Document:

Second Amended and Restated Sub-Advisory Agreement

 Exhibit 10.4 

 
 Second Amended and Restated 

Sub-advisory Agreement 

between 

American Realty Capital II Advisors, LLC 

and 
 Phillips
Edison NTR LLC 
 September 17, 2010 

 Table of Contents 

 
  

			
	 	  	Page
	 Article 1 – Definitions
	  	1
	 Article 2 – Appointment
	  	3
	 Article 3 – Duties of the Sub-advisor
	  	3
	 Article 4 – Authority and Certain Activities of Sub-advisor
	  	3
	 Article 5 – Assignment of Payments
	  	4
	 5.1 Acquisition Fees
	  	4
	 5.2 Asset Management Fee
	  	4
	 5.3 Disposition Fees
	  	4
	 5.4 Financing Fee
	  	4
	 5.5 Subordinated Share of Cash Flows
	  	5
	 5.6 Subordinated Incentive Fee
	  	5
	 5.7 Expense Reimbursements
	  	5
	 Article 6 – Allocation of Expense Reimbursements
	  	5
	 6.1 Organization and Offering Expense Reimbursements
	  	5
	 6.2 All Other Expense Reimbursements
	  	6
	 Article 7 – Voting Agreements
	  	6
	 7.1 Election of Directors
	  	6
	 7.2 Other Voting of Shares
	  	7
	 7.3 Major Decisions
	  	7
	 Article 8 – Relationship Of Advisor And Company; Other Activities Of The Advisor
	  	8
	 8.1 Relationship
	  	8
	 8.2 Time Commitment
	  	9
	 8.3 Advisor and Sub-advisor Meetings
	  	9
	 8.4 Investment Opportunities and Allocation
	  	9
	 8.5 Prospectus Guidance
	  	11
	 Article 9 – Dealer Manager
	  	11
	 Article 10 – The Phillips Edison and ARC Names
	  	11
	 Article 11 – Other Agreements
	  	11
	 11.1 Approval and Funding of Company Organization and Offering Costs
	  	11
	 11.2 Property Level Agreements
	  	13
	 11.3 Advisor, Advisory Agreement and Dealings with Company
	  	13
	 11.4 Initial Capital Contribution
	  	13
	 Article 12 – Certain Transfers
	  	14
	 12.1 Transfers
	  	14
	 12.2 Prohibited Transfers
	  	14
	 Article 13 – Representations, Warranties, and Agreements
	  	15
	 Article 14 – Term And Termination of the Agreement
	  	18
	 14.1 Term
	  	18
	 14.2 Termination
	  	18
	 14.3 Survival upon Termination
	  	19
	 14.4 Payments on Termination and Survival of Certain Rights and Obligations
	  	19

  

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	 Article 15 – Assignment
	  	19
	 Article 16 – Indemnification And Limitation Of Liability
	  	19
	 Article 17 – Miscellaneous
	  	20
	 17.1 Notices
	  	20
	 17.2 Modification
	  	21
	 17.3 Severability
	  	21
	 17.4 Construction
	  	21
	 17.5 Entire Agreement
	  	21
	 17.6 Waiver
	  	21
	 17.7 Gender
	  	21
	 17.8 Titles Not to Affect Interpretation
	  	21
	 17.9 Counterparts
	  	22

  

 ii 

 Second Amended and Restated Sub-advisory Agreement 

This Second Amended and Restated Sub-advisory Agreement, dated as of September 17, 2010 (this “Agreement”), is
between, American Realty Capital II Advisors, LLC, a Delaware limited liability company (the “Advisor”) and Phillips Edison NTR LLC (formerly known as Phillips Edison & Company SubAdvisor LLC), a Delaware limited liability
company (the “Sub-advisor”). 
 W I T N E S S E T H 

WHEREAS, the parties entered into the Sub-advisory Agreement on January 11, 2010; 

WHEREAS, the parties entered into the First Amended and Restated Sub-advisory Agreement on July 1, 2010 (the “Amended
Agreement”); 
 WHEREAS, the parties have agreed to make certain amendments and desire to amend and restate the Amended
Agreement; 
 WHEREAS, Phillips Edison – ARC Shopping Center REIT Inc., a Maryland corporation (the
“Company”) has appointed Advisor as its advisor pursuant to the Fourth Amended and Restated Advisory Agreement between the Company and the Advisor, dated as of even date herewith (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 Board of Directors of the Company, all as provided herein; and 

WHEREAS, the Sub-advisor is willing to undertake such duties and responsibilities, subject to the supervision of the Board of Directors
of the Company, on the terms and subject to the conditions hereinafter set forth. 
 NOW, THEREFORE, in consideration of the
foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree that the Amended Agreement hereby is amended and restated to read in its entirety 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. 
  

 1 

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

 “Advisor” has the meaning set forth at the head of this Agreement. 

“Advisory Agreement” has the meaning set forth in the recitals. 

“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 Phillips Edison Limited Partnership shall be an Affiliate of the Advisor. 

“Agreement” has the meaning set forth in the preamble. 

“Company” has the meaning set forth in the recitals hereto. 

“Dealer Manager” means Realty Capital Services, LLC, a Delaware limited liability company, in its capacity as dealer
manager pursuant to the Dealer Manager Agreement. 
 “Dealer Manager Agreement” means that dealer manager
agreement, dated as of even date herewith, between the Company and the Dealer Manager, providing for the distribution of the Shares. 

“Effective Date” means the initial Effective Date (as defined in the Dealer Manager Agreement). 

“Fund IV” means Phillips Edison Shopping Center Fund IV, L.P. 

“Immediate Family Member” means, with respect to a Key Person: (i) any of such Key Person’s parents and
siblings, spouse and descendants and any of the spouses of such descendants (collectively, the “Individual Group”); (ii) any trust, the beneficiaries of which consist exclusively of one or more members of the Individual Group
(collectively, the “Family Trusts”); and (iii) any entity which is controlled by, directly or indirectly, one or more members of the Individual Group and/or one or more of the Family Trusts. 

“Key Person” means (i) with respect to the Advisor, each of William Kahane and Nicholas Schorsch and his heirs,
legal representatives and executors, and (ii) with respect to the Sub-advisor, each of Michael C. Phillips and Jeffrey S. Edison and his heirs, legal representatives and executors. 

“Offering Period” has the meaning set forth in the Dealer Manager Agreement. 

“Party” or “Parties” refer to the Advisor or the Sub-advisor or both, as the case may be. 

 

 2 

 “Prospectus” has the meaning set forth in the Dealer Manager Agreement.

 “Reference Date” means the first date the Company breaks escrow on stockholder subscriptions in the Initial
Public Offering. 
 “Sub-advisor” has the meaning set forth at the head of this Agreement. 

“Transfer Restriction Period” means, with respect to the Sub-advisor, the Offering Period plus 12 months, and with
respect to the Advisor, the Offering Period plus six months. 
 Article 2 

Appointment 

The Advisor, pursuant to its authority to delegate all of its rights and powers to manage and control the business and affairs of the
Company to the Sub-advisor pursuant to Section 4.1 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. The Advisor delegates, and the
Sub-advisor agrees to perform, all the duties of the Advisor set forth in 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 managing, operating, directing and supervising the operations and
administration of the Company and its assets. Consistent with Article 2 hereof, the Sub-advisor undertakes to use commercially reasonable efforts to present to the Company potential investment opportunities and to provide the Company with a
continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement and the Advisory
Agreement, including Article 4 of the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws 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 or third party, perform the duties set forth in Article 3 of the Advisory Agreement (a copy of which is attached hereto as Appendix A), which duties are incorporated herein by reference as if fully
set forth herein. 
  

 3 

 Article 4 

Authority and Certain Activities of Sub-advisor 

The Sub-advisor shall have the authority set forth in Article 4 of the Advisory Agreement, shall have the authority to establish and
maintain bank accounts as set forth in Article 5 of the Advisory Agreement, shall maintain books and records for the Company as set forth in Article 6 of the Advisory Agreement, and shall abide by the limitations of Article 7 of the Advisory
Agreement, all of which (i.e., Articles 4 through 7 of the Advisory Agreement) are incorporated herein by reference as if fully set forth herein. 

Article 5 

Assignment of Payments 

As compensation for the services provided pursuant to this Agreement, Advisor hereby assigns payments as follows: 

 

	5.1	Acquisition Fees. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Acquisition Fees payable pursuant to
Section 8.1 of the Advisory Agreement. The Advisor will submit an invoice to the Company, which the Sub-advisor shall prepare, following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition
Fee. The portion of the Acquisition Fee payable to each of the Advisor and Sub-advisor then will be paid by the Company at the closing of the applicable transaction upon receipt of the invoice by the Company as provided in the Advisory Agreement.

  

	5.2	Asset Management Fee. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Asset Management Fees payable pursuant to the
Advisory Agreement. The Advisor will submit a quarterly invoice to the Company, which the Sub-advisor shall prepare and which shall include a computation of the Asset Management Fee for the applicable period. The Asset Management Fee shall be
payable by the Company as provided in the Advisory Agreement. 

  

	5.3	Disposition Fees. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Disposition Fees payable pursuant to the Advisory
Agreement; provided, however, that if the receipt by the Advisor of all or any part of a Disposition Fee for any particular transaction would violate applicable law, and if applicable law would permit payment thereof to the
Sub-advisor, then the assignment shall be deemed to be for the Disposition Fee (or part thereof) associated with that particular transaction that would violate applicable law if received by the Advisor. The portion of the Disposition Fee payable to
each of the Advisor and the Sub-advisor shall be paid by the Company as provided in the Advisory Agreement. 

  

	5.4	 Financing Fee. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Financing Fees payable to the
Advisor pursuant to the Advisory Agreement; provided, however, that if the receipt by the Advisor 

 

 4 

	 	 
of a Financing Fee for any particular transaction would violate applicable law, and if applicable law would permit payment thereof to the Sub-advisor, then the assignment shall be deemed to be
for the Financing Fee (or part thereof) associated with that particular transaction that would violate applicable law if received by the Advisor. 

  

	5.5	Subordinated Share of Cash Flows. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Subordinated Share of Cash Flows
payable pursuant to the Advisory Agreement. 

  

	5.6	Subordinated Incentive Fee. The Advisor hereby assigns its right to receive direct payment from the Company of 85% of all Subordinated Incentive Fees payable
pursuant to the Advisory Agreement, in whatever form payable by the Company (i.e., cash, Shares or a promissory note). 

  

	5.7	Expense Reimbursements. Subject to Article 6 of this Agreement and Article 9 of the Advisory Agreement, the Advisor hereby assigns its right to receive
direct payment from the Company of expense reimbursements the Sub-advisor incurs on behalf of the Company or in connection with the services the Sub-advisor provides to the Company pursuant to this Agreement. 

Article 6 

Allocation of Expense Reimbursements 
  

	6.1	Organization and Offering Expense Reimbursements. All Organization and Offering Expense reimbursements will be apportioned between the Advisor and Sub-advisor
pro rata based on the amount of such Organization and Offering Expenses reimbursements due each as of the date of the reimbursement. 

  

	 	(A)	It is understood and agreed that the Company shall be under no obligation to reimburse the Advisor or Sub-advisor to the extent such reimbursement would cause the total
amount spent by the Company on Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees as set forth in detailed and itemized invoices) to exceed 1.5% of Gross
Proceeds raised in a Public Offering as of the termination of such Public Offering; and 

  

	 	(B)	Within 60 days after the end of the month in which a Public Offering terminates, the Sub-advisor shall reimburse the Advisor, to the extent the Advisor was not
reimbursed or had an obligation to reimburse the Company (and did so reimburse the Company), for Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees as set
forth in detailed and itemized invoices) exceeding 1.5% of Gross Proceeds raised in a Public Offering. 

  

 5 

	 	(C)	The Company shall not reimburse the Advisor or Sub-advisor for any Organization and Offering Expenses that the Conflicts Committee determines are not fair and
commercially reasonable to the Company. 

  

	 	(D)	The Company shall not make any reimbursement for any of the following Organization and Offering Expenses incurred by the Dealer Manager that are to be paid out of the
Dealer Manager’s fee: 

  

	 	(1)	participating broker-dealer expense reimbursements (including meals with financial advisors and participating broker-dealer client seminars); 

 

	 	(2)	sales seminars sponsored by participating broker-dealers; 

  

	 	(3)	promotional items; 

  

	 	(4)	marketing support; 

  

	 	(5)	expenses in connection with bona fide training and educational meetings; 

  

	 	(6)	wholesaling commissions, wholesaling salaries and wholesaling expense reimbursements (including travel, meals and lodging in connection with the Offering);

  

	 	(7)	occasional meals and entertainment expenses of participating broker-dealers; and 

 

	 	(8)	legal fees and expenses of the Dealer Manager associated with FINRA-related filings or the drafting and review of any dealer manager agreements, participating
broker-dealer agreements and due diligence agreements. 

  

	6.2	All Other Expense Reimbursements. All other expense reimbursements will be apportioned between the Advisor and Sub-advisor pro rata based on the amount of
such expense reimbursements due each as of the date of the reimbursement. 

 Article 7 

Voting Agreements 
  

	7.1	Election of Directors. The Advisor and Sub-advisor each agrees, with respect to any Shares now or hereinafter owned by it, to vote such Shares in favor of the
Advisor’s nominee for the Board and the Sub-advisor’s nominees for the Board. As of the date hereof, the Advisor’s nominee for the Board is William M. Kahane, and the Sub-advisor’s nominees are Jeffrey S. Edison and Michael C.
Phillips. 

  

 6 

	7.2	Other Voting of Shares. The Advisor and Sub-advisor each agrees that, with respect to any Shares now or hereinafter owned by it, neither will vote or consent on
matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor; (ii) the removal of the Sub-advisor or any Affiliate of the Sub-advisor; (iii) any transaction between the
Company and the Advisor or any of its Affiliates; or (iv) any transaction between the Company and the Sub-advisor or any of its Affiliates. This voting restriction shall survive until such time that the Advisor is no longer serving as such.

  

	7.3	Major Decisions. 

  

	 	(A)	Subject to Sections 7.3(C) and 7.3(D) with respect to the Company, all major decisions of the Company set forth below in clauses (A)(1) through
(A)(6) (“Major Decisions”) shall be subject to the Company’s Articles of Incorporation and joint approval by the Advisor and Sub-advisor. For the avoidance of doubt, Major Decisions specifically exclude any decisions
regarding the day-to-day operations of the Company, the decision-making authority for which has been delegated to the Sub-advisor pursuant to this Agreement. Major Decisions shall consist of the following: 

 

	 	(1)	Decisions to recommend to the Board of Directors that the Company acquire or sell Properties, Loans and other Permitted Investments; 

 

	 	(2)	Retention of investment banks for the Company; 

  

	 	(3)	Marketing methods for the Company’s sale of Shares; 

  

	 	(4)	Extending, initiating or terminating the Initial Public Offering or any subsequent Offering of the Shares; 

 

	 	(5)	Issuing press releases involving the major decisions of the Company or the Advisor or Sub-advisor or their Affiliates with respect to the business or operations of the
Company; provided, that the Sub-advisor need not obtain consent to any press releases regarding acquisitions or dispositions of Properties, Loans or other Permitted Investments; and provided further, however, that
notwithstanding the immediately preceding proviso, any mention of the Advisor or its Affiliates in such press releases regarding acquisitions or dispositions shall be pre-approved by the Advisor; and 

 

	 	(6)	Merging or otherwise engaging in any change of control transaction for the Company. 

 

	 	(B)	 Notwithstanding anything in this Agreement to the contrary, if the Parties do not agree to any action constituting a Major Decision that is described
in any of clauses (A)(2) through (A)(6) above and that has been proposed 

  

 7 

	 	 
by either Party, the Parties shall meet (in person or by phone) to discuss the issue in dispute in good faith over the five-business day period beginning with the delivery of notice of the
proposed action to the other Party. 

  

	 	(C)	Notwithstanding anything in this Agreement to the contrary, with respect to Major Decisions described in clause (A)(1) above (but subject to
Section 7.3(D)), (1) joint approval shall not be required, (2) the Sub-advisor and the Advisor shall discuss the proposed transaction (either in person or by phone) prior to either Party making any recommendation of the
proposed transaction to the Board of Directors, and (3) the Sub-Advisor and the Advisor shall each give due consideration to the opinions of the other Party. Ordinarily, such discussions shall begin at least five business days before a
recommendation is made to the Board of Directors; however, if in the sole discretion of the Sub-advisor it is in the best interest of the Company to make a recommendation to the Board of Directors more promptly, then the Sub-advisor may do so. In
the event the Parties do not agree as to whether to recommend the proposed transaction to the Board of Directors, the Sub-advisor’s decision shall govern. 

 

	 	(D)	Notwithstanding the provisions of this Section 7.3 or any other provision in this Agreement to the contrary, in all events, including Major Decisions, the
Company will be managed under the direction of the Board of Directors. 

  

	 	(E)	Notwithstanding anything in this Agreement to the contrary (but subject to Section 7.3(D)), the Sub-advisor shall have sole authority to act on behalf of
the Company regarding amending the Advisory Agreement. 

 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. Except as set forth in Section 8.4, 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. The Sub-advisor may, with respect to any investment in which the Company is a 

  

 8 

	 	 
participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service. Specifically, it is contemplated that the Company may
enter into Joint Ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or other similar co-investment arrangements, the Advisor or the Sub-advisor may be engaged to
provide advice and service to such Persons, in which case, the Advisor or the Sub-advisor, as applicable, will earn fees for rendering such advice and service. 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 (it being understood and agreed that the conditions and circumstances referred to in the second paragraph of Section 8.4(A) are deemed to have been disclosed to the Board for purposes of this Section 8.1).

