**Exhibit 10.1**

 

 

 

 

 

ADVISORY AGREEMENT 

between 

KBS LEGACY PARTNERS APARTMENT REIT, INC. 

and 

KBS CAPITALADVISORS LLC 

 

January 25, 2011 

TABLE OF CONTENTS 

 
   Page 
ARTICLE 1 – DEFINITIONS
   1  
ARTICLE 2 – APPOINTMENT
   8  
ARTICLE 3 – DUTIES OF THE ADVISOR
   8  
3.01 Organizational and Offering Services
   9  
3.02 Acquisition Services
   9  
3.03 Asset Management Services
   10  
3.04 Stockholder Services
   12  
3.05 Other Services
   12  
ARTICLE 4 – AUTHORITY OF ADVISOR
   13  
4.01 General
   13  
4.02 Powers of the Advisor
   13  
4.03 Approval by the Board
   13  
4.04 Modification or Revocation of Authority of Advisor
   13  
ARTICLE 5 – BANK ACCOUNTS
   13  
ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS
   14  
ARTICLE 7 – LIMITATION ON ACTIVITIES
   14  
ARTICLE 8 – FEES
   14  
8.01 Acquisition Advisory Fees
   14  
8.02 Development and Construction Fees
   15  
8.03 Asset Management Fees
   15  
8.04 Disposition Fees
   16  
8.05 Subscription Processing Fee
   16  
8.06 Property Management Fee
   16  
8.07 Subordinated Share of Cash Flows
   17  
8.08 Subordinated Incentive Fee
   17  
8.09 Changes to Fee Structure
   18  
ARTICLE 9 – EXPENSES
   18  
9.01 General
   18  
9.02 Timing of and Limitations on Reimbursements
   20  
ARTICLE 10 – VOTING AGREEMENT
   20  
ARTICLE 11 – RELATIONSHIP OF ADVISOR AND COMPANY; OTHER

ACTIVITIES OF THE ADVISOR
   21  
11.01 Relationship
   21  
11.02 Time Commitment
   21  
11.03 Investment Opportunities and Allocation
   21  
ARTICLE 12 – THE KBS NAME
   21  
ARTICLE 13 – TERM AND TERMINATION OF THE AGREEMENT
   22  
13.01 Term
   22  
13.02 Termination by Either Party
   22  
13.03 Payments on Termination and Survival of Certain Rights and Obligations
   22  
ARTICLE 14 – ASSIGNMENT
   23  
 
i 

ARTICLE 15 – INDEMNIFICATION AND LIMITATION OF LIABILITY
   23  
15.01 Indemnification
   23  
15.02 Limitation on Indemnification
   24  
15.03 Limitation on Payment of Expenses
   24  
ARTICLE 16 – MISCELLANEOUS
   24  
16.01 Notices
   24  
16.02 Modification
   25  
16.03 Severability
   25  
16.04 Construction
   25  
16.05 Entire Agreement
   25  
16.06 Waiver
   25  
16.07 Gender
   25  
16.08 Titles Not to Affect Interpretation
   25  
16.09 Counterparts
   25  
 
ii 

**ADVISORY AGREEMENT**

This Advisory Agreement, dated as of January 25, 2011 (the “**Agreement**”), is between KBS Legacy Partners ApartmentREIT, Inc., a Maryland corporation (the “**Company**”), and KBS Capital Advisors LLC, a Delaware limited liability company (the “**Advisor**”). 

**W I T N E S S E T H**

WHEREAS, the Company desires to avail itself of theknowledge, 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 supervisionof, the board of directors of the Company (the “**Board**”), all as provided herein; and 

WHEREAS, the Advisor iswilling to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth. 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 

**ARTICLE 1**

**DEFINITIONS**

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

“**Acquisition Advisory Fees**” shall have the meaning set forth in Section 8.01. 

“**Acquisition Expenses**” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of eitherin connection with the selection, acquisition or development of any property or other potential investment, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs ofappraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to selection and acquisition of properties, whether or not acquired.

“**Acquisition Fees**” means the fee payable to the Advisor pursuant to Section 8.01 plus all other feesand commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property or other Permitted Investment or the purchase, development or construction of any Property by the Company.Included in the computation of such fees or commissions 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 shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property. 

