITs. The Company did not recognize any net income from the Managed REITs during the three and nine months ended September 30, 2013.

Leasehold Improvements and Property and Equipment

The Company leases its office facilities under operating leases. Leasehold improvements related to these are recorded at cost less accumulated amortization. Leasehold improvements are amortized over the lesser of the estimated useful life or remaining lease term.

Property and equipment, which primarily include office furniture, fixtures and equipment and computer hardware and software, are stated at cost less accumulated depreciation. Property and equipment are depreciated on a straight-line method over the estimated useful lives of the assets, which range from five to seven years. The Company reassesses the useful lives of its property and equipment and adjusts the future monthly depreciation expense based on the new useful life, as applicable. If the Company disposes of an asset, the asset and related accumulated depreciation are written off upon disposal.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Impairments

Investment in Unconsolidated Entities

The Company is required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of any of its investment in the unconsolidated entities. If an event or change in circumstance has occurred, the Company is required to evaluate its investment in the unconsolidated entity for potential impairment and determine if the carrying amount of its investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in an unconsolidated entity for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. No impairments of unconsolidated entities were identified during the nine months ended September 30, 2014.

Leasehold Improvements and Property and Equipment

Leasehold improvements and property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If this review indicates that the carrying amount of the asset is not recoverable, the Company records an impairment loss, measured at fair value by estimated discounted cash flows or market appraisals. The evaluation of an investment in a property for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. The Company identified properties during the three and nine months ended September 30, 2014 and 2013 with impairment indicators for which the undiscounted future cash flows expected as a result of the use and eventual disposition of the real estate and related assets was less than the carrying amount of each respective properties, as discussed in Note 11 — Fair Value of Financial Instruments.

In addition to the properties discussed in Note 11 — Fair Value of Financial Instruments, as of September 30, 2014, the Company noted potential impairment indicators at certain properties with an aggregate carrying value of $145.5 million. However, the Company’s estimate of undiscounted cash flows indicated that such carrying amounts were expected to be recovered as of September 30, 2014. Nonetheless, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, which will result in the need to record an impairment loss to reduce such assets to fair value. Any such impairment losses may have a material impact on the Company’s assets and stockholder’s equity, operating and net loss and comprehensive loss. The evaluation of properties for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions.

Goodwill

In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. Goodwill that arose as a result of the Company’s mergers and acquisitions was recorded in the Company’s consolidated financial statements.

In the event the Company disposes of a property that constitutes a business under U.S. GAAP from a reporting unit with goodwill, the Company will allocate a portion of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business will be based on the relative fair value of the business to the fair value of the reporting unit. The REI segment and Cole Capital each comprise one reporting unit.

The Company will evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Company’s annual testing date is during the fourth quarter. The Company will test goodwill for impairment by first comparing the book value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the book value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company will estimate the fair value of the reporting units using discounted cash flows and relevant competitor multiples. The evaluation of goodwill for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. In conjunction with the disposition of the Multi-Tenant Portfolio, as defined in Note 22 — Property Dispositions, the Company evaluated the remaining portion of goodwill assigned to the REI segment for impairment. The fair value of the REI segment was determined to be greater than the book value of its net assets. As such, no goodwill impairment was recorded during the nine months ended September 30, 2014.

Subsequent to September 30, 2014, the Company noted potential impairment indicators of goodwill such that it is reasonably possible that the estimate of the fair value of each reporting unit may change in the near term, which will result in the need to record an impairment loss to reduce goodwill to fair value. Any such impairment losses may have a material impact on the Company’s assets and stockholder’s equity, operating and net loss and comprehensive loss.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following summarizes the Company’s goodwill activity during the nine months ended September 30, 2014 by segment (in thousands):


	REI Segment			Cole Capital		Consolidated
Balance as of January 1, 2014	$	92,789		$	—	$	92,789
Cole Merger ⁽¹⁾		1,654,085			558,835		2,212,920
Goodwill allocated to dispositions ⁽²⁾		(209,259	)		—		(209,259	)

Balance as of September 30, 2014	$	1,537,615		$	558,835	$	2,096,450

(1)	Goodwill recognized from the Cole Merger was assigned to the REI segment and Cole Capital based on the excess consideration paid over the fair value of the assets and liabilities acquired and assumed in each segment. Refer to Note 5 — Acquisitions of CapLease, Cole and CCPT for further discussion.

(2)	Goodwill allocated to the cost basis of properties sold or classified as held for sale is included in loss on held for sale assets and disposition of properties, net, in the consolidated statement of operations.

Program Development Costs

The Company pays for organization, registration and offering expenses associated with the sale of common stock of the Managed REITs. The reimbursement of these expenses by the Managed REITs is limited to a certain percentage of the proceeds raised from their offerings, in accordance with their respective advisory agreements and charters. Such expenses paid by the Company on behalf of the Managed REITs in excess of these limits that are expected to be collected are recorded as program development costs. The Company assesses the collectability of the program development costs, considering the offering period and historical and forecasted sales of shares under the Managed REITs’ respective offerings and reserves for any balances considered not collectible. No reserves were recorded as of September 30, 2014, as the Company expects to be reimbursed for all of the program development costs by the Managed REITs as additional proceeds from their respective offerings are raised. Program development costs are included in deferred costs and other assets, net in the accompanying consolidated balance sheets.

Acquisition Related Expenses and Merger and Other Non-routine Transaction Related Expenses

All direct costs incurred as a result of a business combination are classified as acquisition costs or merger and other non-routine transaction costs and expensed as incurred. In addition, indirect costs, such as internal salaries, that are tracked and documented in a manner that clearly indicate that the activities driving the cost directly relate to activities necessary to complete, or effect, a business combination are classified as acquisition related expenses. Similar costs incurred in relation to mergers with entities under common control (which are not accounted for as acquisitions) are included in the caption “merger and other non-routine transactions.” Acquisition related expenses include legal and other transaction related costs incurred in connection with self-originated acquisitions including purchases of portfolios. Other non-routine transaction costs are also presented within the line item merger and other non-routine transactions in the consolidated statements of operations.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Merger and other non-routine transaction related expenses include the following costs (amounts in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013 (As Corrected)			2014		2013 (As Corrected)
Merger related costs:
Strategic advisory services	$	3,150	$	750		$	35,765	$	12,549
Transfer taxes		—		—			5,109		1,085
Legal fees and expenses		579		2,052			5,126		5,242
Personnel costs and other reimbursements		—		348			751		987
Multi-tenant spin-off		2,270		—			7,450		—
Other fees and expenses		—		(52	)		1,676		5,408
Other non-routine costs
Post-transaction support services		—		1,200			14,251		3,200
Subordinated distribution fees		—		—			78,244		98,360
Furniture, fixtures and equipment		—		—			14,085		5,800
Legal fees and expenses		743		—			2,569		950
Personnel costs and other reimbursements		—		—			2,718		—
Other fees and expenses		890		3			7,608		153

Total	$	7,632	$	4,301		$	175,352	$	133,734

Due from Affiliates

The Company receives or may be entitled to receive compensation and reimbursement for services primarily relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets. Refer to Note 20 — Related Party Transactions and Arrangements for further explanation.

Reportable Segments

The Company has concluded that it has two reportable segments as it has organized its operations into two segments for management and internal financial reporting purposes, REI and Cole Capital. The identification and aggregation of reportable segments requires the Company’s management to exercise certain judgments. Refer to Note 6 — Segment Reporting for further information.

Revenue Recognition - Cole Capital

Revenue consists of securities sales commissions and dealer manager fees, real estate acquisition fees, property management fees, advisory fees, asset management fees and performance fees for services relating to the Managed REITs’ offerings and the investment and management of their respective assets, in accordance with the respective advisory and dealer manager agreements. The Company records revenue related to acquisition fees, securities sales commissions and dealer manager fees upon completion of a transaction and advisory, asset and property management fees as services are performed. The Company is also reimbursed for certain costs incurred in providing these services. Securities sales commission and dealer manager reimbursements are recorded as revenue as the expenses are incurred. Other reimbursements are recorded as revenue when reimbursements are reasonably assured.

Income Taxes

ARCP currently qualifies and has elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. As a REIT, except as discussed below, ARCP generally is not subject to federal income tax on taxable income that it distributes to its stockholders so long as it distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if ARCP maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

The Operating Partnership is classified as a partnership for federal income tax purposes. As a partnership, the Operating Partnership is not a taxable entity for federal income tax purposes. Instead, each partner in the Operating Partnership is required to take into account its allocable share of the Operating Partnership’s income, gains, losses, deductions, and credits for each taxable year. However, the Operating Partnership may be subject to certain state and local taxes on its income and property.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

As of September 30, 2014, the Operating Partnership, ARCP, ARCT III and ARCT IV had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2010 remain open to examination by the major taxing jurisdictions to which the Operating Partnership, ARCP, ARCT III and ARCT IV are subject.

Under the LPA, the Operating Partnership is to conduct business in such a manner as to permit ARCP at all times to qualify as a REIT.

The Company conducts substantially all of its Cole Capital business operations through a TRS. A TRS is a subsidiary of a REIT that is subject to corporate federal, state and local income taxes, as applicable. The Company’s use of a TRS enables it to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. The Company conducts all of its business in the United States, and as a result, it files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. Certain of The Company’s inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation.

The Company provides for income taxes in accordance with current authoritative accounting and tax guidance. The tax expense or benefit related to significant, unusual or extraordinary items is recognized in the quarter in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the quarter in which the change occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

In conjunction with the acquisition of the Red Lobster Portfolio, the Company entered into a reverse section 1031 like-kind exchange agreement with a third party intermediary. The exchange agreement is for a maximum of 180 days and allows the Company, for tax purposes, to defer gains on the sale of other properties sold within this period. Until the earlier of termination of the exchange agreements or 180 days after the first acquisition date, the third party intermediary is the legal owner of each property, although the Company controls the activities that most significantly impact each property and retains all of the economic benefits and risks associated with each property. Each property is held by the third party intermediary in a variable interest entity for which the Company is the primary beneficiary. Accordingly, the Company consolidates these properties and their operations even during the period they are held by the third party intermediary. As of September 30, 2014, 541 Red Lobster properties acquired in July and September of 2014 were held by the third party intermediary. The Company has consolidated each of these properties since the date of acquisition.

Repurchase Agreements

In certain circumstances, the Company may obtain financing through a repurchase agreement. The Company evaluates the initial transfer of a financial instrument and the related repurchase agreement for sale accounting treatment. In instances where the Company maintains effective control over the transferred securities, the Company accounts for the transaction as a secured borrowing, and accordingly, both the securities and related repurchase agreement payable are recorded separately in the accompanying consolidated balance sheets in investment securities, at fair value and other debt, net, respectively. In instances where the Company does not maintain effective control over the transferred securities, the Company accounts for the transaction as a sale of securities for proceeds consisting of cash and a forward purchase contract.

Recent Accounting Pronouncements

In April 2014, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update, 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which amends the reporting requirements for discontinued operations by updating the definition of a discontinued operation to be a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, resulting in fewer disposals that qualify for discontinued operations reporting yet the pronouncement also requires expanded disclosures for discontinued operations. The Company adopted ASU 2014-08 effective January 1, 2014. Beginning with the first quarter of 2014, the results of operations for all properties sold and properties classified as held for sale that do not meet the criteria to qualify as a discontinued operation and were not previously reported in discontinued operations in the Amended 10-K for the year ended December 31, 2013 are presented within income from continuing operations on the accompanying consolidated statements of income.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of the new standard on its financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early application permitted. The Company does not believe ASU 2014-15, when effective, will have a material impact on the Company’s consolidated unaudited financial statements because the Company currently does not have any conditions that give rise to substantial doubt about its ability to continue as a going concern.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which eliminates the deferral of FAS 167 and makes changes to both the variable interest model and the voting model. These changes will require re-evaluation of certain entities for consolidation and will require the Company to revise its documentation regarding the consolidation or deconsolidation of such entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of the new standard on its financial statements.

Note 5 — Acquisitions of CapLease, Cole and CCPT

CapLease Acquisition

On November 5, 2013 (the “CapLease Acquisition Date”), the Company completed the CapLease Merger, an acquisition of a real estate investment trust that primarily owned and managed a diversified portfolio of single tenant commercial real estate properties subject to long-term leases, the majority of which were net leases, to high credit quality tenants, by acquiring 100% of the outstanding common stock and voting interests of CapLease. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Company’s consolidated financial statements include the results of operations of CapLease subsequent to the CapLease Acquisition Date.

The purchase price includes a cash payment of $920.7 million, which was funded by the Company through additional borrowings under its revolving credit facility and the credit facility assumed from CapLease. See Note 13 — Other Debt and Note 14 — Credit Facilities.

The purchase price allocation for the CapLease Merger is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with U.S. GAAP. The purchase price allocation will be finalized as the Company receives additional information relevant to the acquisition, including a final valuation of the assets purchased and liabilities assumed.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair value. The following table summarizes the revised estimated fair values of the assets acquired and liabilities assumed at the CapLease Acquisition Date (in thousands):


	Preliminary
	Adjusted Amounts Recognized as of the CapLease Acquisition Date ⁽¹⁾
Fair value of consideration given	$	920,697


Assets purchased, at fair value:
Land		235,843
Buildings, fixtures and improvements		1,596,481
Land and construction in process		12,352
Acquired intangible lease assets		191,964

Total real estate investments		2,036,640
Cash and cash equivalents		41,799
Investment securities		60,730
Loans held for investment		26,457
Restricted cash		29,119
Deferred costs and other assets, net		21,574

Total identifiable assets purchased		2,216,319


Liabilities assumed, at fair value:
Mortgage notes payable		1,037,510
Secured credit facility		121,000
Other debt		114,208
Below-market leases		57,058
Derivative liabilities		158
Accounts payable and accrued expenses		49,291
Deferred rent, derivative and other liabilities		8,619

Total liabilities assumed		1,387,844


Non-controlling interest retained by third party		567


Net identifiable assets acquired by Company		827,908

Goodwill	$	92,789

(1)	As reported in the Amended 10-K.

Management is in the process of further evaluating the purchase price accounting. The fair value of real estate investments and below-market leases have been estimated by the Company with the assistance of third-party valuation firms. Based on a preliminary analysis received to-date, the estimated fair value of these assets and liabilities total $2.0 billion and $57.1 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations.

The ascribed value of the non-controlling interest has been estimated based on the fair value at the acquisition date of the percentage ownership of The Woodlands, Texas development activity not held by the Company. See Note 7 — Real Estate Investments for further information on this development project.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The fair value of the remaining CapLease assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Amended 10-K for the year ended December 31, 2013.

Goodwill of approximately $92.8 million has been preliminarily assigned to the REI segment. The goodwill recognized is attributed to the enhancement of the Company’s year-round rental revenue stream, expected synergies and the assembled work force at CapLease.

The pro forma consolidated statements of operations in Note 7 — Real Estate Investments are presented as if CapLease had been included in the consolidated results of the Company for the nine months ended September 30, 2014 and 2013.

Cole Acquisition

On February 7, 2014, the Company completed its acquisition of Cole, as discussed in Note 3 — Mergers and Acquisitions. The Company accounted for the Cole Merger as a business combination under the acquisition method of accounting. Therefore, the Company’s consolidated financial statements include the results of operations of Cole subsequent to the Cole Acquisition Date.

Fair Value of Consideration Transferred

The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):


	As of Cole Acquisition Date (Preliminary)
Estimated Fair Value of Consideration Transferred:
Cash	$	181,775
Common stock		7,285,868

Total consideration transferred	$	7,467,643

The fair value of the 520.8 million shares of ARCP’s common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of ARCP’s common stock on the Cole Acquisition Date. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former stockholders of Cole.

Allocation of Consideration

The consideration transferred pursuant to the Cole Merger Agreement was allocated to the assets acquired and liabilities assumed for the REI segment and Cole Capital, based upon their preliminary estimated fair values as of the Cole Acquisition Date. The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The measurement periods recorded for the period from the Cole Acquisition Date to September 30, 2014 are presented consolidated and by segments in the tables below.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following table summarizes the revised estimated fair values of the assets acquired and liabilities assumed at the Cole Acquisition Date (in thousands):


	Preliminary
	Adjusted Total as of Cole Acquisition Date
Identifiable Assets Acquired at Fair Value:
Land	$	1,737,839
Buildings, fixtures and improvements		5,901,827
Acquired intangible lease assets		1,324,217

Total real estate investments		8,963,883
Investment in unconsolidated entities		103,966
Investment securities, at fair value		151,197
Loans held for investment, net		72,326
Cash and cash equivalents		149,965
Restricted cash		15,704
Intangible assets		385,368
Deferred costs and other assets		94,667
Due from affiliates		3,301

Total identifiable assets acquired	$	9,940,377


Identifiable Liabilities Assumed at Fair Value:
Mortgage notes payable, net		2,706,585
Credit facilities		1,309,000
Other debt		49,013
Below-market lease liabilities		212,433
Accounts payable and accrued expenses		142,243
Deferred rent, derivative and other liabilities		235,299
Dividends payable		6,271
Due to affiliates		44

Total liabilities assumed		4,660,888


Non-controlling interests		24,766

Net identifiable assets acquired		5,254,723
Goodwill		2,212,920

Net assets acquired	$	7,467,643

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following table summarizes the revised estimated fair values of the assets acquired and liabilities assumed for the REI segment as initially recorded at the Cole Acquisition Date (in thousands):


	Preliminary
	REI Segment (Adjusted)
Identifiable Assets Acquired at Fair Value:
Land	$	1,737,839
Buildings, fixtures and improvements		5,901,827
Acquired intangible lease assets		1,324,217

Total real estate investments		8,963,883
Investment in unconsolidated entities		100,659
Investment securities, at fair value		151,197
Loans held for investment, net		72,326
Cash and cash equivalents		129,552
Restricted cash		15,704
Deferred costs and other assets		43,774

Total identifiable assets acquired	$	9,477,095


Identifiable Liabilities Assumed at Fair Value:
Mortgage notes payable, net		2,706,585
Credit facilities		1,309,000
Other debt		49,013
Below-market lease liabilities		212,433
Accounts payable and accrued expenses		87,628
Deferred rent, derivative and other liabilities		67,841
Dividends payable		6,271

Total liabilities assumed		4,438,771


Non-controlling interests		24,766


Net identifiable assets acquired		5,013,558
Goodwill		1,654,085

Net assets acquired	$	6,667,643

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed for Cole Capital as initially recorded at the Cole Acquisition Date, as well as measurement period adjustments made and the revised estimated fair values of the assets acquired and liabilities assumed at the Cole Acquisition Date (in thousands):


	Preliminary
	Cole Capital (Adjusted)
Identifiable Assets Acquired at Fair Value:
Investment in unconsolidated entities	$	3,307
Cash and cash equivalents		20,413
Intangible assets		385,368
Deferred costs and other assets		50,893
Due from affiliates		3,301

Total identifiable assets acquired		463,282


Identifiable Liabilities Assumed at Fair Value:
Accounts payable and accrued expenses		54,615
Deferred rent, derivative and other liabilities		167,458
Due to affiliates		44

Total liabilities assumed		222,117


Net identifiable assets acquired		241,165
Goodwill		558,835

Net assets acquired	$	800,000

The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities allocated to the REI segment have been estimated by the Company with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $9.0 billion and $212.4 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.

The intangible assets acquired primarily consist of management and advisory contracts that the Company has with the Managed REITs and are subject to an estimated useful life of approximately four years. The Company recorded $62.3 million of amortization expense for the period from the Cole Acquisition Date to September 30, 2014. The estimated amortization expense for the remainder of the year ending December 31, 2014 is $24.3 million. The estimated amortization expense for each of the years ending December 31, 2015, 2016 and 2017 is $96.3 million and the estimated amortization expense for the year ending December 31, 2018 is $9.8 million.

Subsequent to September 30, 2014, the Company noted potential impairment indicators of intangible assets acquired in the Cole Merger such that it is reasonably possible that the estimate of the fair value of such intangible assets may change in the near term, which will result in the need to record an impairment loss to reduce the intangible assets to fair value. Any such impairment losses may have a material impact on the Company’s assets and stockholder’s equity, operating and net loss and comprehensive loss.

Goodwill of approximately $1.7 billion has been preliminarily assigned to the REI segment. The goodwill recognized is attributed to the enhancement of the Company’s year-round rental revenue stream, realized and expected synergies, the impact of the merger on lowering the Company’s cost of capital, as well as the benefits of critical mass, improved portfolio diversification and enhanced access to capital markets. Goodwill of approximately $558.8 million has been preliminarily assigned to Cole Capital. The goodwill is primarily supported by management’s belief that Cole Capital brings an established management platform with numerous strategic benefits including growth from new income streams and the ability to offer new products. None of the goodwill is expected to be deductible for income tax purposes.

The fair value of the remaining Cole assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2013.

The amounts of revenue and net income related to Cole property acquisitions and Cole Capital included in the accompanying consolidated statements of operations from the Cole Acquisition Date to the period ended September 30, 2014 was $625.8 million and $68.9 million respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The pro forma consolidated statements of operations in Note 7 — Real Estate Investments are presented as if Cole had been included in the consolidated results of the Company for the entire periods ended September 30, 2014 and 2013.

CCPT Acquisition

On May 19, 2014, the Company completed its acquisition of CCPT, as discussed in Note 3 — Mergers and Acquisitions. The Company accounted for the CCPT Merger as a business combination under the acquisition method of accounting. Therefore, the Company’s consolidated financial statements include the results of operations of CCPT subsequent to the CCPT Acquisition Date.

Fair Value of Consideration Transferred

The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the CCPT Acquisition Date totaled approximately $73.2 million, which was paid in cash. The acquisition was funded by the Company through additional borrowings under its revolving credit facility.

Allocation of Consideration

The consideration transferred pursuant to the CCPT Merger Agreement was allocated to the assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the CCPT Acquisition Date. The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by segment at the CCPT Acquisition Date (in thousands):


	Preliminary May 19, 2014
Identifiable Assets Acquired at Fair Value:
Land	$	28,258
Buildings, fixtures and improvements		113,296
Acquired intangible lease assets		17,960

Total real estate investments		159,514
Cash and cash equivalents		167
Restricted cash		2,420
Prepaid expenses and other assets		297

Total identifiable assets acquired		162,398

Identifiable Liabilities Assumed at Fair Value:
Mortgage notes payable		85,286
Unsecured credit facility		800
Accounts payable and accrued expenses		443
Below-market lease liability		1,752
Due to affiliates		568
Deferred rent and other liabilities		390

Total liabilities assumed		89,239

Net identifiable assets acquired	$	73,159

The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities have been estimated by the Company with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $159.5 million and $1.8 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.

The fair value of the remaining CCPT assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Amended 10-K for the year ended December 31, 2013.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The amounts of revenue and net loss related to CCPT property acquisitions included in the accompanying consolidated statements of operations from the CCPT Acquisition Date to the period ended September 30, 2014 was $5.0 million and $2.3 million respectively.

Note 6 — Segment Reporting

The Company operates under two segments, REI and Cole Capital.

REI – Through its REI segment, the Company acquires, owns and operates primarily single-tenant, freestanding commercial real estate properties primarily subject to net leases with high credit quality tenants. As of September 30, 2014, the Company owned 4,714 properties comprising 113.8 million square feet of single- and multi-tenant retail and commercial space located in 49 states and Canada, which include properties owned through consolidated joint ventures. The rentable space at these properties was 99.2% leased with a weighted average remaining lease term of 11.50 years. In addition, as of September 30, 2014, the Company owned 10 commercial mortgage-backed securities (“CMBS”), 14 loans held for investment and, through the Unconsolidated Joint Ventures, had interests in six properties comprising 1.6 million rentable square feet of commercial and retail space.

Cole Capital – Cole Capital is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. Cole Capital serves as the dealer manager and distributes shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. Cole Capital receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Cole Capital also develops new REIT offerings, including obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority, Inc. (“FINRA”) and various blue sky jurisdictions for such offerings.

On September 30, 2014, the Company entered into a definitive equity purchase agreement (the “Purchase Agreement”), to sell Cole Capital to RCAP, and, in conjunction with the sale agreement, entered into sub-advisory agreements to provide acquisition and property management services to Cole Capital subsequent to the closing of the transaction. These agreements were subsequently terminated by RCAP on November 3, 2014 as a result of the Audit Committee investigation into the Company. On December 4, 2014, a settlement agreement was reached as discussed within Note 24 — Subsequent Events.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The Company allocates certain operating expenses, such as audit and legal fees, board of director fees, employee related costs and benefits and general overhead expenses between its operating segments. The following tables present a summary of the comparative financial results and total assets for each business segment (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated)¹			2014			2013 (As Restated)¹
REI:
Rental income	$	365,712		$	89,729		$	924,646		$	183,251
Direct financing lease income		625			1,201			2,812			1,201
Operating expense reimbursements		30,984			4,325			81,716			8,516

Total real estate investment revenues		397,321			95,255			1,009,174			192,968

Acquisition related		13,998			26,948			34,616			74,541
Merger and other non-routine transactions		7,613			4,301			173,406			133,734
Property operating		40,977			5,430			110,018			11,065
Management fees to affiliate		—			—			13,888			12,493
General and administrative		14,942			9,866			68,580			23,921
Depreciation and amortization		240,073			62,136			625,521			122,484
Impairment of real estate		2,299			2,074			3,855			2,074

Total operating expenses		319,902			110,755			1,029,884			380,312

Operating income (loss)		77,419			(15,500	)		(20,710	)		(187,344	)

Interest expense, net		(101,643	)		(27,189	)		(326,491	)		(45,414	)
Extinguishment of debt, net		(5,396	)		—			(21,264	)		—
Other income, net		8,508			136			16,799			2,658
Loss on derivative instruments, net		(17,484	)		(38,651	)		(10,398	)		(69,830	)
Loss on disposition of property		(256,894	)		—			(275,768	)		—
Gain (loss) on sale of investments		6,357			(2,246	)		6,357			(1,795	)

Total other expenses, net		(366,552	)		(67,950	)		(610,765	)		(114,381	)

Net loss from continuing operations		(289,133	)		(83,450	)		(631,475	)		(301,725	)

Discontinued operations:
Income from operations of held for sale assets		—			96			—			159

Net income from discontinued operations		—			96			—			159

Net loss	$	(289,133	)	$	(83,354	)	$	(631,475	)	$	(301,566	)


Cole Capital:
Dealer manager and distribution fees, selling commissions and offering reimbursements	$	21,535		$	—		$	73,957		$	—
Transaction service fees		22,972			—			41,942			—
Management fees and reimbursements		15,290			—			35,377			—

Total Cole Capital revenues		59,797			—			151,276			—

Cole Capital reallowed fees and commissions		15,398			—			56,902			—
General and administrative expenses		17,265			—			60,131			—
Merger and other non-routine transactions		19			—			1,946			—
Depreciation and amortization		25,077			—			64,210			—

Total operating expenses		57,759			—			183,189			—

Total other income		(952	)		—			12,903			—

Net loss from continuing operations		1,086			—			(19,010	)		—

Discontinued operations:
Income from operations of held for sale assets		—			—			—			—

Net loss	$	1,086		$	—		$	(19,010	)	$	—


Total Company:
Total revenues	$	457,118		$	95,255		$	1,160,450		$	192,968
Total operating expenses	$	377,661		$	110,755		$	1,213,073		$	380,312
Total other expense	$	(367,504	)	$	(67,950	)	$	(597,862	)	$	(114,381	)
Loss from continuing operations	$	(288,047	)	$	(83,450	)	$	(650,485	)	$	(301,725	)
Income (loss) from discontinued operations	$	—		$	96		$	—		$	159
Net loss	$	(288,047	)	$	(83,354	)	$	(650,485	)	$	(301,566	)

(1)	For discussion of the restatement adjustments, see Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)


	Total Assets
	September 30, 2014		December 31, 2013
REI	$	21,834,806	$	7,809,083
Cole Capital		1,032,777		—

Total Company	$	22,867,583	$	7,809,083

Note 7 — Real Estate Investments

Excluding the Cole Merger, the ARCT IV Merger and the CCPT Merger, the Company acquired interests in 1,092 commercial properties, including 28 land parcels, for an aggregate purchase price of $3.8 billion during the nine months ended September 30, 2014 (the “2014 Acquisitions”). The Company is in the process of obtaining and reviewing the final third party appraisals for some of the 2014 Acquisitions, and as such, the fair value of the related assets acquired and liabilities assumed during the nine months ended September 30, 2014 are provisionally allocated. The following table presents the preliminary allocation of the fair value of the assets acquired and liabilities assumed during the periods presented (dollar amounts in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated)			2014			2013 (As Restated)
Real estate investments, at cost:
Land	$	608,875		$	258,019		$	823,795		$	754,012
Buildings, fixtures and improvements		1,309,751			730,159			2,486,868			2,161,831

Total tangible assets		1,918,626			988,178			3,310,663			2,915,843

Acquired intangible assets:
In-place leases		354,409			118,212			522,568			330,191
Above-market leases		82,023			—			110,230			—
Assumed intangible liabilities:
Below-market leases		(84,071	)		(4,200	)		(101,108	)		(4,200	)
Fair value adjustment of assumed notes payable		—			—			(23,531	)		—

Total purchase price of assets acquired, net		2,270,987			1,102,190			3,818,822			3,241,834
Notes payable assumed		—			—			(301,532	)		—

Cash paid for acquired real estate investments	$	2,270,987		$	1,102,190		$	3,517,290		$	3,241,834

Number of properties acquired		753			650			1,092			1,670

The following table presents unaudited pro forma information as if all of the 2014 Acquisitions and the Cole Merger, ARCT IV Merger and CCPT Merger, as discussed in Note 3 — Mergers and Acquisitions, were completed on January 1, 2013 for each period presented below. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of acquisitions to reflect the additional depreciation and amortization and interest expense that would have been charged had the acquisitions occurred on January 1, 2013. Additionally, the unaudited pro forma net loss attributable to stockholders was adjusted to exclude acquisition related expenses of $34.6 million and $74.5 million for the nine months ended September 30, 2014 and 2013, respectively and merger and other non-routine transaction related expenses of $175.4 million and $133.7 million for the nine months ended September 30, 2014 and 2013, respectively (in thousands).


	Nine Months Ended September 30,
	2014			2013
Pro forma revenues	$	1,397,494		$	1,138,600
Pro forma net income (loss) attributable to stockholders	$	(349,572	)	$	(283,031	)

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Future Lease Payments

The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (in thousands):


	Future Minimum Operating Lease Base Rent Payments		Future Minimum Direct Financing Lease Payments ⁽¹⁾
October 1, 2014 - December 31, 2014	$	897,524	$	1,239
2015		1,413,737		4,757
2016		1,394,782		4,674
2017		1,348,156		4,273
2018		1,296,944		3,183
Thereafter		11,759,055		10,313

Total	$	18,110,198	$	28,439

(1)	41 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties.

Investment in Direct Financing Leases, Net

The components of the Company’s net investment in direct financing leases as of September 30, 2014 and December 31, 2013 are as follows (in thousands):


	September 30, 2014			December 31, 2013
Future minimum lease payments receivable	$	28,439		$	33,729
Unguaranteed residual value of property		39,852			46,172
Unearned income		(10,850	)		(13,789	)

Net investment in direct financing leases	$	57,441		$	66,112

Development Activities

During the nine months ended September 30, 2014, the Company acquired 28 land parcels, upon which single-tenant commercial properties will be developed. Based on budgeted construction costs, the remaining costs to complete the buildings is estimated to be $28.1 million in aggregate. The land acquired for an aggregate amount of $14.9 million is included in land in the accompanying consolidated balance sheet. During the nine months ended September 30, 2014, the Company completed 4 development projects.

Prior to the CapLease Acquisition Date, CapLease entered into an agreement with a major Texas-based developer to develop a 150,000 square foot speculative office building in The Woodlands, Texas, adjacent to and part of the same development as an existing office building owned by CapLease since 2012. Costs of the project, which are budgeted to be $34.0 million, are scheduled to be funded by equity contributions from the Company and its developer partner, and $17.0 million of advances during the construction period under a development loan entered into with Amegy Bank. All equity contributions are scheduled to be borne as follows: the Company, 90%; and the developer, 10%; except for cost overruns, which will be borne 50% by each. Because the Company has a controlling financial interest in the investment, the Company consolidates the investment for financial accounting purposes. The Company has an option to purchase, and the developer the option to sell to the Company, in each case at fair market value, the developer’s interest in the project upon (i) substantial completion of the project and (ii) leases being entered into for 95% of the square footage of the project. Construction activity and funding of the project commenced during the quarter ended September 30, 2013 and was expected to be completed during the second half of 2014. As of September 30, 2014, the Company had a total investment of $23.8 million, including capitalized interest of $69,000, and estimated remaining investment of $10.2 million related to the development project.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Tenant Concentration

As of September 30, 2014, there was one tenant exceeding 10% of consolidated annualized rental income. As of September 30, 2013, there were no tenants exceeding 10% of consolidated annualized rental income. Annualized rental income for net leases is rental income as of the period reported, which includes the effect of tenant concessions such as free rent, as applicable.

Geographic Concentration

As of September 30, 2014, properties located in Texas represented 12.6% of consolidated annualized rental income determined on a straight-line basis. There were no geographic concentrations exceeding 10% of consolidated annualized rental income at September 30, 2013.

Note 8 — Investment Securities, at Fair Value

Investment securities are considered available-for-sale and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income (loss) as a component of equity on the consolidated balance sheets unless the securities are considered to be other-than-temporarily impaired at which time the losses are reclassified to expense.

The following tables detail the unrealized gains and losses on investment securities as of September 30, 2014 and December 31, 2013 (in thousands):


	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
CMBS		56,908		2,169		—		59,077

Total	$	56,908	$	2,169	$	—	$	59,077


	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Investments in real estate fund	$	1,589	$	—	$	(105	)	$	1,484
CMBS		60,452		498		(367	)		60,583

Total	$	62,041	$	498	$	(472	)	$	62,067

CMBS

In connection with the Cole Merger, the Company acquired 15 CMBS with an estimated aggregate fair value of $151.2 million as of the Cole Acquisition Date. On September 29, 2014, the Company sold the 15 CMBS acquired in the Cole Merger for proceeds of $158.0 million, and recorded a gain of $6.2 million which is included in Gain (loss) on sale of investments in the accompanying consolidated statements of operations. In connection with the sale, the Company settled the outstanding repurchase agreements that were secured by a portion of the CMBS. See Note 13 — Other Debt for further discussion. As of September 30, 2014, the Company owned 10 CMBS with an estimated aggregate fair value of $59.1 million. As of December 31, 2013, the Company owned 10 CMBS with an estimated aggregate fair value of $60.6 million.

The scheduled maturity of the Company’s CMBS as of September 30, 2014 is as follows (in thousands):


	September 30, 2014
	Amortized Cost		Fair Value
Due within one year	$	—	$	—
Due after one year through five years		1,075		1,104
Due after five years through 10 years		38,144		39,696
Due after 10 years		17,689		18,277

	$	56,908	$	59,077

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Investment in Real Estate Fund

Prior to September 30, 2014, the Company had investments in a real estate fund that is sponsored by an affiliate of the Former Manager of the Company and which invests primarily in equity securities of other publicly traded REITs. This investment was accounted for under the equity method of accounting because the Company had significant influence but not control. During the three months ended September 30, 2014, the Company sold the investments and recorded a gain on the sale of the securities of approximately $178,000, which is included in the Gain (loss) on sale of investments in the accompanying consolidated statements of operations.

Note 9 — Loans Held for Investment

During the nine months ended September 30, 2014, in connection with the Cole Merger, the Company acquired two mortgage notes receivable, each of which is secured by an office building. The mortgage notes had a fair value of $72.3 million as of the Cole Acquisition Date. As of December 31, 2013, the Company owned 12 loans held for investment, which were acquired in connection with the CapLease Merger and consist predominantly of mortgage loans on properties subject to leases to investment grade tenants. The loans had a fair value of $26.5 million at the CapLease Merger Date. At September 30, 2014, the Company owned 14 loans held for investment, which had a carrying value of $97.0 million and carried interest rates ranging from 5.28% to 7.24%. As of December 31, 2013, the two loans held for investment had a carrying value of $26.3 million and carried interest rates ranging from 5.28% to 7.24%. The fair value adjustment is being amortized to interest expense in the consolidated statements of operations over the term of the loan, using the effective interest method.

The Company’s loan portfolio is comprised primarily of fully amortizing or nearly fully amortizing first mortgage loans on commercial real estate leased to a single tenant. Therefore, the Company’s monitoring of the credit quality of its loans held for investment is focused primarily on an analysis of the tenant, including review of tenant credit ratings (including changes in ratings) and other measures of tenant credit quality, trends in the tenant’s industry and general economic conditions and an analysis of measures of collateral coverage, such as an estimate of the loan’s loan-to-value (“LTV”) ratio (principal amount outstanding divided by estimated value of the property) and its remaining term until maturity. As of September 30, 2014 and December 31, 2013, the Company had no reserve for loan loss.

Note 10 — Deferred Costs and Other Assets, Net

Deferred costs and other assets, net consisted of the following as of September 30, 2014 and December 31, 2013 (in thousands):


	September 30, 2014		December 31, 2013 (As Restated)
Deferred costs, net	$	150,026	$	84,746
Accounts receivable, net ⁽¹⁾		70,224		16,254
Straight-line rent receivable		68,694		19,010
Prepaid expenses		18,764		43,801
Leasehold improvements, property and equipment, net ⁽²⁾		30,153		531
Restricted escrow deposits		43,740		101,813
Derivative assets, at fair value		8,775		9,189
Other assets		56,230		5,317

	$	446,606	$	280,661

(1)	Allowance for doubtful accounts was $1.9 million and $0.2 million as of September 30, 2014 and December 31, 2013, respectively.

(2)

Amortization expense for leasehold improvements totaled $0.3 million and $0.9 million for the three and nine months ended September 30, 2014, respectively. Accumulated amortization was $0.9 million and $7,000 as of September 30, 2014 and December 31, 2013, respectively. Depreciation expense for property and equipment totaled $0.5 million and $1.1 million for the three and nine months ended September 30, 2014, respectively. Accumulated depreciation was $1.1 million and $5,000 as of September 30, 2014 and December 31, 2013, respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 11 — Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The guidance defines three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be infrequent.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2014, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

During the three and nine months ended September 30, 2014, real estate assets with a carrying amount of $5.1 million related to five properties and real estate assets with a carrying amount of $8.2 million related to nine properties, respectively, were deemed to be impaired and their carrying amounts were reduced to their estimated fair values, resulting in impairment charges of $2.3 million and $3.9 million, respectively, which are included in impairment of real estate on the consolidated statements of operations for the three and nine months ended September 30, 2014. During the three and nine months ended September 30, 2013, real estate assets with a carrying amount of $2.6 million related to one property were deemed to be impaired and their carrying amounts were reduced to their estimated fair values, resulting in impairment charges of $2.1 million, which is included in impairment of real estate on the consolidated statements of operations for the three and nine months ended September 30, 2013. During the year ended December 31, 2013, real estate assets with carrying amounts of $4.5 million related to two properties were deemed to be impaired and their carrying amounts were reduced to their estimated fair value, resulting in an impairment charge of $3.3 million.

The Company’s estimated fair values of its real estate assets were primarily based upon an income approach utilizing a present value technique to discount the expected cash flows using market participant assumptions for market rent and terminal values, which are considered to be Level 3 inputs, or based upon recent comparable sales transactions, which are considered to be Level 2 inputs. The aggregate fair value of impaired real estate assets as of September 30, 2014 and December 31, 2013 was $2.8 million, and $1.2 million, respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following tables present information about the Company’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):


	Level 1		Level 2			Level 3			Balance as of September 30, 2014
Assets:
CMBS		—		—			59,077			59,077
Interest rate swap assets		—		8,775			—			8,775

Total assets	$	—	$	8,775		$	59,077		$	67,852

Liabilities:
Interest rate swap liabilities	$	—	$	(5,986	)	$	—		$	(5,986	)

Total liabilities	$	—	$	(5,986	)	$	—		$	(5,986	)


	Level 1		Level 2			Level 3			Balance as of December 31, 2013
Assets:
Investments in real estate fund	$	—	$	1,484		$	—		$	1,484
CMBS		—		—			60,583			60,583
Interest rate swap assets		—		9,189			—			9,189

Total assets	$	—	$	10,673		$	60,583		$	71,256

Liabilities:
Interest rate swap liabilities	$	—	$	(1,719	)	$	—		$	(1,719	)
Series D Preferred Stock embedded derivative		—		—			(16,736	)		(16,736	)

Total liabilities	$	—	$	(1,719	)	$	(16,736	)	$	(18,455	)

CMBS — The fair values of the Company’s CMBS are valued using broker quotations, collateral values, subordination levels and liquidity of the individual securities.

Derivatives — The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

Series D Preferred Stock embedded derivative — The valuation of this derivative instrument was determined using a binomial option pricing model. Key inputs in the model include the expected term, risk-free interest rate, volatility and dividend yield.

The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value on the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following is a reconciliation of the changes in instruments with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, 2014 (in thousands):


	CMBS			Series D Preferred Stock Embedded Derivative			Contingent Consideration Arrangements			Total
Beginning balance as of December 31, 2013	$	60,583		$	(16,736	)	$	—		$	43,847
Total gains and losses:
Unrealized gain included in other comprehensive income, net		9,456			—			—			9,456
Changes in fair value included in net income, net		—			(13,574	)		(990	)		(14,564	)
Purchases, issuances, settlements and amortization:
Fair value at purchase/issuance		151,197			—			(3,606	)		147,591
Sale of CMBS acquired in the Cole Merger		(151,248	)								(151,248	)
Reclassification of previous unrealized gains on investment securities into net loss-CMBS		(7,417	)		—			—			(7,417	)
Return of principal received		(3,678	)		—			—			(3,678	)
Amortization included in net income, net		184			—			—			184
Reclassification of contingent consideration to held for sale		—			—			4,596			4,596
Redemption of Series D		—			30,310			—			30,310

Ending balance	$	59,077		$	—		$	—		$	59,077

The fair values of the Company’s financial instruments that are not reported at fair value on the consolidated balance sheets are reported below (dollar amounts in thousands):


	Level		Carrying Amount at September 30, 2014		Fair Value at September 30, 2014		Carrying Amount at December 31, 2013		Fair Value at December 31, 2013
Assets:
Loans held for investment		3	$	96,981	$	97,607	$	26,279	$	26,435


Liabilities:
Mortgage notes payable, net		3	$	4,327,454	$	4,407,627	$	1,301,114	$	1,305,823
Corporate bonds, net		3		2,546,294		2,553,566		—		—
Convertible debt, net		3		976,251		998,441		972,490		976,629
Credit facilities		3		4,259,000		4,259,000		1,819,800		1,819,800
Secured term loan		3		48,587		50,572		58,979		59,049
Trust preferred notes		3		—		—		26,548		23,345
Unsecured Credit Facility		3		—		—		150,000		150,000
Other debt		3		—		—		19,277		19,350

Total liabilities			$	12,157,586	$	12,269,206	$	4,348,208	$	4,353,996

Loans held for investment — The fair value of the Company’s fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate those that a willing buyer and seller might use.

Credit facilities — Management believes that the stated interest rates (which float based on short-term interest rates) approximate market rates. As such, the fair values of these obligations are estimated to be equal to the outstanding principal amounts.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Convertible notes, mortgage notes payable and secured term loan — The fair value of mortgages payable on real estate investments and the secured term loan is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of market interest rates.

Trust preferred notes — The fair value of the Company’s other long-term debt is estimated using a discounted cash flow analysis, based on management’s estimates of market interest rates.

Note 12 — Mortgage Notes Payable

The Company’s mortgage notes payable consist of the following as of September 30, 2014 and December 31, 2013 (dollar amounts in thousands):


	Encumbered Properties		Outstanding Loan Amount		Weighted Average Effective Interest Rate ⁽²⁾			Weighted Average Maturity ⁽³⁾
September 30, 2014 ⁽¹⁾		806	$	4,237,464		4.80	%		6.27
December 31, 2013		177	$	1,258,661		3.42	%		3.41

(1)	Includes $542.8 million of mortgage notes held for sale.

(2)	Mortgage notes payable primarily have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 2.43% to 7.20% at September 30, 2014 and 1.83% to 6.28% at December 31, 2013.

(3)	Weighted average remaining years until maturity as of September 30, 2014 and December 31, 2013, respectively.

In conjunction with the various mergers and portfolio acquisitions, as described in Note 3 — Mergers and Acquisitions, aggregate net premiums totaling $137.4 million were recorded upon the assumption of the mortgages for above-market interest rates. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages using the effective-interest method. As of September 30, 2014, there was $87.8 million in unamortized net premiums included in mortgage notes payable, net on the consolidated balance sheet.

The following table summarizes the scheduled aggregate principal repayments subsequent to September 30, 2014 (in thousands):


Year	Total
October 1, 2014 - December 31, 2014	$	101,258
2015		162,126
2016		263,679
2017		506,980
2018		260,654
Thereafter		2,942,767

Total	$	4,237,464

The Company’s mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of September 30, 2014, the Company was in compliance with the debt covenants under the mortgage loan agreements.

During the three and nine months ended September 30, 2014, the Company paid off $173.3 million and $1.0 billion, respectively, of mortgage notes payable, including notes that were subject to interest rate swap agreements. In connection with the debt repayments, the Company paid prepayment fees totaling $3.0 million and $35.9 million for the three and nine months ended September 30, 2014, respectively, which are included in Extinguishment of debt, net in the accompanying consolidated statements of operations. In addition, the Company paid $0.1 million and $10.2 million during the three and nine months ended September 30, 2014 for the settlement of interest rate swaps that were associated with certain mortgage notes, which approximated the fair value of the interest rate swaps. The Company wrote off the deferred financing costs and premiums and discounts associated with these mortgages, which resulted in a gain of $1.9 million and $18.9 million during the three and nine months ended September 30, 2014, respectively, which is included in Extinguishment of debt, net in the accompanying consolidated statements of operations. The mortgages repaid during the nine months ended September 30, 2014 had a weighted average remaining interest rate of 5.00% and a weighted average remaining term of 2.45 years.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

National Institute of Health

The Company acquired the National Institute of Health (“NIH”) office building in Bethesda, Maryland with a historical cost approximating $40.0 million on November 5, 2013 as part of the acquisition of CapLease, Inc. As of September 30, 2014, 9,133 of the 207,055 square feet (4.4%) were leased by certain divisions of the NIH, with the remainder of the building substantially vacated since November 1, 2013.

On June 12, 2014, the lender of the $65.2 million mortgage loan, with a current balance outstanding of $53.8 million, collateralized by the property located in Bethesda, Maryland placed our loan with them in default due to non-payment. The Company decided not to make the debt service payment since cash flows generated from the property were insufficient to fund debt service payments and capital improvements necessary to lease and operate the property. The Company was not prepared to fund any further cash shortfalls. We are currently accruing interest at the default interest rate of 5.32% per annum.

Note 13 — Other Debt

Corporate Bond Offering

On February 6, 2014, the OP issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due February 6, 2017 (the “2017 Notes”), $750.0 million aggregate principal amount of 3.00% senior notes due February 6, 2019 (the “2019 Notes”) and $500.0 million aggregate principal amount of 4.60% senior notes due February 6, 2024 (the “2024 Notes,” and, together with the 2017 Notes and 2019 Notes, the “Notes”). The Notes are guaranteed by the Company. The OP may redeem all or a part of any series of the Notes at any time at its option at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest on the principal amount of the Notes of such series being redeemed to, but excluding, the applicable redemption date. With respect to the 2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6, 2019 with respect to the 2019 Notes, or November 6, 2023 with respect to the 2024 Notes, the redemption price will equal 100% of the principal amount of the Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date. In conjunction with this corporate bond offering, aggregate discounts totaling $4.2 million were recorded. As of September 30, 2014, the unamortized net discount totaled $3.7 million.

On September 12, 2014, the OP commenced an offer to exchange the 2017 Notes, 2019 Notes and 2024 Notes for new $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the “Exchange 2017 Notes”), new $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the “Exchange 2019 Notes”) and new $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the “Exchange 2024 Notes,” and, together with the Exchange 2017 Notes and Exchange 2019 Notes, the “Exchange Notes”). The terms of the Exchange Notes are substantially similar to the terms of the Notes except that the Exchange Notes are registered under the Securities Act of 1933 and are freely transferable. The exchange offer closed on October 16, 2014, with 100% of the Notes exchanged for Exchanged Notes.

Convertible Senior Note Offering

Effective July 29, 2013, the Operating Partnership issued to the General Partner $300.0 million of the 3.0% Convertible Senior Notes due 2018 and issued an additional $10.0 million of such notes on August 1, 2013 (collectively, the “Original 2018 Notes”). Effective December 10, 2013, the Company issued an additional $287.5 million through a reopening of the Original 2018 Notes indenture agreement (the “Reopened 2018 Notes,” together with the Original 2018 Notes, the “2018 Notes”). The 2018 Notes mature on August 1, 2018. Such issuances were identical to ARCP’s registered issuances of the same amount of notes to various purchasers in a public offering. The fair value of the Original 2018 Notes and Reopened 2018 Notes was determined at issuance to be $299.6 million and $282.1 million, respectively, resulting in a debt discount of $10.4 million and $5.4 million, respectively, with an offset recorded for the General Partner to additional paid-in capital and for the Operating Partnership to partners’ equity, both representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected lives of the 2018 Notes. As of September 30, 2014, the carrying value of the Original 2018 Notes and Reopened 2018 Notes was $302.1 million and $283.0 million, respectively. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2018 Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Notes at any time into such consideration on or after February 1, 2018. The initial conversion rate is 59.805 General Partner OP Units per $1,000 principal amount of 2018 Notes.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Effective December 10, 2013, the Operating Partnership issued to the General Partner $402.5 million of 3.75% Convertible Senior Notes due 2020 (the “2020 Notes”). The 2020 Notes mature on December 15, 2020. Such issuance was identical to ARCP’s registered issuance of the same amount of notes to various purchasers in a public offering. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded recorded for the General Partner to additional paid-in capital and for the Operating Partnership to partners’ equity, both representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of September 30, 2014, the carrying value of the 2020 Notes was $391.2 million. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2020 Notes into cash, General OP Units or a combination thereof, in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 General Partner OP Units per $1,000 principal amount of 2020 Notes.

The remaining unamortized discount for the 2018 Notes and 2020 Notes totaled $23.7 million as of September 30, 2014.

Secured Term Loan

As part of the CapLease Merger, the Company assumed a secured term loan with KBC Bank, N.V. with a principal balance of $59.8 million and a fair value of $60.7 million at the CapLease Acquisition Date. The Company recorded a premium of $0.8 million upon the assumption of the term loan in Other debt, net on the consolidated balance sheet. The interest coupon on the loan is fixed at 5.81% annually until the loan matures in January 2018. The loan is non-recourse to the Company, subject to limited non-recourse exceptions. The secured term loan provides for monthly payments of both principal and interest. During the nine months ended September 30, 2014, the Company made principal payments of $10.2 million. The scheduled principal repayments subsequent to September 30, 2014 are $2.7 million for the period October 1, 2014 through December 31, 2014 and $11.9 million, $12.5 million, $7.7 million and $13.3 million for the years ended December 31, 2015, 2016, 2017 and 2018, respectively. The premium is being amortized to interest expense on the consolidated statements of operations over the life of the secured term loan. As of September 30, 2014, the unamortized premium is $0.6 million. As of September 30, 2014, the carrying value of the secured term loan was $48.6 million, which is included in other debt, net in the accompanying consolidated balance sheets.

Amounts related to the secured term loan as of September 30, 2014 were as follows (in thousands):


	Borrowings		Collateral Carrying Value
Loans held for investment	$	30,689	$	43,900
Intercompany mortgage loans on CapLease properties		4,201		15,091
CMBS		13,126		21,600

	$	48,016	$	80,591

Repayments and Termination of Other Debt

Trust Preferred Notes

As part of the CapLease Merger, the Company assumed $30.9 million in aggregate principal amount of fixed/floating rate preferred notes with a fair value of $26.5 million at the CapLease Acquisition Date. The Company recorded a discount of $4.4 million upon the assumption of the notes in Other debt, net on the consolidated balance sheet. On July 30, 2014, the Company redeemed the notes at par. Upon redemption, the Company wrote off $4.4 million of the remaining unamortized discount to Extinguishment of debt, net in the consolidated statement of operations.

Senior Notes

As part of the CapLease Merger, the Company assumed $19.2 million of senior notes (the “Senior Notes”) that bore interest at an annual interest rate of 7.50%, payable semi-annually on April 1 and October 1, with a fair value of $19.3 million at the CapLease Acquisition Date. The Company recorded a premium of $0.1 million upon the assumption of the Senior Notes in Other debt, net on the consolidated balance sheet. On July 14, 2014, the Company redeemed the $19.2 million outstanding on the Senior Notes at par. Upon redemption, the Company wrote off $0.1 million of the remaining unamortized premium to Extinguishment of debt, net in the consolidated statement of operations.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Repurchase Agreements

As part of the Cole Merger, the Company assumed $49.0 million of repurchase agreements secured by a portion of the Company’s CMBS portfolio. On September 29, 2014, in connection with the sale of CMBS securities, as discussed in Note 8 — Investment Securities, at Fair Value, the company settled all outstanding Repurchase Agreements at par with proceeds from the sale.

Barclay’s Facility

As of December 31, 2013, the Company had available commitments from Barclays Bank PLC, and other committed parties, for up to $2.1 billion in senior secured term loans (the “Barclays Facility”) which, if funded, would have been available to fund cash amounts payable in connection with the Cole Merger. The Barclays Facility was terminated upon the issuance of the senior unsecured notes in February 2014. In connection with the termination, the Company recorded $32.6 million as amortization of deferred financing costs associated with the Barclays Facility, which is included in interest expense, net in the accompanying consolidated statements of operations.

Note 14 — Credit Facilities

Senior Unsecured Credit Facility

The General Partner, as guarantor, and the OP, as borrower, are parties to an unsecured credit facility with Wells Fargo, National Association, as administrative agent and other lenders party thereto (the “Credit Facility”).

On June 30, 2014, the General Partner, as guarantor, and the OP, as borrower, entered into an amended and restated credit agreement (the “Agreement”), which increased the available borrowings, extended the term and decreased the interest rates associated with the Credit Facility, prior to the execution of the Agreement. The Company accepted commitments from 20 financial institutions totaling $4.7 billion for the Credit Facility. The Credit Facility is comprised of a $1.2 billion term loan facility (with a delayed draw component equal to $200.0 million), a $3.3 billion dollar-denominated revolving credit facility and a $250.0 million multi-currency revolving facility (all of which can be borrowed in dollars, at the Company’s discretion). The Credit Facility includes an accordion feature, which, if exercised in full, allows the Company to increase the aggregate commitments under the Credit Facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions. Subsequent to the Agreement date, the Company accepted an additional $50.0 million commitment on the revolving credit facility from one of the original 20 financial institutions, bringing the total Credit Facility commitments to $4.7 billion.

The revolving credit facility generally bears interest at an annual rate of LIBOR plus from 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon ARCP’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05%, or Base Rate plus 0.15% to 1.05% (based upon ARCP’s then current credit rating). The Loans will initially be priced with an applicable margin of 1.35% in the case of LIBOR revolving loans and 1.60% in the case of LIBOR term loans. In addition, the Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Company’s election, the Company may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates.

The Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of the majority of the lenders (or automatically upon a bankruptcy event of default with respect to the OP or the Company), the commitments of the lenders under the Credit Facility terminate, and payment of any unpaid amounts in respect of the Credit Facility is accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018, in each case, unless extended in accordance with the terms of the Agreement. The Agreement provides for a one-year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at the Company’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the OP and subject to any breakage fees, the OP may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The OP incurs a fee equal to 0.15% to 0.25% per annum (based upon ARCP’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the dollar revolving credit facility and the multi-currency credit facility. The OP incurs an unused fee of 0.25% per annum on the unused amount of the delayed draw term loan commitments. In addition, the OP incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. At September 30, 2014, the OP was in compliance with the debt covenants under the Credit Facility.

In connection with the Agreement, the Company expensed $3.9 million of unamortized deferred financing costs incurred in connection with the original Credit Facility, which is included in interest expense, net in the accompanying consolidated unaudited statements of operations.

As of September 30, 2014, the outstanding balance on the Credit Facility was $4.3 billion, of which $3.3 billion bore a floating interest rate of 1.50% at September 30, 2014. The remaining outstanding balance on the Credit Facility of $1.0 billion is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on ARCP’s credit rating, the interest rate on this portion was 2.84% at September 30, 2014. At September 30, 2014, a maximum of $391.0 million was available to the OP for future borrowings, subject to borrowing availability. The credit facility matures on June 30, 2018.

Subsequent to September 30, 2014, the Company repaid $1.21 billion outstanding on the revolving credit facility with proceeds from the sale of the Multi-Tenant Portfolio (defined below). See Note 22 — Property Dispositions for further discussion and Note 24 — Subsequent Events.

Repayment of Previous Credit Facilities

As part of the ARCT IV Merger, the Company assumed a $800.0 million senior unsecured credit facility with various lenders, with Regions Bank acting as the administrative agent (the “ARCT IV Credit Facility”). As of the date of the ARCT IV Merger, there was $760.0 million outstanding under the ARCT IV Credit Facility, which consisted of a $300.0 million term loan facility and $460.0 million under the revolving credit facility. In connection with the ARCT IV Merger, the Company prepaid all of its loans pursuant to, and terminated all commitments available under, the ARCT IV Credit Facility.

As part of the CapLease Merger, the Company assumed an unsecured credit facility with Wells Fargo, National Association, which had commitments of up to $150.0 million. In February 2014, such credit facility was amended and certain modifications were made to the terms of the agreement (the “CapLease Credit Facility”). On June 6, 2014, the Company repaid the outstanding balance of $150.0 million and terminated the credit facility agreement. No prepayment premium or penalty was paid in connection with the termination of the CapLease Credit Facility.

On February 28, 2013, the Company repaid all of the outstanding borrowings under its previous senior secured revolving credit facility in the amount of $124.6 million and the credit agreement for such facility was terminated. The average interest rate on the borrowings during the period the balance was outstanding was 3.11%. On February 14, 2013, simultaneous with entering into the Credit Facility, the Company terminated its then effective unsecured credit facility agreement, which had been unused.

Note 15 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the nine months ended September 30, 2014, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $10.3 million will be reclassified from other comprehensive income as an increase to interest expense.

As of September 30, 2014, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):


Interest Rate Derivative	Number of Instruments		Notional Amount
Interest rate swaps		18	$	1,249,188

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2014 and December 31, 2013 (in thousands):


Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2014			December 31, 2013
Interest rate products	Deferred costs and other assets, net	$	7,610		$	9,189
Interest rate products	Deferred rent, derivative and other liabilities	$	(4,751	)	$	(1,719	)

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and nine months ended ended September 30, 2014 and 2013, respectively (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2014			2013			2014			2013
Amount of (loss) gain recognized in accumulated other comprehensive income on interest rate derivatives (effective portion)	$	14,920		$	(2,372	)	$	13,624		$	15,682
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (ineffective portion)	$	(6,452	)	$	(1,263	)	$	(9,403	)	$	(3,218	)

In January 2014, the Company entered into an interest rate lock agreement with a notional amount of $250.0 million (the “Treasury Lock Agreement”). The Treasury Lock Agreement, which had an original maturity date of February 12, 2014, was entered into to hedge part of the Company’s interest rate exposure associated with the variability in future cash flows attributable to changes in the ten-year U.S. treasury rates related to the planned issuance of debt securities in conjunction with the Cole Merger. In connection with the Company’s bond offering in February 2014, the Company settled the Treasury Lock Agreement, which was accounted for as cash flow hedge, for $3.9 million, which was recorded to other comprehensive loss and will be amortized into earnings over the ten year term of the Treasury Lock. The Company amortized $0.1 million and $0.2 million into interest expense for the three and nine months ended September 30, 2014, respectively, related to the Treasury Lock.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were approximately a loss of $17.5 million and a loss of $10.4 million for the three and nine months ended September 30, 2014, respectively. The Company recorded a loss of $38.7 million and $69.8 million for the three and nine months ended September 30, 2013 relating to the contingent value rights.

As of September 30, 2014, the Company had the following outstanding interest rate derivatives that were not designated as qualifying hedging relationships (dollar amounts in thousands):


Interest Rate Derivative	Number of Instruments		Notional Amount
Interest rate swaps		4	$	144,800

The table below presents the fair value of the Company’s derivative financial instruments not designated as hedges as well as their classification on the consolidated balance sheets as of September 30, 2014 and December 31, 2013 (in thousands):


Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	September 30, 2014			December 31, 2013
Interest rate products	Deferred costs and other assets, net	$	1,165		$	—
Series D Preferred Stock embedded derivative	Deferred rent, derivative and other liabilities	$	—		$	(16,736	)
Interest rate products	Deferred rent, derivative and other liabilities	$	(1,235	)	$	—

The Series D Preferred Stock was redeemed on September 2, 2014. Refer to Note 18 — Preferred and Common Stock and OP Units for further discussion.

Tabular Disclosure of Offsetting Derivatives

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 2014 and December 31, 2013. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (amounts in thousands).


Offsetting of Derivative Assets and Liabilities
	Gross Amounts of Recognized Assets		Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets			Financial Instruments		Cash Collateral Received		Net Amount
September 30, 2014	$	8,775	$	(5,986	)	$	—	$	8,775	$	(5,986	)	$	—	$	—	$	2,789
December 31, 2013	$	9,189	$	(18,455	)	$	—	$	9,189	$	(18,455	)	$	—	$	—	$	(9,266	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where, if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of September 30, 2014, the fair value of the interest rate derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $7.7 million. As of September 30, 2014, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $7.7 million at September 30, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 16 — Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2014 and December 31, 2013 (in thousands):


	September 30, 2014		December 31, 2013
Accrued other	$	72,703	$	683,197
Accrued interest		41,411		14,189
Accrued real estate taxes		61,450		24,658
Accounts payable		4,774		5,887
Accrued merger costs		—		2,640

	$	180,338	$	730,571

Note 17 — Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company, except as follows:

ARCT III Litigation Matters

After the announcement of the ARCT III Merger Agreement on December 17, 2012, Randell Quaal filed a putative class action lawsuit filed on January 30, 2013 against the Company, the OP, ARCT III, ARCT III OP, the members of the board of directors of ARCT III and certain subsidiaries of the Company in the Supreme Court of the State of New York. The plaintiff alleges, among other things, that the board of ARCT III breached its fiduciary duties in connection with the transactions contemplated under the ARCT III Merger Agreement. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required ARCT III to make certain additional disclosures related to the ARCT III Merger, which were included in a Current Report on Form 8-K filed by ARCT III with the SEC on February 21, 2013. The memorandum of understanding also added that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to ARCT III’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.

CapLease Litigation Matters

Since the announcement of the CapLease Merger Agreement on May 28, 2013, the following lawsuits have been filed:

On May 28, 2013, Jacquelyn Mizani filed a putative class action lawsuit in the Supreme Court for the State of New York against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Mizani Action”). The complaint alleges, among other things, that the merger agreement at issue was the product of breaches of fiduciary duty by the CapLease directors because the proposed merger transaction (the “CapLease Transaction”) purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, the Company, the OP and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

On July 3, 2013, Fred Carach filed a putative class action and derivative lawsuit in the Supreme Court for the State of New York against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Carach Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the merger purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that with respect to the Registration Statement and draft joint proxy statement issued in connection with the proposed CapLease Transaction on July 2, 2013, that disclosures made therein were insufficient or otherwise improper. The complaint also alleges that CapLease LP, CLF OP General Partner, LLC, the Company, the OP and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.

On June 25, 2013, Dewey Tarver filed a putative class action and derivative lawsuit in the Circuit Court for Baltimore City against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Tarver Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the CapLease Transaction purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, CapLease LP, CLF OP General Partner, LLC, the Company, the OP and Safari Acquisition, LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.

Counsel who filed each of these three cases reached an agreement with each other as to who will serve as lead plaintiff and lead plaintiffs’ counsel in the cases and where they will be prosecuted. Thus, on August 9, 2013, counsel in the Tarver Action filed a motion for stay in the Baltimore Court, informing the court that they had agreed to join and participate in the prosecution of the Mizani and Carach Actions in the New York Court. The Defendants consented to the stay of the Tarver Action in the Baltimore Court, and on September 5, 2013, Judge Pamela J. White issued an order granting that stay. Consequently, there has been no subsequent activity in the Baltimore Court in the Tarver Action. Also on August 9, 2013, all counsel involved in the Mizani and Carach Actions filed a joint stipulation in the New York Court, reflecting agreement among all parties that the Mizani and Carach Actions should be consolidated (jointly, “the Consolidated Actions”) and setting out a schedule for early motion practice in response to the complaints filed (the “Consolidation Stipulation”). Pursuant to the Consolidation Stipulation, an amended complaint was also filed in the New York court on August 9, 2013 and was designated as the operative complaint in the Consolidated Actions (“Operative Complaint”). Pursuant to the Consolidation Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on September 23, 2013. Plaintiffs’ response was due on or before November 7, 2013. On November 7, 2013, Plaintiffs filed a motion seeking leave to file a second amended complaint, which the Defendants opposed. On March 24, 2014, Plaintiffs’ counsel in the Consolidated Actions dismissed those claims without prejudice. Consequently, only the Tarver Action currently remains pending among these cases, although it remains stayed.

On October 8, 2013, John Poling filed a putative class action lawsuit in the Circuit Court for Baltimore City against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Poling Action”). The complaint alleges that the merger agreement breaches the terms of the CapLease 8.375% Series B Cumulative Redeemable Preferred Stock (“Series B”) and the terms of the 7.25% Series C Cumulative Redeemable Preferred Stock (“Series C”) and is in violation of the Series B Articles Supplementary and the Series C Articles Supplementary. The Complaint alleges claims for breach of contract and breach of fiduciary duty against the CapLease entities and the CapLease board of directors. The complaint also alleges that the Company, the OP and Safari Acquisition, LLC aided and abetted CapLease and the CapLease directors’ alleged breach of contract and breach of fiduciary duty.

On November 13, 2013, all counsel involved in the Poling Action filed a joint stipulation, reflecting agreement among all parties concerning a schedule for early motion practice in response to the complaint filed (the “Scheduling Stipulation”). Pursuant to the Scheduling Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on December 20, 2013. Plaintiff has filed an opposition to that motion, which remains pending.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Cole Litigation Matters

Three putative class action and/or derivative lawsuits, which were filed in March and April 2013, assert claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, aiding and abetting breach of fiduciary duty and other claims relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings Corporation, pursuant to which Cole became a self-managed REIT. On October 22, 2013, the Circuit Court for Baltimore City granted all defendants’ motion to dismiss with prejudice the action pending before the court, but the plaintiffs appealed that dismissal. On July 31, 2014, plaintiffs dismissed the pending appeal based on an agreement by defendants to reimburse plaintiffs in the amount of $100,000. The other two lawsuits, which also purport to assert shareholder class action claims under the Securities Act of 1933, as amended (the “Securities Act”), are pending in the United States District Court for the District of Arizona. Defendants filed a motion to dismiss both complaints on January 10, 2014. Subsequently, both of those lawsuits have been stayed by the Court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Cole Merger Actions described below.

To date, eleven lawsuits have been filed in connection with the Cole Merger. Two of these suits - Wunsch v. Cole, et al. (“Wunsch”), No. 13-CV-2186, and Sobon v. Cole, et al. (“Sobon”) - were filed as putative class actions on October 25, 2013 and November 18, 2013, respectively, in the U.S. District Court for the District of Arizona. Between October 30, 2013 and November 14, 2013, eight other putative stockholder class action or derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland, captioned as: (i) Operman v. Cole, et al. (“Operman”); (ii) Branham v. Cole, et al. (“Branham”); (iii) Wilfong v. Cole, et al. (“Wilfong”); (iv) Polage v. Cole, et al. (“Polage”); (v) Corwin v. Cole, et al. (“Corwin”); (vi) Green v. Cole, et al. (“Green”); (vii) Flynn v. Cole, et al. (“Flynn”) and (viii) Morgan v. Cole, et al. (“Morgan”). All of these lawsuits name the Company, Cole and Cole’s board of directors as defendants; Wunsch, Sobon, Branham, Wilfong, Flynn, Green, Morgan and Polage also name CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Cole, as a defendant. All of the named plaintiffs claim to be Cole stockholders and purport to represent all holders of Cole’s stock. Each complaint generally alleges that the individual defendants breached fiduciary duties owed to plaintiff and the other public stockholders of Cole in connection with the Cole Merger, and that certain entity defendants aided and abetted those breaches. The breach of fiduciary duty claims asserted include claims that the Cole Merger did not provide for full and fair value for the Cole shareholders, that the Cole Merger was the product of an “inadequate sale process,” that the Cole Merger Agreement contained coercive deal protection measures and that the Cole Merger Agreement and the Cole Merger were approved as a result of or in a manner which facilitates improper self-dealing by certain defendants. In addition, the Flynn, Corwin, Green, Wilfong, Polage and Branham lawsuits claim that the individual defendants breached their duty of candor to shareholders and the Branham and Polage lawsuits assert claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole. The Polage lawsuit also asserts derivative claims for waste of corporate assets and unjust enrichment. The Wunsch and Sobon lawsuits also assert claims against Cole and the individual defendants under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), based on allegations that the proxy materials omitted to disclose allegedly material information, and a claim against the individual defendants under Section 20(a) of the Exchange Act based on the same allegations. Among other remedies, the complaints seek unspecified money damages, costs and attorneys’ fees.

In January 2014, the parties to the eight lawsuits filed in the Circuit Court for Baltimore City, Maryland (the “consolidated Baltimore Cole Merger Actions”) entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of Cole stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein would be dismissed, subject to court approval. The proposed settlement terms required Cole to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by Cole with the SEC on January 14, 2014. The memorandum of understanding also contemplated that the parties would enter into a stipulation of settlement, subject to customary conditions, including confirmatory discovery and court approval following notice to Cole’s stockholders. The Sobon lawsuit was voluntarily dismissed on February 3, 2014.

On August 14, 2014, the parties in the consolidated Baltimore Merger Actions executed a Stipulation and Release and Agreement of Compromise and Settlement (the “Settlement Stipulation”). The parties in the consolidated Baltimore Merger Actions submitted the Settlement Stipulation, along with related filings, for approval by the Maryland court on August 18, 2014. On August 25, 2014, the Baltimore Circuit Court entered an Order on Preliminary Approval of Derivative and Class Action Settlement and Class Action Certification and scheduled a final settlement hearing in the consolidated Baltimore Merger Actions.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

On December 27, 2013, Realistic Partners filed a putative class action lawsuit against the Company and the members of its board of directors in the Supreme Court for the State of New York. Cole was later added as a defendant also. The plaintiff alleges, among other things, that the board of the Company breached its fiduciary duties in connection with the transactions contemplated under the Cole Merger Agreement and that Cole aided and abetted those breaches. In January 2014, the parties entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of the Company’s stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required the Company to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by the Company with the SEC on January 17, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to the Company’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.

Contractual Lease Obligations

The following table reflects the minimum base rental cash payments due from the Company over the next five years and thereafter for certain ground and office lease obligations (in thousands):


	Future Minimum Base Rent Payments
October 1, 2014 - December 31, 2014	$	4,594
2015		12,922
2016		11,575
2017		10,248
2018		7,918
Thereafter		83,934

Total	$	131,191

Purchase Commitments

Cole Capital enters into purchase and sale agreements and deposits funds into escrow towards the purchase of such acquisitions, some of which are expected to be assigned to one of the Managed REITs at or prior to the closing of the respective acquisition. As of September 30, 2014, the Company was a party to 70 purchase and sale agreements with unaffiliated third-party sellers to purchase a 100% interest in 303 properties, subject to meeting certain criteria, for an aggregate purchase price of $1.2 billion, exclusive of closing costs. As of September 30, 2014, the Company had $36.9 million of property escrow deposits held by escrow agents in connection with these future property acquisitions, which may be forfeited if the transactions are not completed under certain circumstances. The Company will be reimbursed by the assigned Managed REIT for amounts escrowed when it acquires a property.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 18 — Preferred and Common Stock and OP Units

Series D and Series E Preferred Stock and OP Units

On September 12, 2013, the General Partner’s board of directors unanimously approved the issuance of Series D Cumulative Convertible Preferred Stock (“Series D Preferred Stock”) and the issuance of Series E Cumulative Preferred Stock (“Series E Preferred Stock”). Concurrently, the Operating Partnership was approved to issue to the General Partner Series D Cumulative Convertible Preferred Units (“Series D Preferred Units”) and Series E Cumulative Preferred Units (“Series E Preferred Units”), if applicable.

On September 15, 2013, the General Partner entered into definitive purchase agreements pursuant to which it agreed to issue Series D Preferred Stock and common stock to certain institutional holders, necessitating that the Operating Partnership concurrently issue to the General Partner Series D Preferred Units and General Partner OP Units, promptly following the close of the CapLease Merger. Pursuant to the definitive purchase agreements, the General Partner issued approximately 21.7 million shares of Series D Preferred Stock and 15.1 million shares of ARCP common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 8, 2013. The Operating Partnership concurrently issued 21.7 million Series D Preferred Units and 15.1 million General Partner OP Units to the General Partner. The Series D Preferred Stock and Series D Preferred Units pay dividends at the rate of 5.81% per annum on their face amount of $13.59 per share (equivalent to $0.79 per share on an annualized basis). The Company redeemed all outstanding Series D Preferred Stock and Units on September 2, 2014 (the “Redemption Date”) for $316.1 million in cash.

As the holders of Series D Preferred Stock were entitled to receive liquidation preferences that other equity holders were not entitled to, the Company classified the Series D Preferred Stock as temporary equity. At the date of issuance, the fair value of the Series D Preferred Stock was $269.3 million.

Prior to redemption, the General Partner had concluded that the conversion option qualified as a derivative and should be bifurcated from the host instrument. At issuance, the conversion option had a fair value of $18.7 million. As of December 31, 2013, the fair value of the conversion option was $16.7 million. The Company recorded losses of $18.8 million and $13.6 million upon redemption of the conversion option in gain (loss) on derivative instruments, net in the consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.

As of September 30, 2014, there were no issued shares of Series D Preferred Stock and no authorized and issued shares of Series E Preferred Stock. Therefore, no equivalent units were issued and outstanding at the Operating Partnership.

Series F Preferred Stock and Series F Preferred Units

On October 6, 2013, in connection with the modification to the ARCT IV Merger, the General Partner’s board of directors unanimously approved the issuance of Series F Preferred Stock. Upon consummation of the ARCT IV Merger on January 3, 2014, 42.2 million shares of Series F Preferred Stock were issued to ARCT IV shareholders, resulting in the Operating Partnership concurrently issuing 42.2 million General Partner Series F Preferred Units to the General Partner, and 0.7 million Limited Partner Series F Preferred Units were issued to the ARCT IV OP Unit holders. Subsequent to original issuance and through September 30, 2014, 0.6 million Limited Partner Series F Preferred Units were converted into an equivalent number of the General Partner’s Series F Preferred Stock. Concurrently, 0.6 million General Partner Series F Preferred Units were issued to the General Partner. As of September 30, 2014, there were 42.8 million shares of Series F Preferred Stock and 0.1 million Series F OP Units issued and outstanding.

The Series F Preferred Units contain the same terms as the Series F Preferred Stock. Therefore, the Series F Preferred Stock/Units will pay cumulative cash dividends at the rate of 6.70% per annum on their liquidation preference of $25.00 per share/unit (equivalent to $1.675 per share/unit on an annual basis). The Series F Preferred Stock is not redeemable by the Company before the fifth anniversary of the date on which such Series F Preferred Stock is issued (the “Initial Redemption Date”), except under circumstances intended to preserve the General Partner’s status as a real estate investment trust for federal and/or state income tax purposes and except upon the occurrence of a change of control. On and after the Initial Redemption Date, the Company may, at its option, redeem shares of the Series F Preferred Stock, in whole or from time to time in part, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. The shares of Series F Preferred Stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company redeems or otherwise repurchases them or they become convertible and are converted into General Partner’s common stock or General Partner OP Units (or, if applicable, alternative consideration). The Series F Preferred Stock of the General Partner trades on the NASDAQ under the symbol “ARCPP.”

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Increases in Authorized Common Stock

On December 9, 2013, the Company filed articles of amendment to its charter to increase the number of authorized shares of common stock to 1.5 billion shares.

Offerings

On August 1, 2012, the General Partner filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Each registration statement became effective on August 17, 2012. As of September 30, 2014, the General Partner had issued 2.1 million shares of common stock and no preferred stock, debt or equity-linked security had been issued under the universal shelf registration statement. Concurrently with the General Partner’s issuance of the $2.1 million shares of common stock referenced above, the Operating Partnership issued 2.1 million General Partner OP Units to the General Partner. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of ARCP’s common stock issued in connection with any future conversion of certain currently outstanding restricted shares, preferred stock or Limited Partner OP Units.

In January 2013, the General Partner commenced its “at the market” equity offering program (“ATM”) in which it may from time to time offer and sell shares of its common stock having aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to the General Partner’s universal shelf registration statement. For each share of common stock the General Partner sells under the ATM, the Operating Partnership will issue a corresponding General Partner OP Unit to the General Partner.

On March 14, 2013, the General Partner filed a universal automatic shelf registration statement that was automatically declared effective and achieved well-known seasoned issuer (“WKSI”) status. As a result of the delayed filing of certain of our periodic reports with the SEC, the General Partner is not currently eligible to use a shelf registration statement for the offer and sale of our securities.

On May 28, 2014, the General Partner closed on a public offering of 138.0 million shares of ARCP common stock at a price of $12.00 per share. The net proceeds to ARCP were approximately $1.59 billion after deducting underwriting discounts, commissions and offering-related expenses, which include a $2.0 million structuring fee paid to RCS. Concurrently, the Operating Partnership issued the General Partner 138.0 million General Partner OP Units.

Dividends

In October 2011, the Company began paying dividends on the 15th day of each month to stockholders/unitholders of record on the eighth day of such month. On October 23, 2013, the board of directors of ARCP authorized an annualized dividend per share of $1.00, which became effective February 7, 2014. The per share/unit annualized dividend of $1.00 reflects an increase of $0.06 per share from an annualized dividend of $0.94 per share. The annualized dividend rate at September 30, 2014 was $1.00 per share.

Common Stock Repurchases

On August 20, 2013, the Company’s board of directors reauthorized its $250.0 million share repurchase program, which was originally authorized in February 2013. During the nine months ended September 30, 2014, the Company did not repurchase any shares of common stock under the share repurchase program.

Upon the closing of the ARCT III Merger, on February 28, 2013, 29.2 million shares, or 16.5% of the then-outstanding shares of ARCT III’s common stock, were paid in cash at $12.00 per share, which is equivalent to 27.7 million shares of the Company’s common stock based on the ARCT III Exchange Ratio. In addition, 148.1 million shares of ARCT III’s common stock were converted to shares of the Company’s common stock at the ARCT III Exchange Ratio, resulting in an additional 140.7 million shares of the Company’s common stock outstanding after the exchange.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 19 — Equity-based Compensation

Equity Plan

The General Partner has adopted the American Realty Capital Properties, Inc. Equity Plan (the “Equity Plan”), which provides for the grant of stock options, stock appreciation rights, restricted shares of common stock, restricted stock units, dividend equivalent rights and other stock-based awards to the General Partner’s and its affiliates’ non-executive directors, officers and other employees and advisors or consultants who are providing services to the General Partner or its affiliates. For each share awarded under the Equity Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with identical terms.