  

	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. Advisor and Sub-advisor shall cause their respective principals to meet (in person or by phone) with representatives of each other upon the request of either Party. 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	Investment Opportunities and Allocation. 

  

	 	(A)	 The Sub-advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is
consistent with the investment policies and objectives of the Company. So long as the Advisor is acting in its capacity as advisor under the Advisory Agreement, each of the Advisor and the Sub-advisor will not (and will cause its Affiliates to not)
(i) pursue any opportunity to acquire any Property, Loan or other Permitted Investment that fits within the Company’s strategy, or (ii) offer such Property, Loan or other Permitted Investment to a third party, in each case unless and
until such opportunity 

  

 9 

	 	 
is first presented to the Company. The Company shall have 30 days from the date of its receipt of a complete written offering package relating to such opportunity, customary in scope and content,
to notify the Advisor or the Sub-advisor, as the case may be, of the Company’s decision as to whether or not to pursue such opportunity. If the Company fails so to notify the Advisor or the Sub-advisor, as the case may be, within such 30-day
period, the Company shall be deemed to have passed on such opportunity. If the Company passes on such opportunity, then the Advisor, Sub-advisor or such Affiliate, as the case may be, may acquire the subject investment or offer the subject
investment to a third party for a period of 180 days, in each case on terms and conditions (including price) that are not materially different from the terms and conditions set forth in the offering package to the Company. If at the expiration of
such 180-day period, such opportunity remains available, then the provisions of this Section 8.4(A) shall once again apply to such opportunity. 

Notwithstanding the preceding, however, the Advisor or any Affiliate of the Advisor shall be permitted to pursue any opportunity or to
offer any opportunity to a third party in respect of (1) any net leased retail, office and industrial properties or other property consistent with the investment policies of American Reality Capital Trust, Inc., (2) any commercial real
estate or other real estate investments that relate to office, retail, multi-family residential, industrial and hotel property types, located primarily in the New York metropolitan area or other property consistent with the investment policies of
American Realty Capital New York Recovery REIT, Inc., or (3) any investments to be made by a contemplated non-traded REIT (the “Identified REIT”) that the Advisor or any of its Affiliates has described as (a) intending to
invest primarily in “power center” real estate developments, (b) being sponsored or co-sponsored by ARC (or one of its Affiliates), the acquisition services for which will be provided by an international commercial and residential
real estate developer and manager (or one of its Affiliates), and (c) being the subject of an executed letter of intent or term sheet between the Advisor (or one of its Affiliates) and such international commercial and residential real estate
developer and manager (or one of its Affiliates), and which has or will have as its publicly disclosed (and not subsequently revised or required to be revised under applicable securities laws) investment objectives to have less than 20% of its
assets (measured by purchase price) in anchored shopping centers with purchase prices of less than $20,000,000 per property (determined once the proceeds of the offering have been fully invested). 

 

	 	(B)	 If Fund IV, Phillips Edison Shopping Center Fund III, L.P., Phillips Edison Strategic Investment Fund or Phillips Edison Limited Partnership presents
an investment opportunity to the Company and discloses in writing that such entity is attempting to seek properties to qualify for tax deferred treatment under Section 1031 of the Code, then if the Company

  

 10 

	 	 
does not respond within 21 days, the Company shall be deemed to have passed on such investment opportunity. For clarification, developing single tenant retail or commercial properties shall not
be considered to fit within the Company’s strategy. 

  

	 	(C)	Notwithstanding the preceding, the restrictions in clauses (A) and (B) will cease to be effective upon termination of the Offering Period or, if
later, the time when all equity raised during the Offering Period has been substantially invested or committed to investment. 

  

	 	(D)	Except as provided in this Section 8.4, none of the Advisor and the Sub-advisor nor any of their respective Affiliates shall be obligated generally to
present any particular investment opportunity to the Company. 

  

	8.5	Prospectus Guidance. 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 

Dealer Manager 

The Parties agree to use their best efforts to cause the Company, subject to approval by the Company’s Board of Directors, to enter
into the Dealer Manager Agreement with the Dealer Manager on terms consistent with the “Plan of Distribution” section of the Prospectus. 

Article 10 

The Phillips Edison and ARC Names 

The Parties acknowledge and reaffirm the rights and obligations set forth with respect to their proprietary interests in their respective
names as set forth in Article 12 of the Advisory Agreement. 
 Article 11 

Other Agreements 
  

	11.1	Approval and Funding of Certain Organization and Offering Costs. 

  

	 	(A)	 On or prior to the date hereof, the Advisor has prepared an initial Organization and Offering Expense budget for the Advisor and its Affiliates
(including Realty Capital Services, LLC in its capacity as Dealer Manager) for the period ending on the Effective Date, a copy of which is attached as Schedule I hereto (the “Initial O&O Budget”) and the Sub-advisor has
reviewed and approved the Initial O&O Budget. On or before 

  

 11 

	 	 
the Effective Date, the Advisor or its Affiliates will prepare and present to the Sub-advisor for its review and approval the proposed Organization and Offering Expense budget for the one-year
period following the Effective Date for the Advisor and its Affiliates (including Realty Capital Services, LLC in its capacity as Dealer Manager). Thereafter, on or before the 30th day preceding the annual anniversary of the Effective Date, the
Advisor or its Affiliates will prepare and present to the Sub-advisor for its review and approval the proposed Organization and Offering Expense budget for the following one-year period for the Advisor and its Affiliates (including Realty Capital
Services, LLC in its capacity as Dealer Manager). Each of (1) the Initial O&O Budget, and (2) each such other Organization and Offering Expense budget for the time period specified therein once approved by the Sub-advisor, shall be
referred to herein as an “Approved O&O Budget”. It is understood and agreed that neither the Initial O&O Budget nor any other Approved O&O Budget shall cover or refer to selling commissions or the Dealer Manager
Fee payable pursuant to the Dealer Manager Agreement. 

  

	 	(B)	Each Approved O&O Budget may contain contingencies for expenditure items anticipated in good faith by the Advisor and its Affiliates, but the precise amounts of
which are unknown at the time of preparation and submission thereof to the Sub-advisor for approval. Within 30 days after each proposed Organization and Offering Expense budget is submitted to it, the Sub-advisor shall notify the Advisor in writing
(1) that it approves the proposed budget or (2) of the revisions it reasonably believes should be made to such proposed budget. If the Sub-advisor fails to respond within such 30-day period, the Sub-advisor shall be deemed to have approved
the proposed budget and such proposed budget shall become the Approved O&O Budget for the time periods specified therein. If the Sub-advisor withholds its approval of any proposed budget, then the Parties shall negotiate a mutually acceptable
Organization and Offering Expense budget for the Advisor and its Affiliates (including Realty Capital Services, LLC in its capacity as Dealer Manager). For the avoidance of doubt, this Section 11.1(B) shall not apply to the Initial
O&O Budget. 

  

	 	(C)	Notwithstanding anything to the contrary contained herein or in any other agreement, the Advisor shall ensure that it and its Affiliates shall not make any expenditure
of Company funds or of funds for which reimbursement is sought from the Company or Sub-advisor, or commit to make any such expenditure, except as provided for in an Approved O&O Budget; provided, however, with respect to any line
item in an Approved O&O Budget, the Advisor and its Affiliates may incur up to 115% of the amount budgeted therefor; provided further, however, with respect to any line item in an Approved O&O Budget, the Advisor and its
Affiliates may incur in excess of 115% of the amount budgeted therefor with the approval of the Sub-advisor. 

  

 12 

	 	(D)	The Advisor and Sub-advisor have caused their Affiliates to fund $75,000 and $425,000, respectively, into their respective bank accounts, and Advisor and Sub-advisor
will bear the initial $500,000 of Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions) in the ratio of 15% to 85%, respectively. After such initial $500,000 of Organization and Offering Expenses have
been borne as aforesaid, Sub-advisor will fund 100% of all Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees set forth in detailed and itemized invoices).

  

	11.2	Property Level Agreements. The Parties agree to use their best efforts to cause the Company, subject to approval by the Company’s Board of Directors, to
enter into a Master Property Management, Leasing, and Construction Management Agreement with an Affiliate of the Sub-advisor consistent with the description of the same in the Prospectus. Advisor shall have the right to review and comment upon such
master agreement, and to approve such master agreement (such approval not to be unreasonably withheld), prior to submission to the Board. Advisor agrees that it shall have no right in the fees generated pursuant to such master agreement.

  

	11.3	Advisor, Advisory Agreement and Dealings with Company. 

  

	 	(A)	Advisor agrees to inform and make Sub-advisor a party to all negotiations between Advisor and the Company regarding any proposed amendment of the Advisory Agreement. No
amendment to the Advisory Agreement will be agreed upon or permitted if such amendment would impact the rights or obligations of the Sub-advisor without the Sub-advisor’s consent and signature. 

 

	 	(B)	Advisor agrees to allow Sub-advisor to present and recommend to the Company all investment opportunities recommended by Sub-advisor. 

 

	11.4	Initial Capital Contribution. Sub-advisor acknowledges that it contributed an amount equal to $200,000 to the capital of the Company on December 3, 2009.
Sub-advisor agrees to purchase or to cause an Affiliate to purchase, on a monthly basis, sufficient Shares sold in the Initial Public Offering during each month following the Reference Date such that the total Shares owned by Sub-advisor and its
Affiliates is at least equal to 0.1% of the Shares outstanding at the end of the immediately preceding month (ignoring for purposes of calculating the outstanding number of Shares at the end of a month any Shares issued after the Reference Date but
outside of the Initial Public Offering, such as Shares issued pursuant to an executive compensation plan or upon exchange of Partnership securities). The Shares to be purchased pursuant to this obligation shall be at a purchase price of $9.00 per
Share. 

  

 13 

 Article 12 

Certain Transfers 
  

	12.1	Transfers. The Parties have selected one another based on the experience and personnel of each other and their Affiliates. Accordingly, each Party agrees that it
is mutually desirable to restrict changes in ownership of each Party. Each Party agrees to amend, to the extent necessary, its governing documents to restrict transferability of any direct or indirect interest in such Party by such Party’s Key
Persons unless both Parties jointly agree as otherwise permitted by this Article 12; provided, however, that any transfer of an interest in either Party by any of such Party’s Key Persons, by any entity controlled by a Key
Person of such Party or by any Immediate Family Member of a Key Person of such Party shall be permitted without any approval so long as (i) the transferee of such interest is an Immediate Family Member of a Key Person of such Party, and
(ii) one or more of the Key Persons of such Party retain management and voting control over such interest held by such transferee at all times after the applicable transfer occurs. 

 

	12.2	Prohibited Transfers. 

  

	 	(A)	Except for Permitted Transfers and other transfers made in accordance with, and as permitted by, this Agreement, neither Party (1) will allow any direct or
indirect transfer of interests therein by its applicable Key Persons, and (2) will directly or indirectly transfer any part of its direct or indirect ownership interest in the Company (if any), whether in each such case voluntarily or by
foreclosure, assignment in lieu thereof or other enforcement of a pledge, hypothecation or collateral assignment without the prior approval of the other Party. 

 

	 	(B)	“Permitted Transfer” (for which no approval by the other Party shall be required) means either of the following: 

 

	 	(1)	any transfer of all or any portion of the direct or indirect interest in the Company held by a Party (if any) to any Affiliate of such Party; provided,
however, that in each such case the transferee executes an instrument agreeing to be bound by the provisions of this Agreement to the extent applicable to the transferor; and 

 

	 	(2)	 any transfer of all or any portion of the direct or indirect interest in a Party held, directly or indirectly, by such Party’s Key Persons or
Immediate Family Members; provided, however, that either (a) either or both of such Party’s Key Persons remain involved with the material decision-making and actions of such Party for the applicable Transfer Restriction
Period (for the sake of clarity, after the applicable Transfer Restriction Period, each Party is permitted to allow the effecting of a transfer of all or any portion of the direct or indirect interest in such Party without regard to the
continued 

  

 14 

	 	 
involvement of such Party’s Key Persons) or (b) in the case of the Advisor, the transfer occurs after the Offering Period and the applicable transferee agrees to cede any decisionmaking
and governance authority relating to the Company (including making Major Decisions) to the Sub-advisor. 

Article 13 

Representations, Warranties, and Agreements 
  

	13.1	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)	Such Party is not aware of any facts pertaining to such Party or its Affiliates that would cause such Party, or any of such Party’s Affiliates, to be unable to
discharge timely the obligations of such Party or its Affiliates under this Agreement or the obligations of the Company under any agreement to which any of them is a party; 

 

	 	(F)	 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 

 

 15 

	 	 
obligations and duties hereunder and such execution, delivery and performance shall not violate any other agreement to which such Party is bound; 

 

	 	(G)	Such Party recognizes that DLA Piper LLP (US) is representing and in the future may represent the Sub-advisor, its Affiliates and the Company with respect to matters in
this Agreement and on other unrelated matters, and acknowledges that it has been notified of this representation and that it has been suggested that it retain independent counsel in reviewing this Agreement and the terms agreed to herein. The
Advisor hereby waives all conflicts of interest regarding DLA Piper with respect thereto and hereby waives all rights to disqualify DLA Piper from representing the Sub-advisor, its Affiliates, and the Company in any matter at any time;

  

	 	(H)	Such Party recognizes that Proskauer Rose LLP is representing and in the future may represent the Advisor, the Dealer Manager, their Affiliates and the Company with
respect to matters in this Agreement and on other unrelated matters, and acknowledges that it has been notified of this representation and that it has been suggested that it retain independent counsel in reviewing this Agreement and the terms agreed
to herein. The Sub-Advisor hereby waives all conflicts of interest regarding Proskauer Rose LLP with respect thereto and hereby waives all rights to disqualify Proskauer Rose LLP from representing the Advisor, the Dealer Manager, their Affiliates
and the Company in any matter at any time; 

  

	 	(I)	Except as specifically provided in this Agreement, such Party is not relying upon the other Party, the Company or their respective Affiliates or advisors, in connection
with any of the matters referred to in this Agreement, including any projections, information, due diligence, representations or warranties (express or implied, oral or written), statements or other matters concerning the Company, the other Party,
or otherwise, and each Party hereby confirms that it has conducted an independent investigation of the facts regarding the same (or has chosen not to do so at such Party’s peril); 

 

	 	(J)	The Party is not acting as the representative or agent or in any other capacity, fiduciary or otherwise, on behalf of another Person in connection with the Company or
the other matters referred to in this Agreement; 

  

	 	(K)	Such Party is aware that the other Party and/or Affiliates of such other Party now and in the future shall be, and in the past have been, engaged in businesses which
are competitive with that of the Company. Each of the Parties hereby acknowledges and agrees that the Parties’ obligations with respect to all future activities which are in competition with the Company are as set forth in Article 8;

  

 16 

	 	(L)	Such Party is aware that compensation and reimbursements may be payable to Affiliates of the Parties by the Company, as addressed in this Agreement, the Advisory
Agreement and the Dealer Manager Agreement; 

  

	 	(M)	No Party is required to cause the controlling persons of such Party to devote any specific portion of their time to Company business other than as necessary to fulfill
such Parties’ obligations under this Agreement and the Advisory Agreement, as the case may be, and such controlling persons are expected to spend substantial amounts of their time on activities that are unrelated to the Company;

  

	 	(N)	Such Party understands that the other Party is relying on the accuracy of the representations set forth in this Article 13 in entering into this Agreement;

  

	 	(O)	Such Party has not granted to any third party rights that would be inconsistent with the rights granted to the other Party by this Agreement; 

 

	 	(P)	Such Party has all requisite licenses to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement; and

  

	 	(Q)	None of its principals has been convicted of any felony, or convicted of any misdemeanor involving moral turpitude (including fraud), or entered a plea of nolo
contendere in connection with any felony or any such misdemeanor. 

  

	13.2	The Sub-advisor hereby represents and warrants to, and agrees with, the Advisor as follows: 

 

	 	(A)	The staff and employees of the Sub-advisor and its Affiliates have the skills, knowledge of and expertise in property selection, acquisitions/development, financing,
asset and property management, and dispositions as to perform their respective duties and obligations hereunder; and 

  

	 	(B)	 The Sub-advisor is sophisticated in real estate and securities transactions, has been granted access to such financial and other material information
concerning the Company, the other Party and the other Party’s Affiliates, and their respective current and anticipated operations and such due diligence materials as it deems necessary or advisable, as it has requested or may require in
connection with its investment (including an advance of expenses that may be reimbursed) in the Company, is able, either directly or through its agents and representatives, to evaluate such information and any due diligence materials provided or
made available to it from time to time hereunder, and is able to bear the financial risk of loss presented by an investment in the Company, particularly in light of the risks that would

  

 17 

	 	 
be disclosed by a detailed analysis thereof (its access to which, to the full extent any Party has requested, hereby is confirmed by each Party); 

Article 14 

Term And Termination of the Agreement 
  

	14.1	Term. This Agreement shall have an initial term of one year from the date hereof and shall be 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. 

  

	14.2	Termination. Subject to last sentence of Section 14.1: 

  

	 	(A)	This Agreement may only be terminated (1) by the Advisor upon 60 days’ prior written notice by the Advisor to the Sub-advisor with approval of a majority of
the Conflicts Committee, or (2) by the Sub-advisor upon 60 days’ prior written notice by the Sub-advisor to the Advisor; 

  

	 	(B)	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; 

  

	 	(C)	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 any action or failure to act undertaken by such Person pertaining to or having a detrimental effect upon the ability of the Advisor or the Sub-advisor to perform 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; or 

 

	 	(D)	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; 

 

	 	(E)	 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,

  

 18 

	 	 
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; or 

  

	 	(F)	This Agreement may be terminated at any time within five years after the date hereof by the Advisor if both Michael C. Phillips and Jeffrey S. Edison cease to be
actively involved in the management of the Sub-advisor. 