 
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“**Advisor**” means (i) KBS Capital Advisors LLC, a Delaware limitedliability company, or (ii) any successor advisor to the Company. 

“**Affiliate or Affiliated**” An Affiliateof another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding withthe power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whoseoutstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not bedeemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governingbody) of such program is composed of Affiliates of the entity. 

“**Appraised Value**” means the value accordingto an appraisal made by an Independent Appraiser. 

“**Asset Management Fee**” shall have the meaning set forth inSection 8.03. 

“**Average Invested Assets**” means, for a specified period, the average of the aggregatebook value of the assets of the Company invested, directly or indirectly, in Properties and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking theaverage of such values at the end of each month during such period. 

“**Board**” means the board of directors ofthe Company, as of any particular time. 

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

“**Cash from Financings**” means the net cash proceeds realized by the Company from the financing ofProperties 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 thereofafter deduction of all expenses incurred in connection therewith including, without limitation, Disposition Fees and (ii) from the prepayment, maturity, workout or other settlement of any other Permitted Investment or portion thereof afterdeduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales andSettlements 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 fromFinancings. 

 
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“**Charter**” means the articles of incorporation of the Company, as amendedfrom time to time. 

“**Code**” means the Internal Revenue Code of 1986, as amended from time to time, or anysuccessor 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 effectfrom time to time. 

“**Company**” means KBS Legacy Partners Apartment REIT, Inc., a corporation organized underthe laws of the State of Maryland. 

“**Competitive Real Estate Commission**” means a real estate or brokeragecommission 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 Charter. 

“**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 toprovide major repairs or rehabilitation on a Property, either initially or at a later date payable pursuant to Section 8.02. 

“**Contract Sales Price**” means the total gross consideration received by the Company for the sale of a Property or other Permitted Investment. 

“**Cost of Real Estate Investments**” means the sum of (i) with respect to Properties wholly owned, directly orindirectly, by the Company, the amount actually paid or allocated to fund the acquisition, development, construction or improvement of Properties, including expenses related thereto (but excluding any Acquisition Fees related thereto), plus theamount of any outstanding debt attributable to such Properties and the budgeted capital improvement costs, and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly orindirectly, a co-venturer or a partner, the portion of the amount actually paid or allocated to fund the acquisition, development, construction or improvement of Properties, including expenses related thereto (but excluding any Acquisition Feesrelated 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 and the budgeted capital improvement costs. 

“**Cost of other Permitted Investments**” means the sum of the cost of all Permitted Investments held, directly orindirectly, by the Company, calculated each month on an ongoing basis, and calculated as follows for each investment: the lesser of (i) the amount actually paid or allocated to acquire or fund the Permitted Investment, including expensesrelated thereto (but excluding any Acquisition Fees related thereto) and the amount of any debt associated with or used to acquire or fund such investment and (ii) the outstanding principal amount of such Permitted Investment, includingexpenses related to the acquisition or funding of such investment (but excluding any Acquisition Fees related thereto), as of the time of calculation. With respect to any Permitted Investment held by the Company through a Joint Venture or

 
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partnership of which it is, directly or indirectly, a co-venturer or partner, such amount shall be the Company’s proportionate share thereof. 

“**Dealer Manager**” means (i) KBS Capital Markets Group LLC, a Delaware limited liability company, or (ii) anysuccessor 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 payable pursuant to Section 8.02. 

“**Director**” means a member of the board of directors of the Company. 

“**Disposition Fee**” shall have the meaning set forth in Section 8.04. 

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

“**GAAP**” meansaccounting principals generally accepted in the United States. 

****“**Gross Proceeds**” means the aggregatepurchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses. ****

“**Independent Appraiser**” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantialextent 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 asthe 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 Registration Statement No. 333-161449 on Form S-11. 

“**Invested Capital**” means the amount calculated by multiplying the total number of Shares purchased by Stockholders bythe issue price, reduced by any amounts paid by the Company to repurchase Shares pursuant to the Company’s plan for redemption of Shares. 

“**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 or otherPermitted Investments. 

“**Listed**” or “**Listing**” shall have the meaning set forth in theCompany’s Charter. 

“**Market Value**” shall have the meaning set forth in Section 8.08. 

