Document:

Exhibit 10.2

 

TAX PROTECTION AGREEMENT

 

This TAX PROTECTION AGREEMENT
(this “Agreement”) is entered into as of October 4, 2017, by and among Phillips Edison Grocery Center REIT I,
Inc., a Maryland corporation (the “REIT”), Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware
limited partnership (the “Operating Partnership”), and each Protected Partner identified as a signatory on Schedule
I, as amended from time to time.

 

RECITALS

 

WHEREAS, the REIT is
a real estate investment trust within the meaning of Section 856 of the Code;

 

WHEREAS, the REIT is
the sole member of Phillips Edison Grocery Center OP GP I LLC, a Delaware limited liability company and general partner of the
Operating Partnership, and a limited partner of the Operating Partnership;

 

WHEREAS, the REIT desires
to cause the Operating Partnership to acquire a portfolio of properties currently owned, directly or indirectly, by certain entities,
as set forth in the Contribution Agreement; and

 

WHEREAS, as a condition
to engaging in the Contribution Transactions, and as an inducement to do so, the parties hereto are entering into this Agreement;

 

NOW, THEREFORE, in consideration
of the promises and mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE
I

DEFINED TERMS

 

For purposes of this
Agreement the following terms shall apply:

 

Section 1.1           “50%
Termination” has the meaning set forth in the definition of “Tax Protection Period.”

 

Section 1.2           “Affiliate”
means, with respect to any Person, any Person directly or indirectly controlling or controlled by or under common control with
such Person. For the purposes of this definition, “control” when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled”
have meanings correlative to the foregoing.

 

Section 1.3           “Allocation
Shortfall” has the meaning set forth in Section 2.4(b).

 

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

 

     

     

    

 

Section
1.5           “Approval of the Partners’
Representative” means the written approval of the Partners’ Representative with respect to any matter or
transaction (for the avoidance of doubt, no vote in favor of any transaction by the Partners’ Representative or any of
its Affiliates in its capacity as owner of shares of the REIT or OP Units shall constitute such approval).

 

Section 1.6           “Approved
Liability” means:

 

(a)          A
liability of the Operating Partnership (or of an entity whose separate existence from the Operating Partnership is disregarded
for U.S. federal income tax purposes) with respect to which all of the following requirements are satisfied:

 

(i)          the
liability is secured by real property or other assets (the “Collateral”) owned directly by the Operating Partnership
or by an entity whose separate existence from the Operating Partnership is disregarded for U.S. federal income tax purposes;

 

(ii)         on
the date on which the Operating Partnership designated such liability as an Approved Liability, the outstanding principal amount
(and any accrued and unpaid interest) of the liability and any other Approved Liabilities secured by such Collateral at such time
was no more than 65% of the fair market value (as reasonably determined in good faith by the Operating Partnership) of the Collateral
at such time, provided that if interest on such liability is “pay in kind” or otherwise not required to be paid
(in cash) at least annually or if the documents evidencing such liability permit the borrower to borrow additional amounts that
are secured by the Collateral, the outstanding principal amount of such liability shall include the maximum amount that could be
so added to the principal amount of such liability without a default;

 

(iii)        no
other Person has executed any guarantees with respect to such liability other than: (A) guarantees by the Protected Partners; (B)
guarantees by Affiliates of the Operating Partnership, provided that each applicable Protected Partner indemnifies each such Affiliate
against any liability of such Affiliate (to the extent such liability does not exceed such Protected Partner’s Required Liability
Amount) arising solely from the existence or performance of such guarantee; and (C) non-recourse carve out guarantees (i.e., bad-boy
guarantees);

 

(iv)        the
Collateral does not provide security for another liability (other than another Approved Liability) that ranks senior to, or pari
passu with, the liability described in clause (i) above; and

 

(v)         the
liability is a Guarantee Permissible Liability.

 

For purposes of determining
whether clause (ii) has been satisfied in situations where one or more potential Approved Liabilities are secured by more than
one item of Collateral, the Operating Partnership shall allocate such liabilities among such items of Collateral in proportion
to their relative fair market values (as reasonably determined in good faith by the Operating Partnership); or

 

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(b)          Any
other indebtedness approved by the Partners’ Representative (or its successor or designee) in its sole and absolute discretion.

 

Section 1.7           “Closing
Date” has the meaning assigned to it in the Contribution Agreement.

 

Section
1.8           “Code” means the Internal Revenue
Code of 1986, as amended.

 

Section
1.9           “Collateral” has the meaning set
forth in the definition of “Approved Liability.”

 

Section
1.10         “Contribution Agreement” means the Contribution
Agreement by and among the REIT, the Operating Partnership, PELP and certain other parties, dated as of May 18, 2017,
pursuant to which the Operating Partnership will acquire, among other things, a portfolio of properties currently owned,
directly or indirectly, by certain entities as set forth in such agreement.

 

Section 1.11         “Contribution
Transactions” means the acquisition of a portfolio of properties pursuant to the Contribution Agreement.

 

Section 1.12         “Debt
Gross Up Amount” has the meaning set forth in definition of “Make Whole Amount.”

 

Section
1.13         “Debt Notification Event” means, with respect to
a Nonrecourse Liability or an Approved Liability, any transaction (a) in which such liability shall be refinanced, otherwise
repaid, or guaranteed by any of the REIT, the Operating Partnership, or one or more of their Affiliates, or guaranteed by one
or more partners of the Operating Partnership, or (b) that would otherwise result in any reduction in the amount of
Nonrecourse Liabilities or Approved Liabilities allocated to a Protected Partner; in each case other than fixed scheduled
payments of principal occurring prior to the maturity date of such liability.

 

Section 1.14         “DownREIT
OP Units” has the meaning set forth in Section 3.2(a)(ii).

 

Section
1.15         “Exchange” has the meaning set forth in Section
2.1(b).

 

Section
1.16         “Fundamental Transaction” means, with respect to
any entity, a merger, combination, consolidation or similar transaction (including a transfer of all or substantially all of
the assets of such entity).

 

Section 1.17         “Fundamental
Transaction Gross Up Amount” has the meaning set forth in definition of “Make Whole Amount.”

 

Section 1.18         “Gain
Transaction” has the meaning set forth in Section 2.1(a).

 

Section 1.19         “Gross
Up Amount” has the meaning set forth in definition of “Make Whole Amount.”

 

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Section
1.20         “Guarantee” has the meaning set forth in Section
2.4(b).

 

Section 1.21         “Guarantee
Opportunity” has the meaning set forth in Section 2.4(b).

 

Section 1.22         “Guarantee
Permissible Liability” means a liability with respect to which the lender permits a guarantee.

 

Section 1.23         “Make
Whole Amount” means:

 

(a)          with
respect to any Protected Partner that recognizes income or gain under Section 704(c) of the Code as a result of a Tax Protection
Period Transfer, the sum of (i) the product of (A) the amount of income or gain recognized by such Protected
Partner under Section 704(c) of the Code in respect of such Tax Protection Period Transfer (taking into account any adjustments
under Section 743 of the Code to which such Protected Partner is entitled) multiplied by (B) the Make Whole Tax
Rate, plus (ii) an amount equal to the combined U.S. federal and applicable state income taxes (calculated using the
Make Whole Tax Rate) imposed on such Protected Partner as a result of the receipt by such Protected Partner of a payment under
Section 2.2 (the “Gross Up Amount”);

 

(b)          with
respect to any Protected Partner that recognizes income or gain as a result of a breach by the Operating Partnership of the provisions
of Section 2.4 hereof, the sum of (i) the product of (A) the amount of income or gain recognized by such Protected
Partner by reason of such breach, multiplied by (B) the Make Whole Tax Rate, plus (ii) an amount equal to the combined
U.S. federal and applicable state income taxes (calculated using the Make Whole Tax Rate) imposed on such Protected Partner as
a result of the receipt by such Protected Partner of a payment under Section 2.4 (the “Debt Gross Up Amount”);
and

 

(c)          with
respect to any Protected Partner that recognizes income or gain as a result of a Fundamental Transaction described in clause (ii)
of Section 2.1(a) or as a result of the receipt of consideration payable pursuant to Section 3.5, the sum of (i)
the product of (A) the amount of income or gain recognized by such Protected Partner in respect of such transaction, multiplied
by (B) the Make Whole Tax Rate, plus (ii) an amount equal to the combined U.S. federal and applicable state income taxes
(calculated using the Make Whole Tax Rate) imposed on such Protected Partner as a result of the receipt by such Protected Partner
of a payment under Section 2.2 or Section 3.5, as applicable (the “Fundamental Transaction Gross Up Amount”).