The General Partner authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of common stock (on a fully diluted basis assuming the redemption of all OP Units for shares of common stock) to be issued at any time under the Equity Plan for equity incentive awards excluding an initial grant of 167,400 shares to the Former Manager in connection with the IPO, all of which were vested as of September 30, 2014. As of September 30, 2014, the General Partner has awarded 6,834,695 shares under the Equity Plan and the Operating Partnership has issued 6,834,695 General Partner OP Units to the General Partner underlying such shares issued under the Equity Plan. In the first quarter of 2014, the Company issued 282,854 shares to its non-executive directors pursuant to the Equity Plan. Upon issuance, the documentation provided for accelerated vesting of shares upon voluntary resignation of the independent directors. As a result, the Company determined there was no required service period and $3.6 million has been recorded as expense during the nine months ended September 30, 2014. However, based upon the findings of the Audit Committee and the Company in connection with the recent review of the Company’s previously filed financial statements, the Company subsequently modified such awards to provide that voluntary resignation would not accelerate the vesting of such awards.

The fair value of restricted common stock awards awarded to employees under the Equity Plan is generally determined on the grant date using the closing stock price on NASDAQ that day and is expensed over the requisite service period. The fair value of restricted common stock awarded to non-employees under the Equity Plan is measured based upon the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable and is typically expensed in full at the date of grant.

Director Stock Plan

The General Partner has adopted a Non-Executive Director Stock Plan (the “Director Stock Plan”), which provides for the grant of restricted shares of common stock to each of the General Partner’s non-executive directors. Awards of restricted stock will vest in accordance with the award agreements, which generally provide for ratable vesting over a five-year period following the date of grant. The awards of restricted stock provide for “distribution equivalents” with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to the stockholders. At September 30, 2014, a total of 99,000 shares of common stock are reserved for issuance under the Director Stock Plan. As of September 30, 2014, the General Partner has awarded 45,000 shares under the Director Stock Plan and the Operating Partnership has issued 45,000 General Partner OP Units to the General Partner in connection with the Director Stock Plan.

The fair value of restricted common stock awards, as well as the underlying General Partner OP Units, under the Director Stock Plan is determined on the grant date using the closing stock price on NASDAQ that day.

ARCT IV Restricted Share Plan

ARCT IV had an employee and director incentive restricted share plan (the “RSP”), which provided for the automatic grant of 1,333 restricted shares of common stock to each of its independent directors without any further action by ARCT IV’s board of directors or its stockholders on the date of initial election to the board of directors and on the date of each annual stockholder’s meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20% per annum. The RSP provided ARCT IV with the ability to grant awards of restricted shares to its directors, officers and employees (if ARCT IV ever had employees), employees of the ARCT IV Advisor and its affiliates, employees of entities that provided services to ARCT IV, directors of the ARCT IV Advisor or of entities that provided services to ARCT IV, certain consultants to ARCT IV and the ARCT IV Advisor and its affiliates or to entities that provided services to ARCT IV.

Immediately prior to the effective time of the ARCT IV Merger, each then-outstanding share of ARCT IV restricted stock fully vested. All shares of ARCT IV common stock then-outstanding as a result of the full vesting of shares of ARCT IV restricted stock, and the satisfaction of any applicable withholding taxes, received shares of the Company’s common stock and additional consideration pursuant to the terms of the ARCT IV Merger Agreement based on the ARCT IV Exchange Ratio. Concurrently, for each share of ARCP common stock or Series F Preferred Stock issued, the Operating Partnership issued a General Partner OP Unit or General Partner Series F Preferred Unit to the General Partner, respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following table details the restricted shares activity within the Equity Plan and Director Stock Plan during the nine months ended September 30, 2014:


	Equity Plan					Director Stock Plan
	Shares of Restricted Common Stock			Weighted-Average Issue Price		Shares of Restricted Common Stock			Weighted-Average Issue Price
Unvested, December 31, 2013		931,442		$	13.82		18,875		$	13.52
Granted		5,641,085			13.28		3,000			13.99
Vested		(634,208	)		12.97		(21,875	)		13.44
Forfeited		(134,825	)		13.92		—			—

Unvested, September 30, 2014		5,803,494		$	13.38		—		$	—

For the three and nine months ended September 30, 2014, compensation expense, excluding Outperformance Bonus expense related to the OPP, for restricted shares was $2.8 million and $23.2 million, respectively, which is recorded in general and administrative on the consolidated statement of operations.

Compensation expense for the nine months ended September 30, 2014 includes $11.4 million of compensation expense recorded for 0.8 million restricted shares granted to affiliates.

Multi-Year Outperformance Plan

Upon consummation of the ARCT III Merger, the Company entered into the 2013 Advisor Multi-Year Outperformance Agreement (the “OPP”) with the Former Manager, whereby the Former Manager was able to potentially earn compensation upon the attainment of stockholder value creation targets.

Under the OPP, the Company’s Former Manager was granted 8,241,101 long-term incentive plan units of the OP (“LTIP Units”), which could be earned or forfeited based on the General Partner’s total return to stockholders (including both share price appreciation and common stock distributions) (“Total Return”), for the three-year period that commenced on December 11, 2012.

Pursuant to previous authorization of the General Partner’s board of directors, as a result of the termination of the Management Agreement, all 8,241,101 LTIP Units became fully earned, vested and convertible into OP Units upon the consummation of the Company’s transition to self-management on January 8, 2014 and were converted to OP Units on such date. During the nine months ended September 30, 2014, the Operating Partnership recorded expenses of $1.6 million for the LTIP Units under the OPP, which is recorded in general and administrative in the accompanying consolidated statements of operations. As of September 30, 2014, all LTIP Units under the OPP were earned and $93.9 million of the expense has been allocated to the non-controlling interest on the consolidated balance sheet.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

New Multi-Year Outperformance Plan

On October 3, 2013, the General Partner approved a multi-year outperformance plan (the “New OPP”), which became effective upon the General Partner’s transition to self-management, which occurred on January 8, 2014. Under the New OPP, individual agreements were entered into between the General Partner and the participants selected by the General Partner’s board of directors (the “Participants”) that set forth the Participant’s participation percentage in the New OPP and the number of LTIP Units of the OP subject to the award (“OPP Agreements”). Under the New OPP and the OPP Agreements, the Participants are eligible to earn performance-based bonus awards equal to the Participant’s participation percentage of a pool that is funded up to a maximum award opportunity (the “New OPP Cap”) of approximately 5% of the General Partner’s equity market capitalization at the time of the approval of the New OPP (“the Initial Market Cap”).

After the Audit Committee’s and the General Partner’s review of the OPP, such parties have determined that the Compensation Committee’s intention in respect of the OPP was that the maximum award pool opportunity should have been $120.0 million. In October 2013, the Compensation Committee approved an aggregate award pool to be measured by the General Partner’s market capitalization as of the date of such approval; however, the OPP was definitively documented to measure market capitalization on a pro forma basis as of the General Partner’s transition to self-management (including the pro forma impact of various transactions expected to be consummated prior to the General Partner’s transition to self-management on January 8, 2014), which was calculated in December 2013.

Subject to the New OPP Cap, the pool will equal an amount to be determined based on the General Partner’s level of achievement of total return to stockholders, including both share price appreciation and common stock distributions (“Total Return”), as measured against an absolute hurdle and against a peer group of companies for a three-year performance period that commenced on October 1, 2013 (the “Performance Period”), with valuation dates on which a portion of the LTIP Units up to a specified amount of the New OPP Cap could be earned on the last day of each 12-month period during the Performance Period (each an “Annual Period”) and the initial 24-month period of the Performance Period (the “Interim Period”), as follows:


		Performance Period		Annual Period		Interim Period
Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period:			21%		7%		14%
Relative Component: 4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group ⁽¹⁾ , subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period:
•	100% will be earned if cumulative Total Return achieved is at least:		18%		6%		12%
•	50% will be earned if a cumulative Total Return achieved is:		0%		0%		0%
•	0% will be earned if cumulative Total Return achieved is less than:		0%		0%		0%
•	a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between:		0% - 18%		0% - 6%		0% - 12%

(1)	The “Peer Group” is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc.

The New OPP provides for early calculation and vesting of the award in the event of a change in control of the General Partner, prior to the end of the Performance Period. The Participants are entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the New OPP constitute “parachute payments” as defined in Section 280G of the Code. The LTIP Units granted under the New OPP represent units of equity ownership in the OP that are structured as a profits interest therein. Subject to the Participant’s continued service through each vesting date, one-third of any earned LTIP Units will vest on October 1, 2016, October 1, 2017 and October 1, 2018, respectively. The Participants are entitled to receive distributions on their LTIP Units to the extent provided for in the LPA, as amended from time to time. During the three and nine months ended September 30, 2014, the Company recorded expenses of $2.7 million and $8.0 million, respectively, for the New OPP, which is recorded in equity-based compensation and included with general and administrative expense on the consolidated statement of operations. As of September 30, 2014, the Company had recorded a total payable for distributions on LTIP units related to the OPP and the New OPP of $6.9 million.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Note 20 — Related Party Transactions and Arrangements (as Restated)

The Company, ARCT III and ARCT IV have incurred commissions, fees and expenses payable to the Former Manager and its affiliates including Realty Capital Securities, LLC (“RCS”), RCS Advisory Services, LLC (“RCS Advisory”), ARC, ARC Advisory Services, LLC (“ARC Advisory”), American Realty Capital Advisors III (the “ARCT III Advisor”), American Realty Capital Advisors IV, LLC (“the ARCT IV Advisor”), American National Stock Transfer, LLC (“ANST”) and ARC Real Estate Partners, LLC (“ARC Real Estate”). References throughout this Note 20 — Related Party Transactions and Arrangements (as Restated) to expenses incurred by ARCT III or ARCT IV are to expenses incurred before their acquisitions by the General Partner on February 28, 2013 and January 3, 2014, respectively.

The Audit Committee’s investigation identified certain payments made by the Company to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. The Company is in the process of evaluating these payments and, upon completion of its evaluation, will consider its alternatives with regard to recovery of any such payments that it concludes were inappropriate. No asset has been recognized in the accompanying consolidated financial statements related to any potential recovery.

The following table summarizes the related party fees and expenses incurred by the Company, ARCT III and ARCT IV by category and the aggregate amounts contained in such categories for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Related party transactions:
Expenses and capitalized costs:
Financing fees and reimbursements	$	—	$	—	$	—	$	13,796
Offering related costs		—		666		2,150		159,323
Acquisition related expenses		—		10,064		1,652		36,894
Merger and other non-routine transactions		—		2,298		137,778		109,233
Management fees to affiliates		—		—		13,888		12,493
General and administrative expenses		60		7,004		16,089		16,347
Indirect affiliate expenses		5,595		—		10,090		—
Cole Capital revenues:
Cole Capital offering related revenue		21,535		—		73,957		—
Cole Capital operating revenue		38,262		—		77,319		—

Total	$	65,452	$	20,032	$	332,923	$	348,086

The following sections below further expand on the summarized related party transactions listed above.

Financing Fees and Reimbursements

During the nine months ended September 30, 2013, the Company, ARCT III and ARCT IV paid the Former Manager, the ARCT III Advisor and the ARCT IV Advisor, respectively, financing coordination fees of $13.8 million which is equal to 0.75% of the amount available under any secured mortgage financing or refinancing that the Company, ARCT III or ARCT IV, respectively, obtained and used for the acquisition of properties that was arranged by the Former Manager, the ARCT III Advisor or the ARCT IV Advisor, respectively. The financing fees were payable in cash at the closing of each financing. In conjunction with the closing of the ARCT III Merger, it was agreed that these fees would no longer be paid by the Company to the Former Manager. These fees were paid by ARCT IV throughout 2013. No such fees were incurred during the nine months ended September 30, 2014 or during the three months ended September 30, 2013. Financing fees and reimbursements are included in deferred costs, net in the accompanying consolidated balance sheets.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Offering Related Costs

The Company, ARCT III and ARCT IV recorded commissions, fees and offering cost reimbursements as shown in the table below for services provided to the Company, ARCT III and ARCT IV, as applicable, by affiliates of the Former Manager during the periods indicated (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Offering related costs:
Commissions and fees	$	—	$	546	$	—	$	148,232
Offering costs and other reimbursements		—		120		2,150		11,091

Total	$	—	$	666	$	2,150	$	159,323

RCS served as the dealer-manager of the ARCT III IPO and the ARCT IV IPO. RCS received fees and compensation in connection with the sale of ARCT III’s and ARCT IV’s common stock in the respective IPOs. RCS received a selling commission of 7% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers in each of the IPOs. RCS received 3% of the gross proceeds from the sale of common stock, before reallowance to participating broker-dealers, as a dealer manager fee in each of the IPOs. In addition, ARCT III and ARCT IV reimbursed the ARCT III Advisor, the ARCT IV Advisor and RCS, as applicable, for services relating to the ARCT III IPO and the ARCT IV IPO during 2013 and for services relating to the Company’s ATM equity program during 2014. Offering related costs are included in offering costs, commissions and dealer-manager fees in the accompanying consolidated statements of changes in equity.

Acquisition Related Expenses

During the nine months ended September 30, 2014, the Company paid a fee of $1.0 million (equal to 0.25% of the contract purchase price) to RCS for strategic advisory services related to its acquisition of certain properties in the Fortress Portfolio and $0.6 million (equal to 0.25% of the contract purchase price) to RCS related to its acquisition of certain properties in the Inland Portfolio. No fees were incurred during the three months ended September 30, 2014 or during the nine months ended September 30, 2013 in connection with these transactions.

Separate from acquisition fees related to the acquisition of certain properties in the GE Capital Portfolio discussed below, the Company, ARCT III and ARCT IV paid acquisition fees to the Former Manager and its affiliates equal to 1.0% of the contract purchase price, inclusive of indebtedness, of each property acquired by the Company, ARCT III or ARCT IV, as applicable. The Company, ARCT III and ARCT IV additionally reimbursed certain expenses as permitted under the advisory agreements. The Company and ARCT III were no longer required to pay these fees as of the ARCT III Merger, except for those properties in the Company’s acquisition pipeline as of that date. ARCT IV incurred these fees throughout 2013. During the three and nine months ended September 30, 2013, these fees and additional reimbursements totaled $2.5 million and $15.7 million, respectively. No such fees were incurred during the nine months ended September 30, 2014.

During the nine months ended September 30, 2013, the Company paid a fee of $1.9 million (equal to 0.25% of the contract purchase price) to RCS and reimbursed expenses of $6.1 million to ARC related to its acquisition of certain properties in the GE Capital Portfolio. No such fees were incurred by the Company during the three months ended September 30, 2013 or during the nine months ended September 30, 2014 in relation to the GE Capital Portfolio.

During the three and nine months ended September 30, 2013, ARCT IV incurred and paid a fee of $3.5 million (equal to 0.25% of the contract price) to RCS related to its acquisition of certain properties in the GE Capital Portfolio. During the three and nine months ended September 30, 2013, ARCT IV incurred and paid $8.2 million and $13.8 million, respectively, to ARC related to this transaction. Additionally, during the three months and nine months ended September 30, 2013, ARC refunded $4.1 million of reimbursements previously charged in 2013 and 2012. No such fees were incurred during the nine months ended September 30, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Merger and Other Non-routine Transactions

The Company, ARCT III and ARCT IV incurred fees and expenses payable to the Former Manager and its affiliates for services related to mergers and other non-routine transactions, as discussed below. These fees are included in merger and other non-routine transactions in the accompanying consolidated statements of operations. The table below shows fees and expenses attributable to each merger and other non-routine transaction during the nine months ended September 30, 2014 (in thousands). No related party transactions classified as merger and other non-routine transactions in the accompanying consolidated statements of operations were incurred during the three months ended September 30, 2014 .


	Nine Months Ended September 30, 2014
	ARCT IV Merger		Internalization and Other		Cole Merger		Multi-tenant Spin Off		Total
Merger related costs:
Strategic advisory services	$	8,400	$	—	$	17,115	$	1,750	$	27,265
Personnel costs and other reimbursements		—		—		72		—		72
Other non-routine transactions:
Subordinated distribution fees		78,244		—		—		—		78,244
Furniture, fixtures and equipment		5,800		10,000		—		—		15,800

Other fees and expenses		—		—		2,900		—		2,900
Personnel costs and other reimbursements		417		—		1,728		—		2,145
Post-transaction support services		1,352		10,000		—		—		11,352

Total	$	94,213	$	20,000	$	21,815	$	1,750	$	137,778

The tables below shows fees and expenses attributable to each merger and other non-routine transaction during the three and nine months ended September 30, 2013 (in thousands) :


	Three Months Ended September 30, 2013
	ARCT IV Merger		Cole Merger		Other		Total
Merger related costs:
Strategic advisory services	$	750	$	—	$	—	$	750
Personnel costs and other reimbursements		180		85		83		348
Other non-routine transactions:
Post-transaction support services		1,200		—		—		1,200

Total	$	2,130	$	85	$	83	$	2,298

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)


	Nine Months Ended September 30, 2013
	ARCT III Merger		ARCT IV Merger		Cole Merger		Other		Total
Merger related costs:
Strategic advisory services	$	—	$	750	$	—	$	—	$	750
Legal fees and expenses		125		—		—		—		125
Personnel costs and other reimbursements		522		203		85		127		937
Other non-routine transactions:
Subordinated distribution fees		98,360		—		—		—		98,360
Furniture, fixtures and equipment		5,800		—		—		—		5,800

Legal fees and expenses		61		—		—		—		61
Post-transaction support services		2,000		1,200		—		—		3,200

Total	$	106,868	$	2,153	$	85	$	127	$	109,233

Merger Related Costs

ARCT IV Merger

ARCT IV entered into an agreement with RCS, RCS Advisory, and ANST under which they agreed to provide advisory and information agent services in connection with the ARCT IV Merger and the related proxy solicitation seeking approval of such merger by ARCT IV’s stockholders. The agreement provided that these services included facilitation of the preparation, distribution and accumulation of proxy materials, stockholder, analyst and financial advisor communications and consultation on materials and communications made to the public and regulatory agencies regarding the ARCT IV Merger. ARCT IV incurred and paid $0.8 million in fees and reimbursed $0.2 million of expenses pursuant to this agreement during the three and nine months ended September 30, 2013. No fees were incurred in connection with this agreement during the nine months ended September 30, 2014.

Pursuant to ARCT IV’s advisory agreement with the ARCT IV Advisor, ARCT IV agreed to pay the ARCT IV Advisor a brokerage commission on the sale of property in connection with the ARCT IV Merger. At the time of the ARCT IV Merger, ARCT IV paid $8.4 million to the ARCT IV Advisor in connection with this agreement. No fees were incurred under this agreement during the nine months ended September 30, 2013 or during the three months ended September 30, 2014.

Cole Merger

The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the Cole Merger. The Company agreed to pay a fee equal to 0.25% of the transaction value upon the consummation of the transaction and reimburse out of pocket expenses. The Company incurred and recognized $14.2 million in expense from this agreement during the nine months ended September 30, 2014. These fees are included in merger and other non-routine transactions in the accompanying consolidated statement of operations. Reimbursement expenses of $0.1 million were incurred under this agreement during the three and nine months ended September 30, 2013.

Pursuant to the Transaction Management Services Agreement dated December 9, 2013, the Company and the OP agreed to pay RCS Advisory an aggregate fee of $2.9 million in connection with providing the following services: transaction management support related to the Cole Merger up to the date of the Transaction Management Services Agreement and ongoing transaction management support, marketing support, due diligence coordination and event coordination up to the date of the termination of the Transaction Management Services Agreement. The Transaction Management Services Agreement expired on the consummation of the Company’s transition to self-management on January 8, 2014. The Company paid RCS Advisory $2.9 million thereunder on January 8, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Multi-tenant Spin-off

The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the Company’s previously announced spin-off of its multi-tenant shopping center portfolio. During the nine months ended September 30, 2014, the Company incurred $1.8 million of such fees, which are included in merger and other non-routine transactions in the accompanying consolidated statement of operations for the nine months ended September 30, 2014. No fees were incurred under this agreement during the nine months ended September 30, 2013 or during the three months ended September 30, 2014.

Other Non-routine Transactions

ARCT III Merger Subordinated Distribution Fees

On February 28, 2013, the OP entered into a Contribution and Exchange Agreement (the “ARCT III Contribution and Exchange Agreement”) with the ARCT III OP and the ARCT III Special Limited Partner, the holder of the special limited partner interest in the ARCT III OP. The ARCT III Special Limited Partner was entitled to receive certain distributions from the ARCT III OP, including a subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT III OP). The ARCT III Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT III’s stockholders in addition to their initial investment. Pursuant to the ARCT III Contribution and Exchange Agreement, the ARCT III Special Limited Partner contributed its interest in the ARCT III OP, inclusive of the $98.4 million subordinated distribution proceeds received, to the ARCT III OP in exchange for 7.6 million ARCT III OP Units. Upon consummation of the ARCT III Merger, these ARCT III OP Units were immediately converted into 7.3 million OP Units after application of the ARCT III Exchange Ratio. The Company recorded an expense of $98.4 million during the nine months ended September 30, 2013 in connection with this transaction. In conjunction with the ARCT III Merger Agreement, the ARCT III Special Limited Partner agreed to hold its OP Units for a minimum of one year before converting them into shares of Company common stock.

ARCT IV Merger Subordinated Distribution Fees

On January 3, 2014, the OP entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, ARCT IV Special Limited Partner and ARC Real Estate . The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of approximately $358.3 million in addition to their initial investment. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the $78.2 million of subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million ARCT IV OP Units. Upon consummation of the ARCT IV Merger, these ARCT IV OP Units were immediately converted into 6.7 million OP Units after application of the ARCT IV Exchange Ratio. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to hold its OP Units for a minimum of two years before converting them into shares of the Company’s common stock.

Furniture, Fixtures and Equipment and Other Assets

The Company entered into three agreements with affiliates of the Former Manager and the Former Manager (the “Sellers”), as applicable, pursuant to which, concurrently with the closing of the ARCT III Merger and ARCT IV Merger and the Company’s transition to self-management, the Sellers sold the OP certain FF&E and other assets used by the Sellers in connection with managing the property level business and operations and accounting functions of the Company and the OP. The Company incurred and recorded $15.8 million and $5.8 million to purchase the FF&E and other assets during the nine months ended September 30, 2014 and 2013, respectively. No costs were incurred during the three months ended September 30, 2014 and 2013, respectively. The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E and other assets. As such, the Company has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction-related expense.

Other Fees and Expenses

In connection with the closing of the Cole Merger, the Company paid $2.9 million to RCS Advisory during the nine months ended September 30, 2014. No such expenses were incurred during the three months ended September 30, 2014 or nine months ended September 30, 2013.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Post-Transaction Support Services

ARCT III entered into an agreement with ARC Advisory under which ARC Advisory agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT III Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT III Merger). ARCT III incurred and paid $2.0 million in fees pursuant to this agreement during the nine months ended September 30, 2013. No fees were incurred during the three months ended September 30, 2013 or for the nine months ended September 30, 2014 in connection with this agreement.

ARCT IV entered into an agreement with ARC Advisory and RCS Advisory under which they agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT IV Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT IV Merger). ARCT IV incurred $1.2 million in expenses pursuant to this agreement during the three and nine months ended September 30, 2013. No fees were incurred during the nine months ended September 30, 2014 in connection with this agreement.

In connection with its entry into the ARCT IV Merger Agreement, ARCT IV agreed to pay additional asset management fees, which totaled $1.3 million net of credits received from affiliates during the nine months ended September 30, 2014. No such fees were incurred during the three months ended September 30, 2014 or during the nine months ended September 30, 2013.

Pursuant to the Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement entered into as of January 8, 2014, the Former Manager agreed to provide certain transition services including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, insurance and risk management, information technology, telecommunications and Internet and services relating to office supplies. In consideration of the aforementioned services, the Company paid $10.0 million to the Former Manager on January 8, 2014. This arrangement was in effect for a 60-day term beginning on January 8, 2014.

Management Fees to Affiliates

The Company, ARCT III and ARCT IV recorded fees and reimbursements as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the Company, ARCT III and ARCT IV during the periods indicated (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Management fees to affiliates:
Asset management fees	$	—	$	—	$	13,888	$	11,693
Property management fees		—		—		—		800

Total	$	—	$	—	$	13,888	$	12,493

Base Management Fees

Prior to the termination of the amended and restated management agreement, the Company paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of the Company’s real estate assets, calculated and payable monthly in advance, for the value of assets up to $3.0 billion and 0.40% per annum for the unadjusted book value of assets over $3.0 billion. The management fee was generally payable in cash however in lieu of cash. Prior to the ARCT III Merger, the Former Manager was entitled to an annual base management fee equal to 0.50% per annum for the unadjusted book value of assets with no asset threshold limitations. The Former Manager waived the management fee of $3.8 million and $6.1 million during the three and nine months ended September 30, 2013, respectively.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Asset Management Fees

ARCT III

Effective July 1, 2012, as payment for the asset management fee, ARCT III issued (subject to periodic approval by its board of directors) to the ARCT III Advisor performance-based restricted partnership units of the ARCT III OP designated as “ARCT III Class B units,” which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT III OP’s assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); and (y) a liquidity event had occurred.

The ARCT III Advisor received distributions on unvested ARCT III Class B units equal to the distribution rate received on ARCT III common stock. In 2012, the ARCT III board of directors approved the issuance of 145,022 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. In 2013, the ARCT III board of directors approved issuance of an additional 603,599 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. As of December 31, 2012, ARCT III did not consider achievement of the performance condition to be probable as the shareholder vote for the ARCT III Merger, which would allow vesting of these ARCT III Class B Units, was not completed. The performance condition related to these ARCT III Class B units was satisfied upon the completion of the ARCT III Merger and as a result a $9.4 million expense was recorded during the three months ended March 31, 2013. The 748,621 ARCT III Class B units converted into ARCT III OP Units, which converted on a one-to-one basis, into 711,190 OP Units after the application of the ARCT III Exchange Ratio.

In connection with a 60-day extension of the advisory agreement which was executed in order to facilitate the smooth transition of advisory services following the consummation of the ARCT III Merger, the Company incurred and paid additional asset management fees of $2.3 million during the nine months ended September 30, 2013. No such fees were incurred during the three months ended September 30, 2013 or during the nine months ended September 30, 2014.

ARCT IV

In connection with the asset management services provided by the ARCT IV Advisor, ARCT IV issued (subject to periodic approval by ARCT IV’s board of directors) to the ARCT IV Advisor performance-based restricted partnership units of the ARCT IV OP designated as “ARCT IV Class B Units,” which were intended to be profit interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT IV OP’s assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); (y) any one of the following occurs: (1) the termination of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the ARCT IV Advisor was still providing advisory services to ARCT IV.

The calculation of the ARCT IV asset management fees was equal to: (i) 0.1875% of the cost of ARCT IV’s assets; divided by (ii) the value of one share of ARCT IV common stock as of the last day of such calendar quarter. When approved by the board of directors, the ARCT IV Class B Units were issued to the ARCT IV Advisor quarterly in arrears pursuant to the terms of the ARCT IV OP agreement. During the year ended December 31, 2013, ARCT IV’s board of directors approved the issuance of 492,483 ARCT IV Class B Units to the ARCT IV Advisor in connection with this arrangement. As of December 31, 2013, ARCT IV did not consider achievement of the performance condition to be probable and no expense was recorded at that time. The ARCT IV Advisor received distributions on unvested ARCT IV Class B Units equal to the distribution rate received on the ARCT IV common stock. The performance condition related to the 498,857 ARCT IV Class B Units, which includes units issued for the period of January 1, 2014 through the ARCT IV Merger Date, was satisfied upon the completion of the ARCT IV Merger. These ARCT IV Class B Units immediately converted into OP Units at the 2.3961 exchange ratio discussed in Note 3 — Mergers and Acquisitions and the Company recorded an expense of $13.9 million based on the fair value of the ARCT IV Class B Units during the nine months ended September 30, 2014. No additional expense was recorded during the three months ended September 30, 2014.

Property Management Fees

ARCT III also agreed to pay an affiliate of ARC, unless it contracted with a third party, a property management fee of up to 2% of gross revenues from ARCT III’s stand-alone single-tenant net leased properties and 4% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. ARCT III also agreed to reimbursed the affiliate for property level expenses. If ARCT III contracted directly with third parties for such services, it paid them customary market fees and paid the affiliated property manager an oversight fee of up to 1% of the gross revenues of the property managed. Property management fees of $0.8 million are recorded in management fees to affiliates in the accompanying consolidated statements of operations for the nine months ended September 30, 2013. No such fees were incurred during the three months ended September 30, 2013 or during the nine months ended September 30, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Quarterly Incentive Fee

Prior to the termination of the amended and restated management agreement as a result of internalization, the Company was required to pay the Former Manager a quarterly incentive fee, calculated based on 20% of the excess of annualized core earnings (as defined in the management agreement with the Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee would be payable in shares of common stock. The remainder of the incentive fee would be payable in cash. No incentive fees were incurred or paid during the nine months ended September 30, 2014 or 2013.

General and Administrative Expenses

The Company, ARCT III and ARCT IV recorded general and administrative expenses as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the Company, ARCT III and ARCT IV during the periods indicated (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
General and administrative expenses:
Advisory fees and reimbursements	$	60	$	866	$	2,015	$	4,533
Equity awards		—		6,138		14,074		11,814

Total	$	60	$	7,004	$	16,089	$	16,347

Advisory Fees and Reimbursements

The Company, ARCT III and ARCT IV agreed to pay certain fees and reimbursements to the Former Manager, for their out-of-pocket costs, including without limitation, legal fees and expenses, transfer agent fees, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties or general operation of the Company. During the three and nine months ended September 30, 2014, these expenses totaled $0.1 million and $2.0 million, respectively. During the three and nine months ended September 30, 2013, these expenses totaled $0.9 million and $4.5 million, respectively.

Equity Awards

Upon consummation of the ARCT III Merger, the Company entered into the OPP with the Former Manager. The OPP gave the Former Manager the opportunity to earn compensation upon the attainment of certain stockholder value creation targets. The Company recorded $6.1 million and $9.8 million of expense during the three and nine months ended September 30, 2013 in connection with the OPP. During the nine months ended September 30, 2014, $1.6 million was recorded to general and administrative as stock based compensation relating to the change in total return to stockholders used in computing the number of LTIP units earned between December 31, 2013 and January 8, 2014. No expenses were incurred during the three months ended September 30, 2014.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

As a result of the ARCT III Merger, certain restricted shares held by employees of affiliates of the Former Manager were fully vested. This expense of $2.0 million is included in general and administrative expense in the accompanying consolidated statement of operations during the nine months ended September 30, 2013. During the three and nine months ended September 30, 2013, the Company granted 295,000 and 620,000, respectively, restricted stock awards to the Former Manager and its affiliates as compensation for certain services. These were two separate grants and the grant date fair values for these issuances were $4.5 million in February 2013 and $4.4 million in July 2013.

During the nine months ended September 30, 2014, the Company granted 796,075 restricted stock awards to employees of affiliates of the Former Manager as compensation for certain services and 87,702 restricted stock awards to two directors who are affiliates of the Former Manager. The grant date fair value of the awards of $12.5 million was recorded in general and administrative expenses in the accompanying consolidated statements of operations. No grants were made to employees of affiliates of the Former Manager during the three months ended September 30, 2014.

Indirect Affiliate Expenses

During 2014, the Company incurred fees and expenses payable to the Company’s affiliates or payable to a third party on behalf of the Company’s affiliates for amenities related to certain buildings, as explained below. No such fees or expenses were incurred during 2013. These expenses are depicted in the table below for the periods indicated (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2014		2014
Indirect affiliate expenses:
Audrain building	$	4,769	$	8,691
ANST office build-out		114		449
New York (405 Park Ave) office		677		864
Dresher, PA office		24		60
North Carolina office		11		26

Total	$	5,595	$	10,090

Audrain Building

During the year ended December 31, 2013, a wholly owned subsidiary of ARC Real Estate purchased a historic building in Newport, Rhode Island (“Audrain”) with plans to renovate the second floor to serve as offices for certain executives of the Company, and affiliates of the Former Manager. ARC Real Estate requested that invoices relating to the second floor renovation and tenant improvements and all building operating expenses either be reimbursed by the Company to the affiliate of the Former Manager or be paid directly to the contractors and vendors. During the three and nine months ended September 30, 2014, the Company paid $4.7 million and $8.5 million , respectively, for tenant improvements and furniture and fixtures relating to the renovation. These payments were made directly to third parties.

In addition, on October 4, 2013, the Company entered into a lease agreement with the subsidiary of ARC Real Estate for a term of 15 years with annual base rent of $0.4 million requiring monthly payments beginning on that date. As there were tenants occupying the building when it was purchased, these tenants subleased their premises from the Company until their leases terminated. During the three and nine months ended September 30, 2014, the Company incurred and paid $0.1 million and $0.2 million, respectively, for base rent, which was partially offset by $17,000 of rental revenue received from the subtenants during the nine months ended September 30, 2014. No rental revenue was received during the three months ended September 30, 2014.

Subsequent to September 30, 2014, as a result of findings of the investigation conducted by the Audit Committee, the Company terminated the lease agreement and was reimbursed for the tenant improvement and furniture costs incurred by the Company during the nine months ended September 30, 2014 totaling approximately $8.5 million. Reimbursement was made by delivery and retirement of 916,423 OP Units held by an affiliate of the Former Manager. The Company never moved into or occupied the building.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

ANST Office Build-out

During the nine months ended September 30, 2014, as a result of the Cole Merger, the Company worked to develop a partnership with ANST to better service clients and shareholders more efficiently, as well as create more career opportunities for the employees. Plans were made to move ANST to part of the Cole Capital office building in 2014. In order to accommodate the ANST employees, the Cole Capital office building was to be remodeled. During the nine months ended September 30, 2014, the Company paid $0.4 million directly to third parties for leasehold improvements and furniture and fixtures relating to the renovation.

Subsequently, ANST never moved into the building. The Company is considering its options with regard to recovery of such payments, although no decisions have been made at this time. No asset has been recognized in the financial statements related to any potential recovery.

Office Rents and New York (405 Park Ave.) Office Build-out

During the three and nine months ended September 30, 2014, the Company paid $0.2 million and $0.5 million, respectively, to an affiliate of the Former Manager for rent related to offices in New York, Pennsylvania and North Carolina where certain of the Company’s employees shared office space with an affiliate of the Former Manager. In addition, during the three and nine months ended September 30, 2014, the Company paid $0.5 million directly to third parties for leasehold improvements and furniture and fixtures for the New York (405 Park Ave.) office.

Additional Related Party Transactions

The following related party transactions were not included in the tables above.

Tax Protection Agreement

The Company is party to a tax protection agreement with ARC Real Estate, which contributed its 100% indirect ownership interests in 63 of the Company’s properties to the Operating Partnership in the formation transactions related to the Company’s IPO. Pursuant to the tax protection agreement, the Company has agreed to indemnify ARC Real Estate for its tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if the Company sells, conveys, transfers or otherwise disposes of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The sole and exclusive rights and remedies of ARC Real Estate under the tax protection agreement will be a claim against the Operating Partnership for ARC Real Estate’s tax liabilities as calculated in the tax protection agreement, and ARC Real Estate shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from the Operating Partnership in violation of the tax protection agreement.

Investment from the ARCT III Special Limited Partner

In connection with the ARCT III Merger, the ARCT III Special Limited Partner invested $750,000 in the ARCT III OP and was subsequently issued 56,797 OP Units in respect thereof upon the closing of the ARCT III Merger after giving effect to the ARCT III Exchange Ratio. This investment is included in non-controlling interests in the accompanying consolidated balance sheets.

Investment in an Affiliate of the Former Manager

As of September 30, 2014 and December 31, 2013, the Company held an investment valued at $1.7 million and $1.6 million, respectively, in a real estate fund advised by an affiliate of the Former Manager, American Real Estate Income Fund, which invests primarily in equity securities of other publicly traded REITs.

Ownership by Affiliates of the Former Manager

Certain affiliates of the Former Manager own shares of the Company’s common stock, shares of unvested restricted common stock, OP Units and LTIP Units. As of September 30, 2014 and December 31, 2013, 2.75% and 4.37%, respectively, of the total equity units issued by the Company and the OP were owned by affiliates.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Due to Affiliates

Due to affiliates, as reported in the accompanying consolidated balance sheets, is comprised of the following amounts discussed above (in thousands):


	September 30, 2014		December 31, 2013
	(as Restated)		(as Restated)
Due to affiliates:
Offering related costs	$	2,000	$	220
Merger and other non-routine transactions		—		38,645
General and administrative		63		59,600
Indirect affiliate costs		413		—
Managed REITs and other		281		—
Management fees to affiliates		—		4,969

Total	$	2,757	$	103,434

Cole Capital

Cole Capital is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. In addition, the Company distributes the shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. The Company receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.

Cole Capital Offering Related Revenue

The Company generally receives a selling commission of up to 7.0% of gross offering proceeds related to the sale of shares of CCPT IV, CCIT II and CCPT V common stock in their primary offerings, before reallowance of commissions earned by participating broker-dealers. The Company has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. In addition, the Company generally receives 2.0% of gross offering proceeds in the primary offerings, before reallowance to participating broker-dealers, as a dealer manager fee in connection with the sale of CCPT IV, CCIT II and CCPT V shares of common stock. The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees are paid to the Company or other broker-dealers with respect to shares sold under the respective Managed REIT’s distribution reinvestment plans, under which the stockholders may elect to have distributions reinvested in additional shares.

In connection with the sale of INAV shares of common stock, the Company receives an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to (i) 1/365th of 0.55% of the net asset value (“NAV”) for Wrap Class shares of common stock (“W Shares”) for such day, (ii) 1/365th of 0.55% of the NAV for Advisor Class shares of common stock (“A Shares”) for such day and (iii) 1/365th of 0.25% of the NAV for Institutional Class shares of common stock (“I Shares”) for such day. The Company, in its sole discretion, may reallow a portion of its dealer-manager fee received on W Shares, A Shares and I Shares to participating broker-dealers. In addition, the Company receives a selling commission on A Shares sold in the primary offering of up to 3.75% of the offering price per share for A Shares. The Company has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. The Company also receives an asset-based distribution fee for A Shares that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.50% of the NAV for A Shares for such day. The Company, in its sole discretion, may reallow a portion of the distribution fee to participating broker-dealers. No selling commissions are paid to the Company or other broker-dealers with respect to W Shares or I Shares or on shares of any class of INAV common stock sold pursuant to INAV’s distribution reinvestment plan, under which the stockholders may elect to have distributions reinvested in additional shares, and no distribution fees are paid to the Company or other broker-dealers with respect to W Shares or I Shares.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

All other organization and offering expenses associated with the sale of the Managed REITs’ common stock (excluding selling commissions, if applicable, and the dealer manager fee) are paid for in advance by the Company and subject to reimbursement by the Managed REITs, up to certain limits per the respective advisory agreement. The organization and offering expenses incurred by the Company which are subject to reimbursement included costs which are paid to affiliates. As these costs are incurred, they are recorded as reimbursement revenue, up to the respective limit, and are included in dealer manager fees, selling commissions and offering reimbursements in the financial results for Cole Capital in Note 6 — Segment Reporting. Expenses paid on behalf of the Managed REITs in excess of these limits that are expected to be collected are recorded as program development costs. As of September 30, 2014, the Company had $18.0 million of organization and offering costs paid on behalf of the Managed REITs in excess of the limits that have not been reimbursed, which are expected to be reimbursed by the Managed REITs as they raise additional proceeds from the respective offering. The program development costs are included in deferred costs and other assets, net in the accompanying consolidated unaudited balance sheets.

The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided to the Managed REITs (as described above) during the three months ended September 30, 2014 and the period from the Cole Acquisition Date to September 30, 2014 (in thousands). As the Company did not commence operations for Cole Capital until the Cole Acquisition Date, comparative financial data is not presented for the three and nine months ended September 30, 2013.


	Three Months Ended September 30, 2014
	CCPT IV ⁽¹⁾			CCPT V		CCIT			CCIT II		INAV		Total
Offering:
Selling commission revenue	$	—		$	5,988		(4	)	$	7,123	$	258	$	13,365
Selling commissions reallowance expense		—			5,988		(4	)		7,123		258		13,365
Dealer manager fee revenue		—			1,764		(1	)		2,167		175		4,105
Dealer manager fees reallowance expense		—			953		(1	)		1,055		12		2,019
Other expense reimbursement revenue		(47	)		1,766		—			2,176		170		4,065

(1)	Due to net cancellations during the quarter, related to shares sold prior to the fund closing on February 25, 2014.


	Period from the Cole Acquisition Date to September 30, 2014
	CCPT IV		CCPT V		CCIT			CCIT II		INAV		Total
Offering:
Selling commission revenue	$	29,113	$	7,335		(4	)	$	12,073	$	474	$	48,991
Selling commissions reallowance expense		29,113		7,335		(4	)		12,073		474		48,991
Dealer manager and distribution fee revenue		8,771		2,180		(1	)		3,653		363		14,966
Dealer manager fees reallowance expense		4,971		1,131		(1	)		1,776		20		7,897
Other expense reimbursement revenue		3,702		2,231		—			3,662		405		10,000

Cole Capital Operating Revenue

The Company earns acquisition fees related to the acquisition, development or construction of properties on behalf of certain of the Managed REITs. In addition, the Company is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits per the respective advisory agreement. The Company is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. In addition, the Company may earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Managed REIT. Acquisition and disposition fees and reimbursements, as applicable, are included in transaction service fees in the financial results for Cole Capital in Note 6 — Segment Reporting.

The Company earns advisory and asset and property management fees from certain Managed REITs and other affiliates. In addition, the Company may be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. In connection with services provided by the Company related to the origination or refinancing of any debt financing obtained by certain Managed REITs that is used to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company is reimbursed for financing expenses incurred, subject to certain limitations. Advisory fees, asset and property management fees and reimbursements of expenses are included in management fees and reimbursements in the financial results for Cole Capital in Note 6 — Segment Reporting.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The Company recorded fees and expense reimbursements as shown in the table below for services provided primarily to the Managed REITs (as described above) during the three months ended September 30, 2014 and the period from the Cole Acquisition Date to September 30, 2014 (in thousands). As the Company did not commence operations for Cole Capital until the Cole Acquisition Date, comparative financial data is not presented for the three and nine months ended September 30, 2013.


	Three Months Ended September 30, 2014
	CCPT IV		CCPT V		CCIT		CCIT II		INAV		Other
Operations:
Acquisition fee revenue	$	16,573	$	3,279		1,216	$	1,827	$	—	$	77
Asset management fee revenue		—		—		—		—		—		251
Property management and leasing fee revenue		—		—		—		—		—		178
Operating expense reimbursement revenue		1,589		957		716		237		151		—
Advisory and performance fee revenue		5,521		80		4,839		467		304		—

	Period from the Cole Acquisition Date to September 30, 2014
	CCPT IV		CCPT V		CCIT		CCIT II		INAV		Other
Operations:
Acquisition fee revenue	$	27,358	$	3,864		4,943	$	5,700	$	—	$	77
Asset management fee revenue		—		—		—		—		—		654
Property management and leasing fee revenue		—		—		—		—		—		752
Operating expense reimbursement revenue		4,192		1,140		1,903		316		286		—
Advisory and performance fee revenue		12,832		89		11,995		608		610		—

Investment in the Managed REITs

As of September 30, 2014, the Company owned aggregate equity investments of $4.2 million in the Managed REITs, which is included in investment in unconsolidated entities in the accompanying consolidated balance sheet. The table below presents certain information related to the Company’s investments in the Managed REITs as of September 30, 2014 (carrying amount in thousands):


	September 30, 2014
Managed REIT	% of Outstanding Shares Owned			Carrying Amount of Investment
CCPT IV		0.01	%		134
CCPT V		2.40	%		2,096
CCIT		0.01	%		77
CCIT II		1.44	%		1,741
INAV		0.18	%		157

				$	4,205

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Due from Affiliates

As of September 30, 2014, $55.7 million was expected to be collected from affiliates, including balances from the Managed REITs lines of credits, as well as balances for services provided by the Company and expenses subject to reimbursement by the Managed REITs in accordance with their respective advisory and property management agreements and was included in due from affiliates on the accompanying consolidated balance sheet. In connection with the Cole Merger, the Company acquired a revolving line of credit agreement that provides for $10.0 million of available borrowings to CCIT II. During the nine months ended September 30, 2014, the Company entered into a revolving line of credit agreement that provides for $10.0 million of available borrowings to CCPT V. The CCIT II and CCPT V line of credit agreements each bear an interest rate equal to the one-month LIBOR plus 2.20% and mature in January 2015 and March 2015, respectively. In addition, during the nine months ended September 30, 2014, the Company increased the available borrowings under the revolving lines of credit for both CCPT V and CCIT II to $60.0 million. During the nine months ended September 30, 2014, CCIT II and CCPT V borrowed $30.0 million and $20.0 million, respectively, on their lines of credit. These amounts remained outstanding as of September 30, 2014 and are included in due from affiliates in the accompanying consolidated balance sheets.

Note 21 — Net Loss Per Share/Unit

Net Loss Per Share

The General Partner’s unvested shares of restricted stock contain non-forfeitable rights to dividends and are considered to be participating securities in accordance with GAAP and, therefore, are included in the computation of earnings per share under the two-class method. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The unvested restricted stock is not allocated losses as the awards do not have a contractual obligation to share in losses of ARCP. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.

The following is a summary of the basic and diluted net loss per share computation for ARCP for the three and nine months ended September 30, 2014 and 2013 (dollar amounts in thousands, except for share and per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated)			2014			2013 (As Restated)
Net loss attributable to the Company	$	(280,398	)	$	(80,201	)	$	(626,562	)	$	(293,684	)
Less: dividends declared on preferred shares and participating securities		37,643			199			84,366			625

Net loss attributable to common stockholders	$	(318,041	)	$	(80,400	)	$	(710,928	)	$	(294,309	)


Weighted average number of shares of common shares outstanding:
Basic		902,096,102			221,707,920			756,289,984			196,254,575

Net loss per common share:
Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(0.35	)	$	(0.36	)	$	(0.94	)	$	(1.50	)

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Net Loss Per Unit

The following is a summary of the basic and diluted net loss per unit computation for the OP for the three and nine months ended September 30, 2014 and 2013 (dollar amounts in thousands, except for unit and per unit data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Restated)			2014			2013 (As Restated)
Net loss attributable to the Operating Partnership	$	(288,202	)	$	(83,354	)	$	(650,720	)	$	(301,566	)
Less: dividends declared on preferred shares and participating securities		37,643			199			84,366			625

Net loss attributable to common unitholders	$	(325,845	)	$	(83,553	)	$	(735,086	)	$	(302,191	)


Weighted average common units outstanding:
Basic		926,801,361			231,682,236			781,112,325			204,318,637

Basic and diluted net loss per unit attributable to common unitholders	$	(0.35	)	$	(0.36	)	$	(0.94	)	$	(1.48	)

As of September 30, 2014, the OP excluded 5,807,504 shares of unvested restricted stock outstanding from the calculation of diluted net loss per share as the effect would have been antidilutive.

Note 22 — Property Dispositions

During the nine months ended September 30, 2014, the Company disposed of 29 single-tenant properties and one multi-tenant property for an aggregate gross sales price of $158.6 million (the “2014 Property Dispositions”). There were no properties disposed of during the nine months ended September 30, 2013. No disposition fees were paid to affiliates in connection with the sale of the 2014 Property Dispositions and the Company has no continuing involvement with these properties. As of September 30, 2014, 71 properties were classified as held for sale.

On June 11, 2014, the OP, through indirect subsidiaries, entered into an agreement of purchase and sale with BRE DDR Retail Holdings III LLC (the “Purchaser”), a joint venture between Blackstone and DDR Corp., by which the Purchaser agreed to purchase 67 multi-tenant properties and nine single-tenant properties and the adjacent land and related properties. The properties to be sold pursuant to such agreement were the same properties that the Company had previously intended to spin off into an externally managed, NASDAQ-traded REIT, American Realty Capital Centers, Inc. In light of the Company’s entry into such agreement, it abandoned its previously contemplated spin-off. On October 17, 2014, the Company completed the final sale of a portfolio consisting of 64 multi-tenant properties and seven single-tenant properties (the “Multi-Tenant Portfolio”) to the Purchaser, as discussed in Note 24 — Subsequent Events.

The Company has classified and accounted for the Multi-Tenant Portfolio’s assets and liabilities as held for sale as of September 30, 2014. As the sale does not represent a change in strategic direction for the Company and will not have a significant effect on the operations or financial results of the Company, the operating results of the Multi-Tenant Portfolio are not classified as discontinued operations for any periods presented. However, the Company has determined that the Multi-Tenant Portfolio is an individually significant component of the Company. As of December 31, 2013, the Company classified one property as held for sale, which has been presented as discontinued operations on the Company’s consolidated statements of operations.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

The following table summarizes the operating income from continued operations of the Multi-Tenant Portfolio for the three and nine months ended September 30, 2014 and 2013 (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
Total revenue	$	47,511		$	—	$	119,467		$	—
Total expenses		(49,490	)		—		(124,069	)		—

Income from assets held for sale	$	(1,979	)	$	—	$	(4,602	)	$	—


Loss on assets held for sale ⁽¹⁾	$	(262,233	)		—	$	(262,233	)		—

(1)

Loss on assets held for sale includes the write-off of $195.5 million of goodwill allocated to the cost basis of the Multi-Tenant Portfolio.

On September 30, 2014, the Company entered into the Purchase Agreement to sell Cole Capital to RCAP , and, in conjunction with the sale agreement, entered into sub-advisory agreements to provide acquisition and property management services to Cole Capital subsequent to the closing of the transaction. Subsequent to September 30, 2014, the Purchase Agreement and sub-advisory agreements were terminated by RCAP as discussed within Note 24 — Subsequent Events. The Company has included the Cole Capital segment in continuing operations as the sale of Cole Capital is not deemed probable within one year as evidenced by the significant changes to the plan that were made.

Note 23 — Income Taxes

As a REIT, the General Partner generally is not subject to federal income tax, with the exception of its TRS. However, the General Partner, including its TRS, and the Operating Partnership are still subject to certain state and local income taxes in the various jurisdictions in which they operate.

Based on the above, Cole Capital’s business, substantially all of which is conducted through a TRS, recognized a provision for federal and state income taxes of $1.1 million and a benefit of $12.6 million for the three and nine months ended September 30, 2014, respectively, which is included in other income, net in the accompanying consolidated statement of operations. No provision or benefit for income taxes was recognized for the three and nine months ended September 30, 2013 as the Company did not commence operations for Cole Capital until the Cole Acquisition Date. The difference in the benefit from income taxes reflected in the consolidated statements of operations as compared to the benefit calculated at the statutory federal income tax rate is primarily attributable to various permanent differences and state and local income taxes.

The REI segment recognized state income and franchise tax expense of $2.0 million and $5.9 million during the three and nine months ended September 30, 2014, respectively, and $0.1 million and $0.4 million during the three and nine months ended September 30, 2013, respectively, which are included in other income, net in the accompanying consolidated statements of operations.

The Company had no unrecognized tax benefits as of or during the nine months ended September 30, 2014 and 2013. Any interest and penalties related to unrecognized tax benefits would be recognized within the provision for income taxes in the accompanying consolidated statements of operations. The Company files income tax returns in the U.S. federal jurisdiction, as well as various state jurisdictions, and is subject to routine examinations by the respective tax authorities. With few exceptions, the Company is no longer subject to federal or state examinations by tax authorities for years before 2010.

Note 24 — Subsequent Events

The following events occurred subsequent to September 30, 2014:

Completion of Acquisition of Assets

The following table presents certain information about the properties that the Company acquired from October 1, 2014 to February 24, 2015 (dollar amounts and square footage in millions):


	No. of Buildings			Square Feet			Base Purchase Price ⁽¹⁾
Total Portfolio – September 30, 2014		4,714			113.8		$	19,854
Acquisitions, net of disposals ⁽²⁾		(55	)		(10.6	)		(1,994	)

Total portfolio – February 24, 2015		4,659			103.2		$	17,860

(1)	Contract purchase price, excluding acquisition and transaction related costs.

(2)	Includes the sale of the Multi-Tenant Portfolio, consisting of 71 properties.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Executive Leadership Changes and Audit Committee Investigation

On September 30, 2014, the Company issued a press release announcing that, effective October 1, 2014, as previously communicated through its stockholder letters, David S. Kay would become Chief Executive Officer of the Company and Lisa E. Beeson would become the Company’s President. Nicholas S. Schorsch, who had served as the Company’s Chief Executive Officer, would remain the Company’s Executive Chairman.

On October 29, 2014, the Company filed a Current Report on Form 8-K with the SEC disclosing the Company’s conclusion that the previously issued consolidated financial statements and other financial information contained in the Company’s Annual Report for the fiscal year ended December 31, 2013 and the Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, and the Company’s earnings releases and other financial communications for these periods, should no longer be relied upon. Results of the investigation are further discussed within Note 2 — Restatement of Previously Issued Consolidated Financial Statements.

On October 28, 2014, Brian S. Block and Lisa Pavelka McAlister, the Company’s Executive Vice President, Chief Financial Officer, Treasurer and Secretary and Senior Vice President and Chief Accounting Officer, respectively, each resigned from the Company. The Company’s board of directors appointed Michael Sodo to serve as the Company’s Chief Financial Officer and Gavin Brandon to serve as the Company’s Chief Accounting Officer.

On December 12, 2014, Nicholas S. Schorsch resigned as Executive Chairman and a director of the Company. He also resigned from all other employment and board positions that he held at the Company and its subsidiaries and certain Company-related entities (including the non-traded real estate investment trusts sponsored or managed by the Company or its affiliates).

On December 15, 2014, David S. Kay resigned as Chief Executive Officer (“CEO”) and a director of the Company and as CEO of the OP. Lisa E. Beeson also resigned as President and Chief Operating Officer of the Company and the Partnership. In addition, each of them resigned from any other employment or board positions held with the Company, its subsidiaries and certain Company-related entities (including the non-traded real estate investment trusts sponsored or managed by the Company or its affiliates).

Effective December 15, 2014, William G. Stanley, who had been serving as the Company’s Lead Independent Director, became the Company’s Interim Chief Executive Officer and Interim Chairman of the Company’s board of directors simultaneously resigning from his role as Lead Independent Director. Mr. Stanley will lead the Company until permanent replacements are named. The Compensation Committee of the Company’s board of directors has commenced a search for a new Chief Executive Officer and a new Chairman of the Company’s board of directors.

Unconsummated Sale of Cole Capital to RCAP

On October 1, 2014, the Company announced that it had entered into the Purchase Agreement, pursuant to which RCAP would acquire Cole Capital, the Company’s private capital management business, for at least $700.0 million. As part of the transaction, the Company would be entitled to an earn-out of up to an additional $130.0 million based upon Cole Capital’s 2015 EBITDA.

On November 3, 2014, the Company received notice from RCAP purporting to terminate the Agreement.

On December 4, 2014, the Company issued a press release announcing that it had entered into a settlement agreement with RCAP that resolved their dispute relating to the Agreement. The settlement, in which the Company received $60.0 million, resolved litigation brought by the Company in the Delaware Court of Chancery to enforce its rights under the Agreement.

The settlement included: $42.7 million in cash paid by RCAP to the Company; a $15.3 million unsecured note issued by RCAP to the Company; and a release of the Company from its obligation to pay $2.0 million to RCAP or its affiliates relating to another matter described in the press release. The $42.7 million in cash included a $10.0 million payment already delivered to the Company by RCAP in connection with the Agreement. The two-year unsecured note bears interest at an 8.0% interest rate per annum. In addition, the Company and RCAP have agreed to terminate, unwind or otherwise discontinue all agreements, arrangements and understandings between the two parties and any of their respective subsidiaries.

Multi-tenant Shopping Center Portfolio Sale

On October 17, 2014, the Company completed the sale of its Multi-Tenant Portfolio for $1.9 billion to the Joint Venture Blackstone and DDR. Additionally, the Company entered into a letter of intent with an unrelated third party to sell five multi-tenant properties for $52.8 million bringing total sale proceeds to $2.0 billion. The transaction aimed to simplify the Company’s business model, allowing it to focus solely on its single-tenant, net lease investments. The disposition to Blackstone and DDR provided $1.3 billion of net proceeds, of which $1.2 billion were used to reduce the Company’s leverage by paying down the Company’s line of credit. In connection with the sale, $542.8 million of secured mortgage debt was either repaid or assumed by the Purchaser, providing the Company with $1.3 billion in net proceeds and a loss on sale of $261.1 million, which includes the write-off of $195.5 million of goodwill allocated to the cost basis of the Multi-Tenant Portfolio.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Line of Credit, Agreements, and Waivers

The Company has substantial amounts of indebtedness outstanding upon which it relies for funding of future capital needs. As discussed within Note 14 — Credit Facilities, at September 30, 2014, the Credit Facility had commitments of $4.3 billion. As of September 30, 2014, a maximum of $391.0 million was available to the OP for future borrowings, subject to borrowing availability.

On November 12, 2014, the Company entered into a consent, waiver and amendment (“the Amendment”) with its lenders under its unsecured credit facility for an extension regarding the delivery of its third quarter 2014 financial statements and certain other financial deliverables until the earlier of five days following the date the Company files with the SEC its third quarter 2014 10-Q and January 5, 2015. The Amendment allowed the Company to remain compliant with its borrowing obligations under its Credit Facility as its external auditors completed their review of the Company’s previously filed 2013 and 2014 financial statements. As part of the Amendment, in order to better align the size of the facility with anticipated future usage, the Company elected to reduce the maximum amount of indebtedness from $4.65 billion to $4.0 billion. Additionally, until the 2013 and 2014 financial statements are filed with the SEC, the maximum principal amount of indebtedness outstanding under the Credit Facility was temporarily reduced thereunder to $3.6 billion.

On December 23, 2014, the Company and the OP, as the borrower, entered into a Consent and Waiver Agreement (the “Consent and Waiver”) with respect to Amended Credit Agreement. The Consent and Waiver, among other things, (i) provided for a further extension regarding the delivery of the Company’s third quarter 2014 financial statements and certain other financial deliverables that the Company agreed to provide under the Amendment, until the earlier of: March 2, 2015; and 45 days following the receipt of a notice of breach or default from the applicable trustee or the requisite percentage of holders under the Company’s and the OP’s respective indentures, (ii) provided an extension from the lenders for the delivery of the Company’s full-year 2014 audited financial statements until the earlier of: the fifth day after the date that the Company files its Annual Report on Form 10-K with the SEC for the fiscal year ended December 31, 2014; and March 31, 2015, (iii) permanently reduced the maximum amount of indebtedness under the Credit Agreement to $3.6 billion, including the reduction of commitments under the Company’s revolving facilities and the elimination of the $25 million swingline facility, (iv) provided that until the date that all required financial deliverables have been delivered, no further loans or letters of credit would be requested under the Amended Credit Agreement by the Company, other than in accordance with the cash flow forecast provided by the Company to the Lenders thereunder, that neither the Company nor the OP would pay any dividends on, or make any other Restricted Payment (as defined in the Credit Agreement) on, its respective common equity and (v) provided that the Company would provide additional financial and other information to the Lenders from time to time. In connection with the Amendment and Consent and Waiver, the Company agreed to pay certain customary fees to the consenting Lenders and agreed to reimburse certain customary expenses of the arrangers. On February 20, 2015, we entered into a third consent (the “Third Consent”) to confirm that certain revisions to the required financial deliverables were agreed with the Lenders.

Agreement in Principle with Senior Noteholder Group; Convertible Notes

On January 22, 2015, the Company announced that it had entered into an agreement in principle with an ad hoc group of holders (the “Senior Noteholder Group”), which the Company had been advised then represented a majority of the aggregate principal amounts outstanding of each of the 2.00% senior notes due 2017, the 3.00% senior notes due 2019 and the 4.60% senior notes due 2024, which, in each case, were issued by the OP, of which the Company is the sole general partner, and guaranteed by us under an Indenture, dated February 6, 2014 (the “Indenture”), by and among the OP, U.S. Bank National Association, as trustee, and the guarantors named therein. Pursuant to such agreement, the Senior Noteholder Group agreed not to issue a notice of default, prior to March 3, 2015, for the Company’s failure to timely deliver this quarterly report on Form 10-Q containing financial information required to be included therein in respect of the OP, which is required to be delivered pursuant to the terms of the Indenture. In exchange, the Company agreed to sign a confidentiality agreement with the Senior Noteholder Group’s counsel and pay reasonable and documented fees and out-of-pocket expenses of such counsel up to $300,000. Furthermore, the parties agreed that in the event a notice of default related to our failure to timely deliver such this quarterly report on Form 10-Q is issued by the senior noteholders on or after March 3, 2015, the 60-day cure period set forth in the Indenture will be reduced by one day for each day after January 19, 2015 that such notice of default is given. Such agreement was subsequently definitively documented and a supplement to the Indenture was entered into on February 9, 2015. The agreement was reached after the ad hoc group organized recently and directed counsel to the Senior Noteholder Group to engage in discussions with the Company regarding the terms of a possible resolution in response to our failure to timely deliver such third quarter 2014 financial information regarding the OP.

In addition, the Company announced on January 22, 2015 that it received at its Phoenix, Arizona corporate office notice (the “Notice”) from the trustee under the indentures (the “Convertible Indentures”) governing each of the 3.00% convertible

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

senior notes due 2018 issued by us on July 29, 2013 and the 3.75% convertible senior notes due 2020 issued by the Company on December 10, 2013 (collectively, the “Convertible Notes”) of the Company’s failure to timely deliver our Third Quarter 10-Q, which was required to be delivered pursuant to the terms of the Convertible Indentures. Subsequent to the Company’s announcement, the Company learned that it also received the Notice on January 16, 2015, at an address in New York City that was formerly the Company’s principal place of business. Pursuant to the terms of the Convertible Indentures, the Company has 60 days following its receipt of a notice of default to deliver the required financial statements, after which such failure would become an event of default under each of the Convertible Indentures. The filing of this quarterly report on Form 10-Q will cure such default.

Non-Compliance Associated with the Company’s and the Partnership’s Filings

The federal securities laws require companies subject to the Exchange Act to disclose information on an ongoing basis. These laws include deadlines for public companies based on the category of the filer as well as type of form filed.

The Company is classified as a Large Accelerated Filer. The deadlines associated with our filing category are as follows:

•

The Company’s Annual Report on Form 10-K must be submitted within 60 days of the Company’s fiscal year end; and

•

The Company’s Quarterly Report on Form 10-Q must be submitted within 40 days of the Company’s fiscal quarter end.

•

The Partnership is a non-accelerated filer and its filing deadlines are 90 and 45 days, respectively.

In light of the non-reliance on the Company’s and the Partnership’s financial statements and the ongoing Audit Committee investigation, such deadlines with the SEC were not met with respect to the Company’s or the Partnership’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014.

On November 12, 2014, the Company received a notification letter (the “Letter”) from the NASDAQ Listing Qualifications Department (“NASDAQ”) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the period ended September 30, 2014 (the “Third Quarter 10-Q”) with the SEC, it was not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1). The Company also received, and has cooperated with, a letter (the “NASDAQ Information Request”) from NASDAQ requesting certain information relating to the matters described in the Current Report on Form 8-K filed October 29, 2014.

Pursuant to the Letter, the Company was required to submit a plan to NASDAQ to regain compliance with the applicable NASDAQ Listing Rule within 60 days of November 12, 2014. We complied and submitted a plan. After review of the Company’s plan for regaining compliance, NASDAQ granted the Company an extension until April 15, 2015 to deliver our Third Quarter 10-Q and any other delinquent filings to regain compliance with the listing rule.

Dividend Policy

As of December 24, 2014, the Company determined that, until it has delivered its 2013 financial statements, 2014 financial statements and related compliance certificates, neither it nor its subsidiary, the OP, will pay any dividends on, or make any other Restricted Payment (as defined in the Amended Credit Agreement) on, its respective common equity. Following the delivery of its financial statements, the Company will reevaluate a reinstatement of its dividend at a rate that is in line with its industry peers.

Cole Litigation Matters

The defendants in the consolidated Baltimore Merger Actions, which were filed by Cole stockholders challenging the Cole Merger, mailed a Notice of Pendency of Derivative and Class Action (the “Class Notice”) to the Cole stockholders on October 7, 2014, following the court’s preliminary approval of the parties’ Settlement Stipulation. On December 3, 2014, the parties in the consolidated Baltimore Merger Actions executed an Amended Stipulation and Release and Agreement of Compromise and Settlement (the “Amended Stipulation”) modifying the Stipulation. A final settlement hearing in the consolidated Baltimore Merger

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Actions was held on December 12, 2014, and on January 13, 2015, the Baltimore Circuit Court issued an order approving the settlement pursuant to the terms of the Amended Stipulation. Two objectors have since filed a notice of appeal of the settlement order. Following court approval of the settlement of the consolidated Baltimore Merger Actions, the Wunsch case was dismissed voluntarily on January 21, 2015.

Regulatory Investigations and Litigation Relating to the Audit Committee Investigation

On October 29, 2014, the Company filed a Current Report on Form 8-K (the “October 29 8-K”) reporting that the Audit Committee had concluded that the previously-issued audited consolidated financial statements and other financial information contained in the original filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, the previously issued unaudited financial statements and other financial information contained in the Company’s Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, and the Company’s earnings releases and other financial communications for these periods should no longer be relied upon. Prior to that filing, the Audit Committee previewed for the SEC the information contained in that filing. Subsequent to the filing, the SEC provided notice that it had commenced a formal investigation and issued subpoenas calling for the production of documents. In addition, the United States Attorney’s Office for the Southern District of New York contacted counsel for the Audit Committee and counsel for the Company with respect to this matter, and the Secretary of the Commonwealth of Massachusetts issued a subpoena calling for the production of various documents. The Audit Committee and the Company are cooperating with these regulators in their investigations.

As discussed below, the Company and certain of its current and former directors and officers have been named as defendants in a number of lawsuits filed in response to the October 29 8-K, including class action, derivative actions, and individual actions under the federal securities laws and state common and corporate laws in both federal and state courts in New York and Maryland.

Between October 30, 2014 and January 20, 2015, the Company and its current and former officers and directors, among others, were named as defendants in ten putative securities class action complaints in the United States District Court for the Southern District of New York (the “SDNY Actions”): Ciraulu v. American Realty Capital, Inc., et al. , No. 14-cv-8659 (AKH); Priever v. American Realty Capital Properties, Inc., et al. , No. 14-cv-8668 (AKH); Rubinstein v. American Realty Capital Properties, Inc., et al. , No. 14-cv-8669 (AKH); Patton v. American Realty Capital Properties, Inc., et al. , No. 14-cv-8671 (AKH); Edwards v. American Realty Capital Properties, Inc., et al. , No. 14-cv-8721 (AKH); Harris v. American Realty Capital Properties, Inc., et al. , No. 14-cv-8740 (AKH); Abadi v. American Realty Capital Properties, Inc., et al. , No. 14-cv-9006 (AKH); City of Tampa General Employees Retirement Fund v. American Realty Capital Properties, Inc., et al. , No. 14-cv-10134 (AKH); Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al. , No. 15-cv-0421 (AKH); and New York City Employees Retirement System v. American Realty Capital Properties, Inc., et al. , No. 15-cv-0422 (AKH). At a February 10, 2015 status conference, the court consolidated the SDNY Actions, appointed a lead plaintiff, and set a deadline of April 10, 2015 for the defendants to respond to the consolidated class action complaint, namely, the complaint filed in Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al. , No. 15-cv-0421 (AKH). The consolidated class action complaint asserts claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. The proposed class period runs from May 6, 2013 to October 29, 2014.

In addition, on November 25, 2014, the Company and certain of its current and former officers and directors were named as defendants in a putative securities class action filed in the Circuit Court for Baltimore County, Maryland, captioned Wunsch v. American Realty Capital Properties, Inc., et al. , No. 03-C-14-012816 (the “Maryland Securities Action,” and together with the SDNY Actions, the “Securities Actions”). On December 23, 2014, the Company removed the Maryland Securities Action to the United States District Court for the District of Maryland (Northern Division), under the caption Wunsch v. American Realty Capital Properties, Inc., et al. , No. 14-cv-4007 (ELH), and seeks to transfer the action to the United States District Court for the Southern District of New York. The Maryland Securities Action asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, arising out of allegedly false and misleading statements made in connection with the Company’s securities issued in connection with the Cole Merger. The Company is not yet required to respond to this complaint.

Between November 17, 2014 and February 2, 2015, six shareholder derivative actions, purportedly in the name and for the benefit of the Company, were filed against certain of the Company’s current and former officers and directors, amongst others, in the United States District Court for the Southern District of New York (the “SDNY Derivative Actions”): Michelle Graham Turner 1995 Revocable Trust v. Schorsch, et al. , No. 14-cv-9140 (AKH); Froehner v. Schorsch, et al. , No. 14-cv-9444 (AKH); Serafin v. Schorsch, et al. , No. 14-cv-9672 (AKH); Hopkins v. Schorsch, et al. , No. 15-cv-262 (AKH); Appolito v.

AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) – (Continued)

Schorsch, et al. , No. 15-cv-644 (AKH); and The Joel and Robin Staadecker Living Trust v. Schorsch, et al. , No. 15-cv-768 (AKH). In addition, between December 30, 2014 and January 16, 2015, the Company and certain of its current and former officers and directors were named as defendants in two shareholder derivative actions filed in the Circuit Court for Baltimore City, Maryland (the “Maryland Derivative Actions”): Meloche v. Schorsch, et al. , No. 24-C-14-008210 and Botifoll v. Schorsch, et al. , No. 24-C-15-000245. In addition, on January 29, 2015, the Company and certain of its current directors, amongst others, were named as defendants in a shareholder derivative action filed in the Supreme Court of the State of New York, captioned Fran Kosky Roth IRA v. Rendell, et al. , No. 15-650269 (the “New York Derivative Action,” and together with the SDNY Derivative Actions and the Maryland Derivative Actions, the “Derivative Actions”). On February 9, 2015 and February 20, 2015, three plaintiffs who filed SDNY Derivative Actions—Appolito, Hopkins and The Joel and Robin Staadecker Living Trust—voluntarily dismissed their actions without prejudice. The Derivative Actions seek money damages and other relief on behalf of the Company for, among other things, alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment in connection with the alleged conduct underlying the claims asserted in the Securities Actions and negligence and breach of contract. At a February 10, 2015 status conference, the court consolidated the SDNY Derivative Actions and directed the plaintiffs to file a consolidated amended complaint by March 10, 2015. The court set a deadline of April 3 for the defendants to respond to the consolidated complaint. On February 18, 2015, the parties to the New York Derivative Action entered into a stipulation setting a deadline of April 20, 2015 for the Company and defendants to respond to the complaint in that action. The Company and defendants are not yet required to respond to the complaints in the Maryland Derivative Actions.

On December 18, 2014, a former employee, Lisa McAlister, filed a defamation action against the Company and certain of its former officers and directors in the Supreme Court for the State of New York, captioned McAlister v. American Realty Capital Properties, Inc., et al., No. 14-162499. The complaint sought, among other things, compensatory and punitive damages and alleged that the October 29 8-K falsely blamed plaintiff for improper accounting and financial reporting practices. On January 26, 2015, the Company and the other defendants filed motions to dismiss plaintiff’s complaint. Subsequently, Ms. McAlister dismissed this action without prejudice.

On January 7, 2015, Ms. McAlister also filed a complaint, No. 2-4173-15-016, with the Occupational Safety and Health Administration of the United States Department of Labor. The complaint sought, among other things, compensatory and punitive damages and asserted claims for wrongful termination of employment for allegedly reporting concerns relating to alleged improper accounting practices by the Company. Ms. McAlister has withdrawn the complaint without prejudice.

On January 15, 2015, the Company and certain of its former directors and officers were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Jet Capital Master Fund, L.P. v. American Realty Capital Properties, Inc., et al. , No. 15-cv-307 (AKH) (the “Jet Capital Action”). The Jet Capital Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. The court set a deadline of April 10 for the defendants to respond to the complaint.

On February 20, 2015, the Company, certain of its current and former directors and officers, and ARC Properties Operating Partnership L.P. (and others) were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Twin Securities, Inc. v. American Realty Capital Properties, Inc., et al. , No. 15-cv-1291 (the “Twin Securities Action”). The Twin Securities Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 14(a), 18, and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. The Company and defendants are not yet required to respond to the complaint in the Twin Securities Action.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of American Realty Capital Properties, Inc. (the “Company”) and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to American Realty Capital Properties, Inc., a Maryland corporation, and, as required by context, including its operating partnership and its subsidiaries. Prior to becoming self-managed as of January 8, 2014, the Company was externally managed by ARC Properties Advisors, LLC (the “Former Manager”), a Delaware limited liability company and wholly owned subsidiary of AR Capital, LLC (“ARC”). Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I - Financial Information,” including the Notes to the Consolidated Financial Statements contained therein.

Restatement and Recast

As discussed in the explanatory note to this Form 10-Q and Note 2 — Restatement of Previously Issued Consolidated Financial Statements to the consolidated financial statements, we are restating our consolidated financial statements and related disclosures for the three and nine months ended September 30, 2013 and the year ended December 31, 2013. In addition, on January 3, 2014, we acquired American Realty Capital Trust IV, Inc. (“ARCT IV”). We and ARCT IV, from inception to January 3, 2014, were considered to be entities under common control because the entities’ advisors were wholly-owned subsidiaries of ARC. The entities’ advisors and ultimately ARC were determined to have a significant economic interest in both companies, in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. Accordingly, the 2013 financial statements have been recast in applying the carryover basis of accounting to include ARCT IV. The following discussion and analysis of our financial condition and results of operations is based on the restated and recasted amounts.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by using words such as “may,” “will,” “expects,” “anticipates,” “believes,” “intends,” “should,” “estimates,” “could” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. We do not undertake publicly to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law.

The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•

We have a limited operating history and limited experience operating a public company. This inexperience makes our future performance difficult to predict.

•

The competition for the type of properties we desire to acquire may cause our dividends and the long-term returns of our investors to be lower than they otherwise would be.

•

We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for dividends to our stockholders, per share trading price of our common stock and our ability to satisfy our debt service obligations.

•

We depend on tenants for our revenue, and, accordingly, our revenue is dependent upon the success and economic viability of our tenants.

•

Failure by any major tenant with leases in multiple locations to make rental payments to us, because of a deterioration of its financial condition or otherwise, or the termination or non-renewal of a lease by a major tenant, would have a material adverse effect on us.

•

We are subject to tenant industry concentrations that make us more susceptible to adverse events with respect to certain industries.

•

Increases in interest rates could increase the amount of our debt payments and limit our ability to pay dividends to our stockholders.

•

We may be unable to make scheduled payments on our debt obligations.

•

We may not generate cash flows sufficient to pay our dividends to stockholders, and as such we may be forced to borrow at higher rates to fund our operations.

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We may be unable to pay or maintain cash dividends or increase dividends over time.

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We may be affected by the incurrence of additional secured or unsecured debt.

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We may be adversely affected by increases in interest rates or a failure to maintain our OP’s credit rating.

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We may not be able to integrate the assets and businesses acquired in recent acquisitions into our existing portfolio or with our business successfully, or may not realize the anticipated benefits within the expected timeframe or at all.

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We may not be able to effectively manage or dispose of assets acquired in connection with our recent acquisitions that do not fit within our target assets.

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We may not be able to effectively manage our expanded portfolio and operations following our recent acquisitions completed acquisitions.

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We may be affected by risks associated with current and future litigation, including pending and filed securities litigation and governmental inquiries.

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We may not be able to successfully acquire future properties on advantageous terms.

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We may not be able to achieve and maintain profitability.

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We are subject to risks associated with lease terminations, tenant defaults, bankruptcies and insolvencies and tenant credit, geographic and industry concentrations.

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We could be subject to unexpected costs or unexpected liabilities that may arise from our Recent Acquisitions.

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We may fail to qualify to be treated as a real estate investment trust for U.S. federal income tax purposes (“REIT”).

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We may be deemed to be an investment company under the Investment Company Act of 1940, as amended, (the “Investment Company Act”) and thus subject to regulation under the Investment Company Act.

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Once we resume paying a dividend in respect of our common stock, there is no guarantee that such dividend will be paid at a rate equal to or at the same frequency as our previously declared monthly dividend.

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Our financial condition may be affected by our recent credit rating downgrade which could impact our access to capital and the terms of potential financing.

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We have material weaknesses in our disclosure controls and procedures and our internal control over financial reporting we have reported for prior periods and we may not be able to remediate such material weaknesses in a timely enough manner to eliminate the risks posed by such material weaknesses in future periods.

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Failure to timely deliver on or before March 31, 2015 our and the OP’s annual report on Form 10-K for the year ended December 31, 2014 in light of our obligations pursuant to an agreement with the lenders under the Credit Facility and pursuant to the terms of our indentures governing our senior unsecured and convertible notes could result in an event of default.

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We may not satisfy NASDAQ’s requirements for regaining compliance with its listing rules and, if so, NASDAQ could delist our common stock and Series F Preferred Stock.

All forward-looking statements should be read in light of the risks identified in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Overview

We were incorporated on December 2, 2010 as a Maryland corporation that qualified as a real estate investment trust for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. On September 6, 2011, we completed our IPO and our shares of common stock began trading on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “ARCP.”

Our business operates in two business segments, Real Estate Investment (“REI”) and our private capital management business, Cole Capital (“Cole Capital”). Through our REI segment, we acquire, own and operate single-tenant, freestanding commercial real estate properties, primarily subject to net leases with high credit quality tenants. We focus on investing in properties that are net leased to credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants. Our long-term business strategy is to continue to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining lease term of 10 to 12 years. We seek to acquire granular, self originated single-tenant net lease assets, which may be purchased through sale-leaseback transactions, small portfolios and built-to-suit opportunities, to the extent they are appropriate in terms of capitalization rate and scale. We expect this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from re-leasing of current below market leases. We have advanced our investment objectives by growing our net lease portfolio through strategic mergers and acquisitions.

As a result of the Cole Merger, in addition to operating a diverse portfolio of core commercial real estate investments, we are responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. We receive compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Furthermore, in order to avoid a potential adverse impact on our status as a REIT, we conduct substantially all of our investment management business through a wholly owned subsidiary of the OP, Cole Capital Advisors, Inc. (“CCA”), which we and CCA jointly elected to treat as a TRS for federal income tax purposes.

Prior to January 8, 2014, we retained our Former Manager to manage our affairs on a day-to-day basis with the exception of certain acquisition, accounting and portfolio management services performed by our employees. In August 2013, our board of directors determined that it is in the best interests of us and our stockholders to become self-managed and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed, we terminated the existing management agreement with our Former Manager, entered into employment and incentive compensation arrangements with our executives and acquired from our Former Manager certain assets necessary for our operations.

As of September 30, 2014, we owned 4,714 properties consisting of 113.8 million square feet, which were 99.2% leased with a weighted average remaining lease term of 11.5 years. In constructing our portfolio, we are committed to diversification by industry, tenant and geography. As of September 30, 2014, rental revenues derived from investment-grade tenants and tenants affiliated with investment-grade entities as determined by a major rating agency approximated 45% (we have attributed the rating of each parent company to its wholly owned subsidiary for purposes of this disclosure). Our strategy encompasses receiving the majority of our REI revenue from investment grade tenants as we further acquire properties and enter into, or assume, lease arrangements.