  

	14.3	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, 10, 13, 14, 16, and 17 shall survive termination of
this Agreement. 

  

	14.4	Payments on Termination and Survival of Certain Rights and Obligations. After termination of this Agreement, the Sub-advisor shall have the rights to payment and
the responsibilities as set forth in Section 13.3 of the Advisory Agreement. 

 Article 15 

Assignment 

This Agreement may be assigned by the Sub-advisor (a) to an Affiliate with the consent of the Advisor, such consent not to be
unreasonably withheld or delayed, provided that such Affiliate remains at all times thereafter an Affiliate of Phillips Edison Limited Partnership or (b) in a manner meeting the conditions of Section 12.2(B)(2). This Agreement shall
not be assigned by the Advisor without the consent of the Sub-Advisor, except in the case of (i) an assignment by the Advisor to the Company whereby the Sub-advisor becomes the advisor to the Company or (ii) an assignment by the Advisor
meeting the conditions of Section 12.2(B)(2). 
 Article 16 

Indemnification And Limitation Of Liability 

The indemnification and limitation of liability provisions contained in the Advisory Agreement apply to both the Advisor and Sub-advisor.
Both Parties agree that neither will take any action inconsistent with such limitation of liability or indemnification provisions. 
  

 19 

 Article 17 

Miscellaneous 
  

	17.1	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 17.1), (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: 

American Realty Capital II Advisors, LLC 

405 Park Avenue 

New York, New York 10022 

Attention: Nicholas S. Schorsch 

   Jesse Galloway 

with a copy to (which shall not constitute Notice): 

Proskauer Rose LLP 

1585 Broadway 

New York, New York 10036 

Attention: Peter M. Fass, Esq. 

   James P. Gerkis, Esq. 

Telephone: (212) 969-3000 

Facsimile: (212) 969-2900 

To the Sub-advisor: 

Phillips Edison NTR LLC 

11501 Northlake Drive 

Cincinnati, OH 45249 

with a copy to (which shall not constitute Notice): 

DLA Piper LLP (US) 

4141 Parklake Drive , Suite 300 

Raleigh, North Carolina 27612 

Attention: Robert Bergdolt 

Telephone: (919) 786-2002 

Facsimile: (919) 786-2202 

Either Party may at any time give Notice in writing to the other Party of a change

  

 20 

 
in its address for the purposes of this Section 17.1. Each Notice shall be deemed given and effective upon receipt (or refusal of receipt). 

 

	17.2	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. 

  

	17.3	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. 

  

	17.4	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. 

  

	17.5	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. 

  

	17.6	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. 

  

	17.7	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. 

  

	17.8	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. 

  

 21 

	17.9	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.] 

 

 22 

 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year
first above written. 
  

			
	American Realty Capital II Advisors, LLC
		
	By:	 	/s/    WILLIAM KAHANE
		 	William Kahane, President
	
	 Phillips Edison NTR LLC

		
	By:	 	/s/    JOHN B. BESSEY
		 	 John B. Bessey, President

 
  
  

[Signature Page to Second Amended and Restated Sub-advisory Agreement between American Realty Capital II Advisors, LLC and Phillips
Edison NTR LLC] 

 Schedule I 

Initial O&O Budget 

Phillips Edison – ARC Shopping Center REIT, Inc. 

Estimated Issuer Costs 
 (Based on $1.5
billion offering) 
 Pre-Effective Period 
  

				
	 	  	Pre-Effective
	 	  	Period
	 SEC Registration Fee
	  	 	97,000
	 FINRA Filing Fee
	  	 	75,500
	 Legal – Issuer
	  	 	900,000
	 Legal – Managing BD (including FINRA)
	  	 	200,000
	 Printing
	  	 	150,000
	 Accounting
	  	 	115,000
	 Blue Sky Expenses
	  	 	50,000
	 Advertising and Sales Literature
	  	 	500,000
	 Miscellaneous – Fulfillment
	  		
	 Seminars
	  	 	250,000
	 Other 1 – Investor Relations and Transfer Agent and Fulfillment
	  	 	175,500
	 Other 2 – Other Overhead Costs
	  	 	202,000
	 Other 3 – Due Diligence
	  	 	200,000
		  	 	 
	 Total Issuer Costs for the Period
	  	$	2,915,000

 Appendix A 

Form of Advisory Agreement 

  
  

Fourth Amended and Restated 

Advisory Agreement 

between 

Phillips Edison – ARC Shopping Center REIT Inc. 

and 
 American
Realty Capital II Advisors, LLC 
 September 17, 2010 

 Table of Contents 

 

			
	 	  	Page
	 Article 1 – Definitions
	  	1
	 Article 2 – Appointment
	  	9
	 Article 3 – Duties Of The Advisor
	  	9
	 3.1 Organizational and Offering Services
	  	10
	 3.2 Acquisition Services
	  	10
	 3.3 Asset Management Services
	  	11
	 3.4 Stockholder Services
	  	14
	 3.5 Other Services
	  	14
	 Article 4 – Authority Of Advisor
	  	14
	 4.1 General
	  	14
	 4.2 Powers of the Advisor
	  	15
	 4.3 Approval by the Board
	  	15
	 4.4 Modification or Revocation of Authority of Advisor
	  	15
	 Article 5 – Bank Accounts
	  	15
	 Article 6 – Records And Financial Statements
	  	15
	 Article 7 – Limitation On Activities
	  	16
	 Article 8 – Fees
	  	16
	 8.1 Acquisition Fees
	  	16
	 8.2 Asset Management Fee
	  	17
	 8.3 Disposition Fees
	  	17
	 8.4 Financing Fee
	  	18
	 8.5 Subordinated Share of Cash Flows
	  	18
	 8.6 Subordinated Incentive Fee
	  	18
	 8.7 Other Services
	  	19
	 8.8 Changes to Fee Structure
	  	19
	 8.9 Internalization
	  	19
	 8.10 Limitation on Acquisition Fees, Acquisition Expenses and Financing Fees
	  	20
	 Article 9 – Expenses
	  	20
	 9.1 General
	  	20
	 9.2 Timing of and Limitations on Reimbursements
	  	22
	 Article 10 – Voting Agreement
	  	23
	 10.1 Election of Directors
	  	23
	 10.2 Other Voting of Shares
	  	24
	 Article 11 – Relationship Of Advisor And Company; Other Activities Of The Advisor
	  	24
	 11.1 Relationship
	  	24
	 11.2 Time Commitment
	  	24
	 11.3 Investment Opportunities and Allocation
	  	25
	 Article 12 – The Phillips Edison and ARC Names
	  	26
	 12.1 The American Realty Capital and ARC Names
	  	26
	 12.2 The Phillips Edison and PECO Names
	  	26
	 Article 13 – Term And Termination of the Agreement and Sub-advisory Agreement
	  	27

  

 i 

			
	 13.1 Term
	  	27
	 13.2 Termination by Either Party
	  	27
	 13.3 Payments on Termination and Survival of Certain Rights and Obligations
	  	28
	 Article 14 – Assignment
	  	29
	 14.1 Assignment of Agreement
	  	29
	 14.2 Assignment of Payments
	  	29
	 Article 15 – Indemnification And Limitation Of Liability
	  	30
	 15.1 Indemnification
	  	30
	 15.2 Limitation on Indemnification
	  	30
	 15.3 Limitation on Payment of Expenses
	  	31
	 Article 16 – Miscellaneous
	  	31
	 16.1 Notices
	  	31
	 16.2 Modification
	  	32
	 16.3 Severability
	  	33
	 16.4 Construction
	  	33
	 16.5 Entire Agreement
	  	33
	 16.6 Waiver
	  	33
	 16.7 Gender
	  	33
	 16.8 Titles Not to Affect Interpretation
	  	33
	 16.9 Third Party Beneficiary
	  	33
	 16.10 Counterparts
	  	33
	 16.11 Restricted Stock
	  	34

  

 ii 

 Fourth Amended and Restated Advisory Agreement 

This Fourth Amended and Restated Advisory Agreement, dated as of September 17, 2010 (this “Agreement”), is between
Phillips Edison – ARC Shopping Center REIT Inc., a Maryland corporation (the “Company”), and American Realty Capital II Advisors, LLC, a Delaware limited liability company (the “Advisor”). 

W I T N E S S E T H 

WHEREAS, the parties entered into the Advisory Agreement on January 11, 2010; 

WHEREAS, the parties entered into the Amended and Restated Advisory Agreement on March 1, 2010; 

WHEREAS, the parties entered into the Second Amended and Restated Advisory Agreement on April 9, 2010; 

WHEREAS, the parties entered into the Third Amended and Restated Advisory Agreement on July 1, 2010 (the “Amended
Agreement”); 
 WHEREAS, the parties have agreed to make certain amendments and desire to amend and restate the Amended
Agreement; 
 WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice,
assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the Board of Directors of the Company, all as
provided herein; and 
 WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the
Board of Directors of the Company, on the terms and subject to the conditions hereinafter set forth. 
 NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree that the Amended Agreement hereby is amended and restated to read in its entirety as follows: 

Article 1 

Definitions 

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

“Acquisition Expenses” means any and all expenses, excluding the Acquisition Fees, incurred by the Company, the Advisor
or any Affiliate of either in connection with 
  

 1 

 
the consideration, investigation, selection, evaluation, acquisition or development of any Property, Loan or other Permitted Investment, whether or not acquired or originated, as applicable,
including legal fees and expenses, travel and communications expenses, brokerage fees, costs of appraisals, nonrefundable option payments on Properties, Loans or other Permitted Investments not acquired, accounting fees and expenses, title insurance
premiums and the costs of performing due diligence. 
 “Acquisition Fees” means (i) the fees payable to
the Advisor pursuant to Section 8.1, and (ii) all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property, Loan or other Permitted
Investment or the purchase, development or construction of any Property by the Company. Included in clause (ii) above shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee,
loan fees or points or any fee of a similar nature, however designated. Excluded in clause (ii) above shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor or Sub-advisor in connection with the
actual development and construction of a Property. 
 “Advisor” has the meaning set forth at the head of this
Agreement. 
 “Affiliate” means, with respect to any Person, any of the following: (i) any other Person
directly or indirectly controlling, controlled by, or under common control with such Person; (ii) any other Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of
such Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any other Person 10% or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such Person; and (v) any executive officer, director, trustee, or general partner of such Person. An entity shall not be deemed to control or be under common control with an Advisor- or
Sub-advisor-sponsored program unless (A) the entity owns 10% or more of the voting equity interests of such program, or (B) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of
the entity. The term “Affiliated” shall have a meaning correlative thereto. 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 Phillips Edison & Company shall be an Affiliate of the Advisor. 

“Appraised Value” means the value according to an appraisal made by an Independent Appraiser. 

“Articles of Incorporation” means the Articles of Incorporation of the Company under Title 2 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended from time to time. 
 “Asset Management Fee”
shall have the meaning set forth in Section 8.2. 
  

 2 

 “Average Invested Assets” means, for a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during such specified period. 
 “Board of
Directors” or “Board” means the persons holding such office, as of any particular time, under the Articles of Incorporation of the Company, whether they be the Directors named therein or additional or successor Directors.

 “Bylaws” means the bylaws of the Company, as amended from time to time. 

“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or
other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith). 

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company: (i) from the sale, exchange
or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith; (ii) from the prepayment, maturity, workout or other settlement of any Loan or Permitted Investment or portion
thereof after deduction of all expenses incurred in connection therewith; and (iii) from regular principal payments on any Loan (or to the extent applicable, any Permitted Investment). In the case of a transaction described in
clause (i)(C) of the definition of “Sale” and clause (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from
the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings. 
 “Cash from
Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings. 

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

 “Company” means Phillips Edison – ARC Shopping Center REIT Inc., a corporation organized under the laws
of the State of Maryland. 
 “Competitive Real Estate Commission” means a real estate or brokerage commission
for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property. 

“Conflicts Committee” shall have the meaning set forth in the Company’s Articles of Incorporation. 

 

 3 

 “Construction Fee” means a fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property. 

“Contract Sales Price” means the total consideration received by the Company for the sale of a Property, Loan or other
Permitted Investment. 
 “Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans
and Permitted Investments held by the Company, calculated each month on an ongoing basis, and calculated as follows for each Loan or Permitted Investment: the lesser of (i) the amount actually paid or allocated to acquire or fund the Loan or
Permitted Investment (exclusive of any fees payable to the Advisor or the Sub-advisor or any their Affiliates in connection therewith, but inclusive of other expenses related thereto and the amount of any debt associated with or used to acquire or
fund such Loan or Permitted Investment) and (ii) the outstanding principal amount of such Loan or Permitted Investment, as of the time of calculation. With respect to any Loan or Permitted Investment held by the Company through a Joint Venture
or partnership of which it is, directly or indirectly, a co-venturer, such amount shall be the Company’s proportionate share thereof. 

“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or
indirectly, by the Company, the amount actually paid or allocated to the purchase, development, construction or improvement of Properties (exclusive of any fees payable to the Advisor or the Sub-advisor or any their Affiliates in connection
therewith, but inclusive of other expenses related thereto), plus the amount of any outstanding debt attributable to such Properties and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the
Partnership is, directly or indirectly, a co-venturer or partner, the portion of the amount actually paid or allocated to the purchase, development, construction or improvement of Properties (exclusive of any fees payable to the Advisor or the
Sub-advisor or any their Affiliates in connection therewith, but inclusive of other expenses related thereto), plus the amount of any outstanding debt associated with such Properties that is attributable to the Company’s investment in the Joint
Venture or partnership. 
 “Dealer Manager” means (i) Realty Capital Securities, LLC, a Delaware limited
liability company, or (ii) any successor dealer manager to the Company. 
 “Development Fee” means a fee
for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date. 

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

“Disposition Fee” shall have the meaning set forth in Section 8.3. 

 

 4 

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

“Financing Fee” shall have the meaning set forth in Section 8.4. 

“GAAP” means accounting principles generally accepted in the United States. 

“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an
Offering, without deduction for Organization and Offering Expenses. 
 “include,” “included,”
“including” and “such as” are to be construed as if followed by the phrase “without limitation.” 

“Independent Appraiser” means a person with no material current or prior business or personal relationship with the
Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board.
Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (“M.A.I.”) or the Society of Real Estate Appraisers (“S.R.E.A.”) shall be conclusive evidence of such
qualification. 
 “Initial Public Offering” means the initial public offering of Shares registered on the
Registration Statement pursuant to the Securities Act of 1933, as amended. 
 “Invested Capital” means the
amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by any amounts paid by the Company to repurchase or redeem Shares pursuant to the Company’s plan for redemption of Shares or
otherwise. 
 “Joint Venture” means any joint venture, limited liability company or other Affiliate of the
Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments. 

“Listed” or “Listing” shall have the meaning set forth in the Company’s Articles of Incorporation.

 “Loans” means mortgage loans and other types of debt financing investments made by the Company or the
Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, and including mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans,
loans on leasehold interests, and participations in such loans. 
 “Management Fee Base”
means, for a specified period, the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments computed by taking the average of such sums at the end of each month during such specified period. 

 

 5 

 “NASAA Guidelines” means the NASAA Statement of Policy Regarding Real
Estate Investment Trusts as in effect on the date hereof. 
 “Net Income” means, for any period, the total
revenues of the Company applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, that Net Income
shall exclude the gain from the sale of the Company’s assets. 
 “Offering” means any offering of Shares
that is registered with the SEC pursuant to the Securities Act of 1933, as amended, excluding Shares offered under any employee benefit plan. 

“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all
principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and
other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliance with Section IV.F. of the
NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on resale of property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property
(other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. 

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under
GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit,
accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization, bad loan reserves, impairments of value, and mark-to-market losses, (v) incentive fees paid in compliance with Section IV.F. of the NASAA
Guidelines, and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on resale of property, property management fees, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans
or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.  

“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of
(i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the
Partnership is, directly or indirectly, a co-venturer or partner. 
  

 6 

 “Organization and Offering Expenses” means all expenses incurred by or on
behalf of the Company in connection with or in preparing the Company for registration of and subsequently offering and distributing its Shares to the public, whether incurred before, on or after the date of this Agreement, including total
dealer-manager, underwriting and brokerage discounts and commissions; legal fees and expenses of any dealer-manager or underwriter; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of
transfer agents, registrars, trustees, escrow holders, depositaries and experts; expenses of qualification of the sale of the securities under Federal and state laws; taxes and fees, accountants’ and attorneys’ fees and expenses.

 “Other Liquidity Event” has the meaning set forth in Section 13.3(F). 

“Partnership” means Phillips Edison – ARC Shopping Center Operating Partnership, L.P., a Delaware limited
partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company. 

“Permitted Investments” means all investments (other than Properties and Loans) in which the Company acquires an
interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Articles of Incorporation, Bylaws and the investment objectives and policies adopted by the Board from time to time,
other than short-term investments acquired for purposes of cash management. 
 “Person” or
“person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively
for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. 

“Property” or “Properties” means any real property or properties transferred or conveyed to the
Company, the Partnership, or any subsidiary of the Company or the Partnership, either directly or indirectly, and/or any real property or properties transferred or conveyed to a Joint Venture or partnership in which the Company is, directly or
indirectly, a co-venturer or partner. 
 “Property Manager” means an entity that has been retained to perform
and carry out at one or more of the Properties property-management services, excluding Persons retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and
ultimately paid by the tenant at such Property. 
 “Prorated Term Fraction” means the fraction, the numerator
of which is the number of days from and including January 11, 2010 to and including the Termination Date, and the denominator of which is the number of days elapsed from and including 

 

 7 

 
January 11, 2010 to and including the date of the determination of the amount of any Subordinated Share of Cash Flows and/or the Subordinated Incentive Fee, as applicable. 