 

For the avoidance of
doubt, each Make Whole Amount shall be calculated pursuant to the formula set forth above, and the actual taxes or tax attributes
of the Protected Partners shall not be taken into account. For purposes of calculating the amount of Section 704(c) gain that
is allocated to a Protected Partner, (i) subject to clause (ii) below, any “reverse Section 704(c) gain”
allocated to such Protected Partner pursuant to Treasury Regulations Section 1.704-3(a)(6) shall not be taken into account, provided,
however, that (ii) if, as a result of adjustments to the Gross Asset Value (as defined in the OP Agreement) of the
Protected Properties pursuant to clause (b) of the definition of Gross Asset Value as set forth in the OP Agreement, all or a portion
of the gain recognized by the Operating Partnership that would have been Section 704(c) gain without regard to such adjustments
becomes or is treated as “reverse Section 704(c) gain” or Section 704(b) gain under Section 704 of the
Code, then such gain shall continue to be treated as Section 704(c) gain.

 

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Section 1.24         “Make
Whole Tax Rate” means, with respect to a Protected Partner who is entitled to receive a payment under Section 2.2,
Section 2.4 or Section 3.5, the highest combined statutory U.S. federal and state tax rate in respect of the income
or gain that gave rise to such payment, taking into account the character of the income and gain in the hands of such Protected
Partner, for the taxable year in which such gain or income is recognized.

 

Section 1.25         “Nonrecourse
Liability” means a liability that is a “nonrecourse liability” for purposes of Section 752 of the Code and
the Treasury Regulations thereunder and “qualified nonrecourse financing” as defined in Section 465(b)(6) of the Code.

 

Section 1.26         “OP
Agreement” means the Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended
from time to time.

 

Section 1.27         “OP
Units” means common units of partnership interest in the Operating Partnership.

 

Section 1.28         “Operating
Partnership” has the meaning set forth in the preamble.

 

Section 1.29         “Partners’
Representative” means any Person designated as the “Partners’ Representative” pursuant to Section
4.16(a).

 

Section 1.30         “Partners’
Representative Expenses” has the meaning set forth in Section 4.16(c).

 

Section 1.31         “Pass
Through Entity” means an entity treated as a partnership, grantor trust, or S corporation for U.S. federal income tax
purposes.

 

Section 1.32         “PELP”
means Phillips Edison Limited Partnership, a Delaware limited partnership, or its permitted assigns.

 

Section 1.33         “Permitted
Disposition” means a sale, exchange or other disposition of OP Units (a) by a Protected Partner: (i) to such Protected
Partner’s children, spouse or issue; (ii) to a trust solely for the benefit of (A) such Protected Partner, (B) such Protected
Partner’s children, spouse or issue, and/or (C) a spouse of any of such Protected Partner’s children; (iii) in the
case of a trust which is a Protected Partner, solely to its beneficiaries, or any of them, whether current or remainder beneficiaries;
(iv) to an inter vivos or testamentary trust of which such Protected Partner and/or the spouse or child of such Protected
Partner is the trustee; (v) in the case of any partnership or limited liability company which is a Protected Partner, solely to
its direct partners or members; and/or (vi) in the case of any corporation which is a Protected Partner, to its shareholders, and
(b) by a party described in clauses (i), (ii), (iii) or (iv) to a partnership, limited liability company or corporation of which
the only partners, members or shareholders, as applicable, are parties described in clauses (i), (ii), (iii) or (iv); provided,
that for purposes of a 50% Termination (as defined in the definition of Tax Protection Period), such Protected Partner shall be
treated as continuing to own any OP Units which were subject to a Permitted Disposition unless and until there has been a sale,
exchange or other disposition of such OP Units by a permitted transferee which is not another Permitted Disposition.

 

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Section 1.34         “Person”
means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or
other entity.

 

Section 1.35         “Protected
Partner” means: (a)  each signatory on Schedule I attached hereto, as amended from time to time; (b) any
Person who holds OP Units and who acquired such OP Units from another Protected Partner in a Permitted Disposition in which such
Person’s adjusted basis in such OP Units, as determined for U.S. federal income tax purposes, is determined, in whole or
in part, by reference to the adjusted basis of the other Protected Partner in such OP Units; and (c) with respect to a Protected
Partner that is Pass Through Entity, and solely for purposes of computing the amount to be paid under Section 2.2, Section
2.4 or Section 3.5, as applicable, with respect to such Protected Partner, any Person who (i) holds an interest
in such Protected Partner, either directly or through one or more Pass Through Entities, and (ii) is required to include all
or a portion of the income of such Protected Partner in its own gross income.

 

Section 1.36         “Protected
Property” means each property identified on Exhibit A hereto and each property and/or interest acquired in Exchange
for a Protected Property as set forth in Section 2.1(b).

 

Section 1.37         “Public
DownREIT” means a real estate investment trust (within the meaning of Section 856 of the Code) (a) that holds some, but
not substantially all, of its assets through a single subsidiary operating partnership that is treated as a partnership for U.S.
federal income tax purposes and (b) whose common equity interests are listed on the New York Stock Exchange or another national
securities exchange.

 

Section 1.38         “Public
UPREIT” means a real estate investment trust (within the meaning of Section 856 of the Code) (a) that holds all or substantially
all of its assets through a single subsidiary operating partnership that is treated as a partnership for U.S. federal income tax
purposes and (b) whose common equity interests are listed on the New York Stock Exchange or another national securities exchange.

 

Section 1.39         “Required
Liability Amount” means, with respect to each Protected Partner, 142% of the amount of such Protected Partner’s
actual “negative tax capital account” determined as of the Closing Date; provided however, that with respect to any
OP Units that PELP, Aegis Realty Operating Partnership, L.P., WG Station Holding Company LLC, East Pointe Station II HoldCo LLC,
or WG Station IX LLC distributes to its partners who are Protected Partners, such amount shall be determined as of the date of
such distribution, taking into account such distribution; provided, further, that the aggregate Required Liability Amount for all
Protected Partners shall be no greater than $160,000,000 (the “Required Liability Amount Cap”). A current estimate
of the Required Liability Amount for each Protected Partner is set forth on Exhibit C hereto. In the event the aggregate
Required Liability Amount for all Protected Partners exceeds the Required Liability Amount Cap, the Required Liability Amount for
each Protected Partner shall be reduced proportionately based on the Protected Partners’ relative Required Liability Amounts,
such that the aggregate Required Liability Amount for all Protected Partners shall not exceed the Required Liability Amount Cap.

 

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Section 1.40         “Required
Liability Amount Cap” has the meaning set forth in the definition of “Required Liability Amount.”

 

Section 1.41         “REIT”
has the meaning set forth in the preamble.

 

Section 1.42         “Section
2.4 Notice” has the meaning set forth in Section 2.4(c).

 

Section 1.43         “Tax
Protection Period” means the period commencing on the Closing Date and ending on the tenth (10th) anniversary
of the Closing Date; provided, however, that (a) such period shall end with respect to any Protected Partner (i)
if such Person owns less than fifty percent (50%) of the OP Units received by the Protected Partner in the Contribution Transactions
on the Closing Date, disregarding Permitted Dispositions (such an event, a “50% Termination”) or (ii) with respect
to any OP Units acquired by such Protected Partner as a result of the death of another Protected Partner, if such death results
in a step-up in the adjusted basis in such OP Units, and (b) such period shall end with respect to all Protected Partners other
than Michael C. Phillips (and any Protected Partners to the extent they acquired OP Units from Michael C. Phillips) if there is
a 50% Termination with respect to Jeffrey S. Edison and his affiliates.

 

Section 1.44         “Tax
Protection Period Transfer” has the meaning set forth in Section 2.1(a).