Completed Mergers and Major Acquisitions

American Realty Capital Trust III, Inc. Merger

On December 14, 2012, we entered into an Agreement and Plan of Merger (the “ARCT III Merger Agreement”) with American Realty Capital Trust III, Inc. (“ARCT III”) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of ours (the “ARCT III Merger”). The ARCT III Merger was consummated on February 28, 2013.

Also in connection with the ARCT III Merger, we entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates and pay certain merger related fees. See Note 20 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

CapLease, Inc. Merger

On May 28, 2013, we entered into an Agreement and Plan of Merger (the “CapLease Merger Agreement”) with CapLease, Inc., a Maryland corporation (“CapLease”), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of the Company (the “CapLease Merger”). The CapLease Merger was consummated on November 5, 2013.

American Realty Capital Trust IV, Inc. Merger

On July 1, 2013, we entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013, (the “ARCT IV Merger Agreement”) with ARCT IV, and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of the OP (the “ARCT IV Merger”). The ARCT IV Merger was consummated on January 3, 2014.

Fortress Portfolio Acquisition

Inland Portfolio Acquisition

Cole Real Estate Investments, Inc. Merger

On October 22, 2013, we entered into an agreement and plan of merger (the “Cole Merger Agreement”) with Cole Real Estate Investments, Inc. (“Cole”), a Maryland corporation, and a wholly owned subsidiary of the Company. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of ours. The Cole Merger was consummated on February 7, 2014.

Cole Credit Property Trust, Inc. Merger

On March 17, 2014, we entered into an Agreement and Plan of Merger (the “CCPT Merger Agreement”) with Cole Credit Property Trust, Inc., a Maryland corporation (“CCPT”). The CCPT Merger Agreement provided for the merger of CCPT with and into a wholly owned subsidiary of the Company. The CCPT Merger was consummated on May 19, 2014.

Red Lobster Portfolio Acquisition

On May 15, 2014, we entered into a master purchase agreement to acquire over 500 properties, substantially all of which are operating as Red Lobster ^® restaurants from a third party. The transaction is structured as a sale-leaseback in which we will purchase and immediately lease the portfolio back to the third party pursuant to the terms of multiple master leases. The overall sale-leaseback transaction consisted of 522 Red Lobster ^® restaurants and 20 other branded restaurant properties for a purchase price of $1.7 billion. The Company closed the Red Lobster Portfolio acquisition in the third quarter of 2014.

Abandoned Spin-off of Multi-Tenant Shopping Center Portfolio

On March 13, 2014, the Company announced its intention to spin off its multi-tenant shopping center business (“MT Spin-off”) into a publicly traded REIT, American Realty Capital Centers, Inc., which was expected to operate under the name “ARCenters” and to trade on the NASDAQ Global Market under the symbol “ARCM.” The OP was expected to retain 25% ownership of ARCM. The spin-off was expected to be effectuated through a pro rata taxable special distribution of one share of ARCM common stock for every 10 shares of the Company’s common stock and every 10 OP Units held by third parties in the OP. On April 4, 2014, ARCM filed a Registration Statement on Form 10 to register ARCM’s common stock, par value $0.01 per share, pursuant to Section 12(b) of the Exchange Act so that, upon consummation of the spin-off, shares of ARCM received by holders of the Company’s common stock, or OP Units, as applicable, could freely trade their newly received ARCM common stock. ARCM was expected to be externally managed by the Company. On May 21, 2014, the Company announced that it had reassessed its plans for the multi-tenant shopping center portfolio and entered into a letter of intent to sell such portfolio to Blackstone, expecting to finalize pertinent documentation related thereto within 30 days of such date. The properties included in such sale were the same properties that would have been spun off into ARCM and, consequently, the Company abandoned its proposed spin-off at such time. On June 11, 2014, indirect subsidiaries of the Company entered into an Agreement of Purchase and Sale with BRE DDR Retail Holdings III LLC, an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., pursuant to which the parties definitively documented the sale of the Company’s multi-tenant shopping center portfolio. The properties to be sold pursuant to such agreement were the same properties that the Company had previously intended to spin off into an externally managed, NASDAQ traded REIT, American Realty Capital Centers, Inc. In light of the Company’s entry into such agreement, it abandoned its previously contemplated spin-off.

Results of Operations

As a result of the Cole Merger, we evaluate our operating results by our two business segments, REI and Cole Capital.

REI Segment

Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. The following table shows the property statistics of our real estate assets, including consolidated joint ventures, as of September 30, 2014 and 2013:


	September 30,
	2014			2013
Number of commercial properties ⁽¹⁾		4,714			2,420
Approximate rentable square feet (in millions) ⁽²⁾		113.8			29.5
Percentage of rentable square feet leased		99.2	%		100.0	%

(1)	Excludes properties owned through the Unconsolidated Joint Ventures.

(2)	Includes square feet of the buildings on land that are subject to ground leases.

Comparison of the Three Months Ended September 30, 2014 to the Three Months Ended September 30, 2013

Total Real Estate Investment Revenue

REI revenue increased $302.1 million to $397.3 million for the three months ended September 30, 2014, compared to $95.3 million for the three months ended September 30, 2013. Our REI revenue consisted primarily of rental income from net leased commercial properties, which accounted for 92% and 94% of total REI revenue during the three months ended September 30, 2014 and 2013, respectively.

Rental Income

Rental income increased $276.0 million to $365.7 million for the three months ended September 30, 2014, compared to $89.7 million for the three months ended September 30, 2013. The increase was primarily due to our net acquisition of 2,283 properties (which excludes 41 properties that are accounted for as direct financing leases) primarily through various mergers and portfolio acquisitions subsequent to September 30, 2013.

Direct Financing Lease Income

Direct financing lease income decreased $0.6 million to $0.6 million for the three months ended September 30, 2014 compared with direct financing income of $1.2 million during the three months ended September 30, 2013. The decrease is due to the disposition and lease expiration on several properties, in addition to the monthly decrease in interest income recognized over the life of the leases.

Operating Expense Reimbursements

Operating expense reimbursements increased by $26.7 million to $31.0 million for the three months ended September 30, 2014 compared to $4.3 million for the three months ended September 30, 2013. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from the tenant per the respective lease. The operating expense reimbursements increase was driven by our net acquisition of 2,283 properties subsequent to September 30, 2013.

We also review our stabilized operating results from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store.” Cash same store rents on the 1,751 properties held for the full period in each of the three months ended September 30, 2014 and 2013 increased $0.6 million, or 0.7%, to $76.0 million compared to $75.4 million for the three months ended September 30, 2013, respectively. Same store annualized average rental income per square foot was $12.01 at September 30, 2014 compared to $11.93 at September 30, 2013. Both cash and annualized average same store rents increases are due to contractual rent increases as well as lease renewals with increased contractual rents.

Acquisition Related Expenses

Acquisition related expenses decreased $13.0 million to $14.0 million for the three months ended September 30, 2014, compared to $26.9 million for the three months ended September 30, 2013. Acquisition costs primarily consisted of legal costs, deed transfer costs and other costs related to granular and portfolio real estate purchase transactions as well as contingent consideration expenses. Acquisition costs for the three months ended September 30, 2014 primarily related to the Red Lobster Portfolio acquisition as well as increased granular acquisitions over the prior year comparable period. In addition to the costs above, during the three months ended September 30, 2013, we paid acquisition fees to the Former Manager for acquisitions by ARCT IV. In conjunction with the ARCT IV Merger, it was agreed that the Former Manager would no longer charge acquisition fees.

Merger and Other Non-routine Transaction Related Expenses

Costs related to various mergers, as well as other non-routine transaction costs increased $3.3 million to $7.6 million for the three months ended September 30, 2014, compared to $4.3 million for the three months ended September 30, 2013. Merger and other non-routine transaction costs incurred for the three months ended September 30, 2014 primarily related to the pending sales of the Company’s multi-tenant shopping center portfolio and Cole Capital operating segment. During the three months ended September 30, 2013, merger and other non-routine transaction costs primarily related to the ARCT IV Merger.

Property Operating Expenses

Property operating expenses increased $35.5 million to $41.0 million for the three months ended September 30, 2014, compared to $5.4 million for the three months ended September 30, 2013. The increase was primarily due to increased property taxes, utilities, repairs and maintenance and insurance expenses relating to the net acquisition of 2,283 rental income-producing properties subsequent to September 30, 2013.

General and Administrative Expenses

General and administrative expenses increased $5.1 million to $14.9 million for the three months ended September 30, 2014, compared to $9.9 million for the three months ended September 30, 2013. The increase in general and administrative expenses was driven by an increase in professional fees and other various expenses related to becoming self-managed on January 8, 2014.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $177.9 million to $240.1 million for the three months ended September 30, 2014, compared to $62.1 million for the three months ended September 30, 2013. The increase in depreciation and amortization was primarily driven by our net acquisition of 2,283 properties subsequent to September 30, 2013.

Impairment of Real Estate

During the three months ended September 30, 2014, we recorded an impairment on real estate of $2.3 million related to five properties. During the three months ended September 30, 2013, we recorded an impairment on real estate of $2.1 million related to one property. Refer to Note 11 — Fair Value of Financial Instruments to our consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further discussion.

Interest Expense, Net

Interest expense, net increased $74.4 million to $101.6 million for the three months ended September 30, 2014, compared to $27.2 million during the three months ended September 30, 2013. The increase in interest expense was due to an increase in the average debt balance of $11.9 billion for the three months ended September 30, 2014 compared to $834.4 million for the three months ended September 30, 2013. The increase in the average debt balance was primarily due to the assumption of mortgage notes in connection with the various mergers and portfolio acquisitions, the issuance of the corporate bonds and the increased draws on the credit facilities. The average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the three months ended September 30, 2014 and 2013 was 3.43% and 3.79%, respectively.

Loss on Extinguishment of Debt, Net

Loss on extinguishment of debt for the three months ended September 30, 2014 was $5.4 million, which primarily relates to prepayment fees of $3.1 million related to the defeasance of mortgage notes payable, as well as fees on other corporate debt extinguished. There was no loss on extinguishment of debt recorded for the three months ended September 30, 2013.

Other Income (Expense), Net

Other income increased $8.4 million to $8.5 million for the three months ended September 30, 2014, compared to $136,000 for the three months ended September 30, 2013. Other income primarily consisted of other non-rental related income of $3.3 million and interest income on CMBS securities of $3.1 million for the three months ended September 30, 2014. During the three months ended September 30, 2013, we recorded $44,000 in income from investments.

Gain (Loss) on Derivative Instruments, Net

Loss on derivative instruments for the three months ended September 30, 2014 was $17.5 million, which primarily related to a loss of $18.8 million recorded for settlement of the Series D embedded derivative in conjunction with the redemption of the Series D Preferred Stock. We recorded a loss on derivative instruments of $38.7 million during the three months ended September 30, 2013 that resulted from marking our derivate instruments to fair value.

Loss on Held for Sale Assets and Disposition of Properties, Net

Loss on held for sale assets and disposition of properties for the three months ended September 30, 2014 was $256.9 million, which consisted of a loss of $260.5 million related to our assets held for sale as of September 30, 2014. This loss was offset by an aggregate gain of $3.6 million related to the disposition of five single-tenant properties. The loss on held for sale assets and dispositions of properties, net, includes the write-off of $196.6 million of goodwill allocated to the cost basis of the properties that were disposed of or classified as held for sale during the three months ended September 30, 2014. There were no dispositions of properties during the three months ended September 30, 2013.

Gain on Sale of Investments

Gain on sale of investments increased $8.6 million to $6.4 million for the three months ended September 30, 2014, compared to a loss of $2.2 million recorded during the three months ended September 30, 2013. The increase of $8.6 million primarily relates to a gain of $6.2 million recorded in connection with the sale of the 15 CMBS we had acquired in the Cole merger, compared to a loss of $2.2 million recorded in connection with a sale of investments in redeemable preferred stock, common stock and senior notes.

Comparison of the Nine Months Ended September 30, 2014 to the Nine Months Ended September 30, 2013

Total Real Estate Investment Revenue

REI revenue increased by approximately $807.0 million to $1.0 billion for the nine months ended September 30, 2014, compared to $193.0 million for the nine months ended September 30, 2013. Our REI revenue consisted primarily of rental income from net leased commercial properties, which accounted for 92% and 95% of total REI revenue during the nine months ended September 30, 2014 and 2013, respectively.

Rental Income

Rental income increased $741.3 million to $924.6 million for the nine months ended September 30, 2014, compared to $183.3 million for the nine months ended September 30, 2013. The increase was primarily due to our net acquisition of 2,283 properties (which excludes properties that are accounted for as direct financing leases) primarily through various mergers and portfolio acquisitions subsequent to September 30, 2013.

Direct Financing Lease Income

Direct financing lease income of $2.8 million was recognized for the nine months ended September 30, 2014, an increase of $1.6 million from $1.2 million for the nine months ended September 30, 2013. Direct financing lease income was primarily driven by our net acquisition of 41 properties comprised of $57.4 million of net investments subject to direct financing leases acquired at the end of or subsequent to the third quarter of 2013.

Operating Expense Reimbursements

Operating expense reimbursements increased by $73.2 million to $81.7 million for the nine months ended September 30, 2014 compared to $8.5 million for the nine months ended September 30, 2013. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from the tenant per their respective leases. Operating expense reimbursements increases were driven by our net acquisition of 2,283 properties subsequent to September 30, 2013.

We also review our stabilized operating results from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store.” Cash same store rents on the 701 properties held for the full period in each of the nine months ended September 30, 2014 and 2013 increased $0.6 million, or 0.6%, to $110.1 million compared to $109.5 million for the nine months ended September 30, 2013, respectively. Same store annualized average rental income per square foot was $13.96 at September 30, 2014 compared to $13.88 at September 30, 2013. Both cash and annualized average same store rents increases are due to contractual rent increases as well as lease renewals with increased contractual rents.

Acquisition Related Expenses

Acquisition related expenses decreased $39.9 million to $34.6 million for the nine months ended September 30, 2014, compared to $74.5 million for the nine months ended September 30, 2013. Acquisition costs primarily consisted of legal costs, deed transfer costs and other costs related to granular and portfolio real estate purchase transactions as well as contingent consideration expenses. Acquisition costs for the nine months ended September 30, 2014 related to the Red Lobster Portfolio, Inland Portfolio and Fortress Portfolio acquisitions, as well as granular acquisitions. In addition to the costs above, during the three months ended September 30, 2013, we paid acquisition fees to the Former Manager for acquisitions by ARCT IV. In conjunction with the ARCT IV Merger, it was agreed that the Former Manager would no longer charge acquisition fees.

Merger and Other Non-routine Transaction Related Expenses

Costs related to various mergers, as well as other non-routine transaction costs increased $39.7 million to $173.4 million for the nine months ended September 30, 2014, compared to $133.7 million for the nine months ended September 30, 2013. Upon the consummation of the ARCT IV Merger, an affiliate of ARCT IV received a subordinated incentive distribution upon the attainment of certain performance hurdles. For the nine months ended September 30, 2014, $78.2 million was recorded for this fee. We issued 6.7 million OP Units to the affiliate as compensation for this fee. In addition, merger and other non-routine transaction related expenses consisted of expenses related to the corporate bond issuance and internalization as well as professional fees, printing fees, proxy services, debt assumption fees and other costs associated with entering into and completing the Cole Merger and CCPT Merger, as well as expenses related to the corporate bond issuance and becoming self-managed. The related mergers during September 2013 were with ARCT III and ARCT IV.

Property Operating Expenses

Property operating expenses increased $98.9 million to $110.0 million for the nine months ended September 30, 2014, compared to $11.1 million for the nine months ended September 30, 2013. The increase was primarily due to increased property taxes, utilities, repairs and maintenance and insurance expenses relating to the acquisition of 2,283 rental income-producing properties subsequent to September 30, 2013.

General and Administrative Expenses

General and administrative expenses increased $44.7 million to $68.6 million for the nine months ended September 30, 2014, compared to $23.9 million for the nine months ended September 30, 2013. The increase in general and administrative expense is primarily related to an increase in equity-based compensation of $12.3 million. In addition, we have incurred increased expenses in professional fees and other various expenses related to becoming self-managed on January 8, 2014.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $503.0 million to $625.5 million for the nine months ended September 30, 2014, compared to $122.5 million for the nine months ended September 30, 2013. The increase in depreciation and amortization was driven by our net acquisition of 2,283 properties subsequent to September 30, 2013.

Impairment of Real Estate

During the nine months ended September 30, 2014, we recorded an impairment on real estate of $3.9 million related to nine properties. During the nine months ended September 30, 2013, we recorded an impairment on real estate of $2.1 million related to one property. Refer to Note 11 — Fair Value of Financial Instruments to our consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further discussion.

Interest Expense, Net

Interest expense increased $281.1 million to $326.5 million for the nine months ended September 30, 2014, compared to $45.4 million during the nine months ended September 30, 2013. The increase in interest expense was due to an increase in the average debt balance of $10.7 billion for the nine months ended September 30, 2014 compared to $780.3 million for the nine months ended September 30, 2013. The increase in debt was primarily due to the assumption of mortgage notes in connection with the various mergers and portfolio acquisitions, the issuance of the corporate bonds and the increased draws on the credit facilities. Additionally, we recorded $32.6 million in interest expense as amortization of deferred financing costs associated with the termination of the Barclays Facility. The average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the nine months ended September 30, 2014 and 2013 was 3.61% and 4.08%, respectively.

Loss on Extinguishment of Debt, Net

Loss on extinguishment of debt for the nine months ended September 30, 2014 was $21.3 million, which is comprised of $35.9 million of prepayment fees related to the defeasance of mortgage notes payable and other corporate debt, partially offset by the write-off of $14.6 million of net premiums and discounts associated with the debt. There was no loss on extinguishment of debt recorded for the nine months ended September 30, 2013.

Other Income (Expense), Net

Other income increased $14.1 million to $16.8 million for the nine months ended September 30, 2014, compared to income of $2.7 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2014 we recorded $0.2 million in income from investments and $3.7 million in other income, which was offset by $3.9 million in state and franchise tax expense. During the nine months ended September 30, 2013, we recorded $1.3 million in income from investments.

Gain (Loss) on Derivative Instruments, Net

Loss on derivative instruments for the nine months ended September 30, 2014 was $10.4 million, which primarily related to a loss of $13.6 million recorded on the Series D embedded derivative, which was settled in conjunction with the redemption of the Series D Preferred Stock. We recorded a loss on derivative instruments of $69.8 million during the nine months ended September 30, 2013 that resulted from marking our derivate instruments to fair value.

Loss on Held for Sale Assets and Disposition of Properties, Net

Loss on held for sale assets and disposition of properties for the nine months ended September 30, 2014 was $275.8 million, which consisted of a loss of $262.2 million related to our assets held for sale as of September 30, 2014, in addition to an aggregate loss on disposition of $13.5 million related to the disposition of 29 single-tenant properties and one multi-tenant property. The loss on held for sale assets and dispositions of properties, net, includes the write-off of $209.3 million of goodwill allocated to the cost basis of the properties that were disposed of or classified as held for sale during the nine months ended September 30, 2014. There were no dispositions of properties during the nine months ended September 30, 2013.

Gain on Sale of Investments

Gain on sale of investments increased $8.2 million to a gain of $6.4 million during the nine months ended September 30, 2014, compared to a loss of $1.8 million for the nine months ended September 30, 2013. We recorded a gain of $6.2 million in connection with the sale of the 15 CMBS the Company had acquired in the Cole merger during the nine months ended September 30, 2014. During the nine months ended September 30, 2013, we recorded a loss of $1.8 million in connection with a sale of investments in redeemable preferred stock, common stock and senior notes.

Cole Capital

Effective February 7, 2014, we consummated the Cole Merger and acquired Cole Capital. As we did not commence operations for Cole Capital until February 7, 2014, comparative financial data is not presented for the three and nine months ended September 30, 2013.

Three Months Ended September 30, 2014

Cole Capital Revenue

Cole Capital revenue for the three months ended September 30, 2014 was $59.8 million. Cole Capital revenue primarily consisted of transaction services revenue of $23.0 million, which included acquisition fees related to the acquisition of properties on behalf of certain of the Managed REITs. In addition, we recorded management fees and reimbursements of $15.3 million, which consisted of advisory fees and asset and property management fees of $11.6 million from certain Managed REITs and other programs sponsored by us and reimbursements of $3.7 million for expenses incurred in providing advisory and asset and property management services to certain Managed REITs.

General and Administrative Expenses

General and administrative expenses were $17.3 million for the three months ended September 30, 2014, which primarily consisted of employee compensation and benefits expense of $11.5 million. The remaining general and administrative expenses include insurance, legal, accounting and professional fees and other operating costs.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $25.1 million for the three months ended September 30, 2014, which primarily consisted of amortization related to the intangible assets acquired in connection with the Cole Merger of $24.3 million. Depreciation and amortization expenses also includes depreciation and amortization related to leasehold improvements and property and equipment.

Other Income (Loss)

Other loss for the three months ended September 30, 2014 was $1.0 million, which primarily consisted of a loss from income taxes of $1.1 million related to our TRS offset by $0.1 million of non-rental income. While most of the business activities of Cole Capital are conducted through the TRS, revenues and expenses recorded in the TRS for tax purposes are not the same as those included in Cole Capital in accordance with U.S. GAAP.

Nine Months Ended September 30, 2014

Cole Capital Revenue

Cole Capital revenue for the nine months ended September 30, 2014 was $151.3 million. Cole Capital revenue primarily consisted of transaction services revenue of $41.9 million, which included acquisition fees related to the acquisition of properties on behalf of certain of the Managed REITs. We also recorded management fees and reimbursements of $35.4 million, which consisted of advisory fees and asset and property management fees of $27.6 million from certain Managed REITs and other programs sponsored by us and reimbursements of $7.8 million for expenses incurred in providing advisory and asset and property management services to certain Managed REITs.

General and Administrative Expenses

General and administrative expenses were $60.1 million for the nine months ended September 30, 2014, which primarily consisted of employee compensation and benefits expense of $29.6 million. The remaining general and administrative expenses include insurance, legal, accounting and professional fees and other operating costs.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $64.2 million for the nine months ended September 30, 2014, which primarily consisted of amortization related to the intangible assets acquired in connection with the Cole Merger of $62.3 million. Depreciation and amortization expenses also includes depreciation and amortization related to leasehold improvements and property and equipment.

Other Income

Other income for the nine months ended September 30, 2014 was $12.9 million, which primarily consisted of a benefit from income taxes recorded of $12.6 million related to our TRS. While most of the business activities of Cole Capital are conducted through the TRS, revenues and expenses recorded in the TRS for tax purposes are not the same as those included in Cole Capital in accordance with U.S. GAAP.

Liquidity and Capital Resources

In the normal course of business, our principal demands for funds will continue to be for property acquisitions, either directly or through investment interests, for the payment of operating expenses, distributions to our investors, and for the payment of principal and interest on our outstanding indebtedness. Our cash needs are intended to be provided by cash flow from operations. If we are unable to satisfy our operating costs with our cash flow from operations, we intend to use borrowings on our line of credit and proceeds from issuances of equity or debt securities to cover such obligations, as necessary. A significant portion of our net leases contain contractual rent escalations during the primary term of the lease. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from offerings, including our “at the market” equity offering program (“ATM”), proceeds from the sale of properties and undistributed funds from operations.

As of September 30, 2014, we had $145.3 million of cash and cash equivalents.

Sources of Funds

Funds from Operations and Adjusted Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), an industry trade group, has promulgated a measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from sales of property, depreciation and amortization of real estate assets and impairment write-downs. These adjustments also include the Company’s pro rata share of unconsolidated partnerships and joint ventures. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of U.S. GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in U.S. GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and adjusted funds from operations (“AFFO”), as described below, should not be construed to be more relevant or accurate than the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and AFFO measures and the adjustments to U.S. GAAP in calculating FFO and AFFO.

We consider FFO and AFFO useful indicators of the performance of a REIT. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs in our peer group. Accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. While certain companies may experience significant acquisition activity, other companies may not have significant acquisition activity and management believes that excluding costs such as merger and transaction costs and acquisition related costs from property operating results provides useful information to investors and provides information that improves the comparability of operating results with other companies who do not have significant merger or acquisition activities. AFFO is not equivalent to our net income or loss as determined under GAAP, and AFFO may not be a useful measure of the impact of long-term operating performance if we continue to have such activities in the future.

We exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments, gains and losses on investments and early extinguishment of debt. In addition, by excluding non-cash income and expense items such as amortization of above and below market leases, amortization of deferred financing costs, straight-line rent, net direct financing lease adjustments and equity-based compensation from AFFO we believe we provide useful information regarding income and expense items which have no cash impact and do not provide us liquidity or require our capital resources. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not as involved in activities which are excluded from our calculation. Investors are cautioned that AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as it excludes certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

In addition, we exclude certain interest expenses related to securities that are convertible to common stock as the shares are assumed to have converted to common stock in our calculation of weighted-average common shares-fully diluted.

In calculating AFFO, we exclude expenses, which under GAAP are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued merger and acquisition fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property and certain other expenses. Therefore, AFFO may not be an accurate indicator of our operating performance, especially during periods in which mergers are being consummated or properties are being acquired or certain other expenses are being incurred. AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments as items which are unrealized and may not ultimately be realized. We view both gains and losses from fair value adjustments as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.

As a result, we believe that the use of FFO and AFFO, together with the required U.S. GAAP presentations, provide a more complete understanding of our performance relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

FFO and AFFO are non-GAAP financial measures and do not represent net income as defined by U.S. GAAP. FFO and AFFO do not represent cash flows from operations as defined by U.S. GAAP, are not indicative of cash available to fund all cash flow needs and liquidity, including our ability to pay distributions and should not be considered as alternatives to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do and/or calculate AFFO differently than we do. Consequently, our presentation of FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs.

As discussed in the Explanatory Note to this Form 10-Q/A, the investigation conducted by the Audit Committee concluded that the Company erroneously calculated AFFO and/or AFFO per share for the three and nine months ended September 30, 2013 due to errors in reflecting non-controlling interests. We are now presenting the restated FFO and AFFO using two methods: 1) we calculate FFO and AFFO on a gross basis, whereby we start with net income attributable to both the stockholders and the non-controlling interest holders, and then adjust net income by the gross reported amounts of the items being adjusted (“Gross Method”); and 2) we calculate FFO and AFFO on a net basis, whereby we start with net income attributable only to the stockholders, and adjust net income by only the stockholders’ portion of the applicable items (“Net Method”). For presentation of the Net Method, the company has included the gross amounts of each adjustment on their respective line items and adjusted for the proportionate share which is attributable to non-controlling interest on a separate line item within FFO and AFFO.

The calculation of AFFO per share follows the same logic. Under the Gross Method, AFFO is divided by a share number that takes into account the dilutive effect of units held by the non-controlling interest holders; Under the Net Method, AFFO is divided by a share number that reflects only the dilutive effects of common shares.

The tables below reflect the two methods of calculating FFO and AFFO for the three and nine months ended September 30, 2014 and 2013 (in thousands).

The below table reflects the items deducted or added to net loss in our calculation of FFO and AFFO for the three and nine months ended September 30, 2014 and 2013 (in thousands except share and per share data).

Net Method


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Corrected)			2014			2013 (As Corrected)
Net loss attributable to the Company	$	(280,398	)	$	(80,201	)	$	(626,562	)	$	(293,684	)
Dividends on non-convertible preferred stock		(17,974	)		—			(53,121	)		—

Adjusted net loss		(298,372	)		(80,201	)		(679,683	)		(293,684	)
Loss on held for sale assets and disposition of properties, net ^a		256,894			—			275,768			—
Depreciation and amortization of real estate assets ^a		240,046			62,136			625,447			122,656
Impairment of real estate ^a		2,299			2,074			3,855			2,074
Proportionate share of adjustments for unconsolidated entities ^a		2,580			—			6,497			—
Proportionate share of adjustments for non-controlling interests ⁽¹⁾		(12,590	)		(2,285	)		(27,073	)		(4,563	)

FFO attributable to the Company		190,587			(18,276	)		204,811			(173,517	)

Acquisition related ^b		13,998			26,948			34,616			74,541
Merger and other non-routine transactions ^b		7,632			4,301			175,352			133,734
Litigation insurance proceeds ^b		(3,275	)		—			(3,275	)		—
Gain (loss) on sale of investments ^b		(6,357	)		2,246			(6,357	)		1,795
Loss on derivative instruments, net ^b		17,484			38,651			10,398			69,830
Interest on convertible obligation to preferred investors ^b		—			6,519			—			8,149
Amortization of premiums and discounts on debt and investments ^b		(8,106	)		347			(17,910	)		347
Amortization of above- and below-market lease assets and liabilities, net ^b		1,934			68			4,425			204
Net direct financing lease adjustments ^b		620			149			1,147			149
Amortization and write off of deferred financing costs ^b		12,486			4,267			68,447			8,365
Interest premium on settlement of convertible obligation to preferred investors ^b		—			4,827			—			4,827
Amortization of intangible assets ^{b (2)}		24,288			—			62,304			—
Extinguishment of debt, net ^b		5,396			—			21,264			—
Straight-line rent ^b		(24,871	)		(4,235	)		(49,804	)		(8,811	)
Non-cash equity compensation expense ^{b (2)}		5,541			7,190			32,805			13,981
Other amortization and non-cash charges ^{b (2)}		713			11			1,832			34
Proportionate share of adjustments for unconsolidated entities ^b		1,268			—			2,050			—
Proportionate share of adjustments for non-controlling interests ⁽³⁾		(1,321	)		(3,010	)		(14,897	)		(7,849	)

AFFO attributable to the Company	$	238,287		$	70,003		$	527,208		$	125,779


Weighted-average shares outstanding - basic		902,096,102			221,707,920			756,289,984			196,254,575
Effect of dilutive securities		20,264,997			29,384,878			24,733,449			13,153,032

Weighted-average shares outstanding - diluted ⁽⁴⁾		922,361,099			251,092,798			781,023,433			209,407,607

AFFO attributable to the Company per dilutive share	$	0.26		$	0.28		$	0.68		$	0.60

(1)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “a”.

(2)	Equity compensation expenses, amortization of intangible assets and other amortization and non-cash charges are expenses generally incurred by Cole Capital. The AFFO adjustments do not include tax impacts. The Company’s effective tax rate is 38%.

(3)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “b”.

(4)	Weighted-average shares for all periods presented excludes the effect of the convertible debt as the effect would be antidilutive.

Gross Method


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013 (As Corrected)			2014			2013 (As Corrected)
Net loss	$	(288,047	)	$	(83,354	)	$	(650,485	)	$	(301,566	)
Dividends on Series F Preferred Stock		(17,974	)		—			(53,121	)		—

Adjusted net loss		(306,021	)		(83,354	)		(703,606	)		(301,566	)
Loss on held for sale assets and disposition of properties, net		256,894			—			275,768			—
Depreciation and amortization of real estate assets		240,046			62,136			625,447			122,656
Impairment of real estate		2,299			2,074			3,855			2,074
Proportionate share of adjustments for unconsolidated entities		2,580			—			6,497			—

FFO		195,798			(19,144	)		207,961			(176,836	)

Acquisition related		13,998			26,948			34,616			74,541
Merger and other non-routine transactions		7,632			4,301			175,352			133,734
Litigation insurance proceeds		(3,275	)		—			(3,275	)		—
Gain (loss) on sale of investments		(6,357	)		2,246			(6,357	)		1,795
Loss on derivative instruments, net		17,484			38,651			10,398			69,830
Interest on convertible obligation to preferred investors		—			6,519			—			8,149
Amortization of premiums and discounts on debt and investments		(8,106	)		347			(17,910	)		347
Amortization of above- and below-market lease assets and liabilities, net		1,934			68			4,425			204
Net direct financing lease adjustments		620			149			1,147			149
Amortization and write-off of deferred financing costs		12,486			4,267			68,447			8,363
Interest premium on settlement of convertible obligation to preferred investors		—			4,827			—			4,827
Amortization of intangible assets ⁽¹⁾		24,288			—			62,304			—
Extinguishment of debt, net		5,396			—			21,264			—
Straight-line rent		(24,871	)		(4,235	)		(49,804	)		(8,811	)
Non-cash equity compensation expense ⁽¹⁾		5,541			7,190			32,805			13,981
Other amortization and non-cash charges ⁽¹⁾		713			11			1,832			34
Proportionate share of adjustments for unconsolidated entities		1,268			—			2,050			—

AFFO	$	244,549		$	72,145		$	545,255		$	130,307


Weighted-average shares outstanding - basic		902,096,102			221,707,920			756,289,984			196,254,575
Effect of dilutive securities		44,970,255			39,359,194			49,555,790			21,217,094

Weighted-average shares outstanding - diluted ⁽²⁾		947,066,357			261,067,114			805,845,774			217,471,669

AFFO per dilutive share	$	0.26		$	0.28		$	0.68		$	0.60

(1)	Equity compensation expenses, amortization of intangible assets and other amortization and non-cash charges are expenses generally incurred by Cole Capital. The AFFO adjustments do not include tax impacts. The Company’s effective tax rate is 38%.

(2)	Weighted-average shares for all periods presented excludes the effect of the convertible debt as the effect would be antidilutive.

The following tables present the combined impact of all changes to the applicable line items in the Company’s previously issued FFO and AFFO presentations using the Net Method for three and nine months ended September 30, 2013 (amounts in thousands):


	Three Months Ended September 30, 2013
	As Previously Reported			ARCT IV Recast ⁽¹⁾			Methodology Adjustments ⁽²⁾			Error Corrections ⁽³⁾			As Corrected
Net loss attributable to the Company	$	(59,063	)	$	(23,653	)	$	—		$	2,515		$	(80,201	)
Depreciation and amortization of real estate assets ^a		39,382			22,645			—			109			62,136
Impairment of real estate ^a					—			—			2,074			2,074
Proportionate share of adjustments for non-controlling interests ⁽⁴⁾		—			—			(2,345	)		60			(2,285	)

FFO attributable to the Company		(19,681	)		(1,008	)		(2,345	)		4,758			(18,276	)

Acquisition related ^b		1,235			25,713			—			—			26,948
Merger and other non-routine transactions ^b		3,791			2,122			—			(1,612	)		4,301
Gain on investment securities ^b		—			2,246			—			—			2,246
Loss on contingent value rights		38,542			—			(38,542	) ⁽⁶⁾		—			—
Loss on derivative instruments, net ^b		99			10			38,542	⁽⁶⁾		—			38,651
Amortization of premiums and discounts on debt and investments ^b		—			—			347	⁽⁷⁾		—			347
Interest on convertible obligation to preferred investments ^b		7,266			—			—			(747	)		6,519
Interest on convertible debt ^b		1,554			—			(1,554	) ⁽⁸⁾		—			—
Amortization of above-market and below-market lease assets and liabilities, net ^b		63			5			—			—			68
Net direct financing lease adjustments ^b					—			149	⁽⁹⁾		—			149
Amortization of deferred financing costs ^b		3,505			762			—			—			4,267
Interest premium on settlement of convertible obligation to preferred investors ^b		5,174			—			(347	) ⁽⁷⁾		—			4,827
Straight-line rent ^b		(2,063	)		(2,134	)		(38	) ⁽¹⁰⁾		—			(4,235	)
Non-cash equity compensation expense ^{b (5)}					—			11	⁽⁹⁾		—			11
Other amortization and non-cash charges ^b		7,180			10			—			—			7,190
Proportionate share of adjustments for non-controlling interests ⁽⁵⁾		—			—			(3,161	)		151			(3,010	)

AFFO attributable to the Company	$	46,665		$	27,726		$	(6,938	)	$	2,550		$	70,003

(1)	The adjustments in this column reflect the carryover basis of accounting of ARCT IV.

(2)	The adjustments in this column reflect the “Net Method” for adjusting for non-controlling interests and certain other methodology adjustments.

(3)	The adjustments in this column reflect the restatement. See Note 2 — Restatement of Previously Reported Financial Information to the consolidated financial statements for further explanation on adjustments.

(4)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “a”.

(5)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “b”.

(6)	Reports loss on contingent value rights with loss on derivatives to align presentation with the income statement.

(7)	Reports amortization of premiums and discounts on own line item to align with current presentation.

(8)	As of September 30, 2013, the effect of the convertible debt was antidilutive and therefore was not included in the diluted weighted average shares. As such, the add back for interest on the debt has been removed.

(9)	In reviewing its AFFO methodology, the Company has determined that it is appropriate to include certain adjustments that were not included in the original AFFO calculation. These adjustments include $149,000 for net direct financing lease adjustments and $11,000 for straight line rent expense.

(10)

The original Filing presented this line item net of the proportionate share for non-controlling interest. A “gross up” adjustment has been made to include the amount attributable to non-controlling interest in order to show all proportionate adjustments for non-controlling interests on one line item called “Proportionate share of adjustments for non-controlling interest.”


	Nine Months Ended September 30, 2013
	As Previously Reported			ARCT IV Recast ⁽¹⁾			Methodology Adjustments ⁽²⁾			Error Corrections ⁽³⁾			As Corrected
Net loss attributable to the Company	$	(248,676	)	$	(47,136	)	$	—		$	2,128		$	(293,684	)
Gain on held for sale asset ^a		(14	)		—			—			14			—
Depreciation and amortization of real estate assets ^a		92,211			30,208			—			237			122,656
Impairment of real estate ^a		—			—			—			2,074			2,074
Proportionate share of adjustments for non-controlling interests ⁽⁴⁾		—			—			(4,823	)		260			(4,563	)

FFO attributable to the Company		(156,479	)		(16,928	)		(4,823	)		4,713			(173,517	)

Acquisition related ^b		21,961			52,603			—			(23	)		74,541
Merger and other non-routine transactions ^b		146,240			3,835			—			(16,341	)		133,734
Gain on investment securities ^b		(451	)		2,246			—			—			1,795
Loss on contingent value rights		69,676			—			(69,676	) ⁽⁶⁾		—			—
Loss on derivative instruments, net ^b		144			10			69,676	⁽⁶⁾		—			69,830
Amortization of premiums and discounts on debt and investments ^b		—			—			347	⁽⁷⁾		—			347
Interest on convertible obligation to preferred investments ^b		8,896			—			—			(747	)		8,149
Interest on convertible debt ^b		1,554			—			(1,554	) ⁽⁸⁾		—			—
Amortization of above-market and below-market lease assets and liabilities, net ^b		189			15			—			—			204
Net direct financing lease adjustments ^b					—			149	⁽⁹⁾		—			149
Amortization of deferred financing costs ^b		6,914			865			—			586			8,365
Interest premium on settlement of convertible obligation to preferred investors ^b		5,174			—			(347	) ⁽⁷⁾		—			4,827
Straight-line rent ^b		(5,038	)		(3,727	)		(46	) ⁽¹⁰⁾		—			(8,811	)
Non-cash equity compensation expense ^b (5)		—			—			34	⁽⁹⁾		—			34
Other amortization and non-cash charges ^b		11,510			19			—			2,452			13,981
Proportionate share of adjustments for non-controlling interests ⁽⁵⁾		—			—			(12,712	)		4,863			(7,849	)

AFFO attributable to the Company	$	110,290		$	38,938		$	(18,952	)	$	(4,497	)	$	125,779

(1)	The adjustments in this column reflect the carryover basis of accounting of ARCT IV.

(2)	The adjustments in this column reflect the “Net Method” for adjusting for non-controlling interests and certain other methodology adjustments.

(3)	The adjustments in this column reflect the restatement. See Note 2 — Restatement of Previously Reported Financial Information to the consolidated financial statements for further explanation on adjustments.

(4)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “a”.

(5)	Includes proportionate share attributable to non-controlling interests of the adjustments denoted with “b”.

(6)	Reports loss on contingent value rights with loss on derivatives to align presentation with the income statement.

(7)	Reports amortization of premiums and discounts on own line item to align with current presentation.

(8)	As of September 30, 2013, the effect of the convertible debt was antidilutive and therefore was not included in the diluted weighted average shares. As such, the add back for interest on the debt has been removed.

(9)	In reviewing its AFFO methodology, the Company has determined that it is appropriate to include certain adjustments that were not included in the original AFFO calculation. These adjustments include $149,000 for net direct financing lease adjustments and $34,000 for straight line rent expense.

(10)

100

Capital Markets

On August 1, 2012, we filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Each registration statement became effective on August 17, 2012. As of September 30, 2014, we had issued 2.1 million shares of common stock through a registered follow-on offering and an ATM (as defined below) offering under the $500.0 million universal shelf registration statement. No preferred stock, debt or equity-linked security had been issued under the universal shelf registration statement. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred stock or limited partnership interests in the OP. As of September 30, 2014, no common stock had been issued under the resale registration statement.

In January 2013, we commenced an “at the market” equity offering program (“ATM”) in which we may from time to time offer and sell shares of our common stock having an aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to our $500.0 million universal shelf registration statement.

On March 14, 2013, we filed a universal automatic shelf registration statement and achieved well-known seasoned issuer (“WKSI”) status. As a result of the delayed filing of certain of our periodic reports with the SEC, we are not currently eligible to use a shelf registration statement for the offer and sale of our securities.

On May 28, 2014, we closed on an underwriting agreement relating to a public offering of 138.0 million shares of common stock, par value $0.01 per share. The offering price to public was $12.00 per share. The net proceeds were approximately $1.59 billion after deducting underwriting discounts and commissions, but excluding expenses which include a $2.0 million structuring fee paid to RCS.

In addition to our common stock offerings, on June 7, 2013, we issued 28.4 million shares of convertible preferred stock (the “Series C Shares”) for gross proceeds of $445.0 million. On November 12, 2013, we converted all outstanding Series C Shares into our common stock. Pursuant to the Series C Shares’ Articles Supplementary, the number of shares of common stock that could be issued upon conversion of Series C Shares was limited to an exchange cap. Therefore, we converted 1.1 million Series C Shares into 1.4 million shares of our common stock. With respect to the 27.3 million Series C Shares for which we could not issue shares of our common stock upon conversion due to the exchange cap, we paid holders of Series C Shares an aggregate cash amount equal to approximately $441.4 million in exchange for such Series C Shares. Based on our share price on the conversion date, the total settlement value was $458.8 million.

On September 15, 2013, we entered into definitive purchase agreements pursuant to which we agreed to issue Series D Preferred Stock, par value $0.01 per share, and common stock, par value $0.01 per share, to certain institutional holders promptly following the close of our merger with CapLease. Pursuant to the definitive purchase agreements, we issued approximately 21.7 million shares of Series D Preferred Stock and 15.1 million shares of common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013. On August 31, 2014, we redeemed all outstanding shares of Series D Preferred Stock for payment of $316.1 million.

Upon consummation of the ARCT IV merger on January 3, 2014, 42.2 million shares of a new series of preferred stock designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) were issued to ARCT IV stockholders. As of September 30, 2014, there were 42.8 million shares issued and outstanding of Series F Preferred Stock. See Note 18 — Preferred and Common Stock and OP Units to our consolidated financial statements in this Quarterly Report on Form 10-Q for a description of the Series D Preferred Stock and Series F Preferred Stock.

See Note 24 — Subsequent Events to our consolidated unaudited financial statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) for a discussion of our plans to regain listing status with the NASDAQ Listing Qualifications Department following the filing of the Form 10-Q.

Availability of Funds from Credit Facilities

We, as guarantor, and our OP, as borrower, are parties to a credit facility with Wells Fargo, National Association, as administrative agent and other lenders party thereto (the “Credit Facility”).

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On June 30, 2014, the Company and OP entered into an amended and restated credit agreement (the “Agreement”), which increased the available borrowings, extended the term and decreased the interest rates associated with the prior credit facility. At September 30, 2014, the Credit Facility contained a $1.2 billion term loan facility and a $3.3 billion revolving credit facility, of which $1.0 billion and $3.3 billion were outstanding, respectively. The revolving credit facility generally bears interest at an annual rate of LIBOR plus from 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon the Company’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05%, or Base Rate plus 0.15% to 1.05% (based upon the Company’s then current credit rating). The Credit Facility includes an accordion feature, which, if exercised in full, allows the Company to increase the aggregate commitments under the Credit Facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions. At September 30, 2014, the Company had undrawn commitments of $0.4 billion under the Credit Facility.

The Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of the majority of the lenders (or automatically upon a bankruptcy event of default with respect to the Company or the Company), the commitments of the lenders under the Credit Facility terminate, and payment of any unpaid amounts in respect of the Credit Facility is accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018, in each case, unless extended in accordance with the terms of the Agreement. The Agreement provides for a one-year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at the Company’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the Company and subject to any breakage fees, the Company may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The Company incurs a fee equal to 0.15% to 0.25% per annum (based upon the Company’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the dollar revolving credit facility and the multi-currency credit facility. The Company incurs an unused fee of 0.25% per annum on the unused amount of the delayed draw term loan commitments. In addition, the Company incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

Significant events pertaining to the 2018 Notes and 2020 Notes that occurred subsequent to June 30, 2014 are detailed within the Amended 10-K. Please refer to Note 24 — Subsequent Events (As Restated) in the Amended 10-K.

Principal Use of Funds

Acquisitions

Cash needs for property acquisitions will generally be met through proceeds from the public or private offerings of debt and equity, availability on our credit facility and other financings. We may also from time to time enter into other agreements with third parties whereby third parties will make equity investments in specific properties or groups of properties that we acquire.

We evaluate potential acquisitions of real estate and real estate-related assets and engage in negotiations with sellers and borrowers. Investors and stockholders should be aware that after a purchase contract is executed that contains specific terms the property will not be purchased until the successful completion of due diligence and negotiation of final binding agreements. During this period, we may decide to temporarily invest any unused proceeds from equity offerings in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.

We financed the aggregate purchase prices of the recent mergers and acquisitions discussed in Note 3 — Mergers and Acquisitions to our consolidated financial statements in this Quarterly Report on Form 10-Q in part through the assumption of outstanding indebtedness, and through a combination of available cash on hand from: (a) a portion of the $896.0 million in net proceeds from the sale of shares of ARCP common stock and convertible preferred stock in separate previously disclosed private placement transactions, which transactions were completed on June 7, 2013; (b) a portion of the $967.8 million in net proceeds from the sale of the 2018 Notes and 2020 Notes; (c) funds available from the issuance of common stock through our current ATM program or any successor program thereto; (d) a portion of the $2.5 billion in net proceeds from the corporate bond offering; (e) financing available under our credit facility; (f) a portion of the $1.59 billion in net proceeds from the sale of ARCP’s common stock on May 28, 2014; and (g) additional alternative financing arrangements, as needed, from the issuance of additional common stock, preferred securities or other debt, equity or equity-linked financings.

Dividends

The amount of dividends payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, financial condition, capital expenditure requirements, as applicable, and annual dividend requirements needed to qualify and maintain our status as a REIT under the Internal Revenue Code. Operating cash flows are expected to increase as additional properties are acquired in our investment portfolio.

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We and our board of directors share a similar philosophy with respect to paying our dividends. The dividends should principally be derived from cash flows generated from operations. Effective January 8, 2014, we completed our transition to self-management and therefore are now focused on generating cash flows by expanding our real estate portfolio consistent with our investment strategy, while keeping the internal costs of running our business low. Prior to January 8, 2014, when we had retained the Former Manager to manage our portfolio and provide other services, our Former Manager had waived certain fees in order to improve our cash flow, lowering our external costs. See Note 20 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for a further discussion of our relationship with the Former Manager.

As our real estate portfolio matures, we expect cash flows from operations to fully cover our dividends.

Loan Obligations

At September 30, 2014, our leverage ratio (net debt, excluding debt convertible to common stock, divided by enterprise value) was 57.8%.

The payment terms of our loan obligations vary. In general, only interest amounts are payable monthly with all unpaid principal and interest due at maturity. Some of our loan agreements stipulate that we comply with specific reporting and financial covenants mainly related to debt coverage ratios and loan to value ratios. Each loan that has these requirements has specific ratio thresholds that must be met. As of September 30, 2014, we were in compliance with the debt covenants under our loan agreements.

As of September 30, 2014, we had non-recourse mortgage indebtedness of $4.2 billion, which was collateralized by 806 properties. Our mortgage indebtedness bore interest at the weighted average rate of 4.80% per annum and had a weighted average maturity of 6.27 years. We may in the future incur additional mortgage debt on the properties we currently own or use long-term non-recourse financing to acquire additional properties in the future.

As of September 30, 2014, there was $4.3 billion outstanding on the Credit Facility, of which $3.3 billion bore a floating interest rate of 1.50%. There is $1.0 billion outstanding on the Credit Facility which is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on the Company’s credit rating, interest on this portion was 2.84% at September 30, 2014. At September 30, 2014, there was up to $0.4 billion available to the Company for future borrowings, subject to borrowing availability.

Our loan obligations require the maintenance of financial covenants, as well as restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios), as well as the maintenance of a minimum net worth. At September 30, 2014, the Company was in compliance with the debt covenants under all of our loan obligations.

Convertible Senior Notes Offering

On July 29, 2013, we issued $300.0 million of 3.00% Convertible Senior Notes due in 2018 (the “2018 Notes”) in an underwritten public offering. The 2018 Notes will mature on August 1, 2018. The 2018 Notes may be converted into cash, common stock or a combination thereof in limited circumstances prior to February 1, 2018 and may be converted at any time into such consideration on or after February 1, 2018. $10.0 million of the $30.0 million over-allotment option available for such offering was exercised. We intend to use the net proceeds of the offering (a) to repay outstanding indebtedness under its existing senior secured revolving credit facility (which will increase the availability of funds under such credit facility) and (b) for other general corporate purposes which includes investing in properties in accordance with its investment objectives.

On December 10, 2013, we issued $402.5 million of 3.75% Convertible Senior Notes due in 2020 (the “2020 Notes”). The 2020 Notes mature on December 15, 2020. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded to additional paid-in capital representing the equity component of the 2020 notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of September 30, 2014, the carrying value of the 2020 Notes was $391.2 million. The holders may elect to convert the 2020 Notes into cash, common stock of ARCP or a combination thereof, at our option, in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 shares of our common stock per $1,000 principal amount of 2020 Notes.

The Company funds interest payments on the 2018 Notes and 2020 Notes from the OP in accordance with the terms of intercompany notes that have substantially the same terms as the 2018 Notes and the 2020 Notes. The remaining unamortized discount of the 2018 Notes and 2020 Notes totaled $23.7 million as of September 30, 2014.

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Bond Offering

Contractual Obligations

The following is a summary of our contractual obligations as of September 30, 2014 (in thousands):


	Total		October 1, - December 31, 2014		2015-2016		2017-2018		Thereafter
Principal payments due on mortgage notes payable	$	4,237,464	$	101,258	$	425,805	$	767,634	$	2,942,767
Interest payments due on mortgage notes payable		1,253,974		51,188		380,950		301,899		519,937
Principal payments due on credit facility		4,259,000		—		—		4,259,000		—
Interest payments due on credit facility		457,960		19,718		206,357		231,885		—
Principal payments due on corporate bonds		2,550,000		—		—		1,300,000		1,250,000
Interest payments due on corporate bonds		373,827		17,875		143,000		93,528		119,424
Principal payments due on convertible debt		1,000,000		—		—		597,500		402,500
Interest payments due on convertible debt		162,379		8,255		66,038		58,569		29,517
Principal payments due on other debt		48,016		2,691		24,378		20,947		—
Interest payments due on other debt		5,337		678		3,774		885		—
Payments due on lease obligations		131,191		4,594		24,497		18,166		83,934

Total	$	14,479,148	$	206,257	$	1,274,799	$	7,650,013	$	5,348,079

Cash Flows for the Nine Months Ended September 30, 2014

During the nine months ended September 30, 2014, net cash provided by operating activities was $265.1 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the nine months ended September 30, 2014 was mainly due to adjusted net income of $494.7 million (net loss of $650.5 million adjusted for non-cash items including including the issuance of operating partnership units, depreciation and amortization, gain on sale of properties, equity-based compensation, gain on derivative instruments and gain on the early extinguishment of debt totaling $1,145.2 million, in the aggregate), offset by a decrease in accounts payable and accrued expenses of $50.8 million, a decrease in prepaid and other assets of $116.6 million and a decrease in deferred rent, derivative and other liabilities of $20.7 million.

Net cash used in investing activities for the nine months ended September 30, 2014 was $4.1 billion, primarily related to the cash considerations of $756.2 million for the ARCT IV Merger, Cole Merger and CCPT Merger and acquisition of 1,092 properties for total cash considerations of $3.5 billion. The net cash used in investing activities was partially offset by the proceeds from the sale of properties of $129.2 million, combined with the proceeds from the sale of investment securities of $159.0 million.

Net cash provided by financing activities was $3.9 billion during the nine months ended September 30, 2014 related to proceeds from the issuance of corporate bonds of $2.5 billion, proceeds from mortgage notes payable of $1.0 billion and proceeds from the issuance of common stock of $1.6 billion. These inflows were partially offset by payments on mortgage notes payable of $1.0 billion, total distributions paid of $675.1 million and $92.2 million of deferred financing cost payments.

Cash Flows for the Nine Months Ended September 30, 2013

During the nine months ended September 30, 2013, net cash used in operating activities was $7.9 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows used in operating activities during the nine months ended September 30, 2013 was mainly due to an adjusted net loss of $5.1 million (net loss of $301.6 million adjusted for non-cash items, including the issuance of OP Units, depreciation and amortization, amortization of deferred financing costs, equity-based compensation, loss on held for sale properties, loss on derivative instruments and gain on sale on investments of $306.7 million, in the aggregate), and a decrease in deferred costs and other assets of $20.5 million, partially offset by an increase in accounts payable and accrued expenses of $10.4 million.

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Net cash used in investing activities for the nine months ended September 30, 2013 was $3.3 billion, primarily related to the acquisition of 1,670 properties with an aggregate purchase price of $3.2 billion, the purchase of investment securities of $81.5 million, and the investment in direct financing leases of $75.6 million, partially offset by the proceeds from the sales of investment securities of $111.4 million.

Net cash provided by financing activities of $3.2 billion during the nine months ended September 30, 2013 related to proceeds net of offering-related costs from the issuance of common stock of $1.8 billion, proceeds from the issuance of preferred stock of $445.0 million, proceeds net of repayments from our credit facilities of $1,185.4 million and $29.8 million of contributions from our affiliate. These inflows were partially offset by common stock repurchases of $358.1 million, $2.2 million of deferred financing cost payments, total distributions paid of $157.6 million, and distributions to non-controlling interest holders of $5.6 million.

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2011. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax to the extent we distribute our REIT taxable income to our stockholders, and so long as we distribute at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income. We believe we are organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ending December 31, 2014.

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Significant Accounting Estimates and Critical Accounting Policies

Our accounting policies have been established to conform to GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.

Except as set forth below, a complete description of such policies and our considerations is contained in our Amended Annual Report on Form 10-K/A for the year ended December 31, 2013. Cole Capital revenue recognition was not considered a critical accounting policies for the year ended December 31, 2013 because such transactions had not occurred at the time. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our restated audited consolidated financial statements as of and for the year ended December 31, 2013, and related notes thereto.

Revenue Recognition - Cole Capital

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are described in Note 4 — Summary of Significant Accounting Policies to our consolidated financial statements in this Quarterly Report on Form 10-Q.

Inflation

We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, our net leases may require the tenant to pay its allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation.

Related Party Transactions and Agreements

We have entered into agreements with affiliates, whereby we pay or have paid in the past certain fees or reimbursements to ARC, the Former Manager or their respective affiliates for acquisition fees and expenses, organization and offering costs, asset management fees and reimbursement of operating costs and have in the past paid sales commissions and dealer manager fees. See Note 20 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees. In August 2013, our board of directors determined that it was in the best interests of us and our stockholders to become self-managed, and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed, we terminated the existing management agreement with the Former Manager (subject to the Former Manager’s agreement to continue to provide services, as requested, for a 60-day tail period for a payment of $10.0 million and continuing to provide certain transition services for an hourly charge), entered into appropriate employment and incentive compensation arrangements with our executives and entered into an agreement pursuant to which the Former Manager agreed to sell us certain assets necessary for our operations. See Note 20 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

We are contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. In addition, we distribute the shares of common stock for certain of the Managed REITs and advise them regarding offerings, manage relationships with participating broker-dealers and financial advisors, and provide assistance in connection with compliance matters relating to the offerings. We receive compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable. See Note 20 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for a further explanation of the various related party transactions, agreements and fees.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

As of September 30, 2014, our debt included fixed-rate debt, including debt that has interest rates that are fixed with the use of derivative instruments, with a carrying and fair value of $8.9 billion and $9.0 billion, respectively. Changes in market interest rates on our fixed rate debt impact fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, 2014 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed rate debt by approximately $244.7 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $258.8 million.

As of September 30, 2014, our debt included variable-rate debt with an aggregate face value and a carrying value of $3.3 billion. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, 2014 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate notes payable would increase or decrease our interest expense by approximately $33.0 million annually.

As the information presented above includes only those exposures that existed as of September 30, 2014, it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and, assume no other changes in our capital structure.

Item 4 Controls and Procedures

For purposes of this discussion, the term “Company” includes the Partnership, as applicable.

Current management, under the supervision of our current Interim Chief Executive Officer and our current Chief Financial Officer, evaluated the Company’s disclosure controls and procedures and, based on that evaluation, concluded that the Company’s disclosure controls and procedures were not effective at September 30, 2014. Current management based its conclusion on the fact that the material weaknesses in disclosure controls and procedures and internal control over financial reporting that had existed June 30, 2014, as disclosed in the Company’s Quarterly Report on Form 10-Q/A for the fiscal periods ended June 30, 2014 filed with the SEC on March 2, 2015, had not been remediated at September 30, 2014. The material weaknesses and remedial steps being taken by the Company are discussed below.

Material Weaknesses in Disclosure Controls and Procedures

The Company’s disclosure controls and procedures were not properly designed or implemented to ensure that the information contained in the Company’s periodic reports and other SEC filings correctly reflected the information contained in the Company’s accounting records and other supporting information and, in the case of AFFO per share (a non-GAAP measure that is an important industry metric), was correctly calculated. In addition, the Company did not have appropriate controls to ensure that its SEC filings were reviewed on a timely basis by senior management or that significant changes to amounts or other disclosures contained in a document that had previously been reviewed and approved by the Audit Committee were brought to the attention of the Audit Committee or its Chair for review and approval before the document was filed with the SEC. Finally, the Company did not have appropriate controls over the formulation of AFFO per share guidance or the periodic re-assessment of the Company’s ability to meet its guidance.

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Material Weaknesses in Internal Control Over Financial Reporting

Under standards established by the Public Company Accounting Oversight Board, a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During 2013, due in part to a number of large portfolio acquisitions, the Company experienced significant growth and increases in the complexity of its financial reporting and number of non-routine transactions. In late 2013 and early in the first quarter 2014, as a result of the anticipation and then completion of the Company’s transition to self-management and acquisitions of ARCT IV and Cole Capital, the complexity of the Company’s transactions and the need for accounting judgments and estimates became more prevalent and had a severe impact on the Company’s control environment.

Control Environment - The Company failed to implement and maintain an effective internal control environment that had appropriate processes to manage the changes in business conditions resulting from the volume and complexity of its 2013 and first quarter 2014 transactions, combined with the pressure of market expectations inherent in announcing AFFO per share guidance for 2014.

The control environment, as part of the internal control framework, sets the tone of an organization, influencing the control consciousness of its people and providing discipline and structure. Among the deficiencies in the control environment were failures to:

•

Emphasize the importance of adherence to the Company’s Code of Business Conduct and Ethics;

•

Establish appropriate policies and procedures surrounding the accounting treatment and classification of merger-related expenses, goodwill, impairments and purchase accounting;

•

Establish controls designed to prevent changes to the financial statements and supporting financial information by senior management without the proper levels of review, support and approval; and

•

Establish controls designed to ensure that accounting employees would not be subject to pressure to make inappropriate decisions affecting the financial statements and/or the financial statement components of the calculation of AFFO, and that accounting concerns raised by employees would be timely and appropriately addressed by senior management.

Related Party Transactions and Conflicts of Interest - The Company did not maintain the appropriate controls to assess, authorize and monitor related party transactions, validate the appropriateness of such transactions or, manage the risks arising from contractual relationships with affiliates. Without the appropriate controls, the Company made certain payments to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny.

Equity-Based Compensation - The Company did not maintain appropriate controls over various grants of equity-based compensation. In the fourth quarter of 2013, in anticipation of the Company’s transition to self-management, the Company entered into employment agreements with the Company’s former Executive Chairman and Chief Executive Officer and its former Chief Financial Officer (which took effect on January 8, 2014), and also approved the 2014 Multi-Year Outperformance Plan pursuant to which awards were made to them on January 8, 2014. Without the appropriate controls, these documents contained terms that were inconsistent with the terms authorized by the Compensation Committee. Additionally, the Company did not obtain copies of or administer the equity awards made by means of block grants allocated by the Former Manager and its affiliates, nor did it review the awards for consistency with the Compensation Committee’s authorization.

Accounting Close Process - The Company did not have consistent policies and procedures throughout its offices relating to purchase accounting, accounting for gain or loss on disposition and testing for impairment. In addition, senior management did not establish clear reporting lines and job responsibilities, or promote accountability over business process control activities.

Critical Accounting Estimates and Non-Routine Transactions - The Company did not maintain effective controls or develop standardized policies and procedures for critical accounting estimates and non-routine transactions, including management review and approval of the accounting treatment of all critical and significant estimates on a periodic basis.

Cash Reconciliations and Monitoring - The Company did not implement appropriate controls to record payments received and to reconcile its cash receipts and bank accounts on a timely basis.

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Information Technology General Controls - Access, Authentication and Information Technology Environment - The Company did not maintain effective information technology environmental and governance controls, including controls over information systems security administration and management functions in the following areas: (a) granting and revoking user access rights; (b) timely notification of user departures; (c) periodic review of appropriateness of access rights; (d) physical access restrictions; and (e) segregation of duties.

Information Technology General Controls Over Management of Third Party Service Providers - When the transition services agreement between the Company and the Former Manager was terminated on January 8, 2014, the Company did not enter into a follow-on formal agreement with the affiliate of the Former Manager that managed technology infrastructure and systems significant to the Company’s financial reporting process. Without a formal agreement governing the delivery of services, the Company’s management cannot make any assertions about the operating effectiveness of the third party service provider’s controls over information systems, programs, data and processes financially significant to the Company or the security of the Company’s data under the control of the related third party service provider.

Remediation

As discussed below, the Company is actively engaged in improving its disclosure controls and procedures and internal control over financial reporting. The Company’s new senior management will report on a quarterly basis to the Audit Committee and, where applicable, to the other Committees of the Board of Directors as to the progress made in remediating the material weaknesses identified above.

Control Environment - During the fourth quarter of 2014, the Company underwent a change in senior leadership as a result of the resignations of the Company’s Executive Chairman of the Board, Chief Executive Officer and director, President and Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer. The Audit Committee, the Board of Directors and new senior leadership are committed to establishing a culture of compliance, integrity and transparency and have begun communicating their commitment and expectations to all employees of Company. This commitment will also be an important consideration in the Board of Directors’ selection of a new independent Chairman of the Board of Directors and a permanent Chief Executive Officer pursuant to its previously-announced search process.

The Board of Directors, with the assistance of outside counsel, has commenced a comprehensive review of its key practices and procedures. This review will include, among other things, the nature, transparency and timeliness of information provided to the Board of Directors by management, the agenda-setting process, the process by which the Board of Directors oversees the Company’s risk management functions and the roles and responsibilities, charters, key practices and procedures of the committees of the Board of Directors. As an outgrowth of this review, the Board of Directors has adopted a new related person transactions policy and assigned the administration of this policy to the Nominating and Corporate Governance Committee.

Under the Audit Committee’s oversight, management has commenced a comprehensive review of corporate compliance policies and programs and is initiating periodic Company-wide training on ethics, reporting procedures and other key topics as well as a review of the Company’s whistleblower hotline policies and procedures.

The Company is also in the process of strengthening its controls in a number of areas highlighted by the Audit Committee investigation, as follows:

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Adding additional layers of review of the Company’s significant accounting policies and estimates, including the bonus accrual process;

•

Improving the controls around decisions on whether or not to reflect certain accounting adjustments in the Company’s books and records and/or to report such adjustments within financial statements, by revising its policies, implementing additional review and training all accounting personnel on the revised policies;

•

Adopting new accounting policies that incorporate technical accounting guidance as to when expenses may be appropriately classified as merger-related expenses, and conducting training on the implementation of this policy with relevant members of its accounting staff; and

•

Adopting new practices surrounding the calculation and presentation of AFFO and the formulation and review of AFFO guidance.

Financial Reporting Disclosure Controls - Under the oversight of the Audit Committee, the Company is in the process of creating a chartered Disclosure Committee to be comprised of senior attorneys, accounting personnel and executives and heads of other pertinent firm-wide disciplines. The Chair of the Disclosure Committee will have ongoing dialogue with the Audit Committee and the Board of Directors on how the Disclosure Committee is fulfilling its mandate to ensure the timeliness,

109

accuracy, completeness and quality of the Company’s SEC filings and other public disclosures. The Disclosure Committee will be responsible for establishing and administering a process by which certain personnel in relevant functions and areas will be required to provide sub-certifications in support of the certifications that the Company’s principal executive and principal financial officers are required to provide in connection with each periodic SEC report. Processes will be implemented to help plan appropriately for quarterly financial reporting as well as securities offerings.

Additionally, at the direction of the Audit Committee, the Company is enhancing and formalizing the procedures for the review and approval of annual and quarterly SEC reports (some of which were previously less formal) as follows:

•

Drafts of reports will be circulated sufficiently in advance of Audit Committee meetings to permit adequate review;

•

Audit Committee meetings will be attended in person to the extent practicable and, in addition to Audit Committee members, required attendees will include the Chief Financial Officer, Chief Accounting Officer, General Counsel, Chair of the Disclosure Committee, head of Internal Audit, independent auditors and outside legal counsel as necessary;

•

At Audit Committee meetings, in addition to required communications from the independent auditors, reports will be made by the Chief Accounting Officer and the Chair of the Disclosure Committee on significant changes from prior filings, significant judgments reflected in the report and receipt of sub-certifications;

•

At Audit Committee meetings, separate executive sessions will be held with the independent auditor, head of Internal Audit, General Counsel and others as necessary; and

•

Any changes to a draft of a periodic report that has been approved by the Audit Committee must be submitted to and reviewed and approved by the Chair of the Audit Committee prior to filing.

Related Party Transactions and Conflicts of Interest - The resignation of the members of senior management affiliated with the Former Manager has eliminated certain conflicts of interest that existed prior to such resignations.

The Audit Committee’s investigation identified certain payments made by the Company to the Former Manager or its affiliates that were not sufficiently documented or otherwise require scrutiny. In November 2014, as a result of the Audit Committee investigation, the Company terminated a lease agreement with an affiliate of its Former Manager for space in a building in Newport, Rhode Island. The Company, which never occupied the building, was reimbursed for certain leasehold improvements and other costs by delivery of 916,423 OP Units valued at approximately $8.5 million, which were retired.

The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statemnets related to any potential recovery.

The Company is working closely with outside counsel to terminate its remaining relationships with affiliates of its Former Manager, including ARC Capital, LLC (“ARC”) and RCS Capital Corporation, and to disentangle its internal control framework from the affiliated entities. The Company is seeking to obtain copies of all of its books and records held by ARC and to eliminate all human resource, information technology and other overlapping departmental services.

The Company has also enhanced the procedures for review and approval of potential related party transactions with directors, director nominees, executive officers, 5% shareholders and their immediate family members through the adoption of a new related party transactions policy administered by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will annually assess the use and effectiveness of the policy.

Equity-Based Compensation - The Company has recently obtained copies from ARC of all equity awards made by means of block grants allocated by the Former Manager or its affiliates and will seek to assume administration of those awards. In addition, the Company will review these equity awards for consistency with Compensation Committee authorization.

Under the Compensation Committee’s oversight, the Company is implementing new governance processes for the authorization, documentation, issuance, administration and accounting for equity-based compensation. The Compensation Committee will approve each award, rather than delegating authority to management to allocate large tranches of awards. In-house counsel, accounting, tax, and human resources personnel will work together to oversee the issuance of equity compensation to directors, officers and employees. Equity compensation tracking and recordkeeping will be improved through the use of equity tracking software. All compensation matters within the Compensation Committee’s purview will be reviewed by the Compensation Committee Chair and in-house counsel against the Compensation Committee’s authorization to ensure consistency and appropriate documentation. In respect of all other employment matters, the human resources department will consult in-house counsel before making any offer of employment or any compensation adjustment that includes any equity award or otherwise raises equity compensation issues.

110

Accounting Close Process - The Company has begun to standardize its internal accounting close process and intends to complete the integration of its accounting and financial reporting processes among its various offices. Toward this end, the Company has documented, and intends to continue to document, its key and significant operational activities and accounting policies and procedures. In addition, the Company has designed and implemented internal controls within its accounting close process to ensure that closing activities, such as reconciliations, timely reviews, journal entry reviews and comprehensive financial analysis, are performed and reviewed. The Company intends to create a financial reporting sub-certification process and is defining key roles and responsibilities within the organizational structure. Lastly, the Company has conducted trainings, and will conduct additional trainings, for its accounting and other professionals to ensure the accounting close processes and entity level and company level controls and procedures are well defined, documented and implemented to support operational effectiveness.

Critical Accounting Estimates and Non-Routine Transactions - The Company has documented various critical accounting policies, and intends to continue to document new accounting policies and to update its existing documentation for any noted changes on a timely basis. New policies have been communicated to the relevant Company employees. The Company has also established a process under which senior management approves all critical accounting estimates and non-routine transactions on a periodic basis as part of the financial close and reporting processes.

Cash Reconciliations and Monitoring - The Company has documented treasury and accounting policies and procedures, implemented controls over the monitoring and reconciliation of cash accounts and plans to review all bank accounts associated with the Company. In addition, the Company has established roles and responsibilities to monitor and account for its various bank accounts.

Information Technology General Controls - Access, Authentication and IT Environment - The Company has implemented an access management system to govern the granting and revocation of user access rights and standardized the administration of access to financially significant systems within the information technology organization. The system maintains a database of access grants and a record of business approvals. The controls governing access to programs and data have been updated to reflect the use of the access management system. The Company has trained business approvers, managers, information technology staff, and human resources staff on the revised controls and their respective roles and responsibilities within each control. The process for managing and conducting the periodic system access reviews has been standardized across all systems. Periodic access reviews will be managed by the Information Technology department to ensure adherence to the control standard.

Information Technology General Controls Over Management of Third Party Service Providers - Executive management responsible for this directive is no longer with the Company. The Company is working to complete the integration of systems, offices and business processes so as to remove the dependencies on the formerly affiliated party service provider as soon as possible. The Company is also establishing a control framework to ensure all service providers have the appropriate contracts and service level agreements in place prior to initiation of any services.

Changes in Internal Control over Financial Reporting

During the three months ended September 30, 2014, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting other than ongoing integration activities relating to the Company’s acquisitions of large portfolios in 2013, ARCT IV and Cole Real Estate Investments, Inc.

111

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

The information contained in Note 17 — Commitments and Contingencies to our consolidated financial statements in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

Based on the events surrounding the investigation conducted by the Audit Committee, the Company has identified changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2013. Refer to the Amended 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5 . Other Information.

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

112

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


AMERICAN REALTY CAPITAL PROPERTIES, INC.

By:		/s/ MICHAEL SODO

Michael Sodo
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)

ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

By:		/s/ GAVIN B. BRANDON

Gavin B. Brandon
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

Date: March 2, 2015

113

EXHIBITS

The following exhibits are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.		Description

10.52**		First Amendment to Agreement of Purchase and Sale, dated as of July 18, 2014, among certain subsidiaries of American Realty Capital Properties, Inc. party thereto and BRE DDR Retail Holdings III LLC.

10.53*		Equity Purchase Agreement by and between ARC Properties Operating Partnership, L.P. and RCS Capital Corporation, dated as of September 30, 2014

31.1*		Certification of the Chief Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of the Chief Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3*		Certification of the Chief Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.4*		Certification of the Chief Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Written statements of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Written statements of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3*		Written statements of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.4*		Written statements of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101†		XBRL (eXtensible Business Reporting Language). The following materials from American Realty Capital Properties, Inc.’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014, formatted in XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Loss; (iv) the Consolidated Statement of Changes in Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended and Section 19 of the Securities Exchange Act of 1934, as amended

*	Filed herewith

**	Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the three months ended June 30, 2014 filed with the SEC on July 29, 2014.

†	To be filed by amendment.