“Registration Statement” means the registration statement filed by the Company with the SEC pursuant to the Securities
Act of 1933, as amended, on Form S-11, as amended from time to time, in connection with the Initial Public Offering. 

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

“Sale” or “Sales” means (i) any transaction or series of transactions whereby: (A) the
Company or the Partnership sells, grants, transfers, conveys, or relinquishes its direct or indirect ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a
ground lease, and including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the Partnership sells, grants,
transfers, conveys, or relinquishes its ownership of all or substantially all of the direct or indirect interest of the Company or the Partnership in any Joint Venture or partnership in which it is, directly or indirectly, a co-venturer or partner;
or (C) any Joint Venture or partnership (in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner) sells, grants, transfers, conveys, or relinquishes its direct or indirect ownership of any Property, Loan or
other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, but (ii) not including any transaction or series of
transactions specified in clause (i)(A), (i)(B), or (i)(C) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Properties, Loans or other Permitted Investments within 180 days
thereafter. 
 “SEC” means the United States Securities and Exchange Commission. 

“Settlement” means (i) the payment of principal, prepayment, maturity, workout or other settlement of any Loan or
other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner,
but (ii) not including any transaction or series of transactions specified in clause (i)(A) or (i)(B) above in which the proceeds of such prepayment, maturity, workout or other settlement are reinvested in one or more
Properties, Loans or other Permitted Investments within 180 days thereafter. 
 “Shares” means the shares of
common stock of the Company, par value $.01 per share. 
 “Stockholders” means the registered holders of the
Shares. 
 “Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative,
non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For 

 

 8 

 
purposes of calculating the Stockholders’ 7% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated and
shall be calculated net of (1) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 7%, as such amounts are computed on a daily basis based
on a three hundred sixty-five day year and (2) Distributions of Cash from Sales, Settlements and Financings, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a
cumulative, non-compounded, annual return of 7%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year. 

“Sub-advisor” means (i) Phillips Edison NTR LLC (formerly known as Phillips Edison & Company SubAdvisor
LLC), a Delaware limited liability company, or (ii) any successor sub-advisor to the Advisor. 
 “Sub-advisory
Agreement” means that Second Amended and Restated Sub-advisory Agreement between the Advisor and the Sub-advisor, dated as of the date hereof, as the same may be amended, restated or otherwise modified from time to time in accordance with
its terms. 
 “Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if
the Shares are Listed, as calculated in Section 5.6. 
 “Subordinated Share of Cash Flows” means
any amount payable to the Advisor or its assignees pursuant to Section 8.5. 
 “Termination” means
the termination of this Agreement in accordance with Article 13 hereof. 
 “Termination Date” means the
date of termination of the Agreement if such termination does not coincide with the parties entering into a renewed or amended advisory agreement. 

“2%/25% Guidelines” has the meaning set forth in Section 9.2(C). 

Article 2 

Appointment 

The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and subject to the conditions set forth in
this Agreement, and the Advisor hereby accepts such appointment. 
  

 9 

 Article 3 

Duties Of The Advisor 

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its
assets. The Advisor undertakes to use commercially reasonable efforts to present to the Company potential investment opportunities and to provide the Company with a continuing and suitable investment program consistent with the investment objectives
and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, consistent with the provisions of the Articles of Incorporation and
Bylaws and the continuing and exclusive authority of the Board over the supervision of the Company, the Advisor shall, either directly or by engaging an Affiliate, the Sub-advisor or third party, perform the following duties: 

 

	3.1	Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering or private sale of the
Company’s securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any
state. 

  

	3.2	Acquisition Services. The Advisor shall: 

  

	 	(A)	Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the
Company’s assets and investment objectives and policies; 

  

	 	(B)	Subject to Article 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments;
(b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other
Permitted Investments on behalf of the Company (including through Joint Ventures); (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted
Investments; (e) select Joint Venture partners and structure corresponding agreements; and (f) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments; 

 

	 	(C)	Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work; 

 

	 	(D)	Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed
investments; 

  

	 	(E)	Obtain reports (which may be prepared by the Advisor, the Sub-advisor or their Affiliates), where appropriate, concerning the value of contemplated investments of the
Company; 

  

 10 

	 	(F)	Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and 

 

	 	(G)	Negotiate and execute approved investments and other transactions, including Settlements of Loans and other Permitted Investments. 

 

	3.3	Asset Management Services. The Advisor shall (or shall retain other Persons to (but shall remain responsible to the Company)): 

 

	 	(A)	Real Estate and Related Services: 

  

	 	(1)	Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) and supervise the performance of such Persons as
the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents,
depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, security investment advisors, mortgagors, the registrar and the transfer agent, construction companies, Property Managers and
any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services; 

  

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

 

	 	(3)	Monitor applicable markets and obtain reports (which may be prepared by the Advisor, the Sub-advisor or their Affiliates) where appropriate, concerning the value of
investments of the Company; 

  

	 	(4)	Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company
and perform and supervise the various management and operational functions related to the Company’s investments; 

  

	 	(5)	 Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, investment, improvement,
financing and refinancing, marketing, 

  

 11 

	 	 
leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis; 

 

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

  

	 	(7)	Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and
maintenance; 

  

	 	(8)	Conduct periodic on-site property visits to some or all (as the Advisor or its designee deems reasonably necessary) of the Properties to inspect the physical condition
of the Properties and to evaluate the performance of the Property Managers; 

  

	 	(9)	Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property
budgets into the Company’s overall budget; 

  

	 	(10)	Coordinate and manage relationships between the Company and any co-venturers or partners; and 

 

	 	(11)	Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset dispositions, sales and refinancings.

  

	 	(B)	Accounting and Other Administrative Services: 

  

	 	(1)	Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

  

	 	(2)	From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this
Agreement; 

  

	 	(3)	 Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor, the Sub-advisor
or any of their respective Affiliates, as well as any investments that have been made by the Advisor, Sub-advisor or any of their Affiliates directly, in each case to the extent such investments constitute a conflict of interest or a

  

 12 

	 	 
potential conflict of interest with the investment policies and objectives of the Company; 

  

	 	(4)	Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary
and incidental to the Company’s business and operations; 

  

	 	(5)	Provide financial and operational planning services; 

  

	 	(6)	Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be
required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency; 

 

	 	(7)	Maintain and preserve all appropriate books and records of the Company; 

  

	 	(8)	Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related
tax matters; 

  

	 	(9)	Provide the Company with all necessary cash management services; 

  

	 	(10)	Deliver to, or maintain on behalf of, the Company copies of all appraisals obtained in connection with Properties, Loans and Permitted Investments;

  

	 	(11)	Manage and coordinate with the transfer agent the monthly dividend process and payments to Stockholders; 

 

	 	(12)	Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management
determinations; 

  

	 	(13)	Consult with the Company’s officers and the Board and assist the Board in evaluating various liquidity events when appropriate; 

 

	 	(14)	Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing
compliance with such matters, including compliance with the Sarbanes-Oxley Act of 2002; 

  

 13 

	 	(15)	Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

  

	 	(16)	Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law, including federal and state
securities laws and the Sarbanes-Oxley Act of 2002; 

  

	 	(17)	Notify the Board of all proposed material transactions before they are completed; and 

 

	 	(18)	Do all things necessary to assure its ability to render the services described in this Agreement. 

 

	3.4	Stockholder Services. The Advisor shall (or shall retain other Persons to (but shall remain responsible to the Company)): 

 

	 	(A)	Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other
communications; 

  

	 	(B)	Oversee the performance of the transfer agent and registrar; 

  

	 	(C)	Establish technology infrastructure to assist in providing Stockholder support and service; and 

 

	 	(D)	Consistent with Section 17.10, perform the various subscription processing services reasonably necessary for the admission of new Stockholders.

  

	3.5	Other Services. Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the
Conflicts Committee). 

 Article 4 

Authority of Advisor 
  

	4.1	General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have
the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company or to the Sub-advisor as
it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Articles of Incorporation.

  

 14 

	4.2	Powers of the Advisor. Subject to the express limitations set forth in this Agreement, to the continuing and exclusive authority of the Board over the
supervision of the Company, and to the right of the Advisor to delegate its responsibilities pursuant to Section 0, the power to direct the management, operation and policies of the Company shall be vested in the Advisor, which shall have the
power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other
undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement. 

  

	4.3	Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or
duly authorized committees thereof if the Articles of Incorporation or Maryland General Corporation Law require the prior approval of the Board. The Advisor will deliver to the Board all documents reasonably required by it to evaluate a proposed
investment (and any related financing). 

  

	4.4	Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or
approvals set forth in Article 3 hereof and this Article 4; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to
which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification. 

Article 5 

Bank Accounts 

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

Article 6 

Records And Financial Statements 

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the
Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and
shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time 

 

 15 

 
to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall
utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor
delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent
auditors and shall provide such officers and auditors with the reports and other information that the Company so requests. 

Article 7 

Limitation On Activities 

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in
good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code (unless the Board has determined that REIT qualification is not in the best interests of the Company and its
Stockholders), (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the
Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Articles of Incorporation or Bylaws. In the event an action that would violate any of
clauses (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such
action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given. 

Article 8 

Fees 
  

	8.1	 Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or
exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee calculated as set forth below in this Section 8.1 to the Advisor or its assignees for each such investment (whether an acquisition
or origination). With respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be owned, directly or indirectly, by the Company or the Partnership, the Acquisition Fee payable to the Advisor or its assignees
shall equal 1.0% of the sum of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated
with such Property, Loan or other Permitted Investment and the amount of any debt 

  

 16 

	 	 
associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment, but exclusive of the Acquisition Fee payable to the Advisor or its assignees. The
calculation of Acquisition Fees payable to the Advisor or its assignees will also include any amounts incurred or reserved for capital expenditures that will be used to provide funds for capital improvements and repairs applied to any real property
investment acquired where the Company plans to add value. With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is,
directly or indirectly, a co-venturer or partner, the Acquisition Fee payable to the Advisor or its assignees shall equal 1.0% of the portion that is attributable to the Company’s or the Partnership’s direct or indirect investment in such
Joint Venture or partnership of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses
associated with such Property, Loan or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment, but exclusive of the Acquisition Fee so payable to
the Advisor or its assignees. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. The Acquisition Fee payable to the Advisor or
its assignees shall be paid at the closing of the transaction upon receipt of the invoice by the Company. 

  

	8.2	Asset Management Fee. The Company shall pay the Advisor or its assignees as compensation for the services described in Section 17.12 hereof a
quarterly fee (the “Asset Management Fee”) in an amount equal to 0.25% of the Management Fee Base. The Asset Management Fee is payable quarterly in advance, on January 1, April 1, July 1 and October 1,
in the amount of 0.25% of the Management Fee Base for the preceding fiscal quarter. The Advisor shall submit an invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. The Asset Management Fee will
be appropriately pro rated for any partial fiscal quarter. 

  

	8.3	 Disposition Fees. If the Advisor or Sub-advisor or any of their Affiliates provides a substantial amount of services (as determined by the
Conflicts Committee) in connection with a Sale, then the Advisor or its assignees shall receive a fee at the closing (a “Disposition Fee”) equal to 2.0% of the Contract Sales Price; provided, however, that no
Disposition Fee shall be payable if the Sale is to an Affiliate of either the Advisor or the Sub-Advisor; provided further, however, that the payment of any Disposition Fees by the Company shall be subject to any limitations contained
in the Company’s Articles of Incorporation. Any Disposition Fee payable under this Section 8.3 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid
to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate Contract Sales Price of each applicable Property, Loan or other Permitted

  

 17 

	 	 
Investment and (ii) the Competitive Real Estate Commission for each applicable Property, Loan or other Permitted Investment. Substantial assistance in connection with the Sale of a Property
includes the preparation of an investment package for the Property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a list of prospective buyers, a structural
report and exhibits) or such other substantial services performed by the Advisor or Sub-advisor or any of their Affiliates in connection with a Sale. The Disposition Fee payable to the Advisor or its assignees shall be paid at the closing of the
transaction upon receipt of the invoice by the Company. 

  

	8.4	Financing Fee. In the event of any debt financing obtained by or for the Company, the Company will pay to the Advisor or its assignees upon the closing of such
debt financing a fee (a “Financing Fee”) equal to (i) 0.75% of the amount available under such debt financing, whether at the Company, Partnership, or any direct or indirect subsidiary level, and (ii) 0.75% of the portion
that is attributable to the Company’s or the Partnership’s direct or indirect investment in a Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner. The Advisor (or
Sub-advisor) may reallow all or a portion of any Financing Fee to reimburse a non-Affiliated third party with whom it may subcontract to procure any such debt financing. All or any portion of the Financing Fees not taken as to any fiscal year shall
be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. 

  

	8.5	Subordinated Share of Cash Flows. Subject to the last sentence of Section 8.6, the Company will pay, from time to time when available, Subordinated
Share of Cash Flows to the Advisor or its assignees in an amount equal to 15% of Operating Cash Flow and 15% of Cash from Sales, Settlements and Financings remaining after the Stockholders have received Distributions of Operating Cash Flow and of
Cash from Sales, Settlements and Financings such that the owners of all outstanding Shares have received Distributions in an aggregate amount equal to the sum of, as of such point in time: 

 

	 	(A)	the Stockholders’ 7% Return; and 

  

	 	(B)	Invested Capital. 

  

	 	    	When determining whether the above threshold has been met: 

  

	 	(1)	Any stock dividend shall not be included as a Distribution; and 

  

	 	(2)	Distributions paid on Shares repurchased or redeemed by the Company (and thus no longer included in the determination of Invested Capital) shall not be included as a
Distribution. 

  

	8.6	 Subordinated Incentive Fee. Upon Listing, the Advisor or its assignees shall be entitled to the Subordinated Incentive Fee in an amount equal to
15.0% of the amount by which (i) the market value of the outstanding Shares, measured by 

  

 18 

	 	 
taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days
after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends and any Distributions paid on Shares that have been repurchased or redeemed by the Company) from the
Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders as of the date Market Value is
determined in order to pay the Stockholders’ 7% Return from inception through the date Market Value is determined. The Company shall have the option to pay such fee in the form of cash, Shares, a non-interest-bearing short-term promissory note
or any combination of the foregoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payments to the Advisor or its assignees of Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the
Advisor or its assignees following Listing, no additional Subordinated Share of Cash Flows will be paid to the Advisor or its assignees. 

  

	8.7	Other Services. Should the Board request that the Advisor or the Sub-advisor or any Affiliate or director, officer or employee of any of the foregoing render
services for the Company other than as set forth in this Agreement, such services shall be separately compensated at such rates and in such amounts as are agreed upon by the Advisor, Sub-advisor or such Affiliate or other Person, on the one hand,
and the Board, including a majority of the Conflicts Committee, on the other hand, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

  

	8.8	Changes to Fee Structure. In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a
perpetual-life entity. 

  

	8.9	Internalization. In the event that the Company’s board of directors elects to internalize any management services provided by the Advisor or the
Sub-advisor, the Company shall not pay any compensation or other remuneration to the Advisor or the Sub-advisor or any of their Affiliates in connection with such internalization transaction. For the avoidance of doubt, any compensation paid or
payable by the Company to employees of the Company in connection with their employment by the Company (which employees were formerly employed by the Advisor or the Sub-Advisor or any of their Affiliates) shall not be deemed to be compensation or
other remuneration in connection with any internalization transaction for purposes of the immediately preceding sentence. This provision shall not limit any other consideration or distributions that the Company may pay the Advisor or the Sub-Advisor
in accordance with this agreement or the Sub-Advisory Agreement (in each case, as such agreement may be amended, restated or modified from time to time) or any other agreement. This provision shall in no way obligate the Advisor or the Sub-Advisor
to facilitate an internalization transaction with the Advisor, the Sub-Advisor or any of their Affiliates. 

  

 19 

	8.10	Limitation on Fees. Notwithstanding anything herein to the contrary, the payment of any fees or expenses pursuant to Articles 8 and 13 by the
Company shall be subject to the limitations thereon contained in the Articles of Incorporation. 

 Article 9

 Expenses 
  

	9.1	General. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor or
Sub-advisor, as the case may be, for all of the expenses paid or incurred by the Advisor, the Sub-advisor or their Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including,
but not limited to: 

  

	 	(A)	All Organization and Offering Expenses; provided, however, that: 

 

	 	(1)	the Company shall not reimburse the Advisor or Sub-advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and
Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees and expenses as set forth in detailed and itemized invoices) to exceed 1.5% of Gross Proceeds raised in an Offering as of
the termination of such Offering; 

  

	 	(2)	within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and
Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees and expenses as set forth in detailed and itemized invoices) exceeding 1.5% of Gross Proceeds raised in such Offering;

  

	 	(3)	the Company shall not reimburse the Advisor or Sub-advisor for any Organization and Offering Expenses that the Conflicts Committee determines are not fair and
commercially reasonable to the Company; and 

  

	 	(4)	the Company shall not make any reimbursement for any of the following Organization and Offering Expenses incurred by the Dealer Manager that are to be paid out of the
Dealer Manager’s fee: 

  

	 	(a)	participating broker-dealer expense reimbursements (including meals with financial advisors and participating broker-dealer client seminars); 

 

 20 

	 	(b)	sales seminars sponsored by participating broker-dealers; 

  

	 	(c)	promotional items; 

  

	 	(d)	marketing support; 

  

	 	(e)	expenses in connection with bona fide training and educational meetings; 

  

	 	(f)	wholesaling commissions, wholesaling salaries and wholesaling expense reimbursements (including travel, meals and lodging in connection with the Offering);

  

	 	(g)	occasional meals and entertainment expenses of participating broker-dealers; and 

 

	 	(h)	legal fees and expenses of the Dealer Manager associated with FINRA-related filings or the drafting and review of any dealer manager agreements, participating
broker-dealer agreements and due diligence agreements. 