 

Section 1.45         “Transfer”
means any direct or indirect sale, exchange, transfer or other disposition, whether voluntary or involuntary.

 

Section 1.46         “Treasury
Regulations” means the income tax regulations under the Code, whether such regulations are in proposed, temporary or
final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

ARTICLE
II

 

TAX MATTERS

 

Section 2.1           Taxable
Transfers.

 

(a)          Unless
the Operating Partnership receives the Approval of the Partners’ Representative with respect to a Tax Protection Period Transfer
or an applicable Fundamental Transaction, during the Tax Protection Period, if the Operating Partnership or any entity in which
the Operating Partnership holds a direct or indirect interest shall cause or permit or suffer to occur (i) any Transfer of all
or any portion of a Protected Property (including any interest therein or in the entity owning, directly or indirectly, the Protected
Property) in a transaction that would result in the recognition of taxable income or gain by any Protected Partner under Section 704(c)
of the Code (a “Tax Protection Period Transfer”), or (ii) any Fundamental Transaction with respect to the Operating
Partnership that would result in the recognition of taxable income or gain by any Protected Partner (a “Gain Transaction”),
then subject to ARTICLE III below, the Operating Partnership shall make a payment to each applicable Protected Partner as
required under Section 2.2.

 

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(b)          Subject
to ARTICLE III below, Section 2.1(a) shall not apply to any Tax Protection Period Transfer of a Protected Property
(including any interest therein or in the entity owning, directly or indirectly, the Protected Property) or any Fundamental Transaction
with respect to the Operating Partnership, in each case in a transaction in which no income or gain is required to be recognized
by a Protected Partner (an “Exchange”), including a transaction qualifying under Section 1031 or Section
721 (or any successor statutes) of the Code; provided, however, that any property and/or interests acquired by the
Operating Partnership in any Exchange shall remain subject to the provisions of this ARTICLE II in place of the exchanged
Protected Property for the remainder of the Tax Protection Period.

 

(c)          Any
successor to the Operating Partnership must expressly assume the obligations of the Operating Partnership under this ARTICLE
II as a condition to becoming a successor to the Operating Partnership.

 

Section 2.2           Indemnification
for Taxable Transfers.

 

(a)          Subject
to ARTICLE III below, in the event of a Tax Protection Period Transfer or Fundamental Transaction described in Section
2.1(a), the Operating Partnership shall pay an amount of cash equal to the estimated Make Whole Amount to each Protected Partner
(i) in the case of a Tax Protection Period Transfer, no later than the thirteenth (13th) day after the end of the quarter
in which such Tax Protection Period Transfer took place, and (ii) in the case of a Fundamental Transaction, within ten (10) business
days after the closing of such Fundamental Transaction. If it is later determined that the true Make Whole Amount applicable to
a Protected Partner exceeds the estimated Make Whole Amount applicable to such Protected Partner, then the Operating Partnership
shall pay such excess to such Protected Partner within ten (10) business days after the date of such determination, and if such
estimated Make Whole Amount exceeds the true Make Whole Amount, then such Protected Partner shall pay such excess to the Operating
Partnership within ten (10) business days after the date of such determination, but only to the extent such excess was actually
received by such Protected Partner.

 

(b)          For
the avoidance of doubt, a vote in favor of a Tax Protection Period Transfer or Fundamental Transaction by a Protected Partner or
the Partners’ Representative in its capacity as, or acting for, an owner of OP Units or shares of the REIT shall not constitute
a waiver of such Protected Partner’s right to indemnification pursuant to this Section 2.2 as a result of such Tax
Protection Period Transfer or Fundamental Transaction.

 

Section
2.3           Section 704(c) Methodology. The Operating
Partnership shall use the traditional method (without curative allocations) as set forth in Treasury Regulations Section
1.704-3(b) with respect to the Protected Properties. A good faith estimate of the initial amount of Section 704(c) gain
allocable to each Protected Property as of the Closing Date of the Contribution Transactions is set forth on Exhibit
B hereto. The parties acknowledge that the initial amount of such Section 704(c) gain may be adjusted over time,
including as required by Section 704(c) of the Code and the Treasury Regulations promulgated thereunder.

 

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Section 2.4           Nonrecourse
Liability Maintenance and Debt Guarantee.

 

(a)          During
the Tax Protection Period, the Operating Partnership shall: (i) use its commercially reasonable best efforts to maintain on a continuous
basis an amount of Nonrecourse Liabilities that would be allocated to each Protected Partner under Treasury Regulations Section
1.752-3 and for purposes of Section 465(b)(6) of the Code at least equal to the Required Liability Amount with respect to such
Protected Partner (provided that from time to time, and for a specified period of time, the Operating Partnership may, with the
Approval of the Partners’ Representative, maintain a lower amount of Nonrecourse Liabilities that would be allocated to each
Protected Partner pursuant to this clause (i)); (ii) allocate excess nonrecourse liabilities (within the meaning of Treasury Regulations
Section 1.752-3(a)(3)) in a manner that results in the greatest amount of excess nonrecourse liabilities being allocated to the
Protected Partners; and (iii) provide the Partners’ Representative, promptly upon request, with a description of the nature
and amount of any Approved Liabilities that are available to be guaranteed by the Protected Partners pursuant to Section 2.4(b)
of this Agreement.

 

(b)          During
the Tax Protection Period, in the event that the amount of Nonrecourse Liabilities allocated to any Protected Partner is, or is
expected to be, less than the Required Liability Amount (unless the Operating Partnership has obtained the Approval of the Partners’
Representative for such lower amount for the applicable period of time pursuant to Section 2.4(a)(i)) with respect to such Protected
Partner (such shortfall, an “Allocation Shortfall”), the Operating Partnership shall provide such Protected
Partner with (i) written notice of such Allocation Shortfall, which notice shall be provided no later than thirty (30) days prior
to the occurrence of such Allocation Shortfall, and (ii) the opportunity to execute an enforceable guarantee (a “Guarantee”)
on a form provided by the Partners’ Representative and approved by the Operating Partnership (which approval shall not be
unreasonably withheld), of one or more Approved Liabilities in an amount up to such Allocation Shortfall (each such opportunity,
a “Guarantee Opportunity”). The Guarantee provided by any Protected Partner shall not be subordinated (i.e.,
have relatively higher economic risk) to any other guarantees of the same debt covered by such Protected Partner’s Guarantee.
The Operating Partnership shall have the discretion to identify the Approved Liability or Approved Liabilities that shall be made
available for guarantee by each Protected Partner. Each Protected Partner that is a Pass Through Entity and its indirect owners
may allocate the Guarantee Opportunity afforded to such Protected Partner in any manner they choose. The Operating Partnership
agrees to file its tax returns allocating any debt subject to a Guarantee to the applicable Protected Partners without disclosure
(relating to the avoidance of penalties), except to the extent that the Operating Partnership is required to do otherwise as a
result of (i) a final determination to the contrary within the meaning of Section 1313(a) of the Code (or comparable applicable
state law) or (ii) a change in applicable tax law after the date this Agreement is executed. Each Protected Partner shall bear
the costs incurred by it in connection with the execution of any Guarantee to which it is a party. To the extent a Protected Partner
executes a Guarantee, the Operating Partnership shall deliver a copy of such Guarantee to the applicable lender promptly after
receiving such copy from the relevant Protected Partner.

 

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(c)          During
the Tax Protection Period, the Operating Partnership shall not allow a Debt Notification Event to occur unless the Operating Partnership
provides at least thirty (30) days’ written notice (a “Section 2.4 Notice”) to each Protected Partner
that may be affected thereby. The Section 2.4 Notice shall describe the Debt Notification Event and designate one or more Approved
Liabilities that may be guaranteed by the Protected Partners pursuant to Section 2.4(b) of this Agreement. The Section 2.4
Notice shall be deemed to have been provided when delivered to the Protected Partner in accordance with Section 15.2 of the OP
Agreement. Any Protected Partner that desires to execute a Guarantee following the receipt of a Section 2.4 Notice shall provide
the Operating Partnership with notice thereof within ten (10) days after the date of the Section 2.4 Notice.