114

Exhibit 10.53

Execution version

EQUITY PURCHASE AGREEMENT

by and between

ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

and

RCS CAPITAL CORPORATION

DATED AS OF SEPTEMBER 30, 2014

TABLE OF CONTENTS


		Page

ARTICLE I

PURCHASE AND SALE

Section 1.1	Purchase and Sale		1
Section 1.2	Consideration		1
Section 1.3	Purchase Price Allocation		3
Section 1.4	Closings		3
Section 1.5	First Closing Deliveries		3
Section 1.6	Second Closing Deliveries		4
Section 1.7	Deferred Payment		5
Section 1.8	Withholding Rights		5
Section 1.9	Adjustment to Stock Consideration		5

ARTICLE II

WORKING CAPITAL ADJUSTMENT

Section 2.1	Working Capital Adjustment		6

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 3.1	Corporate Organization		7
Section 3.2	Capitalization		8
Section 3.3	Authority; No Violation		8
Section 3.4	Consents and Approvals		9
Section 3.5	Financial Statements		9
Section 3.6	Broker’s Fees		9
Section 3.7	Absence of Certain Changes or Events		9
Section 3.8	Legal Proceedings		10
Section 3.9	Taxes and Tax Returns		10
Section 3.10	Employee Benefits		12
Section 3.11	Compliance with Law; Permits		12
Section 3.12	Certain Contracts		13
Section 3.13	Undisclosed Liabilities		13
Section 3.14	Environmental Liability		13
Section 3.15	Real Property		14
Section 3.16	Internal Controls		14
Section 3.17	Insurance		14
Section 3.18	Intellectual Property		14
Section 3.19	Investment Company Act of 1940		15
Section 3.20	No Resale		15


Section 3.21	Broker Regulatory Matters	15
Section 3.22	No Material Adverse Effect	16
Section 3.23	No Other Seller Representations or Warranties	16

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Section 4.1	Organization and Qualification	16
Section 4.2	Capital Structure	17
Section 4.3	Authority; No Violation	17
Section 4.4	Consents and Approvals	18
Section 4.5	Non-Cash Consideration	18
Section 4.6	SEC Filings; Financial Statements; Internal Controls; Sarbanes-Oxley Compliance	18
Section 4.7	Legal Proceedings	19
Section 4.8	Compliance with Law	19
Section 4.9	No Material Adverse Effect	19
Section 4.10	Sufficient Funds	19
Section 4.11	Undisclosed Liabilities	19
Section 4.12	No Other Representations and Warranties	19

ARTICLE V

COVENANTS RELATING TO CONDUCT OF BUSINESS

Section 5.1	Conduct of Business Prior to the Second Closing	19
Section 5.2	Seller Forbearances	20
Section 5.3	Buyer Forbearances	21

ARTICLE VI

CERTAIN COVENANTS OF THE PARTIES

Section 6.1	Regulatory Matters	22
Section 6.2	Access to Information; Confidentiality	23
Section 6.3	Financial Statements	23
Section 6.4	Legal Conditions	24
Section 6.5	Employee Matters	24
Section 6.6	Additional Agreements	25
Section 6.7	Advice of Changes	25
Section 6.8	General Release of Claims	26
Section 6.9	Tax Matters	26
Section 6.10	Certain Pre-Closing Transactions	29
Section 6.11	Change of Name	29
Section 6.12	Subsidiary Advisory Agreement	29
Section 6.13	Reaffirmation of Advisory Agreement	29


Section 6.14	No Negotiation	29
Section 6.15	Wrong Pockets	30
Section 6.16	Intercompany Obligations	30
Section 6.17	Property Disposition Fees	30
Section 6.18	Property Management Agreements	30

ARTICLE VII

CONDITIONS PRECEDENT

Section 7.1	Conditions to Each Party’s Obligations – First Closing	30
Section 7.2	Conditions to Obligations of Buyer – First Closing	31
Section 7.3	Conditions to Obligations of Seller – First Closing	31
Section 7.4	Conditions to Each Party’s Obligations – Second Closing	32
Section 7.5	Conditions to Obligations of Buyer – Second Closing	32
Section 7.6	Conditions to Obligations of Seller – Second Closing	33

ARTICLE VIII

SURVIVAL; INDEMNIFICATION

Section 8.1	Survival	33
Section 8.2	Indemnification	33
Section 8.3	Calculation of Damages	36
Section 8.4	Exclusivity	36

ARTICLE IX

TERMINATION AND AMENDMENT

Section 9.1	Termination	36
Section 9.2	Effect of Termination	37

ARTICLE X

GENERAL PROVISIONS

Section 10.1	Expenses	37
Section 10.2	Notices	37
Section 10.3	Definitions	38
Section 10.4	Interpretation	44
Section 10.5	Counterparts	44
Section 10.6	Entire Agreement	44
Section 10.7	Governing Law; Jurisdiction	44
Section 10.8	Publicity	45
Section 10.9	Assignment; Third Party Beneficiaries	45
Section 10.10	Specific Performance	45
Section 10.11	Amendment; Waiver	45

iii


Annex A	–	Calculation of Contingent Consideration

Exhibit A	–	Form of Buyer Note
Exhibit B-1	–	Form of Interim Sub-Advisory Agreement with respect to CCPT IV
Exhibit B-2	–	Form of Interim Sub-Advisory Agreement with respect to CCPT V
Exhibit B-3	–	Form of Interim Sub-Advisory Agreement with respect to CCIT
Exhibit B-4	–	Form of Interim Sub-Advisory Agreement with respect to CCIT II
Exhibit B-5	–	Form of Interim Sub-Advisory Agreement with respect to INAV
Exhibit C-1	–	Form of Wholesaling Agreement with respect to CCIT II
Exhibit C-2	–	Form of Wholesaling Agreement with respect to INAV
Exhibit C-3	–	Form of Wholesaling Agreement with respect to CCIT
Exhibit C-4	–	Form of Wholesaling Agreement with respect to CCPT IV
Exhibit C-5	–	Form of Wholesaling Agreement with respect to CCPT V
Exhibit D	–	Form of Employee Leasing Agreement
Exhibit E	–	Form of Side Letter
Exhibit F	–	Form of CCP Assignment and Assumption Agreement
Exhibit G	–	Form of Investment Allocation Agreement
Exhibit H	–	Form of Services Agreement
Exhibit I	–	Form of Non-Competition and Exclusivity Agreement
Exhibit J	–	Form of Registration Rights Agreement
Exhibit K-1	–	Form of Sub-Advisory Agreement with respect to CCPT IV
Exhibit K-2	–	Form of Sub-Advisory Agreement with respect to CCPT V
Exhibit K-3	–	Form of Sub-Advisory Agreement with respect to CCIT
Exhibit K-4	–	Form of Sub-Advisory Agreement with respect to CCIT II
Exhibit K-5	–	Form of Sub-Advisory Agreement with respect to INAV

INDEX OF DEFINED TERMS


2015 Buyer VWAP Amount		Section 1.2(d)
2015 Excess Stock Amount		Section 1.2(d)
2015 Stock Threshold		Section 1.2(d)(ii)(x)
Actual EBITDA		Annex A Section 1.1(a)
Acquired Companies		Recitals
Acquired Companies’ Indebtedness		Section 10.3
Acquired Company Benefit Plans		Section 10.3
Acquired Company Qualified Plans		Section 3.10(c)
Acquired Interests		Section 1.1
Acquisition Transaction		Section 6.14
Action		Section 3.8(a)
Adjustment Amount		Section 2.1(e)
Affiliate		Section 10.3
Agreement		Preamble
Allocation Statement		Section 1.3
Ancillary Agreements		Section 10.3
Assumed Benefit Plan		Section 6.5(a)
Audited Financial Statements		Section 3.5
Auditor		Section 10.3
Breach		Section 8.2(a)
Broker		Section 3.1(d)
Broker Sale		Section 10.3
Business		Recitals
Business Day		Section 10.3
Business Employees		Section 6.5(c)
Business Information		Section 6.2(b)
Buyer		Preamble
Buyer Benefit Plan		Section 10.3
Buyer Class A Stock		Section 1.2(d)(ii)
Buyer Class B Stock		Section 4.2(a)
Buyer Disclosure Letter		Article IV
Buyer Indemnified Party		Section 8.2(a)
Buyer Note		Section 1.2(b)
Buyer Preferred Stock		Section 4.2(a)
Buyer SEC Documents		Section 4.6(a)
Buyer Shares		Section 1.2(d)(ii)(x)
Buyer Tax Indemnified Parties		Section 6.9(a)
Cole Sale		Annex A Section 1.1(b)
CCA		Recitals
CCC		Section 10.3
CCP		Recitals
Change in Control		Annex A Section 1.1(c)
CHC		Section 10.3
CHC Employment Agreement		Section 10.3
Claim		Section 8.2(f)
Closing Consideration		Section 1.2(d)
CMA		Section 7.4(b)
Code		Section 10.3
Company IP		Section 3.18(a)
Company Material Contracts		Section 10.3
Company Permits		Section 3.11(b)
Company Regulatory Agreement		Section 3.8(b)
Confidentiality Agreement		Section 6.2(b)
Contingent Consideration		Section 1.2(e)


Contracts		Section 3.3(b)
Damages		Section 8.2(a)
Deferred Consideration		Section 1.2(d)
Designated Employees		Section 6.5(b)
Designated FF&E		Section 10.3
Designated Formation Funds		Section 6.12
Determination		Section 10.3
Determination Date		Section 2.1(d)
Earn-Out Auditor		Annex A Section 1.1(d)
Earn-Out- Buyer VWAP		Annex A Section 1.1(b)(ii)
Earn-Out Excess Stock Amount		Annex A Section 1.1(b)(ii)
Earn-Out Multiple		Annex A Section 1.1(e)
Earn-Out Payment		Annex A Section 1.2(a)
Earn-Out Stock Threshold		Annex A Section 1.1(b)(ii)
EFA		Section 3.1(c)
Equity Interests		Section 10.3
ERISA		Section 10.3
ERISA Affiliate		Section 10.3
Estimated Closing Net Working Capital		Section 10.3
Estimated Closing Net Working Capital Overage		Section 10.3
Estimated Closing Net Working Capital Shortage		Section 10.3
Estimated Closing Statement		Section 2.1(a)
Excess EBITDA		Annex A Section 1.1(f)
Final Closing Net Working Capital		Section 10.3
Final Closing Net Working Capital Overage		Section 10.3
Final Closing Net Working Capital Shortage		Section 10.3
Final Closing Statement		Section 2.1(b)
Final Contingent Consideration Statement		Annex A Section 1.3(c)
Final Earn-Out Payment Statement		Annex A Section 1.3(e)
Final Special Earn-Out Payment		Annex A Section 1.7(b)(4)
Financial Statements		Section 3.5
FINRA		Section 10.3
First Closing		Section 1.4(a)
First Closing Date		Section 1.4(a)
Form BD		Section 3.21(b)
Formation Fund Advisory Agreement		Section 6.12
Formation Fund Sub-Advisory Agreement		Section 6.12
GAAP		Section 10.3
Governing Documents		Section 10.3
Governmental Entity		Section 3.4
Gross Income		Section 10.3
HSR Act		Section 3.4
Incumbent Directors		Annex A Section 1.1(c)(iv)
Indebtedness		Section 10.3
Indemnified Party		Section 10.3
Indemnifying Party		Section 8.2(c)
Initial Closing Consideration		Section 1.2(a)
Initial Contingent Consideration Statement		Section Annex A Section 1.3(a)
Intellectual Property		Section 10.3
IRS		Section 10.3
Knowledge		Section 10.3
Law		Section 3.11(a)
Laws		Section 3.11(a)
Liens		Section 3.2(b)
Material Adverse Effect on Buyer		Section 10.3
Material Adverse Effect on Seller		Section 10.3


Material Subsidiaries		Section 3.1(c)
MTN		Section 10.3
MTN Employment Agreement		Section 10.3
Multiemployer Plan		Section 10.3
NASD		Section 10.3
Net Working Capital		Section 10.3
Notice of Claim		Section 8.2(f)
Notice of Contingent Consideration Statement Disagreement		Annex A Section 1.3(b)
NYSE		Section 10.3
Orders		Section 3.8(a)
Outside Date		Section 9.1(c)
Parties		Preamble
Party		Preamble
Performance Period		Annex A Section 1.1(g)
Permitted Changes		Section 6.12
Permitted Liens		Section 10.3
Person		Section 10.3
Post-Closing Period		Section 10.3
Pre-Closing Period		Section 10.3
Pre-Closing Tax Return		Section 6.9(d)(i)
Premises		Section 10.3
Proposed Contingent Consideration Statement Adjustments		Annex A Section 1.3(b)
Registration Rights Agreement		Section 1.6(a)(vii)
Released Persons		Section 6.8
Releasing Persons		Section 6.8
Requisite Approvals		Section 7.1(a)
Restructuring Transactions		Section 6.10
Retained Employees		Section 10.3
SEC		Section 10.3
Second Closing		Section 1.4(a)
Second Closing Cash Consideration		Section 1.2(c)
Second Closing Date		Section 1.4(a)
Securities Act		Section 10.3
Seller		Preamble
Seller Disclosure Letter		Article III
Seller GP		Recitals
Seller GP/Cole Merger Agreement		Section 10.3
Seller Indemnified Party		Section 8.2(b)
Seller Tax Indemnified Parties		Section 6.9(b)
Special Earn-Out Event		Annex A Section 1.1(h)
Special Earn-Out Notice		Annex A Section 1.7(a)
Special Earn-Out Payment		Annex A Section 1.1(i)
Special Earn-Out Payment Calculation		Annex A Section 1.7(b)(2)
Special Earn-Out Statement		Annex A Section 1.7(b)(1)
Special Earn-Out Trigger Date		Annex A Section 1.7(a)
Straddle Period		Section 10.3
Straddle Period Tax Return		Section 6.9(d)(ii)
Subsidiary		Section 10.3
Target EBITDA		Annex A Section 1.1(j)
Target Net Working Capital		Section 10.3
Tax		Section 10.3
Tax Claim		Section 10.3
Tax Proceeding		Section 10.3
Tax Return		Section 10.3
Tax Sharing Agreement		Section 10.3
Taxes		Section 10.3

vii


Taxing Authority		Section 10.3
Test Date		Annex A Section 1.1(k)
Third Party Claim		Section 8.2(g)
Transfer Taxes		Section 6.9(i)
Unaudited Financial Statements		Section 3.5
Unresolved Contingent Consideration Statement Adjustments		Annex A Section 1.3(d)

viii

EQUITY PURCHASE AGREEMENT

EQUITY PURCHASE AGREEMENT, dated as of September 30, 2014 (as it may be amended or supplemented, this “ Agreement ”), by and between ARC Properties Operating Partnership, L.P., a Delaware limited partnership (“ Seller ”), and RCS Capital Corporation, a Delaware corporation (“ Buyer ”). Each of Seller and Buyer may be referred to herein as a “ party ” and collectively as the “ parties .”

W I T N E S S E T H:

WHEREAS, through the Acquired Companies (as defined below) and their respective Subsidiaries, Seller is engaged in the private capital management business, including the broker-dealer, wholesale distribution, non-traded REIT sponsorship and advisory businesses (referred to herein, together with all related intellectual property and all other related assets and properties, as the “ Business ”);

WHEREAS, Seller and Buyer wish to effect a strategic transaction pursuant to which, on the terms and subject to the conditions set forth in this Agreement, Seller will sell to Buyer, and Buyer will purchase from Seller, all of the outstanding Equity Interests held by Seller in each of Cole Capital Partners, LLC, a Delaware limited liability company (“ CCP ”), and Cole Capital Advisors, Inc., a Delaware corporation (“ CCA ” and, together with CCP, the “ Acquired Companies ”), such that, immediately following the consummation of the transaction, Buyer, through the Acquired Companies and their respective Subsidiaries, will be engaged in the Business;

WHEREAS, the Board of Directors of American Realty Capital Properties, Inc., a Maryland corporation and the general partner of Seller (“ Seller GP ”), has (a) determined that this Agreement and the transactions contemplated hereby are advisable and in the best interests of Seller, and (b) approved this Agreement and the transactions contemplated hereby; and

WHEREAS, the Board of Directors of Buyer has (a) determined that this Agreement and the transactions contemplated hereby are advisable and in the best interests of Buyer, and (b) approved this Agreement and the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

PURCHASE AND SALE

Section 1.1 Purchase and Sale . Upon the terms and subject to the conditions of this Agreement, at the Second Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of all Liens, all of the outstanding Equity Interests in each of the Acquired Companies (the “ Acquired Interests ”).

Section 1.2 Consideration . Upon the terms and subject to the conditions of this Agreement, in consideration for the purchase of the Acquired Interests pursuant to Section 1.1 :

(a) at the First Closing, Buyer shall pay or cause to be paid to Seller or its designee cash in an amount equal to $10 million (the “ Initial Closing Consideration ”).

(b) at the Second Closing, Buyer shall deliver or cause to be delivered to Seller, an unsecured note of Buyer in an aggregate principal amount of $300 million in the form attached hereto as Exhibit A (the “ Buyer Note ”).

(c) at the Second Closing, Buyer shall pay or cause to be paid to Seller cash in an amount equal to $65 million (the “ Second Closing Cash Consideration ”).

(d) if the Second Closing has occurred, then, on April 1, 2015, Buyer shall deliver or cause to be delivered to Seller the following aggregate consideration (the “ Deferred Consideration ” and together with the Buyer Note and the Second Closing Cash Consideration, the “ Closing Consideration ”):

(i) cash in an amount equal to $125 million, plus, if applicable, an amount equal to the 2015 Excess Stock Amount; and

(ii) as determined by Buyer in its sole discretion, either:

(x) 8,397,857 validly issued, fully paid and non-assessable shares (the “ Buyer Shares ”) of Class A common stock, par value $0.001, of Buyer (the “ Buyer Class A Stock ”), provided, however, if such number of shares is greater than a number representing nineteen and nine tenths percent (19.9%) of the shares of Buyer Class A Stock outstanding as of March 31, 2015 (such number, the “ 2015 Stock Threshold ”), then such number of Buyer Shares to be delivered pursuant to this Section 1.2(d)(ii)(x) shall be reduced to the 2015 Stock Threshold; or

(y) cash in the amount equal to $200 million.

For purposes hereof, (i) “ 2015 Excess Stock Amount ” shall mean the number of shares of Buyer Class A Stock in excess of the 2015 Stock Threshold that would have been issued under Section 1.2(d)(ii)(x) but for the proviso thereto, multiplied by the 2015 Buyer VWAP, and (ii) the “ 2015 Buyer VWAP ” shall mean the intraday volume weighted average price of one share of Buyer Class A Stock, as reported by Bloomberg, LP, over the ten (10) trading days ending on the trading day immediately preceding April 1, 2015.

(e) if the Second Closing has occurred, then, subject to Section 1.2(f) , following the Second Closing, and as additional consideration for the Acquired Interests, Buyer shall pay or cause to be paid an earn-out payment or special earn-out payment, if any, in accordance with the terms and conditions set forth in Annex A hereto (the “ Contingent Consideration ”). The Contingent Consideration, if any, will be paid in cash and/or shares of Buyer Class A Stock in accordance with Annex A hereto.

(f) Notwithstanding anything to the contrary herein, if, at the time Seller is entitled to receive the Deferred Consideration pursuant to Section 1.2(d) , the sum of (i) the Gross Income that would be recognized by Seller attributable to the receipt of such Deferred Consideration in the tax year (such Gross Income determined based on the fair market value of the Buyer Shares at the time of their issuance), plus (ii) any other Gross Income that is reasonably expected to be recognized by Seller in the same tax year and that would not qualify as Gross Income under Section 856(c)(3) of the Code (the “ Nonqualifying Income ”), is reasonably expected to exceed 22.5% of the total Gross Income to be recognized by Seller in such tax year (the “ Nonqualifying Income Limitation ”), the amount of Deferred Consideration that exceeds the amount of Deferred Consideration Seller could receive pursuant to Section 1.2(d) and not exceed the Nonqualifying Income Limitation shall be deferred (the “ Deferred Nonqualifying Consideration ”) and Seller shall not be entitled to receive such Deferred Nonqualifying Consideration until the subsequent tax year. If the receipt of the Deferred Nonqualifying Consideration by Seller in such subsequent tax year would reasonably cause Seller to violate the Nonqualifying Income Limitation if applied to such subsequent tax year, the principles of the prior sentence shall be applied to the Deferred Nonqualifying Consideration in order to further defer the receipt by Seller of a sufficient amount of the Deferred Nonqualifying Consideration to subsequent tax years. The Deferred Nonqualifying Consideration payable pursuant to the prior two sentences shall be paid by Buyer to Seller within 5 days after the beginning of the tax year to which such Deferred Nonqualifying Consideration has been deferred. The Buyer shall not redeem, except as otherwise permitted under the Buyer Note, and Seller shall not transfer all or a portion of the Buyer Note in any tax year to the extent the Gross Income that would be recognized by Seller from such redemption or transfer if included in the Nonqualifying Income for such tax year, would cause the total Gross Income to be recognized by Seller in such tax year to exceed the Nonqualifying Income Limitation. The calculations required by this paragraph shall be reasonably determined by Seller in consultation with its external tax accountants. Seller shall notify and provide to Buyer in writing, no later than 5 days prior to the date of a scheduled payment of Deferred Consideration, a copy of such calculations and such notification shall set forth the amount, if any, of such Deferred Consideration that is Deferred Nonqualifying Consideration to be paid in a subsequent taxable year. Buyer shall have no liability to Seller, and shall be held harmless by Seller, in the event that the calculations prepared by Seller are erroneous.

Section 1.3 Purchase Price Allocation . Buyer and Seller agree that the Closing Consideration and the Contingent Consideration, if any, shall be allocated among the assets of CCP, the stock of CCA and the Non-Competition and Exclusivity Agreement in accordance with Section 1060 of the Code (the “ Allocation Statement ”). Buyer and Seller shall cooperate to determine the Allocation Statement within 30 days following the date on which the Final Closing Statement has been determined in accordance with Section 2.1(b) , subject to adjustment in the event of a payment of Contingent Consideration occurring after such determination. If the parties are unable to reach an agreement regarding the allocation, any disagreements shall be resolved by the Auditor and the determination by the Auditor shall be final and binding on the parties. The fees and expenses of the Auditor shall be shared equally by Seller and Buyer. The parties will report, act and file Tax Returns (including IRS Form 8594) in all respects and for all Tax purposes consistent with the Allocation Statement, and the parties and their respective Affiliates will not take any position inconsistent with the Allocation Statement for tax, accounting or financial reporting purposes, unless required to do so by applicable Law.

Section 1.4 Closings . Upon the terms and subject to the conditions set forth in this Agreement:

(a) the closing (i) of the transactions contemplated by Section 1.5 of this Agreement, (the “ First Closing ”) shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10153, on the date no later than three (3) Business Days after the date on which the last of the closing conditions set forth in Section 7.1 , Section 7.2 and Section 7.3 shall have been satisfied or validly waived (subject to applicable Law) (other than those conditions that by their nature are to be satisfied (or validly waived) at the First Closing, but subject to such satisfaction or valid waiver), unless such time or date is extended by mutual agreement of the parties (the “ First Closing Date ”), and (ii) of the transactions contemplated by Section 1.6 of this Agreement (the “ Second Closing ”) shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10153, on the date no later than three (3) Business Days after the date on which the last of the closing conditions set forth in Section 7.4 , Section 7.5 and 7.6 shall have been satisfied or validly waived (subject to applicable Law) (other than those conditions that by their nature are to be satisfied (or validly waived) at the Second Closing, but subject to such satisfaction or valid waiver), unless such time or date is extended by mutual agreement of the parties (the “ Second Closing Date ”);

Section 1.5 First Closing Deliveries .

(a) Buyer Deliveries to Seller . At the First Closing, Buyer shall deliver, or cause to be delivered, to Seller the following:

(i) the Initial Closing Consideration, by wire transfer of immediately available funds to an account designated by Seller at least one Business Day prior to the First Closing Date;

(ii) the Interim Sub-Advisory Agreements in the forms attached hereto as Exhibits B-1 through B-5 executed by the respective parties thereto;

(iii) the Wholesaling Agreements in the forms attached hereto as Exhibits C-1 through C-5 executed by the respective parties thereto;

(iv) the Employee Leasing Agreement in the form attached hereto as Exhibit D executed by the respective parties thereto; and

(v) the Side Letter in the form attached hereto as Exhibit E executed by the respective parties thereto.

(b) Seller Deliveries to Buyer . At the First Closing, Seller shall deliver, or cause to be delivered, to Buyer the following:

(i) the Interim Sub-Advisory Agreements in the forms attached hereto as Exhibits B-1 through B-5 executed by the respective parties thereto;

(ii) the Wholesaling Agreements in the forms attached hereto as Exhibits C-1 through C-5 executed by the respective parties thereto;

(iii) the Employee Leasing Agreement in the form attached hereto as Exhibit D executed by the respective parties thereto; and

(iv) the Side Letter in the form attached hereto as Exhibit E executed by the respective parties thereto.

Section 1.6 Second Closing Deliveries .

(a) At the Second Closing, Buyer shall deliver, or cause to be delivered, to Seller the following:

(i) the Second Closing Cash Consideration.

(ii) the Buyer Note;

(iii) the CCP Assignment and Assumption Agreement in the form attached hereto as Exhibit F , executed by the parties thereto;

(iv) the Investment Allocation Agreement in the form attached hereto as Exhibit G executed by the parties thereto;

(v) the Services Agreement in the form attached hereto as Exhibit H executed by the parties thereto;

(vi) the Non-Competition and Exclusivity Agreement in the form attached hereto as Exhibit I executed by the parties thereto; and

(vii) the Registration Rights Agreement in the form attached hereto as Exhibit J executed by the parties thereto (the “ Registration Rights Agreement ”).

(b) At the Second Closing, Seller shall deliver, or cause to be delivered, to Buyer the following:

(i) the CCP Assignment and Assumption Agreement in the form attached hereto as Exhibit F , executed by the parties thereto;

(ii) stock certificates representing the capital stock of CCA, together with stock powers duly executed in blank in form and substance reasonably satisfactory to Seller and Buyer and with all required stock transfer tax stamps affixed;

(iii) the resignations, effective as of the Second Closing (and otherwise in form and substance reasonably satisfactory to Seller and Buyer), of each of the directors and/or managers of each of the Acquired Companies and their respective Subsidiaries, except for such persons as shall have been designated by Buyer to Seller in writing prior to the First Closing Date;

(iv) the Investment Allocation Agreement in the form attached hereto as Exhibit G executed by the parties thereto;

(v) the Sub-Advisory Agreements in the forms attached hereto as Exhibits K-1 through K-5 executed by the respective parties thereto;

(vi) the Services Agreement in the form attached hereto as Exhibit H executed by the parties thereto;

(vii) an instrument terminating the Agreement, dated January 8, 2014, by and among AR Capital, LLC, Nicholas Schorsch and Seller GP executed by the respective parties and in form and substance satisfactory to Seller and Buyer;

(viii) the Non-Competition and Exclusivity Agreement, substantially in the form attached hereto as Exhibit I , executed by each of the parties set forth in such Exhibit;

(ix) an instrument or instruments in form and substance satisfactory to Buyer and Seller assigning to Buyer, to the extent permissible, (A) the non-competition provisions applicable to CHC contained in the Seller GP/Cole Merger Agreement and the CHC Employment Agreement, and (B) the non-competition provisions applicable to MTN contained in the MTN Employment Agreement;

(x) the Registration Rights Agreement executed by the parties thereto; and

(xi) such other documents and instruments, including the organizational documents of the Acquired Companies, as may be reasonably requested by Buyer to effect or evidence the purchase of the Acquired Interests and the other transactions contemplated by this Agreement, in form and substance reasonably satisfactory to Buyer.

Section 1.7 Deferred Payment . If the Second Closing has occurred, then, on April 1, 2015, Buyer shall deliver or cause to be delivered to Seller the Deferred Payment. If the Deferred Payment includes any Buyer Shares, then, on April 1, 2015, the Buyer shall cause to be made a book entry statement from Buyer’s transfer agent reflecting the issuance of such Buyer Shares to Seller.

Section 1.8 Withholding Rights . Buyer shall be entitled to deduct and withhold from any cash or other consideration required to be delivered pursuant to this Agreement such amounts as Buyer is required to deduct and withhold under the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”), or any provision of state, local or foreign Tax law, with respect to the making of such payment. To the extent the amounts are so withheld by Buyer and paid over to the appropriate Taxing Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such withholding was made.

Section 1.9 Adjustment to Stock Consideration . Notwithstanding any other provision of this Agreement, in the event of a dividend (whether cash or otherwise), stock split, reverse stock split, extraordinary dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination, exchange of shares or rights offering to purchase shares of Buyer, or other similar corporate event or transaction that affects the Buyer Shares (a “ Corporate Event ”), then, without any further corporate action on the part of Buyer or Seller (A) in the event that the Corporate Event entitles the holders of Buyer Class A Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets (including cash) with respect to shares of Buyer Class A Stock, then upon delivery of the Buyer Shares to Seller pursuant to this Agreement, Buyer shall also deliver to Seller such stock, securities or assets (including cash) Seller would have been entitled to receive as a holder of Buyer Class A Stock if the Buyer Shares had been issued to Seller as of the Second Closing Date and (B) in the event that the Corporate Event entitles the holders of Buyer Class A Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets (including cash) in exchange for Buyer Class A Stock, then at the time delivery of the Buyer Shares to Seller pursuant to this Agreement would otherwise occur, Buyer (or any successor entity resulting from such Corporate Event) shall deliver to Seller, in lieu of the Buyer Shares to be delivered to Seller pursuant to this Agreement, such stock, securities or assets (including cash) Seller would have been entitled to receive as a holder of Buyer Class A Stock if the Buyer Shares had been issued to Seller as of the Second Closing Date.

ARTICLE II

WORKING CAPITAL ADJUSTMENT

Section 2.1 Working Capital Adjustment .

(a) No less than three (3) Business Days prior to the Second Closing Date, Seller shall prepare and deliver to Buyer a written closing statement (the “ Estimated Closing Statement ”) of the Estimated Closing Net Working Capital, including the resulting Estimated Closing Net Working Capital Overage (if any) or Estimated Closing Net Working Capital Shortage (if any), which Estimated Closing Statement shall be prepared in good faith in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection with the preparation of the Financial Statements.

(b) No more than forty-five (45) days after the Second Closing Date, Buyer shall prepare and deliver to Seller a written statement (the “ Final Closing Statement ”), as of the Second Closing Date, of the Final Closing Net Working Capital, including the resulting Final Closing Net Working Capital Overage (if any) or Final Closing Net Working Capital Shortage (if any), and including a reasonably detailed breakdown of the various amounts of each component of Net Working Capital, which Final Closing Statement shall be prepared in good faith in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection with the preparation of the Financial Statements.

(c) No less than five (5) Business Days following the date hereof, Seller shall prepare and deliver to Buyer an illustrative example of the Final Closing Statement (including calculations of Net Working Capital), calculated as if the Second Closing Date were June 30, 2014.

(d) If Seller disagrees with the calculation of any amounts on the Final Closing Statement, Seller shall, within thirty (30) days after receipt of the Final Closing Statement, notify Buyer of such disagreement in writing, setting forth in detail the particulars of such disagreement. Buyer will provide Seller with reasonable access upon reasonable notice to any of Buyer’s records and relevant employees not otherwise available to Seller as a result of the transactions contemplated hereby, to the extent reasonably related to Seller’s review of the Final Closing Statement. If Seller does not provide such notice of disagreement within the thirty (30)-day period, Seller shall be deemed to have accepted the Final Closing Statement and the calculation of all amounts set forth thereon, which shall be final, binding and conclusive for purposes of this Agreement and not subject to any further recourse by Seller or its Affiliates. If any such notice of disagreement is timely provided, Seller and Buyer shall use reasonable best efforts for a period of five (5) Business Days (or such longer period as they may mutually agree) to resolve any disagreements with respect to the calculation of any and all amounts set forth on the Final Closing Statement. If, at the end of such period, Seller and Buyer are unable to fully resolve the disagreements, the Auditor shall resolve any remaining disagreements. The Auditor shall be instructed to (i) consider only such matters as to which there is a disagreement, (ii) determine, as promptly as practicable, whether the disputed amounts set forth on the Final Closing Statement were prepared in accordance with the standards set forth in this Agreement, and (iii) deliver, as promptly as practicable, to Seller and Buyer its determination in writing. The resolution for each disputed item contained in the Auditor’s determination shall be made subject to the definitions and principles set forth in this Agreement, and shall be consistent with either the position of Seller or Buyer. Seller and Buyer shall bear their own expenses in the preparation and review of the Estimated Closing Statement and Final Closing Statement. The fees and expenses of the Auditor shall be allocated between Seller on the one hand, and Buyer, on the other hand, in inverse proportion as they may prevail on the matters resolved by the Auditor, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by the Auditor at the time the determination of such firm is rendered on the merits of the matters submitted. The determination of the Auditor shall be final, binding and conclusive for purposes of this Agreement and not subject to any further recourse by Seller, Buyer or their respective Affiliates. Any dispute with respect to the Final Closing Statement will not affect any undisputed amounts in the Final Closing Statement. For purposes of this Agreement, the date on which the amounts set forth on the Final Closing Statement are finally determined in accordance with this Section 2.1(d) shall be the “ Determination Date .”

(e) Promptly after the Determination Date, the Closing Consideration shall be adjusted by an amount (the “ Adjustment Amount ”) equal to the sum of (i) the Final Closing Net Working Capital Overage (if any) minus

(ii) the Final Closing Net Working Capital Shortage (if any). The Adjustment Amount may be a positive or negative number. If the Adjustment Amount is a positive number, then the Closing Consideration shall be increased by the absolute value of the Adjustment Amount and Buyer shall pay to Seller an amount in cash equal to the Adjustment Amount, together with interest thereon from and including the Second Closing Date through and including the date immediately prior to the payment date at a rate of 1.7% per annum, such payment to be made by wire transfer of immediately available funds to an account designated by Seller no later than five (5) Business Days after the Determination Date. If the Adjustment Amount is a negative number, then the Closing Consideration shall be decreased by the absolute value of the Adjustment Amount, and Seller shall pay to Buyer an amount in cash equal to such absolute value, together with interest thereon from and including the Second Closing Date through and including the date immediately prior to the payment date at a rate of 1.7% per annum, such payment to be made by wire transfer of immediately available funds to an account designated by Buyer no later than five (5) Business Days after the Determination Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Except (i) as disclosed in the forms, statements and reports of Seller publicly available, filed with, or furnished (on a publicly available basis) to, as applicable, the SEC on or after February 7, 2014 and prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks or other matters included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to, or disclosure for purposes of, any representation or warranty set forth in this Article III ), or (ii) as specifically disclosed in a correspondingly numbered section of the disclosure letter (the “ Seller Disclosure Letter ”) delivered by Seller to Buyer prior to the execution of this Agreement (it being acknowledged and agreed that disclosure of any item in any section or subsection of the Seller Disclosure Letter shall be deemed disclosed with respect to any other section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face), Seller hereby represents and warrants to Buyer as follows:

Section 3.1 Corporate Organization .

(a) Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Acquired Company is a corporation or limited liability company duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each Acquired Company has all requisite corporate or limited liability company power and authority to own or lease all of its properties and assets and to carry on its Business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the Business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except for failures to be so licensed or qualified, as the case may be, that would not, individually or in the aggregate, be material to the Acquired Companies and their respective Subsidiaries taken as a whole.

(b) Each Acquired Company’s Subsidiary (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its Business requires it to be so qualified and (iii) has all requisite corporate or limited liability company power and authority to own or lease its properties and assets and to carry on its business as now conducted, except for failures to be so qualified or in good standing or have such requisite powers, as the case may be, that would not, individually or in the aggregate, be material to the Acquired Companies and their respective Subsidiaries taken as a whole.

(c) Other than each Acquired Company’s Subsidiaries, the Acquired Companies do not hold any interests, either directly or indirectly, in any other entities. The following constitute the only material Subsidiaries of the Acquired Companies: Cole Growth Opportunity Fund I, GP LLC, Equity Fund Advisors, Inc. (“ EFA ”), Cole Corporate Income Advisors II, LLC, Cole REIT Advisors, LLC, Cole REIT Advisors II, LLC, Cole REIT Advisors IV, LLC, Cole Corporate Income Advisors, LLC, Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, Cole Capital Corporation, Cole Corporate Income Advisors III, LLC, Cole REIT Advisors V, LLC, Cole REIT Advisors VI, LLC , CCSN III, LLC and CCSN IV, LLC (the “ Material Subsidiaries ”).

(d) Section 3.1(d) of the Seller Disclosure Letter sets forth the name of each Acquired Company or Subsidiary of an Acquired Company which is a broker-dealer registered with the SEC and a member of FINRA (each, a “ Broker ”).

Section 3.2 Capitalization .

(a) All of the authorized, issued and outstanding Equity Interests of each of the Acquired Companies are owned beneficially of record by Seller. As of the date of this Agreement, none of the Equity Interests of any Acquired Company or any of its Subsidiaries were held in such Acquired Company’s or Subsidiary’s treasury. As of the date of this Agreement, no Equity Interests of any Acquired Company or any of its Subsidiaries were reserved for issuance. All of the issued and outstanding Equity Interests of each Acquired Company have been duly authorized and validly issued and, as applicable, are fully paid, nonassessable, free and clear of all Liens (other than Permitted Liens), and not subject to preemptive rights. Except pursuant to this Agreement, the Acquired Companies do not have and are not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any Equity Interests of any Acquired Company or any securities representing the right to purchase or otherwise receive any such Equity Interests. Neither the Acquired Companies nor any of their respective Subsidiaries have issued or awarded, or authorized the issuance or award of any, and there are currently no outstanding, options or other equity-based awards under the Acquired Company Benefit Plans or otherwise for the purchase or issuance of any Equity Interests of any Acquired Company. There are no outstanding bonds, debentures, notes or other Indebtedness of any Acquired Company or any Subsidiary of an Acquired Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of Equity Interests in any Acquired Company or such Subsidiary may vote.

(b) All of the issued and outstanding shares of capital stock or other Equity Interests of each Subsidiary of an Acquired Company are owned by such Acquired Company, directly or indirectly, free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind (other than liens for property Taxes not yet due and payable, collectively, “ Liens ”), other than Permitted Liens (which shall be released in full at or prior to the Second Closing) and all of such shares or Equity Interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. No such Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or other Equity Interest of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other Equity Interest of such Subsidiary. No Subsidiary of any Acquired Company owns any Equity Interests in any Acquired Company.

Section 3.3 Authority; No Violation .

(a) Seller has full limited partnership power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each Ancillary Agreement to which Seller is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Seller GP, as the general partner of Seller. No other limited partnership proceedings on the part of Seller are necessary to approve this Agreement or such Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and such Ancillary Agreements have been duly and validly executed and delivered by Seller and (assuming due authorization, execution and delivery by the other parties thereto) constitute valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).

(b) Neither the execution and delivery by Seller of this Agreement or any Ancillary Agreement to which it is a party nor the consummation by Seller of the transactions contemplated hereby and thereby, nor compliance by Seller with any of the terms or provisions this Agreement or any such Ancillary Agreement, will (i) violate any provision of the Governing Documents of Seller or any of the Acquired Companies or their respective Subsidiaries or (ii) assuming that the consents, approvals and filings referred to in Section 3.4 are duly obtained and/or made, (A) violate any statute, code, ordinance, rule, regulation or Order applicable to the Acquired Companies, any of their respective Subsidiaries or any of their respective properties or assets or (B) violate, conflict

with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of the Acquired Companies or any of their respective Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument (collectively, “ Contracts ”) to which any Acquired Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults with respect to clause (ii)(B) that are not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Seller.

Section 3.4 Consents and Approvals . Except for (i) any notices or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (ii) such notices and applications with FINRA that are required under FINRA and NASD rules, (iii) such filings and approvals as are required to be made or obtained under applicable securities or “blue sky” laws in connection with the issuance of the Buyer Shares pursuant to this Agreement and (iv) such filings, consents and approvals set forth in Section 3.4 of the Seller Disclosure Letter, no material consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality or applicable self-regulatory organization (each a “ Governmental Entity ”) are necessary in connection with (A) the execution and delivery by Seller of this Agreement or any Ancillary Agreement to which it is a party and (B) the consummation by Seller of the transactions contemplated by this Agreement or such Ancillary Agreements.

Section 3.5 Financial Statements . Seller has previously made available to Buyer true and complete copies of (a) the audited consolidated balance sheets of CCA and its Subsidiaries as of December 31, 2010 and December 31, 2011, and the related consolidated statements of operations for the years then ended (the “ Audited Financial Statements ”), (b) the unaudited summary balance sheets of CCP as of December 31, 2010, December 31, 2011 and December 31, 2012 and the related summary income statements for the years then ended, (c) the unaudited consolidated summary balance sheet of CCA as of November 30, 2012, and the related consolidated summary income statement for the period then ended, and (d) the unaudited summary balance sheet of CCC as of December 31, 2013 and the notes thereto (the items set forth in clauses (b), (c) and (d) of this Section 3.5 the “ Unaudited Financial Statements ” and, together with the Audited Financial Statements, the “ Financial Statements ”). Except as described in the notes thereto and, in the case of the Unaudited Financial Statements, the absence of notes, and normal adjustments (which, in the aggregate, are not and will not be material), the Financial Statements have been prepared in accordance with GAAP consistently applied and fairly present, in all material respects, the financial condition and results of operations of the Acquired Companies and their respective Subsidiaries as of the dates thereof or for the periods then ended, as applicable.

Section 3.6 Broker’s Fees . Neither Seller nor any Acquired Company or its Subsidiaries, nor any of their respective officers or directors has employed any broker, investment banker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees or other similar fees or commissions in connection with the transactions contemplated by this Agreement, other than Moelis & Company LLC (the fees and expenses in respect of which shall be paid by Seller.

Section 3.7 Absence of Certain Changes or Events . Since February 7, 2014, the Acquired Companies and their respective Subsidiaries have conducted their respective businesses, in all material respects, only in the ordinary course consistent with past practice, and there has not been:

(a) any issuance or award of any equity awards or other equity-based awards in respect of any Equity Interests of any Acquired Company or any of its Subsidiaries to any director, officer or employee of such Acquired Company or any of its Subsidiaries;

(b) except as required by the terms of any of the Acquired Company Benefit Plans or by applicable Law or in the ordinary course of business, (i) any granting by Seller, any Acquired Company or any of its Subsidiaries to any Business Employee of any increase in compensation, bonus or other benefits, (ii) any granting by Seller, any Acquired Company or any of its Subsidiaries to any Business Employee of any increase in severance or termination pay, (iii) any entry by any Acquired Company or any of its Subsidiaries into, or any amendment of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any Business Employee, or (iv) any establishment, adoption, entry into, amendment or modification of any Acquired Company Benefit Plan for the benefit of any Business Employee;

(c) any change in any material respect in accounting methods, principles or practices by any Acquired Company or any of its Subsidiaries affecting its assets, liabilities or business, other than changes after the date hereof to the extent required by a change in GAAP or regulatory accounting principles;

(d) any material Tax election or change in or revocation of any material Tax election, amendment to any material Tax return, closing agreement with respect to Taxes, or settlement or compromise of any material income Tax liability by any Acquired Company or any of its Subsidiaries;

(e) any material change in its investment or risk management or other similar policies; or

(f) any agreement or commitment (contingent or otherwise) to do any of the foregoing.

Section 3.8 Legal Proceedings .

(a) There are no (i) actions, claims, suits, arbitrations, investigations or proceedings (each, an “ Action ”) pending (or, to the Knowledge of Seller, threatened) against or affecting any Acquired Company or any of its Subsidiaries, or any of their respective properties, at law or in equity, or (ii) orders, judgments, injunctions, awards, stipulations, decrees or writs handed down, adopted or imposed by, including any consent decree, settlement agreement or similar written agreement with, any Governmental Entity (collectively, “ Orders ”) against any Acquired Company or any of its Subsidiaries, in each case of clause (i) or (ii), which would, individually or in the aggregate, be material to the Acquired Companies and their respective Subsidiaries taken as a whole.

(b) Neither the Acquired Companies nor any of their respective Subsidiaries is subject to any cease-and-desist or other Order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is party to any commitment letter or similar undertaking to, or is subject to any Order or directive by, or has been since February 7, 2014, a recipient of any supervisory letter from, or has been ordered to pay any material civil money penalty by, or since February 7, 2014, has adopted any policies, procedures or board resolutions at the request or suggestion of any Governmental Entity, in each case that currently restricts in any material respect the conduct of its business (each, whether or not set forth in the Seller Disclosure Letter, a “ Company Regulatory Agreement ”), nor has any Acquired Company or any of its Subsidiaries received written notice since February 7, 2014, by any Governmental Entity that it is considering issuing, initiating, ordering or requesting any such Company Regulatory Agreement.

Section 3.9 Taxes and Tax Returns .

(a) all income, franchise and other material Tax Returns required by Law to be filed by the Acquired Companies and their Subsidiaries have been timely filed with the appropriate Taxing Authority when due (taking into account extensions validly obtained), all such Tax Returns were true, correct and complete in all material respects, and all material amounts of Taxes payable by the Acquired Companies and their Subsidiaries that were due and payable prior to the Second Closing Date (whether or not shown on a return) have been paid within the required time periods, other than those (i) currently payable without penalty or interest or (ii) being contested in good faith by appropriate proceedings which have not been finally determined, and have been adequately reserved against in accordance with GAAP on Seller’s or Seller GP’s most recent consolidated financial statements.

(b) no written claim has been made by a Taxing Authority in a jurisdiction in which any of the Acquired Companies or any of their Subsidiaries do not file Tax Returns that such entity is or may be subject to Tax in that jurisdiction.

(c) all material amounts of Taxes that the Acquired Companies and their Subsidiaries are or have been required by Law to withhold or collect for payment to a Taxing Authority on behalf of another Person, regardless of the characterization by the Acquired Companies and their Subsidiaries or the payee of the payments giving rise to such requirement or the characterization of the status of the payee as an employee, independent contractor, member or otherwise of the Acquired Companies or any of their Subsidiaries, have been duly withheld or collected, and have been paid to the proper Taxing Authority within the time prescribed by applicable Law.

(d) the Acquired Companies and their Subsidiaries do not have in effect any waiver or extension of any statute of limitations, or any closing agreement or similar agreement with any Taxing Authority, with respect to Taxes.

(e) there are no claims pending or, to the Knowledge of Seller, threatened against the Acquired Companies or any of their Subsidiaries for past due Taxes.

(f) no audits, examinations, investigations or other proceedings in respect of any Tax or Tax matter of the Acquired Companies or any of their Subsidiaries are pending, or have been threatened in writing.

(g) Seller, the Acquired Companies and their Subsidiaries have not participated in and have no liability or obligation with respect to any “listed transaction” within the meaning of Section 6707A(c)(2) of the Code and Treasury Regulations Section 1.6011-4(b)(2).

(h) there are no liens for Taxes upon the assets of the Acquired Companies or any of their Subsidiaries other than in respect of any Tax liability not yet due and payable.

(i) the Acquired Companies and their Subsidiaries are not a party to and are not bound by any Tax Sharing Agreement. The Acquired Companies and their Subsidiaries have never been a member of an affiliated group filing a consolidated U.S. federal income Tax Return other than the group the parent of which is CCA and neither the Acquired Companies nor any of their Subsidiaries have assumed liability for the Taxes of any Person as a transferee or successor, by contract or otherwise, other than customary Tax indemnification or other arrangements contained in a commercial agreement entered into in the ordinary course of business the primary purpose of which does not relate to Taxes.

(j) no Acquired Company nor any of its Subsidiaries has (i) deferred the payment of Taxes by the use of the cash, installment or a long-term contract method of accounting or (ii) been required to make an adjustment under Section 481 of the Code (or any corresponding or similar provisions of state, local or foreign Law) because of a change of method of accounting.

(k) no Acquired Company nor any of its Subsidiaries will be required to include amounts in income, or exclude items of deduction, after the Second Closing Date as a result of (i) any intercompany transaction or excess loss account described in the Treasury Regulations promulgated pursuant to Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Law) arising or occurring on or prior to the Second Closing, (ii) any agreement with a Governmental Authority entered into prior to the Second Closing or (iii) the receipt of prepaid amounts by the Acquired Companies or any of their Subsidiaries prior to the Second Closing.

(l) Seller is not a “foreign person” within the meaning of Treasury Regulations Section 1.1445-2.

(m) no election has ever been made to treat CCP or its Subsidiaries as associations taxable as corporations for U.S. federal income tax purposes and each is and has been properly treated as a disregarded entity as defined in Treasury Regulations Section 301.7701-3(b)(ii) since all of the equity of CCP was acquired by Seller.

(n) none of the Acquired Companies or their Subsidiaries have constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

(o) no written power of attorney that has been granted by Seller, the Acquired Companies or their Subsidiaries currently is in force with respect to any matter relating to Taxes of the Acquired Companies and their Subsidiaries that would continue in effect after the Second Closing.

Section 3.10 Employee Benefits .

(a) Section 3.10(a) of the Seller Disclosure Letter includes a complete list of all material Acquired Company Benefit Plans.

(b) All material contributions required to be made to any Acquired Company Benefit Plan on behalf of the Business Employees by applicable law or regulation or by any plan document or other contractual undertaking, and all premiums due or payable on behalf of the Business Employees with respect to insurance policies funding any Acquired Company Benefit Plan, for any period through the date hereof have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the financial statements to the extent required by GAAP.

(c) With respect to each Acquired Company Benefit Plan as applicable to the Business Employees, (i) such Acquired Company Benefit Plan complies in form in all material respects with all provisions of ERISA, the Code and all other applicable laws and regulations applicable to such Acquired Company Benefit Plan, (ii) such Acquired Company Benefit Plan has been administered in all material respects in accordance with its terms and (iii) each Acquired Company Benefit Plan that is intended to be a “qualified plan within the meaning of Section 401(a) of the Code (“ Acquired Company Qualified Plans ”) has been issued a favorable determination letter by the IRS that has not been revoked or is entitled to rely on a favorable opinion issued by the IRS, and, to the Knowledge of Seller, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of any Acquired Company Qualified Plan. None of Seller, the Acquired Companies, their Subsidiaries and their ERISA Affiliates nor, to the Knowledge of Seller, any other Person, including any fiduciary, has engaged in any non-exempt “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA), which would reasonably be expected to subject any of Assumed Benefit Plan, any Acquired Company or any of its Subsidiaries or any person that any Acquired Company or any of its Subsidiaries has an obligation to indemnify, to any material Tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA. No Acquired Company Benefit Plan is subject to Title IV or Section 302 of ERISA or Section 412 of the Code.

(d) (i) No Acquired Company Benefit Plan is a Multiemployer Plan or a plan that has two (2) or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA.

(e) Except as set forth on Section 3.10(e) of the Seller Disclosure Letter, neither the execution nor the delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will by itself (i) result in any material payment or benefit becoming due or payable, or required to be provided, to any Business Employee, (ii) materially increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any Business Employee, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation to any Business Employees or (iv) result in any material amount failing to be deductible by reason of Section 280G of the Code with respect to any Business Employee.

(f) No labor organization or group of employees of any Acquired Company or any of its Subsidiaries has made a pending demand for recognition or certification with respect to any Business Employee, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Seller, threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority with respect to any Business Employee. Each Acquired Company and its Subsidiaries is in material compliance with all applicable Laws respecting employment and employment practices, immigration, terms and conditions of employment, wages and hours and occupational safety and health with respect to the Business Employees.

Section 3.11 Compliance with Law; Permits .

(a) Except for such matters as would not, individually or in the aggregate, be material to the Acquired Companies and their respective Subsidiaries taken as a whole, each Acquired Company and each of its Subsidiaries is, and since the later of February 7, 2014 and its respective date of formation or organization has been, in compliance with and is not in default under or in violation of any applicable federal, state, local or foreign or provincial law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, award or agency requirement of or undertaking to or agreement with any Governmental Entity (collectively, “ Laws ” and each, a “ Law ”).

(b) The Acquired Companies and their respective Subsidiaries are in possession of all material franchises, tariffs, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Acquired Companies and their respective Subsidiaries, including each Broker, to own, lease and operate their properties and assets and to carry on their businesses as they are now being conducted (the “ Company Permits ”). All the Company Permits are in full force and effect, except for any failure to be in full force and effect that would not be material to the Acquired Companies and their respective Subsidiaries, taken as a whole. The Acquired Companies and their respective Subsidiaries are not, and since February 7, 2014 have not been, in material violation or breach of, or material default under, any Company Permit.

Section 3.12 Certain Contracts .

(a) Except for any advisory agreements, selling agreements or employment agreements, neither the Acquired Companies nor any of their respective Subsidiaries is a party to or bound by: (i) any non-competition Contract which purports to limit or restrict in any material respect the manner in which, or the localities in which, the business of any Acquired Company or its Subsidiaries is conducted, (ii) any material Contract, not otherwise terminable on sixty (60) or fewer days’ notice, providing for any payments that are conditioned, in whole or in part, on, or any Contract that is terminable upon or otherwise prohibits, a change of control of any Acquired Company or any of its respective Subsidiaries, (iii) any Contract which would reasonably be expected to materially delay the consummation of the transactions contemplated by this Agreement or (iv) any Contract not made in the ordinary course of business that would require any payment or series of payments in an amount greater than $500,000 per year or in any year.

(b) Each Company Material Contract is valid and binding on the Acquired Company party thereto (or, to the extent a Subsidiary of an Acquired Company is a party, such Subsidiary) and, to the Knowledge of Seller, any other party thereto and is in full force and effect. Neither the Acquired Companies nor any of their respective Subsidiaries is in material breach or default under any Company Material Contract. As of the date hereof, neither Seller, any Acquired Company nor any Subsidiary of any Acquired Company has received written notice of any material violation or default under any Company Material Contract by any other party thereto.

Section 3.13 Undisclosed Liabilities .

Except for (i) those liabilities that are reflected or reserved against in the Financial Statements (including any notes thereto), (ii) liabilities incurred in connection with this Agreement and the transactions contemplated hereby and (iii) liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2013, neither the Acquired Companies nor any of their respective Subsidiaries has incurred any liability of any nature that would be required under GAAP to be set forth on the financial statements of the Acquired Companies. There is no Acquired Companies’ Indebtedness.

Section 3.14 Environmental Liability .

There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that are reasonably likely to result in the imposition, on the Acquired Companies or any of their respective Subsidiaries of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance pending or threatened against any such Person, except as would not be reasonably likely to be, individually or in the aggregate, material to the Acquired Companies and their respective Subsidiaries taken as a whole. Neither the Acquired Companies nor any of their respective Subsidiaries are subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation with respect to the foregoing that is reasonably likely to be, individually or in the aggregate, material to the Acquired Companies and their respective Subsidiaries taken as a whole.

Section 3.15 Real Property .

(a) None of the Acquired Companies or their respective Subsidiaries owns any real property.

(b) To the Knowledge of Seller, none of the Acquired Companies or their respective Subsidiaries is party to any leases pursuant to which any Acquired Company or any of its Subsidiaries leases any real property as a tenant.

(c) To the Knowledge of Seller, the Acquired Companies and their respective Subsidiaries are not parties to any leases pursuant to which any Acquired Company or any of its Subsidiaries leases any material real property to a third party.

Section 3.16 Internal Controls .

(a) None of the Acquired Companies’ or their respective Subsidiaries’ records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of such Acquired Company or Subsidiary or their respective accountants except as would not, individually or in the aggregate, reasonably be expected to result in a materially adverse effect on the system of internal accounting controls described in the next sentence. The Acquired Companies and their respective Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

(b) Since February 7, 2014, (i) through the date hereof, neither the Acquired Companies nor any of their respective Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Acquired Companies or any of their respective Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that any Acquired Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing any Acquired Company or any of its Subsidiaries, whether or not employed by any Acquired Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by any Acquired Company, any of its Subsidiaries or any of their respective officers, directors, managers, employees or agents to the Board of Directors (or equivalent governing body) of Seller or Seller GP or any committee thereof or to any director, manager or officer of any Acquired Company or any of its Subsidiaries.

Section 3.17 Insurance . Each Acquired Company and its Subsidiaries is insured with reputable insurers against such risks and in such amounts as management of Seller reasonably has determined to be prudent in accordance with industry practices.

Section 3.18 Intellectual Property .

(a) The Acquired Companies or their respective Subsidiaries own all of the intellectual property set forth in Section 3.18(a) of the Seller Disclosure Letter (the “ Company IP ”). The Company IP, together with any Intellectual Property properly and validly licensed to the Acquired Companies of their Subsidiaries, constitute all of the Intellectual Property necessary to conduct the Business in all material respects as currently conducted on the date hereof.

(b) None of the Intellectual Property owned by any of the Acquired Companies or their respective Subsidiaries infringes or, to the Knowledge of Seller, is alleged to infringe any Intellectual Property rights of any third party in any material respect. The conduct of the Business as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third party. The Acquired Companies and their Subsidiaries are taking all actions that are reasonably necessary to maintain and protect each material item of Intellectual Property that they own. To the Knowledge of Seller, no Person is misappropriating, infringing or otherwise violating any Intellectual Property of the Acquired Companies or their respective Subsidiaries.

Section 3.19 Investment Company Act of 1940 . Neither Acquired Companies nor any of their respective Subsidiaries are, or at the First Closing will be, required to be registered under the Investment Act of 1940, as amended.

Section 3.20 No Resale . Seller is an “accredited investor” within the meaning of Regulation D under the Securities Act, and is acquiring the Buyer Shares for its own benefit and account, for investment only, and not with a view to, or for resale in connection with, a public offering or distribution thereof. Seller acknowledges that (except as contemplated in the Registration Rights Agreement) (a) the Buyer Shares have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and will be issued in reliance upon federal and state exemptions for transactions not involving a public offering, (b) the Buyer Shares cannot be disposed of unless they are subsequently registered or otherwise pursuant to an exemption from registration under the Securities Act and the securities laws of any applicable Jurisdiction, and (c) any certificate or book-entry statement representing the Buyer Shares will bear a restrictive legend to the effect set forth in the forgoing clauses (a) and (b).

Section 3.21 Broker Regulatory Matters .

(a) Each Broker (i) is, and at all times has been, duly registered, licensed or qualified as a broker-dealer under the Exchange Act and in each jurisdiction where the conduct of its business requires such registration, licensing or qualification, (ii) is, and at all times has been, in compliance in all material respects with all applicable Laws requiring any such registration, licensing or qualification and (iii) is not subject to any liability or disability by reason of the failure to be so registered, licensed or qualified.

(b) The Uniform Application for Broker-Dealer Registration on Form BD of each Broker on file with the SEC, reflecting all amendments thereof that are in effect as of the date of this Agreement (the “ Form BD ”), and all FOCUS reports, amendments and updates for the period ended June 30, 2014, filed by such Broker with the SEC, are in compliance in all material respects with the applicable requirements of the Exchange Act and the rules thereunder.

(c) Each Broker is a member in good standing of FINRA, the Securities Industry Protection Corp. and each other Governmental Entity where the conduct of its business requires membership or association.

(d) Each Broker (i) has established, maintains and enforces written compliance, supervisory and control policies and procedures in compliance, with applicable Laws, including FINRA Rules 3010 and 3012 and Section 15(g) of the Exchange Act, and (ii) has been and remains in compliance in all material respects with such policies and procedures.

(e) Each of Broker’s officers, employees and independent contractors who is required to be registered, licensed or qualified with any Governmental Entity as a registered principal or registered representative is duly and properly registered, licensed or qualified as such, and has been so registered, licensed or qualified at all times while in the employ or under contract with such Broker, and such licenses are in full force and effect, or are in the process of being registered as such within the time periods required by applicable Law, except as the failure to be so registered would not, or would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on Seller.

(f) No Broker, nor any of its directors, managers, officers, employees, registered representatives or “associated persons” (as defined in the Exchange Act) is the subject of any material disciplinary proceedings or orders of any Governmental Entity arising under applicable Laws which would be required to be disclosed on Form BD or Forms U-4 or U-5 that are not so disclosed on such Form BD or Forms U-4 or U-5, and no such disciplinary proceeding or order is pending against any Broker or, to the Knowledge of Seller, threatened against any Broker or pending or threatened against the other Persons referred to above. Except as disclosed on the Form BD or Forms U-4 or U-5, no Broker nor any of its directors, managers, officers, employees, registered representatives or associated

persons (i) has been permanently enjoined by any order from engaging or continuing any conduct or practice in connection with any activity or in connection with the purchase or sale of any security, or (ii) is or has been ineligible to serve as a broker-dealer or an associated person of a broker dealer under Section 15(b) of the Exchange Act (including being subject to any “statutory disqualification”, as defined in Section 3(a)(39) of the Exchange Act).

(g) Each Broker has timely made or given all filings, applications, notices and amendments with or to each Governmental Entity that regulates such Broker or its business, and all such filings, applications, notices and amendments are accurate, complete and up-to-date in all material respects. Each Broker has received all consents, orders, authorizations, permissions, registrations, licenses, approvals, qualifications, designations and declarations necessary in order for it to conduct its business in all material respects as currently conducted.

(h) To the Knowledge of the Seller, there are no material customer complaints, individually or in the aggregate, including those reportable to FINRA pursuant to FINRA Rule 4530 or on any Form U-4, which were made from December 31, 2010 through February 7, 2014 against any Broker or any of its representatives. There are no material customer complaints, individually or in the aggregate, including those reportable to FINRA pursuant to FINRA Rule 4530 or on any Form U-4, which have been made since February 7, 2014 against any Broker or any of its representatives. As of the date of this Agreement, no material customer complaints, individually or in the aggregate, reportable pursuant to FINRA Rule 4530 or on Form U-4, are pending or, to the Knowledge of Seller, threatened.

(i) Each Broker (i) is in compliance with all applicable regulatory net capital requirements, and no distribution of cash is required to be made by any Broker that will or would result in such Broker not being in compliance with such applicable regulatory net capital requirements, and (ii) is in compliance in all material respects with all applicable regulatory requirements for the protection of customer funds and securities. No Broker has made any withdrawals from any reserve bank account it is required to maintain pursuant to Rule 15c3-3(e) of the SEC, except as permitted by Rule 15c3-3(g) of the SEC.

Section 3.22 No Material Adverse Effect . Since February 7, 2014, there has not been a Material Adverse Effect on Seller.

Section 3.23 No Other Seller Representations or Warranties . Except for the representations and warranties made by Seller in this Article III , neither Seller nor any of its Affiliates has made any representation or warranty, expressed or implied, with respect to Seller, the Acquired Companies or their Subsidiaries, businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding Seller, the Acquired Companies or their respective Subsidiaries or any other matter.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Except (a) as specifically disclosed in a correspondingly numbered section of the disclosure letter (the “ Buyer Disclosure Letter ”) delivered by Buyer to Seller prior to the execution of this Agreement (it being acknowledged and agreed that disclosure of any item in any section or subsection of the Buyer Disclosure Letter shall be deemed disclosed with respect to any section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face) or (b) as disclosed in the forms, statements and reports of Buyer publicly available, filed with, or furnished (on a publicly available basis) to, as applicable, the SEC on or after February 28, 2014 and prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks or other matters included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to, or disclosure for purposes of, any representation or warranty set forth in this Article IV ), Buyer, hereby represents and warrants to Seller as follows:

Section 4.1 Organization and Qualification . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and

authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Buyer is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for failures to be so licensed, qualified or in good standing, as the case may be, that would not, individually or in the aggregate, be material to Buyer and its Subsidiaries, taken as a whole.

Section 4.2 Capital Structure

(a) The authorized capital stock of Buyer consists of (i) 100,000,000 shares of Buyer Class A Stock, (ii) 10,000,000 shares of Class B common stock, $0.001 par value (the “ Buyer Class B Stock ”) and (iii) 100,000,000 shares of preferred stock, $0.001 par value (the “ Buyer Preferred Stock ”). As of the close of business on August 14, 2014, (A) 65,272,174 shares of Buyer Class A Stock were issued and outstanding, (B) one share of Buyer Class B Stock was issued and outstanding, and (C) 14,657,980 shares of Buyer Preferred Stock were issued and outstanding.

(b) Except as set forth in Section 4.2(b) of the Buyer Disclosure Letter or pursuant to this Agreement, Buyer does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of any capital stock of Buyer or any other equity securities of Buyer or any securities representing the right to purchase or otherwise receive any shares of capital stock of Buyer or any other equity securities of Buyer. Buyer has not issued or awarded, or authorized the issuance or award of, any options, restricted stock or other equity-based awards under any Buyer Benefit Plan or otherwise, and there are no options, restricted stock or other equity-based awards issued by Buyer or any Subsidiary of Buyer currently outstanding under the Buyer Benefit Plans or otherwise. All issued and outstanding shares of the capital stock of Buyer are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. There are no outstanding bonds, debentures, notes or other Indebtedness of Buyer having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Buyer capital stock may vote.

Section 4.3 Authority; No Violation .

(a) Buyer has full corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is party and to consummate the transactions contemplated hereby and thereby (including the issuance of the Buyer Note and the Buyer Shares). The execution and delivery by Buyer of this Agreement and each Ancillary Agreement to which it is party and the consummation by Buyer of the transactions contemplated hereby and thereby (including the issuance of the Buyer Note and the Buyer Shares) have been duly and validly authorized by the Board of Directors of Buyer. No other corporate proceedings on the part of Buyer are necessary to approve this Agreement or any Ancillary Agreement to which Buyer is party or to consummate the transactions contemplated hereby and thereby (including the issuance of the Buyer Note and the Buyer Shares). This Agreement and each Ancillary Agreement to which Buyer is party have been duly and validly executed and delivered by Buyer and (assuming due authorization, execution and delivery by each other party thereto) constitute valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies).

(b) Neither the execution and delivery by Buyer of this Agreement or any Ancillary Agreement to which Buyer is a party, nor the consummation by Buyer of the transactions contemplated hereby and thereby (including the issuance of the Buyer Note and the Buyer Shares), nor compliance by Buyer with any of the terms or provisions of this Agreement or any Ancillary Agreement to which Buyer is a party, will (i) violate (A) any provision of the Governing Documents of Buyer or any of its Subsidiaries or (ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly obtained and/or made, (A) violate any statute, code, ordinance, rule, regulation or Order applicable to Buyer or its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of Buyer or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contracts to which Buyer or any of its Subsidiaries is a party, or by which they or

any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults with respect to clause (ii)(B) that are not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Buyer.

Section 4.4 Consents and Approvals . Except for (i) any notices or filings under the HSR Act, (ii) such notices and applications with FINRA that are required under FINRA and NASD rules, (iii) such filings and approvals as are required to be made or obtained under any applicable securities or “blue sky” laws in connection with the issuance of the Buyer Shares pursuant to this Agreement, (iv) the filing of a listing application with the NYSE with respect to the Buyer Shares to be issued pursuant to this Agreement and approval of such issuance by the NYSE, subject to official notice of issuance and (v) such filings, consents and approvals set forth in Section 4.4 of the Buyer Disclosure Letter, no material consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (A) the execution and delivery by Buyer of this Agreement or any Ancillary Agreement to which Buyer is party and (B) the consummation by Buyer of the transactions contemplated by this Agreement or such Ancillary Agreement (including the issuance of the Buyer Note and the Buyer Shares).

Section 4.5 Non-Cash Consideration . The Buyer Shares, if and when issued pursuant to this Agreement, shall be validly issued, fully paid, non-assessable and free and clear of any Liens and shall not have been issued in violation of any preemptive rights. The Buyer Note when delivered to Seller shall be valid and binding.

Section 4.6 SEC Filings; Financial Statements; Internal Controls; Sarbanes-Oxley Compliance .

(a) Buyer has timely filed with or furnished to, as applicable, the SEC all registration statements, prospectuses, reports, schedules, forms, statements and other documents required to be filed or furnished by it with the SEC since June 6, 2013 and prior to the date of this Agreement (the “ Buyer SEC Documents ”). As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), each of the Buyer SEC Documents complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, and the rules and regulations of the SEC thereunder applicable to such Buyer SEC Documents. None of the Buyer SEC Documents, including any financial statements, schedules or exhibits included or incorporated by reference therein at the time they were filed (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Buyer SEC Documents (i) was prepared in accordance in all material respects with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q), and (ii) fairly presented in all material respects the consolidated financial position of Buyer and its consolidated subsidiaries at the respective dates thereof and the consolidated results of Buyer’s operations and cash flows for the periods indicated therein, in each case in accordance with GAAP, subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by GAAP and the applicable rules and regulations of the SEC.

(c) Buyer has established and maintains a system of “internal controls over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that is sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

(d) Buyer has established and maintains a system of “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to provide reasonable assurance that all material information relating to Buyer and its subsidiaries required to be disclosed by Buyer in the reports that it files or furnishes under the Exchange Act is made known to the chief executive officer and chief financial officer of Buyer.

(e) Buyer does not have outstanding (nor has it arranged or modified) any “extensions of credit” (within the meaning of Section 402 of the Sarbanes-Oxley Act of 2002) to its directors or executive officers (as defined in Rule 3b-7 under the Exchange Act).

Section 4.7 Legal Proceedings . There are no Actions pending (or, to the Knowledge of Buyer, threatened) against or affecting Buyer or any of its Subsidiaries, or any of their respective properties, at law or in equity, or (ii) Orders against Buyer or any of its Subsidiaries, in each case of clause (i) or (ii), which would, individually or in the aggregate, be material to Buyer and its Subsidiaries taken as a whole.

Section 4.8 Compliance with Law . Except for such matters as would not, individually or in the aggregate, be material to Buyer and its Subsidiaries taken as a whole, each of Buyer and its Subsidiaries is, and since the later of June 6, 2013 and its respective date of formation or organization has been, in compliance with and is not in default under or in violation of any applicable Law.

Section 4.9 No Material Adverse Effect . Since December 31, 2013, there has not been a Material Adverse Effect on Buyer.

Section 4.10 Sufficient Funds . Buyer has sufficient funds to pay the cash portion of the Closing Consideration and to perform the other obligations contemplated by this Agreement to be performed by Buyer at or prior to the First Closing and the Second Closing, respectively.

Section 4.11 Undisclosed Liabilities . Except for (i) those liabilities that are reflected or reserved against on the consolidated balance sheet of Buyer as of December 31, 2013 (including any notes thereto), included in the Buyer SEC Documents, (ii) liabilities incurred in connection with this Agreement and the transactions contemplated hereby and (iii) liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2013, neither Buyer nor any of its Subsidiaries has incurred any liability of any nature that would be required under GAAP to be set forth on the financial statements of Buyer, and that would be reasonably likely to be, in the aggregate, material to Buyer and its Subsidiaries taken as a whole.

Section 4.12 No Other Representations and Warranties . Except for the representations or warranties expressly set forth in this Article IV , neither Buyer nor any of its Affiliates has made any representation or warranty, expressed or implied, with respect to Buyer, its Subsidiaries, or their respective businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding Buyer or its Subsidiaries.

ARTICLE V

COVENANTS RELATING TO CONDUCT OF BUSINESS

Section 5.1 Conduct of Business Prior to the Second Closing . During the period from the date of this Agreement to the Second Closing, except as set forth in Section 5.2 of the Seller Disclosure Letter, as otherwise agreed to in writing by Buyer (which agreement shall not be unreasonably withheld, conditioned or delayed), or as expressly contemplated or permitted by this Agreement, Seller shall (i) cause the Business to be conducted in the ordinary course in all material respects and in a manner consistent with past practice, (ii) use its commercially reasonable efforts to (A) maintain the Business’ assets and properties in their current condition (normal wear and tear excepted), (B) preserve intact in all material respects the Business’ current business organization, goodwill, ongoing businesses and significant relationships with third parties, (C) keep available the services of the Business’ key officers and (D) maintain all of the Business’ material insurance policies.

Section 5.2 Seller Forbearances . During the period from the date of this Agreement to the Second Closing, except as set forth in Section 5.2 of the Seller Disclosure Letter or as expressly contemplated or permitted by this Agreement (including pursuant to Section 6.10 , Section 6.16 , Section 6.17 and Section 6.18 ), Seller shall not permit the Acquired Companies or any of their respective Subsidiaries to, without the prior written consent of Buyer, which shall not be unreasonably withheld, conditioned or delayed:

(a) (i) other than (x) dividends and other distributions, in each case of cash and cash equivalents, by an Acquired Company or Subsidiary of an Acquired Company to the extent such dividends or distributions would not cause a violation of Rule 15c3-1 of the SEC, (y) dividends and other distributions by a direct or indirect Subsidiary of an Acquired Company to an Acquired Company or any direct or indirect wholly owned Subsidiary of an Acquired Company and (z) the distribution of those assets contemplated by the Restructuring Transaction, declare, set aside or pay any dividends on, make any other distributions in respect of, or enter into any agreement with respect to the voting of, any of its Equity Interests, (ii) split, combine or reclassify any of its Equity Interests or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for, its Equity Interests or (iii) purchase, redeem or otherwise acquire any Equity Interests of any Acquired Company or any of its Subsidiaries;

(b) issue, deliver, sell, pledge or otherwise encumber or subject to any Lien any of its Equity Interests;

(d) acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or any equity securities of, or by any other manner, any business or any Person, or otherwise acquire or agree to acquire any assets or Equity Interests except in the ordinary course of business consistent with past practice;

(e) sell, lease, license, mortgage or otherwise encumber or subject to any Lien, or otherwise dispose of any of its properties or assets (including any Company IP), other than in the ordinary course of business consistent with past practice, and provided any such Liens are not material, individually or in the aggregate;

(f) incur any Indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of any Person (other than an Acquired Company or any wholly owned Subsidiary thereof), or make any loans, advances or capital contributions to, or investments in, any Person other than its wholly owned Subsidiaries or as a result of ordinary advances and reimbursements to employees;

(g) change in any material respect its accounting methods (or underlying assumptions), principles or practices affecting its assets, liabilities or business, including any reserving, renewal or residual method, practice or policy, in each case, in effect on the date hereof, except as required by changes in GAAP or regulatory accounting principles;

(h) enter into any new line of business or change in any material respect its operating, asset liability, investment or risk management or other similar policies;

(i) except investments by an Acquired Company or any of its respective Subsidiaries in an Acquired Company or any of its respective Subsidiaries, make any investment in excess of $1,000,000 in the aggregate, whether by purchase of Equity Interests, contributions to capital, property transfers, or entering into binding agreements with respect to any such investment;

(j) make, change or revoke any material Tax election, change an annual Tax accounting period, adopt or change any material Tax accounting method, file any material amended Tax Return, enter into any closing agreement, settle any material Tax claim or assessment or surrender any right to claim a refund of a material amount of Taxes;

(k) terminate or waive any material provision of any material Contract other than normal renewals of Contracts without materially adverse changes, additions or deletions of terms, or enter into or renew any agreement or contract or other binding obligation of the Acquired Companies or any of their respective Subsidiaries containing (i) any restriction on the ability of any Acquired Company or its Subsidiaries, or, after the Second Closing, Buyer or its Subsidiaries, to conduct the Business as it is presently being conducted or currently contemplated to be conducted or (ii) any restriction on any Acquired Company or its Subsidiaries, or, after the Second Closing, Buyer or its Subsidiaries, in engaging in any type of business;

(l) incur any capital expenditures in excess of $500,000 individually or $1,000,000 in the aggregate or enter into any agreement obligating any Acquired Company or any of its Subsidiaries to spend more than $500,000 individually or $1,000,000 in the aggregate;

(m) except as required by agreements or instruments in effect on the date hereof, alter in any material respect, or enter into any commitment to alter in any material respect, any material interest in any corporation, association, joint venture, partnership or business entity in which any Acquired Company or any of its Subsidiaries directly or indirectly holds any Equity Interest on the date hereof, other than any Subsidiary of any Acquired Company;

(n) Except to the extent required by applicable Laws or the terms of any Acquired Company Benefit Plan as in effect on the date hereof and subject to the terms of the Employee Leasing Agreement, (i) except in the ordinary course of business consistent with past practice for any Business Employee whose annualized cash compensation for the 12 months prior to the date hereof does not exceed $750,000, grant or pay to any Business Employee any (A) material increase in severance or termination pay or (B) increase in compensation or benefits, (ii) make any discretionary contributions or payments to any trust or other funding vehicle on behalf of any Business Employee, (iii) accelerate the payment or vesting of any payment or benefit provided or to be provided to any Business Employee, (iv) enter into, adopt, amend or modify any Assumed Benefit Plan (other than amendments to Assumed Benefit Plans in the ordinary course of business consistent with past practice that do not materially increase the cost of maintaining or providing benefits under such Assumed Benefit Plan), any plan, policy, or arrangement that would be an Assumed Company Benefit Plan if it were in effect on the date hereof, or (v) establish, adopt or enter into any collective bargaining agreement on behalf of any Business Employee;

(o) agree or consent to any material agreement or material modifications of any existing agreements with any Governmental Entity in respect of the operations of its business, except as required by Law;

(p) pay, discharge, settle or compromise any claim, action, litigation, arbitration, suit, investigation or proceeding, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves money damages in an amount not in excess of $700,000 individually or $3,000,000 in the aggregate that is paid prior to the Second Closing; provided , that in no event shall any Acquired Company be permitted to settle any stockholder litigation against any Acquired Company, its Subsidiaries and/or their respective officers and directors relating to this Agreement and the transactions contemplated hereby without the prior written consent of Buyer;

(q) let lapse, abandon or cancel any material registered Company IP owned by any Acquired Company or any of its Subsidiaries;

(r) take any action that would materially impede or delay the ability of the parties to obtain any necessary approvals of any Governmental Entity required for the transactions contemplated hereby; or

(s) agree to take, make any commitment to take, or cause its board of directors (or equivalent governing body) to adopt any resolutions in support of, any of the actions prohibited by this Section 5.2 .

Section 5.3 Buyer Forbearances . During the period from the date of this Agreement to the Second Closing, except as expressly contemplated or permitted by this Agreement, Buyer shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Seller, which shall not be unreasonably withheld, conditioned or delayed:

(a) amend, repeal or otherwise modify any provision of the Governing Documents of Buyer (other than to adopt any amendment or other modification to any provision that would not be adverse to Seller or those that would not impede Buyer’s ability to consummate the transactions contemplated hereby);

(b) make any material investment either by purchase of Equity Interests, contributions to capital, property transfers or purchase of any property or assets of any other Person, in any case to the extent such action would be reasonably expected to prevent, or materially impede or delay, the consummation of the transactions contemplated by this Agreement;

(c) take any action that would reasonably be expected to prohibit or materially delay the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (including the issuance of the Buyer Note and the Buyer Shares); or

(d) agree to take, make any commitment to take, or cause its Board of Directors to adopt any resolutions in support of, any of the actions prohibited by this Section 5.3 .

ARTICLE VI

CERTAIN COVENANTS OF THE PARTIES

Section 6.1 Regulatory Matters .

(a) Buyer shall use its reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, necessary, proper or advisable on its part under applicable Laws and rules and policies of the NYSE to enable the listing of the Buyer Shares on the NYSE effective upon the First Closing.

(b) Seller, on the one hand, and Buyer, on the other hand, shall cooperate with each other and use their respective reasonable best efforts to (i) promptly prepare and file (or cause to be filed) all necessary documentation to effect all applications, notices, petitions and filings to obtain as promptly as practicable all permits, consents, approvals, clearances and authorizations of all third parties and Governmental Entities that are necessary or advisable to consummate the transactions contemplated by this Agreement, (ii) use reasonable best efforts to cause the expiration or termination of any applicable waiting periods, or receipt of required authorizations, as applicable, under the HSR Act, (iii) supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and (iv) comply with the terms and conditions of all such permits, consents, approvals, clearances and authorizations of all such Governmental Entities. Seller shall use its reasonable best efforts (and Buyer shall cooperate with Seller) to promptly (and in any event within five (5) Business Days after the date of this Agreement) prepare and file (or cause to be filed) any notice or application with FINRA as required under applicable FINRA and NASD rules. Each party shall have the right to review in advance, and, to the extent practicable, each party will consult the other party on, in each case subject to applicable Laws relating to the exchange of information, all the information relating to such party and any of its Subsidiaries, which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable. The parties shall consult with each other with respect to the obtaining of all permits, consents, approvals, clearances and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the party apprised of the status of matters relating to completion of the transactions contemplated by this Agreement, including promptly furnishing the other with copies of notices or other communications received by such party or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to such transactions; provided , however , that nothing in this Agreement shall be deemed to require any party to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals, clearances and authorizations of third parties or Governmental Entities, that would reasonably be expected to have a Material Adverse Effect (measured on a scale relative to such party and its Subsidiaries, taken as a whole) on such party.

(c) Subject to the proviso contained in Section 6.1(b) , if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement, each party shall cooperate in all respects with the other party and shall use its reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated

by this Agreement. Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 6.1 shall limit a party’s right to terminate this Agreement pursuant to Section 9.1(b) or Section 9.1(c) so long as such party has, prior to such termination, complied with its obligations under this Section 6.1 .

(d) Each party shall give prompt notice to the other party of any Action commenced or, to such party’s actual knowledge, threatened against, relating to or involving such party or any of its Subsidiaries or other Persons directly or indirectly controlled by it or any director or manager of any of the foregoing, which relates to this Agreement or the transactions contemplated by this Agreement. Each party shall give the other party the opportunity to reasonably participate in the defense and settlement of any such Action and no such settlement shall be agreed to without each party’s prior written consent.

(e) Each party shall, upon reasonable request, furnish to the other party all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of such other party or any of their respective Subsidiaries to the NYSE or any Governmental Entity in connection with the transactions contemplated by this Agreement.

(f) Each party shall promptly advise the other party upon receiving any communication from any Governmental Entity the consent or approval of which is required for consummation of the transactions contemplated by this Agreement that causes such party to believe that there is a reasonable likelihood that any Requisite Approval will not be obtained or that the receipt of any such approval may be materially delayed, and, to the extent permitted by applicable Law, shall promptly provide the other party with a copy of such communication.

Section 6.2 Access to Information; Confidentiality .

(a) Upon reasonable notice and subject to applicable Laws relating to the exchange of information, each party shall, and shall cause its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other party, reasonable access, during normal business hours during the period from the date of this Agreement to the Second Closing, to all of such party’s properties, books, contracts, commitments and records, and, during such period, each of the parties shall, and shall cause its Subsidiaries to, make available to the other party all other information concerning such party’s business, properties and personnel as the other party may reasonably request. None of the parties and their Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of such party or its Subsidiaries or contravene any Law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties shall make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

(b) All information and materials provided pursuant to or in connection with this Agreement shall be subject to the provisions of the Confidentiality Agreement, entered into between Seller GP and Buyer on September 3, 2014 (the “ Confidentiality Agreement ”). From and after the Second Closing, Seller shall, and shall cause its Affiliates and representatives to, keep confidential and not use for any purpose all nonpublic information regarding the Business or any of the Acquired Companies or their respective Subsidiaries of which Seller or such Affiliates or representatives may be aware (“ Business Information ”), subject only to the exceptions to the confidentiality and non-use obligations of Seller and such Affiliate and representatives in the Confidentiality Agreement, as applied mutatis mutandis to Seller and such Affiliates and representatives with respect to Business Information.

Section 6.3 Financial Statements . Seller shall deliver to Buyer prior to the Second Closing (i) true and complete copies of combined audited balance sheets for the Acquired Companies and their respective Subsidiaries as of December 31, 2012 and 2013 and the related combined statements of operations, statements of stockholder’s equity and statements of cash flows for the years then ended and (ii) the unaudited combined balance sheets of the Acquired Companies and their respective Subsidiaries as of the most recent quarter required to be filed in reports with the SEC, and the related combined statements of operations, statements of stockholder’s equity and statements of cash flows for the quarter then ended. These audited financial statements and interim financial statements shall be prepared in accordance with GAAP consistently applied and fairly present, in all material respects, the combined financial condition, results of operations, stockholder’s equity and cash flows of the

Acquired Companies and their respective Subsidiaries as of the applicable dates or for the applicable periods, in such form as may be required for filing with the SEC. In addition, promptly following Buyer’s request, Seller shall furnish to Buyer such other financial statements as may be required to be included in Seller’s filings with the SEC.

Section 6.4 Legal Conditions . Subject to Section 6.1(b) , each of the parties shall, and shall cause its Subsidiaries to, use their reasonable best efforts (i) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements that may be imposed on such party or its Subsidiaries with respect to the transactions contemplated by this Agreement and, subject to the conditions set forth in Article VII , to consummate such transactions, and (ii) to obtain (and to cooperate with the other parties to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party that is required to be obtained by such party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.

Section 6.5 Employee Matters .

(a) Immediately prior to the Second Closing, Seller shall (i) cause the Retained Employees to be employed by Seller or an Affiliate of Seller other than any Acquired Company or Subsidiary of an Acquired Company and (ii) cause the Acquired Companies or their Subsidiaries to, terminate or assign and transfer to an Affiliate of Seller other than any Acquired Company or Subsidiary of an Acquired Company each Acquired Company Benefit Plan and all assets thereof, other than any Acquired Company Benefit Plan listed on Section 6.5(a) of the Seller Disclosure Letter (each such listed plan an “ Assumed Benefit Plan ”).

(b) On or following the First Closing, Buyer shall, or shall cause one if its Affiliates to, make an offer of employment to each of the employees listed in Section 6.5(b) of the Seller Disclosure Letter (the “ Designated Employees ”), which employment, with respect to each Designated Employee, shall be effective upon such Designated Employee’s acceptance of such offer (or another date prior to the Second Closing as designated by Buyer). Seller shall reasonably cooperate with Buyer and any such Designated Employee that accepts such offer of employment with regard to the termination of such Designated Employee’s employment with an Acquired Company or any Subsidiary of an Acquired Company. In the event that this Agreement terminates prior to the consummation of the Second Closing, (i) any such offers of employment that have not been accepted by a Designated Employee, or under which a Designated Employee has not yet commenced employment with Buyer, shall be revoked and rescinded, and upon such revocation and rescission, such offers shall have no further force or effect; and (ii) Buyer shall cause the employment of any Designated Employee hired and employed by Buyer or one of its Affiliates to be terminated effective upon the termination of this Agreement, and Seller shall cause the Acquired Company or Subsidiary of an Acquired Company that previously employed such Designated Employee to offer employment to such Designated Employee upon the same terms as applied to such Designated Employee prior to the First Closing.

(c) From and after the Second Closing, any individual who remains employed with an Acquired Company or any Subsidiary of an Acquired Company as of the Second Closing, and from and after the date a Designated Employee begins employment with Buyer or one of its Affiliates with respect to those Designated Employees to whom an offer was made in accordance with Section 6.5(b) and accepted (such employees collectively, the “ Business Employees ”) will participate and be covered or be offered participation and coverage, as applicable, under the applicable Buyer Benefit Plans; provided , that continued participation and coverage following the Second Closing under any Assumed Benefit Plan as in effect immediately prior to the Second Closing shall be deemed to satisfy the obligations under this sentence.