  

	 	(B)	Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such
expenses incurred related to assets pursued or considered but not ultimately acquired by the Company; provided, however, that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by
the Company shall be subject to the limitations contained in the Company’s Articles of Incorporation; 

  

	 	(C)	The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor or Sub-advisor, including travel,
meals and lodging expenses incurred by the Advisor or Sub-advisor in performing duties associated with the acquisition or origination of Properties, Loans or other Permitted Investments; 

 

	 	(D)	Interest and other costs for borrowed money, including discounts, points and other similar fees; 

 

	 	(E)	Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or
income; 

  

	 	(F)	Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors; 

 

	 	(G)	 Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or

  

 21 

	 	 
indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including prepayments, maturities, workouts and other
settlements of Loans and other Permitted Investments; 

  

	 	(H)	All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders; 

 

	 	(I)	All out-of-pocket expenses associated with a Listing, if applicable; 

  

	 	(J)	Personnel and related employment costs incurred by the Advisor, the Sub-advisor or their Affiliates in performing the services described in Article 3 hereof,
including reasonable salaries and wages (but excluding bonuses), benefits and overhead of all employees directly involved in the performance of such services; provided, however, that no reimbursement shall be made for costs of such
employees of the Advisor, Sub-advisor or their Affiliates to the extent that such employees performed services for which the Advisor received Acquisition Fees, Financing Fees or Disposition Fees; 

 

	 	(K)	Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual
reports and other Stockholder reports, proxy statements and other reports required by governmental entities; 

  

	 	(L)	Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on
behalf of, the Board, the Conflicts Committee or any other committee of the Board; 

  

	 	(M)	Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances; 

 

	 	(N)	Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders; 

 

	 	(O)	Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Articles of Incorporation or the Bylaws; and

  

	 	(P)	All other out-of-pocket costs incurred by the Advisor or Sub-advisor in performing the Advisor’s duties hereunder. 

 

	9.2	Timing of and Additional Limitations on Reimbursements. 

  

	 	(A)	 Expenses incurred by the Advisor or Sub-advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less
than monthly to the Advisor or Sub-advisor in the manner and 

  

 22 

	 	 
proportion directed by the Advisor and Sub-advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the
Company within 45 days after the end of each quarter. 

  

	 	(B)	Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article 9 shall not become reimbursable to the Advisor
unless and until the Company has raised $2,500,000 in the Initial Public Offering. 

  

	 	(C)	Commencing upon the earlier to occur of the end of the fourth fiscal quarter after (1) the Company’s acquisition of its first real estate asset and
(2) six months after the commencement of the Initial Public Offering, the following limitation on Operating Expenses shall apply: The Company shall not reimburse the Advisor or Sub-advisor at the end of any fiscal quarter for the portion of
Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceeds (the “Excess Amount”) the greater of (i) 2% of Average Invested Assets and (ii) 25% of Net Income
(the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that the Excess Amount was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts
Committee does not approve the Excess Amount as being so justified, the Advisor or Sub-advisor shall repay to the Company any Excess Amount paid to the Advisor or Sub-advisor during a fiscal quarter. If the Conflicts Committee determines the Excess
Amount was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee,
shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of
such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that the Excess Amount was justified. The Company will ensure that such determination will be reflected in the minutes of the meetings
of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis. 

Article 10 

Voting Agreement 
  

	10.1	 Election of Directors. The Company agrees that it will take such actions that are necessary to cause William M. Kahane, Nicholas Schorsch or
another representative of the Advisor reasonably satisfactory to the Company and Sub-advisor to be a member of the initial Board of Directors of the Company if such 

 

 23 

	 	 
representative executes an advance letter of resignation to become effective upon such time that the Advisor is no longer serving as the advisor to the Company. 

 

	10.2	Other Voting of Shares. The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters
submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor or (ii) any transaction between the Company and the Advisor or any of its Affiliates. This voting restriction shall
survive until such time that the Advisor is no longer serving as such. 

 Article 11 

Relationship Of Advisor And Company; Other Activities Of The Advisor 

 

	11.1	Relationship. The Company and the 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. Except as set forth in Section 11.3, nothing herein contained shall prevent the Advisor or any of its Affiliates 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 any of its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director,
officer, member, partner, employee or equityholder of the Advisor or any of its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in
which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service. Specifically, it is contemplated that the Company may enter into Joint Ventures or
other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or other similar co-investment arrangements, the Advisor may be engaged to provide advice and service to such Persons, in
which case the Advisor will earn fees for rendering such advice and service. The Advisor shall 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 the Advisor’s obligations to the Company and its obligations to or its interest in any other Person (it being understood and agreed that the conditions and circumstances referred to in
the second paragraph of Section 11.3 are deemed to have been disclosed to the Board for purposes of this Section 11.1). 

  

	11.2	 Time Commitment. The 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. The Company acknowledges that the Advisor and its Affiliates and their respective
employees, officers and agents may also engage in activities unrelated to the 

  

 24 

	 	 
Company and may provide services to Persons other than the Company or any of its Affiliates. 

  

	11.3	Investment Opportunities. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the
Company that is consistent with the investment policies and objectives of the Company. So long as the Advisor is acting in its capacity as advisor under this Agreement, the Advisor will not (and will cause its Affiliates to not) (i) pursue any
opportunity to acquire any Property, Loan or other Permitted Investment that fits within the Company’s strategy, or (ii) offer such Property, Loan or other Permitted Investment to a third party, in each case unless and until such
opportunity is first presented to the Company. The Company shall have 30 days from the date of its receipt of a complete written offering package relating to such opportunity, customary in scope and content, to notify the Advisor of the
Company’s decision as to whether or not to pursue such opportunity. If the Company fails so to notify the Advisor within such 30-day period, the Company shall be deemed to have passed on such opportunity. If the Company passes on such
opportunity, then the Advisor or such Affiliate, as the case may be, may acquire the subject investment or offer the subject investment to a third party for a period of 180 days, in each case on terms and conditions (including price) that are not
materially different from the terms and conditions set forth in the offering package to the Company. If at the expiration of such 180-day period, such opportunity remains available, then the provisions of this Section 11.3 shall once
again apply to such opportunity. 

 Notwithstanding the preceding, however, the Advisor or any Affiliate of the
Advisor shall be permitted to pursue any opportunity or to offer any opportunity to a third party in respect of (i) any net leased retail, office and industrial properties or other property consistent with the investment policies of American
Reality Capital Trust, Inc., (ii) any commercial real estate or other real estate investments that relate to office, retail, multi-family residential, industrial and hotel property types, located primarily in the New York metropolitan area or
other property consistent with the investment policies of American Realty Capital New York Recovery REIT, Inc., or (iii) any investments to be made by a contemplated non-traded REIT (the “Identified REIT”) that the Advisor or
any of its Affiliates described as (a) intending to invest primarily in “power center” real estate developments, (b) being sponsored or co-sponsored by ARC (or one of its Affiliates), the acquisition services for which will be
provided by an international commercial and residential real estate developer and manager (or one of its Affiliates), and (c) being the subject of an executed letter of intent or term sheet between the Advisor (or one of its Affiliates) and
such international commercial and residential real estate developer and manager (or one of its Affiliates), and which has or will have as its publicly disclosed (and not subsequently revised or required to be revised under applicable securities
laws) investment objectives to have less than 20% of its assets (measured by purchase price) in anchored shopping centers with purchase prices of less than $20,000,000 per property (determined once the proceeds of the offering have been fully
invested). 
  

 25 

 Article 12 

The Phillips Edison and ARC Names 
  

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

  

	12.2	 The Phillips Edison and PECO Names. The Sub-advisor and its Affiliates have or may have a proprietary interest in the names “Phillips
Edison” and “PECO.” The Sub-advisor hereby grants to the Company, to the extent of any proprietary interest the Sub-advisor may have in the names “Phillips Edison” and “PECO,” a

  

 26 

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

Article 13 

Term And Termination Of The Agreement 
  

	13.1	Term. This Agreement shall have an initial term ending June 30, 2011 and may be renewed for an unlimited number of successive one-year terms upon mutual
consent of the parties. The Company (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal
must be approved by the Conflicts Committee. 

  

	13.2	 Termination by Either Party. This Agreement may be terminated upon 60 days’ written notice without cause or penalty by either the Company
(acting through the Conflicts Committee) or the Advisor. The provisions of Section 8.5, 8.6 and 14.2 and Articles 1, 12, 13, 15 and 16 (other than Section 16.11) shall

  

 27 

	 	 
survive termination of this Agreement. 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. 

  

	13.3	Payments on Termination and Survival of Certain Rights and Obligations. 

 

	 	(A)	After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except the Advisor (and its assignees, including the
Sub-advisor) shall be entitled to receive from the Company (1) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor or its assignees prior to termination of this Agreement, payable within 30 days after the
effective date of such termination, and (2) to the extent not already payable pursuant to the preceding clause or to the extent not already paid, the Subordinated Share of Cash Flows and/or the Subordinated Incentive Fee payable when and as
provided in Article 8; provided, that the amount of each Subordinated Share of Cash Flows and the amount of the Subordinated Incentive Fee shall be reduced by multiplying such amount by the Prorated Term Fraction. 

 

	 	(B)	The Advisor shall promptly upon termination: 

  

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

  

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

  

	 	(3)	deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and 

 

	 	(4)	cooperate with the Company to provide an orderly transition of advisory functions. 

 

	 	(C)	 After the Termination Date, the Sub-advisor shall be entitled to receive from the Company (1) all unpaid reimbursements of expenses and all earned
but unpaid fees payable to the Sub-advisor prior to the termination of this Agreement, payable within 30 days after the effective date of such termination, and (2) to the extent not already payable pursuant to the preceding clause or to the
extent not already paid, the Sub-advisor’s share of the Subordinated Share of Cash Flows and/or the Subordinated Incentive Fee, as assignee thereof, payable when and as provided in Article 8; provided, that the amount of the
Sub-advisor’s share of each 

  

 28 

	 	 
Subordinated Share of Cash Flows and the amount of the Sub-advisor’s share of the Subordinated Incentive Fee shall be reduced by multiplying such amount by the Prorated Term Fraction.

  

	 	(D)	After the termination of the Sub-advisory Agreement, to the extent payments are not provided for by Section 13.3(C) (i.e., if the Sub-advisory
Agreement is terminated independently of the Advisory Agreement), the Sub-advisor shall be entitled to receive from the Company, within 30 days after the effective date of such termination, all unpaid reimbursements of expenses and all earned but
unpaid fees payable to the Sub-advisor prior to the termination of the Sub-advisory Agreement. 

  

	 	(E)	Promptly upon the termination of the Sub-advisory Agreement, the Sub-advisor shall promptly upon such termination: 

 

	 	(1)	pay over to the Company all money, if any, collected and held on behalf of the Company pursuant to the Sub-advisory Agreement after deducting any accrued compensation
and reimbursement for its expenses to which it is then entitled; 

  

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

  

	 	(3)	deliver to the Board all assets and documents of the Company then in the custody of the Sub-advisor; and 

 

	 	(4)	cooperate with the Company to provide an orderly transition of advisory or sub-advisory functions. 

Article 14 

Assignment 
  

	14.1	Assignment of Agreement. This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. This Agreement shall not be
assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such
successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement. 

  

	14.2	 Assignment of Payments. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval
of the Board 

  

 29 

	 	 
or Conflicts Committee, and the Company shall honor and pay directly the assignee of such assignment. 

Article 15 

Indemnification And Limitation Of Liability 
  

	15.1	Indemnification. Except as prohibited by the restrictions provided in this Section 0, Section 15.2 and Section 15.3, the Company
shall indemnify, defend and hold harmless the Advisor, the Sub-advisor and their Affiliates, as well as their respective officers, directors, equity holders, members, partners and employees, from all liability, claims, damages or losses arising in
the performance of their duties hereunder or under any sub-advisory agreement, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by
insurance. Any indemnification of the Advisor or Sub-advisor may be made only out of the net assets of the Company and not from Stockholders. 

Notwithstanding the foregoing, the Company shall not indemnify the Advisor or Sub-advisor or their Affiliates, as well as their respective
officers, directors, equity holders, members, partners and employees, for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are
met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the 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 the related
costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities
of the Company were offered or sold as to indemnification for violations of securities laws. 
  

	15.2	Limitation on Indemnification. Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor, the Sub-advisor or their
Affiliates or of their respective officers, directors, equity holders, members, partners and employees, for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company,
unless all of the following conditions are met: 

  

	 	(A)	The Advisor, the Sub-advisor or one of their Affiliates (as applicable) has determined, in good faith, that the course of conduct that caused the loss or liability was
in the best interests of the Company. 

  

 30 

	 	(B)	The Advisor, the Sub-advisor or one of Affiliates (as applicable) was acting on behalf of or performing services for the Company. 

 

	 	(C)	Such liability or loss was not the result of negligence or misconduct by the Advisor, the Sub-advisor or one of their Affiliates (as applicable).

  

	15.3	Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable legal expenses and other costs incurred by any of the Advisor, the Sub-advisor
or their Affiliates, or by any of their respective officers, directors, equity holders, members, partners and employees, in advance of the final disposition of a proceeding only if (in addition to any applicable procedures required by the Maryland
General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (b) the legal
proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement; and (c) such Person undertakes to repay the amount
paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that such Person is not entitled to indemnification. 

Article 16 

Miscellaneous 
  

	16.1	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 16.1), (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 Company or the Board: 

Phillips Edison – ARC Shopping Center REIT Inc. 

11501 Northlake Drive 

Cincinnati, OH 45249 

with a copy to (which shall not constitute Notice): 

DLA Piper LLP (US) 

4141 Parklake Drive , Suite 300 

Raleigh, North Carolina 27612 

Attention: Robert Bergdolt 

Telephone: (919) 786-2002 
  

 31 

 Facsimile: (919) 786-2202 

To the Advisor: 

American Realty Capital II Advisors, LLC 

405 Park Avenue 

New York, New York 10022 

Attention: Nicholas S. Schorsch 

                  Jesse Galloway 

with a copy to (which shall not constitute Notice): 

Proskauer Rose LLP 

1585 Broadway 

New York, New York 10036 

Attention: Peter M. Fass, Esq. 

                  James P. Gerkis, Esq.

 Telephone: (212) 969-3000 

Facsimile: (212) 969-2900 

To the Sub-advisor: 

Phillips Edison NTR LLC 

11501 Northlake Drive 

Cincinnati, OH 45249 

with a copy to (which shall not constitute Notice): 

DLA Piper LLP (US) 

4141 Parklake Drive, Suite 300 

Raleigh, North Carolina 27612 

Attention: Robert Bergdolt 

Telephone: (919) 786-2002 

Facsimile: (919) 786-2202 

Any 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 17.1. Each Notice shall be deemed given and effective upon receipt (or refusal or receipt). 
  

	16.2	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 the Company and the Advisor, or their respective successors or permitted assigns; provided, however, that no modification that impacts the rights or obligations of the Sub-advisor may be made without the
Sub-advisor’s consent and signature. 

  

 32 

	16.3	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. 

  

	16.4	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. 

  

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

  

	16.6	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. 

  

	16.7	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. 

  

	16.8	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. 

  

	16.9	Third Party Beneficiary. The Sub-advisor is intended to be a third party beneficiary of the Company’s payment and indemnification obligations hereunder.
Except as set forth in the immediately preceding sentence and except for those Persons entitled to indemnification under Article 15 who shall be third party beneficiaries of this Agreement, no other Person is a third party beneficiary of this
Agreement. 

  

	16.10	 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 

 

 33 

	 	 
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. 

  

	16.11	Restricted Stock. Each of the Company, the Advisor and the Sub-advisor agrees that no restricted stock awards or grants shall be made by the Company to any
Persons other than to (a) both the Advisor and the Sub-advisor, or (b) the members of the Conflicts Committee. To the extent that the Company makes restricted stock awards or grants to the Advisor and the Sub-advisor, the Company shall
issue (and the Advisor and the Sub-advisor shall use reasonable efforts to cause the Company to issue) 15% of such restricted stock awards or grants to the Advisor and 85% of such restricted stock awards or grants to the Sub-advisor. In turn, each
of the Advisor and the Sub-advisor may allocate, in its sole discretion and as it may determine, all or any part of such restricted stock award or grant so issued to it to its or its Affiliates’ directors, officers, equityholders, partners,
employees, members or to its respective Affiliates on such terms and conditions as may be determined by it. Notwithstanding Section 13.2, the provision of this Section 16.11 shall terminate upon termination of this Agreement
in accordance with its terms. 

 [The remainder of this page is intentionally left blank. 

Signature page follows.] 
  

 34 

 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year
first above written. 
  

									
		 		 	Phillips Edison – ARC Shopping Center REIT Inc.
				
