Item 1.01. Entry into a Material Definitive Agreement.
Transfer Agreement
On September 16, 2016,
AR Capital Acquisition Corp. (the “Company”) entered into an agreement (the “Agreement”) with AR Capital,
LLC (“AR Capital”) and Axar Master Fund Ltd. (“Axar”), pursuant to which Axar agreed to purchase from AR
Capital (i) 5,947,827 shares (“founder shares”) of the Company’s common stock (“Common Stock”) that
were issued to AR Capital prior to the Company’s initial public offering (the “IPO”) and (ii) 6,550,000 warrants
to purchase Common Stock that were issued to AR Capital concurrently with the IPO (“private placement warrants”), in
exchange for (a) $10.00 cash to be paid at the closing of the transactions contemplated by the Agreement (the “Closing”)
and (b) an additional amount of cash upon the Company’s closing of a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”) equal
to 2.5% of the amount of cash held in the Company’s trust account established in connection with the IPO (the “Trust
Account”) immediately following (x) the completion of any and all redemptions of Common Stock in connection with the approval
by the Company’s stockholders of the Extension (as defined below) (“Extension Redemptions”) and (y) the payment
of the Cash Dividend (as defined below), if any, provided that such additional amount of cash shall not be less than $1,000,000
nor more than $3,000,000.
The Closing is subject
to a number of conditions specified in the Agreement, including that the Company obtain the requisite approval of its stockholders
(i) to amend the Company’s amended and restated certificate of incorporation (“Charter”) to extend the date by
which the Company must complete a Business Combination from October 7, 2016 to December 31, 2017 (the “Extension”),
(ii) to amend the Charter to change the name of the Company from “AR Capital Acquisition Corp.” to “Axar Acquisition
Corp.” (the “Name Change”), (iii) to amend the investment management trust agreement, dated October 1, 2014,
between the Company and Continental Stock Transfer & Trust Company, as trustee (the “Trust Amendment”), entered
into in connection with the IPO to extend the date by which the trustee must commence liquidating the Trust Account if the Company
has not consummated a Business Combination from October 7, 2016 to December 31, 2017 and to permit the withdrawal of funds to pay
the Extension Redemptions and to pay the Cash Dividend (as defined below) and (iv) to amend the Charter to effect a reverse stock
split of the Common Stock (the “Reverse Split”), only if greater than 10,000,000 shares of Common Stock initially sold
as part of the units in the IPO (the “Public Shares”) remain outstanding immediately after the completion of any Extension
Redemptions, using a ratio which will have the effect of reducing the total number of Public Shares to 10,000,000, and to permit
the withdrawal of funds from the Trust Account to pay a dividend on the outstanding shares of Common Stock in an amount per Public
Share equal to (a) the amount of cash in the Trust Account in excess of $100,000,000 after giving effect to all Extension Redemptions,
if any, divided by (b) 10,000,000 (the “Cash Dividend”).
The
Closing is also subject to the Company obtaining the requisite approval of holders of its outstanding warrants included as part
of the units sold in the IPO (“Public Warrants”) to amend the warrant agreement, dated October 1, 2014, between the
Company and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agreement”),
(i)
to provide for the conversion of all of the 12,000,000 outstanding Public Warrants into the right to receive $0.15 per Public Warrant,
payable in cash or shares of Common Stock (valued at $10.00 per share), at the discretion of the Company,
automatically
upon the consummation of a Business Combination, and (ii) to increase the exercise price of the private placement warrants from
$11.50 to $12.50 (subject to further adjustment as provided therein) (the “Warrant Amendment” and together with the
Extension, the Name Change, the Trust Amendment and the Reverse Split, the “Company Actions”). The private placement
warrants and the new warrants to be issued in connection with the Warrant Dividend (as defined below) will not be automatically
converted into cash or shares of Common Stock upon the consummation of a Business Combination (regardless of whether the Warrant
Amendment is approved).
In addition, the Closing
is subject to (i) the condition that that there be at least $25 million in the Trust Account after giving effect to the Company
Actions and Extension Redemptions and (ii) other customary closing conditions.
If the Company Actions
are approved and the Closing occurs, Axar has agreed to loan the Company (i) on January 1, 2017 and on the first day of each fiscal
quarter commencing thereafter through the fiscal quarter in which the Company consummates a Business Combination or liquidates
the Trust Account, an amount equal to the lesser of (a) $250,000.00 and (b) $0.05 multiplied by the number of outstanding Public
Shares following the completion of the Company Actions and Extension Redemptions (collectively, the “Trust Loans”),
the proceeds of which will be deposited by the Company into the Trust Account, and (ii) up to $2,000,000 to satisfy (in the discretion
of the Company) the Company’s working capital and other expenses (together with the Trust Loans, the “Loans”).