 

(d)          If
the Operating Partnership fails to comply with any provision of this Section 2.4 (and the Operating Partnership does not
receive the Approval of the Partners’ Representative with respect to such failure), the Operating Partnership shall pay an
amount of cash equal to the estimated Make Whole Amount to each Protected Partner no later than the thirteenth (13th)
day after the end of the quarter in which in which such failure took place. If it is later determined that the true Make Whole
Amount applicable to a Protected Partner exceeds the estimated Make Whole Amount applicable to such Protected Partner, then the
Operating Partnership shall pay such excess to such Protected Partner within ten (10) business days after the date of such determination,
and if such estimated Make Whole Amount exceeds the true Make Whole Amount, then such Protected Partner shall pay such excess to
the Operating Partnership within ten (10) business days after the date of such determination, but only to the extent such excess
was actually received by such Protected Partner.

 

ARTICLE
III

 

Fundamental
Transaction Matters

 

Section 3.1           Public
UPREIT Surviving Company.

 

(a)          In
the case of any Fundamental Transaction in which the REIT or the Operating Partnership is acquired by or merged with or into a
Public UPREIT, each Protected Partner shall be provided with at least the following choices of consideration for each OP Unit held
by such Protected Partner immediately prior to the transaction:

 

(i)          the
same consideration that is paid with respect to each share of the REIT’s common stock in the transaction in accordance with
Section 11.2(c)(i) of the OP Agreement; and

 

(ii)         common
units of partnership interest in the operating partnership of such Public UPREIT, with terms that are at least as favorable as
the terms of the OP Units and otherwise in accordance with Section 11.2(c)(ii) of the OP Agreement.

 

(b)          For
the avoidance of doubt, subject to compliance with the ongoing terms of this Agreement by the Public UPREIT, if the consideration
choices described in Section 3.1(a) are offered to the Protected Partners and, in the case of clause (a)(ii) above, in a
transaction that is not a Gain Transaction, the Operating Partnership shall not be required to pay any Make Whole Amount pursuant
to Section 2.2 or Section 3.5, and no consent of OP Unit holders shall be required for the consummation of the Fundamental
Transaction other than the consent described in Article 11 of the OP Agreement.

 

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Section 3.2           Public
DownREIT Surviving Company.

 

(a)          In
the case of any Fundamental Transaction in which the REIT or the Operating Partnership is acquired by or merged with or into a
Public DownREIT, each Protected Partner shall be provided with at least the following choices of consideration for each OP Unit
held by such Protected Partner immediately prior to the transaction:

 

(i)          the
same consideration that is paid with respect to each share of the REIT’s common stock in the transaction in accordance with
Section 11.2(c)(i) of the OP Agreement; and

 

(ii)         common
units of partnership interest in the operating partnership of such Public DownREIT (“DownREIT OP Units”), with
terms that are at least as favorable as the terms of the OP Units and otherwise in accordance with Section 11.2(c)(ii) of the OP
Agreement; provided that such partnership must (A) have and maintain at all times subordinate units of partnership interest (e.g.,
owned by the Public DownREIT) with a value equal to at least 100% of the value of the OP Units exchanged for DownREIT OP Units;
and (B) not have at closing, or thereafter incur, debt (including debt-like preferred or senior units) that would, at the time
incurred, cause such partnership to have aggregate leverage on a consolidated basis in excess of 65% of the fair market value of
such partnership’s assets; provided, further, that no distribution may be made by such partnership with respect to such subordinate
units of partnership interest to the extent the requirement described in clause (B) of the preceding proviso would not be met immediately
after such distribution.

 

(b)          For
the avoidance of doubt, subject to compliance with the ongoing terms of this Agreement by the Public DownREIT, if the consideration
choices described in Section 3.2(a) are offered to the Protected Partners and, in the case of clause (a)(ii) above, in a
transaction that is not a Gain Transaction, and the leverage and distribution limitations described in Section 3.2(a) are
complied with, the Operating Partnership shall not be required to pay any Make Whole Amount pursuant to Section 2.2 or Section
3.5, and no consent of OP Unit holders shall be required for the consummation of the Fundamental Transaction other than the
consent described in Article 11 of the OP Agreement.

 

Section 3.3           Other
Surviving Company.

 

(a)          In
the case of any Fundamental Transaction (1) in which the REIT or the Operating Partnership is acquired by or merged with or into
an entity other than a Public UPREIT or Public DownREIT or (2) after which the REIT’s common stock will not be listed on
the New York Stock Exchange or other national securities exchange, each Protected Partner shall be provided with at least the following
choices of consideration for each OP Unit held by such Protected Partner immediately prior to the transaction:

 

(i)          the
same consideration that is paid with respect to each share of the REIT’s common stock in the transaction in accordance with
Section 11.2(c)(i) of the OP Agreement;

 

    	 	11	 

     

    

 

(ii)         common
units in an acquiror partnership that initially acquires all or substantially all of the assets of the Operating Partnership with
the following terms and conditions:

 

(A)         the
Protected Partner(s) must receive common units based on a value per unit equal to the value of the consideration paid by the acquiror
for each share of the REIT’s common stock;

 

(B)         the
terms of such common units are at least as favorable as the terms of the OP Units and otherwise in accordance with Section 11.2(c)(ii)
of the OP Agreement;

 

(C)         the
acquiror partnership must (x) not have at closing, or thereafter incur, debt (including debt-like preferred or senior units) that
would, at the time incurred, cause such partnership to have aggregate leverage on a consolidated basis in excess of 65% of the
fair market value of such partnership’s assets, and (y) not make any distribution to the extent the leverage limitation described
in clause (x) would not be met immediately after such distribution; and

 

(D)         until
the second anniversary of the expiration of the Tax Protection Period, upon the earlier of (x) the fifth anniversary of the consummation
of the relevant Fundamental Transaction or (y) the expiration of the Tax Protection Period, the holder must have a put right to
the acquiror partnership for cash in an amount equal to the fair market value of such common units at the time of the exercise
of the put right (without liquidity discount or minority interest discount); provided, however, that the exercise of such put right
during the Tax Protection Period will not trigger the payment of any Make Whole Amount pursuant to Section 2.2 or Section
3.5, unless the acquiror partnership is in breach of the covenants set forth in clause (C) above, the Partners’ Representative
provides to the acquiror partnership written notice of such breach, and such breach has not been cured within ten (10) days of
the date of such notice; provided, further, that after the expiration of the Tax Protection Period, the exercise of such put right
will not trigger any payment of any Make Whole Amount pursuant to Section 2.2 or Section 3.5; and

 

(iii)        preferred
units in an acquiror partnership that initially acquires all or substantially all of the assets of the Operating Partnership with
the following terms and conditions:

 

(A)         the
liquidation preference of each preferred unit must be equal to the value of the consideration paid by the acquiror for each share
of the REIT’s common stock;

 

(B)         the
distribution rate on the preferred units will be set at market for the terms of the units and the acquiror partnership;

 

    	 	12	 

     

    

 

(C)         the
partnership that issues the preferred units must (x) have and maintain at all times subordinate or common units with a value equal
to at least 100% of the value of the OP Units exchanged for preferred units; (y) not have at closing, or thereafter incur, debt
(including debt-like preferred or senior units) that would, at the time incurred, cause it to have aggregate leverage on a consolidated
basis in excess of 65% of the fair market value of the issuing partnership’s assets; and (z) not make any distribution with
respect to subordinate or common partnership interests to the extent the leverage limitation described in clause (y) would not
be met immediately after such distribution; and

 

(D)         until
the second anniversary of the expiration of the Tax Protection Period, upon the earlier of (x) the fifth anniversary of the consummation
of the relevant Fundamental Transaction or (y) the expiration of the Tax Protection Period, the holder must have a put right to
the acquiror partnership for cash in an amount equal to the liquidation preference of such preferred units plus any accrued and
unpaid distributions; provided, however, that the exercise of such put right during the Tax Protection Period will not trigger
the payment of any Make Whole Amount pursuant to Section 2.2 or Section 3.5, unless the acquiror partnership is in
breach of the covenants set forth in clause (C) above, the Partners’ Representative provides to the acquiror partnership
written notice of such breach, and such breach has not been cured within ten (10) days of the date of such notice; provided, further,
that after the expiration of the Tax Protection Period, the exercise of such put right will not trigger any payment of any Make
Whole Amount pursuant to Section 2.2 or Section 3.5.