 
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“**NASAA Guidelines**” means the NASAA Statement of Policy Regarding RealEstate Investment Trusts as in effect on the date hereof. 

“**Net Income**” means, for any period, the totalrevenues 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, Net Income for purposes of calculating totalallowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets. 

“**Offering**” means any offering of Shares that is registered with the SEC, excluding Shares offered under any employeebenefit plan. 

“**Operating Cash Flow**” means Operating Revenue Cash Flows minus the sum of (i) OperatingExpenses, (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 tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliancewith Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estateinterests, mortgage 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 arerelated 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 tax 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 and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estatecommissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, mortgage loans or other property (other than commissions on the sale of assets other than realproperty), 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) Permitted Investments, (iv) short-terminvestments, and (v) interests in Properties 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. 

“**Organization and Offering Expenses**” means all expenses incurred by or on behalf of the Company in connection with orpreparing the Company for registration of and subsequently offering and distributing its Shares to the public, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokeragediscounts 

 
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and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by theCompany; 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; and expenses of qualification of the saleof the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees. 

“**Partnership**” means KBS Legacy Partners Limited Partnership, a Delaware limited partnership formed to own and operateProperties and other Permitted Investments on behalf of the Company. 

“**Permitted Investments**” means allinvestments (other than Properties and short-term investments acquired for purposes of cash management) in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture orpartnership, pursuant to the Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time, including, without limitation, mortgage loans and other types of debt financing investments. 

“**Person**” means an individual, corporation, partnership, estate, trust (including a trust qualified underSection 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 ofSection 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 ExchangeAct of 1934, as amended. 

“**Property**” or “**Properties**” means any real property or propertiestransferred or conveyed to the Company or the Partnership, either directly or indirectly, including through ownership interests in 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 Propertiesproperty management services. 

“**Registration Statement**” means the registration statementfiled by the Company with the SEC on Form S-11 (Reg. No. 333-161449), 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**” means (i) any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of anyProperty or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Property or other Permitted Investment that gives rise to a significantamount 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 interest of the Company or the Partnership in any Joint

 
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Venture or any partnership in which it is, directly or indirectly, a co-venturer or partner; or (C) any Joint Venture or any partnership in which the Company or the Partnership is, directlyor indirectly, a co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other PermittedInvestment 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 suchtransaction or series of transactions are reinvested in one or more Properties or other Permitted Investments within 180 days thereafter. 

“**SEC**” means the United States Securities and Exchange Commission. 

“**Settlement**” means (i) the prepayment, maturity, workout or other settlement of any Permitted Investment or portionthereof 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 anytransaction 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 or other PermittedInvestments within 180 days thereafter. 

“**Shares**” means shares of common stock of the Company, par value $.01per share. 

“**Stockholders**” means the registered holders of the Shares. 

“**Stockholders’ 8% Return**” means, as of any date, an aggregate amount equal to a 8% 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 purposes of calculating the Stockholders’ 8% Return, Invested Capital shall be determined for each day duringthe period for which the Stockholders’ 8% 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 8%, 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 berequired to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 8%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year. 

“**Subordinated Incentive Fee**” means the fee payable to the Advisor under certain circumstances if the Shares are Listed,as calculated in Section 8.08. 

“**Subordinated Performance Fee Due Upon Termination**” means a fee payablein the form of an interest bearing promissory note (the “Performance Fee Note”) in a principal amount equal to (1) 15% of the amount, if any, by which (a) the Appraised Value of the Company’s Properties at the TerminationDate, less amounts of all indebtedness secured by the Company’s Properties, plus the fair market value of all other Permitted Investments of the Company at the Termination Date, less amounts of indebtedness related to such PermittedInvestments, plus total Distributions (excluding any stock dividend) through the Termination Date exceeds (b) the sum 

 
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of Invested Capital plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 8% Return from inception through the Termination Date less (2) anyprior payment to the Advisor of a Subordinated Share of Cash Flows. Interest on the Performance Fee Note will accrue beginning on the Termination Date at a rate deemed fair and reasonable by the Conflicts Committee. The Company shall repay thePerformance Fee Note at such time as the Company completes the first Sale or Settlement after the Termination Date using Cash from Sales and Settlements. If the Cash from Sales and Settlements from the first Sale or Settlement after the TerminationDate is insufficient to pay the Performance Fee Note in full, including accrued interest, then the Performance Fee Note shall be paid in part from the Cash from Sales and Settlements from the first Sale or Settlement, and in part from the Cash fromSales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full, with interest. If the Performance Fee Note has not been paid in full within five years from the Termination Date, then the Advisor, itssuccessors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date ofsuch election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price perShare equal to the fair market value for the Shares as determined by the Board based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Permitted Investments of the Company on thedate of election. 