Accordingly, if the Company Actions are approved and the Closing occurs, the redemption price per share in connection with
the consummation of a Business Combination or liquidation of the Trust Account will be approximately $10.00 per share plus the
pro rata amount of the Trust Loans deposited in the Trust Account at the time of such Business Combination or liquidation. The
Loans will be non-interest bearing and repayable by the Company to Axar upon consummation of a Business Combination.
Axar has also agreed
to forfeit to the Company for zero consideration upon the consummation of a Business Combination a number of founder shares equal
to the excess (if positive) of (a) 6,000,000, over (b) 25% of the sum of (i) the total number of Public Shares outstanding immediately
following the completion of the Company Actions and Extension Redemptions, plus (ii) the excess of (x) the total number of shares
of Common Stock issued or deemed issued, or issuable upon the conversion or exercise of any equity-linked securities or rights
issued or deemed issued, by the Company in connection with or in relation to the consummation of such Business Combination, excluding
any shares of Common Stock or equity-linked securities exercisable for or convertible into shares of Common Stock issued, or to
be issued, to any seller in such Business Combination or to Axar and its affiliates, over (y) the total number of Public Shares
redeemed in connection with such Business Combination (for the avoidance of doubt, no founder shares will be forfeited if the excess
of the foregoing clause (a) over the foregoing clause (b) is equal to or less than zero). In addition, Axar has agreed to forfeit
to the Company for zero consideration upon the consummation of a Business Combination a percentage of private placement warrants
equal to the percentage of founder shares required to be forfeited pursuant to the preceding sentence.
Under the Agreement,
Axar has agreed to commit to purchase at least $100 million of shares of Common Stock of the Company in connection with a Business
Combination, at a price per share of $10.00.
As a condition to the
Closing, Company shall declare a dividend payable to stockholders of record following completion of the Company Actions in the
form of one-third of one warrant to purchase Common Stock, where each whole warrant entitles the holder to purchase one share of
Common Stock at an exercise price of $12.50 per share (the “Warrant Dividend”). The new warrants to be issued in the
Warrant Dividend will otherwise have the same terms and conditions as the existing Public Warrants without giving effect to the
Warrant Amendment. Under the Agreement, Axar has agreed to waive its right to receive the Cash Dividend and the Warrant Dividend
with respect to the founder shares transferred to it and any rights or adjustments to its private placement warrants under the
Warrant Agreement in respect of the Cash Dividend and Warrant Dividend.
The Agreement provides
that, at the Closing, Axar will execute an insider letter with the Company in substantially the form as was entered into by AR
Capital and the Company’s current directors and officers in connection with the IPO. Pursuant thereto, Axar will be liable
to the Company if and to the extent any claims by a vendor for services rendered (other than the Company’s independent public
accountants) or products sold to the Company, or a prospective target business with which the Company has discussed entering into
a transaction agreement, reduce the amount of funds in the Trust Account, except as to (x) any claims by a third party who has
executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account and (y) any
claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the “Securities Act”). At the Closing, the Company’s current management,
other than its independent directors and its chief investment officer, will execute amendments to their respective insider letters
with the Company terminating such agreements.
In addition, the founder
shares to be transferred to Axar at the Closing will continue to be subject to the securities escrow agreement that was entered
among the Company, the initial holders of the founder shares and Continental Stock Transfer & Trust Company, as escrow agent,
in connection with the IPO. At the Closing, AR Capital will also (i) assign to Axar its rights and obligations under the registration
rights agreement that AR Capital entered into with the Company in connection with the IPO, which provides for certain registration
rights in respect of the founder shares and private placement warrants to be transferred to Axar under the Agreement, and (ii)
enter into a termination of the compensation reimbursement agreement with the Company, providing for the termination, effective
as of the Closing, of the compensation reimbursement agreement between AR Capital and the Company and acknowledgement by AR Capital
that all amounts payable thereunder are forgiven and fully discharged as of the Closing.
The Agreement includes
customary representations and warranties made by the parties for transactions of this nature. The parties to the Agreement have
also agreed to customary indemnification obligations following the Closing in respect of breaches of representations, warranties,
covenants and other losses or claims specified in the Agreement and releases of certain pre-Closing claims.
The foregoing summary
of the Agreement is qualified in its entirety by reference to the text of the Agreement, which is attached as Exhibit 2.1 hereto
and incorporated herein by reference.
Amendment to Underwriting Agreement
On September 16, 2016,
the Company and Citigroup Global Markets Inc., the representative of the underwriters of the IPO (the “underwriters”),
entered into an amendment to the underwriting agreement for the IPO (the “Amendment”) pursuant to which the underwriters
have agreed to adjust the deferred underwriting discount payable upon the consummation of a Business Combination to be equal to
2.4% of the amount held in the Trust Account immediately after giving effect to all Extension Redemptions and the Cash Dividend,
if any.
The foregoing summary
of the Amendment is qualified in its entirety by reference to the text of the Amendment, which is attached as Exhibit 10.1 hereto
and incorporated herein by reference.