		 		 	By:	 	/s/    JOHN B. BESSEY
		 		 		 		 	John B. Bessey, President
			
		 		 	American Realty Capital II Advisors, LLC
				
		 		 	By:	 	/s/    William Kahane 
		 		 		 		 	John B. Bessey, President
			
	 With respect to Sections 8.9, 12.2

and 13.3, Articles 9, 14, 15 and 16:
	 		 	Phillips Edison NTR LLC (formerly known as Phillips Edison & Company SubAdvisor LLC)
				
		 		 	By:	 	/s/    JOHN B. BESSEY
		 		 		 		 	John B. Bessey, President

  

 
  

[Signature Page to Fourth Amended and Restated Advisory Agreement between Phillips Edison – ARC Shopping Center REIT Inc. and
American Realty Capital II Advisors, LLC]Proxy Agreement

 Exhibit 10.1 

 
  

PROXY AGREEMENT 

WITH RESPECT TO CAPITAL STOCK 

OF 

API DEFENSE USA, INC. 
  

 

 PROXY AGREEMENT 

WITH RESPECT TO CAPITAL STOCK 

OF 
 API
DEFENSE USA, INC. 
 Table of Contents 

 

			
	 Topic
	  	Page
		
	 RECITALS
	  	3
		
	 ORGANIZATION
	  	5
		
	 Article I – Establishment of Proxy Agreement
	  	5
	 Article II – Appointment of Proxy Holders
	  	5
	 Article III – Acknowledgment of Obligations
	  	7
	 Article IV – Indemnification and Compensation of Proxy Holders
	  	8
	 Article V – Restrictions Binding on Subsidiaries of the Corporation
	  	9
		
	 OPERATIONS
	  	9
		
	 Article VI – Actions by the Proxy Holders
	  	9
	 Article VII – Voting Discretion
	  	10
	 Article VIII – Government Security Committee
	  	12
	 Article IX – Annual Review and Certification
	  	14
	 Article X – Duty to Report Violations of this Agreement
	  	16
		
	 CONTACTS AND VISITS
	  	16
		
	 Article XI – Regulated Meetings, Visits and Communications
	  	16
	 Article XII – DoD Remedies
	  	17
		
	 ADMINISTRATION
	  	18
		
	 Article XIII – Grant of Proxy, Restrictive Legend and Sale of Stock
	  	18
	 Article XIV – Dividends
	  	19
	 Article XV – Notices
	  	19
	 Article XVI – Inconsistencies with Other Documents
	  	20
	 Article XVII – Governing Law and Construction
	  	20
	 Article XVIII – Termination, Amendment and Interpretations of the Agreement
	  	20
	 Article XIX – Actions Upon Termination of this Agreement
	  	21
	 Article XX – Place of Filing
	  	22
	 Article XXI – Integration
	  	22
		
	 EXECUTION
	  	22

  

 2 

 PROXY AGREEMENT 

WITH RESPECT TO CAPITAL STOCK 

OF 
 API
DEFENSE USA, INC. 
 345 Pomroys Drive 

Windber, PA 15963 

This Proxy Agreement (“Agreement”) is made this     day of
            , 2010, by and among API Defense USA, Inc., a Delaware corporation (“Corporation”); API Technologies Corp., a Delaware corporation (“Shareholder”);
Messrs. Phillip DeZwirek and Jason DeZwirek (“Ultimate Shareholders”); Robert T. Conway, Jr., Kenneth L. Fisher, and Richard D. Hearney, and their successors appointed as provided in this Agreement (each individually a “Proxy
Holder” and collectively the “Proxy Holders”); and the United States Department of Defense (“DoD”); all of the above collectively the “Parties.” 

RECITALS 

WHEREAS, the Corporation is duly organized and existing under the laws of the State of Delaware and has an authorized capital of
1,000 shares, all of which are common voting shares with par value $0.001 per share, and 100 shares issued and outstanding with no par value; and 

WHEREAS, the Ultimate Shareholders, directly or indirectly, own or control 19.19 percent of the outstanding voting shares of the
Shareholder; and 
 WHEREAS, the Shareholder owns all the outstanding voting shares of the Corporation; and 

WHEREAS, the Corporation and its subsidiaries perform * * * for various User Agencies of the United States
(“U.S.”) Government,1 including, without
limitation, the DoD; and 
 WHEREAS, the offices and plants of the Corporation and certain of its
subsidiaries require facility security clearances2 issued
under the National Industrial Security Program (“NISP”) to conduct its business and the NISP requires that a corporation maintaining a facility security clearance be effectively insulated from foreign ownership, control or influence
(“FOCI”); and 
  

	1
	 The Office of the Secretary of Defense (including all boards, councils, staffs, and commands), DoD agencies, and the Departments of Army, Navy, and Air
Force (including all of their activities), Department of Commerce, General Services Administration, Department of State, Small Business Administration, National Science Foundation, Department of the Treasury, Department of Transportation, Department
of the Interior, Department of Agriculture, Department of Labor, Environmental Protection Agency, Department of Justice, Federal Reserve System, Government Accountability Office, United States Trade Representative, United States International Trade
Commission, United States Agency for International Development, National Aeronautics and Space Administration, Nuclear Regulatory Commission, Department of Education, Department of Health and Human Services, Department of Homeland Security and
Federal Communications Commission (the “User Agencies”). 

	2
	 “Facility security clearance” means an administrative determination that a facility is eligible for access to classified information of a
certain category. 

  

 3 

 WHEREAS, the Under Secretary of Defense for Intelligence (“USD (I)”) has
determined that the provisions of this Agreement are necessary to enable the United States to protect itself against the unauthorized disclosure of information relating to the National Security; and 

WHEREAS, the DoD will not grant or continue the facility clearances of the Corporation or its subsidiaries
without, at a minimum and without limitation, the Parties’ execution and compliance with the provisions of this Agreement, the purpose of which is to reasonably and effectively deny the Affiliates, as defined below, from unauthorized access to
classified information3 and controlled unclassified
information4 and influence over the Corporation’s
business or management in a manner that could result in the compromise of classified information or could adversely affect the performance of classified contracts. As used herein, the term “Affiliates” means: (i) the Shareholder;
(ii) the Ultimate Shareholders; and (iii) except for the Corporation itself and its subsidiaries, each entity that, whether directly or indirectly, controls, is controlled, or is under common control with the Shareholder or the Ultimate
Shareholders, which shall include without limitation, Icarus Investment Corporation, a Delaware corporation, Icarus Investment Corporation, a corporation organized and existing under the laws of Canada, and New Dimension Resources Ltd., a company
organized and existing under the laws of Canada; and 
 WHEREAS, a schedule listing each Affiliate is attached hereto as
Attachment A; and 
 WHEREAS, certain investors have sufficient holdings in the Shareholder to require them to file Forms
13D and 13G with the U.S. Securities & Exchange Commission (“SEC”), and a schedule listing each such Investor is attached hereto as Attachment B; and 

WHEREAS, the Defense Security Service (“DSS”) has oversight responsibilities of the NISP on behalf of the DoD; and the
NISP requires that a corporation maintaining such a facility clearance be effectively insulated from FOCI, this Agreement is entered into between the Parties in order to negate such FOCI, and to be submitted to DSS for approval as required by
applicable DoD regulation and policy; and 
 WHEREAS, in order to comply fully with the National Industrial Security
Program Operating Manual (“NISPOM”), DoD 5220.22-M, the parties hereto have agreed that the control of the voting shares (“Shares”) of the Corporation should be vested in citizens of the United States. 

 

	3
	 “Classified information” is any information that has been determined pursuant to Executive Order 12356 or any predecessor order to require
protection against unauthorized disclosure and is so designated. The classifications TOP SECRET, SECRET and CONFIDENTIAL are used to designate such information. 

	4
	 “Controlled unclassified information” is unclassified information, the export of which is controlled by the International Traffic in Arms
Regulation (“ITAR”) and/or the Export Administration Regulation (“EAR”). The export of technical data which is inherently military in nature is controlled by the ITAR. The export of technical data which has both military and
commercial uses is controlled by the EAR. 

  

 4 

 NOW THEREFORE, in consideration of the premises and of the mutual undertakings of the
Parties hereinafter set forth, a Proxy Agreement in respect of the shares of the Corporation is hereby created and established, subject to the following terms and conditions, to each of which the Parties expressly assent and agree: 

ORGANIZATION 
 Article
I - Establishment of Proxy Agreement 
 1.01. Independence of Corporation. The establishment of this Agreement shall
involve the selection of no less than three Proxy Holders with the qualifications set forth below in Section 2.01. Pursuant to Article XIII below, the Shareholder shall grant proxies to the Proxy Holders in accordance with this Agreement. DoD
shall determine whether all of the requirements set forth in this Agreement have been satisfied, including the necessary independence, separation of operation, and lack of interdependence between the Affiliates on the one hand, and the Corporation
and/or its subsidiaries on the other hand, and the financial self-reliance and business viability of the Corporation. * * * 

1.02. * * * 
 Article II -
Appointment of Proxy Holders 
 2.01. Initial Proxy Holder nominees will be chosen by the Shareholder.
The initial and successor Proxy Holders shall: (i) be resident citizens of the United States; (ii) have had no prior contractual, financial, or employment relationships with the Affiliates or the Corporation; (iii) certify their
willingness to accept their security responsibilities; and (iv) be eligible for the requisite personnel security
clearance.5 The appointment of initial and successor Proxy
Holders shall not become effective until approved by DSS. 
 2.02. The Shareholder may not remove a Proxy Holder except for acts
of gross negligence or willful misconduct while in office or as authorized by Section 2.03 below. The Shareholder may remove a Proxy Holder for such acts by an instrument signed by or on behalf of the Shareholder and filed with the Corporation
at its principal office in Windber, Pennsylvania. The Shareholder must notify DSS pursuant to Section 15.01 below at least twenty (20) days prior to filing such instrument. Such an instrument of removal shall not be effective until a
successor Proxy Holder who is qualified to serve hereunder has accepted appointment. However, if such removal would result in only one remaining Proxy Holder, then such an instrument of removal shall not be effective until a successor Proxy Holder
who is qualified to serve hereunder has accepted appointment. 
 2.03. With the approval of DSS, the Shareholder may also remove
a Proxy Holder for acts in violation of this Agreement, including the inability to protect the legitimate economic interests of the Shareholder pursuant to Section 6.05 below. The Shareholder must petition DSS for permission to remove a Proxy
Holder for acts in violation of this Agreement. However, DSS has the right to determine, in its sole discretion, whether to grant such petition. 

2.04. A Proxy Holder may at any time resign by submitting to the Corporation at its principal office in Windber, Pennsylvania, a
resignation in writing, with notice to the Shareholder and DSS pursuant to Section 15.01 below. Such resignation shall be effective on the date of resignation stated by the Proxy Holder. No formal acceptance of resignation by the Corporation is
necessary to make the resignation effective. Upon resignation, a Proxy Holder’s obligations and responsibilities under this Agreement are completed. 

 

	5
	The requisite personnel security clearance is an administrative determination that an individual is eligible for access to classified information of a certain category.

  

 5 

 2.05. Nomination and appointment of successor Proxy Holders shall be accomplished as
follows: 
 a. In the event of the death, resignation, removal or inability to act of any Proxy Holder, the
Corporation shall give prompt written notice to DSS and the Shareholder. The remaining Proxy Holders shall nominate a successor Proxy Holder using their best
efforts6 and diligence, and shall notify the Shareholder
and DSS of the nominee. In the event that a nominee is vetoed by the Shareholder pursuant to Section 2.05.b below, the remaining Proxy Holders shall use their best efforts and diligence to nominate an alternate successor Proxy Holder.

 b. The Shareholder shall not have the right to nominate or suggest any person for the position of a successor Proxy Holder.
The Shareholder shall have the right to veto without cause a nominee for the position of successor Proxy Holder. Absent a veto by the Shareholder of a nominee, and upon approval by DSS, the nominee may be appointed by the remaining Proxy Holders.
The Shareholder shall notify the remaining Proxy Holders and DSS of acceptance or veto within twenty (20) days of receipt of the nomination of a successor Proxy Holder. Failure by the Shareholder to notify the Proxy Holders within twenty
(20) days of notification of nomination shall be deemed to constitute acceptance. 
 c. If the Shareholder vetoes three
successive nominees proposed by the remaining Proxy Holders, the third nominee, upon approval by DSS, shall be accepted absent an appeal submitted by the Shareholder to DSS for reasonable cause. 

d. Any nomination and appointment of a successor Proxy Holder shall be made by an instrument in writing signed by the remaining Proxy
Holders. Counterparts of such instrument shall be delivered to the Corporation, DSS and the Shareholder as provided in Section 15.01 below. 

2.06. Acceptance of appointment for all initial or successor Proxy Holders as provided above may only be accomplished by their agreement
to be bound by the terms of this Agreement, as evidenced by their signature on the counterpart of this Agreement on file at the Corporation’s principal office in Windber, Pennsylvania, with copies to the incumbent Proxy Holders, the Shareholder
and DSS. Upon acceptance of appointment by the nominee and approval by DSS, the initial or successor Proxy Holders shall be vested with all the rights, powers, authority and immunities herein conferred upon the Proxy Holders by this Agreement.

  

	6
	 For purposes of this Agreement, the term “best efforts” signifies performance of duties reasonably and in good faith, in the manner believed
to be in the best interests of the Corporation but consistent with the national security concerns of the United States, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar
circumstances. 

  

 6 

 2.07. Upon the death, resignation, removal or disability of a Proxy Holder, the remaining
Proxy Holders may exercise all of the rights, powers and privileges of the Proxy Holders as set forth in this Agreement until a successor accepts appointment. If no Proxy Holders remain, the Chairman or Acting Chairman of the Board of Directors of
the Corporation shall, upon written notice to DSS, be automatically vested with all rights, powers, authorities and immunities of the Proxy Holders for an interim period not to exceed thirty (30) days, except that the Shareholder shall, under
such circumstances, have the right to appoint two new Proxy Holders pursuant to Section 2.01 above. The two new Proxy Holders shall nominate the third Proxy Holder pursuant to Section 2.05 above. 

Article III - Acknowledgment of Obligations 

3.01. All Proxy Holders shall become Directors of the Corporation. The Proxy Holders may appoint or remove other Directors in their sole
discretion. The Board of Directors of the Corporation shall elect a Chairman, who may be one of the Proxy Holders. 
 3.02. The
terms of compensation including any and all benefits for the Proxy Holders shall be negotiated between the Proxy Holders and the Shareholder, and shall be paid by the Corporation. Said terms, which may include provisions agreed upon in advance * *
*, shall not be changed during the Proxy Holders’ tenure as Proxy Holders, and shall be provided to DSS. 
 3.03. The Proxy
Holders agree to perform the duties set forth in, and be bound by, all provisions of this Agreement. The Proxy Holders shall exercise the powers bestowed upon them by, and perform the duties set forth in, this Agreement according to their best
efforts. 
 3.04. Each Proxy Holder agrees as follows: 

a. that, in order to be qualified under this Agreement, he must have had no prior or existing contractual, financial or employment
relationships with either the Corporation or the Affiliates prior to his appointment; 
 b. that, in order to maintain his
qualification as a Proxy Holder, he shall not establish any relationship of any kind with the Shareholder, the Affiliates or the Corporation except as may be required or permitted by this Agreement; and 

c. that, in order to be processed for and remain eligible for a U.S. Government personnel security clearance, he must reside in the
United States during his term of service as a Proxy Holder under this Agreement. 
 3.05. In recognition of their obligations
under this Agreement, the Proxy Holders individually and collectively acknowledge and agree as follows: 
 a. that the Shares
are being placed under proxy in accordance with this Agreement as a security measure designed to insulate the Corporation from any foreign control or influence that may arise from the Shareholder’s ownership of the Shares; 

b. that the U.S. Government is placing its reliance upon them as U.S. citizens to exercise independently all the prerogatives of
ownership of the Corporation; 
  

 7 

 c. that, one year from the effective date of this Agreement and annually thereafter, they
shall ensure that a report is submitted to DSS in accordance with Section 9.02 below; 
 d. that, upon the acceptance of
his appointment, each Proxy Holder shall be briefed by a representative of DSS on his responsibilities under the NISPOM and this Agreement; 

e. that, one year from the effective date of this Agreement and annually thereafter, they shall meet with representatives of DSS in
accordance with Section 9.01 below; 
 f. that, upon the acceptance of his appointment and annually thereafter, each Proxy
Holder shall execute for delivery to DSS a certificate affirming his agreement to be bound by, and the acceptance of, his responsibilities under this Agreement; 

g. that they shall not accept direction from the Shareholder on any matter before them or the Board of Directors of the Corporation, and
they shall not permit the Shareholder to exercise any control or influence over the business or management of the Corporation except as provided in this Agreement; 

h. that they shall ensure that the management appointed by them fully understands their responsibility to exercise all the prerogatives
of management with complete independence from any foreign influence or control; 
 i. that they shall ensure that each principal
officer of the Corporation is furnished with a policy statement on FOCI stating that management has complete independence from the Shareholder, management and the principal officers are barred from taking any action that would countermand this
Agreement, and that any suspected violation of this Agreement shall be reported immediately to the Chairman of the Government Security Committee (see Article VIII below); and 

j. that they shall ensure that records, journals and minutes of meetings and copies of all communications sent or received by them in the
execution of their duties as Proxy Holders are properly maintained. Such data and copies of all information furnished to the Shareholder by the Corporation or the Proxy Holders shall be made available upon request for review by DSS at the offices of
the Proxy Holders or the Corporation. 
 3.06. The Proxy Holders shall appoint an independent financial auditor to conduct an
annual audit of the Corporation’s books and records. * * * The Proxy Holders shall advise DSS and the Shareholder of their action. Upon completion of the audit and review by the Proxy Holders, and subject to the removal of any information not
releasable under this Agreement, the audit report shall be forwarded to the Shareholder. 
 Article IV - Indemnification and Compensation of
Proxy Holders 
 4.01. In voting the Shares and in their capacity as Directors of the Corporation, the Proxy Holders shall
vote and act on all matters in accordance with their best efforts. 
  