(d) Buyer shall cause each Buyer Benefit Plan in which Business Employees are eligible to participate to take into account for purposes of eligibility, vesting and benefit accruals under the Buyer Benefit Plans (other than benefit accruals under any of Buyer’s tax-qualified and non-qualified defined benefit pension plans) the service of such Business Employees with the Acquired Companies and their Subsidiaries (and any predecessor entities) to the same extent as such service was credited for such purpose by the Acquired Companies and their Subsidiaries under a comparable Acquired Company Benefit Plan; provided , however , that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits with respect to the same period of service or with respect to newly implemented plans for which prior service is not taken into account or with respect to plans for which participation, service and/or benefit accrual is frozen. Nothing herein shall limit the ability of Buyer to amend or terminate any of the Assumed Benefit Plans or Buyer Benefit Plans in accordance with their terms at any time.

(e) At and following the Second Closing, Buyer will honor the accrued and vested obligations of the Acquired Companies and their Subsidiaries as of the Second Closing under the provisions of the Assumed Benefit Plans, provided , that this provision shall not prevent Buyer from amending, suspending or terminating any such plans or agreements to the extent permitted by the respective terms of such plans or agreements. Nothing contained in this Agreement shall constitute or be deemed to be an amendment to any Acquired Company Benefit Plan (including any Assumed Benefit Plan), Buyer Benefit Plan or any other compensation or benefit plan, program or arrangement of Buyer, Seller, the Acquired Companies and their respective Subsidiaries.

(f) If Business Employees become eligible to participate in a medical, dental or other health care insurance plan of Buyer, Buyer shall cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans of Buyer, (ii) honor under such plans any deductible, co-payment and out-of-pocket expenses incurred by such employees and their beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Second Closing for the year in which the Second Closing or participation in such medical, dental or other health care insurance plan of Buyer, as applicable, occurs, in each case to the extent such employee had satisfied any similar limitation or requirement under an analogous medical, dental or other health care insurance plan of Seller, the Acquired Companies and their respective Subsidiaries prior to the Second Closing for the year in which the Second Closing or participation in such medical, dental or health care insurance plan of Buyer, as applicable, occurs.

(g) To the extent any employee of an Acquired Company or a Subsidiary of an Acquired Company (including any Designated Employee), other than a Retained Employee, does not become a Business Employee, Buyer shall be solely responsible for, and Seller shall have no responsibility, liability or obligation for, any and all cash severance amounts payable to such employees in connection with their termination of employment from an Acquired Company or Affiliate of an Acquired Company, as applicable, other than amounts payable with respect to the termination or accelerated vesting of any equity-related rights (i.e., restricted stock) held by such employees as of the date of termination.

(h) Without limiting the generality of Section 10.9 , this Section 6.5 shall be binding upon and inure solely to the benefit of each party to this Agreement, and nothing in this Section 6.5 , express or implied, is intended to confer upon any other Person, including any current or former director, officer or employee the Acquired Companies and their respective Subsidiaries, any rights or remedies of any nature whatsoever under or by reason of this Section 6.5 .

Section 6.6 Additional Agreements . In case at any time after the Second Closing any further action is necessary or desirable to carry out the purposes of this Agreement or to vest Buyer with full title to all properties, assets, rights, approvals, immunities and franchises of any of the Acquired Companies or their respective Subsidiaries, the proper officers and directors of each party and its Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, Buyer.

Section 6.7 Advice of Changes . Each party shall promptly advise the other parties of any change or event (i) having or reasonably likely to have a Material Adverse Effect on Seller or Material Adverse Effect on Buyer, as the case may be, or (ii) that it believes would or would be reasonably likely to cause or constitute a material breach of any of such party’s representations, warranties or covenants contained in this Agreement; provided , however , that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; provided , further , that a failure to comply with this Section 6.7 shall not constitute (i) the failure of any condition set forth in Article VII to be satisfied unless the underlying Material Adverse Effect on Seller or Material Adverse Effect on Buyer, as applicable, or material breach would independently result in the failure of a condition set forth in Article VII to be satisfied or (ii) a breach of covenant or agreement pursuant to Section 8.2(a)(y) or Section 8.2(b)(y) .

Section 6.8 General Release of Claims . Effective as of the Second Closing, Seller, on behalf of itself and its Affiliates (other than the Acquired Companies and their respective Subsidiaries) (collectively, the “ Releasing Persons ”), hereby irrevocably releases and forever discharges each of the Acquired Companies and their respective Subsidiaries (for the benefit of Buyer and its respective Subsidiaries (including the Acquired Companies) and their respective parents, subsidiaries, Affiliates, divisions and predecessors and their respective past and present directors, managers, officers, employees and agents, and each of their respective successors, heirs, assigns, executors and administrators (collectively, the “ Released Persons ”)) of and from all manner of action and actions, cause and causes of action, suits, rights, debts, dues, sums of money, accounts, bonds, bills, covenants, contracts, controversies, omissions, promises, variances, trespasses, losses, judgments, executions, claims and demands whatsoever, in Law or in equity that any of the Releasing Persons ever had, now has or which it hereafter can, shall or may have, against the Released Persons, whether known or unknown, suspected or unsuspected, matured or unmatured, fixed or contingent, for, upon or by reason of any matter or cause arising at any time prior to the Second Closing, other than as provided in or contemplated by this Agreement or any Ancillary Agreement (it being expressly understood and agreed that there shall be no release or waiver with respect to any of the matters set forth in Section 10.1 ).

Section 6.9 Tax Matters .

(a) Tax Indemnification by Seller . From and after the Second Closing, Seller shall pay or cause to be paid, and shall indemnify Buyer and each of its Affiliates (including the Acquired Companies and their Subsidiaries after the Closing Date) (collectively, the “ Buyer Tax Indemnified Parties ”) and hold each Buyer Tax Indemnified Party harmless from and against: (A) any Taxes imposed on the Acquired Companies or any of their Subsidiaries for any Pre-Closing Period; (B) any Taxes of Seller or any of its affiliates (other than the Acquired Companies or any of their Subsidiaries) for which any of the Acquired Companies or any of their Subsidiaries is liable under Treasury Regulation Section 1.1502-6 (or under any similar provision of state, local or foreign Law); (C) any and all Taxes of any Person imposed on an Acquired Company or its Subsidiaries as a result of any Tax Sharing Agreement or Tax allocation agreement, arrangement, or understanding entered into by such Acquired Company or its Subsidiaries prior to the Second Closing; (D) any Taxes resulting from any transfer of assets or employees or restructuring in anticipation of or in connection with the transactions contemplated by this Agreement (including the Restructuring Transactions contemplated by Section 6.10 ); (E) any Taxes arising out of or relating to any breach or inaccuracy of any representation or warranty contained in Section 3.9(m) ; (F) any Taxes arising out of or relating to any breach of any covenant or agreement of Seller contained in this Agreement; (G) any Transfer Taxes for which Seller is responsible under Section 6.9(i) ; and (H) any costs and expenses, including reasonable legal fees and expenses attributable to any item described in clauses (A) to (G) in each case except to the extent a liability or reserve for such Taxes was reflected in the calculation of the Final Acquired Companies’ Indebtedness or the Final Closing Net Working Capital.

(b) Tax Indemnification by Buyer . From and after the Second Closing, Buyer shall pay or cause to be paid, and shall indemnify Seller and its Affiliates (collectively, the “ Seller Tax Indemnified Parties ”) and hold each Seller Tax Indemnified Party harmless from and against: (A) any Taxes imposed on the Acquired Companies or any of their Subsidiaries for any Post-Closing Period; (B) any Taxes arising out of or relating to any breach of any covenant or agreement of Buyer contained in this Agreement; (C) any Transfer Taxes for which Buyer is responsible under Section 6.9(i) ; and (D) any costs and expenses, including reasonable legal fees and expenses attributable to any item described in clauses (A) to (C); provided, however, that Buyer shall not be required to pay or cause to be paid, or to indemnify or hold harmless the Seller Tax Indemnified Parties from and against any Taxes for which Seller is responsible pursuant to Section 6.9(a) .

(c) Straddle Periods . To the extent permitted or required by applicable Law, the taxable year of each Acquired Company and its Subsidiaries that includes the Second Closing Date shall be treated as closing on (and including) the Second Closing Date. To the extent not so permitted or required by applicable Law, for purposes of this Agreement, in the case of any Straddle Period, (i) Taxes of an Acquired Company and its Subsidiaries imposed on a periodic basis and not based on income, or any transaction or event (such as real or personal property Taxes) allocable to the Pre-Closing Period shall be equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of calendar days during the Straddle Period that are in the Pre-Closing Period and the denominator of which is the number of calendar days in the entire Straddle Period, and (ii) in the case of all other Taxes of an Acquired Company and its Subsidiaries allocable to the Pre-Closing Period, such Taxes shall be computed as if such taxable period ended as of the end of the day on the Second Closing

Date; provided that exemptions, allowances or deductions that are calculated on an annual basis (including, but not limited to, depreciation and amortization deductions) shall be allocated between the period ending on the Second Closing Date and the period beginning after the Second Closing Date in proportion to the number of days in each period.

(d) Tax Returns .

(i) Seller shall prepare or shall cause to be prepared any Tax Return that is required to be filed by or with respect to an Acquired Company or its Subsidiaries for any taxable period that ends on or before the Second Closing Date (a “ Pre-Closing Tax Return ”). Seller shall (x) prepare such Pre-Closing Tax Returns in a manner consistent with the past Tax accounting practices, methods, elections and conventions of the relevant entity and in compliance with applicable Laws, and (y) deliver to Buyer for its review and comment a copy of any such Pre-Closing Tax Return required to be filed after the Second Closing at least thirty (30) days prior to the due date thereof (taking into account any extensions) and Seller shall reflect on such Pre-Closing Tax Returns all reasonable comments received from Buyer not later than fifteen (15) days before the due date thereof (taking into account any extensions). Seller shall timely file or cause to be timely filed any Pre-Closing Tax Return that is required to be filed (taking into account any extensions) on or before the Second Closing Date. Seller shall deliver, or cause to be delivered, to Buyer all Pre-Closing Tax Returns that are required to be filed after the Second Closing Date at least five (5) days prior to the due date for filing such Tax Returns (taking into account any extensions), together with payment by Seller of the amount of any Taxes shown as due thereon (other than to the extent a liability or reserve for such Taxes was reflected in the calculation of the Final Acquired Companies’ Indebtedness or the Final Closing Net Working Capital), and Buyer shall timely file or cause to be timely filed such Tax Returns.

(ii) Buyer shall prepare and timely file or cause to be prepared and timely filed all Tax Returns and in compliance with applicable Laws with respect to an Acquired Company or its Subsidiaries for any Straddle Period. In the case of any such Tax Return for a Straddle Period (a “ Straddle Period Tax Return ”), such Tax Returns shall be prepared in a manner consistent with past practice of the Acquired Companies and Buyer shall deliver to Seller for its review and comment a copy of such Straddle Period Tax Returns at least thirty (30) days prior to the due date thereof (taking into account any extensions) and Buyer shall reflect on such Tax Returns all reasonable comments received from Seller not later than fifteen (15) days before the due date thereof (taking into account any extensions) to the extent such comments relate to the Pre-Closing Period. Seller shall pay to Buyer at least five (5) days prior to the due date for filing such Straddle Period Tax Returns (taking into account any extensions) the amount of any Taxes shown as due thereon allocable (as determined under Section 6.9(c) ) to the Pre-Closing Period (other than to the extent a liability or reserve for such Taxes was reflected in the calculation of the Final Acquired Companies’ Indebtedness or the Final Closing Net Working Capital).

(e) Tax Contests .

(i) If any Taxing Authority asserts a Tax Claim, then the party to this Agreement first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party to this Agreement; provided , however , that the failure of such party to give such prompt notice shall not relieve the other party of any of its obligations under this Section 6.9 , except to the extent that the other party is actually prejudiced by such failure. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Taxing Authority.

(ii) In the case of a Tax Proceeding of or with respect to an Acquired Company or its Subsidiaries for any taxable period ending on or before the Second Closing Date, Seller shall have the right to control such Tax Proceeding; provided, however, that Seller shall (x) keep Buyer reasonably informed with respect to such Tax Proceeding, (y) consult Buyer before taking any significant action in connection with such Tax Proceeding, and (z) to the extent that a settlement or compromise of such Tax Proceeding could reasonably be expected to have an adverse effect on Buyer or any of its Subsidiaries (including the Acquired Companies or any of their Subsidiaries), not settle or compromise such Tax Proceeding without the prior written consent of Buyer, which consent shall not be unreasonably withheld.

(iii) In the case of a Tax Proceeding of or with respect to an Acquired Company or its Subsidiaries for any Straddle Period, Buyer shall have the right to control such Tax Proceeding; provided, however,

that Buyer shall (x) keep Seller reasonably informed with respect to such Tax Proceeding, (y) consult Seller before taking any significant action in connection with such Tax Proceeding, and (z) to the extent that a settlement or compromise of such Tax Proceeding could reasonably be expected to have an adverse effect on Seller or any of its Subsidiaries, not settle or compromise such Tax Proceeding without the prior written consent of Seller, which consent shall not be unreasonably withheld.

(iv) Buyer shall have the exclusive right to control any Tax Proceeding other than any Tax Proceeding described in Section 6.9(e)(ii) and Section 6.9(e)(iii) .

(f) Cooperation and Exchange of Information .

(i) Each party to this Agreement shall, and shall cause its Affiliates to, provide to the other party to this Agreement such cooperation, documentation and information as either of them reasonably may request in (i) filing any Tax Return, amended Tax Return or claim for refund, (ii) determining a liability for Taxes or an indemnity obligation under this Section 6.9 or a right to refund of Taxes, or (iii) conducting any Tax Proceeding. Such cooperation and information shall include providing necessary powers of attorney, copies of all relevant portions of relevant Tax Returns, together with all relevant portions of relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property and other information, which any such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide an explanation of any documents or information so provided.

(ii) Each party shall retain all Tax Returns, schedules and work papers, and all material records and other documents relating to Tax matters, of the relevant entities for their respective Tax periods ending on or prior to the Second Closing Date until the later of (x) the expiration of the statute of limitations for the Tax periods to which the Tax Returns and other documents relate, or (y) eight (8) years following the due date (without extension) for such Tax Returns. Thereafter, the party holding such Tax Returns or other documents may dispose of them after offering the other party reasonable notice and opportunity to take possession of such Tax Returns and other documents at such other party’s own expense.

(g) After the Second Closing, all refunds received by Buyer or any of its affiliates (including the Acquired Companies and their Subsidiaries) for Taxes of an Acquired Company or any of its Subsidiaries for any Pre-Closing Period (other than (i) any refund of Taxes attributable to, or resulting from, a carry back of any item of loss, deduction, credit or other similar item arising in a Post-Closing Period or, in the case of a refund of Taxes for a Straddle Period, the use of the prorated amount of any such item that arises in a Post-Closing Period and (ii) any refund reflected as an asset in the Final Closing Net Working Capital) shall be for the account of Seller and shall be paid by Buyer to Seller, net of expenses and net of any Taxes imposed on or resulting from the receipt of such refund. The amount of any other refund of Taxes shall be for the account of Buyer. To the extent that a refund that gives rise to a payment to Seller hereunder is subsequently disallowed or otherwise reduced, Seller shall pay to Buyer the amount of such disallowed or reduced refund.

(h) Tax Treatment of Payments . Except to the extent otherwise required pursuant to a Determination, Seller, Buyer, the Acquired Companies and their respective Subsidiaries and their respective Affiliates shall treat any and all payments under this Section 6.9 , Section 1.2(e) , Section 2.1(e) , and Article VIII as an adjustment to the consideration for income Tax purposes.

(i) Transfer Taxes . Notwithstanding anything to the contrary in this Agreement, each of Seller and Buyer shall pay and be responsible for fifty percent (50%) of any sales, use, transfer, documentary, stamp, value added or similar Taxes and related fees imposed on or payable with respect to the transactions contemplated hereby (“ Transfer Taxes ”). Such Transfer Taxes shall be paid by the party responsible under applicable Law to pay such Transfer Taxes (with the other party indemnifying the party that is legally responsible to pay the Tax, its share of such Tax at least three (3) days before the Tax payment due date). Both parties shall, and shall cause their respective Affiliates to, cooperate in the execution of the Tax Returns and other filings relating to such Transfer Taxes.

(j) Timing of Payments . Any indemnity payment required to be made pursuant to this Section 6.9 shall be made within ten (10) days after the indemnified party makes written demand upon the indemnifying party, but in no case earlier than five (5) days prior to the date on which the relevant Taxes or other amounts are required to be paid to the applicable Taxing Authority.

(k) Notwithstanding anything to the contrary in this Agreement, indemnification with respect to Taxes and the procedures relating thereto shall be governed exclusively by this Section 6.9 , Section 8.3 and Section 8.4 , and the provisions of Article VIII (other than Section 8.3 and Section 8.4 ) shall not apply. The covenants and agreements in this Section 6.9 and the representations and warranties contained in Section 3.9(m) shall survive the Second Closing until the date that is six (6) months after the expiration of the applicable statute of limitations; provided, however, that any claim for indemnity made by a party hereto on or prior to such date shall survive until such claim is finally resolved. The representations and warranties contained in Section 3.9 (other than in Section 3.9(m) ) shall not survive, and shall terminate at, the Second Closing.

Section 6.10 Certain Pre-Closing Transactions . Prior to the Second Closing, Seller shall complete each of the following transactions (collectively, the “ Restructuring Transactions ”), in each case pursuant to documentation in form and substance satisfactory to Seller and Buyer:

(a) distribute or cause the distribution of all of the Equity Interests of CREI Advisors, LLC to Seller or an Affiliate of Seller (other than any Acquired Company or Subsidiary of any Acquired Company); and

(b) cause the Designated FF&E to be transferred to an Acquired Company or a Subsidiary of an Acquired Company.

Section 6.11 Change of Name . Effective upon the Second Closing, Seller shall, and shall cause its Affiliates to, cease all use of the name “Cole” and any derivative thereof for marketing, promotion or sales purposes to customers or the general public, except (solely with respect to the general public) for a transition period not to exceed forty-five (45) days immediately following the Second Closing Date.

Section 6.12 Subsidiary Advisory Agreement . Seller agrees that, after the Second Closing, it or one of its Affiliates will enter into a sub-advisory agreement with the advisor of each of Cole Credit Property Trust VI, Inc., a Maryland corporation, and Cole Office & Industrial REIT (CCIT III), Inc., a Maryland corporation, each of which as of the date of this Agreement has not been formed (the “ Designated Formation Funds ”), as promptly as practicable after the formation of each such Designated Formation Fund (the “ Formation Fund Sub-Advisory Agreement ”). Seller and Buyer agree that the advisory agreement to be entered into with each of the Designated Formation Funds (the “ Formation Fund Advisory Agreement ”) will be materially in the same form as the advisory agreement for the prior Designated Fund in such series, subject only to such changes as may be required by Governmental Entities, as do not materially adversely affect Seller or as are agreed to by Seller and Buyer (the “ Permitted Changes ”), and that the Formation Fund Sub-Advisory Agreement (other than to reflect the fee schedule set forth in Section 6.12 of the Seller Disclosure Letter) will be substantially in the same form as the Formation Fund Advisory Agreement, with such changes as are necessary to conform to the Permitted Changes or as are agreed to by Seller and Buyer. Except for the Designated Funds and the Designated Formation Funds, neither Seller nor any of its Affiliates will serve as sub-advisor to any fund sponsored by Buyer, unless Seller and Buyer otherwise agree.

Section 6.13 Reaffirmation of Advisory Agreement . On or before the Second Closing, Seller shall use, and shall cause its applicable Affiliates to use, commercially reasonable best efforts to assist Buyer and the Acquired Companies in reaffirming or renewing, or causing to be reaffirmed or renewed, any advisory contract, investment management contract, property management contract, dealer manager agreement, soliciting dealer agreement and any similar agreement which relates to the Business.

Section 6.14 No Negotiation . During the period commencing on the date hereof and ending on the earlier of the Second Closing Date or the date on which this Agreement is terminated pursuant to Article IX , Seller shall not, shall not authorize or permit any of its Affiliates to, and shall instruct its representatives not to: (a) solicit or knowingly encourage the initiation or submission of any expression of interest, inquiry, proposal or offer from any Person (other than Buyer or its Affiliates or representatives) relating to a possible Acquisition Transaction; (b) participate in any discussions or negotiations or enter into any agreement, understanding or arrangement with, or

provide any non-public information to, any Person (other than Buyer or its Affiliates or representatives) relating to or in connection with a possible Acquisition Transaction; (c) entertain or accept any proposal or offer from any Person (other than Buyer or its Affiliates or representatives) relating to a possible Acquisition Transaction; or (d) consummate any Acquisition Transaction. For purposes of this Agreement, “ Acquisition Transaction ” means any transaction or series of related transactions involving: (i) the sale, license, encumbrance or other disposition of all or any material portion of the business or assets of any Acquired Company or any of its Subsidiaries; (ii) the issuance, pledge, transfer, acquisition or other disposition of all or any material portion of the Equity Interests of any Acquired Company or any of its Subsidiaries; or (iii) any merger, consolidation, business combination, share exchange, stock or asset purchase, reorganization or similar transaction involving a change of control of any Acquired Company or any of its Subsidiaries.

Section 6.15 Wrong Pockets . If, after the Second Closing, (i) Seller reasonably determines that any asset, property or subsidiary that should not have been transferred pursuant to this Agreement or any of the Ancillary Agreements has been transferred to Buyer or is held by an Acquired Company or (ii) Buyer reasonably determines that any asset, property or subsidiary that should have been transferred pursuant to this Agreement or any of the Ancillary Agreements has not been transferred to Buyer or is not held by an Acquired Company, Buyer and Seller shall consult with one another in good faith and reasonably cooperate to determine if such asset, property or subsidiary is held by the wrong party and, if so determined, to effect the transfer of such asset, property or subsidiary to the appropriate party or its designee as soon as practicable and for no consideration.

Section 6.16 Intercompany Obligations . Seller shall use reasonable efforts to take, or cause to be taken, such action and make, or cause to be made, such payments as may be necessary so that, as of the Second Closing Date, there shall be no intercompany obligations (other than pursuant to this Agreement and the Ancillary Agreements) between any of the Acquired Companies or their respective Subsidiaries, on the one hand, and Seller or any of its Affiliates (other than the Acquired Companies and their respective Subsidiaries), on the other hand. Except for this Agreement and the Ancillary Agreements, all intercompany arrangements and Contracts, whether written or oral, between any Acquired Company or their respective Subsidiaries, on the one hand, and Seller or any of its Affiliates (other than the Acquired Companies and their respective Subsidiaries), on the other hand, shall terminate and be of no further force and effect after the Second Closing. The parties hereto agree that this Section 6.16 does not apply to intercompany accounts or obligations owing to and from, or any arrangements or contracts, among any of the Acquired Companies and/or their respective Subsidiaries.

Section 6.17 Property Disposition Fees . Prior to the Second Closing, EFA will assign its right to receive any disposition fees payable by, and reimbursement of expenses from, the applicable Ancillary Programs with respect to the sale or disposition of any of the properties set forth on Section 6.17 of the Seller Disclosure Letter.

Section 6.18 Property Management Agreements . Prior to the Second Closing, Seller shall cause EFA to enter into property management agreements with Carbon Realty Advisors, LLC relating to the payment of property management fees from the properties owned by the Ancillary Programs in accordance with the terms set forth on Section 6.18 of the Seller Disclosure Letter; provided , however , that such property management agreements shall only be entered into to the extent they are not already in effect.

ARTICLE VII

CONDITIONS PRECEDENT

Section 7.1 Conditions to Each Party’s Obligations – First Closing . The respective obligations of the parties to effect the First Closing shall be subject to the satisfaction at or prior to the First Closing of the following conditions:

(a) Required Approvals . (i) Any applicable waiting period under the HSR Act shall have expired or been earlier terminated, (ii) all of the Buyer Shares issuable pursuant to this Agreement shall have been approved for listing on the NYSE, subject to official notice of issuance and (iii) any other approvals set forth in Section 3.4 and Section 4.4 required to be obtained for the consummation, as of the First Closing, of the transactions contemplated by this Agreement (other than, in the case of this clause (iii), any approvals the failure of which to obtain would not

have, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller or a Material Adverse Effect on Buyer), shall have been obtained (all such approvals and the expiration or termination of all such waiting periods are referred to herein as the “ Requisite Approvals ”).

(b) No Injunctions or Restraints; Illegality . No Order (whether temporary, preliminary or permanent) issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation or Order shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits or makes illegal consummation of the transactions contemplated by this Agreement. There shall be no pending Action by any Governmental Entity with respect to this Agreement or the transactions contemplated hereby.

Section 7.2 Conditions to Obligations of Buyer – First Closing . The obligations of Buyer to effect the First Closing are also subject to the satisfaction, or waiver by Buyer, at or prior to the First Closing, of the following conditions:

(a) Representations and Warranties . The representations and warranties of Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the First Closing as though made on and as of the First Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date); provided, however, that no representation or warranty of Seller (other than the representations and warranties contained in Section 3.1(a) (first sentence only), Section 3.1(b) (with respect to material Subsidiaries of the Acquired Companies only), Section 3.2 , Section 3.3(a) and Section 3.5 , which shall be true and correct in all material respects), shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Seller, has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller, disregarding for these purposes any qualification or exception for, or reference to, materiality in any such representation or warranty, including the use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty, other than, in each case, in Section 3.5 , Section 3.7(a) , Section 3.10(a) , Section 3.12(a) , and Section 3.13 ; and Buyer shall have received a certificate signed on behalf of Seller by the Chief Executive Officer or the Chief Financial Officer of Seller to the foregoing effect.

(b) Performance of Obligations of Seller . Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the First Closing; and Buyer shall have received a certificate signed on behalf of Seller by the Chief Executive Officer or the Chief Financial Officer of Seller to such effect.

Section 7.3 Conditions to Obligations of Seller – First Closing . The obligation of Seller to effect the First Closing is also subject to the satisfaction, or waiver by Seller, at or prior to the First Closing, of the following conditions:

(a) Representations and Warranties . The representations and warranties of Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the First Closing as though made on and as of the First Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date); provided , however , that no representation or warranty of Buyer (other than the representations and warranties in Section 4.1 (first sentence only), Section 4.2 , and Section 4.3(a) which shall be true and correct in all material respects) shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Buyer, has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer, disregarding for these purposes any qualification or exception for, or reference to, materiality in any such representation or warranty, including the use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty; and Seller shall have received a certificate signed on behalf of Buyer by an authorized officer of Buyer to the foregoing effect.

(b) Performance of Obligations of Buyer . Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the First Closing; and Seller shall have received a certificate signed on behalf of Buyer by an authorized officer of Buyer to such effect.

Section 7.4 Conditions to Each Party’s Obligations – Second Closing . The respective obligations of the parties to effect the Second Closing shall be subject to the satisfaction at or prior to the Second Closing of the following conditions:

(a) No Injunctions or Restraints; Illegality . No Order (whether temporary, preliminary or permanent) issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation or Order shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits or makes illegal consummation of the transactions contemplated by this Agreement. There shall be no pending Action by any Governmental Entity with respect to this Agreement or the transactions contemplated hereby.

(b) FINRA Approval . Each of: (i) thirty-one (31) days shall have elapsed following submission to FINRA of the initial Continuing Membership Application of each Broker (the “ CMA ”) and FINRA shall not have rejected the CMA as incomplete during such period; (ii) each Broker shall have notified FINRA that the parties to this Agreement intend to consummate the Broker Sale without written approval from FINRA; and (iii) FINRA shall not have advised any Broker that it will impose material operating conditions on the Broker if the Second Closing occurs prior to obtaining FINRA’s approval of the CMA.

Section 7.5 Conditions to Obligations of Buyer – Second Closing . The obligations of Buyer to effect the Second Closing are also subject to the satisfaction, or waiver by Buyer, at or prior to the Second Closing, of the following conditions:

(a) Representations and Warranties . The representations and warranties of Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Second Closing as though made on and as of the Second Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date); provided , however , that no representation or warranty of Seller (other than the representations and warranties contained in Section 3.1(a) (first sentence only), Section 3.1(b) (with respect to material Subsidiaries of the Acquired Companies only), Section 3.2 , Section 3.3(a) and Section 3.5 , which shall be true and correct in all material respects), shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Seller, has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller, disregarding for these purposes any qualification or exception for, or reference to, materiality in any such representation or warranty, including the use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty, other than, in each case, in Section 3.5 , Section 3.7(a) , Section 3.10(a) , Section 3.12(a) and Section 3.13 ; and Buyer shall have received a certificate signed on behalf of Seller by the Chief Executive Officer or the Chief Financial Officer of Seller to the foregoing effect.

(b) Performance of Obligations of Seller . Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Second Closing; and Buyer shall have received a certificate signed on behalf of Seller by the Chief Executive Officer or the Chief Financial Officer of Seller to such effect.

(d) Other Deliveries . Seller shall have made the other deliveries set forth in Section 1.6(b) .

(e) FIRPTA Certificate . Seller shall have delivered to Buyer a duly executed certification that Seller is not a foreign person within the meaning of Section 1445 of the Code, substantially in the form of the sample certification set forth in Treasury Regulation Section 1.1445-2(b)(2)(iv)(A).

Section 7.6 Conditions to Obligations of Seller – Second Closing . The obligations of Seller to effect the Second Closing are also subject to the satisfaction, or waiver by Buyer, at or prior to the Second Closing, of the following conditions:

(a) Representations and Warranties . The representations and warranties of Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Second Closing as though made on and as of the Second Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date); provided , however , that no representation or warranty of Buyer (other than the representations and warranties contained in Section 4.1 (first sentence only), Section 4.2 , and Section 4.3(a) , which shall be true and correct in all material respects), shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Buyer, has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer, disregarding for these purposes any qualification or exception for, or reference to, materiality in any such representation or warranty, including the use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty; and Seller shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer or the Chief Financial Officer of Buyer to the foregoing effect.

(b) Performance of Obligations of Buyer . Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Second Closing; and Seller shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer or the Chief Financial Officer of Buyer to such effect.

(d) Other Deliveries . Buyer shall have made the other deliveries set forth in Section 1.6(a) .

ARTICLE VIII

SURVIVAL; INDEMNIFICATION

Section 8.1 Survival . The representations and warranties of the parties contained in this Agreement shall survive the Second Closing until March 31, 2016; provided that (i) the representations and warranties of Seller contained in Section 3.1 , Section 3.2 and Section 3.3(a) and the representations and warranties of Buyer contained in Section 4.2 , Section 4.3(a) and Section 4.5 shall survive indefinitely and (ii) the representations and warranties contained in Section 3.9 (Taxes and Tax Returns) shall survive in the manner set forth in Section 6.9(k) . The covenants and agreements of the parties hereto shall remain in full force and effect in accordance with their terms (or, if no survival period is specified herein, such covenants and agreements shall survive until fully performed or fulfilled). Notwithstanding the foregoing, if notice of a breach of any representation, warranty, covenant or agreement has been given prior to the expiration of the applicable representation, warranty, covenant or agreement, the ability of a party to initiate an Action with respect to such breach shall survive until any such Action relating thereto has been fully and finally resolved.

Section 8.2 Indemnification .

(a) From and after the Second Closing, Seller shall indemnify, defend and hold harmless Buyer and its Affiliates (including the Acquired Companies and their respective Subsidiaries), and its and their respective

officers, directors and employees (any of the foregoing, a “ Buyer Indemnified Party ”), against any and all damages, losses, liabilities, claims, fines, deficiencies, payments (including those arising out of any settlement, judgment or compromise relating to any Action and expenses (including interest and penalties due and payable with respect thereto and reasonable expenses of investigation, preparation, defense, avoidance or settlement of an Action and reasonable attorneys’ fees and expenses in connection with any Action whether involving a third party claim or a claim solely between the parties hereto) (“ Damages ”) incurred, asserted against or suffered by any Buyer Indemnified Party, including in connection with enforcing Seller’s obligations hereunder, resulting from or arising out of (x) any inaccuracy in any representation or breach of warranty of Seller contained in Article III (other than Section 3.9 , which shall be governed by Section 6.9 ) by virtue of its failure to be true and correct (A) on and as of the First Closing Date with the same effect as though made on and as of the First Closing Date (other than any such representation or warranty that speaks as of a specific date or time other than the First Closing Date), (B) on and as of the date of this Agreement (other than any such representation or warranty that speaks as of a specific date or time other than the date of this Agreement) or (C) on and as of the date or time when made, in the case of any representation or warranty that speaks as of a specific date or time other than the date of this Agreement or the First Closing Date; provided that, in the event of any such breach or inaccuracy of any representation or warranty that includes any limitation or qualification as to “materiality” (including the word “material”), “Material Adverse Effect” or “Knowledge,” for purposes of determining the amount of such Damages with respect to such breach or inaccuracy, no effect will be given to such limitation or qualification contained therein (each such inaccuracy in a representation or breach of warranty a “ Breach ”) or (y) breach of covenant or agreement made or to be performed by Seller pursuant to this Agreement on or prior to the Second Closing.

(b) From and after the Second Closing, Buyer shall indemnify, defend and hold harmless Seller and its Affiliates (other than the Acquired Companies and their respective Subsidiaries), and its and their respective officers, directors and employees (any of the foregoing, a “ Seller Indemnified Party ”), against any and all Damages incurred, asserted against or suffered by any Seller Indemnified Party, including in connection with enforcing Buyer’s obligations hereunder, resulting from or arising out of (x) any inaccuracy in any representation or breach of warranty of Buyer contained in Article IV by virtue of its failure to be true and correct (A) on and as of the First Closing Date with the same effect as though made on and as of the First Closing Date (other than any such representation or warranty that speaks as of a specific date or time other than the First Closing Date), (B) on and as of the date of this Agreement (other than any such representation or warranty that speaks as of a specific date or time other than the date of this Agreement) or (C) on and as of the date or time when made, in the case of any representation or warranty that speaks as of a specific date or time other than the date of this Agreement or the First Closing Date; provided that, for purposes of determining the amount of such Damages with respect to any Breach by Buyer, no effect will be given to any limitation or qualification as to “materiality” (including the word “material”), “Material Adverse Effect” or “Knowledge” contained in any related representation or warranty or (y) breach of covenant or agreement made or to be performed by Buyer pursuant to this Agreement on or prior to the Second Closing.

(c) With respect to indemnification by Seller or Buyer (each being referred in its capacity as the indemnifying party as, the “ Indemnifying Party ”) for its Breaches pursuant to Section 8.2(a)(x) and Section 8.2(b)(x) , as applicable:

(i) the Indemnifying Party shall not be liable unless the aggregate amount of Damages with respect to all such Breaches exceeds $10 million, after which the Indemnifying Party shall be liable for the amount of all Damages with respect to its Breaches in excess of $10 million;

(ii) the Indemnifying Party shall not be liable for any single claim or series of related claims with respect to such Breaches which result in Damages of $250,000 or less (and such claims shall not be aggregated for purposes of aggregating Damages pursuant to clause Section 8.2(c)(i) ); and

(iii) the Indemnifying Party’s maximum aggregate liability for all such Breaches shall not exceed $75 million;

provided , further , that the limitations on indemnifiable Damages set forth in clauses (i), (ii) and (iii) above shall not apply with respect to the representations and warranties of Seller set forth in Section 3.1 , Section 3.2 , Section 3.3(a) and Section 3.6 or the representations and warranties of Buyer set forth in Section 4.1 , Section 4.2 , Section 4.3(a) and Section 4.5 .

(d) Notwithstanding anything to the contrary in this Agreement, in no event shall the Indemnifying Party be liable to an Indemnified Party for any exemplary, punitive, special or consequential damages, including lost profits or diminution of value or any loss of goodwill or possible business after the Second Closing, except for any such damages to the extent paid to a third party, including a Governmental Entity.

(e) With respect to any claim brought by a Buyer Indemnified Party against Seller under this Agreement or otherwise relating to this Agreement, Seller expressly waives any right of subrogation, contribution, advancement, indemnification or other claim against any Acquired Company or any Subsidiary of any Acquired Company with respect to any amounts owed by Seller pursuant to this Agreement.

(f) Seller or Buyer, as the case may be, agrees to give prompt notice (a “ Notice of Claim ”) to the Indemnifying Party, in the event indemnity is sought by a Buyer Indemnified Party or a Seller Indemnified Party, as the case may be, under this Section 8.2 , of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under this Section 8.2 (each, a “ Claim ”) and will provide the Indemnifying Party such information with respect thereto in the possession of Seller or Buyer, as the case may be, that the Indemnifying Party may reasonably request. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, unless (and solely to the extent) such failure shall have actually materially prejudiced the Indemnifying Party’s defense of such Claim.

(g) The Indemnifying Party shall be entitled to participate in the defense of any claim asserted by a third party (each, a “ Third Party Claim ”) and, subject to the limitations set forth in this Section 8.2 , shall have fifteen (15) days after the date on which Notice of Claim is given (or such lesser number of days set forth in the Notice of Claim as may be required by court proceedings in the event of a litigated matter) to notify the party giving such Notice of Claim in writing of its election to control and appoint lead counsel for such defense, in each case at its expense.

(h) If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 8.2 , the Indemnifying Party shall obtain the prior written consent of Seller or Buyer, as the case may be, before entering into any settlement of such Third Party Claim, if the settlement does not unconditionally release the Indemnified Parties from all liabilities and obligations with respect to such Third Party Claim, the settlement includes a statement or admission of fault, culpability or failure to act by or on behalf of any Indemnified Party, or the settlement imposes injunctive or other equitable relief against any Indemnified Party, and any Indemnified Party shall be entitled to participate in the defense of such Third Party Claim and to employ separate counsel of its choice for such purpose. The fees and expenses of such separate counsel shall be paid by the Indemnified Party; provided that in the event that the Indemnified Party determines in good faith that representation by counsel to the Indemnifying Party of both such Indemnifying Party and the Indemnified Party could reasonably be expected to present such counsel with a conflict of interest, then the Indemnified Party may employ separate counsel to represent or defend it in any such Action and the Indemnifying Party shall pay the reasonable fees and expenses of such counsel; provided , however , that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all Indemnified Parties. If the Indemnifying Party does not elect to defend such Third Party Claim or does not defend such Third Party Claim in good faith, the Indemnified Party shall have the right in addition to any other right or remedy it may have hereunder, at the Indemnifying Party’s expense, to defend such Third Party Claim; provided , however , that (i) the Indemnified Party’s defense of or participation in the defense of any such Third Party Claim shall not in any way diminish or lessen the obligations of the Indemnifying Party under the agreements of indemnification set forth in this Article VIII , and (ii) the Indemnified Party may not settle any such Third Party Claim without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).

(i) At the Indemnifying Party’s expense, each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

(j) At the Indemnifying Party’s expense, each Indemnified Party shall use reasonable efforts to collect any amounts available under insurance coverage, or from any other person alleged to be responsible, for any Damages payable under this Section 8.2 .

(k) Except for Third Party Claims being defended in good faith, an Indemnifying Party shall satisfy its obligations under this Article VIII in respect of a claim for indemnification hereunder which is not contested by the Indemnifying Party in good faith as promptly as practical but in any event no later than thirty (30) days after the date on which the Notice of Claim in respect thereof is given.

Section 8.3 Calculation of Damages . The amount of any Damages payable under Section 6.9 and/or Section 8.2 by the Indemnifying Party shall be: (i) net of any amounts actually previously recovered by the Indemnified Party under applicable insurance policies in respect of the Damages giving rise to the right of indemnification (net of any increase in premiums to be paid by the Indemnified Party arising from the insurance carrier’s payment of such claim); (ii) increased by any Tax cost actually incurred by the Indemnified Party arising from the receipt or accrual of the indemnity payment; and (iii) decreased by any cash Tax savings actually realized by the Indemnified Party arising in the taxable year in which such Damages are incurred or, if later, at the time the indemnity payment is made. If the Indemnified Party receives any amounts in respect of the Damages giving rise to the right of indemnification under applicable insurance policies subsequent to an indemnification payment in respect of such Damages by the Indemnifying Party, then such Indemnified Party shall, to the extent fully indemnified for the applicable Damages (after giving effect to the following reimbursement obligation), promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to the amount so received by the Indemnified Party, net of any expenses incurred by such Indemnified Party in collecting such amount (including any increase in premiums arising from the payment by an insurance carrier of such amount). Notwithstanding the foregoing, Seller shall not be required to pay Damages pursuant to this Section 8.3 if, and solely to the extent, liability for such Damages is reflected in the calculation of the Final Closing Net Working Capital.

Section 8.4 Exclusivity . After the Second Closing, Section 6.9 and this Article VIII shall provide the exclusive remedy for any claim by any Indemnified Party based on a Breach by the Indemnifying Party, other than any such claim based on fraud or willful breach of this Agreement and except as set forth in Section 10.10 .

ARTICLE IX

TERMINATION AND AMENDMENT

Section 9.1 Termination . This Agreement may be terminated at any time prior to the Second Closing:

(a) by mutual consent of Seller and Buyer in a written instrument;

(b) by either Buyer or Seller if any Governmental Entity that must grant a Requisite Approval has denied such approval and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable Order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, provided that the party seeking to terminate this Agreement pursuant to this Section 9.1(b) shall have complied with its obligations pursuant to Section 6.1 with respect to such denial or Order;

(c) by either Buyer or Seller if the Second Closing shall not have occurred on or before December 31, 2014 (the “ Outside Date ”) unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth in this Agreement; or

(d) by either Buyer or Seller if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of Seller, in the case of a termination by Buyer, or Buyer, in the case of a termination by Seller, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Second Closing Date, the failure of the conditions set forth in Section 7.2(a) or Section 7.2(b) , in the case of a termination by Buyer, or the conditions set forth in Section 7.3(a) or Section 7.3(b) , in the case of a termination by Seller, and which, if curable, is not cured within thirty (30) days following written notice to the party committing such breach or which by its nature or timing cannot be cured prior to the Outside Date.

Section 9.2 Effect of Termination . In the event of termination of this Agreement by either Seller or Buyer as provided in Section 9.1 (or by Seller and Buyer as provided in Section 9.1(a) ), this Agreement shall forthwith become void and have no effect, and none of the parties or any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that (i) the first sentence of Section 6.2(b) , this Section 9.2 and Article X shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, no party shall be relieved or released from any liabilities or damages arising out of its fraud or willful breach of any provision of this Agreement.

ARTICLE X

GENERAL PROVISIONS

Section 10.1 Expenses . Except as set forth in Section 6.9(i) , all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such cost or expense, provided , however , that the parties shall share equally all out-of-pocket fees and expenses related to any notices or filings under the HSR Act and the submission of the CMA of the Broker to FINRA, in each case, other than attorneys’ and accountants’ fees and expenses.

Section 10.2 Notices . All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

(a) if to Seller, to:

ARC Properties Operating Partnership, L.P.

405 Park Ave, 15th floor

New York, NY 10022

Attention: Richard A. Silfen, General Counsel

Facsimile: (215) 887-2585

with a copies to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Phone: (212) 310-8000

Facsimile: (212) 310-8007

Attention:

Michael J. Aiello, Esq.

Matthew J. Gilroy, Esq.

and

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036-8299

Phone: (212) 969-3025

Facsimile: (212) 969-2900

Attention:

Peter Fass, Esq.

Steven L. Lichtenfeld, Esq.

if to Buyer, to:

RCS Capital Corporation

405 Park Ave, 15th floor

New York, NY 10022

Attention: James A. Tanaka, General Counsel

Facsimile: (212) 415-6567

with a copies to:

Duane Morris LLP

30 South 17th Street

Philadelphia, PA 19103-4196

Phone: (215) 979-1206

Facsimile: (215) 405-2906

Attention:

Darrick M. Mix, Esq.

Chad J. Rubin, Esq.

and

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036-8299

Phone: (212) 969-3025

Facsimile: (212) 969-2900

Attention:

Peter Fass, Esq.

Steven L. Lichtenfeld, Esq.

Section 10.3 Definitions . For purposes of this Agreement:

(a) “ Acquired Companies’ Indebtedness ” means the Acquired Companies’ Indebtedness as it would be reflected on a combined balance sheet of the Acquired Companies as of the opening of business on the First Closing Date prepared in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection with the preparation of the Financial Statements.

(b) “ Acquired Company Benefit Plan ” means any employee benefit plan, program, policy, practice, or other arrangement providing compensation or benefits to any Business Employee or any beneficiary or dependent thereof that is sponsored or maintained by an Acquired Company or any of its Subsidiaries or to which an Acquired Company or any of its Subsidiaries contributes or is obligated to contribute, on behalf of any Business Employee, including any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any bonus, incentive, performance, equity or stock or stock related, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control, supplemental unemployment benefit, vacation, sick or paid time off benefit, or fringe benefit plan, arrangement, program or policy.

(c) “ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the

management policies of such Person, whether through the ownership of voting securities or by contract or otherwise. For the avoidance of doubt, neither Buyer nor any of its Subsidiaries shall be deemed to be Affiliates of Seller or any of its Subsidiaries.

(d) “ Ancillary Agreements ” means all documents, instruments and certificates to be executed and delivered pursuant to this Agreement, including an executed version of each form contract attached hereto as an Exhibit.

(e) “ Ancillary Programs ” means the 1031 exchange, tenant in common and Delaware statutory trust businesses that are managed by the Acquired Companies.

(f) “ Auditor ” means an independent accounting firm of recognized national standing selected by Buyer and Seller that has no existing material relationship with either Seller or Buyer.

(g) “ Broker Sale ” means the purchase and sale, upon the terms and subject to the conditions of this Agreement, of the Acquired Interests in CCA.

(h) “ Business Day ” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or obligated by Law or executive order to close.

(i) “ Buyer Benefit Plan ” means any employee benefit plan, program, policy, practice, or other arrangement providing compensation or benefits to any employee of Buyer or any of its Affiliates or any beneficiary or dependent thereof that is sponsored or maintained by Buyer or any of its Affiliates or to which Buyer or any of its Affiliates contributes or is obligated to contribute, on behalf of any employee of Buyer or any of its Affiliates or any beneficiary or dependent thereof, including any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any bonus, incentive, performance, equity or stock or stock related, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control, supplemental unemployment benefit, vacation, sick or paid time off benefit, or fringe benefit plan, arrangement, program or policy.

(j) “ CCC ” means Cole Capital Corporation, an Arizona corporation.

(k) “ CHC ” means Christopher H. Cole.

(l) “ CHC Employment Agreement ” means, that certain Employment Agreement, dated March 5, 2013, by and among Cole Credit Property Trust III, Inc., Cole REIT III Operating Partnership, LP and CHC.

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

(n) “ Company Material Contracts ” means any Contract relating to the incurring of Indebtedness by any Acquired Company or any of its Subsidiaries in an amount in excess in the aggregate of $2,000,000, (ii) any non-competition Contract, or any other agreement or obligation which purports to limit or restrict in any material respect (A) the ability of any Acquired Company or its Subsidiaries to solicit customers or employees or (B) the manner in which, or the localities in which, all or any portion of the business of any Acquired Company or its Subsidiaries or, following the consummation of the transactions contemplated by this Agreement, Buyer or its Subsidiaries, is or would be conducted, (iii) any Contract providing for any payments that are conditioned, in whole or in part, on, or on any Contract that is terminable upon or otherwise prohibits, a change of control of any Acquired Company or any of its respective Subsidiaries, (iv) any collective bargaining agreement, (v) any joint venture or partnership agreements, (vi) any Contract that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of any Acquired Company or its Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business, (vii) any employment agreement with, or any agreement or arrangement that contains any severance pay or post-employment liabilities or obligations to, any current or former director, officer or employee of any Acquired Company or its Subsidiaries, (viii) any Contract that contains a “most favored nation” clause or similar term providing preferential pricing or treatment to a third party, (ix) any Contract pursuant to which any Acquired Company or any of its Subsidiaries manages or provides services with respect to

any real properties or entities other than (A) the real property of the Acquired Companies or any of their respective Affiliates and (B) Contracts pursuant to which the Acquired Companies and their respective Subsidiaries are not entitled to obtain any fees, (x) any Contract requiring any Acquired Company or any of its Subsidiaries to provide any funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in any third party other than any such Contracts for real estate investments for Persons advised by any Acquired Company or any of its Subsidiaries, (xi) any Contract not made in the ordinary course of business which (A) is material to the Acquired Companies and their respective Subsidiaries taken as a whole or (B) which would reasonably be expected to materially delay the consummation of the transactions contemplated by this Agreement and (xii) the Contracts entered into with the top seven (7) vendors (measured by annualized spend) of the Business.

(o) “ Designated FF&E ” means the furniture, fixtures and equipment listed on Section 10.3(o) of the Seller Disclosure Letter.

(p) “ Determination ” means a “determination” within the meaning of Section 1313(a) of the Code or any similar provision of state, local or foreign Law.

(q) “ Equity Interests ” means (i) the shares of capital stock of a corporation, (ii) the general or limited partnership interests of any partnership, (iii) the membership or other ownership interest of any limited liability company, (iv) the equity securities or other ownership interests of any kind of any other legal entity, or (v) any security, instrument, binding obligation or option, call, warrant or other right (whether or not immediately exercisable) to acquire, convert into or otherwise receive any of the foregoing, in any such case, whether owned or held beneficially, of record or legally.

(r) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

(s) “ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

(t) “ Estimated Closing Net Working Capital ” means Seller’s good faith estimate of the Net Working Capital of the Acquired Companies.

(u) “ Estimated Closing Net Working Capital Overage ” means the amount, if any, by which the Estimated Closing Net Working Capital exceeds the Target Net Working Capital.

(v) “ Estimated Closing Net Working Capital Shortage ” means the amount, if any, by which the Estimated Closing Net Working Capital is less than the Target Net Working Capital.

(w) “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended and the rules and regulations thereunder.

(x) “ Final Closing Net Working Capital ” means the Net Working Capital of the Acquired Companies as set forth in the Final Closing Statement (as adjusted pursuant to Section 2.1(d) ).

(y) “ Final Closing Net Working Capital Overage ” means the amount, if any, by which the Final Closing Net Working Capital exceeds the Target Net Working Capital.

(z) “ Final Closing Net Working Capital Shortage ” means the amount, if any, by which the Final Closing Net Working Capital is less than the Target Net Working Capital.

(aa) “ FINRA ” means the Financial Industry Regulatory Authority, Inc.

(bb) “ GAAP ” means United States generally accepted accounting principles.

(cc) “ Governing Documents ” means, with respect to any Person: (i) if a corporation, the articles, deed or certificate of incorporation and the bylaws; (ii) if a general partnership, the partnership agreement and any statement of partnership or other organizational documents; (iii) if a limited partnership, the limited partnership agreement and the certificate of limited partnership or other organizational documents; (iv) if a limited liability company, the constitution deed, articles of organization, bylaws, and deeds of amendment of bylaws, and operating agreement or other organizational documents; (v) if another type of Person, any other charter, trust agreement or similar document adopted or filled in connection with the creation, formation or organization of such Person; (vi) all equityholders’ agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equityholders of any Person; and (vii) any amendment, supplement or restatement of any of the foregoing.

(dd) “ Gross Income ” means “gross income” as such term is used for purposes of Section 856(c) of the Code.

(ee) “ Indebtedness ” of a Person means, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes and similar instruments and (iii) all leases of such Person capitalized pursuant to GAAP.

(ff) “ Indemnified Party ” means either a Buyer Indemnified Party or a Seller Indemnified Party.

(gg) “ Intellectual Property ” means all foreign and domestic intellectual property including all (i) trademarks, service marks, brand names, Internet domain names, logos, symbols, trade dress, fictitious names, trade names, and other indicia of origin and all goodwill associated therewith and symbolized thereby; (ii) patents and inventions and discoveries, whether patentable or not; (iii) confidential information, proprietary information, trade secrets and know-how, (including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists); (iv) copyrights and works of authorship in any media (including computer software programs, source code, databases and other complications of information); (v) all applications and registrations for any of the foregoing; and (vi) all extensions, modifications, renewals, divisions, continuations, continuations-in-part, reissues, restorations and reversions related to any off the foregoing.

(hh) “ IRS ” means the United States Internal Revenue Service.

(ii) “ Knowledge ” means (i) with respect to Seller, the actual knowledge of the persons listed on Section 10.3(ii)(i) to the Seller Disclosure Letter and (ii) with respect to Buyer, the knowledge, after reasonable inquiry, of the persons listed on Section 10.3(ii)(ii) of the Buyer Disclosure Letter.

(jj) “ Material Adverse Effect on Buyer ” means any event, circumstance, change, effect, development, condition or occurrence (a) that has a material adverse effect on the assets, liabilities, business, financial condition or results of operations of Buyer and its Subsidiaries, taken as a whole, or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of Buyer to consummate the transactions contemplated by this Agreement before the Outside Date; provided , however , that for purposes of clause (a) “Material Adverse Effect on Buyer” shall not include any event, circumstance, change, effect, development, condition or occurrence to the extent arising out of or resulting from (i) any failure of Buyer to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period ( provided that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a Material Adverse Effect on Buyer), (ii) any changes that affect the industries in which Buyer and its Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (vi) the execution and delivery of this Agreement, or the public announcement of the transactions contemplated hereby, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior

written consent of Seller, (viii) earthquakes, hurricanes, floods or other natural disasters, or (ix) changes in Law or GAAP (or the interpretation thereof), which in the case of each of clauses (ii), (iii), (iv), (v) and (ix) do not disproportionately affect Buyer and its Subsidiaries, taken as a whole, relative to others in the industries in which Buyer and its Subsidiaries operate, and in the case of clause (viii) do not disproportionately affect Buyer and its Subsidiaries, taken as a whole, relative to others in the industries in which Buyer and its Subsidiaries operate, in the geographic regions in which Buyer and its Subsidiaries operate.

(kk) “ Material Adverse Effect on Seller ” means any event, circumstance, change, effect, development, condition or occurrence (a) that has a material adverse effect on the assets, liabilities, business, financial condition or results of operations of the Acquired Companies and their respective Subsidiaries, taken as a whole, or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of Seller to consummate the transactions contemplated by this Agreement before the Outside Date; provided , however , that for purposes of clause (a), “Material Adverse Effect on Seller” shall not include any event, circumstance, change, effect, development, condition or occurrence to the extent arising out of or resulting from: (i) any failure of the Acquired Companies to meet any internal or external projections or forecasts or any estimates of earnings, revenues, or other metrics for any period ( provided that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a Material Adverse Effect on Seller), (ii) any changes that affect the industries in which the Acquired Companies and their respective Subsidiaries operate generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (vi) the execution and delivery of this Agreement, or the public announcement of the transactions contemplated hereby, (vii) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of Buyer, (viii) earthquakes, hurricanes, floods or other natural disasters, (ix) changes in Law or GAAP (or the interpretation thereof), or (x) any loss of one or more agents, producers, brokers, registered representatives or employees, which in the case of each of clauses (ii), (iii), (iv), (v) and (ix) do not disproportionately affect the Acquired Companies and their respective Subsidiaries, taken as a whole, relative to others in the industries in which the Acquired Company and their respective Subsidiaries operate, and in the case of clause (viii) do not disproportionately affect the Acquired Companies and their respective Subsidiaries, taken as a whole, relative to others in the industries in which the Acquired Companies and their respective Subsidiaries operate, in the geographic regions in which the Acquired Companies and their respective Subsidiaries operate.

(ll) “ MTN ” means Marc T. Nemer.

(mm) “ MTN Employment Agreement ” means, that certain Employment Agreement, dated March 5, 2013, by and among Cole Credit Property Trust III, Inc., Cole REIT III Operating Partnership, L.P. and MTN.

(nn) “ Multiemployer Plan ” means any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.

(oo) “ NASD ” means the National Association of Securities Dealers, Inc.

(pp) “ Net Working Capital ” means (i) cash and cash equivalents plus (ii) current assets minus (iii) current liabilities, each of (i), (ii) and (iii) as they would be reflected on a combined balance sheet of the Acquired Companies as of the opening of business on the Second Closing Date prepared in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection of the preparation of the Financial Statements, provided , that current assets shall not include deferred tax assets and current liabilities shall not include any Acquired Companies’ Indebtedness and any deferred tax liabilities; and provided , further , that current assets shall not include any accrued expenses for which Seller is entitled to reimbursement under any advisory or sub-advisory agreements.

(qq) “ NYSE ” means the New York Stock Exchange, Inc.

(rr) “ Permitted Liens ” means (i) any restriction on transfer arising under or imposed by applicable securities Laws, (ii) Liens for Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings by or on behalf of any of the Acquired Companies and its Subsidiaries; (iii) mechanics’, carriers’, workers’, repairers’, landlords’ and similar statutory Liens arising or incurred in the ordinary course of business for amounts which are not delinquent, or the amount or validity of which is being contested in good faith by appropriate proceedings by or on behalf of the Company and its Subsidiaries; (iv) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legal requirements or applicable Law; (v) purchase money Liens and Liens securing rental payments under capital lease arrangements; and (vi) other Liens arising in the ordinary course of business or that are not material.

(ss) “ Person ” means an individual, a corporation, a general or limited partnership, an association, a limited liability company, a Governmental Entity, a trust or other entity or organization.

(tt) “ Post-Closing Period ” any taxable period beginning after the Second Closing Date, and, in the case of any Straddle Period, the portion of such period beginning after the Second Closing Date.

(uu) “ Pre-Closing Period ” means any taxable period ending on or prior to the Second Closing Date and, in the case of any Straddle Period, the portion of such period ending on and including the Second Closing Date.

(vv) “ Premises ” means floors 1, 8 and 9 in that certain commercial office building located at 2325 E. Camelback Road, Phoenix, Arizona 85106.

(ww) “ Retained Employees ” means the employees of the Acquired Companies and their Subsidiaries other than the Business Employees.

(xx) “ SEC ” means the United States Securities and Exchange Commission.

(yy) “ Securities Act ” means the United States Securities Act of 1933, as amended and the rules and regulations thereunder.

(zz) “ Seller GP/Cole Merger Agreement ” means, that certain Agreement and Plan of Merger, dated as of October 22, 2013, by and among Seller GP, Clark Acquisition, LLC and Cole Real Estate Investments, Inc.

(aaa) “ Straddle Period ” means any taxable period that begins on or before the Second Closing Date and ends after the Second Closing Date.

(bbb) “ Subsidiary ” when used with respect to any Person, means any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, a majority of the Equity Interests of which are owned, directly or indirectly, by such Person.

(ccc) “ Target Net Working Capital ” means the amount that is the greater of: (x) $2,500,000 or (y) the average twelve-month trailing Net Working Capital as of August 30, 2014, unless otherwise agreed in writing by the parties (such agreement not to be unreasonably withheld).

(ddd) “ Tax ” or “ Taxes ” means with respect to any Person (i) any and all federal, state, local, foreign and other taxes, customs, duties, governmental fees or other like assessments or charges, including any net income, alternative or add-on minimum, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, capital stock, franchise, profits, license, registration, recording, documentary, intangibles, conveyance, gains, withholding, payroll, employment, social security (or similar), unemployment, disability, excise, severance, stamp, occupation, premium, property (real and personal), environmental, windfall profits or other taxes of any kind imposed by any Taxing Authority, together with any and all interest, penalties, additions to tax and additional amounts imposed by any Taxing Authority responsible for the imposition of any such tax (domestic or foreign) whether such tax is disputed or not, and (ii) liability for the payment of any amounts of the type described in clause (i) above relating to any other Person by contract, as a transferee or successor to another Person, or under Treasury Regulations Section 1.1502-6 or any analogous provisions of state, local, foreign or other Tax Law.

(eee) “ Tax Claim ” means any claim with respect to Taxes made by any Taxing Authority that, if pursued successfully, would reasonably be expected to serve as the basis for a claim for indemnification under Section 6.9 .

(fff) “ Tax Proceeding ” means any audit, examination, contest, litigation or other proceeding with or against any Taxing Authority.

(ggg) “ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, supplied or required to be supplied to a Taxing Authority.

(hhh) “ Tax Sharing Agreement ” means any written agreement, indemnity or other arrangement for the allocation or payment of Tax liabilities or payment for Tax benefits between an Acquired Company or its Subsidiaries and any Person (other than the indemnity provided pursuant to this Agreement or the Seller GP/Cole Merger Agreement), other than customary Tax indemnification or other arrangements contained in a commercial agreement entered into in the ordinary course of business, the primary purpose of which does not relate to Taxes.

(iii) “ Taxing Authority ” means any Governmental Entity responsible for the administration or collection of Taxes.

Section 10.4 Interpretation . When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The Seller Disclosure Letter and the Buyer Disclosure Letter, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement.

Section 10.5 Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

Section 10.6 Entire Agreement . This Agreement (including the documents and the instruments referred to in this Agreement), together with the Confidentiality Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, other than the Confidentiality Agreement.

Section 10.7 Governing Law; Jurisdiction . This Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State of Delaware, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 10.2 shall be deemed effective service of process on such party. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 10.8 Publicity . Neither Seller nor the Buyer shall, and neither Seller nor Buyer shall permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the prior consent (which consent shall not be unreasonably withheld, conditioned or delayed) of (a) Buyer, in the case of a proposed announcement or statement by Seller or its Affiliates, or (b) Seller, in the case of a proposed announcement or statement by Buyer or its Affiliates; provided , however , that any party may, without the prior consent of the other parties (but after prior consultation with the other parties to the extent practicable under the circumstances) issue or cause the publication of any press release or other public announcement to the extent required by applicable Law or by the rules and regulations of the NYSE, Nasdaq or any Governmental Entity to which the relevant party is subject or submits.

Section 10.9 Assignment; Third Party Beneficiaries . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by any of the parties (whether by operation of law or otherwise, but except by intestate succession) without the prior written consent of the other parties, except that Buyer may assign this Agreement or any of its rights or obligations hereunder to one or more of its Subsidiaries, provided that no such assignment shall relieve Buyer of any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each of the parties and their respective successors and permitted assigns. This Agreement (including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any person other than the parties hereto any rights or remedies under this Agreement.

Section 10.10 Specific Performance . The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal or state court located in the state of Delaware in addition to any other remedy to which they are entitled at law or in equity. Any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 10.11 Amendment; Waiver . Subject to compliance with applicable Law, the provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of each of the parties. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. At any time prior to the Second Closing, the parties may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of another party contained in this Agreement and (iii) waive compliance with any of the agreements of the other party or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of Seller and Buyer has caused this Agreement to be executed by its respective officers thereunto duly authorized as of the date first above written.


SELLER

By:	/s/ David S. Kay
	Name:	David S. Kay
	Title:	President

BUYER

By:	/s/ Edward M. Weil, Jr.
	Name:	Edward M. Weil, Jr.
	Title:	CEO

Annex A

Calculation of Contingent Consideration

The Contingent Consideration contemplated in Section 1.2(e) of the Agreement shall be payable pursuant to the terms of this Annex A . Capitalized terms used and not defined in this Annex A shall have the meaning ascribed to them in the Agreement.

Section 1.1 Definitions .

(a) “ Actual EBITDA ” means, for the fiscal year ending December 31, 2015, combined earnings before interest, tax, depreciation and amortization of the Acquired Companies, calculated in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection with the preparation of the Financial Statements, for the fiscal year ending December 31, 2015. In calculating Actual EBITDA, allocation of shared expenses to the Acquired Companies shall be made in a fair and equitable matter.

(b) “ Cole Sale ” means any transaction or series of related transactions resulting in the sale, transfer or other disposition of all or substantially all of the Business or the assets of the Acquired Companies and their respective Subsidiaries, taken as a whole, to any Person, other than Buyer or any of its Subsidiaries or Affiliates, whether effected through a transfer of assets or equity interests, a merger, a reorganization, a consolidation or any other similar transaction or series of related transactions, provided that, for the avoidance of doubt, a transfer of personnel of the Business shall not be deemed a Cole Sale.

(i) any Person or “group” other than the holder of Class B Common Stock as of the date hereof, any of its members, and/or any of their Affiliates, is or becomes the “beneficial owner,” directly or indirectly, of securities of Buyer representing 50% or more of (i) the combined voting power of all the outstanding securities of Buyer or (ii) the economic interest of all the outstanding equity securities of Buyer, voting or otherwise; or

(ii) Buyer or any of its Subsidiaries consolidates with, or mergers with or into, another Person or “group” other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates, (ii) Buyer sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of Buyer’s and/or its Subsidiaries’ assets to another Person or “group” other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates, or (iii) any Person other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates consolidates with, or a merges with or into, Buyer or any of its Subsidiaries, in each case, other than pursuant to a transaction in which (x) the Persons that “beneficially owned,” directly or indirectly, securities of Buyer, immediately prior to such transaction “beneficially own,” directly or indirectly, immediately after giving effect to such transaction outstanding securities of the continuing or surviving or transferee Person (or any parent thereof) representing 50% or more of the combined voting power of all the outstanding securities of such Person and (y) the Persons that “beneficially owned,” directly or indirectly, equity securities of Buyer, immediately prior to such transaction “beneficially own,” directly or indirectly, immediately after giving effect to such transaction outstanding equity securities of the continuing or surviving or transferee Person (or any parent thereof) representing 50% or more of the economic interest of all the outstanding equity securities of such Person; or

(iii) a transaction, or series of related transactions, in which the holder of Class B Common Stock as of the date hereof or any of its members, and/or any of their Affiliates ceases to “beneficial own,” directly or indirectly, securities representing 50% or more of the combined voting power of all the outstanding securities of Buyer; or

(iv) at any time prior to the Maturity Date, a majority of the members of the Board of Directors of Buyer cease for any reason (other than due to death, disability or compliance with any policy adopted by the Board of Directors of Buyer regarding mandatory retirement age) to be Incumbent Directors (for the purposes

hereof, the term “ Incumbent Directors ” shall mean (i) any of Nicholas S. Schorsch, Mark Auerbach, Jeffrey J. Brown, Peter M. Budko, William M. Kahane, C. Thomas McMillen, Michael Weil and Doug Wood and (ii) any director whose election, or nomination for election by Buyer’s stockholders, was approved by a vote of at least a majority of the then Incumbent Directors);

provided, however, that the exercise by the Buyer of its right to repurchase the issued and outstanding share of the Buyer Class B Stock shall not constitute, or be deemed to give rise to, a Change in Control.

(d) “ Earn-Out Auditor ” means an independent accounting firm of recognized national standing selected by Buyer and reasonably acceptable to Seller.

(e) “ Earn-Out Multiple ” means 7.40 times (7.40x).

(f) “ Excess EBITDA ” means the amount (expressed in U.S. dollars), if any, by which Actual EBITDA exceeds Target EBITDA.

(g) “ Performance Period ” means the calendar year commencing on January 1, 2015 and ending on December 31, 2015.

(h) “ Special Earn-Out Event ” means any of the following occurring prior to the Test Date:

(i) a Change in Control of Buyer (or entry into a definitive agreement by Buyer or any of its Subsidiaries providing for such a Change of Control); or

(ii) a Cole Sale.

(i) “ Special Earn-Out Payment ” means a payment (i) in cash or (ii) in cash and shares of Buyer Class A Stock, in lieu of the Earn-Out Payment, determined in the same manner as the Earn-Out Payment, except that for the portion of calendar year 2015 (if any) after the occurrence of the Special Earn-Out Trigger Date, instead of Actual EBITDA, a projection of such Actual EBITDA (and of each component thereof), determined as provided in Section 1.7(b) of this Annex A , shall be used; provided , however , that in no event shall the Special Earn-Out Payment be less than $50 million.

(j) “ Target EBITDA ” means $75.0 million.

(k) “ Test Date ” means December 31, 2015.

Section 1.2 Contingent Consideration.

(a) Promptly (and in any event within two (2) Business Days) following a Final Earn-Out Payment Statement being deemed final and binding pursuant to Section 1.3(e) of this Annex A , Buyer shall pay to Seller (by wire transfer of immediately available funds to an account designated in writing by Seller) an amount (not to exceed $130 million) in cash equal to one-half (1/2) of the product of (i) Excess EBITDA, multiplied by (ii) the Earn-Out Multiple (such amount, the “ Earn-Out Payment ”). For illustration purposes only, (A) if Actual EBITDA was $100 million, then the Earn-Out Payment would be $92.5 million (representing one-half of the product of (i) $25 million, multiplied by (ii) 7.40), and (B) if Actual EBITDA was $200 million, then the Earn-Out Payment would be $130 million because the Earn-Out Payment is capped at $130 million.

(b) Notwithstanding the foregoing, and so long as shares of Buyer Class A Stock are listed on a national securities exchange, Buyer may, as determined by Buyer in its sole discretion, pay to Seller the Earn-Out Payment as follows, and such payment, if elected, shall be made promptly (and in any event within two (2) Business Days) following the Final Earn-Out Payment Statement referred to in Section 1.2(a) of this Annex A being deemed final and binding:

(i) an amount in cash (by wire transfer of immediately available funds to an account designated in writing by Seller) equal to one-half (1/2) of the Earn-Out Payment; and

(ii) in satisfaction of the other one-half (1/2) of the Earn-Out Payment, the issuance by Buyer to Seller of such number of validly issued, fully paid and non-assessable shares of the Buyer Class A Stock determined by dividing (x) fifty percent (50%) of the Earn-Out Payment by (y) the intraday volume weighted average price of one share of Buyer Class A Stock, as reported by Bloomberg, LP, over the ten (10) trading days ending on the trading day immediately preceding the date on which the Final Earn-Out Payment Statement is deemed final (the “ Earn-Out Buyer VWAP ”); provided, however, if the foregoing number of shares, together with the Buyer Shares, is greater than a number representing nineteen and nine tenths percent (19.9%) of the shares of Buyer Class A Stock outstanding as of such date (such number, the “ Earn-Out Stock Threshold ”), then the number of shares of Buyer Class A Stock to be delivered pursuant to this Section 1.2(b)(ii) of this Annex A shall be reduced to the Earn-Out Stock Threshold and, in such event, Buyer shall pay to Seller the Earn-Out Excess Stock Amount in cash (by wire transfer of immediately available funds to an account designated in writing by Seller). For purposes hereof, “ Earn-Out Excess Stock Amount ” shall mean the number of shares of Buyer Class A Stock in excess of the Earn-Out Stock Threshold that would have been issued under the preceding sentence but for the proviso thereto, multiplied by the Earn-Out Buyer VWAP.

Section 1.3 Contingent Consideration Statements.

(a) Buyer shall engage the Earn-Out Auditor for the purposes of determining the Earn-Out Payment. Within thirty (30) days following the Test Date, Buyer shall prepare and deliver to Seller a written statement that sets forth in reasonable detail its calculation of Actual EBITDA, and the components thereof, and the Earn-Out Payment (such statement, an “ Initial Contingent Consideration Statement ”), along with reasonable support documentation for such calculations.

(b) Seller shall review the Initial Contingent Consideration Statement during the thirty (30) day period commencing on the date that Buyer delivers such Initial Contingent Consideration Statement. Buyer shall give Seller reasonable access to Buyer’s records, personnel and the Earn-Out Auditor for purposes of such review. In the event Seller disagrees with such Initial Contingent Consideration Statement, Seller may, prior to the end of such thirty (30)-day period, deliver a written notice to Buyer (a “ Notice of Contingent Consideration Statement Disagreement ”) setting out Seller’s objections and specifying in reasonable detail the adjustments that, in Seller’s opinion, should be made to such Initial Contingent Consideration Statement (collectively, the “ Proposed Contingent Consideration Statement Adjustments ”). In the event a Notice of Contingent Consideration Statement Disagreement is delivered in accordance with the terms of this Annex A , Seller and Buyer shall seek in good faith to resolve within ten (10) days any differences in relation to the Proposed Contingent Consideration Statement Adjustments and to reach agreement in writing on whether to address, and if so, how to address, each such Proposed Contingent Consideration Statement Adjustment.

(c) If Seller is satisfied with the applicable Initial Contingent Consideration Statement (either as originally submitted or after adjustments are agreed upon by Seller and Buyer in accordance with Section 1.3(b) of this Annex A ) or Seller fails to deliver a Notice of Contingent Consideration Statement Disagreement with respect to such Initial Contingent Consideration Statement within the thirty (30) day period specified in Section 1.3(b) of this Annex A ), then such Initial Contingent Consideration Statement (incorporating, if applicable, any agreed adjustments) shall be deemed final and constitute the applicable “ Final Contingent Consideration Statement ” for purposes of the Agreement.

(d) If any of the Proposed Contingent Consideration Statement Adjustments are not resolved or otherwise agreed to (or deemed agreed to) in accordance with Section 1.3(b) or Section 1.3(c) of this Annex A (the “ Unresolved Contingent Consideration Statement Adjustments ”) within ten (10) days after Buyer’s receipt of a Notice of Contingent Consideration Statement Disagreement, then the Unresolved Contingent Consideration Statement Adjustments may be submitted for resolution at the request of Buyer or Seller to the Auditor as set forth in Section 2.1(d) of the Agreement, mutatis mutandis ( provided that in the event that the Auditor is the same as the Earn-Out Auditor, Buyer and Seller shall select a different independent accounting firm of recognized national standing).

(e) When (A) pursuant to Section 1.3(b) or Section 1.3(c) of this Annex A , the Initial Contingent Consideration Statement is deemed to constitute the Final Contingent Consideration Statement for purposes of the Agreement, (B) Seller and Buyer reach agreement in writing with respect to the Initial Contingent Consideration Statement or (C) the Initial Contingent Consideration Statement is finally determined in accordance with the procedures set forth in Section 1.3(b) of this Annex A , the Initial Contingent Consideration Statement as so agreed (or deemed agreed) or determined shall be the applicable “ Final Earn-Out Payment Statement ” for purposes of the Agreement and shall be final and binding on the parties and shall be used for determination of the Earn-Out Payment, if any.

Section 1.4 Certain Changes to the Business; Remedies.

(a) In the event of any transaction, other than a Cole Sale, resulting in the sale or other disposition or transfer of any portion of the Business or the assets of the Acquired Companies or any of their respective Subsidiaries to any Person other than Buyer or any of its Subsidiaries, whether effected through a transfer of assets or equity interests, a merger, a reorganization, a consolidation or any other transaction (for the avoidance of doubt, not to include any transfer of personnel of the Business), Buyer and Seller shall work in good faith to agree upon an equitable adjustment to the manner in which Actual EBITDA (or any component thereof) shall be calculated such that Seller shall have substantially the same ability to receive the Earn-Out Payment that Seller had prior to such transaction. If Buyer and Seller are unable to agree on such adjustments, they will jointly refer the matter to a financial advisor of recognized national standing to provide such adjustments. Seller and Buyer will use their respective reasonable best efforts to cause such financial advisor to submit its adjustments within thirty (30) calendar days of its engagement for these purposes. The adjustments determined by such financial advisor shall be deemed final and binding on the parties. The fees and expenses of such financial advisor shall be allocated between Seller on the one hand, and Buyer, on the other hand in inverse proportion as they may prevail on the matters resolved by such financial advisor, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by such financial advisor at the time the determination of such firm is rendered on the merits of the matters submitted.

(b) Notwithstanding anything to the contrary in this Annex A or the Agreement, (i) the sole and exclusive liability and responsibility of Buyer and its Affiliates for any breach of Section 1.2(b) of the Agreement and the terms contained in this Annex A , and the sole and exclusive remedy of Seller with respect to any of the foregoing, shall be the payment of the Contingent Consideration, subject to an adjustment to such Contingent Consideration, taking into account the Actual EBITDA (and the components thereof) that would have resulted had such breach not occurred and other adjustments to the calculation of the Contingent Consideration to be mutually agreed by Buyer and Seller, and (ii) upon payment of the Contingent Consideration as so adjusted, any and all obligations of the parties under this Section 1.4 shall thereafter terminate and cease to have any further force or effect. In the event that Buyer and Seller are not able to mutually agree to adjustments to the Contingent Consideration within ten (10) Business Days after the party alleging such breach has given notice of alleged breach to Buyer (in the event of a breach alleged by Seller) or to Seller (in the event of a breach alleged by Buyer), then such adjustments shall be submitted for resolution at the request of the party alleging such breach to the Auditor as set forth in Section 2.1(d) of the Agreement, mutatis mutandis ( provided that in the event that the Auditor is the same as the Earn-Out Auditor, the party alleging such breach shall select a different independent accounting firm of recognized national standing reasonably acceptable to the party alleged to have breached).

Section 1.5 Tax Treatment of Contingent Consideration . The parties agree that for federal, state and local income tax purposes, the Contingent Consideration shall be treated by the parties as additional consideration for the purchase by Buyer of the Acquired Interests, and the parties shall cause such payment to be reported in good faith in accordance herewith.

Section 1.6 Certain Covenants of Buyer . From and after the Second Closing Date through the Test Date, Buyer will (a) maintain a separate set of accounts for the Acquired Companies and their Subsidiaries as if they were a stand-alone company separate from the other Subsidiaries of Buyer, (b) operate in the ordinary course of business consistent with past practice and not take any action outside the ordinary course of business the primary purpose of which is to eliminate or reduce the Earn-Out Payment, (c) except for a Cole Sale, not liquidate or otherwise dissolve any of the Acquired Companies or their Subsidiaries, (d) not effect any transaction (including any allocation of corporate expense) between Buyer or any Affiliate thereof (other than any Acquired Company or

Subsidiary thereof), on the one hand, and an Acquired Company or a Subsidiary thereof, on the other hand, on a basis less favorable in any material respect to such Acquired Company or Subsidiary than would be the case if such transaction had been at arms’-length with an unrelated third party. Notwithstanding the foregoing, Seller acknowledges and agrees that (i) the Earn-Out Payment, if any, is speculative and not guaranteed and subject to numerous factors outside the control of Buyer, (ii) neither Buyer nor any of its Affiliates has promised or projected any payments under this Annex A or any amount of Actual EBITDA for any period following the Second Closing Date, (iii) other than the express covenants and agreements contained in this Annex A , neither Buyer nor any of its Affiliates (including, following the Second Closing, the Acquired Companies) owes any duties (express or implied) to Seller, (iv) the parties solely intend the express provisions of this Annex A and the Agreement to govern their contractual relationship, and (v) subject to compliance with the provisions of this Annex A and the Agreement, Buyer shall have sole discretion with respect to all matters relating to the operation of the Acquired Companies, their Subsidiaries and their respective businesses, and shall have no obligation to operate any such Person or business in order to achieve any Earn-Out Payment or to maximize the amount thereof. From and after the Second Closing until December 31, 2015, no later than thirty (30) days after the end of each calendar month, Buyer shall prepare and deliver to Seller a written statement that sets forth in reasonable detail its calculation of the combined earnings before interest, tax, depreciation and amortization of the Acquired Companies, calculated in accordance with GAAP applied on a basis consistent with Seller’s accounting principles, policies and methodologies used in connection with the preparation of the Financial Statements, for the previous calendar month and, beginning in January 1, 2015, for the year to date.

Section 1.7 Special Earn-Out Events .

(a) Buyer shall provide Seller with twenty (20) days’ prior written notice of a Special Earn-Out Event. If a Special Earn-Out Event occurs, Seller will have the right to require, in lieu of the Contingent Consideration payable pursuant to this Annex A , a special payment in accordance with this Section 1.7 of Annex A . Seller may exercise such right within 60 days after obtaining actual knowledge that such Special Earn-Out Event has occurred (the date of such occurrence, the “ Special Earn-Out Trigger Date ”) by providing written notice to Buyer of such request, which notice shall also describe the reasons supporting the request (a “ Special Earn-Out Notice ”).