“**Subordinated Share of Cash Flows**” has the meaning set forth in Section 8.07.

“**Subscription Processing Fee**” has the meaning set forth in Section 8.05. 

“**Termination Date**” means the date of termination of the Agreement determined in accordance with Article 13 hereof.

“**2%/25% Guidelines**” means the requirement pursuant to the NASAA Guidelines that, in any period of fourconsecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period. 

**ARTICLE 2**

**APPOINTMENT**

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

**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 its

 
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best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, thedirection and oversight of the Board and Section 4.03 hereof, 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 timeto time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engagingan Affiliate or third party, perform the following duties: 

**3.01 Organizational and Offering Services**. The Advisorshall 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 toperform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state. 

**3.02Acquisition Services**. 

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

(ii) Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms andconditions of transactions pursuant to which investments in Properties and other Permitted Investments will be made; (c) acquire and dispose of Properties and other Permitted Investments on behalf of the Company; (d) arrange for financingand refinancing and make other changes in the asset or capital structure of investments in Properties and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties and other PermittedInvestments; 

(iii) Perform due diligence on prospective investments and create due diligence reportssummarizing the results of such work; 

(iv) With respect to prospective investments presented to the Board,prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments; 

(v) Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value ofcontemplated investments of the Company; 

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

(vii) Negotiate and executeapproved investments and other transactions, including prepayments, maturities, workouts and other settlements of Permitted Investments. 

 
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**3.03 Asset Management Services**. 

(i) Real Estate and Related Services: 

(a) Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with)such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporatefiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary ordesirable for the performance of any of the foregoing services; 

(b) Negotiate and service the Company’sand the Properties’ debt facilities and other financings; 

(c) Monitor applicable markets and obtainreports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of the Properties and other Permitted Investments; 

(d) 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 thevarious management and operational functions related to the Properties and other Permitted Investments; 

(e)Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties and other Permitted Investments onan overall portfolio basis; 

(f) Consult with the Company’s officers and the Board and assist the Boardin the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to themaking of investments consistent with the investment objectives and policies of the Company and with respect to any borrowings proposed to be undertaken by the Company; 

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

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

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

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

(k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented tothe Board. 

(ii) Accounting and Other Administrative Services: 

(a) Provide the day-to-day management of the Company and perform and supervise the various administrative functionsreasonably necessary for the management of the Company; 

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

(c) Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or any of its Affiliates, including KBS Realty Advisors LLC, aswell as any investments that have been made by the Advisor or any of its Affiliates directly; 

(d) Provide orarrange 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; 

(e) Provide financial and operational planning services; 

(f) Maintain accounting and other record-keeping functions at the Company and investment levels, including informationconcerning 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 regulatoryagency; 

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

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

(i) Provide the Company with allnecessary cash management services; 

 
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(j) Manage and coordinate with the transfer agent the monthly dividendprocess and payments to Stockholders; 

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

(l) Provide the Company’s officers and the Board with timely updates related to the overall regulatory environmentaffecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002; 

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

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

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

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

**3.04 Stockholder Services**. 

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

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

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

(iv) Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonablynecessary for the admission of new Stockholders. 

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

 
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**ARTICLE 4**

**AUTHORITY OF ADVISOR**

**4.01 General**. All rights and powers to manageand 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 tosuch officers, employees, Affiliates, agents and representatives of the Advisor or the Company 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 theAdvisor specifically set forth in this Agreement or the Charter. 

**4.02 Powers of the Advisor**. Subject to the expresslimitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposingof investments, 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 performall 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. 

**4.03 Approval by the Board**. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company withoutthe prior approval of the Board or duly authorized committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financingor disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition. 

**4.04 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 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investmenttransactions 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 its own name for the account of the Company or 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 from time totime render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company. 