 8 

 4.02. The Corporation and the Shareholder jointly and severally shall indemnify and hold
each Proxy Holder harmless from any and all claims arising from or in any way connected to his performance as a Proxy Holder, which includes services as a Director of the Corporation, under this Agreement except for his own individual gross
negligence or willful misconduct. The Corporation and the Shareholder shall advance fees and costs incurred by any Proxy Holder in connection with the defense of any such claim to the maximum extent permitted by Delaware law. 

4.03. The compensation of the Proxy Holders, as well as any reasonable and necessary travel or other expense paid or incurred by the
Proxy Holders in the administration of their duties under this Agreement, shall be borne and promptly paid by the Corporation upon submission of reasonably detailed documentation to the Corporation by or on behalf of the Proxy Holders. 

Article V - Restrictions Binding on Subsidiaries of the Corporation 

5.01. The Parties agree that the provisions of this Agreement shall apply to, and shall be made binding upon, all present and future
subsidiaries and business lines or divisions of the Corporation. The Corporation hereby agrees to undertake any and all measures, and to provide such authorizations, as may be necessary to effectuate this requirement. The sale of, or termination of
the Corporation’s control over, any such subsidiary shall terminate the applicability of this Agreement to it. 
 5.02. If
the Corporation proposes to form a subsidiary, or to acquire ownership or control of another company, it shall give notice of such proposed action to DSS and shall advise DSS immediately upon consummation of such formation or acquisition. * * *

 OPERATIONS 

Article VI - Actions by the Proxy Holders 

6.01. The Proxy Holders shall adopt written standard operating procedures (“Operating Procedures”) which shall be followed by
the Proxy Holders in discharging their responsibilities under this Agreement. The Operating Procedures shall be maintained by the Proxy Holders for review by DSS. The Shareholder may review the Operating Procedures only with the advance written
approval of DSS. Shareholder appeals of any provision of the Operating Procedures shall be forwarded to DSS. DSS reserves the right to determine, in its sole discretion, whether such appeal should be favorably considered. 

6.02. The Proxy Holders shall hold regularly scheduled meetings. These official meetings may be held at such time and at such place
within the United States as shall be decided, from time to time, by a majority of the Proxy Holders. At least four (4) meetings shall be held each year. Minutes of such meetings shall be prepared and retained by the Proxy Holders for review by
DSS. 
 6.03. For the purpose of conducting the Corporation’s business, a majority of the Proxy Holders shall be required
to be present, either in person or by written proxy, at an official meeting. Each Proxy Holder who is present either in person or by written proxy, shall have the right to cast one vote on each question. In lieu of a meeting, action may also be
taken on the business of the Corporation by a writing signed by all the Proxy Holders. Each Proxy Holder agrees to attend, except for good cause shown, not less than fifty percent (50%) of all official meetings held in one year’s time at
which his attendance is formally requested pursuant to the Operating Procedures. 
  

 9 

 6.04. No proxy to vote the Shares may be given to, or voted by, any person other than one of
the Proxy Holders. 
 6.05. Subject at all times to the responsibility to ensure compliance by the Corporation with
NISPOM’s requirements and this Agreement, the Proxy Holders shall act in good faith as reasonably prudent persons to protect the legitimate economic interests of the Shareholder in the Corporation as an ongoing business concern. 

Article VII - Voting Discretion 

7.01. Except as otherwise provided in this Agreement, the Proxy Holders shall possess and shall be entitled to exercise in their sole and
absolute discretion, with respect to any and all of the Shares at any time covered by this Agreement, the right to vote the same or to consent to any and every act of the Corporation in the same manner and to the same extent as if they were the
absolute owners of such Shares in their own right. All decisions and actions by the Proxy Holders pursuant to this Agreement shall be based on their independent judgment and shall be free from any control or influence from the Shareholder in any
manner whatsoever except as specifically permitted in this Agreement. Any communication of any nature and by any means from the Shareholder that is deemed by the Proxy Holders to be an attempt to assert any influence or control precluded by this
Agreement shall be reported immediately by the Proxy Holders to DSS. 
 7.02. In addition to the general authorities conferred
by Section 7.01 above, the Proxy Holders are specifically authorized in the exercise of their sole and absolute discretion with respect to any and all of the Shares to vote for or consent to: 

a. the election of Directors of the Corporation; 

b. any changes or amendments to the Articles of Incorporation or Bylaws of the
Corporation7 other than those necessary pursuant to
Section 7.04 below, and except as described in Section 7.03 below; 
 c. the sale, transfer or disposal of the
property or assets of the Corporation, except as prohibited in Section 7.03 below; 
 d. the pledging, mortgaging or
encumbering of any assets of the Corporation, which any shareholder might otherwise lawfully exercise, except as described in Section 7.03 below; 

e. except as prohibited in Section 7.03 below, * * *; 

 

	7
	 The Bylaws and Articles of Incorporation of the Corporation shall be reviewed by DSS at the time of establishment of this Agreement and at least
annually thereafter. 

  

 10 

 f. * * *;g. * * *; 

h. the appointment or dismissal of officers and senior managers, provided that: (i) the Shareholder reserves the authority to
require that the Proxy Holders remove the CEO of the Corporation, and the Proxy Holders shall so remove the CEO of the Corporation, in the event that: (a) the CEO is the subject of a criminal conviction; or (b) the CEO is determined by the
Proxy Holders to have materially violated the Corporation’s Code of Ethics; * * *; and (ii) under no other circumstances may the Shareholder require the Proxy Holders remove the CEO of the Corporation, but if the Corporation and its
subsidiaries fail to meet the targets; * * *, the Shareholder may request that the Proxy Holders remove the CEO of the Corporation, and the Proxy Holders shall do so if: (a) in the exercise of their business judgment such removal is warranted;
and (b) the Proxy Holders provide the Shareholder with a rationale for their decision* * *; 
 i. the appointment or
dismissal of employees with access to classified information or sensitive technology or data; and 
 j. any action with respect
to the foregoing, or any other matter affecting the Corporation, and not specifically described in Section 7.03 below, which any shareholder might otherwise lawfully exercise. 

7.03. The Proxy Holders are not authorized to take any of the following actions without the express written approval of the Shareholder:

 a. sell or dispose of, in any manner, the capital assets (tangible or intangible) or business of the Corporation; 

b. pledge, mortgage or encumber the assets of the Corporation for purposes other than obtaining working capital; 

c. any reorganization, merger or dissolution of the Corporation; 

d. acquire the stock or assets of another business or entity; 

e. close, relocate, or alter the material operations or production facilities of the Corporation; 

f. issue equity or debt, or instruments convertible or exchangeable into equity or debt; 

g. alter the terms of existing equity or debt (excluding working capital loans); 

h. file or make any petition under the U.S. bankruptcy laws or any similar law or statute of any state or any foreign country;

 i. * * *;j. * * *;k. * * *; or 
  

 11 

 l. amend the Articles of Incorporation or Bylaws of the Corporation with respect to the
matters described in Sections 7.03.a through 7.03.k above. 
 * * * 

7.04. The Proxy Holders agree that they shall, upon written request by the Shareholder, take such action or actions as are necessary to
recommend, authorize or approve the actions specified in Section 7.03 above. The Proxy Holders shall consult with the Shareholder concerning such action so that the Shareholder may have sufficient information to ensure that all such actions
will be taken in accordance with applicable United States laws and regulations. Any action by the Proxy Holders with respect to the matters specified in Section 7.03 that is taken without the approval of the Shareholder shall be void and
without effect. 
 Article VIII - Government Security Committee 

8.01. There shall be established a permanent committee of the Corporation’s Board of Directors, to be known as the Government
Security Committee (“GSC”), consisting of all Proxy Holders/Directors and those officers of the Corporation who are also Directors and who hold personnel security clearances at the level of the Corporation’s facility security
clearance. The members of the GSC shall exercise their best efforts to ensure that the Corporation maintains policies and procedures to safeguard classified information in the possession of the Corporation and its subsidiaries, and to ensure that
the Corporation, including its subsidiaries, complies with this Agreement, the ITAR, the EAR, and the NISPOM. 
 8.02. The
members of the GSC shall exercise their best efforts to ensure the implementation, within the Corporation and its subsidiaries, of all procedures, organizational matters and other aspects pertaining to the security and safeguarding of classified and
controlled unclassified information called for by this Agreement, including the exercise of appropriate oversight and monitoring of the operations of the Corporation, and its subsidiaries, to ensure that the protective measures contained in this
Agreement are effectively maintained and implemented throughout its duration. 
 8.03. The GSC shall designate one of the Proxy
Holders to serve as Chairman of the GSC. 
 8.04. The Chairman of the GSC shall designate a member of the GSC to be Secretary of
the GSC. The Secretary’s responsibilities shall include ensuring that all records, journals, and minutes of GSC meetings and other documents sent to or received by the GSC are prepared and retained for review by DSS. 

8.05. A Facility Security Officer (“FSO”) shall be appointed by the Corporation and shall be the principal advisor to the GSC
concerning the safeguarding of classified information. The FSO’s responsibilities include the operational oversight of the Corporation’s compliance, including that of its subsidiaries, with the requirements of the NISPOM. 

8.06. The members of the GSC shall exercise their best efforts to ensure that the Corporation develops and implements a Technology
Control Plan (“TCP”), which shall be subject to approval by DSS. The GSC shall have authority to establish the policy for the Corporation’s TCP. The TCP shall prescribe measures to prevent unauthorized disclosure or export of
controlled unclassified information consistent with applicable U.S. laws and regulations. 
  

 12 

 8.07. A Technology Control Officer (“TCO”) shall be appointed by the Corporation
and shall be the principal advisor to the GSC concerning the protection of controlled unclassified information and other proprietary technology and data subject to regulatory or contractual control by the U. S. Government. The TCO’s
responsibilities shall include the establishment and administration of all intracompany procedures, including employee training programs to prevent the unauthorized disclosure or export of controlled unclassified information, and to ensure that the
Corporation otherwise complies with the requirements of the ITAR and the EAR. 
 8.08. Discussions of classified and controlled
unclassified information by the GSC shall be held in closed sessions and accurate minutes of such meetings shall be kept and shall be made available only to such authorized individuals as are so designated by the GSC. 

8.09. Upon taking office, the GSC members, the FSO and the TCO shall be briefed by a DSS representative on their responsibilities under
the NISPOM and this Agreement. 
 8.10. Each member of the GSC shall exercise his best efforts to ensure that all provisions of
this Agreement are carried out; that the Corporation’s Directors, officers, and employees comply with the provisions of this Agreement; and that DSS is advised of any known violation of, or known attempt to violate, any provision of this
Agreement, appropriate contract provisions regarding security, U.S. export control laws and regulations, or the NISPOM. 
 8.11.
Each member of the GSC shall execute for delivery to DSS, upon accepting his appointment and thereafter at each annual meeting of the Corporation with DSS as established by this Agreement, a certificate acknowledging: (i) the protective
security measures taken by the Corporation to implement this Agreement; (ii) his agreement to be bound by, and acceptance of, his responsibilities under this Agreement; and (iii) that the U.S. Government has placed its reliance on him as a
U.S. citizen and as the holder of a personnel security clearance to exercise his best efforts to ensure compliance with the matters set forth in this Agreement. 

8.12. Electronic Communications. The GSC shall establish a written Electronic Communications Plan (“ECP”) in accordance
with the following: 
 a. The GSC shall establish policies and procedures and maintain such oversight as is necessary to assure
itself and DSS that electronic communications between the Corporation, its subsidiaries, and the Affiliates do not disclose classified or export controlled information without proper authorization and that electronic communications are not used by
the Affiliates to exert influence or control over the Corporation’s business or management in a manner which could adversely affect the performance of classified contracts. 

b. As used in this Agreement, the term “electronic communications” is defined broadly to mean any transfer of information,
data, signs, signals, writing, images, sounds, or intelligence of any nature including that transmitted in whole or in part by wire, radio cable, or other like connection, or by electromagnetic, photoelectronic, photooptical, eletronic, mechanical
or other device or system. Any such transfer may be oral, written or electronic and includes any intercepted or recorded content however acquired and whether or not intended for the recipient. Electronic communications shall also include the
temporary, intermediate storage incidental to the electronic transmission thereof as well as any storage for purposes of backup protection. For clarification, common devices used to transfer electronic communications as defined in this Agreement
include without limitation telephone, facsimile, video, internet (including Voice over Internet Protocol, instant messaging and any other web-based means), and electronic mail. 

 

 13 

 c. The ECP must include a detailed network description and configuration diagram that
clearly shows all communications networks and delineates which networks will be shared and which will be protected from foreign access by any unauthorized person including without limitation, each of the Affiliates. The systems description shall
include all facilities used by the Corporation for the transmission of electronic communications, as defined herein, including without limitation, any computer equipment used for the electronic storage of such communications. The network description
shall address firewalls, physical and logical access controls, remote administration, monitoring, maintenance, separate e-mail retention, and the electrical and physical separation of systems and servers, as appropriate. 

8.13. Administrative Services Provided to the Corporation. The GSC shall ensure that any administrative services provided by any
of the Affiliates to the Corporation do not circumvent the requirements of this Agreement. The Corporation shall notify DSS and the GSC in advance of the proposed administrative services to be provided to the Corporation (including its subsidiaries
and affiliates) by the Affiliates. Upon DSS’ confirmation that the identified administrative services are acceptable, DSS shall issue an interim approval for those services. Thereafter, the GSC shall certify in writing that it is effectively
monitoring the administrative services being provided, and that said services do not allow the Affiliates to control or influence the management or business of the Corporation in violation of this Agreement. The initial GSC certification referenced
in this Section shall be provided to DSS within forty-five (45) calendar days of the execution of this Agreement, and subsequent annual GSC certifications shall be included in the Corporation’s annual report as provided in
Section 9.02 below. The Affiliates shall not provide any administrative services to the Corporation that have not been reviewed and approved by DSS in accordance with Section 8.13. 

a. The Corporation may provide administrative services to the Affiliates, so long as the provision of such services does not circumvent
the requirements of this Agreement. The Corporation shall notify the GSC and DSS in advance of the proposed administrative services to be provided by the Corporation to any Affiliate. Upon DSS’ confirmation that the identified administrative
services are acceptable, DSS shall issue an interim approval for those services. Thereafter, the GSC shall certify in writing that it is effectively monitoring the administrative services being provided to any Affiliate and that such services do not
allow the Affiliate(s) to control or influence the management or business of the Corporation in violation of this Agreement. The Corporation shall not provide any administrative services to an Affiliate that have not been reviewed and approved by
DSS in accordance with this Section 8.13.a. 
 8.14. * * * 

Article IX - Annual Review and Certification 

9.01. Representatives of DSS, the Proxy Holders, other members of the GSC, the FSO, the Corporation’s Chief Executive Officer
(“CEO”) and Chief Financial Officers, and the Shareholder shall meet annually to review the purpose and effectiveness of this Agreement and to establish a common understanding of the operating requirements and how they will be implemented.
These meetings shall include a discussion of the following: 
 a. whether this Agreement is working in a satisfactory manner;

  

 14 

 b. compliance or acts of noncompliance with this Agreement, the NISPOM, or other applicable
laws and regulations; 
 c. necessary guidance or assistance regarding problems or impediment associated with the practical
application or utility of this Agreement; and 
 d. whether security controls, practices or procedures warrant adjustment.

 9.02. The CEO of the Corporation and the Chairman of the GSC shall jointly submit to DSS one year from the effective date of
this Agreement and annually thereafter an implementation and compliance report. Such reports shall include the following information: 

a. detailed description of the manner in which the Corporation is carrying out its obligations under this Agreement; 

b. any changes to security procedures, implemented or proposed, and the reasons for those changes; 

c. a detailed description of any acts of noncompliance, whether inadvertent or intentional, with a discussion of what steps were taken to
prevent such acts from occurring in the future; 
 d. any changes, or impending changes, to any of the Corporation’s
management, including the reasons for such changes; 
 e. a statement, as appropriate, that a review of the records concerning
all visits and communications between representatives of the Corporation and the Affiliates has been accomplished and the records are in order; 

f. a detailed chronological summary of all transfers of classified and/or controlled unclassified information, if any, from the
Corporation to the Affiliates, complete with an explanation of the U.S. Government authorization relied upon to effect such transfers. Copies of approved export licenses covering the reporting period shall be appended to the report; 

g. a list of the Corporation’s (including its cleared divisions and cleared subsidiaries) current classified contracts and the
percentage of income derived from each such classified contract; and 
 h. any other issues that could have a bearing on the
effectiveness or implementation of this Agreement. 
  