(b) If a Special Earn-Out Event occurs and Seller delivers a Special Earn-Out Notice in accordance with this Section 1.7 , the following provisions shall apply:

(1) Upon receipt of a Special Earn-Out Notice, each of Seller and Buyer shall engage a financial advisor of recognized national standing to prepare a calculation of the Special Earn-Out Payment, which will incorporate such financial advisor’s good faith projection of Actual EBITDA from the Special Earn-Out Trigger Date through the end of the Performance Period. Each party’s financial advisor shall submit its calculation of the Special Earn-Out Payment within 20 Business Days of receipt by Buyer of the Special Earn-Out Notice, along with reasonable supporting documentation for such calculations (each, a “ Special Earn-Out Statement ”). Buyer shall give each financial advisor reasonable access to its records, personnel and independent accountants for purposes of the financial advisors’ calculations of the Special Earn-Out Payment.

(2) If the higher calculation of the Special Earn-Out Payment contained in the two Special Earn-Out Statements is not more than 110% of the calculation of the Special Earn-Out Payment contained in the other Special Earn-Out Statement (such calculations collectively, the “ Special Earn-Out Payment Calculations ” and each individually a “ Special Earn-Out Payment Calculation ”), then the calculation of the Special Earn-Out Payment will be calculated based on an average of the two Special Earn-Out Payment Calculations.

(3) If the higher calculation of the Special Earn-Out Payment Calculations is more than 110% of the lower Special Earn-Out Payment Calculation, then Buyer’s and Seller’s financial advisors shall select and engage on behalf of Buyer and Seller a third financial advisor of recognized national standing, within ten (10) Business Days after the submission of the Special Earn-Out Statements pursuant to Section 1.7(b)(1) . The third financial advisor so selected shall use its reasonable best efforts to render its decision as to which of the two Special Earn-Out Payment Calculations is more accurate within thirty (30) days of the engagement of such third financial advisor. Buyer shall give such financial advisor reasonable access to its records, personnel and independent accountants for purposes of the financial advisor’s calculations of the Special Earn-Out Payment.

(4) Buyer and Seller agree that, upon the determination of the average of the Special Earn-Out Payment Calculations pursuant to Section 1.7(b)(2) , or upon the rendering of the decision of the third financial advisor pursuant to Section 1.7(b)(3), as applicable, Buyer and Seller shall be bound to such average or such decision which shall be deemed final and binding on the parties to the Agreement (such average or such Special Earn-Out Payment Calculation decided as the more accurate by the third financial advisor, the “ Final Special Earn-Out Payment ”). The Final Special Earn-Out Payment shall be paid by Buyer to Seller (by wire transfer of immediately available funds to an account designated in writing by Seller) promptly after the determination of the Final Special Earn-Out Payment in accordance with this Section 1.7(b)(4) .

The fees and expenses of the third financial advisor shall be allocated between Seller on the one hand, and Buyer, on the other hand in inverse proportion as they may prevail on the matters resolved by such financial advisor, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by such financial advisor at the time the determination of such firm is rendered on the merits of the matters submitted.

Exhibit A

FORM OF NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED PURSUANT TO THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

UNSECURED PROMISSORY NOTE DUE DECEMBER 16, 2021

No. 1

New York, NY

$300,000,000

[ — ], 2014

RCS CAPITAL CORPORATION

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, RCS Capital Corporation, a Delaware corporation (the “ Issuer ”), hereby promises to pay to the order of ARC Properties Operating Partnership, L.P., a Delaware limited partnership (the “ Initial Holder ”), or his, her or its registered assigns on the Maturity Date (as hereafter defined), the principal amount of Three Hundred Million Dollars ($300,000,000), together with all accrued and unpaid interest on the principal amount of this Note (as hereafter defined below) as provided herein. The Indebtedness (as hereafter defined below) evidenced by this Note shall constitute unsecured Indebtedness of the Issuer.

1. Definitions . Capitalized terms used herein shall have the meanings set forth in this Section 1 .

“ Affiliate ” shall mean, when used with respect to a specific Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“ Applicable Rate ” means, (i) from the Issue Date until [ — ], 2018 ¹ , 7.50 percentage points (7.5%) per annum, (ii) from [ — ], 2018 ¹ until [ — ], 2019 ² , 8.50 percentage points (8.5%) per annum, (iii) from [ — ], 2019 ² until [ — ], 2020 ³ , 9.50 percentage points (9.5%) per annum and (iv) from [ — ], 2020 ³ until the Maturity Date, 10.50 percentage points (10.5%) per annum.

“ Bankruptcy Code ” means the provisions of Title 11 of the United States Code, 11 U.S.C. § 101 et seq. , as now or hereafter in effect or any successor thereto.

“ beneficial owner ” and the related terms “beneficially owned” and “beneficially own” shall have the meaning as defined in Rule 13d-3 under the Exchange Act.

¹	4 years from the Issue Date.

²	5 years from the Issue Date.

³	6 years from the Issue Date.

“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by Law to close.

“ Capital Lease ” shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person.

“ Capital Lease Obligation ” shall mean, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease.

“ Change of Control ” shall be deemed to have occurred if any of the following occurs:

any Person or “group,” other than the holder of Class B Common Stock as of the date hereof, any of its members, and/or any of their Affiliates, is or becomes the “beneficial owner,” directly or indirectly, of securities of the Issuer representing 50% or more of (i) the combined voting power of all the outstanding securities of the Issuer or (ii) the economic interest of all the outstanding equity securities of the Issuer, voting or otherwise; or

(i) the Issuer or any of its subsidiaries consolidates with, or mergers with or into, another Person or “group” other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates, (ii) the Issuer sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the Issuer’s and/or its subsidiaries’ assets to another Person or “group” other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates, or (iii) any Person other than the holder of Class B Common Stock as of the date hereof, any of its members and/or any of their Affiliates consolidates with, or merges with or into, the Issuer or any of its subsidiaries, in each case, other than pursuant to a transaction in which (x) the Persons that “beneficially owned,” directly or indirectly, securities of the Issuer, immediately prior to such transaction “beneficially own,” directly or indirectly, immediately after giving effect to such transaction outstanding securities of the continuing or surviving or transferee Person (or any parent thereof) representing 50% or more of the combined voting power of all the outstanding securities of such Person and (y) the Persons that “beneficially owned,” directly or indirectly, equity securities of the Issuer, immediately prior to such transaction “beneficially own,” directly or indirectly, immediately after giving effect to such transaction outstanding equity securities of the continuing or surviving or transferee Person (or any parent thereof) representing 50% or more of the economic interest of all the outstanding equity securities of such Person; or

a transaction, or series of related transactions, in which the holder of Class B Common Stock as of the date hereof or any of its members, and/or any of their Affiliates ceases to “beneficial own,” directly or indirectly, securities representing 50% or more of the combined voting power of all the outstanding securities of Issuer; or

at any time prior to the Maturity Date, a majority of the members of the board of directors of the Issuer cease for any reason (other than due to death, disability or compliance with any policy adopted by the board of directors of the Issuer regarding mandatory retirement age) to be Incumbent Directors;

provided, however, that the exercise by the Issuer of its right to repurchase the issued and outstanding share of the Class B Common Stock shall not constitute, or be deemed to give rise to, a Change of Control.

“ Change of Control Payment Date ” has the meaning set forth in Section 3.3 .

“ Class B Common Stock” means the Class B common stock of the Issuer, par value $0.001 per share.

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

“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” shall have meanings correlative thereto.

“ Debt Service ” shall mean, with respect to any Person for any fiscal period, an amount equal to the sum of (a) Interest Expense for such period and (b) the scheduled amortization of any outstanding Indebtedness during such period.

“ Debt Service Coverage Ratio ” shall mean with respect to any Person for any period, the ratio of EBITDA to Debt Service.

“ Default ” means any of the events specified in Section 7 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 7 , would, unless cured or waived, become an Event of Default.

“ Default Rate ” means, at any time, the Applicable Rate plus 2.0%.

“ EBITDA ” shall mean, with respect to any Person for any fiscal period, an amount equal to (a) net income of such Person for such period, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (v) any other non-cash gains which have been added in determining net income, in each case to the extent included in the calculation of net income of such Person for such period in

accordance with GAAP, but without duplication, plus (c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) the amount of non-cash charges (including depreciation and amortization) for such period, (v) amortized debt discount for such period and (vi) the amount of any deduction to net income as the result of any grant to any members of the management of such Person of any Stock, in each case to the extent included in the calculation of net income of such Person for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining net income of a Person: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets and (9) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary.

“ Equity Purchase Agreement ” means that certain Equity Purchase Agreement dated [ — ], 2014, by and between the Issuer and the Initial Holder.

“ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended and the rules and regulations thereunder.

“ Event of Default ” has the meaning set forth in Section 7 .

“ Funded Debt ” shall mean, with respect to any Person, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and which by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of a Permitted Issuer Transferee, the Notes.

“ Governmental Authority ” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supranational bodies such as the European Union or the European Central Bank).

“ Gross Income ” means “gross income” as such term is used for purposes of Section 856(c) of the Code.

“ Holder ” means a holder of the Note(s) registered in the Note Register.

“ Incumbent Directors ” shall mean (i) any of Nicholas S. Schorsch, Mark Auerbach, Jeffrey J. Brown, Peter M. Budko, William M. Kahane, C. Thomas McMillen, Michael Weil and Doug Wood and (ii) any director whose election, or nomination for election by the Issuer’s stockholders, was approved by a vote of at least a majority of the then Incumbent Directors.

“ Indebtedness ” of any Person shall mean without duplication (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers’ acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Notes.

“ Initial Holder ” has the meaning set forth in the introductory paragraph.

“ Interest Expense ” shall mean, with respect to any Person for any fiscal period, interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including, in any event, interest expense with respect to any Funded Debt of such Person.

“ Interest Payment Date ” means March 16, June 16, September 16 and December 16 of each fiscal year, as appropriate; provided that if any such day is not a Business Day, then the applicable Interest Payment Date shall be the immediately preceding Business Day.

“ Issuer ” has the meaning set forth in the introductory paragraph.

“ group ” shall have the meaning as defined in Section 13(d)(3) of the Exchange Act.

“ Issue Date ” means [ — ]. ⁴

“ Law ” as to any Person, means any law (including common law), statute, ordinance, treaty, rule, regulation, policy or requirement of any Governmental Authority and authoritative interpretations thereon, whether now or hereafter in effect, in each case, applicable to or binding on such Person or any of its properties or to which such Person or any of its properties is subject.

“ Lien ” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction).

“Limitation Notice” has the meaning set forth in Section 9(c).

“ Majority Holder ” means the Holder or Holders of at least a majority of the aggregate principal amount of the Note(s) then outstanding, other than the Issuer and any of its controlled Affiliates.

“ Mandatory Change of Control Offer ” has the meaning given that term in Section 3.3 .

“ Maturity Date ” means the earlier of (a) December 16, 2021 and (b) the date on which all amounts under this Note shall become due and payable pursuant to Section 8 .

“ Notes ” means the Issuer’s aggregate principal amount of Three Hundred Million Dollars ($300,000,000) in unsecured promissory note(s) due December 16, 2021, issued under the Equity Purchase Agreement or in connection with any assignment thereafter.

“ Note Register ” has the meaning set forth in Section 5.1(a) .

“ Optional Redemption Price ” the meaning set forth in Section 3.2 .

“ Parties ” or “ Party ” has the meaning set forth in the introductory paragraph.

“ Payment Default ” means a Default or an Event of Default in the payment of the principal of, interest on and any other amount under, any Note.

“ Permitted Issuer Transferee ” means any corporation, limited liability company or partnership organized in the United States of America (excluding, for the avoidance of doubt any

⁴	Insert date of the Second Closing Date as such term is defined in the Equity Purchase Agreement.

individual or Governmental Authority) that (i) if not an Affiliate of the Issuer, (A) after taking into account the transactions in respect of which the Note is assumed, has Stockholders’ Equity of at least $400 million, (B) pro forma, after taking into account the transactions in respect of which the Note is assumed, has a Debt Service Coverage Ratio for the four most recent preceding fiscal quarters of not less than 1.3:1.0, and (C) which the Majority Holders have determined in their reasonable business judgment (which determination shall not be unreasonably withheld, conditioned or delayed (for purposes hereof, a delay exceeding 10 days shall be deemed to be an unreasonable delay)) has sufficient cash flows and revenues to meet its obligations under the Notes; and (ii) if an Affiliate of the Issuer (A) after taking into account the transactions in respect of which the Note is assumed, has Stockholders’ Equity of at least $250 million, (B) pro forma, after taking into account the transactions in respect of which the Note is assumed, has a Debt Service Coverage Ratio for the four most recent preceding fiscal quarters of not less than 1.3:1.0, and (C) which the Majority Holders have determined in their reasonable business judgment (which determination shall not be unreasonably withheld, conditioned or delayed (for purposes hereof, a delay exceeding 10 days shall be deemed to be an unreasonable delay)) has sufficient cash flows and revenues to meet its obligations under the Notes.

“ Permitted Transferee ” means an Affiliate of the applicable Transferor so long as such Affiliate remains an Affiliate of such Transferor.

“ Person ” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, Governmental Authority or other entity.

“ Record Date ” means, with respect to any Interest Payment Date, the March 1, June 1, September 1, or December 1 (whether or not such day is a Business Day) immediately preceding the applicable March 16, June 16, September 16 or December 16 Interest Payment Date.

“ Redemption Date ” has the meaning set forth in Section 3.2 .

“ Redemption Notice ” has the meaning set forth in Section 3.4(a) .

“ RFO Notice ” has the meaning set forth in Section 10.15(b)(i) .

“ Securities Act ” has the meaning set forth in the securities legend.

“ Stock ” shall mean all shares, options, warrants, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Exchange Act).

“ Stockholders’ Equity ” means, with respect to any Permitted Issuer Transferee, the value of its assets less its liabilities, as determined in accordance with GAAP.

“ Subsidiary ” shall mean, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting

power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner.

“ Taxes ” has the meaning set forth in Section 9(a) .

“ Transfer ” has the meaning set forth in Section 10.15(a) .

“ Transferor ” has the meaning set forth in Section 10.15(a) .

“ UCC ” shall mean the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York.

“ Voidable Transfer ” has the meaning set forth in Section 10.7 .

2. Issuance of this Note .

2.1 The Issuer issued this Note under the Equity Purchase Agreement. This Note is a general obligation of the Issuer.

3. Final Payment Date; Redemption .

3.1 Final Payment Date . The aggregate unpaid principal amount of the Notes, along with accrued and unpaid interest and all other amounts payable under this Note shall become due and payable on the Maturity Date.

3.2 Optional Redemption . Subject to Section 9(c), the Notes shall be redeemable, in whole or in part, at any time after December 31, 2015 at the option of the Issuer at a redemption price equal to 100% of the outstanding principal amount of such Notes plus all accrued and unpaid interest thereon to the date of redemption (the “ Optional Redemption Price ”). The Issuer shall give each Holder of the Notes written notice of any redemption pursuant to this Section 3.2 at least ten (10) Business Days prior to the date of redemption. Subject to Section 9(c), the notice shall identify the Notes to be redeemed and shall state the redemption date, which shall be a Business Day (the “ Redemption Date ”), the Optional Redemption Price (and include a reasonably detailed calculation thereof) and, in accordance with Section 5.3(a) , the manner and place of payment. Any notice of redemption given by the Issuer pursuant to this Section 3.2 shall be irrevocable and shall obligate the Issuer to pay the Optional Redemption Price on the date specified in such notice.

3.3 Mandatory Redemption . Not later than 1:00 p.m. (New York time), at least twenty (20) days prior to the occurrence of a Change of Control, the Issuer shall make an offer to redeem the Notes by providing written notice thereof to the Holder (a “ Mandatory Change of Control Offer ”), setting forth the proposed date of the Change of Control and the Redemption Date (which shall be the date upon which the Change of Control is consummated) (the “ Change of Control Payment Date ”), agreeing to redeem the Notes at a redemption price equal to 100% of the outstanding principal amount of the Notes plus any accrued but unpaid interest thereon to the date of redemption; provided that such Mandatory Change of Control Offer may be conditioned upon the effectiveness of such Change of Control, in which such case, if such condition is not satisfied, such Mandatory Change of Control Offer may be revoked by the Issuer by written notice to the Holder by 9:00 a.m. (New York time) on the Business Day set forth in such specified prepayment notice. On the Change of Control Payment Date, the Issuer shall accept for payment all Notes or portions thereof properly tendered at least three (3) Business Days prior to the Change of Control Payment Date.

3.4 Redemption Procedures .

(a) A notice of redemption delivered pursuant to Section 3.2 (the “ Redemption Notice ”) or Mandatory Change of Control Offer, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such Redemption Notice or Mandatory Change of Control Offer by mail or any defect in the Redemption Notice or Mandatory Change of Control Offer to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. With respect to a Note that is to be redeemed in part only, the portion of the principal amount thereof to be redeemed and after the date of redemption thereof, upon surrender of such Note, a new Note in principal amount equal to the unredeemed portion thereof shall be issued.

(b) If fewer than all of the outstanding Notes are to be redeemed pursuant to a Redemption Notice, the Issuer shall select the Notes to be redeemed on a pro rata basis.

(c) The Issuer may not redeem any Notes pursuant to Section 3.2 on any date if the principal amount of the Notes has been accelerated in accordance with the terms of the Notes and such acceleration has not been rescinded, on or prior to the Redemption Date (except in the case of an acceleration resulting from an Event of Default by the Issuer in the payment of the redemption price with respect to such Notes).

(d) In the event of any redemption of the Notes in accordance with this Section 3.4 , the Issuer shall not be required to issue, register the transfer of or exchange any Note during the fifteen (15) calendar day period prior to the date on which the Redemption Notice is deemed to have been given to all Holders of Notes to be redeemed, or register the transfer of or exchange any Notes so selected for redemption, in whole or in part, except the portion of any Notes being redeemed in part that shall not be redeemed.

4. Interest .

4.1 Interest . Except as otherwise provided herein, the Note shall bear interest at the Applicable Rate from [ — ] ⁵ or from the most recent date to which interest had been paid, but excluding, the next scheduled Interest Payment Date, until the Maturity Date.

4.2 Interest Payment Dates . Interest shall be payable in cash quarterly in arrears to the Persons who are registered Holders of the Notes at close of business on Record Date immediately preceding the applicable Interest Payment Date.

4.3 Default Interest . During the continuance of an Event of Default, the Issuer shall pay to the Holder interest at the Default Rate on the outstanding principal amount of the Notes and on any other amount payable by the Issuer hereunder (including accrued but unpaid interest to the extent permitted under applicable Law). Interest payable at the Default Rate shall be payable upon demand and in cash.

4.4 Computation of Interest . All computations of interest shall be made on the basis of a year of 365 days (or 366 days in the case of a leap year), and the actual number of days elapsed (including the first day but excluding the last day).

4.5 Interest Rate Limitation . If at any time and for any reason whatsoever, the interest rate payable on the Notes shall exceed the maximum rate of interest permitted to be charged under applicable Law, such interest rate shall be reduced automatically to the maximum rate of interest permitted to be charged under applicable Law and that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest permitted by applicable Law shall be deemed a voluntary prepayment of principal.

5. Note Register; Payment Mechanics .

5.1 Note Register .

(a) The Issuer shall cause to be kept at its principal office a register for the registration and transfer of each of the Notes (the “ Note Register ”). The names and addresses of the Holders of Notes, the transfer of Notes, and the names and addresses of the transferees of the Notes shall be registered in the Note Register.

⁵	Insert date of the First Closing Date as defined in the Equity Purchase Agreement.

(b) The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Note, and the Issuer shall not be affected by any notice to the contrary, until due presentment of such Note for registration of transfer so provided in this Section 5.1 . Payment of or on account of the principal, and interest on any registered Notes shall be made to or upon the written order of such registered holder.

(c) When Notes are presented to the Issuer with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Issuer shall register the transfer or make the exchange as requested if requirements set for under Section 5.6 herein, are met.

(d) The Person in whose name any Note is registered on the Note Register at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be payable at the office or agency of the Issuer maintained by the Issuer for such purposes. The Notes will be payable both as to principal and interest by Federal funds wire transfer of lawful money of the United States to each Holder’s account in any bank in the United States as may be designated and specified in writing by such Holder at least two Business Days prior thereto.

5.2 Delivery Expenses . If a Holder surrenders any Note to the Issuer for any reason, the Issuer agrees to pay the cost of delivering to such Holder’s home office or to the office of such Holder’s designee from the Issuer, the Note(s) issued in substitution, replacement or exchange for, the surrendered Note.

5.3 Direct Payment .

(a) The Issuer will pay or cause to be paid all amounts payable with respect to any Note (without any presentment of such Note and without any notation of such payment being made thereon) by crediting (before 1:00 p.m., New York time), by intra-bank or Federal funds bank wire transfer in same day funds in U.S. Dollars to each Holder’s account in any bank in the United States as may be designated and specified in writing by such Holder at least two Business Days prior thereto.

(b) Notwithstanding anything to the contrary contained in the Notes, if any principal amount payable with respect to a Note is payable, at maturity, upon redemption, or otherwise, on a day which is not a Business Day, then the Issuer shall pay such amount on the next succeeding Business Day, and interest shall accrue on such amount until the date on which such amount is paid and payment of such accrued interest shall be made concurrently with the payment of such amount; provided that the Issuer may elect to pay in full (but not in part) any such amount on the last Business Day prior to the date such payment otherwise would be due, and no such additional interest shall accrue on such amount. Notwithstanding anything to the contrary contained in the Notes, if any interest payable with respect to a Note is payable on a day which is not a Business Day, then the Issuer may elect to pay in full (but not in part) any such interest on the last Business Day prior to the date such payment otherwise would be due, and such diminution in time shall be included in the computation of the interest payment.

5.4 Lost, etc. Notes . If a mutilated Note is surrendered to the Issuer or if the Holder of a Note claims and submits an affidavit or other evidence, reasonably satisfactory to the Issuer to the effect that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue a replacement Note if the customary requirements relating to replacement securities are reasonably satisfied. If required by the Issuer, such Holder must provide an indemnity bond, or other form of indemnity, sufficient in the reasonable judgment of the Issuer to protect the Issuer from any loss which it may suffer if a Note is replaced. The affidavit of such Holder at the time of loss, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the unsecured written agreement of such Holder reasonably satisfactory to the Issuer to indemnify the Issuer or, at the option of the Issuer, an indemnity bond in the amount of the Note remaining outstanding. Every replacement Note is an obligation of the Issuer.

5.5 Other Covenants . The Issuer further covenants and agrees not to, and to ensure that no affiliate (as defined in Rule 501(b) of the Securities Act) of the Issuer will, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) that would be integrated with the issuance of the Notes in a manner that would require the registration under the Securities Act of the issuance of the Note under the Equity Purchase Agreement.

5.6 Transfer Restrictions . No transfer or sale (including, without limitation, by pledge or hypothecation) of Notes by any Holder which is otherwise permitted hereunder, other than a transfer or sale to the Issuer, shall be effective unless such transfer or sale is made (i) pursuant to an effective registration statement under the Securities Act and a valid qualification under applicable state securities or “blue sky” laws or (ii) without such registration or qualification as a result of the availability of an exemption therefrom, and if reasonably requested by the Issuer, counsel for such transferee (who may be in-house) shall have furnished the Issuer with an opinion, reasonably satisfactory in form and substance to the Issuer, to the effect that no such registration is required because of the availability of an exemption from the registration requirements of the Securities Act; provided , however , that with respect to transfers by Holders to their Affiliates, no such opinion shall be required. For the avoidance of doubt, all transfers or sales of Notes shall be subject to Section 10.15 .

5.7 Replacements Notes . All Notes issued by the Issuer shall be in form and substance identical to this Note other than the principal amount and the Holder thereof and otherwise to the extent set forth in Section 10.9(d) . Any Note issued by the Issuer in connection with one or more assignments or redemptions of this Note as permitted hereunder will be in the principal amount of One Thousand Dollars ($1,000) (except in the case of any redemption following which the aggregate principal amount remaining is less than $1,000) or integral multiplies of One Thousand Dollars ($1,000) or excess thereof.

6. Affirmative Covenants . So long as any of the Notes remain unpaid and outstanding, the Issuer covenants to the Holders of the outstanding Notes as follows:

(a) Do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence; and

(b) Provide prompt notice of the occurrence of, after the Issuer becomes aware of any such event, any Default or Event of Default hereunder.

7. Events of Default . The occurrence and continuance of any of the following shall constitute an “ Event of Default ” hereunder:

(a) default in any payment of interest on this Note or any other amount (other than principal) payable hereunder when due and payable, and the default continues for a period of five (5) days;

(b) default in the payment of principal of this Note when due and payable on the Maturity Date, upon any required redemption, upon declaration of acceleration or otherwise;

(c) failure by the Issuer to issue a Mandatory Change of Control Offer in accordance with Section 3.3 , and such failure is not cured within five (5) days after the due date for such notice;

(d) failure by any Permitted Issuer Transferee to comply with the covenants set forth in Sections 5 and 6 of the Assumption Agreement (as defined below);

(e) failure by the Issuer to comply with any of its other covenants or agreements contained in the Note and such failure shall continue for thirty (30) days from receipt by the Issuer of written notice thereof from the Holder;

(f) default by the Issuer with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of Twenty-Eight Million Seven Hundred and Fifty Thousand Dollars ($28,750,000) (or its foreign currency equivalent) in the aggregate of the Issuer whether such indebtedness now exists or shall hereafter be created (i) resulting in such

indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise;

(g) a final judgment for payment of Twenty-Eight Million Seven Hundred and Fifty Thousand Dollars ($28,750,000) (or its foreign currency equivalent) or more (excluding any amounts covered by insurance) rendered against the Issuer, which judgment is not discharged or stayed within sixty (60) days after (i) the date on which the right to appeal thereof has expired if no such appeal has commenced or (ii) the date on which all rights to appeal have extinguished;

(h) the Issuer shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Issuer or its debts under bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of trustee, receiver, liquidator, custodian or other similar official of the Issuer or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

(i) an involuntary case or other proceeding shall be commenced against the Issuer seeking liquidation, reorganization or other relief with respect to the Issuer or debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment of trustee, receiver, liquidator, custodian or other similar official of the Issuer or any substantial part of its property, and such involuntary care or other proceeding shall remain undismissed and unstayed for a period of ninety (90) consecutive days.

8. Remedies.

8.1 Acceleration of Notes .

(a) Subject to Section 8.1(c) , if an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 7 occurs and is continuing), the Majority Holders, by notice to the Issuer (a copy of which shall be provided to each other Holder; provided that such copy shall not constitute a notice for the purpose thereof), may declare the unpaid principal of and any accrued interest on all the Notes to be due and payable, and immediately upon such declaration, the principal and interest shall be due and payable. If an Event of Default specified in clause (g) or (h) of Section 7 occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of any Holder.

(b) Notwithstanding Section 8.1(a) , but subject to Section 8.1(c) , if an Event of Default specified in clauses (a) or (b) of Section 7 occurs and is continuing, any Holder, by notice to the Issuer (a copy of which shall be provided to each other Holder; provided that such copy shall not constitute a notice for the purpose thereof), may declare the unpaid principal of and any accrued interest on all the Notes it holds to be due and payable, and immediately upon such declaration, the principal and interest shall be due and payable.

(c) The Holder by notice to the Issuer (a copy of which shall be provided to each other Holder; provided that such copy shall not constitute a notice for the purpose thereof) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that have become due solely because of the acceleration.

8.2 Other Remedies .

(a) If an Event of Default occurs and is continuing, the Majority Holders or, if a Payment Default occurs and is continuing, any Holder, may pursue any rights and remedies available under the Notes and the applicable law to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes.

(b) A delay or omission by any Holder of any Notes in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

8.3 Waiver of Past Defaults . The Majority Holders by notice to the Issuer (a copy of which shall be provided to each other Holder; provided that such copy shall not constitute a notice for the purpose thereof) may waive an existing Default or Event of Default under the Notes and its consequences except a continuing Payment Default.

8.4 Rights of Holders to Receive Payment . Notwithstanding any other provision of this Note, the right of any Holder of a Note to receive payment of principal and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

9. Taxes; Tax Assurances .

(a) The Issuer shall make all payments, whether on account of principal, interest or otherwise, free of and without deduction or withholding for any present or future taxes, duties or other charges (“ Taxes ”), unless otherwise required by Law.

(b) The Issuer and each Holder acknowledges that it is intended that the Notes not be readily tradable on an “established securities market” and each of Holder and the Issuer agrees that he or it will not take any action that would result in a Note being traded on an established securities market. Any transfer of a Note on an established securities market shall be null and

void. As used herein, “established securities market” means (i) a national securities exchange which is registered under Section 6 of the Exchange Act (15 U.S.C. 78f), (ii) an exchange which is exempted from registration under Section 5 of the Exchange Act (15 U.S.C. 78e) because of its limited volume of transactions, and (iii) any over-the-counter market (within the meaning of Treasury Regulations Section 1.453-3(d)(4)).

(c) Until January 31, 2017, the Issuer shall not redeem the Notes held by the Initial Holder or any of its Affiliates and the Initial Holder shall not transfer all or any portion of its Note(s) in any tax year to the extent the Gross Income that would be recognized by the Initial Holder from such redemption or transfer if included in the Nonqualifying Income (as defined in the Equity Purchase Agreement) for such tax year, would cause the total Gross Income to be recognized by the Initial Holder in such tax year to exceed the Nonqualifying Income Limitation (as defined in the Equity Purchase Agreement) in accordance with Section 1.2(f) of the Equity Purchase Agreement. The Initial Holder shall notify the Issuer (the “ Limitation Notice ”) within five (5) Business Days after a Redemption Notice if redemption of the Notes would not be permitted. From and after the date of any Limitation Notice until the earlier of January 31, 2017 or the date on which the Initial Holder notifies the Issuer in writing that that Issuer may again effect a redemption, any Note held by the Initial Holder or any of its Affiliates shall bear interest at a rate of one percent (1%) per annum. Nothing in this Section 9(c) shall affect the Issuer’s right to redeem, or the interest payable on, Notes held by any other Holders.

10. Miscellaneous .

10.1 Notices .

(a) All notices, requests or other communications required or permitted to be delivered hereunder shall be delivered in writing:

(i) If to the Issuer:

RCS Capital Corporation

405 Park Ave, 15th floor

New York, NY 10022

Attention: James A. Tanaka, General Counsel

Facsimile: (212) 415-6567

With copies ( which shall not constitute notice ) to:

Duane Morris LLP

30 South 17th Street

Philadelphia, PA 19103-4196

Attn: Darrick M. Mix, Esq.

Telephone: 1 215-979-1206

Facsimile: 215 827 5560

and

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036


Attn:		Peter M. Fass, Esq. and
		Steven L. Lichtenfeld, Esq.

Telephone: 212-969-3735

Facsimile: 212-969-2900

If to any Holder which acquired a Note from the Issuer on the Issue Date at the address or facsimile number set forth on Exhibit A hereto or, the in the case of another Holder, at the address or facsimile number provided by such Holder to the Issuer.

With copies ( which shall not constitute notice ) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attn: Michael J. Aiello, Esq. and Matthew Gilroy, Esq.

Telephone: 212-310-8552

Facsimile: 212-310-8007

and

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036


Attn:		Peter M. Fass, Esq. and
		Steven L. Lichtenfeld, Esq.

Telephone: 212-969-3735

Facsimile: 212-969-2900

(b) Notices if (i) mailed by certified or registered mail or sent by hand or overnight courier service shall be deemed to have been given when received, (ii) sent by facsimile during the recipient’s normal business hours shall be deemed to have been given when sent (and if sent after normal business hours shall be deemed to have been given at the opening of the recipient’s business on the next Business Day) and (iii) sent by e-mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment).

10.2 Successors and Assigns . This Note shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. The Issuer’s rights or obligations hereunder or any interest herein may not be assigned or delegated by the Issuer to any Person without the prior written consent of each Holder (and any attempted assignment or transfer by the Issuer without such consent shall be null and void), provided that the Issuer may assign all (but not part) or its rights and obligations under this Note (for the avoidance of doubt any such transfer shall be with respect to all of the Notes then outstanding) to a Permitted Issuer Transferee (whether or not an Affiliate of the Issuer and whether or not in connection with a spinoff, corporate reorganization or otherwise) so long as (a) the Issuer shall provide not less than thirty (30) days prior written notice of such proposed assignment to each Holder, together with such Permitted Issuer Transferee’s most recent audited (or in the case of a Permitted Issuer Transferee that is an Affiliate of the Issuer and for which an audit has not been conducted, unaudited) annual and unaudited quarterly financial statements (each in accordance with GAAP), (b) each Holder shall have received all other information and documentation (including, without limitation,

certificates of good standing, organizational documents and legal opinions) pertaining to such Permitted Issuer Transferee and the proposed assignment, as reasonably requested by each Holder, (c) such Permitted Issuer Transferee shall execute and deliver an assumption agreement with respect to this Note in the form attached hereto as Exhibit B (the “ Assumption Agreement ”), pursuant to which it shall agree to be bound by all of the terms hereof as the Issuer, and (d) both as of the date of such assignment and immediately after giving effect thereto (for the avoidance of doubt, pertaining to Permitted Issuer Transferee whether or not an Affiliate of the Issuer), each of the representations and warranties contained in the Assumption Agreement shall be true and correct in all material respects; (e) whether or not an Affiliate of the Issuer, no Default or Event of Default shall have occurred and be continuing, and (f) such proposed assignment shall not be for the purpose of avoiding a Change of Control. Upon any such assignment by the Issuer, the Issuer shall have no further obligations under this Note.

10.3 GOVERNING LAW; SUBMISSION TO JURISDICTION . THE NOTES SHALL BE GOVERNED BY AND CONSTRUCTED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(B) OF THE NEW YORK CIVIL PRACTICE LAWS AND RULES. THE ISSUER AND EACH OF THE HOLDERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE NOTES, AND IRREVOCABLY ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE ISSUER, AND EACH OF THE HOLDERS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY SUCH CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUER IN ANY OTHER JURISDICTION.

10.4 Waiver of Jury Trial . THE ISSUER AND EACH HOLDER WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THE NOTES.

10.5 Independence of Covenants . All covenants hereunder shall be given in any jurisdiction independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

10.6 Notes Solely Corporate Obligations . No recourse for the payment of the principal of or accrued and unpaid interest on any Note, nor for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Issuer under any Note shall be had against any stockholder, employee, agent, officer, member of the Board of Directors or subsidiary, as such, past, present or future, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation whether by virtue of any constitution, statue or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the issue of the Notes.

10.7 Revival and Reinstatement of Obligations . If the Holder repays, refunds, restores, or returns in whole or in part, any payment or property previously paid or transferred to the Holder in full or partial satisfaction of any obligation evidenced by a Note, because the payment, transfer, or the incurrence of the obligation so satisfied is asserted or declared to be void, voidable, or otherwise recoverable under any Law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent transfers, preferences, or other voidable or recoverable obligations or transfers (each, a “ Voidable Transfer ”), or because the Holder elects to do so on the reasonable advice of its counsel in connection with a claim that the payment, transfer, or incurrence is or may be a Voidable Transfer, then, as to any such Voidable Transfer, or the amount thereof that the Holder elects to repay, restore, or return (including pursuant to a settlement of any claim in respect thereof), and as to all reasonable costs, expenses, and attorneys’ fees of the Holder related thereto, the liability of the Issuer with respect to the amount or property paid, refunded, restored, or returned will automatically and immediately be revived, reinstated, and restored and will exist.

10.8 Waiver of Notice . The Issuer hereby waives demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity and diligence in taking any action to collect sums owing hereunder.

10.9 Amendments and Waivers .

(a) With Consent of Holders . The Issuer, with the written consent of the Majority Holders (a copy of which shall be provided to each other Holder), may amend the Notes, provided that each Holder shall have received prior notice and a draft of such proposed amendment. The Majority Holders may waive compliance by the Issuer with any provision of the Notes by a written consent (a copy of which shall be provided to each Holder), provided that each Holder shall have received prior notice and a draft of such proposed waiver. Without the consent of each Holder affected, however, no amendment may (with respect to any Notes held by a nonconsenting Holder of Notes):

(i)

reduce the principal amount of Notes;

(ii)

reduce the principal of or change the fixed maturity of any Note, or alter the provisions with respect to the redemption of the Notes;

(iii)

reduce the rate of interest on any Note;

(iv)

make any change in the provisions of this Note relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest on the Notes;

(v)

make any change to the definition of “Majority Holders”; or

(vi)

make any change in the foregoing amendment provisions.

(b) It shall not be necessary for the consent of the Holders under Section 10.9(a) to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment or waiver under Section 10.9(a) becomes effective, the Issuer shall mail to all other Holders a notice briefly describing the amendment or waiver and a copy of the fully executed amendment or waiver. Any failure of the Issuer to mail such notice and copy, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment or waiver.

(c) In connection with any amendment under Section 10.9(a) , the Issuer may offer, but shall not be obligated to offer, to any Holder who consents to such amendment or waiver, consideration for such Holder’s consent.

(d) Revocation and Effectiveness of Consents . Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every

subsequent Holder of a Note or portion of a Note that evidence that same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of his Note by notice to the Issuer received before the date on which the Majority Holders have consented (and not theretofore revoked such consent) to the amendment or waiver.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.

After an amendment or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of the clauses (i) though (vi) of Section 10.9(a) , in which case, the amendment or waiver shall bind only each Holder of a Note who consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of, premium (if any) and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or amendment, Notes owned by the Issuer or any Affiliate of the Issuer shall be considered as though not outstanding.

(e) Notation on or Exchange of Notes . If an amendment or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Issuer so that it may place an appropriate notation on the Note about the changed terms and return it to the Holder.

10.10 Headings . The headings of the various Sections and subsections herein are for reference only and shall not define, modify, expand or limit any of the terms or provisions hereof.

10.11 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising on the part of the Holder, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

10.12 Electronic Execution . The words “execution”, “signed”, “signature”, and words of similar import in the Notes shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the same effect, validity and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable Law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq .), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), or any other similar state Laws based on the Uniform Electronic Transactions Act.

10.13 Severability . If any term or provision of the Note is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of the Notes or invalidate or render unenforceable such term or provision in any other jurisdiction.

10.14 Expenses . The Issuer agrees to pay all reasonable out-of-pocket expenses incurred by the Holder in connection with the administration of this Note or in connection with any amendments, modifications or waivers of the provisions hereof or thereof or incurred by the Holder in connection with the enforcement or protection of its rights under this Note, including in connection with any refinancing or restructuring of the credit arrangements provided under this Note in the nature of a “work-out” or pursuant to any insolvency or bankruptcy proceedings the reasonable fees, charges and disbursements of one New York counsel (and counsel in each other relevant local jurisdiction) for the Holder. The agreements in this Section 10.14 shall survive repayment of all of the indebtedness evidenced by this Note. All amounts due under this Section 10.14 shall be paid promptly following receipt by the Issuer of an invoice relating thereto setting forth such expenses in reasonable detail.

10.15 Right of First Offer .

(a) Notwithstanding anything herein to the contrary, and subject to the terms and conditions specified in this Section 10.15 , unless any Event of Default occurs and is continuing at the time of such Transfer, the Issuer shall have a right of first offer with respect to any sale, assignment, exchange or other transfer, whether involuntarily or voluntarily (each, a “ Transfer ”), of all or any part of this Note by the Initial Holder or any of its Affiliates (the Initial Holder and any such Affiliate, each a “ Transferor ”) other than to a Permitted Transferee.

(b) If a Transferor proposes to Transfer this Note, the Transferor shall first make an offer of this Note to the Issuer in accordance with the following provisions:

(i)

The Transferor shall deliver a notice (the “ RFO Notice ”) to the Issuer stating (i) the Transferor’s bona fide intention to Transfer this Note and (ii) the price and terms upon which it proposes to Transfer this Note.

(ii)

Within thirty (30) calendar days after delivery of the RFO Notice, the Issuer may elect, upon written notice to the Transferor, to purchase, at the price and on the terms specified in the RFO Notice, this Note. If the Issuer elects to purchase this Note, such purchase shall be completed promptly following such notice from the Issuer to the Transferor.

(iii)

If the Issuer does not notify the Transferor of its election to purchase this Note in accordance with Section 10.15(b)(ii) , the Transferor may, during the ninety (90) day period following the expiration of the thirty (30)-day period provided in Section 10.15(b)(ii) hereof, Transfer this Note to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the RFO Notice. If the Transferor does not Transfer this Note within such period, the right provided hereunder shall be deemed to be revived and this Note shall not be Transferred unless first reoffered to the Issuer in accordance with this Section 10.15 .

10.16 Effectiveness of Note . This Note shall become effective at and as of the Second Closing Date (as defined in the Equity Purchase Agreement).

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.


RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Unsecured Promissory Note]

EXHIBIT A

Address and Facsimile Number for Notice: ⁶

⁶	NTD: To come from Atom.

EXHIBIT B

Form of Assumption Agreement

Exhibit B-1

Form of

Interim Sub-advisory Agreement

between

Cole REIT Advisors IV, LLC

and

[RCAP Sub-advisor]

[ — ][ — ] , 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			2

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			3

5.1	Acquisition Fees		3

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

5.6	Prior Fees and Expenses		5

Article 6 – Allocation of Expense Reimbursements			5

6.1	All Expense Reimbursements		5

6.2	Quarterly Review of Expenses		5

Article 7 – Advisor’s Responsibilities			5

Article 8 – Relationship of Sub-advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			5

8.1	Relationship		5

8.2	Time Commitment		6

8.3	Advisor and Sub-advisor Meetings		6

8.4	Prospectus Guidance		6

Article 9 – Other Agreements			6

Article 10 – Representations and Warranties			7

Article 11 – Term and Termination of the Agreement			8

11.1	Term		8

11.2	Termination		8

11.3	Survival upon Termination		9

11.4	Sub-advisor’s Obligations on Termination and Obligations		9

Article 12 – Assignment			9

Article 13 – Indemnification and Limitation of Liability			9


Article 14 – Miscellaneous		10

14.1	Reaffirmation of Advisory Agreement	10

14.2	Notices	10

14.3	Modification	11

14.4	Severability	11

14.5	Construction	11

14.6	Entire Agreement	11

14.7	Waiver	11

14.8	Gender	12

14.9	Titles Not to Affect Interpretation	12

14.10	Counterparts	12

Interim Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ][ — ], 2014 (this “ Agreement ”), is between, COLE REIT ADVISORS IV, LLC a Delaware limited liability company (the “ Advisor ”) and [RCAP Sub-Advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS, Cole Credit Property Trust IV, Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Advisory Agreement between the Company and the Advisor, dated as of January 20, 2012 (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

WHEREAS, the Advisor desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Sub-advisor and to have the Sub-advisor undertake the duties and responsibilities hereinafter set forth, on behalf of the Advisor, and subject to the supervision of the Advisor and the Board, all as provided herein; and

WHEREAS, the Sub-advisor is willing to undertake such duties and responsibilities, subject to the supervision of the Advisor and the Board, 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 agree as follows:

Article 1

Definitions

Capitalized and other terms that are defined in the Advisory Agreement but not otherwise defined in this Agreement have the respective meanings ascribed to such terms in the Advisory Agreement, a copy of which is attached hereto as Appendix A .

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Affiliate ” has the meaning set forth in the Advisory Agreement. For the avoidance of doubt, none of the Company, the Sub-advisor, any subsidiary of the Company, any subsidiary of the Sub-advisor and any other Person controlled by, controlling or under common control with the Sub-advisor shall be an Affiliate of the Advisor and none of the Company, the Advisor, any subsidiary of the Company, any subsidiary of the Advisor and any other Person controlled by, controlling or under common control with the Advisor shall be an Affiliate of the Sub-advisor.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Equity Purchase Agreement ” means that certain Equity Purchase Agreement, dated as of September 30, 2014, by and between ARC Properties Operating Partnership, L.P. and RCS Capital Corporation.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“ Prospectus ” means the prospectus dated May 1, 2013, as amended or supplemented from time to time, filed by the Company pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

The Advisor, pursuant to its authority to engage a duly qualified and licensed Person in the performance of its duties under the Advisory Agreement pursuant to Section 2.02 of the Advisory Agreement, hereby appoints the Sub-advisor to serve as the Sub-advisor for the Company. The Sub-advisor hereby accepts such appointment. Subject to the supervision of, the Advisor and the Board, the Sub-advisor agrees to perform the duties of the Advisor set forth in Sections 2.02(b), (d) (except as it relates to the Assets), (e) (except as it relates to the Assets), (f) (except as it relates to the Assets), (j), (k), (n) and (w) of the Advisory Agreement and to assist the Advisor in the performance of the duties set forth in Section 2.02(l), (m), (p), (r) and (u) of the Advisory Agreement, all on the terms and subject to the conditions set forth in this Agreement.

Article 3

Duties of the Sub-advisor

Subject to the limitations set forth in this Agreement and the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and subject to the supervision of the Advisor and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate, perform, and assist the Advisor in the performance of, the duties under the Advisory Agreement set forth in Article 2 of this Agreement, which duties are incorporated herein by reference as if fully set forth herein. In the event that the Sub-advisor engages a third party to perform the services that the Advisor has engaged Sub-advisor to perform pursuant to this Agreement, such third party shall be compensated by the Sub-advisor out of the fees it received pursuant to Article 5 of this Agreement.

Article 4

Authority and Certain Activities of Sub-advisor

To the same extent as the Advisor and subject to the supervision of the Advisor and the Board, the Sub-advisor shall have the authority set forth in Section 2.03 of the Advisory Agreement, shall have the authority to establish and maintain bank accounts as set forth in Section 2.04 of the Advisory Agreement (other than with respect to the Assets), shall maintain books and records for the Company (other than with respect to the Assets) as set forth in Section 2.05 of the Advisory Agreement, and shall abide by the limitations of Section 2.06 of the Advisory Agreement, all of which are incorporated herein by reference as if fully set forth herein.

Article 5

Compensation

As compensation for the services provided pursuant to this Agreement, the Advisor shall pay to Sub-advisor, solely out of payments received by Advisor from the Company under the Advisory Agreement, simultaneously with the payment by the Company to the Advisor:

5.1

Acquisition Fees Acquisition Fees equal to 1.00% of the Contract Purchase Price of each Asset. Notwithstanding the foregoing, all Acquisition Fees payable in connection with those certain Assets separately disclosed in writing prior to the date of the Equity Purchase Agreement, with respect to which the Advisor represents that a purchase agreement or letter of intent has been executed shall be paid to the Advisor and the Sub-advisor shall not be entitled to any Acquisition Fees with respect to such Assets.

5.2	Advisory Fees . Advisory Fees calculated according to the following schedule:


Average Invested Assets	Annualized Fee Rate

$0 — $2 billion		0.375	%

Over $2 billion — $4 billion		0.350	%

Over $4 billion		0.325	%

The Advisory Fee shall be applied according to the above schedule for each level of monthly Average Invested Assets, resulting in a blended annualized rate for fees paid in respect of Average Invested Assets in excess of $2 billion.

5.3	Disposition Fees . 75% of any Disposition Fees paid to Advisor on the Sale of a Property.

5.4	Subordinated Performance Fee . 85% of all Subordinated Performance Fees paid to the Advisor, in whatever form payable by the Company (i.e., cash, securities or a promissory note).

5.5

Expense Reimbursements . Subject to Article 6 of this Agreement and Section 3.04 of the Advisory Agreement, the Advisor shall reimburse Sub-advisor to the extent the Advisor receives reimbursement from the Company for the following expenses of the Sub-advisor to the extent they are actually incurred by the Sub-Advisor in connection with the services the Sub-advisor provides pursuant to this Agreement; provided , however that in each case the reimbursement is permitted under the Advisory Agreement and Prospectus and such reimbursements shall be determined consistent with past practice:

(A)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses; and

(B)

Reimbursement for administrative service expenses of the Sub-advisor, including all costs and expenses incurred by the Sub-advisor in fulfilling its duties under the Sub-advisory Agreement, provided , however that the reimbursement of the Advisor and the Sub-advisor for administrative service expenses, in each case, shall not be greater than 50% of the amounts permitted by the Advisory Agreement. Such costs and expenses may include reasonable wages and salaries and other personnel-related expenses of all employees of the Sub-advisor or its Affiliates who are engaged in the management, administration and operations and marketing of the Company and its Assets, with respect to the Sub-advisor who are engaged in the management, administration and operations of the Company’s Assets and shall include taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses which are directly related to their services provided under this Agreement, provided , however that the Sub-advisor shall not be reimbursed for salaries and benefits paid to persons who are executive officers of the Company, nor shall the Company pay personnel costs in connection with services for which the Advisor or Sub-advisor receives an Acquisition Fee or Disposition Fee.

5.6	Prior Fees and Expenses . Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall affect the Advisor’s right to receive fees and expenses under the Advisory Agreement accrued prior to the date hereof.

Article 6

Allocation of Expense Reimbursements

6.1

All Expense Reimbursements . All expense reimbursements will be apportioned between the Advisor and Sub-advisor pro rata based on the amount of such expense reimbursements due each that relate to the period commencing on the later of the date of this Agreement or the beginning of the applicable quarter to which such reimbursable expense relates and ending as of the date of the reimbursement; provided , however that the Sub-advisor shall repay the Advisor its pro rata share (as so determined) of any Excess Amount that the Advisor is required to repay the Company pursuant to Section 3.04 of the Advisory Agreement.

6.2

Quarterly Review of Expenses . Within 45 days of the end of each fiscal quarter, each Party shall provide the other Party with a detailed description of such Party’s aggregate Operating Expenses incurred during such fiscal quarter for the purpose of the Parties’ jointly reviewing such expenses against applicable caps and limitations set forth in the Advisory Agreement.

Article 7

Advisor’s Responsibilities

The Advisor shall be solely responsible for all services to the Company under the Advisory Agreement other than the services covered by Article 3 of this Agreement and shall bear any expenses related thereto required to be borne by the Advisor or its Affiliates and shall be entitled to reimbursement for all expenses related thereto, to the extent permitted under the Advisory Agreement and the Prospectus. The Sub-advisor shall have no responsibility or obligation in connection with providing such services to the Company or any expenses related thereto.

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

Advisor or Sub-advisor or their Affiliates to engage in or earn fees from any other business or to render services of any kind to any other Person. Each of the Advisor and the Sub-advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or which would reasonably result in a conflict of interest between its obligations to the Company and its obligations to or its interest in any other Persons.

8.2

Time Commitment . The Sub-advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. Each Party acknowledges that the other Party and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

8.3

Advisor and Sub-advisor Meetings . The Parties shall meet on a regular basis (frequency to be determined) to discuss and consult with one another regarding the Company and its assets and opportunities. The Parties will provide each other information regarding the operations and acquisitions of the Company as reasonably requested by the other. Each of Advisor and Sub-advisor shall have direct access to the books and records of the Company and of each attorney, accountant, servicer and other contracting party of the Company (except to the extent such attorney represents either Party with respect to this Agreement).

8.4

Prospectus Guidance . Each of the Advisor and Sub-advisor has read and will abide by the Prospectus with respect to the Company’s investment objectives, targeted assets and investment restrictions, targeted markets, leverage, distribution policy, and investor profile except to the extent directed by the Board.

Article 9

Other Agreements

9.1

The Advisor shall not agree to an amendment to the Advisory Agreement or waive any provision thereof, to the extent that such amendment or waiver would directly or indirectly reduce the amount payable to the Sub-advisor pursuant to Article 5 of this Agreement or adversely impact the Sub-advisor’s right to indemnification under Article 13 of this Agreement without the prior written consent of the Sub-advisor.

9.2

The Sub-advisor shall use its commercially reasonable efforts to cooperate with the Advisor to provide an orderly transfer and transition of services upon the expiration or earlier termination of this Agreement and shall provide any and all documents, reports and materials belonging or related to the services provided to the Advisor hereunder, including any and all other documents, reports and materials otherwise belonging or related to the Advisor or the Company. Furthermore, the Sub-advisor will, whenever and as reasonably requested, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered any documents that may be necessary to transition efficiently any services covered under this Agreement.

9.3

The Advisor shall have the right, but not the obligation, upon request and during normal business hours, to meet with key personnel and/or other executive level employees of the Sub-advisor on an ongoing and regular basis to provide feedback and input regarding the performance of the Sub-advisor’s services hereunder

9.4

The Sub-advisor shall maintain appropriate records of all its activities hereunder and shall, at the Advisor’s election, provide copies of such records to the Company or make such records available for inspection and duplication by the Company, its counsel, auditors and authorized agents, upon notice from the Advisor.

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

This Agreement has been duly authorized, executed and delivered by such Party and constitutes the valid and legally binding agreement of such Party, enforceable in accordance with its terms against such Party, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws relating to creditors’ rights generally, and by general equitable principles.

(D)

The execution and delivery of this Agreement by such Party and the performance of its duties and obligations hereunder do not result in a breach of any of the terms, conditions or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or any lease or other agreement, or any license, permit, franchise or certificate to which such Party is a party or by which it is bound or to which its properties are subject or require any authorization or approval under or pursuant to any of the foregoing, or violate any statute, regulation, law, order, writ, injunction, judgment or decree to which such Party is subject;

(E)

To the knowledge of such Party, no consent, approval or authorization of, or filing, registration or qualification with, any court or governmental authority on

the part of such Party is required for the execution and delivery of this Agreement by such Party and the performance of its obligations and duties hereunder and such execution, delivery and performance shall not violate any other agreement to which such Party is bound; and

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall expire on the earlier of (1) consummation of the “Second Closing” as such term is defined in the Equity Purchase Agreement, (2) the termination of the Equity Purchase Agreement and (3) December 31, 2014.

11.2	Termination . Subject to Section 11.1:

(A)

This Agreement may be terminated by the Advisor, if the Sub-advisor materially breaches this Agreement; provided , however , that the Sub-advisor shall have 30 calendar days after the receipt of notice of such breach from the Advisor to cure such breach or, if such material breach is not of a nature that can be remedied within such period, the Sub-advisor does not diligently take all reasonable steps to cure such breach and does not cure such breach within 60 days;

(B)

This Agreement may be terminated by the Advisor, as a result of any fraud, criminal conduct, gross negligence or willful misconduct by Sub-advisor or any Affiliate thereof in the performance of their respective duties hereunder; provided , however , that the Sub-advisor does not cure any such act within 30 calendar days after the receipt of notice of such act (or at such later time as may be stated in the notice) from the Advisor;

(C)

This Agreement may be terminated by the Sub-advisor, if the Advisor materially breaches this Agreement; provided , however , that the Advisor shall have 30 calendar days after the receipt of notice of such breach from the Sub-advisor to cure such breach or, if such material breach is not of a nature that can be remedied within such period, the Advisor does not diligently take all reasonable steps to cure such breach and does not cure such breach within 60 days;

(D)

This Agreement may be terminated by the Sub-advisor, as a result of any fraud, criminal conduct, gross negligence or willful misconduct by the Advisor or any Affiliate thereof in the performance of their respective duties hereunder or under the Advisory Agreement; provided , however , that the Advisor does not cure any such act within 30 calendar days after the receipt of notice of such act (or at such later time as may be stated in the notice) from the Sub-advisor;

(E)

This Agreement may be terminated by either Party, if the other Party (1) commences a voluntary case under any applicable bankruptcy, insolvency or

other similar law now or hereafter in effect, (2) consents to the entry of an order for relief in an involuntary case under any such law, (3) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for the other Party or for any substantial part of its property, or (4) makes any general assignment for the benefit of creditors under applicable state law; or

(F)

This Agreement may be terminated by either Party, if: (1) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect has been commenced against the other Party, and such case has not been dismissed within 60 days after the commencement thereof; or (2) a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) has been appointed for the other Party or has taken possession of the other Party or any substantial part of its property, and such appointment has not been rescinded or such possession has not been relinquished within 60 days after the occurrence thereof.

11.3

Survival upon Termination . Notwithstanding anything else that may be to the contrary herein, the expiration or earlier termination of this Agreement shall not relieve a party for liability for any breach occurring prior to such expiration or earlier termination. The provisions of Articles 1, 5, 6, 9, 11, 13 and 14 shall survive termination of this Agreement.

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

This Agreement shall not be assigned by the Sub-advisor, except that this Agreement may be assigned by the Sub-advisor to an Affiliate of the Sub-advisor with the consent of the Advisor, such consent not to be unreasonably withheld, conditioned or delayed. This Agreement shall not be assigned by the Advisor without the consent of the Sub-advisor; provided , however , this Agreement may be assigned without the consent of the Sub-advisor to a permitted assignee of the Advisor under the Advisory Agreement in connection with such a permitted assignment of the Advisory Agreement by the Advisor.

Article 13

Indemnification and Limitation of Liability

criminal, administrative or investigative, that the Sub-advisor becomes subject to or liable (1) that are related to or a result of the performance of, or failure to perform, services by the Advisor which are required to be performed by it under this Agreement or under the Advisory Agreement or (2) by reason of actions or inactions of the Advisor (except in each case to the extent that such performance or failure to perform or action or inaction results from any performance or failure to perform services by Sub-advisor under this Agreement).

The Sub-advisor shall indemnify and hold harmless the Advisor from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, reasonable attorneys’ fees and other 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 the Advisor becomes subject to or liable, including as a result of claims asserted against it for breach of or indemnification under the Advisory Agreement, (1) that are related to or a result of the performance of, or failure to perform, services by Sub-advisor under this Agreement or (2) by reason of actions or inactions of the Sub-advisor or its Affiliates or the Advisor is required to indemnify the Company under Section 5.02 of the Advisory Agreement as a result of any action or inaction by Sub-advisor under this Agreement.

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

Notices . Any notice, request, demand, approval, consent, waiver or other communication required or permitted to be given hereunder or to be served upon any of the Parties hereto (each a “ Notice ”) shall be in writing and shall be (a) delivered in person, (b) sent by facsimile transmission (with the original thereof also contemporaneously given by another method specified in this Section 14.2), (c) sent by a nationally-recognized overnight courier service, or (d) sent by certified or registered mail (postage prepaid, return receipt requested), to the address of such Party set forth herein.

To the Advisor:

Cole REIT Advisors V, LLC

2555 E. Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention: President

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

To the Sub-advisor:

[RCAP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

Either Party may at any time give Notice in writing to the other Party of a change in its address for the purposes of this Section 14.2. Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

Entire Agreement . This Agreement contains the entire agreement and understanding between 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 and/or usage of the trade inconsistent with any of the terms hereof. In all events, nothing contained herein shall be read, construed, interpreted or applied in any manner that prevents or hinders the Company from qualifying as a real estate investment trust under Section 856(c) of the Code.

14.7	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.

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

Counterparts . This Agreement may be executed 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. This Agreement shall become binding when one or more counterpart signature pages or counterparts hereof, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE REIT ADVISORS IV, LLC

By:
Name:

[RCAP Sub-advisor]

By:
Name:

[ Signature Page to Interim Sub-advisory Agreement between Cole REIT Advisors IV, LLC and [RCAP Sub-advisor]

Exhibit B-2

Form of

Interim Sub-advisory Agreement

between

Cole REIT Advisors V, LLC

and

[RCAP Sub-advisor]

[ — ][ — ] , 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			2

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			3

5.1	Acquisition Fees		3

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

5.6	Prior Fees and Expenses		5

Article 6 – Allocation of Expense Reimbursements			5

6.1	O&O Expense Reimbursements		5

6.2	All Other Expense Reimbursements		5

6.3	Quarterly Review of Expenses		5

Article 7 – Advisor’s Responsibilities			6

Article 8 – Relationship of Sub-advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			6

8.1	Relationship		6

8.2	Time Commitment		6

8.3	Advisor and Sub-advisor Meetings		6

8.4	Prospectus Guidance		7

Article 9 – Other Agreements			7

Article 10 – Representations and Warranties			8

Article 11 – Term and Termination of the Agreement			9

11.1	Term		9

11.2	Termination		9

11.3	Survival upon Termination		10

11.4	Sub-advisor’s Obligations on Termination and Obligations		10

Article 12 – Assignment			10


Article 13 – Indemnification and Limitation of Liability		10

Article 14 – Miscellaneous		11

14.1	Reaffirmation of Advisory Agreement	11

14.2	Notices	11

14.3	Modification	12

14.4	Severability	12

14.5	Construction	12

14.6	Entire Agreement	12

14.7	Waiver	13

14.8	Gender	13

14.9	Titles Not to Affect Interpretation	13

14.10	Counterparts	13

Interim Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ][ — ], 2014 (this “ Agreement ”), is between, COLE REIT ADVISORS V, LLC, a Delaware limited liability company (the “ Advisor ”) and [RCAP Sub-Advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS, Cole Credit Property Trust V, Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Advisory Agreement between the Company and the Advisor, dated as of March 17, 2014 (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

Article 1

Definitions

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

Advisor and none of the Company, the Advisor, any subsidiary of the Company, any subsidiary of the Advisor and any other Person controlled by, controlling or under common control with the Advisor shall be an Affiliate of the Sub-advisor.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“ Prospectus ” means the prospectus dated March 17, 2014, as amended or supplemented from time to time, filed by the Company pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

The Advisor, pursuant to its authority to engage a duly qualified and licensed Person in the performance of its duties under the Advisory Agreement pursuant to Section 2.02 of the Advisory Agreement, hereby appoints the Sub-advisor to serve as the Sub-advisor for the Company. The Sub-advisor hereby accepts such appointment. Subject to the supervision of, the Advisor and the Board, the Sub-advisor agrees to perform the duties of the Advisor set forth in Sections 2.02(b), (d) (except as it relates to the Assets), (e) (except as it relates to the Assets), (f) (except as it relates to the Assets), (j), (k), (n) and (w) of the Advisory Agreement and to assist the Advisor in the performance of the duties set forth in Section 2.02(l), (m), (p), (r), (u) and (v) of the Advisory Agreement, all on the terms and subject to the conditions set forth in this Agreement.

Article 3

Duties of the Sub-advisor

supervise the operations and administration of the Company, other than the acquisition, operation and disposition of the Company’s Assets. Subject to the limitations set forth in this Agreement and the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and subject to the supervision of the Advisor and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate, perform, and assist the Advisor in the performance of, the duties under the Advisory Agreement set forth in Article 2 of this Agreement, which duties are incorporated herein by reference as if fully set forth herein. In the event that the Sub-advisor engages a third party to perform the services that the Advisor has engaged Sub-advisor to perform pursuant to this Agreement, such third party shall be compensated by the Sub-advisor out of the fees it received pursuant to Article 5 of this Agreement.

Article 4

Authority and Certain Activities of Sub-advisor

Article 5

Compensation

5.1

5.2	Advisory Fees . Advisory Fees calculated according to the following schedule:


Average Invested Assets	Annualized Fee Rate

$0 — $2 billion		0.375	%

Over $2 billion — $4 billion		0.350	%

Over $4 billion		0.325	%

5.3	Disposition Fees . 75% of any Disposition Fees paid to Advisor on the Sale of a Property.

5.4	Subordinated Performance Fee . 85% of all Subordinated Performance Fees paid to the Advisor, in whatever form payable by the Company (i.e., cash, securities or a promissory note).

5.5

(A)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses;

(B)

legal, travel and other out-of-pocket expenses which are directly related to their services provided under this Agreement, provided , however that the Sub-advisor shall not be reimbursed for salaries and benefits paid to persons who are executive officers of the Company, nor shall the Company pay personnel costs in connection with services for which the Advisor or Sub-advisor receives an Acquisition Fee or Disposition Fee; and

(C)

Reimbursement out of reimbursements paid by the Company to the Advisor for Organization and Offering Expenses.

5.6	Prior Fees and Expenses . Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall affect the Advisor’s right to receive fees and expenses under the Advisory Agreement accrued prior to the date hereof.

Article 6

Allocation of Expense Reimbursements

6.1

O&O Expense Reimbursements . All Organization and Offering Expense reimbursements received from the Company, to the extent that they are less than the full amount of Organization and Offering Expense reimbursements due to the Advisor and the Sub-advisor will be apportioned between the Advisor and Sub-advisor pro rata based on the amount of such Organization and Offering Expenses reimbursements due each that relate to the period commencing on the date of this Agreement and ending as of the date of the reimbursement; provided , however that within 50 days after the end of the month in which the Offering terminates, the Sub-advisor shall reimburse the Advisor the Sub-advisor’s pro rata share of reimbursements to the Company by the Advisor (based on its pro rata share of reimbursements received from the Company as so determined) pursuant to Section 3.02(a) of the Advisory Agreement for Organization and Offering Expenses reimbursed by the Company to the extent that such reimbursements by the Company exceed 2.0% of the Gross Proceeds raised in the completed Offering.

6.2

All Other Expense Reimbursements . All expense reimbursements will be apportioned between the Advisor and Sub-advisor pro rata based on the amount of such expense reimbursements due each that relate to the period commencing on the later of the date of this Agreement or the beginning of the applicable quarter to which such reimbursable expense relates and ending as of the date of the reimbursement; provided , however that the Sub-advisor shall repay the Advisor its pro rata share (as so determined) of any Excess Amount that the Advisor is required to repay the Company pursuant to Section 3.04 of the Advisory Agreement.

6.3

Quarterly Review of Expenses . Within 45 days of the end of each fiscal quarter, each Party shall provide the other Party with a detailed description of such Party’s aggregate Organization and Offering Expenses and aggregate Operating Expenses incurred during such fiscal quarter for the purpose of the Parties’ jointly reviewing such expenses against applicable caps and limitations set forth in the Advisory Agreement.

Article 7

Advisor’s Responsibilities

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

Relationship . The Advisor and the Sub-advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor or Sub-advisor from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or Sub-advisor, respectively, or any of their Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, member, partner, employee or equityholder of the Advisor or Sub-advisor or their Affiliates to engage in or earn fees from any other business or to render services of any kind to any other Person. Each of the Advisor and the Sub-advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or which would reasonably result in a conflict of interest between its obligations to the Company and its obligations to or its interest in any other Persons.

8.2

8.3	Advisor and Sub-advisor Meetings . The Parties shall meet on a regular basis (frequency to be determined) to discuss and consult with one another regarding the Company and its assets and opportunities. The Parties will provide each other

information regarding the operations and acquisitions of the Company as reasonably requested by the other. Each of Advisor and Sub-advisor shall have direct access to the books and records of the Company and of each attorney, accountant, servicer and other contracting party of the Company (except to the extent such attorney represents either Party with respect to this Agreement).

8.4

Article 9

Other Agreements

9.1

9.2

9.3

9.4

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

(D)

(E)

To the knowledge of such Party, no consent, approval or authorization of, or filing, registration or qualification with, any court or governmental authority on the part of such Party is required for the execution and delivery of this Agreement by such Party and the performance of its obligations and duties hereunder and such execution, delivery and performance shall not violate any other agreement to which such Party is bound; and

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall expire on the earlier of (1) consummation of the “Second Closing” as such term is defined in the Equity Purchase Agreement, (2) the termination of the Equity Purchase Agreement and (3) December 31, 2014.

11.2	Termination . Subject to Section 11.1:

(A)

(B)

(C)

(D)

(E)

This Agreement may be terminated by either Party, if the other Party (1) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (2) consents to the entry of an order for relief in an involuntary case under any such law, (3) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for the other Party or for any substantial part of its property, or (4) makes any general assignment for the benefit of creditors under applicable state law; or

(F)

11.3

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

Article 13

Indemnification and Limitation of Liability

The Advisor shall indemnify and hold harmless the Sub-advisor from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, reasonable attorneys’ fees and other 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 the Sub-advisor becomes subject to or liable (1) that are related to or a result of the performance of, or failure to perform, services by the Advisor which are required to be performed by it under this Agreement or under the Advisory Agreement or (2) by reason of

actions or inactions of the Advisor (except in each case to the extent that such performance or failure to perform or action or inaction results from any performance or failure to perform services by Sub-advisor under this Agreement).

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

To the Advisor:

Cole REIT Advisors V, LLC

2325 E. Camelback Road, Suite 1100

Phoenix, Arizona 85016

Attention: President

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

To the Sub-advisor:

[RCAP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

14.7

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.

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE REIT ADVISORS V, INC.

By:
Name:

[RCAP Sub-advisor]

By:
Name:

[ Signature Page to Interim Sub-advisory Agreement between Cole REIT Advisors V, Inc . and [RCAP Sub-advisor]]

Exhibit B-3

Form of

Interim Sub-advisory Agreement

between

Cole Corporate Income Advisors, LLC

and

[RCAP Sub-advisor]

[ — ][ — ] , 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			2

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			3

5.1	Acquisition Fees		3

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

5.6	Prior Fees and Expenses		5

Article 6 – Allocation of Expense Reimbursements			5

6.1	All Expense Reimbursements		5

6.2	Quarterly Review of Expenses		5

Article 7 – Advisor’s Responsibilities			5

Article 8 – Relationship of Sub-advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			6

8.1	Relationship		6

8.2	Time Commitment		6

8.3	Advisor and Sub-advisor Meetings		6

8.4	Prospectus Guidance		6

Article 9 – Other Agreements			7

Article 10– Representations and Warranties			7

Article 11 – Term and Termination of the Agreement			8

11.1	Term		8

11.2	Termination		8

11.3	Survival upon Termination		9

11.4	Sub-advisor’s Obligations on Termination and Obligations		9

Article 12 – Assignment			10

Article 13 – Indemnification and Limitation of Liability			10


Article 14 – Miscellaneous		11

14.1	Reaffirmation of Advisory Agreement	11

14.2	Notices	11

14.3	Modification	12

14.4	Severability	12

14.5	Construction	12

14.6	Entire Agreement	12

14.7	Waiver	12

14.8	Gender	12

14.9	Titles Not to Affect Interpretation	12

14.10	Counterparts	12

Interim Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ][ — ], 2014 (this “ Agreement ”), is between, COLE CORPORATE INCOME ADVISORS, LLC, a Delaware limited liability company (the “ Advisor ”) and [RCAP Sub-Advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS Cole Corporate Income Trust, Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Advisory Agreement between the Company and the Advisor, dated as of January 18, 2011 (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

Article 1

Definitions

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“ SIR Transaction ” means the transaction announced in the Company’s press release dated September 2, 2014 and filed as Exhibit 99.1 to the Company’s current report on Form 8-K, filed with the U.S. Securities and Exchange Commission on September 2, 2014.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

Article 3

Duties of the Sub-advisor

Under the Advisory Agreement, the Advisor is responsible for using its commercially reasonable best efforts to present to the Company potential investment opportunities consistent

with the investment objectives and policies of the Company as determined and adopted from time to time by the Board and managing and supervising the operations and administration of the Company’s Assets. Consistent with Article 2 hereof, the Sub-advisor undertakes to use commercially reasonable best efforts to manage and supervise the operations and administration of the Company, other than the acquisition, operation and disposition of the Company’s Assets. Subject to the limitations set forth in this Agreement and the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and subject to the supervision of the Advisor and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate, perform, and assist the Advisor in the performance of, the duties under the Advisory Agreement set forth in Article 2 of this Agreement, which duties are incorporated herein by reference as if fully set forth herein. In the event that the Sub-advisor engages a third party to perform the services that the Advisor has engaged Sub-advisor to perform pursuant to this Agreement, such third party shall be compensated by the Sub-advisor out of the fees it received pursuant to Article 5 of this Agreement.

Article 4

Authority and Certain Activities of Sub-advisor

Article 5

Compensation

5.1

5.2	Advisory Fees . Advisory Fees calculated according to the following schedule:


Average Invested Assets	Annualized Fee Rate

$0 — $2 billion		0.375	%

Over $2 billion — $4 billion		0.350	%

Over $4 billion		0.325	%

5.3	Disposition Fees . 75% of any Disposition Fees paid to Advisor on the Sale of a Property, except that the Sub-advisor is entitled to 100% of any Disposition Fees payable to the Advisor in connection the SIR Transaction.

5.4

Subordinated Performance Fee . 85% of all Subordinated Performance Fees paid to the Advisor, in whatever form payable by the Company (i.e., cash, securities or a promissory note) ), except that the Sub-advisor is entitled to 100% of any Subordinated Performance Fees payable to the Advisor in connection the SIR Transaction.

5.5

(A)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses; and

(B)

Assets and shall include taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses which are directly related to their services provided under this Agreement, provided , however that the Sub-advisor shall not be reimbursed for salaries and benefits paid to persons who are executive officers of the Company, nor shall the Company pay personnel costs in connection with services for which the Advisor or Sub-advisor receives an Acquisition Fee or Disposition Fee.

5.6	Prior Fees and Expenses. Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall affect the Advisor’s right to receive fees and expenses under the Advisory Agreement accrued prior to the date hereof.

Article 6

Allocation of Expense Reimbursements

6.1

6.2

Article 7

Advisor’s Responsibilities

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

8.2

8.3

8.4

Article 9

Other Agreements

9.1

9.2

9.3

9.4

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

(D)

(E)

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall expire on the earlier of (1) consummation of the “Second Closing” as such term is defined in the Equity Purchase Agreement, (2) the termination of the Equity Purchase Agreement and (3) December 31, 2014.

11.2	Termination . Subject to Section 11.1:

(A)

(B)

(C)

(D)

(E)

(F)

11.3

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

Article 13

Indemnification and Limitation of Liability

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

To the Advisor:

Cole Corporate Income Advisors, LLC

2555 E. Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention: President

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

To the Sub-advisor:

[RCAP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

14.7

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

and the same instrument. This Agreement shall become binding when one or more counterpart signature pages or counterparts hereof, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE CORPORATE INCOME ADVISORS, LLC

By:
Name:

[RCAP Sub-advisor]

By:
Name:

[ Signature Page to Interim Sub-advisory Agreement between Cole Corporate Income Advisor, LLC and [RCAP Sub-advisor]]

Exhibit B-4

Form of

Interim Sub-advisory Agreement

between

Cole Corporate Income Advisors II, LLC

and

[RCAP Sub-advisor]

[ — ][ — ] , 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			2

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			3

5.1	Acquisition Fees		3

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

5.6	Prior Fees and Expenses		5

Article 6 – Allocation of Expense Reimbursements			5

6.1	O&O Expense Reimbursements		5

6.2	All Other Expense Reimbursements		5

6.3	Quarterly Review of Expenses		5

Article 7 – Advisor’s Responsibilities			6

Article 8 – Relationship of Sub-advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			6

8.1	Relationship		6

8.2	Time Commitment		6

8.3	Advisor and Sub-advisor Meetings		6

8.4	Prospectus Guidance		7

Article 9 – Other Agreements			7

Article 10 – Representations and Warranties			8

Article 11 – Term and Termination of the Agreement			8

11.1	Term		8

11.2	Termination		9

11.3	Survival upon Termination		10

11.4	Sub-advisor’s Obligations on Termination and Obligations		10

Article 12 – Assignment			10


Article 13 – Indemnification and Limitation of Liability		10

Article 14 – Miscellaneous			11

14.1	Reaffirmation of Advisory Agreement		11

14.2	Notices		11

14.3	Modification		12

14.4	Severability		12

14.5	Construction		12

14.6	Entire Agreement		12

14.7	Waiver		12

14.8	Gender		12

14.9	Titles Not to Affect Interpretation		13

14.10	Counterparts		13

Interim Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ][ — ], 2014 (this “ Agreement ”), is between, COLE CORPORATE INCOME ADVISORS II, LLC, a Delaware limited liability company (the “ Advisor ”) and [RCAP Sub-Advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS, Cole Office & Industrial REIT (CCIT II), Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Advisory Agreement between the Company and the Advisor, dated as of August 27, 2013 (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

Article 1

Definitions

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“ Prospectus ” means the prospectus dated September 27, 2013, as amended or supplemented from time to time, filed by the Company pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

Article 3

Duties of the Sub-advisor

Article 4

Authority and Certain Activities of Sub-advisor

Article 5

Compensation

5.1

Acquisition Fees Acquisition Fees equal to 1.00% of the Contract Purchase Price of each Asset. Notwithstanding the foregoing, all Acquisition Fees payable in connection with those certain Assets separately disclosed in writing prior to the date of the Purchase Agreement, with respect to which the Advisor represents that a purchase agreement or letter of intent has been executed shall be paid to the Advisor and the Sub-advisor shall not be entitled to any Acquisition Fees with respect to such Assets.

5.2	Advisory Fees . Advisory Fees calculated according to the following schedule:


Average Invested Assets	Annualized Fee Rate

$0 — $2 billion		0.375	%

Over $2 billion — $4 billion		0.350	%

Over $4 billion		0.325	%

5.3	Disposition Fees . 75% of any Disposition Fees paid to Advisor on the Sale of a Property.

5.4	Subordinated Performance Fee . 85% of all Subordinated Performance Fees paid to the Advisor, in whatever form payable by the Company (i.e., cash, securities or a promissory note).

5.5

(A)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses;

(B)

shall not be reimbursed for salaries and benefits paid to persons who are executive officers of the Company, nor shall the Company pay personnel costs in connection with services for which the Advisor or Sub-advisor receives an Acquisition Fee or Disposition Fee; and

(C)

Reimbursement out of reimbursements paid by the Company to the Advisor for Organization and Offering Expenses.

5.6	Prior Fees and Expenses . Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall affect the Advisor’s right to receive fees and expenses under the Advisory Agreement accrued prior to the date hereof.

Article 6

Allocation of Expense Reimbursements

6.1

6.2

6.3

Quarterly Review of Expenses . Within 45 days of the end of each fiscal quarter, each Party shall provide the other Party with a detailed description of such Party’s aggregate Organization and Offering Expenses and aggregate Operating Expenses incurred during such fiscal quarter for the purpose of the Parties’ jointly reviewing such expenses against applicable caps and limitations set forth in the Advisory Agreement.

Article 7

Advisor’s Responsibilities

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

8.2

8.3

8.4

Article 9

Other Agreements

9.1

9.2

9.3

9.4

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

(D)

(E)

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall expire on the earlier of (1) consummation of the “Second Closing” as such term is defined in the Equity Purchase Agreement, (2) the termination of the Equity Purchase Agreement and (3) December 31, 2014.

11.2	Termination . Subject to Section 11.1:

(A)

(B)

(C)

(D)

(E)

(F)

11.3

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

Article 13

Indemnification and Limitation of Liability

Agreement, (1) that are related to or a result of the performance of, or failure to perform, services by Sub-advisor under this Agreement or (2) by reason of actions or inactions of the Sub-advisor or its Affiliates or the Advisor is required to indemnify the Company under Section 5.02 of the Advisory Agreement as a result of any action or inaction by Sub-advisor under this Agreement.