 

(b)          For
the avoidance of doubt, subject to compliance with the ongoing terms of this Agreement by the surviving entities, if the consideration
choices described in Section 3.3(a) are offered to the Protected Partners and, in the case of clauses (a)(ii) and (a)(iii)
above, as applicable, in a transaction that is not a Gain Transaction, and the leverage and distribution limitations described
in Section 3.3(a) are complied with, the Operating Partnership shall not be required to pay any Make Whole Amount pursuant
to Section 2.2 or Section 3.5, and no consent of OP Unit holders shall be required for the consummation of the Fundamental
Transaction other than the consent described in Article 11 of the OP Agreement.

 

Section 3.4           Continuation
of Protections. If a Protected Partner elects to receive the units described in Section 3.1(a)(ii), Section
3.2(a)(ii), Section 3.3(a)(ii) or Section 3.3(a)(iii) with respect to a Fundamental Transaction, such Protected
Holder shall be entitled to the continuation of the protections set forth in this Agreement with respect to the equity interests
received in the acquiror partnership, including with respect to the covenants set forth in ARTICLE II and this ARTICLE
III. Any successor to the Operating Partnership must expressly assume the obligations of the Operating Partnership under this
ARTICLE III as a condition to becoming a successor to the Operating Partnership.

 

    	 	13	 

     

    

 

Section
3.5           Indemnification. During the Tax Protection
Period, if a Protected Partner elects to receive the units described in Section 3.1(a)(ii), Section 3.2(a)(ii), Section
3.3(a)(ii) or Section 3.3(a)(iii) with respect to a Fundamental Transaction and thereafter the REIT, the Operating
Partnership or their successors fail to comply with their equity, leverage or distribution obligations set forth in this ARTICLE
III (after taking into account applicable cure periods set forth in this ARTICLE III) (and the Operating
Partnership does not receive the Approval of the Partners’ Representative with respect to such failure), then to the
extent any Protected Partner elects to, or is required to, receive the consideration payable with respect to the
redemption, exchange or other liquidity rights relating to such units, the Operating Partnership shall pay, within ten (10)
business days after the expiration of the applicable cure periods, to each Protected Partner an amount of cash equal to the
estimated Make Whole Amount applicable to such transaction. If it is later determined that the true Make Whole Amount
applicable to a Protected Partner exceeds the estimated Make Whole Amount applicable to such Protected Partner, then the
Operating Partnership shall pay such excess to such Protected Partner within ten (10) business days after the date of such
determination, and if such estimated Make Whole Amount exceeds the true Make Whole Amount, then such Protected Partner shall
pay such excess to the Operating Partnership within ten (10) business days after the date of such determination, but only to
the extent such excess was actually received by such Protected Partner. For the avoidance of doubt, a vote in favor of a
Fundamental Transaction by a Protected Partner or the Partners’ Representative in its capacity as, or acting for, an
owner of OP Units or shares of the REIT shall not constitute a waiver of such Protected Partner’s right to
indemnification pursuant to this Section 3.5 as a result of such Fundamental Transaction.

 

ARTICLE
IV

 

GENERAL PROVISIONS

 

Section 4.1           Changes
in Law; Voluntary Redemptions.

 

(a)          Notwithstanding
any provision of this Agreement to the contrary, the Operating Partnership shall not be required to make an indemnification payment
to a Protected Partner pursuant to this Agreement if such obligation arises solely as a result of a change in any provision of
the Code, the Treasury Regulations or any other applicable tax law or any administrative or judicial interpretation thereof (and
not, for example, as a result of any Tax Protection Period Transfer or Fundamental Transaction, or any change with respect to Operating
Partnership liabilities allocated to any Protected Partner if such change is attributable to any act or omission by the Operating
Partnership).

 

(b)          For
the avoidance of doubt, a Protected Partner shall not be entitled to the protections set forth in ARTICLE II and ARTICLE
III in the event of a full or partial redemption of the Protected Partner’s interest in the Operating Partnership pursuant
to Section 15.1 of the OP Agreement; provided, however, that the foregoing limitation in this Section 4.1(b) shall not apply
to such Protected Partner, and such Protected Partner shall be entitled to any Make Whole Amount payable to such Protected Partner
in an amount determined under Section 3.5, in the event the REIT or the Operating Partnership engages in a Fundamental Transaction
described in Section 3.1(a), Section 3.2(a) or Section 3.3(a) and either a Protected Partner is not offered
the consideration described in such provisions, as applicable, or one or more compliance failures described in Section 3.5
occurs.

 

Section 4.2           Cooperation.
The Operating Partnership and the Partners’ Representative agree to furnish or cause to be furnished to the other, upon request,
as promptly as practicable, such information and assistance as is reasonably necessary to effectuate the provisions of this Agreement.
In the event any change in any applicable provision of the Code, the Treasury Regulations or any other applicable tax law or any
administrative or judicial interpretation thereof would result in the recognition of taxable income or gain by any Protected Partner,
the parties shall reasonably cooperate to minimize or avoid any resulting tax on such Protected Partner. Prior to any anticipated
change (or as soon as reasonably possible following any unanticipated change) in any applicable provision of the Code, the Treasury
Regulations or any other applicable tax law or any administrative or judicial interpretation thereof, or the consummation of any
spin-off transaction, reorganization transaction or other transaction that would affect the Operating Partnership and the Protected
Partners, the parties shall cooperate in good faith to amend this Agreement as may be necessary or appropriate to preserve the
intent and effect of this Agreement.

 

    	 	14	 

     

    

 

Section 4.3           Dispute
Resolution. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation,
performance, enforcement or breach of this Agreement (and any closing document executed in connection herewith) shall be governed
by the dispute resolution provisions set forth in Section 11.11 of the Contribution Agreement.

 

Section 4.4           Notices.
All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or
permitted by the terms of this Agreement shall be given in the same manner as in the OP Agreement.

 

Section 4.5           Titles
and Captions. All Article or Section titles or captions in this Agreement are for convenience only. They shall not be
deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except
as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections
of this Agreement.

 

Section 4.6           Pronouns
and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

Section 4.7           Further
Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action
as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 4.8           Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.

 

Section 4.9           Creditors.
Other than as expressly set forth herein, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable
by, any creditor of the Operating Partnership.

 

Section 4.10         Waiver.
No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any covenant, duty,
agreement or condition.

 

    	 	15	 

     

    

 

Section 4.11         Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.

 

Section 4.12         Applicable
Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.

 

Section 4.13         Invalidity
of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality or enforceability of other remaining provisions contained herein shall not be affected thereby.

 

Section 4.14         Entire
Agreement; Coordination with OP Agreement. This Agreement contains the entire understanding and agreement among the Partners
with respect to the subject matter hereof and amends, restates and supersedes the OP Agreement and any other prior written or oral
understandings or agreements among them with respect thereto. The parties hereto agree that, to the extent of any conflict between
the provisions of the OP Agreement and the provisions of this Agreement with respect to the rights, obligations or remedies of
any such party under this Agreement, the provisions of this Agreement shall control.

 

Section 4.15         No
Rights as Stockholders. Nothing contained in this Agreement shall be construed as conferring upon the holders of the OP Units
any rights whatsoever as stockholders of the REIT, including, without limitation, any right to receive dividends or other distributions
made to stockholders of the REIT or to vote or to consent or to receive notice as stockholders in respect of any meeting of stockholders
for the election of directors of the REIT or any other matter.

 

Section 4.16         Partners’
Representative Matters.

 

(a)          The
Protected Partners agree that it is desirable to designate a Person to act as the Partners’ Representative for purposes of
this Agreement with all powers, authority, rights, privileges and protections set forth in this Agreement. Each Protected Partner
hereby grants to PELP (which, as used in this Section 4.16, shall include any designee or successor of PELP) the
full power and authority, on behalf of such Protected Partner, to appoint the Partners’ Representative in PELP’s sole
and absolute discretion, and any such Person so chosen shall be deemed for all purposes under this Agreement or otherwise as having
been designated by each such Protected Partner. PELP hereby designates Jeffrey S. Edison as the initial Partners’ Representative,
and each Protected Partner acknowledges such designation. In the event the Partners’ Representative is unwilling or unable
to continue to act as Partners’ Representative, PELP shall appoint his successor. Each successor Partners’ Representative
shall have all of the power, authority, rights, privileges and protections conferred by this Agreement upon the initial Partners’
Representative, and the term “Partners’ Representative” shall include any interim or successor representative.