 
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**ARTICLE 6**

**RECORDS AND FINANCIAL STATEMENTS**

The Advisor, in the conduct of itsresponsibilities 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 areproperly 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 to timeduring 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 overaccounting 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 inaccordance 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 thereports 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 theCompany to qualify or continue to qualify as a REIT under the Code, (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 anygovernmental 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 Charter or Bylaws. In the event anaction that would violate (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 refrainfrom 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**

**8.01 Acquisition Advisory Fees**. As compensation for the investigation, selection and acquisition (by purchase, contribution,investment or exchange) of Properties and other Permitted Investments, the Company shall pay a fee to the Advisor (an “**Acquisition Advisory Fee**”) for each such investment. With respect to the acquisition of a Property or otherPermitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Advisory Fee payable to the Advisor shall equal 1.0% of the sum of the amount actually paid or allocated to fund the acquisition, development,construction or improvement of the Property or 

 
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other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property or other Permitted Investment and the amount of any debt associated with, or used to fund theinvestment in, such Property or other Permitted Investment plus budgeted capital improvement costs. With respect to the acquisition of a Property or other Permitted Investment through any Joint Venture or any partnership in which the Company or thePartnership is, directly or indirectly, a co-venturer or partner, the Acquisition Advisory Fee payable to the Advisor shall equal 1.0% of the portion of the amount actually paid or allocated to fund the acquisition, development, construction orimprovement of the Property or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, suchProperty or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership plus budgeted capital improvement costs. Notwithstanding anything herein to the contrary, the payment of AcquisitionAdvisory Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter. The Advisor shall submit an invoice to the Company on or about the closing or closings of eachacquisition, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Advisory Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the AcquisitionAdvisory Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Acquisition Advisory Fees not taken as to any fiscal year shall be deferred without interest and may be paidin such other fiscal year as the Advisor shall determine. 

**8.02 Development and Construction Fees**. If the Advisor or anAffiliate provides development services and/or construction services with respect to a Property, the Company shall pay the Advisor Development Fees and/or Construction Fees, as applicable, in amounts that are usual and customary for comparableservices rendered to similar projects in the geographic market; provided, however, that the Conflict Committee must determine that such Development Fees and Construction Fees are fair and reasonable and on terms and conditions not less favorablethan those available from unaffiliated third parties. Development Fees and Construction Fees will include the reimbursement of the specified cost incurred by the Advisor of engaging third parties for such services. However, the Development Feeand/or Construction Fee, as applicable, may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Development Fees and/or Construction Fees, as applicable, not taken as to anyfiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. Notwithstanding the above, the Advisor may engage (on behalf of the Company) third parties to provide development orconstruction services pursuant to its authority under Article 4 and pay such third parties all applicable Development Fees or Construction Fees. Notwithstanding anything herein to the contrary, the payment of Development Fees and Construction Feesby the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter. 

**8.03 Asset Management Fees**. The Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “**Asset Management Fee**”) inan amount equal to one-twelfth of 1.0% of the sum of the Cost of Real Estate Investments and the Cost of other Permitted Investments. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Feefor the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last 

 
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day of such month, or the first business day following the last day of such month. However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the solediscretion of the Advisor. All or any portion of the Asset Management 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. 

**8.04 Disposition Fees**. If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by theConflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “**Disposition Fee**”) equal to 1.0% of the Contract Sales Price; provided, however, that no Disposition Fee shall bepayable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in whichcase the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above). The payment of any Disposition Fees by the Company shall be subject to the limitations contained in theCompany’s Charter. Any Disposition Fee payable under this Section 8.04 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 Companyfor each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Property or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property or other PermittedInvestment. The Advisor shall submit an invoice to the Company on or about the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at theclosing of the transaction upon receipt of the invoice by the Company. However, the Disposition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Disposition Fees nottaken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. 

**8.05 Subscription Processing Fee**. The Company shall pay the Advisor as compensation for the services described in Section 3.04(iv) hereof a monthly fee (the “**Subscription ProcessingFee**”) in an amount equal to $35 per subscription agreement for Shares received and processed by the Advisor. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the SubscriptionProcessing Fee for the applicable period. Generally, the Subscription Processing Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the SubscriptionProcessing Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subscription Processing Fees not taken as to any fiscal year shall be deferred without interest and may bepaid in such other fiscal year as the Advisor shall determine. The Subscription Processing Fee is an Organization and Offering Expense of the Company and is subject to the limitations on Organization and Offering Expenses in Article 9 hereof.