 15 

 Article X - Duty to Report Violations of this Agreement 

10.01. The Parties agree to report promptly to DSS all instances in which the terms and obligations of this Agreement may have been
violated. 
 CONTACTS AND VISITS 

Article XI - Regulated Meetings, Visits and Communications 

11.01. The Parties agree to abide by the following procedures regarding meetings, visits, and communications between the Corporation
(including its subsidiaries and affiliates) and the Affiliates: 
 a. The Proxy Holders shall schedule a meeting with the
Shareholder once each year or more frequently if all the Proxy Holders agree. Representatives of the Corporation may attend these meetings if requested by the Proxy Holders. The Proxy Holders may convene a meeting with the Shareholder at any time as
long as the agenda is limited to the matters described in Section 7.03 above. * * * For any such meetings to be attended by Shareholder representatives, a written agenda shall be prepared and submitted in advance to DSS for approval, and the
meeting shall not occur until the Proxy Holders receive the approval of DSS. Classified and controlled unclassified information shall not be disclosed to the Shareholder except as specifically authorized by applicable law or regulation. Suggestions
or requests by the Shareholder representatives present at these meetings shall not be binding on the Proxy Holders or the Corporation. Minutes of meetings in which Shareholder representatives are in attendance shall be prepared and retained by the
GSC for review by DSS. 
 b. All proposed visits to the Corporation and its subsidiaries by any person who represents the
Affiliates (including all directors, officers, employees, representatives, and agents of each) and all proposed visits to the Affiliates by any person who represents the Corporation or its subsidiaries (including all directors, officers, employees,
representatives, and agents of each) as well as visits between such persons at other locations, must be approved in advance by a Proxy Holder designated to act on such requests. All requests for such approval shall be submitted in writing to the
Corporation’s FSO for routing to the designated Proxy Holder. Although strictly social contacts at other locations between the Corporation’s personnel and any individual representing the Affiliates are not prohibited, written reports of
such visits must be submitted after the fact to the FSO for filing with, and review by, the designated Proxy Holder. 
 c. A
written request for approval of a visit must be submitted to the FSO no less than seven (7) calendar days prior to the date of the proposed visit. If any unforeseen exigency precludes compliance with this requirement, such request may be
communicated via telephone or other electronic means to the FSO and promptly confirmed in writing. The exact purpose and justification for the visit must be set forth in detail sufficient to make a reasonable and prudent evaluation of the proposed
visit. Each proposed visit must be individually justified and a separate approval request must be submitted for each. Representatives of DoD shall have the right to be present and to monitor all visits described in Section 11.01.b above, no
matter where they occur. 
  

 16 

 d. Upon receipt of a written request for approval of a visit, the FSO will promptly relay
the information to the designated Proxy Holder, who, as soon as possible after being so advised, will indicate approval or disapproval of the request telephonically or by other expeditious means to the visiting parties. Such approval or disapproval
will be promptly confirmed in writing. The GSC shall review periodically the records of any proposed and consummated visits that have occurred since the last review to ensure proper adherence to approved procedures and to verify that sufficient and
proper justification was furnished. 
 11.02. Visits and other communications between the Corporation, its subsidiaries, and the
Affiliates on such commercial matters as proposed contracts, subcontracts, joint ventures, partnerships, and teaming arrangements shall be approved in advance by a majority of the Proxy Holders. 

11.03. Nothing in this Agreement shall be construed to prevent the Corporation from supplying to the Shareholder financial data relating
to the financial condition and financial operations of the Corporation. The Corporation shall also respond in writing through the Proxy Holders to written questions that the Shareholder may have concerning information contained in such reports. The
Proxy Holders and the Shareholder shall engage in discussions to determine the format of such reporting. The format must be acceptable to DSS. * * * 

11.04. A chronological file of all documentation associated with meetings, visitations and communications, together with appropriate
approvals or disapprovals and reports, required pursuant to this Article XI, shall be maintained by the GSC for review by DSS. 
 Article XII
- DoD Remedies 
 12.01. DoD reserves the right to impose any security safeguard not expressly contained in this Agreement
that it believes is necessary to ensure that unauthorized access by the Affiliates to classified and controlled unclassified information is effectively precluded. 

12.02. Nothing contained in this Agreement shall limit or affect the authority of a U.S. Government Agency to deny or revoke the
Corporation’s access to classified and controlled unclassified information under that Agency’s jurisdiction if it determines that U.S. national security so requires. 

12.03. The Parties hereby assent and agree that the U.S. Government has the right, obligation and authority to require any or all of the
following remedies in the event of a material breach of this Agreement: 
 a. the novation of the Corporation’s classified
contracts to another company qualified to perform such contracts under the NISPOM. The costs of such novation to a qualified successor-in-interest will be borne by the Corporation; 

b. the termination of any classified contracts being performed by the Corporation or any of its subsidiaries and the denial of new
classified contracts for the Corporation or any of its subsidiaries; 
 c. the revocation of the Corporation’s facility
security clearance; and 
  

 17 

 d. the suspension and/or debarment of the Corporation from participation in all U.S.
Government contracts, in accordance with the provisions of the Federal Acquisition Regulations. 
 12.04. Nothing in this
Agreement limits the right of the U.S. Government to pursue criminal sanctions against the Corporation, the Shareholder, any Affiliate, or any director, officer, employee, representative, or agent of any of these companies, for violations of the
criminal laws of the United States in connection with their performance of any of the obligations imposed by this Agreement, including but not limited to, any violations of the False Statements Act, 18 U.S.C. § 287, or of federal criminal
statutes pertaining to the unauthorized disclosure of classified information. 
 ADMINISTRATION 

Article XIII - Grant of Proxy, Restrictive Legend and Sale of Stock 

13.01. The Shareholder hereby appoints the Proxy Holders as its proxies, to have all rights, powers and authority to exercise all voting
rights with respect to the Shares, subject to the terms and conditions set forth in this Agreement. 
 13.02. It is the essence
of this Agreement that none of the rights, powers and authority which this Agreement confers on the Proxy Holders may be terminated at any time or in any manner other than as provided in this Agreement. 

13.03. Concurrent with the execution and delivery of this Agreement, the Shareholder shall annotate all certificates representing the
Shares with the legend set out below to reflect that the Shares are subject to a proxy which is terminable only at such time or times, and in such manners, as are provided in this Agreement: 

The shares represented by this certificate are subject to a Proxy Agreement dated
                        , under which the owner of these Shares has granted to the Proxy Holders named therein, and to
their successors, those voting rights with respect to the shares represented hereby that are set forth in said Agreement, which rights are terminable only at such time or times, and in such manner as are provided in said agreement. The purpose of
said Agreement is to meet the requirements of the Department of Defense so that the facility security clearances of the Corporation may be continued. 

13.04. All certificates representing the Shares shall be deposited with the Proxy Holders in trust for the Shareholder and made available
for review by DSS and the Shareholder. Receipts for such certificates shall be provided to the Shareholder. 
 13.05. If
additional Shares of the Corporation are issued to the Shareholder, it shall be a condition of such issuance that the Shareholder execute a supplemental Proxy Agreement containing the same terms and conditions set forth in this Agreement, appointing
the current Proxy Holders as its proxies to exercise all voting rights with respect to such shares. The certificates for such shares shall be annotated in the same manner as provided in Section 13.03 above. 

 

 18 

 13.06. Nothing in this Agreement shall restrict the right of the Shareholder or any
successor owner of the Shares from selling, transferring, pledging or otherwise encumbering, all the Shares, or a portion thereof, subject to the terms and conditions of this Agreement, as appropriate, and the aforementioned restrictive legend shall
not purport nor be construed to limit any owner’s ability to effect any such sale, transfer or encumbrance. However, DSS shall be advised in writing of any proposed sale of the Shares or assets of the Corporation prior to the execution of any
sales agreement. Conversely, the Proxy Holders shall not have the power to sell, transfer or pledge or otherwise encumber the Shares, * * *. 

Article XIV - Dividends 

14.01. During the term of this Agreement, the Shareholder, or its successor, shall be entitled from time to time to receive from the Proxy
Holders payments equal to cash dividends, if any, collected by or for the account of the Proxy Holders upon the Shares. 

14.02. In the event the Proxy Holders receive any shares as a dividend upon the Shares, the Proxy Holders shall accept such shares.

 Article XV - Notices 

15.01. All notices required or permitted to be given to the Parties to this Agreement shall be given by mailing the same in a sealed,
post-paid envelope, via registered or certified mail, or by sending the same by courier or facsimile, addressed to the addressees shown below, or to such other addressees as the Parties may designate from time to time: 

 

			
	For the Ultimate Shareholders:	  	Phillip DeZwirek
		  	Yonge-Eglinton Centre
		  	2300 Yonge Street
		  	P.O. Box 2408, Suite 1710
		  	Toronto, Ontario M4P 1E4
		  	Canada
		
		  	Jason DeZwirek
		  	Yonge-Eglinton Centre
		  	2300 Yonge Street
		  	P.O. Box 2408, Suite 1710
		  	Toronto, Ontario M4P 1E4
		  	Canada
		
	For the Shareholder:	  	API Technologies Corp.
		  	c/o Phillip DeZwirek
		  	Yonge-Eglinton Centre
		  	2300 Yonge Street
		  	P.O. Box 2408, Suite 1710
		  	Toronto, Ontario M4P 1E4
		  	Canada

  

 19 

			
	For the Corporation:	  	Steve Pudles
		  	API Defense USA, Inc.
		  	345 Pomroys Drive
		  	Windber, PA 15963
		
	For DSS:	  	Director, Industrial Policy and Programs
		  	Defense Security Service
		  	Department of Defense
		  	1340 Braddock Place
		  	Alexandria, VA 22314

 Article XVI - Inconsistencies with
Other Documents 
 16.01. In the event that any resolution, regulation or bylaw of any of the Parties to the Agreement is
found to be inconsistent with any provision of this Agreement, the terms of this Agreement shall control. 
 Article XVII - Governing Law and
Construction 
 17.01. This Agreement shall be construed so as to comply with all applicable U.S. laws, regulations, and
Executive Orders except that, to the extent not inconsistent with the rights of the United States hereunder, the laws of the State of Delaware shall apply to questions concerning the rights, powers, and duties of the Corporation, the Parent
Corporation, and the Ultimate Shareholders under, or by virtue of, this Agreement. 
 17.02. In all instances consistent with
the context, nouns and pronouns of any gender shall be construed to include the other gender. 
 Article XVIII - Termination, Amendment and
Interpretations of the Agreement 
 18.01. After five (5) years from the effective date of this Agreement, if this
Agreement is not otherwise terminated pursuant to Section 18.02 below, this Agreement shall continue in successive thirty (30) day periods until such time as the Parties execute a revised, restated or alternative agreement effectively
mitigating FOCI at the Corporation. The Shareholder and the Corporation jointly shall notify DSS no later than ninety (90) days prior to the running of the five (5) year term with a proposed revised, restated or alternative agreement and
shall include with such proposal a detailed description of the foreign ownership, control or influence. The Parties agree to negotiate a revised, restated or alternative agreement in conformance with U.S. Government industrial security policy in
good faith and to use best efforts to execute such agreement expeditiously. 
 18.02. This Agreement may only be terminated by
DSS as follows: 
 a. in the event of a sale of the business or all of the Shares of the Corporation to a company or person not
under FOCI; 
 b. when the existence of this Agreement is no longer necessary to maintain a facility security clearance for the
Corporation; 
  

 20 

 c. when the continuation of a facility security clearance for the Corporation is no longer
necessary; 
 d. when there has been a breach of this Agreement that requires it to be terminated, or when DoD otherwise
determines that termination is in the national interest; 
 e. when the Shareholder and the Corporation for any reason and at
any time, petition DSS to terminate this Agreement; however, DSS has the right to receive full disclosure of the reason or reasons therefor, and has the right to determine, in its sole discretion, whether such petition should be granted; or

 f. for any reason upon or following the date that is five (5) years from the effective date of this Agreement.

 18.03. If DoD determines that this Agreement should be terminated for any reason, DSS shall provide the Corporation and the
Shareholder with thirty (30) days written advance notice of its intent and the reasons therefor. 
 18.04. DoD may only
refuse to terminate this Agreement when its continuation is necessary in the interest of the national security of the United States. 

18.05. This Agreement may be amended by an agreement in writing executed by all Parties. 

18.06. The Proxy Holders are authorized to consult with the Shareholder concerning any proposed amendments to, or termination of, this
Agreement. Documentation concerning such consultations shall be prepared and retained by the Proxy Holders for review by DSS. 

18.07. The Parties to this Agreement agree that any questions concerning the interpretation of this Agreement or whether a proposed
activity is permitted hereunder, shall be referred to DSS, and that DoD shall serve as final arbiter/interpreter of such matters; provided that DSS shall not require the Shareholder or the Ultimate Shareholders to violate requirements of the
applicable securities laws, rules or regulations, or Delaware law. 
 Article XIX - Actions Upon Termination of this Agreement

 19.01. Upon termination of this Agreement in any manner provided herein, the restrictive legend affixed to the
certificates representing the Shares will be removed. 
 19.02. DSS shall furnish the Corporation and the Shareholder with
written notice of the termination of this Agreement. 
 19.03. Upon termination of this Agreement, all further obligations or
duties of the Proxy Holders under this Agreement shall cease. 
  

 21 

 Article XX - Place of Filing 

20.01. Upon execution and until the termination of this Agreement, one original counterpart shall be filed at the principal office of the
Corporation, located in Windber, Pennsylvania. 
 Article XXI - Integration 

21.01. This Agreement embodies the entire understanding of the Parties with respect to the subject matter herein and supersedes all prior
negotiations, understandings and agreements, whether written, oral, or implied. 
 EXECUTION 

This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of such counterparts
shall together constitute but one and the same instrument. The Parties to this Agreement are entitled to retain an executed counterpart of this Agreement. 

IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement which shall not become effective until duly executed by
the DoD. 
  

							
	  
	 		 	By:	 	 /s/ Stephen Pudles

	Signature of Witness	 		 	Name:	 	
		 		 	Title:	 	
		 		 		 	FOR API DEFENSE USA, INC.
				
	  
	 		 	By:	 	 /s/ Phillip DeZwirek

	Signature of Witness	 		 	Name:	 	
		 		 	Title:	 	
		 		 		 	FOR API TECHNOLOGIES CORP.
				
	  
	 		 	By:	 	 /s/ Phillip DeZwirek

	Signature of Witness/Date	 		 		 	Phillip DeZwirek
				
	  
	 		 	By:	 	 /s/ Jason DeZwirek

	Signature of Witness/Date	 		 		 	Jason DeZwirek
				
	  
	 		 	By:	 	 /s/ Robert T. Conway, Jr.

	Signature of Witness	 		 		 	Robert T. Conway, Jr.
		 		 		 	PROXY HOLDER
				
	  
	 		 	By:	 	 /s/ Kenneth L. Fisher

	Signature of Witness	 		 		 	Kenneth L. Fisher
		 		 		 	PROXY HOLDER

  

 22 

							
	  
	 		 	By:	 	 /s/ Richard D. Hearney

	Signature of Witness	 		 		 	Richard D. Hearney
		 		 		 	PROXY HOLDER
				
	  
	 		 	By:	 	 /s/ Drew R. Winneberger

	Effective Date	 		 		 	Drew R. Winneberger
	(Date of DSS Signature)	 		 		 	Director, Industrial Policy and Programs
		 		 		 	Defense Security Service
		 		 		 	FOR THE DEPARTMENT OF DEFENSE

  

 23 

 PROXY AGREEMENT 

WITH RESPECT TO CAPITAL STOCK 

OF 
 API
DEFENSE USA, INC. 
 ATTACHMENT A 

LIST OF AFFILIATES OF API TECHNOLOGIES CORP. 

API Nanotronics Holdings Corp. 
 Pace
Technology, Inc. 
 API Nanofabrication and Research Corporation 

 PROXY AGREEMENT 

WITH RESPECT TO CAPITAL STOCK 

OF 
 API
DEFENSE USA, INC. 
 ATTACHMENT B 

LIST OF INVESTORS 
 GMP
Diversified Alpha Master Fund Ltd. 
 Goodman & Company, Investment Counsel Ltd. 

Harvey Sandler Revocable Trust 

 API DEFENSE USA, INC. 

PROXY HOLDER CERTIFICATE 

Pursuant to the provisions of the National Industrial Security Program Operating Manual, DoD 5220.22-M, and the proposed Proxy Agreement
among API Defense USA, Inc., API Technologies Corp., certain shareholders, each of whom owns or controls five percent or more of the voting shares of API Technologies Corp., the Department of Defense, and the Proxy Holders for the stock of API
Defense USA, Inc., under which I will be one of the Proxy Holders, the following assurances are provided: 
 1. I am a United
States citizen currently residing within the continental United States, capable of assuming full responsibility for voting the stock of API Defense USA, Inc., and exercising the management prerogative relating thereto in such a way as to ensure that
API Technologies Corp. and its affiliates will be effectively insulated from API Defense USA, Inc., the cleared facility, and any of its cleared subsidiaries. 

2. I agree to be processed for a personnel security clearance to the same level as the API Defense USA, Inc. facility clearance. I
understand that my personnel clearance must be maintained while serving as a Proxy Holder for API Defense USA, Inc. 
 3. I am a
completely disinterested individual with no prior involvement with API Defense USA, Inc., including any of its subsidiaries, or API Technologies Corp., including any of its affiliates. 

4. I fully understand the functions and the responsibilities of a Proxy Holder under the proposed Proxy Agreement, and I am willing to
accept those responsibilities. 
  

					
	Signed:	 	  

	Name:	 		 	
	Dated:	 	  
	 	

  

					
	Witness:	 	  

 API DEFENSE USA, INC. 

GOVERNMENT SECURITY COMMITTEE MEMBER CERTIFICATE 

By execution of this Certificate, I acknowledge the protective security measures that have been taken by API Defense USA, Inc. through
resolutions dated                     , to implement the Proxy Agreement (“Agreement”), copies of which are attached. 

I further acknowledge that the United States Government has placed its reliance on me as a United States citizen and as a holder of a
personnel security clearance to exercise all appropriate aspects of the Agreement; to assure that members of the API Defense USA, Inc. Board of Directors, officers, representatives, agents and employees comply with the provisions of the Agreement;
and to assure that the Defense Security Service is advised of any violation of, or attempt to violate, any undertaking in the Agreement, appropriate contract provisions regarding security, or the National Industrial Security Program Operating
Manual, DoD 5220.22-M, of which I am aware. 
  

					
	Dated:	 	  

 

			
	Signature:	 	  

	Name:

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