 

    	 	16	 

     

    

 

(b)          The
Partners’ Representative shall have, and each Protected Partner hereby grants
to the Partners’ Representative, such power, authority, rights, privileges and protections as are necessary to carry out
the functions assigned to it under this Agreement; provided, however that the Partners’ Representative shall
have no obligation to act, except as expressly provided in this Agreement. Without limiting the generality of the foregoing, the
Partners’ Representative shall have full power, authority and discretion to (i) submit any Approval of the Partners’
Representative with respect to the matters specified in this Agreement, (ii) estimate and determine the amounts of Partners’
Representative Expenses and to pay such Partners’ Representative Expenses in accordance with Section 4.16(c) and (iii)
take any and all actions, or elect not to take actions, that it believes are necessary under or contemplated by this Agreement,
irrespective of whether such actions or election not to take actions may result in disparate outcomes for each Protected Partner,
it being expressly agreed by each Protected Partner that, when exercising its authority under this Agreement, the Partners’
Representative shall have no obligation to take into consideration the specific tax or other attributes of any single Protected
Partner or group of Protected Partners, but may take into consideration only such facts, circumstances and considerations (including
its own interests) as it determines in its sole and absolute discretion are relevant to such exercise of authority. All actions
taken by the Partners’ Representative under this Agreement shall be binding on the Protected Partners and their respective
successors and assigns as if expressly confirmed and ratified in writing by each of them. The parties hereto may rely upon any
decision, act, consent or instruction of the Partners’ Representative as being the decision, act, consent or instruction
of each of the Protected Partners.

 

(c)          From
time to time, the Partners’ Representative shall be entitled to submit to PELP
an estimate of any costs, fees and expenses incurred, or that may be in the future incurred, by the Partners’ Representative
in connection with exercising its powers and performing its function hereunder in its capacity as the Partners’ Representative
(the “Partners’ Representative Expenses”). PELP shall promptly pay to the Partners’ Representative
and/or to such other persons (and in such amounts) as may be designated in writing to PELP by the Partners’ Representative,
by wire transfer to an account or accounts designated by the Partners’ Representative to PELP in writing, of immediately
available funds in the amount of such Partners’ Representative Expenses.

 

(d)          Each
Protected Partner agrees that (i) this Agreement is not intended to, and does not, create or impose any fiduciary or other similar
duty on the Partners’ Representative (or PELP in exercising its authority to designate the Partners’ Representative),
(ii) such Protected Partner hereby disclaims and waives any and all duties owed to such Protected Partner by the Partners’
Representative (including those duties that, absent such waiver, may be implied by law), (iii) the only duties and obligations
of the Partners’ Representative (in such capacity) to any Person are only as expressly set forth in this Agreement, (iv)
actions taken (or elected not to be taken) by the Partners’ Representative that are consistent with the authority and discretion
granted in this Agreement shall be deemed to satisfy any covenant or good faith and/or fair dealing implied by law, (v) the Partners’
Representative shall have no liability to such Protected Partner or any other party hereto with respect to actions taken or omitted
to be taken in its capacity as the Partners’ Representative that are consistent with the grant of authority made under this
Agreement, (vi) the Partners’ Representative shall at all times be entitled to rely on any directions received from the Protected
Partners or any other party hereto; provided, however, that the Partners’ Representative shall not be required
to follow any such direction, (vii) the Partners’ Representative shall have no liability for any actions (or elections not
to act) taken under this Agreement, and shall be indemnified by the Protected Partners for and shall be held harmless against any
loss, liability or expense incurred by the Partners’ Representative relating to the Partners’ Representative’s
conduct as Partners’ Representative, in each case, other than losses, liabilities or expenses resulting from the bad faith
or fraud of the Partners’ Representative resulting in material harm to the Protected Partners as a whole, it being agreed
that such exculpation indemnification shall survive the termination of this Agreement, (viii) the Partners’ Representative
shall be entitled to engage counsel, experts, accountants and advisors as it shall deem necessary in connection with exercising
its powers and performing its function hereunder and shall be entitled to rely conclusively on the opinions and advice of such
Persons and shall have no liability for any actions (or elections not to act) taken after consultation with such counsel, experts,
accountants and/or advisors and (ix) such Protected Partner expressly disclaims any right to bring any legal or regulatory action,
and agrees for itself and its successors and assigns that such Protected Partner will not bring any such legal or regulatory action
against, any representative, member, shareholder, employee, partner, affiliate, controller, officer or other agent of the Partners’
Representative.

 

[Remainder of Page Left Blank Intentionally]

 

    	 	17	 

     

    

 

 

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

 

	 	REIT:
	 	 
	 	PHILLIPS EDISON GROCERY CENTER REIT I, INC.,
	 	a Maryland corporation

 

	 	By:	/s/ Devin I. Murphy
	 	 	Devin I. Murphy, CFO, Treasurer and Secretary

 

	 	OPERATING PARTNERSHIP:
	 	 
	 	PHILLIPS EDISON GROCERY CENTER OPERATING PARTNERSHIP I, L.P.,
	 	a Delaware limited partnership

 

	 	By:	PHILLIPS EDISON GROCERY CENTER
	 	 	OP GP I LLC,
	 	 	a Delaware limited liability company,
	 	 	its general partner

 

	 	 	By:	PHILLIPS EDISON GROCERY CENTER
	 	 	 	REIT I, INC.,
	 	 	 	a Maryland corporation,
	 	 	 	its sole member

 

	 	By:	/s/ Devin I. Murphy
	 	 	Devin I. Murphy, CFO, Treasurer and Secretary

 

     

     

    

 

	 	PROTECTED PARTNERS LISTED ON SCHEDULE I HERETO:

 

	 	By:	PHILLIPS EDISON LIMITED PARTNERSHIP,
	 	 	a Delaware limited partnership
	 	 	As attorney-in-fact acting on behalf of the Protected Partners named on Schedule I hereto

 

	 	By:	/s/ Jeffrey S. Edison
	 	 	 
	 	 	Jeffrey S. Edison, Chief Executive OfficerExhibit 10.3

 

EQUITY HOLDER AGREEMENT

 

This EQUITY HOLDER AGREEMENT
(this “Agreement”) is entered into as of October 4, 2017, by and among Phillips Edison Grocery Center REIT I,
Inc., a Maryland corporation (the “REIT”), Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware
limited partnership (the “Operating Partnership”), and each of the individuals signatory hereto (each, an “Equity
Holder” and, collectively, the “Equity Holders”).

 

RECITALS

 

WHEREAS, concurrently
with the execution and delivery of this Agreement, the Operating Partnership will acquire a portfolio of properties currently owned,
directly or indirectly, by Phillips Edison Limited Partnership, a Delaware limited partnership (“PELP”), pursuant
to that certain Contribution Agreement, dated as of May 18, 2017 (the “Contribution Agreement”), by and among
the REIT, the Operating Partnership, PELP and certain other contributors listed on Exhibit A thereto (collectively, “Contributors”)
and Jeffrey S. Edison (“JSE”) as Contributors’ Representative (as defined therein), in exchange for consideration
that includes cash, common units of limited partnership interest in the Operating Partnership (“OP Units”) and
contingent rights to receive additional OP Units pursuant to certain earn-out provisions in the Contribution Agreement;

 

WHEREAS, PELP and the
other Contributors anticipate that, concurrently with or immediately after the closing of the transactions contemplated by the
Contribution Agreement (the “Closing”), they will distribute a substantial portion of the OP Units received
at the Closing to their partners and members, including the Equity Holders, who will then become direct limited partners in the
Operating Partnership and hold a significant portion of the fully diluted equity of the REIT; and

 

WHEREAS, as a condition
to the Closing, the parties hereto are entering into this Agreement to (i) limit Transfers of certain OP Units by the Equity Holders
for certain periods, (ii) provide JSE with certain Board rights and (iii) provide the Equity Holders with certain registration
and information rights, in each case, subject in all cases to the exceptions and other terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration
of the promises and mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE
I

 

DEFINED
TERMS

 

Unless otherwise defined
in this Agreement, capitalized terms have the meanings given to them in that certain Third Amended and Restated Agreement of Limited
Partnership of the REIT, dated as of the Closing Date (the “OP Agreement”). Without otherwise limiting the foregoing,
for purposes of this Agreement the following terms shall apply:

 

     

     

    

 

“Affiliate”
means, with respect to any Person, any Person directly or indirectly controlling or controlled by or under common control with
such Person. For the purposes of this definition, “control” when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled”
have meanings correlative to the foregoing.