**8.06 Property Management Fees**. If the Company retains the Advisor or its Affiliates to manage any of its Properties,the Company will pay the Advisor or its Affiliates in amounts that are usual and customary for comparable services rendered to similar Properties in the geographic market; provided, however, that the Conflict Committee must determine that suchProperty 

 
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Management Fees are fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. Property Management Fees will include thereimbursement of the specified cost incurred by the Advisor of engaging third parties for such services. However, the Property Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All orany portion of the Property Management 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. Notwithstanding the above, the Advisor may engage (on behalf ofthe Company) third parties to provide property management services pursuant to its authority under Article 4 and pay such third parties all applicable Property Management Fees. 

**8.07 Subordinated Share of Cash Flows**. The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to15% of Operating Cash Flow and 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 outstandingShares have received Distributions in an aggregate amount equal to the sum of: 

a. the Stockholders’ 8% Return and

b. Invested Capital. 

When determining whether the above threshold has been met: 

 
 (A)Any stock dividend shall not be included as a Distribution; and 
 
 (B)Distributions paid on Shares redeemed by the Company (and thus no longer included in the determination of Invested Capital), shall not be included as a Distribution.
Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor. 

If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by acomputation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first business dayfollowing the last day of such month. However, the Subordinated Share of Cash Flows may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Share of Cash Flows nottaken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. 

**8.08 Subordinated Incentive Fee**. Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15% of the amount by which (i) the market value of theoutstanding Shares of the Company, measured by 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 afterListing (the “**Market Value**”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends) from the 

 
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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 tothe Stockholders in order to pay the Stockholders’ 8% 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 promissory note or any combination of theforegoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payment to the Advisor of a Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no otherperformance fee will be paid to the Advisor. In addition, the Subordinated Incentive Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Incentive Fee nottaken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. 

**8.09 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. 

**ARTICLE 9**

**EXPENSES**

**9.01 General**. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly orreimburse the Advisor for all of the expenses paid or incurred by the Advisor or its 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:

(i) All Organization and Offering Expenses; provided, however, that the Company shall not reimburse theAdvisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses to exceed 15% of the Gross Proceeds raised as of the date of the reimbursement and provided further that within 60 daysafter 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 exceeding 15% of the Gross Proceeds raised in the completed Offering; theCompany shall not reimburse the Advisor for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company, and the Advisor shall reimburse the Company for any Organization and Offering Expenses that are not fairand commercially reasonable to the Company; 

(ii) Acquisition Fees and Acquisition Expenses incurred inconnection with the selection and acquisition of Properties and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anythingherein 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 Charter; 

(iii) The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliatedwith the Advisor; 

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

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

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

(vii) Expenses of managing, improving, developing, operating and selling Properties and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactionsrelating to such Properties and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of other Permitted Investments; 

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

(ix) Personnel and related employment costs incurred by the Advisor or its Affiliates in performing theservices described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that, other than reimbursement of travel andcommunications expenses, no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees or Disposition Fees; 

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

(xi) 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, theConflicts Committee or any other committee of the Board; 

(xii) Out-of-pocket costs for the Company to complywith all applicable laws, regulations and ordinances; 

(xiii) Expenses connected with payments ofDistributions made or caused to be made by the Company to the Stockholders; 

(xiv) Expenses of organizing,redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and 

(xv) All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder. 

 
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**9.02 Timing of and Additional Limitations on Reimbursements**. 

(i) Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall bereimbursed no less than monthly to the 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.

(ii) Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article9 shall not become reimbursable to the Advisor unless and until the Company has raised $2.5 million in the Initial Public Offering. 

(iii) Commencing upon the earlier to occur of four fiscal quarters after (i) the Company’s making of its first investment or (ii) six months after commencement of the Initial PublicOffering, the following limitation on Operating Expenses shall apply: The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “**ExpenseYear**”) exceed (the “**Excess Amount**”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “**2%/25% Guidelines**”) for such year unless the Conflicts Committee determines that such excess wasjustified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall berepaid to the Company. If the Conflicts Committee determines such excess 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 byfiling 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 such excess expenses were justified. The Company will ensurethat 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**

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) theremoval of the Advisor, a director or any of their Affiliates or (ii) any transaction between the Company and the Advisor, a director or any of their Affiliates. This voting restriction shall survive until such time that the Advisor is both nolonger serving as such and is no longer an Affiliate of the Company. 