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

To the Advisor:

Cole Corporate Income Advisors II, LLC

2325 E. Camelback Road, Suite 1100

Phoenix, Arizona 85016

Attention: President

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

To the Sub-advisor:

[RCAP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

14.7

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE CORPORATE INCOME ADVISORS II, LLC

By:
Name:

[RCAP Sub-advisor]

By:
Name:

[ Signature Page to Interim Sub-advisory Agreement between Cole Corporate Income Advisors II, LLC and [RCAP Sub-advisor]]

Exhibit B-5

Form of

Interim Sub-advisory Agreement

between

Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC

and

[RCAP Sub-advisor]

[ — ][ — ] , 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			2

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			3

5.1	Fees		3

5.2	Expense Reimbursements		4

5.3	Prior Fees and Expenses		4

Article 6 – Allocation of Expense Reimbursements			4

6.1	Expense Reimbursements		4

6.2	All Other Expense Reimbursements		5

6.3	Quarterly Review of Expenses		5

Article 7 – Advisor’s Responsibilities			5

Article 8 – Relationship of Sub-advisor and and Advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			6

8.1	Relationship		6

8.2	Time Commitment		6

8.3	Advisor and Sub-advisor Meetings		6

8.4	Prospectus Guidance		6

Article 9 – Other Agreements			7

Article 10 – Representations and Warranties			7

Article 11 – Term and Termination of the Agreement			8

11.1	Term		8

11.2	Termination		8

11.3	Survival upon Termination		9

11.4	Sub-advisor’s Obligations on Termination and Obligations		9

Article 12 – Assignment			10

Article 13 – Indemnification And Limitation Of Liability			10

Article 14 – Miscellaneous			10

14.1	Reaffirmation of Advisory Agreement		10



14.2	Notices	11

14.3	Modification	12

14.4	Severability	12

14.5	Construction	12

14.6	Entire Agreement	12

14.7	Waiver	12

14.8	Gender	12

14.9	Titles Not to Affect Interpretation	12

14.10	Counterparts	12

Interim Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ], 2014 (this “ Agreement ”), is between, COLE REAL ESTATE INCOME STRATEGY (DAILY NAV) ADVISORS, LLC, a Delaware limited liability company (the “ Advisor ”) and [RCAP Sub-Advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS, Cole Real Estate Income Strategy (Daily NAV), Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Amended and Restated Advisory Agreement between the Company, Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP, and the Advisor, dated as of August 26, 2013 (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

Article 1

Definitions

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Affiliate ” has the meaning set forth in the Advisory Agreement. For the avoidance of doubt, none of the Company, the Sub-advisor, any subsidiary of the

Company, any subsidiary of the Sub-advisor and any other Person controlled by, controlling or under common control with the Sub-advisor shall be an Affiliate of the Advisor and none of the Company, the Advisor, any subsidiary of the Company, any subsidiary of the Advisor and any other Person controlled by, controlling or under common control with the Advisor shall be an Affiliate of the Sub-advisor.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“ Prospectus ” means the prospectus dated May 28, 2014, as amended or supplemented from time to time, filed by the Company pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

The Advisor, pursuant to its authority to engage a duly qualified and licensed Person in the performance of its duties under the Advisory Agreement pursuant to Section 2.02 of the Advisory Agreement, hereby appoints the Sub-advisor to serve as the Sub-advisor for the Company. The Sub-advisor hereby accepts such appointment. Subject to the supervision of, the Advisor and the Board, the Sub-advisor agrees to perform the duties of the Advisor set forth in Sections 2.02, (f) (except as it relates to the Assets), (e) (except as it relates to the Assets), (g) (except as it relates to the Assets), (h), (k), (l), (n), (p), (q), (r), (t), (v), (w), (x) and (y) of the Advisory Agreement and to assist the Advisor in the performance of the duties set forth in Section 2.02(l), (m), (p), (r), (u) and (v) of the Advisory Agreement, all on the terms and subject to the conditions set forth in this Agreement.

Article 3

Duties of the Sub-advisor

operations and administration of the Company’s Assets. Consistent with Article 2 hereof, the Sub-advisor undertakes to use commercially reasonable best efforts to manage and supervise the operations and administration of the Company, other than the acquisition, operation and disposition of the Company’s Assets. Subject to the limitations set forth in this Agreement and the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and subject to the supervision of the Advisor and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate, perform, and assist the Advisor in the performance of, the duties under the Advisory Agreement set forth in Article 2 of this Agreement, which duties are incorporated herein by reference as if fully set forth herein. In the event that the Sub-advisor engages a third party to perform the services that the Advisor has engaged Sub-advisor to perform pursuant to this Agreement, such third party shall be compensated by the Sub-advisor out of the fees it received pursuant to Article 5 of this Agreement.

Article 4

Authority and Certain Activities of Sub-advisor

Article 5

Compensation

5.1

Fees. 50% of any Fees paid to the Advisor pursuant to Section 3.01 in whatever form payable by the Company; provided , however that, during the calendar month and calendar year in which this Agreement is executed, the Advisor shall be entitled to 100% of the Advisory Fee and 100% Performance Fee for such calendar month and calendar year, respectively, prorated for the number of days elapsed since the beginning of such month and year until the date hereof and 50% of the balance of the Advisory Fee and Performance fee payable for such month and year after subtracting such prorated amount from the total Advisory Fee and Performance Fee payable.

5.2

Expense Reimbursements . Subject to Article 6 of this Agreement and Section 3.04 of the Advisory Agreement, the Advisor shall reimburse Sub-advisor to the extent the Advisor receives reimbursement from the Company for the following expenses of the Sub-advisor to the extent they are actually incurred by the Sub-advisor in connection with the services the Sub-advisor provides pursuant to this Agreement; provided , however that in each case the reimbursement is permitted under the Advisory Agreement and Prospectus and such reimbursements shall be determined consistent with past practice:

(A)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses;

(B)

(C)

Reimbursement out of reimbursements paid by the Company to the Advisor for Organization and Offering Expenses.

5.3	Prior Fees and Expenses . Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall affect the Advisor’s right to receive fees and expenses under the Advisory Agreement accrued prior to the date hereof.

Article 6

Allocation of Expense Reimbursements

6.1

Sub-advisor pro rata based on the amount of such Organization and Offering Expenses reimbursements due each that relate to the period commencing on the date of this Agreement and ending as of the date of the reimbursement; provided , however that within 50 days after the end of the month in which the Offering terminates, the Sub-advisor shall reimburse the Advisor the Sub-advisor’s pro rata share of reimbursements to the Company by the Advisor (based on its pro rata share of reimbursements received from the Company as so determined) pursuant to Section 3.02(a) of the Advisory Agreement for Organization and Offering Expenses reimbursed by the Company to the extent that such reimbursements by the Company exceed 15.0% of the Gross Proceeds raised in the completed Offering.

6.2

6.3

Review of Expenses . Within 35 days of the end of each month in the case of expenses other than Organization and Offering Expenses and 10 days of the end of each month in the case of Organization and Offering Expenses, each Party shall provide the other Party with a detailed statement of such Party’s aggregate expenses (including a specific statement of Operating Expenses) other than Organization and Offering Expenses and a statement of such Party’s aggregate Organization and Offering Expenses, respectively, incurred during such month for the purpose of the Parties’ jointly reviewing such expenses against applicable caps and limitations set forth in the Advisory Agreement and preparing the statements required under Section 3.04(c) and (d) of the Advisory Agreement.

Article 7

Advisor’s Responsibilities

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

8.2

8.3

8.4

Article 9

Other Agreements

9.1	The Advisor shall not agree to any amendment to the Advisory Agreement or waive any provision thereof without the prior written consent of the Sub-advisor.

9.2

9.3

9.4

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

(D)

(E)

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall expire on the earlier of (1) consummation of the “Second Closing” as such term is defined in the Equity Purchase Agreement, (2) the termination of the Equity Purchase Agreement and (3) December 31, 2014.

11.2	Termination . Subject to Section 11.1:

(A)

(B)

(C)

(D)

(E)

(F)

11.3

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

Article 13

Indemnification and Limitation of Liability

The Sub-advisor shall indemnify and hold harmless the Advisor from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, reasonable attorneys’ fees and other 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 the Advisor becomes subject to or liable, including as a result of claims asserted against it for breach of or indemnification under the Advisory Agreement, (1) that are related to or a result of the performance of, or failure to perform, services by Sub-advisor under this Agreement or (2) by reason of actions or inactions of the Sub-advisor or its Affiliates or the Advisor is required to indemnify the Company or Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP under Section 5.02 of the Advisory Agreement as a result of any action or inaction by Sub-advisor under this Agreement.

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

To the Advisor:

Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC

2325 E. Camelback Road, Suite 1100

Phoenix, Arizona 85016

Attention: President

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

To the Sub-advisor:

[RCAP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

14.7

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

binding when one or more counterpart signature pages or counterparts hereof, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE REAL ESTATE INCOME STRATEGY (DAILY NAV) ADVISORS, LLC

By:
Name:

[RCAP Sub-advisor]

By:
Name:

[ Signature Page to Interim Sub-advisory Agreement between Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC and [RCAP Sub-advisor]]

Exhibit C-1

FORM OF WHOLESALING AGREEMENT

[ ], 2014

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Ladies and Gentlemen:

Cole Capital Corporation, a Delaware corporation (the “ Dealer Manager ”), with its address at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016, has entered into an agreement dated as of September 17, 2013 (the “ Dealer Manager Agreement ”), with Cole Office & Industrial REIT (CCIT II), Inc. (the “ Company ”). Under the Dealer Manager Agreement, the Dealer Manager serves as the Company’s exclusive Dealer Manager in connection with a public offering (the “ Offering ”) of the Company’s common stock. The shares of the Company’s stock (the “ Offered Shares ”) are being issued and sold to the public on a “best efforts” basis through the Dealer Manager and the broker-dealers and other appropriately licensed firms participating in the Offering (the “ Participating Broker-Dealers ”), pursuant to Participating Broker-Dealer Agreements between the Dealer Manager and each Participating Broker-Dealer (each, a “ Participating Broker-Dealer Agreement ”). The Dealer-Manager shall provide to the Wholesaler the form of the Participating Broker-Dealer Agreement used by the Dealer Manager. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Dealer Manager Agreement.

In consideration of the mutual covenants and agreements contained herein, intending to be legally bound, the parties hereby agree to the following terms and conditions set forth in this Wholesaling Agreement (this “ Agreement ”):

1.	Appointment and Acceptance of the Wholesaler

Upon the terms and subject to the conditions set forth in this Agreement, the Dealer Manager hereby appoints Realty Capital Securities, LLC, a Delaware limited liability company (the “ Wholesaler ”), and the Wholesaler hereby accepts such appointment, as the Dealer Manager’s distribution agent to assist, through the Wholesaler’s employees, agents, contractors, registered representatives and all other representatives who will perform services hereunder (collectively, the “ RCS Service Providers ”), the Dealer Manager with the sale of Offered Shares through the recruitment of, and the provision of assistance to, Participating Broker-Dealers, and the Wholesaler desires to accept such engagement; provided , however , that nothing herein shall be construed to: (i) contravene the Company’s appointment of the Dealer Manager as its exclusive agent and dealer manager during the Offering Period, and the Dealer Manager’s acceptance of such appointment, pursuant to Section 3.1 of the Dealer Manager Agreement; or (ii) imply that the Dealer Manager shall not have sole discretion to accept or reject any subscription for the Offered Shares in whole or in part.

2.	Undertakings of the Wholesaler

(a) The Wholesaler will use diligent efforts to recruit certain broker-dealers and other appropriately licensed firms to serve as Participating Broker-Dealers, each of which shall be a member of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”) in good standing, to agree to offer and sell the Offered Shares on a best efforts basis without any commitment on the Participating Broker-Dealers’ part to purchase any Offered Shares pursuant to a Participating Broker-Dealer Agreement with the Dealer Manager.

(b) The Wholesaler will use diligent efforts to assist the Dealer Manager in providing certain services to Participating Broker-Dealers in connection with the Offering, which will consist primarily of:

(i) providing training and education regarding the Company and the offering of the Offered Shares to Participating Broker-Dealers;

(ii) providing marketing and sales support for Participating Broker-Dealers,; and

(iii) such other assistance to Participating Broker-Dealers and their registered representatives in marketing the Offered Shares and otherwise participating in the Offering as shall be reasonably determined to be appropriate by the Dealer Manager.

(c) The Wholesaler acknowledges that it is familiar with FINRA Rule 2310 and that it will comply in all material respects with all the terms thereof to the extent FINRA Rule 2310 applies to the conduct contemplated herein. Notwithstanding the foregoing sentence, the Wholesaler shall not be responsible for the obligations of the Dealer Manager under the Dealer Manager Agreement and Section 6(i) to assure compliance with the organization and offering expenses limitations of FINRA Rule 2310(b)(4).

3.	Compensation and Expense Reimbursement

(a) In consideration for the Wholesaler performing its obligations under this Agreement, the Dealer Manager shall pay the Wholesaler a sourcing fee (the “ Sourcing Fee ”) equal to 1.80% of the Selling Price of each of the Offered Shares sold by Participating Broker-Dealers who entered into dealer agreements with the Dealer Manager primarily as a result of the efforts of RCS Service Providers (“ RCS Sales ”); provided , however , the Sourcing Fee shall be payable solely from that portion of the Dealer Manager Fee that is (i) actually received by the Dealer Manager from the Company pursuant to Section 3,3 of the Dealer Manager Agreement, and (ii) not reallowed to any Participating Broker-Dealer pursuant to Section 3.3 of the Dealer Manager Agreement (a “ Sourcing Fee Reallowance ”) in respect of any RCS Sales.

(b) The Sourcing Fee shall be paid substantially concurrently with the receipt of corresponding payments to the Dealer Manager from the Company pursuant to Section 3.3 of the Dealer Manager Agreement, but in no event no later than five business days thereafter.

(c) The Dealer Manager also will reimburse the Wholesaler for all costs and expenses incurred that are: (i) in connection with bona fide due diligence activities; and (ii) incident to the Offering, but only to the extent such costs or expenses (A) are permitted pursuant to prevailing rules and regulations of FINRA, (B) would have been incurred by the Dealer Manager if the Wholesaler had not incurred them, and (C) are otherwise eligible for reimbursement from the Company pursuant to Section 3.6 of the Dealer Manager Agreement. The Wholesaler will present the Dealer Manager with itemized and detailed invoices for all incurred costs and expenses that are reimbursable pursuant to this Section 3(c) . The Dealer Manager will submit such request to the Company within five business days following receipt of such invoices and will reimburse the Wholesaler within five business days following receipt of funds from the Company for such reimbursement.

4.	Representations and Warranties of the Dealer Manager

(a) The Dealer Manager is a corporation duly organized and validly existing under the laws of the State of Delaware, with full power and authority to conduct its business and to enter into this Agreement and to perform the transactions contemplated hereby.

(b) This Agreement has been duly authorized, executed and delivered by the Dealer Manager, constitutes a legal, valid and binding agreement of the Dealer Manager, enforceable against the Dealer Manager in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles relating to the availability of remedies, and except to the extent that the enforceability of the indemnity provisions contained in this Agreement may be limited under applicable securities laws.

dealer registered as such in those states and jurisdictions where the Dealer Manager is required to be registered in order to provide the services contemplated by this Agreement and the Dealer Manager Agreement, and (D) it and those of its employees and representatives who are required to have approvals, licenses or registrations to act under this Agreement have all applicable required approvals, licenses and registrations to act under this Agreement. There is no provision in the Dealer Manager’s FINRA membership agreement that would prohibit or restrict the ability of the Dealer Manager to carry out the services related to the Offering as contemplated by this Agreement and the Dealer Manager Agreement or to perform its obligations hereunder and thereunder. With respect to its participation in the offer and sale of the Offered Shares (including, without limitation any resales and transfers of Offered Shares), the Dealer Manager shall comply in all material respects with all applicable requirements of (1) the Securities Act of 1933, as amended (the “ Securities Act ”), and the applicable rules and regulations promulgated thereunder (the “ Securities Act Regulations ”), the Exchange Act and the applicable rules and regulations promulgated thereunder (the “ Exchange Act Regulations ”) and all other federal rules and regulations applicable to the Offering and the sale of the Offered Shares, (2) applicable state securities or “blue sky” laws, and (3) the rules set forth in the FINRA rulebook applicable to the Offering, which currently consists of rules promulgated by FINRA, the National Association of Securities Dealers (“ NASD ”) and the New York Stock Exchange (collectively, the “ FINRA Rules ”), specifically including, but not in any way limited to, FINRA Rule 2310, FINRA Rule 5110, FINRA Rule 5141, NASD Rule 2340 and NASD Rule 2420.

(d) The Dealer Manager and its representatives have all required Governmental Licenses and have made all filings and registrations with federal and state governmental and regulatory agencies required to conduct their business and to perform their obligations under this Agreement and the Dealer Manager Agreement, except where the inability of such Governmental Licenses to be in full force and effect would not have a material adverse effect on the business, properties, financial position, results of operations or cash flows of the Dealer Manager or as otherwise may be disclosed in the Registration Statement and the Prospectus. The performance of the obligations of the Dealer Manager under this Agreement and the Dealer Manager Agreement will not (A) violate or result in a breach of any provisions of its articles of incorporation or by-laws (or similar instruments or documents) or any order, law or regulation binding upon it, and (B) result in a material breach of any provisions of any agreement or instrument to which it is a party or which is otherwise binding upon it.

5.	Representations and Warranties of the Wholesaler

The Wholesaler represents and warrants to the Dealer Manager:

(a) The Wholesaler is a limited liability company duly organized and validly existing under the laws of the State of Delaware, with full power and authority to conduct its business and to enter into this Agreement and to perform the transactions contemplated hereby.

(b) This Agreement has been duly authorized, executed and delivered by the Wholesaler and, assuming due authorization, execution and delivery of this Agreement by the Dealer Manager, constitutes a legal, valid and binding agreement of the Wholesaler, enforceable against the Wholesaler in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles relating to the availability of remedies, and except to the extent that the enforceability of the indemnity provisions contained in this Agreement may be limited under applicable securities laws.

(c) The Wholesaler (i) is duly registered as a broker-dealer pursuant to the provisions of the Exchange Act, (ii) is a member of FINRA in good standing, (iii) is a broker or dealer registered as such in those states and jurisdictions where the Wholesaler is required to be registered in order to provide the services contemplated by this Agreement, and (iv) it and those of its employees and representatives who are required to have approvals, licenses or registrations to act under this Agreement have all applicable required approvals, licenses and registrations to act under this Agreement. There is no provision in the Wholesaler’s FINRA membership agreement that would prohibit or restrict the ability of the Wholesaler to carry out the services related to the Offering as contemplated by this Agreement or to perform its obligations hereunder. With respect to its participation in the offer and sale of the Offered Shares (including, without

limitation any resales and transfers of Offered Shares), the Wholesaler agrees to comply in all material respects with all applicable requirements, in each case to the extent such requirements are applicable to the Wholesaler in connection with the performance of its obligations hereunder, of (i) the Securities Act, the Exchange Act, the Securities Act Regulations and the Exchange Act Regulations and all other federal rules and regulations applicable to the Offering and the sale of the Offered Shares, (ii) applicable state securities or “blue sky” laws, and (iii) the FINRA Rules, specifically including, but not in any way limited to, FINRA Rule 2310, FINRA Rule 5110, FINRA Rule 5141, NASD Rule 2340 and NASD Rule 2420.

(d) The Wholesaler and those of its employees and representatives who are required to have Governmental Licenses have all required Governmental Licenses and have made all filings and registrations with federal and state governmental and regulatory agencies required to conduct their business and to perform their obligations under this Agreement. The performance of the obligations of the Wholesaler under this Agreement will not violate or result in a breach of any provisions of its articles of incorporation or by-laws (or similar instruments or documents) or any agreement, instrument, order, law or regulation binding upon it.

(e) To the extent required by applicable law in connection with the transactions contemplated in this Agreement, the Wholesaler represents that it has established and implemented an anti-money laundering compliance program (“ AML Program ”) in accordance with applicable law, including applicable FINRA Rules, Exchange Act Regulations, the USA PATRIOT Act and implementing regulations, specifically including, but not limited to, Section 352 of the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “ Money Laundering Abatement Act ,” and together with the USA PATRIOT Act, the “ AML Rules ”) reasonably expected to detect and cause the reporting of suspicious transactions in connection with the offering and sale of the Offered Shares. The Wholesaler further represents that it is currently in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act; has Know Your Customer (KYC) policies and procedures in place; that the AML Program has been adopted by a person with sufficient authority to oversee the AML policies and procedures; that the AML Program has education and/or training programs for officers and employees regarding AML policies and procedures; and that the Wholesaler will remain in compliance with such requirements. The Wholesaler shall, upon request by the Dealer Manager or the Company, provide a certification that, as of the date of such certification, (i) its AML Program then in effect is consistent with the AML Rules and (ii) it is currently in compliance with its AML Program and all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act.

6.	Covenants of the Dealer Manager

(a) The Dealer Manager shall comply with the record keeping requirements of the Exchange Act, including but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act. The Dealer Manager will make such documents and records available to (i) the Wholesaler, upon reasonable request, and (ii) representatives of the Securities and Exchange Commission (“ SEC ”), FINRA and applicable state securities administrators upon the receipt of an appropriate document subpoena or other appropriate request for documents from any such agency; provided , however , that if the Dealer Manager determines, in its sole discretion, not to provide documents in accordance with this section, it may oppose such document subpoena or other request, provided that the Dealer Manager shall be responsible for all reasonable direct costs of such opposition. The Dealer Manager further agrees to keep such required records with respect to each customer who purchases Offered Shares, the customer’s suitability and the amount of Offered Shares sold, and to retain such records for six years or such period of time as may be required by the SEC, any state securities commission, FINRA or the Company, whichever is later. The Wholesaler, agree that the Dealer Manager can satisfy its recordkeeping obligations hereunder by contractually requiring such information to be maintained by the Participating Broker-Dealers, investment advisors or banks offering the Offered Shares.

federal or state law; (iii) any reasonable written privacy policies and standards provided to the Dealer Manager by the Wholesaler and the Company; and (d) the Dealer Manager’s own internal privacy policies and procedures, each as may be amended from time to time.

(c) To the extent the Dealer Manager directly sells Offered Shares, the Dealer Manager will only offer and sell Offered Shares in jurisdictions in which qualifications or exemptions for the offer and sale of the Offered Shares are in effect as of the relevant date (“ Qualified Jurisdictions ”). No Offered Shares shall be offered or sold for the account of the Company in any other states or foreign jurisdictions.

(d) The Dealer Manager is familiar with Rule 15c2-8 under the Exchange Act, relating to the distribution of preliminary and final Prospectuses, and confirms that it has complied and will comply therewith.

(e) The Dealer Manager will notify the Wholesaler immediately (i) when any amendment to the Registration Statement shall have become effective, (ii) of the issuance by the SEC or any other Federal or state regulatory body of any order suspending the effectiveness of the Registration Statement under the Securities Act or the registration of Offered Shares under the Blue Sky or securities laws of any state or other jurisdiction or any order or decree enjoining the offering or the use of the Prospectus or of the institution, or notice of the intended institution, of any action or proceeding for that purpose, and (iii) when any Prospectus shall have been filed under the Securities Act with the SEC.

(f) The Dealer Manager will deliver to the Wholesaler as promptly as practicable from time to time during the period when the Prospectus is required to be delivered under the Securities Act, with reasonable quantities of copies of the Prospectus (as amended or supplemented), as provided by the Company, for delivery to investors and for the purposes contemplated by the Securities Act or any rules or regulations thereunder.

(g) The Dealer Manager will provide a reasonable amount of Authorized Sales Material to the Wholesaler as and when requested by the Wholesaler, subject to receipt of such material by the Dealer Manager from the Company.

(h) The Dealer Manager shall be responsible for the timely filing of all documents and information to be filed with the Corporate Financing Department of FINRA, as required under FINRA Rules 5110(b)(5) and 5110(b)(6), and shall have and maintain internal controls sufficient to monitor compliance with the organization and offering expense limitations of FINRA Rule 2310(b)(4).

(i) The Dealer Manager shall comply, in all material respects, with all applicable laws, and the applicable rules and regulations of FINRA, the SEC, state securities administrators and any other applicable regulatory body in connection with the Offering.

7.	Covenants of the Wholesaler

(a) The Wholesaler shall, in all material respects and to the extent such requirements are applicable to the Wholesaler in connection with the performance of its obligations hereunder, comply, with the record keeping requirements of the Exchange Act, including but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act. The Wholesaler will make such documents and records available to (i) the Dealer Manager and the Company upon reasonable request, and (ii) representatives of the SEC, FINRA and applicable state securities administrators upon the receipt of an appropriate document subpoena or other appropriate request for documents from any such agency; provided , however , that in the event the Wholesaler determines, in its sole discretion, not to provide documents in accordance with this section, it may oppose such document subpoena or other request, provided that the Wholesaler shall be responsible for all reasonable direct costs of such opposition.

state law; (iii) any reasonable written privacy policies and standards provided to the Wholesaler by the Dealer Manager and the Company; and (iv) the Wholesaler’s own internal privacy policies and procedures, each as may be amended from time to time.

(c) To the extent the Wholesaler directly sells Offered Shares in connection with the performance of its obligations hereunder, the Wholesaler will only offer and sell Offered Shares in Qualified Jurisdictions. No Offered Shares shall be offered or sold for the account of the Company in any other states or foreign jurisdictions.

(d) The Wholesaler is familiar with Rule 15c2-8 under the Exchange Act, relating to the distribution of preliminary and final Prospectuses, and confirms that it will, to the extent applicable to the Wholesaler in connection with the performance of its obligations hereunder, comply with Rule 15c2-8 under the Exchange Act.

(e) The Dealer Manager will provide the Wholesaler with certain Authorized Sales Materials to be used by the Wholesaler and the Participating Broker-Dealers in connection with the Offering. If the Wholesaler elects to use such Authorized Sales Materials in connection with the performance of its obligations hereunder, then the Wholesaler agrees that such material shall not be used by it in connection with the Offering and that it will direct Participating Broker-Dealers not to make such use of any Authorized Sales Materials unless accompanied or preceded by the Prospectus. If the Wholesaler elects to use such Authorized Sales Materials in connection with the performance of its obligations hereunder, the Wholesaler will only use Authorized Sales Materials provided by the Dealer Manager. The Wholesaler shall not give or provide any information or make any representation other than those contained in the Prospectus or the Authorized Sales Materials. The Wholesaler will not use any “broker-dealer use only” Authorized Sales Materials with members of the public in connection with offers or sales or the Offered Shares.

(f) The Wholesaler will suspend or terminate the offering and sale of the Offered Shares by the Wholesaler upon request of the Company at any time and resume offering and sale of the Offered Shares upon subsequent request of the Company if required to do so in connection with the performance of its obligations hereunder.

(g) The Wholesaler will provide to the Company and the Dealer Manager as soon as practicable upon receipt by the Wholesaler copies of any written or otherwise documented customer complaints received by the Wholesaler from Participating Broker-Dealers relating in any way to the Offering (including, but not limited to, the manner in which the Offered Shares are offered by any Participating Broker-Dealer), the Offered Shares or the Company.

(h) Other than with respect to use of Authorized Sales Materials or the Prospectus or otherwise pursuant to or in connection with this Agreement, the Wholesaler will not, without the Company’s prior written consent, make a source-identifying use of (i) the Company’s name, brand, logo or trademark or any reasonably similar variant or derivative thereof or (ii) the “Cole” name, brand, logo or trademark or any reasonably similar variant or derivative thereof.

(i) The Wholesaler shall under no circumstances engage in any activities hereunder in any jurisdiction (i) in which the Dealer Manager has not informed the Wholesaler that counsel’s advice has been received that the Offered Shares are qualified for sale or are exempt under the applicable securities or Blue Sky laws thereof, or (ii) in which the Wholesaler may not lawfully engage.

(j) The Wholesaler shall comply, in all material respects, with all applicable laws, and the applicable rules and regulations of FINRA, the SEC, state securities administrators and any other applicable regulatory body in connection with the Offering.

8.	Indemnification; Contribution

equity-holders and control persons (collectively, the “ Other Indemnified Parties ”), from and against any losses, claims (including the reasonable costs of investigation and legal fees), damages or liabilities (or actions in respect thereof), to which the Wholesaler, its affiliates or their respective Other Indemnified Parties may become subject under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any inaccuracy in or breach of a representation or warranty contained herein by the Dealer Manager, any breach of a covenant or agreement contained herein of the Dealer Manager, or any failure by the Dealer Manager to comply with state or federal securities law applicable to the Offering; (ii) any untrue statement or alleged untrue statement of a material fact contained in the information relating to the Dealer Manager that appears in the Dealer Manager Sections of the Prospectus or any amendment thereof, or arise out of or are based upon the omission or alleged omission to state in the Dealer Manager Sections a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (iii) any unauthorized use of sales materials or use of unauthorized verbal representations concerning the Offered Shares by the Dealer Manager. The Dealer Manager will reimburse the Wholesaler and its Other Indemnified Parties for any legal or other expenses reasonably incurred by such Wholesaler, its affiliates and their respective Other Indemnified Parties in connection with investigating or defending such loss, claim, damage, liability or action.

(b) The Wholesaler will indemnify, defend and hold harmless the Dealer Manager, the Company and their respective Other Indemnified Parties, from and against any losses, claims (including the reasonable costs of investigation and legal fees), damages or liabilities (or actions in respect thereof), to which the Dealer Manager, the Company and any of their respective Other Indemnified Parties may become subject under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims (including the reasonable costs of investigation and legal fees), damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any inaccuracy in or breach of a representation or warranty contained herein by the Wholesaler, any breach of a covenant or agreement contained herein of the Wholesaler, or any failure by the Wholesaler to comply with state or federal securities laws applicable to the Offering; and (ii) any unauthorized use of sales materials or use of unauthorized verbal representations concerning the Shares by the Wholesaler.

(c) Promptly after receipt by an indemnified party of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under this Section 8 unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in this Agreement. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided , however , that such counsel shall be subject to approval by the indemnified party, not to be unreasonably withheld or delayed. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ and select separate counsel (including local counsel), subject to approval by the indemnifying party not to be unreasonably withheld or delayed, and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel for the indemnified party (subject to approval by the indemnified party not to be unreasonably withheld or delayed) to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party may settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be

sought hereunder but may not do so without the prior written consent of the indemnified parties, unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.

(d) If the right to indemnification provided for in this Section 8 would by its terms be available to a person hereunder, but is held to be unavailable by a court of competent jurisdiction for any reason, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party as a result of such Losses and expenses in respect thereof, as incurred, in such proportion as is appropriate to reflect the relative fault of the Dealer Manager and the Wholesaler, as applicable, in connection with the statements, omissions or other circumstances which resulted in such Losses or expenses, as well as any other relevant equitable considerations. The relative fault of the Dealer Manager and the Wholesaler, as applicable, shall be determined by reference to, among other things, the parties’ relative intent, knowledge, and access to information. It is understood that it would not be just and equitable if contribution pursuant to this Section 8(d ) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(d) . Notwithstanding the provisions of this Section 8(d) , the Dealer Manager shall not be required to contribute any amount in excess of the total price of the Offering Shares sold by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8(d) , each Other Indemnified Party affiliate of the Dealer Manager shall have the same rights to contribution as the Dealer Manager and each Other Indemnified Party of the Wholesaler shall have the same rights to contribution as the Wholesaler.

9.	Relationship of Wholesaler, Participating Broker-Dealers and the Dealer Manager

(a) The obligations of each of the Wholesaler and the Participating Broker-Dealers are several and not joint. Nothing herein contained shall constitute the Wholesaler and the Participating Broker-Dealers, or any of them, as an association, partnership, unincorporated business or other separate entity. The Dealer Manager and the Company shall be under no liability to the Wholesaler except for lack of good faith and for obligations expressly assumed by the Dealer Manager and the Company in this Agreement.

(b) The parties hereto acknowledge that, other than as expressly set forth herein, the Wholesaler is not authorized to act as agent of the Dealer Manager or the Company in any connection or transaction, and the Wholesaler agrees that it will not so act or purport to so act.

(c) The parties hereto acknowledge that the Wholesaler’s obligations under this Agreement, including without limitation the Wholesaler Exclusivity have no impact on, and in no way release the Dealer Manager from, the Dealer Manager’s obligations and rights to act as the dealer manager for the Company pursuant to Section 3.1 of the Dealer Manager Agreement.

10.	Termination

This Agreement shall terminate upon the earlier to occur of (i) termination of the Offering, (ii) the Second Closing (as defined in the Equity Purchase Agreement (the “Equity Purchase Agreement”), dated as of September 30, 2014, by and between ARC Properties Operating Partnership, L.P. and RCS Capital Corporation), (iii) termination of the Equity Purchase Agreement or (iv) December 31, 2014.

(a) Wholesaler may terminate this Agreement at any time by giving ten days’ prior written notice thereof to the other parties hereto. This Agreement automatically shall terminate with no further action by any party hereto if the Wholesaler or the Dealer Manager ceases to be a member in good standing of FINRA, or with the securities commission of the state in which its principal office is located. The Wholesaler will notify the Dealer Manager immediately if the Wholesaler ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Wholesaler is currently registered or licensed. The Dealer Manager will notify the Wholesaler immediately if the Dealer Manager ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Dealer Manager is currently registered or licensed.

(b) In the event of termination under Section 11(b) , the Dealer Manager will continue to pay any Sourcing Fees with respect to RCS Sales to the Wholesaler and reimburse costs and expenses incurred, to the extent reimbursable under Section 3(c) , for so long as Offered Shares remain outstanding (it being understood and agreed that the calculation of the Sourcing Fees in such event shall take into account the number of Offered Shares sold primarily from the efforts of RCS Service Providers in the Offering). Notwithstanding the foregoing sentence, the Dealer Manager will not continue to pay the Sourcing Fee to the Wholesaler and reimburse costs and expenses related to the Offering incurred by the Wholesaler pursuant to Section 3(c) subsequent to the termination of the Offering to the extent, but only to the extent, that such payments or reimbursements would cause the total underwriting compensation (as defined in accordance with applicable FINRA rules) paid with respect to the Offering to exceed 10% of the gross proceeds from the sale of the Offered Shares calculated as of the termination of the Offering.

(c) The termination of this Agreement for any reason shall not affect (i) the Wholesaler’s obligations under the second sentence of Section 10(a) , (ii) the indemnification obligations under Section 8 , or (iii) this Section 10 . Without limiting the foregoing, the provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect.

11.	Amendment

(a) The Dealer Manager has the right, subject to written consent from the other parties hereto which shall not be unreasonably withheld or delayed, to amend this Agreement as necessary, in the reasonable opinion of outside counsel to the Dealer Manager, to comply with applicable law or the requirements of any governmental or self-regulatory body or agency.

(b) This Agreement may not otherwise be amended, supplemented or waived except by the express written consent of the parties hereto. No waiver of any provision of this Agreement may be implied from any course of dealing between or among any of the parties hereto or from any failure by any party hereto to assert its rights under this Agreement on any occasion or series of occasions.

12.	Miscellaneous

(a) No party may assign this Agreement without the prior written consent of the other parties. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto.

(b) All notices, requests, demands, approvals, consents, waivers and other communications required or permitted to be given under this Agreement (each, a “ Notice ”) shall be in writing and shall be (i) delivered personally, (ii) mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, (iii) sent by next-day or overnight mail or delivery, or (iv) sent by facsimile transmission ( provided , however , that the original copy thereof also is sent by one of the other means specified above in this Section 13(b) ):

If to the Dealer Manager:

Cole Capital Corporation

2325 East Camelback Road

Suite 1100

Phoenix, AZ 85016,

Attention: Jim Siegel, Chief Compliance Officer

Facsimile: (480) 449-7001

If to the Wholesaler:

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Attention:

Facsimile:

or to such other Person or address as any party shall specify by Notice in writing to the other parties in accordance with this Section 13(b) . Each Notice shall be deemed effective and given upon actual receipt or refusal of receipt.

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of choice of the law thereof.

(d) If any party hereto initiates any legal action arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover from the other party all reasonable attorneys’ fees, expert witness fees and expenses incurred by the prevailing party in connection therewith.

(e) All captions used in this Agreement are for convenience only, are not a part hereof and are not to be used in construing or interpreting any aspect hereof.

(f) This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in multiple counterparts, each such counterpart to be deemed an original but which all together shall constitute one and the same instrument.

(g) If any provision of this Agreement, or the application of any provision to any person or circumstance, shall be held to be inconsistent with any law, ruling, rule or regulation, the remainder of this Agreement or the application of the provision to persons or circumstances other than those as to which it is held inconsistent, shall not be affected thereby.

If the foregoing is in accordance with your understanding of this Agreement, please sign and return a counterpart signature page or a counterpart hereof, whereupon this Agreement will become a binding agreement among us in accordance with its terms.

[ Signature pages follow. ]


COLE CAPITAL CORPORATION

By:
Name:
Title:

By:
Name:
Title:


Confirmed, Accepted and Agreed to as of the date first above written:

REALTY CAPITAL SECURITIES, LLC

By:
Name:
Title:

[Signature Page to Wholesaling Agreement – CCIT II]

Exhibit C-2

FORM OF WHOLESALING AGREEMENT

[ ], 2014

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Ladies and Gentlemen:

Cole Capital Corporation, a Delaware corporation (the “ Dealer Manager ”), with its address at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016, has entered into an agreement dated as of August 26, 2013 (the “ Dealer Manager Agreement ”), with Cole Real Estate Income Strategy (Daily NAV), Inc. (the “ Company ”). Under the Dealer Manager Agreement, the Dealer Manager serves as the Company’s exclusive Dealer Manager in connection with a public offering (the “ Offering ”) of the Company’s common stock. The shares of the Company’s stock (the “ Offered Shares ”) are being issued and sold to the public on a “best efforts” basis through the Dealer Manager and the broker-dealers and other appropriately licensed firms participating in the Offering (the “ Participating Broker-Dealers ”), pursuant to Participating Broker-Dealer Agreements between the Dealer Manager and each Participating Broker-Dealer (each, a “ Participating Broker-Dealer Agreement ”). The Dealer-Manager shall provide to the Wholesaler the form of the Participating Broker-Dealer Agreement used by the Dealer Manager. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Dealer Manager Agreement.

1.	Appointment and Acceptance of the Wholesaler

2.	Undertakings of the Wholesaler

(i) providing training and education regarding the Company and the offering of the Offered Shares to Participating Broker-Dealers;

(ii) providing marketing and sales support for Participating Broker-Dealers,; and

3.	Compensation and Expense Reimbursement

(a) In consideration for the Wholesaler performing its obligations under this Agreement, the Dealer Manager shall pay the Wholesaler a sourcing fee (the “ Sourcing Fee ”) equal to 3.375% of the Selling Price of each of the Offered Shares sold by Participating Broker-Dealers who entered into dealer agreements with the Dealer Manager primarily as a result of the efforts of RCS Service Providers (“ RCS Sales ”); provided , however , the Sourcing Fee shall be payable solely from that portion of the Dealer Manager Fee that is (i) actually received by the Dealer Manager from the Company pursuant to Section 3,3 of the Dealer Manager Agreement, and (ii) not reallowed to any Participating Broker-Dealer pursuant to Section 3.3 of the Dealer Manager Agreement (a “ Sourcing Fee Reallowance ”) in respect of any RCS Sales.

(c) The Dealer Manager also will reimburse the Wholesaler for all costs and expenses incurred that are: (i) in connection with bona fide due diligence activities; and (ii) incident to the Offering, but only to the extent such costs or expenses (A) are permitted pursuant to prevailing rules and regulations of FINRA, (B) would have been incurred by the Dealer Manager if the Wholesaler had not incurred them, and (C) are otherwise eligible for reimbursement from the Company pursuant to Section 3.5 of the Dealer Manager Agreement. The Wholesaler will present the Dealer Manager with itemized and detailed invoices for all incurred costs and expenses that are reimbursable pursuant to this Section 3(c) . The Dealer Manager will submit such request to the Company within five business days following receipt of such invoices and will reimburse the Wholesaler within five business days following receipt of funds from the Company for such reimbursement.

4.	Representations and Warranties of the Dealer Manager

(c) The Dealer Manager (A) is duly registered as a broker-dealer pursuant to the provisions of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), (B) is a member of FINRA in good standing, (C) is a broker or dealer registered as such in those states and jurisdictions where the Dealer Manager is required to be registered in order to provide the services contemplated by this Agreement and the Dealer Manager Agreement, and (D) it and those of its employees and representatives who are required to have approvals, licenses or registrations to act under this Agreement have all applicable required approvals, licenses and registrations to act under this Agreement. There is no provision in the Dealer Manager’s FINRA membership agreement that would prohibit or restrict the ability of the Dealer Manager to carry out the services related to the Offering as contemplated by this Agreement and the Dealer Manager Agreement or to perform its obligations hereunder and thereunder. With respect to its participation in the offer and sale of the Offered Shares (including, without limitation any resales and transfers of Offered Shares), the Dealer Manager shall comply in all material respects with all applicable requirements of (1) the Securities Act of 1933, as amended (the “ Securities Act ”), and the applicable rules and regulations promulgated thereunder (the “ Securities Act Regulations ”), the Exchange Act and the applicable rules and regulations promulgated thereunder (the “ Exchange Act Regulations ”) and all other federal rules and regulations applicable to the Offering and the sale of the Offered Shares, (2) applicable state securities or “blue sky” laws, and (3) the rules set forth in the FINRA rulebook applicable to the Offering, which currently consists of rules promulgated by FINRA, the National Association of Securities Dealers (“ NASD ”) and the New York Stock Exchange (collectively, the “ FINRA Rules ”), specifically including, but not in any way limited to, FINRA Rule 2310, FINRA Rule 5110, FINRA Rule 5141, NASD Rule 2340 and NASD Rule 2420.

5.	Representations and Warranties of the Wholesaler

The Wholesaler represents and warrants to the Dealer Manager:

Wholesaler to carry out the services related to the Offering as contemplated by this Agreement or to perform its obligations hereunder. With respect to its participation in the offer and sale of the Offered Shares (including, without limitation any resales and transfers of Offered Shares), the Wholesaler agrees to comply in all material respects with all applicable requirements, in each case to the extent such requirements are applicable to the Wholesaler in connection with the performance of its obligations hereunder, of (i) the Securities Act, the Exchange Act, the Securities Act Regulations and the Exchange Act Regulations and all other federal rules and regulations applicable to the Offering and the sale of the Offered Shares, (ii) applicable state securities or “blue sky” laws, and (iii) the FINRA Rules, specifically including, but not in any way limited to, FINRA Rule 2310, FINRA Rule 5110, FINRA Rule 5141, NASD Rule 2340 and NASD Rule 2420.

6.	Covenants of the Dealer Manager

(b) The Dealer Manager shall abide by and comply with: (i) the privacy standards and requirements of the Gramm-Leach Bliley Act of 1999 (“ GLB Act ”); (ii) the privacy standards and requirements of any other applicable federal or state law; (iii) any reasonable written privacy policies and standards provided to the Dealer Manager by the Wholesaler and the Company; and (d) the Dealer Manager’s own internal privacy policies and procedures, each as may be amended from time to time.

7.	Covenants of the Wholesaler

(b) The Wholesaler shall, in all material respects and to the extent such requirements are applicable to the Wholesaler in connection with the performance of its obligations hereunder, abide by and comply with (i) the privacy standards and requirements of the GLB Act; (ii) the privacy standards and requirements of any other applicable federal or state law; (iii) any reasonable written privacy policies and standards provided to the Wholesaler by the Dealer Manager and the Company; and (iv) the Wholesaler’s own internal privacy policies and procedures, each as may be amended from time to time.

(h) Other than with respect to use of Authorized Sales Materials or the Prospectus or otherwise pursuant to or in connection with this Agreement, the Wholesaler will not, without the Company’s prior written consent, make a source-identifying use of (i) the Company’s name, brand, logo or trademark or any reasonably similar variant or derivative thereof or (ii) the “ Cole” name, brand, logo or trademark or any reasonably similar variant or derivative thereof.

8.	Indemnification; Contribution

(a) The Dealer Manager will indemnify, defend (subject to Section 4 of the Dealer Manager Agreement) and hold harmless the Wholesaler, its affiliates and their respective officers, directors, shareholders, members, partners, other equity-holders and control persons (collectively, the “ Other Indemnified Parties ”), from and against any losses, claims (including the reasonable costs of investigation and legal fees), damages or liabilities (or actions in respect thereof), to which the Wholesaler, its affiliates or their respective Other Indemnified Parties may become subject under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any inaccuracy in or breach of a representation or warranty contained herein by the Dealer Manager, any breach of a covenant or agreement contained herein of the Dealer Manager, or any failure by the Dealer Manager to comply with state or federal securities law applicable to the Offering; (ii) any untrue statement or alleged untrue statement of a material fact contained in the information relating to the Dealer Manager that appears in the Dealer Manager Sections of the Prospectus or any amendment thereof, or arise out of or are based upon the omission or alleged omission to state in the Dealer Manager Sections a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (iii) any unauthorized use of sales materials or use of unauthorized verbal representations concerning the Offered Shares by the Dealer Manager. The Dealer Manager will reimburse the Wholesaler and its Other Indemnified Parties for any legal or other expenses reasonably incurred by such Wholesaler, its affiliates and their respective Other Indemnified Parties in connection with investigating or defending such loss, claim, damage, liability or action.

or delayed) to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party may settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder but may not do so without the prior written consent of the indemnified parties, unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.

9.	Relationship of Wholesaler, Participating Broker-Dealers and the Dealer Manager

10.	Termination

Wholesaler or the Dealer Manager ceases to be a member in good standing of FINRA, or with the securities commission of the state in which its principal office is located. The Wholesaler will notify the Dealer Manager immediately if the Wholesaler ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Wholesaler is currently registered or licensed. The Dealer Manager will notify the Wholesaler immediately if the Dealer Manager ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Dealer Manager is currently registered or licensed.

11.	Amendment

12.	Miscellaneous

If to the Dealer Manager:

Cole Capital Corporation

2325 East Camelback Road

Suite 1100

Phoenix, AZ 85016,

Attention: Jim Siegel, Chief Compliance Officer

Facsimile: (480) 449-7001

If to the Wholesaler:

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Attention:

Facsimile:

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of choice of the law thereof.

(e) All captions used in this Agreement are for convenience only, are not a part hereof and are not to be used in construing or interpreting any aspect hereof.

[ Signature pages follow. ]


COLE CAPITAL CORPORATION

By:
Name:
Title:

By:
Name:
Title:


Confirmed, Accepted and Agreed to as of the date first above written:

REALTY CAPITAL SECURITIES, LLC

By:
Name:
Title:

[Signature Page to Wholesaling Agreement – INAV]

Exhibit C-3

FORM OF WHOLESALING AGREEMENT

[ ], 2014

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Ladies and Gentlemen:

Cole Capital Corporation, a Delaware corporation (the “ Dealer Manager ”), with its address at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016, has entered into an agreement dated as of February 10, 2011 (the “ Dealer Manager Agreement ”), with Cole Corporate Income Trust, Inc. (the “ Company ”). Under the Dealer Manager Agreement, the Dealer Manager serves as the Company’s exclusive Dealer Manager in connection with a public offering (the “ Offering ”) of the Company’s common stock. The shares of the Company’s stock (the “ Offered Shares ”) are being issued and sold to the public on a “best efforts” basis through the Dealer Manager and the broker-dealers and other appropriately licensed firms participating in the Offering (the “ Participating Broker-Dealers ”), pursuant to Participating Broker-Dealer Agreements between the Dealer Manager and each Participating Broker-Dealer (each, a “ Participating Broker-Dealer Agreement ”). The Dealer-Manager shall provide to the Wholesaler the form of the Participating Broker-Dealer Agreement used by the Dealer Manager. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Dealer Manager Agreement.

1.	Appointment and Acceptance of the Wholesaler

2.	Undertakings of the Wholesaler

(i) providing training and education regarding the Company and the offering of the Offered Shares to Participating Broker-Dealers;

(ii) providing marketing and sales support for Participating Broker-Dealers,; and

3.	Compensation and Expense Reimbursement

4.	Representations and Warranties of the Dealer Manager

5.	Representations and Warranties of the Wholesaler

The Wholesaler represents and warrants to the Dealer Manager:

6.	Covenants of the Dealer Manager

7.	Covenants of the Wholesaler

(h) Other than with respect to use of Authorized Sales Materials or the Prospectus or otherwise pursuant to or in connection with this Agreement, the Wholesaler will not, without the Company’s prior written consent, make a source-identifying use of (i) the Company’s name, brand, logo or trademark or any reasonably similar variant or derivative thereof or (ii) the “ Cole” name, brand, logo or trademark or any reasonably similar variant or derivative thereof.

8.	Indemnification; Contribution

9.	Relationship of Wholesaler, Participating Broker-Dealers and the Dealer Manager

10.	Termination

11.	Amendment

12.	Miscellaneous

If to the Dealer Manager:

Cole Capital Corporation

2325 East Camelback Road

Suite 1100

Phoenix, AZ 85016,

Attention: Jim Siegel, Chief Compliance Officer

Facsimile: (480) 449-7001

If to the Wholesaler:

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Attention:

Facsimile:

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of choice of the law thereof.

(e) All captions used in this Agreement are for convenience only, are not a part hereof and are not to be used in construing or interpreting any aspect hereof.

[ Signature pages follow. ]


COLE CAPITAL CORPORATION

By:
Name:
Title:

By:
Name:
Title:


Confirmed, Accepted and Agreed to as of the date first above written:

REALTY CAPITAL SECURITIES, LLC

By:
Name:
Title:

[Signature Page to Wholesaling Agreement – CCIT]

Exhibit C-4

WHOLESALING AGREEMENT

[ ], 2014

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Ladies and Gentlemen:

Cole Capital Corporation, a Delaware corporation (the “ Dealer Manager ”), with its address at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016, has entered into an agreement dated as of January 26, 2012 (the “ Dealer Manager Agreement ”), with Cole Credit Property Trust IV, INC. (the “ Company ”). Under the Dealer Manager Agreement, the Dealer Manager serves as the Company’s exclusive Dealer Manager in connection with a public offering (the “ Offering ”) of the Company’s common stock. The shares of the Company’s stock (the “ Offered Shares ”) are being issued and sold to the public on a “best efforts” basis through the Dealer Manager and the broker-dealers and other appropriately licensed firms participating in the Offering (the “ Participating Broker-Dealers ”), pursuant to Participating Broker-Dealer Agreements between the Dealer Manager and each Participating Broker-Dealer (each, a “ Participating Broker-Dealer Agreement ”). The Dealer-Manager shall provide to the Wholesaler the form of the Participating Broker-Dealer Agreement used by the Dealer Manager. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Dealer Manager Agreement.

1.	Appointment and Acceptance of the Wholesaler

2.	Undertakings of the Wholesaler

(i) providing training and education regarding the Company and the offering of the Offered Shares to Participating Broker-Dealers;

(ii) providing marketing and sales support for Participating Broker-Dealers,; and

3.	Compensation and Expense Reimbursement

4.	Representations and Warranties of the Dealer Manager

5.	Representations and Warranties of the Wholesaler

The Wholesaler represents and warrants to the Dealer Manager:

6.	Covenants of the Dealer Manager

7.	Covenants of the Wholesaler

(h) Other than with respect to use of Authorized Sales Materials or the Prospectus or otherwise pursuant to or in connection with this Agreement, the Wholesaler will not, without the Company’s prior written consent, make a source-identifying use of (i) the Company’s name, brand, logo or trademark or any reasonably similar variant or derivative thereof or (ii) the “ Cole” name, brand, logo or trademark or any reasonably similar variant or derivative thereof.

8.	Indemnification; Contribution

9.	Relationship of Wholesaler, Participating Broker-Dealers and the Dealer Manager

10.	Termination

(a) This Agreement shall terminate upon the earlier to occur of (i) termination of the Offering, (ii) the Second Closing (as defined in the Equity Purchase Agreement (the “Equity Purchase Agreement”), dated as of September 30, 2014, by and between ARC Properties Operating Partnership, L.P. and RCS Capital Corporation), (iii) termination of the Equity Purchase Agreement or (iv) December 31, 2014.

Wholesaler is currently registered or licensed. The Dealer Manager will notify the Wholesaler immediately if the Dealer Manager ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Dealer Manager is currently registered or licensed.

(c) In the event of termination under Section 11(b) , the Dealer Manager will continue to pay any Sourcing Fees with respect to RCS Sales to the Wholesaler and reimburse costs and expenses incurred, to the extent reimbursable under Section 3(c) , for so long as Offered Shares remain outstanding (it being understood and agreed that the calculation of the Sourcing Fees in such event shall take into account the number of Offered Shares sold primarily from the efforts of RCS Service Providers in the Offering). Notwithstanding the foregoing sentence, the Dealer Manager will not continue to pay the Sourcing Fee to the Wholesaler and reimburse costs and expenses related to the Offering incurred by the Wholesaler pursuant to Section 3(c) subsequent to the termination of the Offering to the extent, but only to the extent, that such payments or reimbursements would cause the total underwriting compensation (as defined in accordance with applicable FINRA rules) paid with respect to the Offering to exceed 10% of the gross proceeds from the sale of the Offered Shares calculated as of the termination of the Offering.

(d) The termination of this Agreement for any reason shall not affect (i) the Wholesaler’s obligations under the second sentence of Section 10(a) , (ii) the indemnification obligations under Section 8 , or (iii) this Section 10 . Without limiting the foregoing, the provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect.

11.	Amendment

12.	Miscellaneous

If to the Dealer Manager:

Cole Capital Corporation

2325 East Camelback Road

Suite 1100

Phoenix, AZ 85016,

Attention: Jim Siegel, Chief Compliance Officer

Facsimile: (480) 449-7001

If to the Wholesaler:

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Attention:

Facsimile:

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of choice of the law thereof.

(e) All captions used in this Agreement are for convenience only, are not a part hereof and are not to be used in construing or interpreting any aspect hereof.

[ Signature pages follow. ]


COLE CAPITAL CORPORATION

By:
Name:
Title:

By:
Name:
Title:


Confirmed, Accepted and Agreed to as of the date first above written:

REALTY CAPITAL SECURITIES, LLC

By:
Name:
Title:

[Signature Page to Wholesaling Agreement – CCPT IV]

Exhibit C-5

WHOLESALING AGREEMENT

[ ], 2014

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Ladies and Gentlemen:

Cole Capital Corporation, a Delaware corporation (the “ Dealer Manager ”), with its address at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016, has entered into an agreement dated as of March 17, 2014 (the “ Dealer Manager Agreement ”), with Cole Credit Property Trust V, INC. (the “ Company ”). Under the Dealer Manager Agreement, the Dealer Manager serves as the Company’s exclusive Dealer Manager in connection with a public offering (the “ Offering ”) of the Company’s common stock. The shares of the Company’s stock (the “ Offered Shares ”) are being issued and sold to the public on a “best efforts” basis through the Dealer Manager and the broker-dealers and other appropriately licensed firms participating in the Offering (the “ Participating Broker-Dealers ”), pursuant to Participating Broker-Dealer Agreements between the Dealer Manager and each Participating Broker-Dealer (each, a “ Participating Broker-Dealer Agreement ”). The Dealer-Manager shall provide to the Wholesaler the form of the Participating Broker-Dealer Agreement used by the Dealer Manager. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Dealer Manager Agreement.

1.	Appointment and Acceptance of the Wholesaler

Upon the terms and subject to the conditions set forth in this Agreement, the Dealer Manager hereby appoints Realty Capital Securities, LLC, a Delaware limited liability company (the “ Wholesaler ”), and the Wholesaler hereby accepts such appointment, as the Dealer Manager’s distribution agent to assist, through the Wholesaler’s employees, agents, contractors, registered representatives and all other representatives who will perform services hereunder (collectively, the “ RCAP Service Providers ”), the Dealer Manager with the sale of Offered Shares through the recruitment of, and the provision of assistance to, Participating Broker-Dealers, and the Wholesaler desires to accept such engagement; provided , however , that nothing herein shall be construed to: (i) contravene the Company’s appointment of the Dealer Manager as its exclusive agent and dealer manager during the Offering Period, and the Dealer Manager’s acceptance of such appointment, pursuant to Section 3.1 of the Dealer Manager Agreement; or (ii) imply that the Dealer Manager shall not have sole discretion to accept or reject any subscription for the Offered Shares in whole or in part.

2.	Undertakings of the Wholesaler

(i) providing training and education regarding the Company and the offering of the Offered Shares to Participating Broker-Dealers;

(ii) providing marketing and sales support for Participating Broker-Dealers,; and

3.	Compensation and Expense Reimbursement

(a) In consideration for the Wholesaler performing its obligations under this Agreement, the Dealer Manager shall pay the Wholesaler a sourcing fee (the “ Sourcing Fee ”) equal to 1.80% of the Selling Price of each of the Offered Shares sold by Participating Broker-Dealers who entered into dealer agreements with the Dealer Manager primarily as a result of the efforts of RCAP Service Providers (“ RCAP Sales ”); provided , however , the Sourcing Fee shall be payable solely from that portion of the Dealer Manager Fee that is (i) actually received by the Dealer Manager from the Company pursuant to Section 3,3 of the Dealer Manager Agreement, and (ii) not reallowed to any Participating Broker-Dealer pursuant to Section 3.3 of the Dealer Manager Agreement (a “ Sourcing Fee Reallowance ”) in respect of any RCAP Sales.

4.	Representations and Warranties of the Dealer Manager

5.	Representations and Warranties of the Wholesaler

The Wholesaler represents and warrants to the Dealer Manager:

6.	Covenants of the Dealer Manager

7.	Covenants of the Wholesaler

(h) Other than with respect to use of Authorized Sales Materials or the Prospectus or otherwise pursuant to or in connection with this Agreement, the Wholesaler will not, without the Company’s prior written consent, make a source-identifying use of (i) the Company’s name, brand, logo or trademark or any reasonably similar variant or derivative thereof or (ii) the “ Cole” name, brand, logo or trademark or any reasonably similar variant or derivative thereof.

8.	Indemnification; Contribution

9.	Relationship of Wholesaler, Participating Broker-Dealers and the Dealer Manager

10.	Termination

(b) Wholesaler may terminate this Agreement at any time by giving ten days’ prior written notice thereof to the other parties hereto. This Agreement automatically shall terminate with no further action by any party hereto if the Wholesaler or the Dealer Manager ceases to be a member in good standing of FINRA, or with the securities commission of the state in which its principal office is located. The Wholesaler will notify the Dealer Manager immediately if the Wholesaler ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Wholesaler is currently registered or licensed. The Dealer Manager will notify the Wholesaler immediately if the Dealer Manager ceases to be a member in good standing of FINRA or with the securities commission of any state in which the Dealer Manager is currently registered or licensed.

(c) In the event of termination under Section 11(b) , the Dealer Manager will continue to pay any Sourcing Fees with respect to RCAP Sales to the Wholesaler and reimburse costs and expenses incurred, to the extent reimbursable under Section 3(c) , for so long as Offered Shares remain outstanding (it being understood and agreed that the calculation of the Sourcing Fees in such event shall take into account the number of Offered Shares sold primarily from the efforts of RCAP Service Providers in the Offering). Notwithstanding the foregoing sentence, the Dealer Manager will not continue to pay the Sourcing Fee to the Wholesaler and reimburse costs and expenses related to the Offering incurred by the Wholesaler pursuant to Section 3(c) subsequent to the termination of the Offering to the extent, but only to the extent, that such payments or reimbursements would cause the total underwriting compensation (as defined in accordance with applicable FINRA rules) paid with respect to the Offering to exceed 10% of the gross proceeds from the sale of the Offered Shares calculated as of the termination of the Offering.

11.	Amendment

12.	Miscellaneous

If to the Dealer Manager:

Cole Capital Corporation

2325 East Camelback Road

Suite 1100, Phoenix, AZ 85016,

Attention: Jim Siegel, Chief Compliance Officer

Facsimile: (480) 449-7001

If to the Wholesaler:

Realty Capital Securities, LLC

One Beacon Street

14th Floor

Boston, MA 02108

Attention:

Facsimile:

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of choice of the law thereof.

(e) All captions used in this Agreement are for convenience only, are not a part hereof and are not to be used in construing or interpreting any aspect hereof.

[ Signature pages follow. ]


COLE CAPITAL CORPORATION

By:
Name:
Title:

By:
Name:
Title:


Confirmed, Accepted and Agreed to as of the date first above written:

REALTY CAPITAL SECURITIES, LLC

By:
Name:
Title:

[Signature Page to Wholesaling Agreement – CCPT V]

Exhibit D

FORM OF EMPLOYEE LEASING AGREEMENT

This EMPLOYEE LEASING AGREEMENT (this “ Agreement ”), is hereby made as of [ — ], 2014 (the “ Effective Date ”) by and between ARC Properties Operating Partnership, L.P., a Delaware limited partnership (“ ARCP OP ”), and RCS Capital Corporation, a Delaware corporation (“ RCAP ”).

W I T N E S S E T H :

WHEREAS , ARCP OP and RCAP are parties to that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Equity Purchase Agreement ”) (capitalized terms used herein without definition shall have the meaning ascribed to such terms in the Equity Purchase Agreement);

WHEREAS, following the First Closing RCAP will engage in certain aspects of the Business, and, pursuant to the terms and conditions of the Equity Purchase Agreement, RCAP has agreed to acquire from ARCP OP all of the outstanding Equity Interests held by ARCP OP in each of the Acquired Companies, such that, immediately following the consummation of the Second Closing, RCAP, through the Acquired Companies and their respective Subsidiaries, will be engaged in the Business; and

WHEREAS , RCAP desires to utilize certain employees of the Acquired Companies and their Subsidiaries (collectively, along with ARCP OP, the “ ARCP Companies ”) to perform work for RCAP relating to the Business during the period between the consummation of the First Closing and the earlier of (i) the consummation of the Second Closing, (ii) the termination of the Equity Purchase Agreement pursuant the terms thereof and (iii) December 31, 2014 (the “ Leasing Period ”) as hereinafter provided and ARCP OP desires to lease such employees to RCAP.

NOW, THEREFORE , in consideration of the premises and the mutual covenants herein set forth, RCAP and ARCP OP (collectively, the “ Parties ”) agree as follows:

1. Term . This Agreement shall be effective as of the First Closing and shall continue in full force and effect through the Leasing Period or such earlier date as agreed to by the Parties (the “ Term ”).

2. Leasing of Employees and Compensation . During the Term, ARCP OP shall, or shall cause the applicable ARCP Company to, lease to RCAP, or one or more of its Affiliates (collectively, along with RCAP (other than Realty Capital Securities, LLC), the “ RCAP Companies ”) specified by RCAP, for the purpose of performing work in the Business, the services of the persons identified in Attachment A (with such additions as are from time to time agreed to by the Parties and such subtractions as are from time to time determined by RCAP in its sole discretion, the “ Leased Employees ”). A lease may be for a Leased Employee’s full or part work time as agreed from time to time by the Parties. Attachment A shall include, with respect to each such Leased Employee, the Leased Employee’s current annual base

compensation rate and commission, bonus or any other incentive-based compensation. ARCP OP shall use commercially reasonable efforts to cause all services performed by the Leased Employees under this Agreement to be performed at service and performance levels consistent with those provided to the Business prior to the beginning of the Term. ARCP OP shall not take any action to intentionally degrade such services during the Term. During the Term, RCAP shall compensate ARCP OP for all Leased Employee wage and benefit costs as provided in Attachment B .

3. Payroll and Benefits . The ARCP Companies shall be solely responsible during the Term for (i) paying to the Leased Employees all compensation at the wage and salary rates set forth on Attachment A , (ii) providing to the Leased Employees all benefits pursuant to the ARCP Companies’ applicable employee benefit plans or programs and as otherwise provided under applicable Law and (iii) providing all payroll, accounting and administrative services associated with payment of each Leased Employee’s compensation and the administration and provision of benefits pursuant to ARCP OP’s employee benefit plans or programs and as provided under applicable Law. The ARCP Companies shall be solely responsible for the payment of all required federal, foreign, state and local payroll taxes, workers’ compensation insurance, unemployment compensation and social security benefits for the Leased Employees and for preparing and filing all returns and reports concerning the Leased Employees.

4. Management . During the Term, (i) the applicable ARCP Company shall be, at all times, the employer for all purposes of the Leased Employees, (ii) the Leased Employees shall not be deemed to be employees of any RCAP Company for any purpose and (iii) RCAP shall have supervisory authority over the activities of the Leased Employees on behalf of the applicable RCAP Companies with respect to the services provided under this Agreement. Notwithstanding anything herein to the contrary, during the Term the Leased Employees shall be subject to the exclusive control of the ARCP Companies and the ARCP Companies shall be responsible for all personnel matters regarding the Leased Employees, including, but not limited to, employment terminations, promotions, transfers, compensation, performance evaluations and all disciplinary actions.

5. Compliance with Laws . The ARCP Companies will use commercially reasonable efforts to comply, and will use commercially reasonable efforts to cause all of their applicable personnel, including, without limitation, the Leased Employees, to comply, with applicable federal, foreign, state and local labor and employment Laws with respect to the Leased Employees. The applicable ARCP Companies shall be responsible for maintaining time records, payroll records, employment eligibility forms, personnel files, medical files, workers’ compensation records, unemployment compensation records and other documents pertaining to the Leased Employees, in accordance with applicable federal, foreign, state and local Laws. The RCAP Companies will use commercially reasonable efforts, and will use commercially reasonable efforts to cause all of their applicable personnel, to comply, with the requirements of any applicable Laws pertaining to the RCAP Companies’ lease of the Leased Employees.

6. Indemnification .

RCAP will indemnify each of the ARCP Companies providing Leased Employees against, and agrees to hold any of them harmless from, any and all damage, loss, claim, liability and expense (including, without limitation, reasonable attorneys’ fees and expenses in connection with any claim, action, suit or proceeding brought against any of them) incurred or suffered by such ARCP Company arising out of:

a breach of this Agreement by RCAP; or

ii.

any acts or omissions of a Leased Employee while performing services at the direction of RCAP as a Leased Employee during the Term or the acts or omissions of a RCAP Company with regard to any Leased Employee.

provided , however , that none of the RCAP Companies shall be obligated to indemnify any ARCP Company for any damage, loss, claim, liability and expense to the extent arising or resulting directly from the gross negligence or intentional misconduct of any ARCP Company. In the event of any litigation or proceeding against ARCP OP (but not against any RCAP Company) relating to the subject matter of this Agreement, ARCP OP shall control the litigation with counsel of its choice; provided that ARCP OP shall not settle any claim without RCAP’s consent, which consent shall not unreasonably be withheld.

ARCP OP will indemnify each of the RCAP Companies against, and agrees to hold any of them harmless from, any and all damage, loss, claim, liability and expense (including, without limitation, reasonable attorneys’ fees and expenses in connection with any claim, action, suit or proceeding brought against any of them) incurred or suffered by any RCAP Company arising out of:

a breach of this Agreement by ARCP OP;

ii.

any claim for compensation or benefits by the Leased Employees (or the dependents or beneficiaries thereof) related to or arising from events during or preceding the Term; or

iii.

acts or omissions relating to the subject matter of this Agreement by an ARCP Company employee, excluding the Leased Employees while Leased Employees, or an agent or contractor engaged by an ARCP Company or the acts or omissions of any ARCP Company.

provided , however , that none of the ARCP Companies shall be obligated to indemnify any RCAP Company for any damage, loss, claim, liability and expense to the extent arising or resulting directly from the gross negligence or intentional misconduct of any RCAP Company.

7. Controlling Law . The interpretation and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of law doctrines.

8. Modifications . The Parties agree that the provisions of this Agreement may not be modified by any subsequent agreement unless the modifying agreement is (i) in writing, (ii) specifically references this Agreement, and (iii) is signed by authorized representatives of the Parties.

9. Access to Leased Employee Records . Subject to any limitations imposed by applicable Law, the ARCP Companies shall make payroll and employee benefit plan records with respect to the Leased Employees available to RCAP for the reasonable and legitimate business, financial and tax requirements of RCAP upon reasonable request and at the expense of RCAP.

10. Severability . The Parties acknowledge and agree that each provision of this Agreement shall be enforceable independently of every other provision. Furthermore, in the event that any provision is deemed to be unenforceable for any reason, the remaining provisions shall remain effective, binding and enforceable.

11. Controlling Upon Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. This Agreement may not be assigned by any Party, except to a wholly controlled affiliate or wholly owned subsidiary of such Party, or with the written permission of the other Party.

12. Notices. All notices or other communications hereunder shall be given and received in the manner set forth under Section 10.2 of the Equity Purchase Agreement.

13. Counterparts . This Agreement may be executed in multiple counterparts, all of which shall constitute a single agreement.

14. Captions . The titles of the sections herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the terms and provisions hereof. As used in this Agreement, the plural shall include the singular and the singular shall include the plural whenever appropriate.

15. Waivers . No waiver of any of the provisions of this Agreement shall be valid and enforceable unless such waiver is in writing and signed by the Parties to be charged, and, unless otherwise stated therein, no such waiver shall constitute a waiver of any other provision hereof (whether or not similar) or a continuing waiver.

16. Third Parties . Except as otherwise explicitly provided herein, nothing in this Agreement, whether expressed or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any other persons (including the Leased Employees) other than the Parties and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any Party, nor shall any provision give any third parties any right of subrogation or action over or against any of the Parties hereto. This Agreement is not intended to and does not create any third party beneficiary rights whatsoever.

17. Relationship of the Parties . No joint venture, partnership, agency, employment or co-employment relationship is created by this Agreement. No Party shall act as an agent or partner of the other Party or make any commitments for or create any obligations of the other Party, except as provided herein, without the other Party’s prior written consent.

18. Survival . The provisions of this Agreement shall survive the expiration of the Term and the termination of ARCP OP’s services pursuant to this Agreement.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.


ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

By:
		Name:
		Title:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Employee Leasing Agreement]

Attachment A

[ Leased Employees to be listed and associated wage and salary rates per Leased Employee ]

Attachment B

On the Effective Date with respect to both the remainder of the calendar month in which the Effective Date occurs and the subsequent calendar month, and thereafter not less than five days prior to the commencement of any subsequent calendar month during the Term, RCAP shall pay to ARCP OP an amount equal to the sum of the following for services to be rendered to a RCAP Company by the Leased Employees during each calendar month (or portion thereof) of the Term. Any excess of amounts paid for any calendar month shall be credited towards and reduce RCAP’s payment obligations for the next calendar month. ARCP OP shall refund to RCAP any amounts paid as of the expiration of the Term that are in excess of the amounts actually paid by ARCP OP by no later than 10 business days after the expiration of the Term.

The wages and salary payable by the applicable ARCP Company to the Leased Employees in the ordinary course of business consistent with past practice with respect to such services, including for holidays but excluding paid time off, with such wages and salary to be based on the wage and salary rates set forth on Attachment A ;

Employer matching contributions in the ordinary course of business which are consistent with past practice due to the applicable ARCP Company’s defined contribution plan based on 401(k) contributions deferred from wages and salary described in item 1;

All insurance premiums payable by the applicable ARCP Company pursuant to this Agreement (adjusted pro-rata based on the number of Leased Employees as compared to the total number of such ARCP Company’s employees covered under each applicable policy of insurance), including the employer-paid portion of premiums under any insured welfare/workers’ compensation plan or program due for such period (pro-rated if is appropriate and actual coverage provided is less than a full calendar month) in respect of Leased Employees; and

The amount of payroll taxes imposed on and payable by the applicable ARCP Company during such period in respect of the above items.

The amount payable with respect to any Leased Employee whose lease provides for less than the Leased Employee’s full work time will be pro-rated based on the percentage of work time such Leased Employee will provide to the RCAP Companies. For the avoidance of doubt, any amount paid by RCAP for Leased Employee services shall not include any costs attributable to any other ARCP OP (or any of its Affiliates) compensation or benefit plan or program, including, without limitation any severance plan or program.

ARCP OP shall provide RCAP with a statement of the amounts to be paid by RCAP hereunder prior to the Effective Date with respect to the first such period and not less than 10 days prior to the first day of each subsequent calendar month thereafter.

Exhibit E

FORM OF TRANSITION SERVICES SIDE LETTER

COLE CAPITAL ADVISORS, INC.

CONFIDENTIAL

RCS Capital Corporation

405 Park Avenue, 15th Floor

New York, NY 10022

Ladies and Gentlemen:

Reference is hereby made to that certain Equity Purchase Agreement (the “ Purchase Agreement ”), dated September 30, 2014, by and between ARC Properties Operating Partnership, L.P., a Delaware limited partnership (“ Seller ”), and RCS Capital Corporation, a Delaware corporation (“ Buyer ”). Capitalized terms used but not defined herein shall have their respective meanings as set forth in the Purchase Agreement.

In connection with the sale of the Business from Seller to Buyer as contemplated by the Purchase Agreement, Cole Capital Advisors, Inc. (“ CCA ”) (or its designee) shall provide assistance in the conveyance of the Business to Buyer, including the services set forth on Exhibit A hereto (the “ Services ”), for a period commencing on October 1, 2014 and ending on December 31, 2014. As consideration for the Services to be rendered hereunder, Buyer agrees to pay to CCA such amount in cash as set forth on Exhibit B , payable at least three (3) Business Days prior to the Second Closing (the “ Consideration ”). In the event that the Second Closing does not occur by the Outside Date, CCA shall promptly refund to Buyer any amounts paid hereunder.

Neither this letter agreement nor any of the rights, interests or obligations under this letter agreement shall be assigned by either of the parties without the prior written consent of the other party; provided , that, CCA (or its designee) may assign this letter agreement or any of its rights, interests or obligations hereunder (including its right to receive the Consideration) to one or more of its Affiliates. Subject to the preceding sentence, this letter agreement shall be binding upon, inure to the benefit of and be enforceable by each of the parties and their respective successors and permitted assigns.

This letter agreement shall be governed and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this letter agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State of Delaware, and each party hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent

permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

This letter agreement may be executed in two (2) or more counterparts, including facsimile counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto and delivered to the other party, it being understood that each party need not sign the same counterpart.

[SIGNATURE PAGE FOLLOWS]

If you are in agreement with the foregoing, please sign and return one copy of this letter agreement which will thereupon constitute the agreement of the parties hereto with respect to the subject matter of this letter agreement.


Very truly yours,

COLE CAPITAL ADVISORS, INC.

By:
		Name:
		Title:


Accepted and agreed to as of the date first written above:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Transition Services Side Letter]

Exhibit A

1.	Transfer of FF&E items

2.	Assistance in transfer of selling agreements

3.	Assistance in conveyance of employees and related matters

4.	Event coordination

5.	Conveyance of accounting systems

6.	Assistance in IT transfer

Exhibit B

$20,000,000

Exhibit F

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Assignment ”), dated as of [ — ], 2014, is entered between ARC Properties Operating Partnership, L.P., a Delaware limited partnership (“ Assignor ”), and RCS Capital Corporation, a Delaware corporation (“ Assignee ”).

WITNESSETH:

WHEREAS, this Assignment is being executed and delivered pursuant to that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Purchase Agreement ”) by and between Assignor and Assignee. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Purchase Agreement.

WHEREAS, Assignor owns one hundred percent (100%) of the limited liability company interests (the “ Interests ”) in Cole Capital Partners, LLC, a Delaware limited liability company (“ CCP ”);

WHEREAS, Assignor desires to assign, transfer and convey one hundred percent (100%) of Assignor’s right, title and interest in, to and under the Interests to Assignee; and

WHEREAS, Assignee desires to acquire one hundred percent (100%) of the Interests.

NOW, THEREFORE, the undersigned, in consideration of the premises, covenants and agreement contained herein, and for other good and valuable consideration, do hereby agree as follows:

Assignment and Assumption . Upon the execution of this Assignment by the parties hereto, Assignor does hereby assign, transfer and convey to Assignee one hundred percent (100%) of the Interests, free and clear of all Liens, and all of Assignor’s rights with respect to such Interests. Assignee does hereby assume and accept one hundred percent (100%) of the Interests and all of the duties and responsibilities thereto to the extent provided for in the Purchase Agreement.

2.	Admission . Contemporaneously with the assignment described in Paragraph 1 of this Assignment, Assignee shall become the sole member of CCP, and Assignor shall cease to be a member of CCP.

3.	Continuation of CCP . The assignment of one hundred percent (100%) of the Interests shall not dissolve CCP, and the business of CCP shall continue.

4.	Consideration . Assignee has paid good and valuable consideration to Assignor for one hundred percent (100%) of the Interests, the receipt and sufficiency of which are hereby acknowledged.

5.	Binding Effect . This Assignment shall be binding upon, and shall inure to the benefit of the parties hereto and their respective successors and assigns.

6.	Execution in Counterparts . This Assignment may be executed (a) in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and (b) by telecopy or other facsimile signature (which shall be deemed an original for all purposes).

7.	Governing Law . This Assignment shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the choice of law principles thereof.

8.	Recourse . This Assignment is made without recourse, representation or warranty, except as otherwise set forth in the Purchase Agreement.

9.	Conflict . In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms of this Assignment, the terms of the Purchase Agreement shall govern.

10.

Further Assurances . Each party hereto shall cooperate at all times from and after the date hereof with respect to all of the matters described herein, and shall execute such further documents as may be reasonably requested for the purpose of giving effect to, or evidencing or giving notice of, the transactions contemplated by this Assignment. Without limiting the foregoing, Assignor hereby irrevocably constitutes and appoints Assignee as Assignor’s attorney-in-fact to transfer Assignor’s Interests on the books and records of CCP, with full power of substitution in the premises.

[signature page follows]

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first above written.


ARC PROPERTIES OPERATING PARTNERSHIP, INC.

By:
		Name:
		Title:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Assignment and Assumption Agreement]

Exhibit G

FORM OF INVESTMENT OPPORTUNITY ALLOCATION AGREEMENT

This INVESTMENT OPPORTUNITY ALLOCATION AGREEMENT (this “ Agreement ”) is dated as of [ — ] ¹ , 2014, by and among American Realty Capital Properties, Inc., a Maryland corporation (“ ARCP ”), RCS Capital Corporation, a Delaware corporation (“ RCAP ”), [ARCP Sub-advisor 1], a Delaware limited liability company (“ ARCP Sub-advisor 1 ”), [ARCP Sub-advisor 2], a Delaware limited liability company (“ ARCP Sub-advisor 2 ”), [ARCP Sub-advisor 3], a Delaware limited liability company (“ ARCP Sub-advisor 3 ”), [ARCP Sub-advisor 4], a Delaware limited liability company (“ ARCP Sub-advisor 4 ”), and [ARCP Sub-advisor 5], a Delaware limited liability company (“ ARCP Sub-advisor 5 ” and, collectively, the “ Sub-advisors ”).

WHEREAS, ARCP is the general partner of ARC Properties Operating Partnership, L.P., a Delaware limited partnership (the “ Seller ”);

WHEREAS, RCAP and the Seller have entered into that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Purchase Agreement ”);

WHEREAS, the Purchase Agreement requires delivery of this Agreement;

WHEREAS, Cole Credit Property Trust IV, Inc., a Maryland corporation (“ CCPT IV ”), receives certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement, dated as of [ — ] ² , 2014, as amended from time to time, by and between ARCP Sub-advisor 1, as sub-advisor, and Cole REIT Advisors IV, LLC, a Delaware limited liability company (“ CCPT IV Advisor ”), as advisor (the “ CCPT IV Agreement ”);

WHEREAS, Cole Credit Property Trust V, Inc., a Maryland corporation (“ CCPT V ”), receives certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement, dated as of [ — ] ³ , 2014, as amended from time to time, by and between ARCP Sub-advisor 2, as sub-advisor, and Cole REIT Advisors V, LLC, a Delaware limited liability company (“ CCPT V Advisor ”), as advisor (the “ CCPT V Agreement ”);

WHEREAS, Cole Corporate Income Trust, Inc., a Maryland corporation (“ CCIT ”), receives certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement, dated as of [ — ] ⁴ , 2014, as amended from time to time, by and between ARCP Sub-advisor 3, as sub-advisor, and Cole Corporate Income Advisors, LLC, a Delaware limited liability company (“ CCIT Advisor ”), as advisor (the “ CCIT Agreement ”);

¹	To be the date of the Second Closing Date.

²	To be the date of the Second Closing Date.

³	To be the date of the Second Closing Date.

⁴	To be the date of the Second Closing Date.