 

“Beneficial
Ownership” has the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and
the term “Beneficially Own” has a meaning correlative to the foregoing.

 

“Board”
means the board of directors of the REIT.

 

“Cause”
means, with respect to an Equity Holder, the meaning given to such term in the Executive Severance and Employment Agreement between
such Equity Holder and Phillips Edison & Company, Ltd.

 

“Closing
Date” has the meaning assigned to it in the Contribution Agreement.

 

“Consent of
the REIT” means the prior written consent of the REIT, as the general partner of the Operating Partnership, pursuant
to a resolution duly adopted by the Special Committee (as defined in the Contribution Agreement) or any other committee of independent
and disinterested directors on the Board that is delegated with the authority to provide such consent by the Board.

 

“Escrowed Consideration”
has the meaning assigned to it in the Contribution Agreement.

 

“Fundamental
Transaction” means either (i) a “Transaction,” as defined in the OP Agreement, or (ii) a “Business
Combination,” as defined in the OP Agreement, that, in the case of this clause (ii), results in a change in the Beneficial
Ownership of more than fifty percent (50%) of the outstanding voting equity interests of the Operating Partnership.

 

“Good Reason”
means, with respect to an Equity Holder, the meaning given to such term in the Executive Severance and Change in Control Plan of
the REIT.

 

“Governmental
Entity” means any government or any arbitrator, tribunal or court of competent jurisdiction, administrative agency, department
or commission or other governmental authority or instrumentality (in each case whether Federal, state, local, foreign, international
or multinational).

 

“Immediate Family”
means any family relationship by blood, marriage or adoption, not more remote than first cousin.

 

“Incapacity”
has the meaning assigned to it in Section 4.4(a) of the OP Agreement.

 

    	 	2	 

     

    

 

“Judgment”
means any judgment, order, decree, award, ruling, decision, verdict, subpoena, injunction or settlement entered, issued, made or
rendered by, or any consent agreement, memorandum of understanding or other contract with, any Governmental Entity (in each case
whether temporary, preliminary or permanent).

 

“Law”
means any federal, state, local, municipal, foreign, supranational or other law, statute, constitution, treaty, principle of common
law, directive, resolution, ordinance, code, edict, writ, decree, rule, regulation, Judgment, ruling, injunction or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.

 

“Lock-up Period”
means the period beginning on the date of this Agreement and ending (i) with respect to JSE, on the three (3) year anniversary
of the Closing Date, and (ii) with respect to each other Equity Holder, on the two (2) year anniversary of the Closing Date.

 

“Person”
means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or
other entity.

 

“Restricted
OP Units” means, with respect to an Equity Holder: (i) all OP Units distributed to such Equity Holder at or substantially
around the time of the Closing, plus (ii) such Equity Holder’s ratable interest in (x) any OP Units held by
PELP or any of its Affiliates (including the other Contributors) on the date of this Agreement, (y) the Class B Units held by PELP
or its Affiliates (including the other Contributors) on the date of this Agreement and which are eligible to convert to OP Units
pursuant to the OP Agreement after the date of this Agreement, and (z) the OP Units included in the Escrowed Consideration (in
each case, as adjusted (if applicable) for any unit split, combination, distribution on units made in units or other recapitalization
or reclassification of units effected after the date of this Agreement, as such adjustment may be deemed necessary and appropriate
in the reasonable, good faith judgment of the Board).

 

ARTICLE
II

 

Lock-up
of restricted op units

 

Section 2.1           Lock-up.
Subject to Section 2.2 below, but without otherwise limiting or affecting the limitations on Transfers otherwise set forth
in the OP Agreement, each Equity Holder agrees not to Transfer any Restricted OP Unit until the expiration of his applicable Lock-up
Period without the Consent of the REIT.

 

Section 2.2           Qualified
Exceptions. Notwithstanding Section 2.1, but subject to the proviso at the end of this Section 2.2, each Equity
Holder shall be entitled to make the following Transfers of Restricted OP Units:

 

(a)          pledges
as collateral by such Equity Holder or any of its Affiliates in connection with a bona fide borrowing or hedging transaction, and
Transfers of such Restricted OP Units that result from the bona fide exercise of lender remedies in connection with any such borrowing
or hedging transaction;

 

    	 	3	 

     

    

 

(b)          Transfers
to one or more members of such Equity Holder’s Immediate Family or to any trust for the direct or indirect benefit of such
Equity Holder or one or more members of his Immediate Family, provided that such Equity Holder and/or one or more members
of his Immediate Family continue to Beneficially Own such Restricted OP Units throughout the applicable Lock-up Period;

 

(c)          Transfers
to Affiliates of such Equity Holder, provided that such Equity Holder or one or more members of his Immediate Family continue
to Beneficially Own such Restricted OP Units throughout the applicable Lock-up Period;

 

(d)          Transfers
that are bona fide gifts or charitable donations; and/or

 

(e)          Transfers
to raise cash for the settlement of, or in settlement of, tax obligations in respect of phantom income solely attributable to the
ownership of the Restricted OP Units;

 

provided, however,
that the aggregate amount of any such Transfers by such Equity Holder described in clauses (a) through (e) above
shall not exceed 50% of such Equity Holder’s Restricted OP Units.

 

Section 2.3           Other
Exceptions. Notwithstanding Section 2.1, the REIT and the Operating Partnership agree that each Equity Holder shall
also be entitled to make the following Transfers of Restricted OP Units:

 

(a)          Transfers
required by Law or any Judgment, including pursuant to a qualified domestic order or in connection with a divorce settlement, or
pursuant to will or intestate succession upon the death of such Equity Holder;

 

(b)          with
the Consent of the REIT, Transfers to the REIT, the Operating Partnership or one or more of their wholly-owned subsidiaries; and/or

 

(c)          Transfers
pursuant to or in connection with any Fundamental Transaction approved by the Board.

 

Section 2.4           Early
Termination Upon Specified Events. Notwithstanding anything to the contrary in this Agreement, an Equity Holder’s Lock-up
Period shall terminate upon any of the following events:

 

(a)          the
Incapacity (including death) of such Equity Holder;

 

(b)          termination
of such Equity Holder’s employment with the REIT, Operating Partnership and their subsidiaries (as applicable) either (i)
without Cause by the REIT, Operating Partnership or such subsidiary, or (ii) by such Equity Holder for Good Reason; and/or

 

(c)          the
consummation of any Fundamental Transaction.

 

    	 	4	 

     

    

 

ARTICLE
III

 

OTHER
RIGHTS

 

Section 3.1           Nomination
Rights.

 

(a)          Subject
to Section 3.1(b) below, the Board (or a duly authorized committee thereof) shall continue to include JSE or, subject to
Section 3.1(c) below, his designee as a nominee in its slate of directors for election by the REIT’s stockholders
at each of the ten (10) succeeding annual meetings following the Closing (or at each special meeting of the REIT’s stockholders
called for the purpose of electing directors of the REIT during such time period), and at any adjournment or postponement thereof.
The REIT agrees to use its reasonably best efforts to solicit the vote of stockholders of the REIT to elect JSE or, subject to
Section 3.1(c) below, his designee to the Board (which efforts shall, to the fullest extent permitted by applicable law,
include the inclusion in any proxy statement prepared, used, delivered or publicly filed by the REIT to solicit the vote of its
stockholders in connection with any such meeting the recommendation of the Board that the stockholders of the REIT vote in favor
of nominating JSE or, subject to Section 3.1(c) below, his designee to the Board).

 

(b)          This
nomination right shall automatically terminate in the event that JSE sells, pledges, donates, gifts or otherwise transfers more
than thirty-five percent (35%) in the aggregate of the OP Units (and any shares of the common stock of the REIT (“Common
Stock”) he receives in exchange therefor) that he beneficially owns as of the Closing (other than to Affiliates; provided,
however, that beneficial ownership of the OP Units continues to be held by JSE, his family or estate-planning entities controlled
by JSE).

 

(c)          Any
designee of JSE entitled to be nominated for election to the Board as provided in this Section 3.1 shall be subject to approval
by the Special Committee, which approval shall not be unreasonably withheld, conditioned or delayed.

 

Section 3.2           Registration
and Rule 144 Information Rights.

 

(a)          Following
any listing of the Common Stock on a national securities exchange, the REIT shall, to the extent it files a shelf registration
statement on Form S-3 with the Securities and Exchange Commission (the “Commission”) following the effectiveness
of such listing, (i) provide each Equity Holder the opportunity to be named as a selling securityholder in such shelf registration
statement (or in a separate “resale” shelf registration statement on Form S-3) (the “Registration Statement”)
and to register such number of shares of Common Stock held by (or receivable upon the exchange of OP Units held by) such Equity
Holder as such Equity Holder may request and (ii) use reasonable efforts to cause such Registration Statement to become and remain
effective, until the earliest of (y) such time as no Equity Holder is an Affiliate of the REIT, or (z) the date on which all shares
of Common Stock held by (or receivable upon the exchange of OP Units held by) each Equity Holder and covered by such Registration
Statement have been sold. Notwithstanding the foregoing, if the filing, initial effectiveness or continued use of such Registration
Statement would require the REIT to make a public disclosure of material non-public information, which disclosure in the good faith
determination of the REIT (i) would be required to be made in any Registration Statement so that such Registration Statement
would not be materially misleading, (ii) would not be required to be made at such time but for the filing, effectiveness
or continued use of such Registration Statement or (iii) would reasonably be expected to adversely affect in any material
respect the REIT or its business or the REIT’s ability to effect a bona fide material proposed acquisition, disposition,
financing, reorganization, recapitalization or similar transaction, then the REIT may, upon giving written notice to each Equity
Holder participating in such registration, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement
(and any related prospectus), provided that the REIT shall not be permitted to do so for any single period of
time in excess of 90 days, or for periods exceeding, in the aggregate, 120 days during any 12-month period. In the event that the
REIT exercises its rights under the preceding sentence, each Equity Holder agrees to suspend, promptly upon receipt of the written
notice referred to above, the use of the Registration Statement (and any related prospectus) in connection with any sale or offer
to sell shares of Common Stock held by (or receivable upon the exchange of OP Units held by) such Equity Holder until such Equity
Holder is advised in writing by the REIT that the use of such Registration Statement (and any related prospectus) may be resumed.

 

    	 	5	 

     

    

 

(b)          As
long as any Equity Holder owns shares of Common Stock or OP Units, and as long as the REIT is required to file reports under Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the REIT shall (i) make
and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), at all times after the Closing; (ii) use reasonable efforts to file with
the Commission in a timely manner (or obtain extensions in respect thereof and file within the applicable grace period) all
reports and other documents required of the REIT under Section 13 or 15(d) of the Exchange Act at any time after the Closing; and
(iii) furnish to any Equity Holder so long as such Equity Holder owns shares of Common Stock or OP Units, promptly upon request
by such Equity Holder, a written statement by the REIT as to its compliance with the reporting requirements of Rule 144 and of
the Exchange Act, a copy of the most recent annual or quarterly report of the REIT, and such other reports and documents so filed
or furnished by the REIT as such Equity Holder may reasonably request.

 

ARTICLE
IV

 

GENERAL PROVISIONS

 

Section 4.1           GOVERNING
LAW. THIS AGREEMENT AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR
RELATE TO THIS AGREEMENT OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CONFLICTS
OF LAW PRINCIPLES OF SUCH STATE.

 

Section 4.2           Dispute
Resolution. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation,
performance, enforcement or breach of this Agreement (and any closing document executed in connection herewith) shall be governed
by the dispute resolution provisions set forth in Section 11.11 of the Contribution Agreement.

 

    	 	6	 

     

    

 

Section 4.3           Enforcement.
The parties agree that irreparable damage could occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled
to an inunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity.

 

Section 4.4           Notices.
All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or
permitted by the terms of this Agreement shall be given in the same manner as in the OP Agreement.

 

Section 4.5           Titles
and Captions. All Article or Section titles or captions in this Agreement are for convenience only. They shall not be
deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except
as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections
of this Agreement.

 

Section 4.6           Pronouns
and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

Section 4.7           Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.

 

Section 4.8           Amendments
and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of (i) the REIT (with the
Consent of the REIT) and (ii) JSE; provided, that any amendment of this Agreement that would disproportionately and adversely affect
an Equity Holder relative to the Equity Holders in the aggregate shall not be effective against any such adversely affected Equity
Holder without his written consent. No delay or omission by any party hereto to exercise any right or power under this Agreement
or pursuant to Law shall impair such right or power or be construed as a waiver thereof. A waiver by or for the benefit of party
any provision of this Agreement shall not be construed to be a waiver of any other provision of this Agreement or a waiver for
the benefit or any other party hereto.

 

Section 4.9           No
Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such assigns, any
legal or equitable rights hereunder.

 

Section 4.10         Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.

 

    	 	7	 

     

    

 

Section 4.11         Severability.
If any provision hereof (or any portion thereof) or the application of any such provision (or any portion thereof) to any Person
or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application
of such provision to any other Persons or circumstances.

 

Section 4.12         Entire
Agreement. This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter
hereof and amends, restates and supersedes the OP Agreement and any other prior written or oral understandings or agreements among
them with respect thereto.

 

Section 4.13         Non-Recourse.
This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of, or related to this Agreement
or the transactions contemplated hereby may only be brought against, the Persons that are expressly named as parties hereto and
then only with respect to the specific obligations set forth herein with respect to such party. Except to the extent a named party
to this Agreement (and then only to the extent of the specific obligations undertaken by such named party in this Agreement and
not otherwise), no past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate,
agent, attorney, advisor or representative or Affiliate of any of the foregoing shall have any liability (whether in contract,
tort, equity or otherwise) for any one or more of the representations, warranties, covenants, agreements or other obligations or
liabilities of any one or more of each Equity Holder, the REIT or the Operating Partnership under this Agreement (whether for indemnification
or otherwise) or of or for any claim based on, arising out of, or related to this Agreement or the transactions contemplated hereby

 

[Remainder of Page Left Blank Intentionally]

 

    	 	8	 

     

    

 

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

 

	 	REIT:
	 	 
	 	PHILLIPS EDISON GROCERY CENTER REIT I, INC.,
	 	a Maryland corporation

 

	 	By:	/s/ Devin I. Murphy
	 	 	Devin I. Murphy, CFO, Treasurer and Secretary  

 

	 	OPERATING PARTNERSHIP:
	 	 
	 	PHILLIPS EDISON GROCERY CENTER OPERATING PARTNERSHIP I, L.P.,
	 	a Delaware limited partnership

 

	 	By:	PHILLIPS EDISON GROCERY CENTER
	 	 	OP GP I LLC,
	 	 	a Delaware limited liability company,
	 	 	its general partner

 

	 	By:	PHILLIPS EDISON GROCERY CENTER
	 	 	REIT I, INC.,
	 	 	a Maryland corporation,
	 	 	its sole member

 

	 	By:	/s/ Devin I. Murphy
	 	 	Devin I. Murphy, Vice President  

 

     

     

    

 

	 	EQUITY HOLDERS:
	 	 
	 	/s/ Jeffrey S. Edison
	 	JEFFREY S. EDISON
	 	 
	 	/s/ Devin I. Murphy
	 	DEVIN I. MURPHY
	 	 
	 	/s/ Robert F. Myers
	 	ROBERT F. MYERS
	 	 
	 	/s/ R. Mark Addy
	 	R. MARK ADDY

  

[Lock-Up Partners - Signature Page to Lock-Up
Agreement]

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