WHEREAS, Cole Office & Industrial REIT (CCIT II), Inc., a Maryland corporation (“ CCIT II ”), receives certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement, dated as of [ — ] ⁵ , 2014, as amended from time to time, by and between ARCP Sub-advisor 4, as sub-advisor, and Cole Corporate Income Advisors II, LLC, a Delaware limited liability company (“ CCIT II Advisor ”), as advisor (the “ CCIT II Agreement ”);

WHEREAS, Cole Real Estate Income Strategy (Daily Nav), Inc., a Maryland corporation (“ INAV ”) receives certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement, dated as of [ — ] ⁶ , 2014, as amended from time to time, by and between ARCP Sub-advisor 5, as sub-advisor, and Cole Real Estate Income Strategy (Daily NAV), LLC, a Delaware limited liability company (“ INAV Advisor ”), as advisor (the “ INAV Agreement ”);

WHEREAS, it is contemplated that Cole Office & Industrial REIT (CCIT III), Inc., a Maryland corporation (“ CCIT III ”), will receive certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement to be entered into by and between ARCP or one or more Affiliates of ARCP, as sub-advisor, and Cole Corporate Income Advisors III, LLC, a Delaware limited liability company (“ CCIT III Advisor ”), as advisor (the “ CCIT III Agreement ”);

WHEREAS, it is contemplated that Cole Credit Property Trust VI, Inc., a Maryland corporation (“ CCPT VI ” and together with CCPT IV, CCPT V, CCIT, CCIT II, INAV and CCIT III, the “ Funds ” and each, a “ Fund ”), will receive certain sub-advisory services from ARCP or one or more Affiliates of ARCP, pursuant to a Sub-advisory Agreement to be entered into by and between ARCP or one or more Affiliates of ARCP, as sub-advisor, and Cole REIT Advisors VI, LLC, a Delaware limited liability company (“ CCPT VI Advisor ” and together with CCPT IV Advisor, CCPT V Advisor, CCIT Advisor, CCIT II Advisor, INAV Advisor and CCIT III Advisor, the “ Advisors ”), as advisor (the “ CCPT VI Agreement ” and together with the CCPT IV Agreement, CCPT V Agreement, CCIT Agreement, CCIT II Agreement, INAV Agreement and CCIT III Agreement, the “ Sub-advisor Agreements ”);

WHEREAS, each Fund is a public real estate investment trust sponsored by Cole Capital Corporation, an Arizona corporation, or its Affiliates;

WHEREAS, ARCP (and/or its Affiliates) and each Fund has invested in, or may in the future invest in, the Proposed Property Acquisitions; and

⁵	To be the date of the Second Closing Date.

⁶	To be the date of the Second Closing Date.

WHEREAS, ARCP and the Funds wish to delineate their respective rights and obligations with respect to each other in connection with investing in the Proposed Property Acquisitions.

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

ARTICLE I

INVESTMENT OPPORTUNITIES

1.1 Committees .

(a) The parties agree that ARCP shall establish and maintain an investment allocation committee (the “ Allocation Committee ”), which shall allocate Proposed Property Acquisitions as set forth in this Article I . The members of the Allocation Committee shall be appointed by ARCP’s Chief Executive Officer, and shall serve at the pleasure of ARCP’s Chief Executive Officer; provided, however, that RCAP shall have the right to appoint one member to the Allocation Committee. ARCP’s Chief Executive Officer also may appoint one or more alternates for each Allocation Committee member who shall be authorized to act in such Allocation Committee member’s absence.

(b) The parties agree that ARCP shall establish and maintain a portfolio strategy committee (the “ Portfolio Committee ”), which shall review the allocations made by the Allocation Committee. The members of the Portfolio Committee shall be appointed by ARCP’s Chief Executive Officer, and shall serve at the pleasure of ARCP’s Chief Executive Officer; provided, however, that RCAP shall have the right to appoint one member to the Portfolio Committee.

1.2 Investment Allocation Process .

(a) The Allocation Committee shall endeavor to meet on a weekly basis. Members of the Allocation Committee may participate by means of conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. The Advisors shall be provided with, on a quarterly basis upon request, certified copies of the minutes of all meetings of the Allocation Committee.

(b) When a Proposed Property Acquisition is introduced to the Allocation Committee for review, the Allocation Committee shall analyze the following factors in determining whether a Proposed Property Acquisition is most appropriate for ARCP or a particular Fund (each, an “ Entity ”): (i) how the Proposed Property Acquisition fits into each Entity’s respective investment objectives; (ii) which Entity has available cash to acquire the Proposed Property Acquisition, the amount of such available cash, and how long such cash has been available for investment; (iii) the anticipated operating cash flows and cash requirements of each Entity, respectively; (iv) how the Proposed Property Acquisition would affect the tenant, industry and geographic concentrations in each Entity, respectively; and (v) how the size, income

tax effect, potential leverage and projected cash flow of the Proposed Property Acquisition would affect each Entity, respectively. If the Allocation Committee determines that a Proposed Property Acquisition is equally appropriate for one or more Entities, the Allocation Committee shall first offer such Proposed Property Acquisition to the Entity that has had the longest period of time elapse since it was allocated an investment opportunity of a similar size and type (e.g., office, industrial or single tenant or multi-tenant retail).

(c) Notwithstanding the foregoing, in the event that the Allocation Committee, in accordance with Section 1.2(b) above, allocates a Proposed Property Acquisition with a value greater than one hundred million dollars ($100,000,000) to any of CCIT II, CCPT V, CCIT III or CCPT VI, then ARCP shall have the right to veto such allocation and allocate such Proposed Property Acquisition to ARCP.

1.3 Review by Portfolio Committee .

(a) The Portfolio Committee shall meet on a monthly basis to review the allocations made by the Allocation Committee. Members of the Portfolio Committee may participate by means of conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.

(b) If there have been no subsequent developments associated with a particular Proposed Property Acquisition or the Entity to which the Proposed Property Acquisition was initially allocated by the Allocation Committee, the Portfolio Committee will confirm the allocation of the Proposed Property Acquisition to the selected Entity. If, in the judgment of the Portfolio Committee, a subsequent development has caused any such Proposed Property Acquisition to be more appropriate for an Entity other than an Entity to which the Proposed Property Acquisition was initially allocated, the Portfolio Committee may override the Allocation Committee and specify that the Proposed Property Acquisition should be made available to such other Entity. In making this determination, the Portfolio Committee shall examine the factors set forth in Section 1.2(b) above. For the avoidance of doubt, the Portfolio Committee may not re-allocate a Proposed Property Acquisition with respect to which ARCP exercised its veto right set forth in Section 1.2(b) above. The re-allocation decisions, if any, made by the Portfolio Committee shall be recorded and the record retained by ARCP.

1.4 Compliance with this Agreement . Any determination of a failure to comply with this Agreement shall be reported immediately to the Allocation Committee and to members of senior management of ARCP.

1.5 Miscellaneous .

(a) The Portfolio Committee shall meet on a quarterly basis with the Allocation Committee to report to the Allocation Committee on the prior quarter’s allocations and to discuss potential investments that are in the pipeline, as well as the Portfolio Committee’s then-current thinking on future allocations.

(b) The Allocation Committee shall be responsible for establishing and updating the policies and rules set forth herein as it deems appropriate, taking into account all contractual and legal requirements it deems applicable, and shall suggest any amendments to this Agreement as necessary to comply with applicable law. The Allocation Committee shall, notwithstanding any contrary provision or policy, follow the Portfolio Committee’s guidance and directives.

(c) The covenants and agreements set forth in this Article I shall not apply to the extent inconsistent with the constituent documents of any of the Funds or ARCP (or any of its Affiliates), or applicable law.

ARTICLE II

MISCELLANEOUS

2.1 Definitions. For purposes of this Agreement:

(a) “ Affiliate ” means, with respect to a specified Person, any Person directly or indirectly controlling, controlled by, or under common control with the specified Person.

(b) “ Person ” means any individual, general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits.

(c) “ Proposed Property Acquisition ” means any freestanding, single-tenant real estate assets net leased to investment grade and other creditworthy tenants with a lease duration of 10 or more years.

2.2 Effectiveness of Agreement . This Agreement shall become effective at and as of the Second Closing Date (as defined in the Purchase Agreement).

2.3 No Fiduciary Relationship . The parties acknowledge and agree that neither ARCP nor any of its Affiliates nor any of the Sub-advisors is a fiduciary to, or shall be deemed to have any type of fiduciary relationship with, any of the Funds.

2.4 Sub-advisor Agreements . This Agreement is subject to the terms of each of the Sub-advisor Agreements. In the event of a conflict between the terms of this Agreement and the terms of any of the Sub-advisor Agreements, the terms of such Sub-advisor Agreement shall control.

2.5 Termination . This Agreement shall terminate, with respect to a specific Sub-advisor, on the earliest of the date on which (i) the advisory agreement between the applicable Fund and the Advisor who is party to such Sub-advisor’s Sub-advisor Agreement terminates; (ii) the Sub-advisor Agreement to which such Sub-advisor is party terminates or expires in accordance with its terms and (iii) the Advisor for the Fund to which the Sub-advisor provides advisory services is no longer majority owned and controlled by RCAP or its Affiliates.

2.6 Notices . All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered against receipt or upon actual receipt of (i) personal delivery, (ii) delivery by reputable overnight courier, (iii) delivery by facsimile transmission with telephonic confirmation or (iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below (or to such other address as may be hereafter notified by the respective parties hereto in accordance with this Section 2.6 ):


ARCP:		American Realty Capital Properties, Inc. 405 Park Avenue, 15th Floor New York, New York 10022 Attention: Richard A. Silfen, General Counsel Facsimile: (215) 887-2585

with copies to:		Weil, Gotshal and Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq. Facsimile: (212) 310-8007 Proskauer Rose LLP Eleven Times Square New York, NY 10036 Attention: Peter Fass, Esq. and Steven Lichtenfeld, Esq. Facsimile: (212) 969-2900

RCAP:		RCS Capital Corporation 405 Park Avenue, 15th Floor New York, NY 10022 Attention: James A. Tanaka, General Counsel Fax: (212) 415-6567

with copies to:		Duane Morris LLP 30 South 17th Street Philadelphia, Pennsylvania 19103 Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq. Facsimile: (215) 405-2906 Proskauer Rose LLP Eleven Times Square New York, NY 10036 Attention: Peter Fass, Esq. and Steven Lichtenfeld, Esq. Facsimile: (212) 969-2900

2.7 Binding Nature of Agreement; Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns as provided herein.

2.8 Third-Party Beneficiary Rights . This Agreement is not intended to and shall not confer upon any person other than the parties hereto any rights or remedies hereunder; provided , however, that the Advisors shall be third-party beneficiaries solely for the purposes of Section 1.2(a) and Section 2.10 of this Agreement.

2.9 Integration . 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 and/or usage of the trade inconsistent with any of the terms hereof.

2.10 Amendments; Waivers . This Agreement and the terms hereof may not be amended, supplemented or modified except in an instrument in writing executed by the parties hereto, and no waiver of any term or condition hereof or obligation hereunder shall be valid unless made in writing and signed by the party to which performance is due; provided , that no amendment or waiver of this Agreement or any provision hereof shall be effective without the prior written consent of the Advisors (which consent shall not be unreasonably withheld, conditioned or delayed).

2.11 GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR ANY DISTRICT WITHIN SUCH STATE FOR THE PURPOSE OF ANY ACTION OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF VENUE IN SUCH COURT.

2.12 WAIVER OF JURY TRIAL . EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

2.13 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of a party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

2.14 Section Headings . The section and subsection headings in this Agreement are for convenience in reference only and shall not be deemed to alter or affect the interpretation of any provisions hereof.

2.15 Counterparts . This Agreement may be executed (including by facsimile transmission) by the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

2.16 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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


AMERICAN REALTY CAPITAL PROPERTIES, INC.

By:
	Name:
	Title:

RCS CAPITAL CORPORATION

By:
	Name:
	Title:

	[ARCP SUB-ADVISOR 1]

	By:
		Name:
		Title:

	[ARCP SUB-ADVISOR 2]

	By:
		Name:
		Title:

	[ARCP SUB-ADVISOR 3]

	By:
		Name:
		Title:

[Signature Page to Investment Opportunity Allocation Agreement]


[ARCP SUB-ADVISOR 4]

By:
		Name:
		Title:

[ARCP SUB-ADVISOR 5]

By:
		Name:
		Title:

[Signature Page to Investment Opportunity Allocation Agreement]

Exhibit H

FORM OF SERVICES AGREEMENT

This SERVICES AGREEMENT (this “ Agreement ”) dated as of [ — ], 2014, is by and between RCS Capital Corporation, a Delaware corporation (the “ Buyer ”), and ARC Properties Operating Partnership, L.P. (the “ Seller ”). The Buyer and the Seller are sometimes referred to herein collectively as the “ Parties ” and each individually as a “ Party ” or, as applicable, the “ Receiving Party ” and the “ Providing Party ,” which shall mean the applicable Party receiving services hereunder and the applicable Party providing such services hereunder, respectively.

WITNESSETH :

WHEREAS, the Buyer and the Seller have entered into that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Purchase Agreement ”);

WHEREAS, the Purchase Agreement requires delivery of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, IT IS HEREBY AGREED:

1. Definitions . Capitalized terms, as used herein, shall have the meanings set forth below:

“ Acquired Business ” shall mean the private capital management business, including the broker-dealer, wholesale distribution, non-traded REIT sponsorship and advisory businesses.

“ Affiliate ” shall mean, with respect to a Person, (a) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of any class of the voting securities of, or equity interest in, such Person; (b) any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person; or (c) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of the outstanding voting securities of any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person. For purposes of this definition, the term “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 the ownership of voting rights, by contract or otherwise.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or obligated by Law or executive order to close.

“ Buyer ” shall have the meaning set forth in the preamble.

“ Buyer Business Information ” shall have the meaning set forth in Section 18(a) .

“ Confidentiality Agreement ” shall have the meaning set forth in Section 18(a) .

“ Force Majeure Event ” shall have the meaning set forth in Section 12 .

“ Governmental Entity ” shall mean any court, administrative agency or commission or other governmental authority or instrumentality or applicable self-regulatory organization.

“ Landlord ” shall have the meaning set forth in Section 6 .

“ Law ” shall mean any applicable federal, state, local or foreign or provincial law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, award or agency requirement of or undertaking to or agreement with any Governmental Entity.

“ Parties ” and “ Party ” shall have the meaning set forth in the preamble.

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

“ Premises ” shall mean floors 1, 8 and 9 in that certain commercial office building located at 2325 E. Camelback Road, Phoenix, Arizona 85106.

“ Premises Lease ” shall mean that certain Office Lease Agreement by and between 24 ^TH AND CAMELBACK PHASE II L.L.C., as landlord, and Diamond Real Estate, LLC, as tenant, dated as of December 16, 2010.

“ Premises License ” shall have the meaning set forth in Section 6 .

“ Purchase Agreement ” shall have the meaning set forth in the recitals.

“ Representative ” of a Person means any director, officer, employee, agent, consultant, accountant, auditor, attorney or other representative of such Person.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Seller ” shall have the meaning set forth in the preamble.

“ Seller Business ” shall mean the business of the Seller (excluding the Acquired Business) as presently conducted or as proposed to be conducted on the date hereof.

“ Seller Business Information ” shall have the meaning set forth in Section 18(a) .

“ Sub-Advisory Agreements ” shall mean those certain sub-advisory agreements, dated as of the date hereof, by and between the Seller (or its Affiliate) and each of Cole Credit Property Trust IV, Inc., a Maryland corporation; Cole Credit Property Trust V, Inc., a Maryland corporation; Cole Corporate Income Trust, Inc., a Maryland corporation; Cole Office & Industrial REIT (CCIT II), Inc., a Maryland corporation; and Cole Real Estate Income Strategy (Daily NAV), Inc., a Maryland corporation.

“ Sublease ” shall have the meaning set forth in Section 6 .

2. Effectiveness of Agreement . This Agreement shall become effective at and as of the Second Closing Date (as defined in the Purchase Agreement).

3. Services Provided to the Buyer .

(a) The Buyer, on its own behalf and on behalf of its Affiliates, hereby retains and appoints the Seller as the services provider of the Buyer and to perform the services hereinafter set forth (or to cause an Affiliate of the Seller to provide such services), and the Seller hereby accepts such

appointment, all subject to the terms and conditions hereinafter set forth. In the performance of this undertaking, the Seller shall devote sufficient resources to discharge its obligations hereunder and shall provide the following services (or shall cause an Affiliate of the Seller to provide such services):

•

acquisition support;

•

accounting support;

•

information technology support;

•

asset management services on behalf of the 1031 exchange, tenant in common and Delaware statutory trust businesses acquired by the Buyer in connection with the transactions contemplated by the Purchase Agreement; and

•

any and all other services requested by the Buyer (including, without limitation, the services set forth in the Sub-Advisory Agreements) in accordance with Section 3(e) .

(b) The foregoing services shall not include any legal support services.

(c) The services hereunder shall be available to the Buyer only for purposes of conducting the Acquired Business substantially in the manner it was conducted by the Seller prior to the date hereof. In furtherance of the foregoing and, subject to the terms and conditions set forth in this Agreement, during the term of this Agreement, the Seller shall provide, or shall cause to be provided, to the Buyer (and/or its Affiliates) each of the services hereunder, but in each case only at the locations such services have been provided to the Acquired Business prior to the date hereof in the ordinary course of the Acquired Business.

(d) The Seller shall not be obligated to provide, or cause to be provided, any services hereunder if to do so would require it or any of its Affiliates to incur (after giving effect to the fees payable hereunder) any cost or expense, to hire any additional employees or consultants, to pay overtime to employees, or to acquire any additional equipment or software. If any service cannot be provided by reason of this Section 3(d) , the Seller shall provide the Buyer with written notice thereof (together with a reasonable description of such service and the approximate actual cost thereof to the Seller (without markup) to provide such service). Upon receipt of such notice, the Buyer may request that the Seller, and the Seller shall, provide or cause to be provided such service upon the Buyer’s agreement to bear such incremental costs; provided , however , that the Seller shall not be required to provide such service to the extent it is required to hire any additional employees (other than temporary employees) beyond the number of employees necessary to provide such service prior to the date hereof.

(e) The Buyer may request in writing that the Seller provide additional services not otherwise provided hereunder, which request must include a description of the services requested to be performed and, if any, the associated business specifications. The Seller shall consider such request by the Buyer in good faith and if the Seller agrees to perform such additional services, then the performance of such additional services shall be subject to the terms and conditions of this Agreement; provided , however , the Seller shall have no obligation to provide such additional services to the Buyer.

(f) The Buyer hereby grants to the Seller, to the extent of any proprietary interest the Buyer or its Affiliates may have in the name “Cole Capital” or any derivative thereof a non-transferable, non-assignable, non-exclusive, royalty-free right and license to use the name “Cole Capital” or any derivative thereof in connection with providing services hereunder until the expiration or termination of this Agreement. The Seller shall have the authority to enter into contracts in the name of any entity with respect to which the Parties have entered into a Sub-Advisory Agreement in connection with the performance of its duties under this Agreement.

4. Services Provided to the Seller .

(a) The Seller, on its own behalf and on behalf of its Affiliates, hereby retains and appoints the Buyer as the services provider of the Seller and to perform the services hereinafter set forth (or to cause an Affiliate of the Buyer to provide such services), and the Buyer hereby accepts such appointment, all subject to the terms and conditions hereinafter set forth. In the performance of this undertaking, the Buyer shall devote sufficient resources to discharge its obligations hereunder and shall provide the following services (or shall cause an Affiliate of the Buyer to provide such services):

•

accounting system services; and

•

any and all other services requested by the Seller in accordance with Section 4(e) .

(b) The foregoing services shall not include any legal support services.

(c) The services hereunder shall be available to the Seller only for purposes of conducting the Seller Business substantially in the manner it was conducted prior to the date hereof. In furtherance of the foregoing and, subject to the terms and conditions set forth in this Agreement, during the term of this Agreement, the Buyer shall provide, or shall cause to be provided, to the Seller (and/or its Affiliates) each of the services hereunder, but in each case only at the locations such services have been provided to the Seller Business prior to the date hereof in the ordinary course of the Seller Business.

(d) The Buyer shall not be obligated to provide, or cause to be provided, any services hereunder if to do so would require it or any of its Affiliates to incur (after giving effect to the fees payable hereunder) any cost or expense, to hire any additional employees or consultants, to pay overtime to employees, or to acquire any additional equipment or software. If any service cannot be provided by reason of this Section 4(d) , the Buyer shall provide the Seller with written notice thereof (together with a reasonable description of such service and the approximate actual cost thereof to the Buyer (without markup) to provide such service). Upon receipt of such notice, the Seller may request that the Buyer, and the Buyer shall, provide or cause to be provided such service upon the Seller’s agreement to bear such incremental costs; provided , however , that the Buyer shall not be required to provide such service to the extent it is required to hire any additional employees (other than temporary employees) beyond the number of employees necessary to provide such service prior to the date hereof.

(e) The Seller may request in writing that the Buyer provide additional services not otherwise provided hereunder, which request must include a description of the services requested to be performed and, if any, the associated business specifications. The Buyer shall consider such request by the Seller in good faith and if the Buyer agrees to perform such additional services, then the performance of such additional services shall be subject to the terms and conditions of this Agreement; provided , however , the Buyer shall have no obligation to provide such additional services to the Seller.

5. Standard of Care .

(a) The duties to be performed by the Providing Party pursuant to this Agreement may be performed by it or by its officers, members or directors or by Affiliates of the foregoing under the direction of the Providing Party or delegated to unaffiliated third parties under the Providing Party’s direction. If any duties to be performed hereunder are delegated by the Providing Party to an unaffiliated third party, then the Providing Party shall provide the Receiving Party with written notice of such delegation.

(b) Except as otherwise provided in this Agreement, and provided that the Providing Party is not restricted by an existing contract with a third party or by Law, the Providing Party agrees to

perform, or cause to be performed, the services hereunder such that the standard of care at which such services are performed shall be substantially the same as the standard of care that the Providing Party provides to its Affiliates with respect to such services. In the event there is any restriction on the Providing Party by an existing contract with a third party or by Law that would restrict the standard of care applicable to delivery of the services to be provided by the Providing Party to the Receiving Party, the Providing Party shall use its commercially reasonable best efforts in good faith to provide such services in a manner as closely as possible to the standards described in this Section 5(b) .

(c) Each Party hereto shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement. No Party will take any action in violation of any such applicable Law that would reasonably be likely to result in liability being imposed on the other Party.

(d) Except as expressly set forth herein, the Parties acknowledge and agree that the services hereunder are provided as-is, that the Receiving Party assumes all risks and liability arising from or relating to its use of and reliance upon such services and the Providing Party makes no representation or warranty with respect thereto. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE PROVIDING PARTY HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICES HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NON-INFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS OF THE SERVICES HEREUNDER FOR A PARTICULAR PURPOSE.

6. Premises . Subject to obtaining the prior written consent of 24 ^TH AND CAMELBACK PHASE II L.L.C. (the “ Landlord ”), the Seller shall provide the Buyer with exclusive use of, and access to, the Premises, and the use of the equipment located at the Premises that has been previously used by the Seller or its Affiliates prior to the date hereof, in each case in substantially the same manner as such space and equipment was used or accessed in the conduct of the Acquired Business prior to the date hereof (collectively, the “ Premises License ”). The Premises License shall terminate upon the termination of this Agreement in accordance with its terms. Promptly following the date hereof, the Seller and the Buyer shall use their reasonable efforts (a) to negotiate a sublease (the “ Sublease ”) with respect to the Premises ( provided that the terms of the Sublease shall in no way increase the cost of the use and access of the Premises and the related service provided hereunder by the Seller or any of its Affiliates to the Buyer or any of its Affiliates), or (b) assist the Buyer to negotiate a lease of the premises directly with the Landlord. To the extent not obtained prior to the date hereof, the Seller shall use its best efforts to obtain the written consent of the Landlord to (i) the use and access of the Premises by the Buyer pursuant to this Section 6 and (ii) the execution by the Seller and the Buyer of the Sublease. The Buyer shall not use the Premises in a manner, or take, cause or allow to be taken, an action with respect to the Premises that would cause the Seller to be in violation of the terms of the Premises Lease.

7. Fees and Other Compensation of the Seller . The Seller or its designees shall be entitled to receive from the Buyer its actual costs and expenses incurred (with costs and expenses in connection with the services provided by Seller’s Representatives calculated based on hourly rates set forth on Annex A ). The Seller shall invoice the Buyer monthly in arrears for all costs and expenses due pursuant to this Section 7 . The Buyer (or the Buyer’s Affiliates on behalf of the Buyer) shall pay to the Seller all invoiced amounts by wire transfer within thirty (30) days of the date of receipt of such invoice as instructed by the Seller.

8. Fees and Other Compensation of the Buyer . The Buyer or its designees shall be entitled to receive from the Seller its actual costs and expenses incurred (with costs and expenses in connection with the services provided by Buyer’s Representatives calculated based on hourly rates set

forth on Annex B ). The Buyer shall invoice the Seller monthly in arrears for all costs and expenses due pursuant to this Section 8 . The Seller (or the Seller’s Affiliates on behalf of the Seller) shall pay to the Buyer all invoiced amounts by wire transfer within thirty (30) days of the date of receipt of such invoice as instructed by the Buyer.

9. Records . At all times, the Providing Party shall keep books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Receiving Party and the Receiving Party’s Representatives at any time during the ordinary business hours of the Providing Party.

10. Access . The Receiving Party shall, and shall cause its Affiliates to, allow the Providing Party and its Representatives reasonable access to the facilities of the Receiving Party necessary for the Providing Party to provide services under this Agreement.

11. Term; Termination of Agreement . This Agreement shall continue in full force and effect so long as any of the Sub-Advisory Agreements are in full force and effect; provided , however , that either Party may terminate this Agreement upon sixty (60) days’ prior written notice to the other Party. Upon the termination of this Agreement, each Party will cooperate with the other Party and take all reasonable steps requested to assist such other Party in making an orderly transition of the services provided hereunder. From and after the effective date of termination of this Agreement, neither Party shall be entitled to compensation for further services provided hereunder, but shall be paid all compensation and reimbursed for all expenses accrued through the date of termination within thirty (30) days of such termination.

12. Force Majeure . Each Party will be excused for any failure or delay in performing any of its obligations under this Agreement (other than payment obligations) if such failure or delay is caused by any act of God, accident, explosion, fire, act of terrorism, storm, earthquake, flood, strike, labor dispute or similar extraordinary circumstance or event outside the reasonable control of the non-performing Party (each a “ Force Majeure Event ”). Following notice of a Force Majeure Event by a Party, the Parties shall consult to assess the Force Majeure Event and any ways in which the same may be avoided or mitigated. During the pendency of a Force Majeure Event, the affected Providing Party shall use its commercially reasonable efforts to minimize the effect of Force Majeure Event on and to resume the performance of its obligations under this Agreement with the least practicable delay.

13. No Partnership or Joint Venture . The Buyer and the Seller 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.

14. Indemnification .

(a) Subject to subsections (b)-(d) below, the Receiving Party shall indemnify the Providing Party and its Affiliates for any loss arising out of any of their acts or omissions in connection with this Agreement and the Providing Party and its Affiliates will be held harmless for any loss or liability (whether in contract, tort or otherwise) suffered by the Receiving Party or any of its Affiliates, as applicable.

(b) The Receiving Party shall not indemnify the Providing Party or its Affiliates for any loss or liability suffered by the Providing Party or its Affiliates, nor shall it hold the Providing Party or its Affiliates harmless for any loss or liability suffered by the Receiving Party or any of its Affiliates unless all of the following conditions are met: (i) the Providing Party or its Affiliates determined in good faith that the course of conduct which caused the loss or liability was in the best interests of the

Receiving Party (and/or its Affiliates, as applicable), (ii) the Providing Party or its Affiliates were acting on behalf of the Receiving Party or its Affiliates or performing services for the Receiving Party or its Affiliates, (iii) such liability or loss or expense was not the result of gross negligence or willful misconduct on the part of the Providing Party or its Affiliates and (iv) such indemnification or agreement to hold harmless shall be recoverable only out of the net assets of the Receiving Party and its Affiliates and not from the stockholders, partners or members of the Receiving Party and its Affiliates.

(c) Notwithstanding anything to the contrary in Section 14(b) above, the Receiving Party shall not indemnify the Providing Party or its Affiliates or any persons acting as a broker-dealer for any losses, liabilities or expenses 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 securities Law violations as to the particular indemnitee, (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and related costs should be made, and the court considering the matter has been advised of the position of the SEC and the published position of any state securities regulatory authority as to indemnification for violations of securities Law.

(d) The Receiving Party will advance amounts to the Providing Party or its Affiliates 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 of 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 Receiving Party or its Affiliates, (ii) the legal action is initiated by a third party who is not a stockholder or is initiated by a stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves the advancement and (iii) the Providing Party or its Affiliates undertake in writing to repay the advanced funds to the Receiving Party or its Affiliates, as applicable, together with the applicable legal rate of interest thereon, in cases in which the Providing Party or its Affiliates are found not to be entitled to indemnification.

15. Amendments . Subject to compliance with applicable Law, the provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of each of the Parties. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties. Any waiver of compliance with any provision of this Agreement shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.

16. Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by either of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Party, except (i) the Buyer may assign this Agreement or any of its rights or obligations hereunder to one or more of its Affiliates, provided that no such assignment shall relieve the Buyer of any of its obligations hereunder, and (ii) the Seller may assign this Agreement or any of its rights or obligations hereunder to one or more of its Affiliates, provided that no such assignment shall relieve the Seller of any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each of the Parties and their respective successors and permitted assigns. This Agreement (including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any Person other than the Parties hereto any rights or remedies under this Agreement.

17. Notices . All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to the Buyer, to:

RCS Capital Corporation

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: James A. Tanaka, General Counsel

Facsimile: (212) 415-6567

with copies to:

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036

Attention: Peter Fass, Esq. and Steven L. Lichtenfeld, Esq.

Facsimile: (212) 969-2900

If to the Seller, to

American Realty Capital Properties, Inc.

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: Richard A. Silfen, General Counsel

Facsimile: (215) 887-2585

with copies to:

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036

Attention: Peter Fass, Esq. and Steven Lichtenfeld, Esq.

Facsimile: (212) 969-2900

18. Confidential Information .

(a) All information and materials provided pursuant to or in connection with this Agreement shall be subject to the provisions of the Confidentiality Agreement entered into between the

Seller and the Buyer on September 3, 2014 (the “ Confidentiality Agreement ”). From and after the date hereof, the Seller shall, and shall cause its Affiliates and Representatives to, keep confidential and not use for any purpose all nonpublic information regarding the Acquired Business or any of the Buyer, its Affiliates or their respective subsidiaries of which the Seller or such Affiliates or Representatives may be aware (“ Buyer Business Information ”), subject only to the exceptions to the confidentiality and non-use obligations of the Seller and such Affiliates and Representatives in the Confidentiality Agreement, as applied mutatis mutandis to the Seller and such Affiliates and Representatives with respect to Buyer Business Information. From and after the date hereof, the Buyer shall, and shall cause its Affiliates and Representatives to, keep confidential and not use for any purpose all nonpublic information regarding the Seller Business or any of the Seller, its Affiliates or their respective subsidiaries of which the Buyer or such Affiliates or Representatives may be aware (“ Seller Business Information ”), subject only to the exceptions to the confidentiality and non-use obligations of the Buyer and such Affiliates and Representatives in the Confidentiality Agreement, as applied mutatis mutandis to the Buyer and such Affiliates and Representatives with respect to Seller Business Information.

(b) Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of services hereunder.

19. Headings . The section headings herein have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction, interpretation or effect of this Agreement.

20. No Waivers . 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 occurrences. No waiver shall be effective unless it is in writing and is signed by the Party asserted to have granted such waiver.

21. Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that each Party need not sign the same counterpart.

22. Entire Agreement . This Agreement (including the documents and the instruments referred to in this Agreement) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement.

23. Governing Law . This Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles. The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State of Delaware, and each Party hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 17 shall be deemed effective service of process on such Party. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

24. Non-Recourse . No past, present or future incorporator, member, partner, stockholder, Affiliate or Representative of either Party or its Affiliates shall have any liability for any obligations or liabilities of such Party or its Affiliates, under this Agreement of or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby.

25. Severability . If any provision of this Agreement is held to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect.

[ Signature Page Follows ]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed as of the day and year first above written.


AMERICAN REALTY CAPITAL PROPERTIES, INC.

By:
		Name:
		Title:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Services Agreement]

Annex A

Seller Rates

[To be provided.]

Annex B

Buyer Rates

[To be provided.]

Exhibit I

FORM OF NON-COMPETITION AND EXCLUSIVITY AGREEMENT

THIS NON-COMPETITION AND EXCLUSIVITY AGREEMENT (this “ Agreement ”) is made as of the [[ — ] day of [ — ]] ¹ , 2014, by and among RCS Capital Corporation, a Delaware corporation (the “ Company ”), American Realty Capital Properties, Inc., a Maryland corporation (“ Seller GP ”), and the executives of Seller GP set forth on the signature pages hereto (the “ Seller GP Executives ”). The Company, Seller GP and the Seller GP Executives are sometimes referred to herein collectively as the “ Parties ” and each individually as a “ Party .”

WHEREAS , Seller GP is the general partner of ARC Properties Operating Partnership, L.P., a Delaware limited partnership (the “ Seller ”);

WHEREAS , the Company and Seller have entered into that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Purchase Agreement ”); and

WHEREAS , the Purchase Agreement requires delivery of this Agreement.

NOW, THEREFORE , the Parties hereto, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, do hereby agree as follows:

1. Definitions . Capitalized terms, as used herein, shall have the meanings set forth below:

“ Advisory Services ” shall mean, whether pursuant to an advisory agreement, sub-advisory agreement, management agreement or otherwise, services of the type provided or to be provided to the Carbon Funds by Seller GP or any Affiliate of Seller GP, including, without limitation: investment and financial advice, investment analysis, transaction structure and negotiation advice, general administration services, property management and leasing services, and daily management and supervision services.

“ Affiliate ” shall mean, with respect to a Person, (a) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of any class of the voting securities of or equity interest in such Person; (b) any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person; or (c) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of the outstanding voting securities of any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person. For purposes of this definition, the term “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 the ownership of voting rights, by contract or otherwise.

“ Agreement ” shall have the meaning set forth in the preamble.

¹	To be the date of the Second Closing Date.

“ Carbon Funds ” shall mean Cole Real Estate Income Strategy (Daily Nav), Inc., a Maryland corporation, Cole Credit Property Trust IV, Inc., a Maryland corporation, Cole Credit Property Trust V, Inc., a Maryland corporation, Cole Credit Property Trust VI, Inc., a Maryland corporation, Cole Corporate Income Trust, Inc., a Maryland corporation, Cole Office & Industrial REIT (CCIT II), Inc., a Maryland corporation, and Cole Office & Industrial REIT (CCIT III), Inc., a Maryland corporation.

“ Company ” shall have the meaning set forth in the preamble.

“ Parties ” and “ Party ” shall have the meaning set forth in the preamble.

“ Purchase Agreement ” shall have the meaning set forth in the recitals.

“ Restricted Activities ” shall have the meaning provided in Section 3(a) .

“ Seller ” shall have the meaning set forth in the recitals.

“ Seller GP ” shall have the meaning set forth in the preamble.

“ Seller GP Executives ” shall have the meaning set forth in the preamble.

“ U.S. Net Lease REITs ” means non-traded REITs or similar offerings whose primary investment strategy, in each case, is to invest in single tenant net-leased properties in the United States.

2. Effectiveness of Agreement . This Agreement shall be effective at and as of the Second Closing Date (as defined in the Purchase Agreement).

3. Covenant Not to Compete .

(a) Each of Seller GP and the Seller GP Executives expressly agrees and acknowledges that such Party shall not (and shall cause its controlled Affiliates, and in the case of Seller GP, the Seller GP Executives, not to), directly or indirectly, (i) sponsor, distribute any securities of, raise capital for, invest in, or engage in similar activities with respect to any U.S. Net Lease REITs (the “ Restricted Activities ”) other than the Carbon Funds or (ii) hold any interest in, or perform services in any capacity for, any Person that directly or indirectly engages in any Restricted Activities other than the Carbon Funds; provided, however, that nothing herein contained shall be deemed to prevent Seller GP or the Seller GP Executives from investing in or acquiring 5% or less of any class of securities of any Person if such class of securities is listed on a national securities exchange.

(b) The restriction set forth in Section 3(a) above shall remain in full force and effect for so long as the Company is in the business of sponsoring, distributing any securities of, raising capital for, or otherwise investing in any U.S. Net Lease REITs.

(c) At the request of the Company, Seller GP will enforce, or cause to be enforced, any non-competition agreement or covenant between a Seller GP Executive, on the one hand, and Seller GP or any of its Affiliates, on the other hand.

4. Non-Interference. Without the prior written consent of the Company, each of Seller GP and the Seller GP Executives expressly agrees and acknowledges that such Party shall not (and shall cause its controlled Affiliates, and in the case of Seller GP, the Seller GP Executives, not to), directly or indirectly, solicit, employ or retain the services of, accept business from, endeavor to knowingly entice away from the Company or any of its Affiliates or otherwise knowingly interfere with the relationship of the Company or any of its Affiliates with (a) any person (other than senior executives or wholesalers) who is employed by or otherwise engaged to perform services for the Company or any of its Affiliates, in each case, primarily related to U.S. Net Lease REITs, (b) any person who is, or was within the then most recent six month period, a senior executive or wholesaler of the Company or any of its Affiliates, in each case, whose engagement with the Company or any of its Affiliates primarily relates to U.S. Net Lease REITs, or (c) any account of the Company or any of its Affiliates primarily related to U.S. Net Lease REITs; provided, however, that this Agreement shall not prohibit (i) any advertisement or general solicitation (or hiring, retention of services or business relationship as a result thereof) that is not specifically targeted at such persons or accounts, (ii) the solicitation (or hiring, retention of services or business relationship as a result thereof) of any such person or account who initiates discussions with Seller GP or the Seller GP Executives, (iii) the solicitation (or hiring, retention of services or business relationship as a result thereof) of any such person whose employment was terminated or such account whose business relationship was terminated by the Company or any of its Affiliates, or (iv) any action by Seller GP or the Seller GP Executives not related to U.S. Net Lease REITs. The restrictions set forth in this Section 4 shall remain in full force and effect for so long as the Company is in the business of sponsoring, distributing any securities of, raising capital for, or otherwise investing in any U.S. Net Lease REITs.

5. Exclusivity Covenant .

(a) Seller GP expressly agrees and acknowledges that Seller GP shall not (and shall cause its controlled Affiliates not to) provide Advisory Services to any funds (other than the Carbon Funds), sponsors (other than sponsors of the Carbon Funds) or any competitors of the Carbon Funds. The restriction set forth in this Section 5(a) shall remain in full force and effect for so long as the Company is in the business of sponsoring, distributing any securities of, raising capital for, or otherwise investing in any U.S. Net Lease REITs.

(b) The Company expressly agrees and acknowledges that the Company shall not engage any sub-advisor to perform Advisory Services for the Carbon Funds other than Seller GP. The restriction set forth in this Section 5(b) above shall remain in full force and effect for so long as the Company is in the business of sponsoring, distributing any securities of, or raising capital for, the Carbon Funds.

6. Termination . Notwithstanding any other provision in this Agreement to the contrary, this Agreement shall terminate and be of no further force and effect solely with respect to any Seller GP Executive following the date on which such Seller GP Executive is no longer an officer of Seller GP or any of its Affiliates.

7. Enforceability; Reformation . Each of the obligations in this Agreement is an entire, separate and independent restriction, despite the fact that they may be contained in the same phrase, and if any part is found to be invalid or unenforceable the remainder will remain valid and enforceable. While the restrictions are considered by the parties to be fair and reasonable under the circumstances, the Parties hereto agree that, if any court of competent jurisdiction determines that a specified time period, a specified geographical area, a specified business limitation or any other relevant feature of this Agreement is unreasonable, arbitrary or against public policy, then a lesser period of time, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable Party.

8. Binding Effect; Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, permitted assigns and legal representatives, including any successor to the Company or Seller GP by merger, purchase or otherwise or any acquirer of all or substantially all of the Company or Seller GP, as applicable. This Agreement is not assignable by the Seller GP Executives. The Company may assign its rights, but not its obligations, hereunder, without the Consent of any Party hereto, to any Affiliate of the Company, any successor thereof and to any other person or entity which acquires all or substantially all of the assets of the Company. Seller GP may assign its rights, but not its obligations, hereunder, without the Consent of any Party hereto to any Affiliate of Seller GP, any successor thereof and to any other person or entity which acquires all or substantially all of the assets of Seller GP.

9. Entire Agreement; Recitals . This Agreement (including the documents and the instruments referred to in this Agreement), constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement. The recitals set forth above are incorporated herein and made a part of this Agreement as if set forth at length herein.

10. Amendments . Subject to compliance with applicable law, the provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of each of the Parties. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties. Any waiver of compliance with any provision of this Agreement shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.

11. Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that each Party need not sign the same counterpart.

12. Injunctive Relief . Each Party acknowledges that compliance with this Agreement is necessary to protect the goodwill and other proprietary interests of the other Parties. Each Party acknowledges that a breach of this Agreement may result in irreparable and continuing damage to the other Parties and/or their respective Affiliates and their respective businesses, for which there may be no adequate remedy at law. Each Party further agrees that in the event of any breach of this Agreement, the other Parties and their respective successors and assigns shall be entitled to seek injunctive relief and to such other and further relief, including damages, as may be proper without any requirement of the posting of any bond or similar security.

13. Governing Law . This Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles. The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the State of Delaware, and each Party hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[ Signature page follows ]

IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement as of the day and year first written above.


AMERICAN REALTY CAPITAL PROPERTIES, INC.

By:
		Name:
		Title:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:


David S. Kay


Lisa E. Beeson

[Signature Page to Non-Competition and Exclusivity Agreement]

Exhibit J

FORM OF REGISTRATION RIGHTS AGREEMENT

dated as of

[ ], 2014

among

ARC PROPERTIES OPERATING PARTNERSHIP, L.P.,

RCS CAPITAL CORPORATION

and

THE PARTIES HERETO

FORM OF REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT dated as of [ ], 2014 (this “ Agreement ”), is entered into by and among RCS Capital Corporation, a Delaware corporation (the “ Company ”), and ARC Properties Operating Partnership, L.P., a Delaware limited partnership (“ ARCP OP ”), and any Transferee thereof that become party to this Agreement (collectively, the “ Investors ”).

WHEREAS, ARCP OP and the Company have entered into that certain Equity Purchase Agreement dated as of September 30, 2014 (the “ Purchase Agreement ”); and

WHEREAS, the Purchase Agreement requires delivery of this Agreement.

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

ARTICLE 1

Definitions

Section 1.01 . Definitions. (a) The following terms, as used herein, have the following meanings:

“ Affiliate ,” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.

“ Agreement ” has the meaning set forth in the preamble, as amended, modified or supplemented from time to time, together with any exhibits, schedules, appendices or other attachments thereto.

“ ARCP OP ” has the meaning set forth in the preamble.

“ Business Day ” means any day that is not a Saturday, Sunday or other day in which banks are not required or authorized to be closed in New York City, New York.

“ Common Stock ” means the Class A Common Stock of the Company.

“ Company ” has the meaning set forth in the preamble.

“ Damages ” has the meaning set forth in Section 3.01 .

“ Demand ” has the meaning set forth in Section 2.03(a) .

“ Demand Notice ” has the meaning set forth in Section 2.03(a) .

“ Effective Date ” means, with respect to each Registration Statement, the date that such Registration Statement is first declared effective by the SEC or if the Company is a WKSI, the date that such Registration Statement is filed with the SEC.

“ Effectiveness Date ” means, with respect to the Shelf Registration Statement required to be filed hereunder, the 40th calendar day following the Filing Date; provided, however, that in the event

the Company is notified by the SEC that the Shelf Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be not later than the fifth Trading Day following the date on which the Company is so notified if such date precedes the date otherwise required above.

“ Earn-out Payment ” has the meaning set forth in the Purchase Agreement.

“ Effectiveness Period ” has the meaning set forth in Section 2.01(b) .

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

“ Filing Date ” means, with respect to the Shelf Registration Statement, the tenth day after the Stock Issuance Date or, if such date is not a Business Day, the next date that is a Business Day, and, if after the Stock Issuance Date, Common Stock is issued to the Investor pursuant to the Earn-out Payment, such shares of Common Stock are not registered pursuant to a Registration Statement previously filed under Section 2.01 and such shares of Common Stock cannot be sold publicly without any volume limitations under Rule 144, the tenth day after the Stock Issuance Date with respect to the Common Stock issued to Investors pursuant to the Earn-out Payment or, if such date is not a Business Day, the next date that is a Business Day.

“ FINRA ” means the Financial Industry Regulatory Authority, Inc., or any successor thereto.

“ Indemnified Party ” has the meaning set forth in Section 3.03 .

“ Indemnifying Party ” has the meaning set forth in Section 3.03 .

“ Investors ” has the meaning set forth in the preamble.

“ Joinder Agreement ” has the meaning set forth in Section 4.02(b) .

“ Non-Underwritten Shelf Takedown ” has the meaning set forth in Section 2.03(c) .

“ Notice ” has the meaning set forth in Section 4.03 .

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

“ Piggyback Registration ” has the meaning set forth in Section 2.02(a) .

“ Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“ Purchase Agreement ” has the meaning set forth in the recitals.

“ Registrable Securities ” means the Common Stock issued or issuable to the Investors pursuant to the Purchase Agreement, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

“ Registration Statement ” means each registration statement required to be filed under Article 2 with respect to the Registrable Securities, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement

“ Rule 144 ,” “ Rule 172 ,” “ Rule 415 ,” and “ Rule 424 ” means Rule 144, Rule 172, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“ Rule 144A ” means Rule 144A as promulgated by the SEC under the Securities Act, and any successor rule or regulation thereto.

“ SEC ” means the United States Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, and the rules and regulations of the SEC promulgated thereunder, as from time to time amended.

“ Selling Expenses ” means all underwriting discounts, selling fees or commissions and stock transfer taxes applicable to any sale of Registrable Securities.

“ Shelf Registration Statement ” has the meaning set forth in Section 2.01(a) .

“ Special Registration ” has the meaning set forth in Section 2.02(a) .

“ Stock Issuance Date ” has the meaning set forth in Section 4.01 .

“ Trading Day ” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that, in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

“ Trading Market ” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

“ Transfer ” means, with respect to any Registrable Securities, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer such Registrable Securities or any participation or interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge, encumbrance, hypothecation, or other transfer of such Registrable Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing.

“ Transfer Agent ” means Computershare Trust Company, N.A., or any successor transfer agent for the Company.

“Transferee” means a Person to whom Registrable Securities are Transferred by an Investor; provided that such Transfer is not made in a registered offering or pursuant to Rule 144 and that the Transferee executes a Joinder Agreement.

“ Underwritten Shelf Takedown ” has the meaning set forth in Section 2.03(a) .

“WKSI” means a Well-Known Seasoned Issuer as defined in Rule 405 of the Securities Act.

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections or Exhibits are to Articles, Sections and Exhibits of this Agreement unless otherwise specified. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and/or thereof, as applicable. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE 2 R EGISTRATION R IGHTS

Section 2.01 Registration Statement

(a) On or prior to the Filing Date, the Company shall prepare and file with the SEC a Registration Statement or, if a Registration Statement is then effective, a supplement to the Prospectus, in either case covering the resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415 (or any successor provision) (the “ Shelf Registration Statement ”).

(b) The Company shall use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as promptly as possible, if the Shelf Registration Statement is not then effective, but in any event on or prior to the Effectiveness Date, and shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until the earlier of the date that all Registrable Securities covered by such Registration Statement have been sold or can be sold publicly without any volume limitations under Rule 144 (the “ Effectiveness Period ”).

(c) Notwithstanding anything in this Agreement to the contrary, the Company may, by written notice to each Investor, suspend sales under a Registration Statement, including the Shelf Registration Statement, after the Effective Date thereof and/or require that each Investor immediately cease the sale of Registrable Securities pursuant thereto and/or defer the filing of any subsequent Registration Statement if the Company is engaged in a material merger, acquisition or sale and the Board of Directors of the Company determines in good faith, by appropriate resolutions, that, as a result of such activity, (i) it would be materially detrimental to the Company (other than as relating solely to the price of the Common Stock) to maintain a Registration Statement at such time or (ii) it is in the best interests of the Company to suspend sales under such Registration Statement at such time. Upon receipt of such notice, each Investor shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Investor is advised in writing by the Company that the current Prospectus or amended Prospectus, as applicable, may be used. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Board of Directors of the Company) the failure to require such suspension would be materially detrimental to the Company. The Company’s rights under this Section 2.01(c) may be exercised for a period of no more than 15 Trading Days at a time and not more than two times in any twelve-month (12) period. Immediately after the end of any suspension period under this Section 2.01(c) , the Company shall take all necessary actions (including filing any required supplemental Prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of each Investor to publicly resell its Registrable Securities pursuant to such effective Registration Statement.

Section 2.02 Piggyback Registration .

(a) Whenever the Company proposes to register any of its Common Stock in connection with an underwritten public offering (whether an offering of Common Stock by the Company, stockholders of the Company, or both, but other than in connection with a Special Registration (as defined below)), the Company will give prompt written notice to the Investors of its intention to effect such a registration (but in no event less than ten (10) days prior to the anticipated filing date) and (subject to Section 2.02(b) below) will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) business days after the date of the Company’s notice (a “ Piggyback Registration ”). Any Investor that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth (5 ^th ) business day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 2.02 prior to the effectiveness of such registration, whether or not any Investor has elected to include Registrable Securities in such registration. “ Special Registration ” means the registration of equity securities and/or options or other rights in respect thereof (i) on Form S-4 or Form S-8 (or successor form), (ii) in connection with an at-the-market offering, (iii) on any other registration form which may not be used for the registration or qualification for distribution of Registrable Securities, or (iv) in connection with any employee benefit or dividend reinvestment plan.

(b) The right of the Investors to participate in a registration referred to in Section 2.02(a) will be conditioned upon such persons’ participation in such underwriting and the inclusion of such persons’ Registrable Securities in the underwriting, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company. If the managing underwriters advise the Company in writing that, in their reasonable opinion, the number of shares of Common Stock requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company shall include in such Registration Statement or Prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which shares shall be so included in the following order of priority: (i) first, the shares the Company and/or selling stockholders, as applicable, propose to sell and (ii) second, shares of the participating Investors pro rata on the basis of the aggregate number of such shares owned by each participating Investor.

Section 2.03 Requests and Demands .

(a) ARCP OP may make three (3) requests to sell all or any portion of its Registrable Securities in an underwritten offering that is registered pursuant to a Registration Statement (each, an “ Underwritten Shelf Takedown ”). A request (a “ Demand ”) for an Underwritten Shelf Takedowns shall be made by ARCP OP by giving written notice to the Company (the “ Demand Notice ”). Each Demand Notice shall specify the approximate number of Registrable Securities to be sold by ARCP OP in the Underwritten Shelf Takedown and the expected price range (net of underwriting discounts and commissions) of such Underwritten Shelf Takedown. Within two (2) business days after receipt of any Demand Notice, the Company shall send written notice of such requested Underwritten Shelf Takedown to each non-requesting Investor, if any, and shall include in such Underwritten Shelf Takedown all Registrable Securities with respect to which the Company has received written requests for inclusion therein within five (5) business days after sending such notice (except that each non-requesting Investor shall have two (2) business days after receipt of such notice to request inclusion of Registrable Securities in the Underwritten Shelf Takedown in the case of a “bought deal”, “registered direct offering” or “overnight transaction”).

(b) The underwriters in any Underwritten Shelf Takedown shall be selected by ARCP OP.

(c) If an Investor desires to initiate an offering or sale of all or part of such Investor’s Registrable Securities that does not constitute an Underwritten Shelf Takedown (a “ Non- Underwritten Shelf Takedown ”), such Investor shall so indicate in a written request delivered to

the Company no later than two (2) business days (or in the event any amendment or supplement to the Registration Statement or Prospectus is necessary, no later than five (5) business days) prior to the expected date of such Non-Underwritten Shelf Takedown, which request shall include (i) the total number of Registrable Securities expected to be offered and sold in such Non-Underwritten Shelf Takedown, (ii) the expected plan of distribution of such Non-Underwritten Shelf Takedown and (iii) the action or actions required (including the timing thereof) in connection with such Non-Underwritten Shelf Takedown, and, to the extent necessary, the Company shall file and effect an amendment or supplement to its Registration Statement or Prospectus for such purpose as soon as practicable. For the avoidance of doubt, unless otherwise agreed to by the requesting Investor, a non-requesting Investor shall not have the right to participate in a Non-Underwritten Shelf Takedown.

Section 2.04 Registration Procedures . In connection with the Company’s registration obligations hereunder, the Company shall:

(a) Not less than three (3) Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, furnish to each Investor copies of all such documents proposed to be filed, which documents (other than any document that is incorporated or deemed to be incorporated by reference therein) will be subject to the review of each Investor. The Company shall reflect in each such document when so filed with the SEC all reasonable comments regarding the description of the transactions under the Purchase Agreement, the Investors or the plan of distribution as each Investor may reasonably and promptly propose no later than two (2) Trading Days after each Investor has been so furnished with copies of such documents as aforesaid

(b) (i) Subject to Section 2.01(c) , prepare and file with the SEC such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any successor provision); and (iii) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Investors thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

(c) Notify each Investor as promptly as reasonably possible and, if requested by any Investors, confirm such notice in writing no later than two (2) Trading Days thereafter, of any of the following events: (i) the SEC issues any stop order suspending the effectiveness of any Registration Statement or initiates any proceedings for that purpose; (ii) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any proceeding for such purpose; or (iii) the financial statements included in any Registration Statement become

ineligible for inclusion therein or any Registration Statement or Prospectus or other document contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(d) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as possible.

(e) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by the Investors in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto to the extent permitted by federal and state securities laws and regulations.

(f) Prior to any public offering of Registrable Securities, use reasonable best efforts to register or qualify or cooperate with the selling Investors in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Investor requests in writing, to keep each such registration or qualification (or exemption therefrom) effective for so long as required, but not to exceed the duration of the Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided , however , that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(g) Cooperate with the Investors to facilitate the timely preparation and delivery of certificates or book-entry records, as required by such Investors, representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates or records, as applicable, shall be free, to the extent permitted by the Transaction Documents and under law, of all restrictive legends, and to enable such certificates to be in such denominations and registered in such names as any of the Investors may reasonably request.

(h) Upon the occurrence of any event described in Section 2.02(c)(iii) , as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(i) (A) Cooperate with any reasonable due diligence investigation undertaken by the Investors, the lead underwriter or underwriters, if any, and any attorneys or accountants retained by the Investors or the lead underwriter or underwriters, in connection with the sale of Registrable Securities, including, without limitation, by making available documents and information; (B) cause the officers, directors and employees of the Company to supply in all material respects the information, in each case, reasonably requested by any such representative, lead underwriter, attorney or accountant in connection with such Registration Statement, and (C) make the Company’s independent certified public accountants available for any such lead underwriter’s or underwriters’ due diligence if so requested by counsel to the Underwriters or the Investors; provided, that, the Company will not deliver or make available to any Investor material, nonpublic information unless such Investor requests in advance in writing to receive material, nonpublic information and agrees in writing to keep such information confidential and not use such information in a manner that violates applicable securities laws. Make such representations and warranties to the Investors and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in underwritten public offerings.

(j) Enter into such customary agreements (including underwriting and indemnification agreements) and take such other actions as the lead underwriter, if any, may reasonably request in order to facilitate the Registration and disposition of such Registrable Securities.

(k) In the event of an Underwritten Shelf Takedown, use its reasonable best efforts to obtain for delivery to the lead underwriter, if any, an opinion or opinions from counsel for the Company dated the date of the closing under the underwriting agreement, in form and substance as is customarily given to underwriters in an underwritten secondary public offering.

(l) In the case of an Underwritten Shelf Takedown, use its reasonable best efforts to obtain for delivery to the Company and the lead underwriter, if any, a “comfort” letter from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants in an underwritten secondary public offering.

(m) Cooperate with each Investor and the underwriters, if any, of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA.

(n) Use its reasonable best efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed or quoted on the Trading Market, if any, on which similar securities issued by the Company are then listed.

(o) In the case of an Underwritten Shelf Takedown, ensure that two (2) senior officers of the Company who are reasonably acceptable to ARCP OP (A) reasonably participate in good faith in the customary “road show” presentations, which shall be for a period not to exceed two (2) calendar days and other customary marketing efforts that may be reasonably requested by the lead underwriter or underwriters in any such Underwritten Shelf Takedown, and (B) take such actions as the lead underwriter or underwriters or ARCP OP may reasonably request and that are customary in underwritten public offerings in order to facilitate the sale of Registrable Securities.

(p) Comply with all rules and regulations of the SEC applicable to the registration of the Common Stock.

(q) Use its reasonable best efforts to procure the cooperation of the Transfer Agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical security instruments into book-entry form in accordance with any procedures reasonably requested by the Investors or any lead underwriter or underwriters.

(r) It shall be a condition precedent to the obligations of the Company pursuant to this Agreement with respect to the Registrable Securities of any Investor that such Investor furnishes to the Company the information reasonably requested by the Company and such other information regarding itself, the Registrable Securities and other Common Stock held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities or file a Prospectus supplement with respect to the Registrable Securities of such Investor and shall complete and execute such documents in connection with the foregoing as the Company may reasonably request.

(s) The Company shall comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 (or any successor provision) under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 (or any successor provision) under the Securities Act, reasonably promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 (or any successor provision) and, as a result thereof, the Investors are required to make available a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

Section 2.05 Registration Expenses . The Company shall pay all fees and expenses (other than Selling Expenses) incurred in connection with the performance of or compliance with Article 2 of this Agreement by the Company, including without limitation (a) all registration and filing fees and expenses including, without limitation, those related to filings with the SEC, FINRA, any Trading Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the expenses associated with the delivery by independent certified public accountants of any “comfort letters” requested pursuant to the terms hereof, and (f) all listing fees to be paid by the Company to the Trading Market. All Selling Expenses incurred in connection with the sale of Registrable Securities shall be borne by the Investors or other holders selling such Registrable Securities in proportion to such Investors’ or other holders’ Registrable Securities sold. Each Investor and other holder of Registrable Securities shall pay the expenses of their own counsel and other advisers.

ARTICLE 3

Indemnification and Contribution

Section 3.01. Indemnification by the Company . The Company agrees to indemnify and hold harmless each Investor beneficially owning any Registrable Securities covered by a Registration Statement, its officers, directors, employees, partners and agents, and each Person, if any, who controls such Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (collectively, “ Damages ”) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus or free-writing prospectus (as defined in Rule 405 under the Securities Act), or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such Investor or on such Investor’s behalf expressly for use therein.

Section 3.02 Indemnification by Participating Investors . Each Investor holding Registrable Securities included in any Registration Statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity from the Company to such Investor provided in Section 3.01 , but only with respect to information furnished in writing by such Investor or on such Investor’s behalf expressly for use in any Registration Statement or Prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus or free-writing prospectus. No Investor shall be liable under this Section 3.02 for any Damages in excess of the net proceeds (after giving effect to any underwriters discounts and commissions) realized by such Investor in the sale of Registrable Securities of such Investor to which such Damages relate.

Section 3.03. Conduct of Indemnification Proceedings . If any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this ARTICLE 3, such Person (an “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses, provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is actually materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (a) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, (b) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, including one or more

defenses or counterclaims that are different from or in addition to those available to the Indemnifying Party, or (c) the Indemnifying Party shall have failed to assume the defense within 30 days of notice pursuant to this Section 3.03 . It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement (A) includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding, and (B) does not include any injunctive or other equitable or non-monetary relief applicable to or affecting such Indemnified Person.

Section 3.04. Contribution . If the indemnification provided for in this Article 3 is unavailable to the Indemnified Parties in respect of any Damages, then each Indemnifying Party, in lieu of indemnifying the Indemnified Parties, shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Damages as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Damages shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this ARTICLE 3 was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 3.04 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 3.04 , no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the sale of the Registrable Securities subject to the proceeding (after giving effect to any underwriters discounts and commissions) exceeds the

amount of any damages that such Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Investor. Each Investor’s obligation to contribute pursuant to this Section 3.04 is several in the proportion that the proceeds of the offering received by such Investor bears to the total proceeds of the offering received by all such Investors and not joint.

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Article 3 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

ARTICLE 4

Miscellaneous

Section 4.01 . Effectiveness of Agreement. The rights and obligations of the parties under this Agreement shall become effective, if at all, on the date on which the Company issues to the Investor Common Stock pursuant to either Section 1.2(d)(ii) or Section 1.2(e) of the Purchase Agreement (the “ Stock Issuance Date ”).

Section 4.02 Binding Effect; Assignability; Benefit. (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns. Any Investor that ceases to own beneficially any Registrable Securities and no longer has the right to receive any Registrable Securities pursuant to the terms and conditions of the Purchase Agreement shall cease to be bound by the terms hereof (other than (i) the provisions of ARTICLE 3 applicable to such Investor with respect to any offering of Registrable Securities completed on or before the date such Investor ceased to own any Registrable Securities, and (ii) this ARTICLE 4).

(b) Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto pursuant to any Transfer of Registrable Securities or otherwise, except that each Investor may assign rights hereunder to any Transferee of such Investor who executes and deliver to the Company an agreement to be bound by this Agreement in the form of Exhibit A hereto (a “ Joinder Agreement ”) and shall thenceforth be an “ Investor ”.

(c) Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

Section 4.03. Notices . All notices, requests and other communications (each, a “ Notice ”) to any party shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission,

if to the Company to:

RCS Capital Corporation

405 Park Avenue, 15 ^th Floor

New York, NY 10022

Attention: James A. Tanaka, General Counsel

Fax: (212) 415-6567

with copies to:

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

and

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036

Attention: Peter Fass, Esq. and Steven Lichtenfeld, Esq.

Facsimile: (212) 969-2900

if to any Investor, at the address for such Investor listed on the signature pages below or otherwise provided to the Company as set forth below.

Any Notice shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, such Notice shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. Any Notice sent by facsimile transmission also shall be confirmed by certified or registered mail, return receipt requested, posted within one Business Day after the date of the sending of such facsimile transmission, or by personal delivery, whether courier or otherwise, made within two Business Days after the date of such facsimile transmission.

Any Person that becomes an Investor after the date hereof shall provide its address and fax number to the Company.

Section 4.04. Waiver; Amendment . No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective. No provision of this Agreement may be amended or supplemented other than by an instrument in writing executed by the Company and the holders of at least 75% of the Registrable Securities held by the parties hereto at the time of such proposed amendment or modification.

Section 4.05. Governing Law . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to the conflicts of laws rules of such state.

Section 4.06. Jurisdiction . The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any state or federal court in The City of New York, Borough of Manhattan, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.03 shall be deemed effective service of process on such party.

Section 4.07. WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 4.08. Specific Enforcement . Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond or furnishing other security, and in addition to all other remedies that may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available.

Section 4.09. Counterparts; Effectiveness . 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, and all of which shall, taken together, be considered one and the same agreement, it being understood that each party need not sign the same counterpart. This Agreement shall become effective when each party hereto shall have executed and delivered this Agreement. Until and unless each party has executed and delivered this Agreement, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 4.10. Entire Agreement . This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes all prior and contemporaneous agreements and understandings, both oral and written, among the parties hereto with respect to the subject matter hereof.

Section 4.11. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 4.12 . Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor hereunder, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Investor shall be entitled to protect and enforce its rights, including the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

Section 4.13. Other Registration Rights. Notwithstanding anything to the contrary contained in this Agreement, to the extent that any existing registration rights agreements of the Company so require, the registration rights of the Investors under this Agreement shall be subordinated to the rights of the parties to such existing registration rights agreements. From and after the Stock Issuance Date, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which have priority over the registration rights granted to Investors hereunder.

[Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement or have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.


ARC PROPERTIES OPERATING PARTNERSHIP, L.P.

By:
		Name:
		Title:

RCS CAPITAL CORPORATION

By:
		Name:
		Title:

[Signature Page to Registration Rights Agreement]

EXHIBIT A

JOINDER TO REGISTRATION RIGHTS AGREEMENT

This Joinder Agreement (this “ Joinder Agreement ”) is made as of the date written below by the undersigned (the “ Joining Party ”) in accordance with the Registration Rights Agreement dated as of [ ], 2014 (as the same may be amended from time to time, the “ Registration Rights Agreement ”), among ARC Properties Operating Partnership, L.P., RCS Capital Corporation and the Investors party thereto. Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in the Registration Rights Agreement.

The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this Joinder Agreement, the Joining Party shall be deemed to be a party to the Registration Rights Agreement as of the date hereof as a “ Transferee ” of an “ Investor ” thereto, and shall have all of the rights and obligations of an “ Investor ” thereunder as if it had executed the Registration Rights Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Registration Rights Agreement (including, without limitation, Section 4.02 thereof).

IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date written below.

Date: ,


	[NAME OF JOINING PARTY]

	By:
		Name:
		Title:

Address for Notices:

Exhibit K-1

Form of

Sub-advisory Agreement

between

Cole REIT Advisors IV, LLC

and

[ARCP Sub-advisor]

[ — ] [ — ], 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			3

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			4

5.1	Acquisition Fees		4

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

Article 6 – Allocation of Expense Reimbursements			6

6.1	All Expense Reimbursements		6

6.2	Quarterly Review of Expenses		6

Article 7 – Advisor’s Responsibilities			6

Article 8 – Relationship of Sub-advisor and Advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			6

8.1	Relationship		6

8.2	Time Commitment		7

8.3	Advisor and Sub-advisor Meetings		7

8.4	Investment Opportunities and Allocation		7

8.5	Prospectus Guidance		7

Article 9 – Other Agreements			7

Article 10 – Representations and Warranties			8

Article 11 – Term and Termination of the Agreement			9

11.1	Term		9

11.2	Termination		9

11.3	Survival upon Termination		10

11.4	Sub-advisor’s Obligations on Termination and Obligations		10

Article 12 – Assignment			10

Article 13 – Indemnification and Limitation of Liability			10


Article 14 – Miscellaneous		11

14.1	Reaffirmation of Advisory Agreement	11

14.2	Notices	11

14.3	Modification	12

14.4	Severability	12

14.5	Construction	12

14.6	Entire Agreement	12

14.7	Waiver	13

14.8	Gender	13

14.9	Titles Not to Affect Interpretation	13

14.10	Counterparts	13

Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ][ — ], 2014 (this “ Agreement ”), is between, Cole REIT Advisors IV, LLC, a Delaware limited liability company (the “ Advisor ”) and [ARCP Sub-advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).

W I T N E S S E T H

WHEREAS, Cole Credit Property Trust IV, Inc., a Maryland corporation (the “ Company ”) has appointed Advisor as its advisor pursuant to the Advisory Agreement between the Company and the Advisor, dated as of January 20, 2012, (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “ Advisory Agreement ”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

Article 1

Definitions

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

“ Advisor ” has the meaning set forth in the preamble to this Agreement.

“ Advisory Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Investment Allocation Agreement ” means that certain investment allocation agreement, dated the date hereof, among ARC Properties Operating Partnership, L.P. and the [ARCP Sub-advisors].

“ Non-Competition Agreement ” means that certain non-competition agreement, dated the date hereof, among ARC Properties Operating Partnership, L.P., RCS Capital Corporation and certain of ARC Properties Operating Partnership, L.P.’s key executives.

“ Notice” has the meaning set forth in Section 14.2 of this Agreement.

“ Party ” has the meaning set forth in the preamble to this Agreement.

“Purchase Agreement” means that certain Equity Purchase Agreement, dated as of September 30, 2014, by and between ARC Properties Operating Partnership, L.P. and RCS Capital Corporation.

“ Sub-advisor ” has the meaning set forth in the preamble to this Agreement.

Article 2

Appointment

The Advisor, pursuant to its authority to engage a duly qualified and licensed Person in the performance of its duties under the Advisory Agreement pursuant to Section 2.02 of the Advisory Agreement, hereby appoints the Sub-advisor to serve as the Sub-advisor for the Company. The Sub-advisor hereby accepts such appointment. Subject to the supervision of, the Advisor and the Board, the Sub-advisor agrees to perform the duties of the Advisor set forth in Sections 2.02(a), (c), (d) (as it relates to the Assets), (e) (as it relates to the Assets), (f) (as it relates to the Assets), (g), (h), (i), (o), (q) and (s) of the Advisory Agreement and to assist the Advisor in the performance of the duties set forth in Section 2.02(l), (m), (p), (r) and (u) of the Advisory Agreement, all on the terms and subject to the conditions set forth in this Agreement.

Article 3

Duties of the Sub-advisor

Under the Advisory Agreement, the Advisor is responsible for using its commercially reasonable best efforts to present to the Company potential investment opportunities consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board and managing and supervising the operations and administration of the Company’s Assets. Consistent with Article 2 hereof and, subject to the Investment Allocation Agreement, the Sub-advisor undertakes to use commercially reasonable best efforts to present investment opportunities to the Company consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board and to manage and supervise the operations and administration of the Company’s Assets. Subject to the limitations set forth in this Agreement and the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and subject to the supervision of the Advisor and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate, perform, and assist the Advisor in the performance of, the duties under the Advisory Agreement set forth in Article 2 of this Agreement, which duties are incorporated herein by reference as if fully set forth herein. In the event that the Sub-advisor engages a third party to perform the services that the Advisor has engaged Sub-advisor to perform pursuant to this Agreement, such third party shall be compensated by the Sub-advisor out of the fees it received pursuant to Article 5 of this Agreement; provided , however that third-party property management fees payable by tenants of a property, including amounts payable to affiliates of the Sub-advisor, may be charged to and paid by such tenant and will not reduce the fees paid to the Sub-advisor.

Article 4

Authority and Certain Activities of Sub-advisor

To the same extent as the Advisor and subject to the supervision of the Advisor and the Board, the Sub-advisor shall have the authority to enter into contracts in the name of the Company to the extent set forth in Section 2.02 of the Advisory Agreement in connection with the performance of its duties under Article 2, shall have the authority set forth in Section 2.03 of the Advisory Agreement, shall have the authority to establish and maintain bank accounts as set forth in Section 2.04 of the Advisory Agreement with respect to the Assets, shall maintain books and records for the Company with respect to the Assets as set forth in Section 2.05 of the Advisory Agreement, and shall abide by the limitations of Section 2.06 of the Advisory Agreement, all of which are incorporated herein by reference as if fully set forth herein. The Advisor hereby grants to the Sub-Advisor, to the extent of any proprietary interest the Advisor or its Affiliates may have in any of the names “Cole” or any derivative thereof a non-transferable, non-assignable, non-exclusive, royalty-free right and license to use the name “Cole” or any derivative thereof solely in connection with providing services hereunder until the expiration or termination of this Agreement.

Article 5

Compensation

5.1	Acquisition Fees . Acquisition Fees equal to 1.00% of the Contract Purchase Price of each Asset.

5.2	Advisory Fees . Advisory Fees calculated according to the following schedule:


Average Invested Assets	Annualized Fee Rate

$0 — $2 billion		0.375	%

Over $2 billion — $4 billion		0.350	%

Over $4 billion		0.325	%

5.3	Disposition Fees . 25% of any Disposition Fees paid to Advisor on the Sale of a Property.

5.4	Subordinated Performance Fee . 15% of all Subordinated Performance Fees paid to the Advisor, in whatever form payable by the Company (i.e., cash, securities or a promissory note).

5.5

Expense Reimbursements . Subject to Article 6 of this Agreement and Section 3.04 of the Advisory Agreement, the Advisor shall reimburse Sub-advisor to the extent the Advisor receives reimbursement from the Company for the following expenses of the Sub-advisor to the extent they are actually incurred by the Sub-advisor in connection with the services the Sub-advisor provides pursuant to this Agreement; provided , however that in each case the reimbursement is permitted under the Advisory Agreement and Prospectus and such reimbursements shall be determined consistent with past practice:

(A)

Acquisition Expenses incurred in connection with the selection and acquisition of Assets in an amount up to 0.5% of the Contract Purchase Price;

(B)

The actual cost incurred by the Sub-advisor of goods, services and materials used by the Company and obtained from Persons not affiliated with the Sub-advisor, other than Acquisition Expenses, including property management and leasing services;

(C)

Expenses of managing and operating Assets owned by the Company, whether payable to an Affiliate of the Company or the Sub-advisor, including wages and salaries and other personnel-related expenses, unless otherwise waived, in whole or in part, by the Sub-advisor or the Affiliate in its sole discretion, of all on-site and off-site employees of the Sub-advisor or the Affiliate who are engaged in the operation, management, maintenance and leasing or access control of the Asset, or to a non-affiliated Person; and

(D)

Notwithstanding anything to the contrary contained in this Article 5:

(i)

All Acquisition Fees and Acquisition Expenses payable in connection with those certain Assets separately disclosed in writing prior to the date of the Purchase Agreement, with respect to which Sub-advisor represents that a purchase agreement or letter of intent has been executed shall be paid to the Sub-advisor and the Advisor shall not be entitled to any Acquisition Fees or Acquisition Expenses with respect to such Assets;

(ii)

All expenses incurred by the Advisor incurred prior to the date of this Agreement shall be treated as expenses of the Sub-Advisor for purposes of this Agreement; and

(iii)

All expenses incurred by the Sub-advisor under the Interim Sub-advisory Agreement between the Advisor and a subsidiary of RCS Capital Corporation, shall be treated as expenses of the Advisor for purposes of this Agreement.

Article 6

Allocation of Expense Reimbursements

6.1

6.2

Quarterly Review of Expenses. Within 45 days of the end of each fiscal quarter, each Party shall provide the other Party with a detailed description of such Party’s aggregate Operating Expenses incurred during such fiscal quarter for the purpose of the Parties’ jointly reviewing such expenses against applicable caps and limitations set forth in the Advisory Agreement.

Article 7

Advisor’s Responsibilities

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates;

Other Activities of the Advisor and Sub-advisor

8.1

8.2

8.3

8.4

Investment Opportunities and Allocation . Subject to Article 3 of this Agreement, Sub-advisor’s obligations with respect to offering investment opportunities to the Company shall be governed by the Investment Allocation Agreement, which cannot be amended or modified without the written consent of the Advisor.

8.5

Article 9

Other Agreements

9.1

9.2

9.3

9.4

9.5	The Sub-advisor will utilize the Advisor’s accounting system in connection with performing such duties, or a system mutually agreed to between Advisor and Sub-advisor.

Article 10

Representations and Warranties

10.1	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

(A)

Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

(B)

Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

(C)

(D)

(E)

To the knowledge of such Party, no consent, approval or authorization of, or filing, registration or qualification with, any court or governmental authority on

(F)

Such Party is duly qualified and licensed to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement.

Article 11

Term and Termination of the Agreement

11.1	Term . This Agreement shall have an initial term ending January 20, 2015 and shall be automatically renewed for an unlimited number of successive one-year terms upon renewal of the Advisory Agreement. This Agreement shall be co-terminus with the Advisory Agreement.

11.2	Termination . Subject to last sentence of Section 11.1:

(A)

(B)

(C)

(D)

(E)

(F)

11.3

11.4	Sub-advisor’s Obligations on Termination and Obligations . After termination of this Agreement, the Sub-advisor shall have the responsibilities to the same extent as the Advisor as set forth in Section 4.03 of the Advisory Agreement.

Article 12

Assignment

Article 13

Indemnification and Limitation of Liability

The Advisor shall indemnify and hold harmless the Sub-advisor from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation,

reasonable attorneys’ fees and other 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 the Sub-advisor becomes subject to or liable (1) that are related to or a result of the performance of, or failure to perform, services by the Advisor which are required to be performed by it under this Agreement or under the Advisory Agreement or (2) by reason of actions or inactions of the Advisor (except in each case to the extent that such performance or failure to perform or action or inaction results from any performance or failure to perform services by Sub-advisor under this Agreement).

Article 14

Miscellaneous

14.1	Reaffirmation of Advisory Agreement . Sub-advisor shall use, and shall cause its Affiliates to use, commercially reasonable best efforts to assist Advisor in obtaining the reaffirmation or renewal by the Company, or causing the reaffirmation or renewal by the Company, of the Advisory Agreement.

14.2

To the Advisor:

Cole REIT Advisors V, LLC

2555 E. Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention: President

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

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attention: Darrick M. Mix, Esq. and Chad J. Rubin, Esq.

Facsimile: (215) 405-2906

To the Sub-advisor:

[ARCP Sub-advisor]

405 Park Avenue, 15th Floor

New York, New York 10022

Attention: Richard Silfen

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

Weil, Gotshal and Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael Aiello, Esq. and Matthew Gilroy, Esq.

Facsimile: (212) 310-8007

14.3	Modification . This Agreement shall not be amended, supplemented, changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.

14.4	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.

14.5	Construction . 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.

14.6

14.7

14.8	Gender . Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

14.9	Titles Not to Affect Interpretation . The titles of Articles and Sections 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.

14.10

[The remainder of this page is intentionally left blank.

Signature page follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.


COLE REIT ADVISORS IV, LLC

By:
Name:

[ARCP Sub-advisor]

By:
Name:

Signature Page to Sub-advisory Agreement between Cole REIT Advisors IV, LLC and [Name of ARCP Sub-advisor]

Exhibit K-2

Form of

Sub-advisory Agreement

between

Cole REIT Advisors V, LLC

and

[ARCP Sub-advisor]

[ — ] [ — ], 2014

Table of Contents


		Page

Article 1 – Definitions			1

Article 2 – Appointment			2

Article 3 – Duties of the Sub-advisor			3

Article 4 – Authority and Certain Activities of Sub-advisor			3

Article 5 – Compensation			4

5.1	Acquisition Fees		4

5.2	Advisory Fees		4

5.3	Disposition Fees		4

5.4	Subordinated Performance Fee		4

5.5	Expense Reimbursements		4

Article 6 – Allocation of Expense Reimbursements			6

6.1	O&O Expense Reimbursements		6

6.2	All Other Expense Reimbursements		6

6.3	Quarterly Review of Expenses		6

Article 7 – Advisor’s Responsibilities			7

Article 8 – Relationship of Sub-advisor and Advisor and their Affiliates; Other Activities of the Advisor and Sub-advisor			7

8.1	Relationship		7

8.2	Time Commitment		7

8.3	Advisor and Sub-advisor Meetings		8

8.4	Investment Opportunities and Allocation		8

8.5	Prospectus Guidance		8

Article 9 – Other Agreements			8

Article 10 – Representations and Warranties			9

Article 11 – Term and Termination of the Agreement			10

11.1	Term		10

11.2	Termination		10

11.3	Survival upon Termination		11

11.4	Sub-advisor’s Obligations on Termination and Obligations		11

Article 12 – Assignment			11


Article 13 – Indemnification and Limitation of Liability		11

Article 14 – Miscellaneous		12

14.1	Reaffirmation of Advisory Agreement	12

14.2	Notices	12

14.3	Modification	13

14.4	Severability	13

14.5	Construction	13

14.6	Entire Agreement	13

14.7	Waiver	14

14.8	Gender	14

14.9	Titles Not to Affect Interpretation	14

14.10	Counterparts	14

Sub-advisory Agreement

This Sub-advisory Agreement, dated as of [ — ] , 2014 (this “ Agreement ”), is between, COLE REIT ADVISORS V, LLC, a Delaware limited liability company (the “ Advisor ”) and [ARCP Sub-advisor] a Delaware limited liability company (the “ Sub-advisor ”)(each a “ Party ” and collectively, the “ Parties ”).