 
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**ARTICLE 11**

**RELATIONSHIP OF ADVISOR AND COMPANY;**

**OTHER ACTIVITIES OF THE ADVISOR**

**11.01 Relationship**. The Company and the Advisor are not partners or joint venturers with each other, and nothingin this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in 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 its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of theAdvisor or its Affiliates to engage in 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 everyother participant therein. The Advisor shall promptly disclose to the Conflicts Committee the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest betweenthe Advisor’s obligations to the Company and its obligations to or its interest in any other Person. Notwithstanding the foregoing, the Advisor shall promptly provide notice to the Conflicts Committee if the Advisor and Legacy PartnersResidential Realty, LLC propose, after the date of this Agreement, to create any additional exclusion from the restrictions on competing business activities set forth in Section 8.1(a) of the operating agreement of KBS-Legacy ApartmentCommunity REIT Venture, LLC. Such notice shall include a detailed description of the proposed exclusion and the basis for the determination by the Advisor and Legacy Partners Residential Realty, LLC that the excluded activity is not competitive withthe Company or its investments. Within a reasonable time following its receipt of such notice, the Conflicts Committee shall approve or reject (by majority vote) the proposed exclusion. 

**11.02 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 Affiliatesand 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. 

**11.03 Investment Opportunities and Allocation**. The Advisor shall be required to use commercially reasonable efforts to present acontinuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company. 

**ARTICLE 12**

**THE KBS NAME**

The Advisor and its Affiliates have a proprietary interest in the name “KBS.” The Advisor hereby grants to the Company anon-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “KBS” during the term of this Agreement. 

 
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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 name “KBS” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that doesnot contain the name “KBS” 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 suchtime, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “KBS.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or moreof 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 “KBS” as apart of their name, all without the need for any consent (and without the right to object thereto) by the Company. 

**ARTICLE13**

**TERM AND TERMINATION OF THE AGREEMENT**

**13.01 Term**. This Agreement shall have an initial term of one year from the date hereof and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties.The Company’s board of directors 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 a majority of theCompany’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction. 

**13.02 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 theAdvisor. The provisions of Articles 1, 10, 12, 13, 15 and 16 shall survive termination of this Agreement. 

**13.03 Paymentson Termination and Survival of Certain Rights and Obligations**. Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable. 

(i) After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder exceptit shall be entitled to receive from the Company within 30 days after the effective date of such termination (A) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreementand (B) the Subordinated Performance Fee Due Upon Termination, provided that no Subordinated Performance Fee Due Upon Termination will be paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee. 

(ii) The Advisor shall promptly upon termination: 

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

(b) 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 lastaccounting furnished to the Board; 

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

(d) cooperate with the Company to provide an orderly transition of advisoryfunctions. 

**ARTICLE 14**

**ASSIGNMENT**

This Agreement may be assigned by the Advisor to an Affiliatewith the consent of a majority of the Company’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction. The Advisor may assign any rights to receive fees or other payments under thisAgreement without obtaining the approval of the Board or 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 otherorganization 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 thisAgreement. 

**ARTICLE 15**

**INDEMNIFICATION AND LIMITATION OF LIABILITY**

**15.01 Indemnification**.Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers,directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, 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 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 Advisors or its Affiliates for any loss, liability or expense arisingfrom 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 materialsecurities 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 jurisdictionapproves a settlement of the claims against a particular 

 
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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 theSEC 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. 

**15.02 Limitation on Indemnification**. Notwithstanding the foregoing, the Company shall not provide for indemnification of theAdvisor or its Affiliates 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: 

(i) The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss orliability was in the best interests of the Company. 

(ii) The Advisor or its Affiliates were acting on behalfof or performing services for the Company. 

(iii) Such liability or loss was not the result of negligence ormisconduct by the Advisor or its Affiliates. 

**15.03 Limitation on Payment of Expenses**. The Company shall pay orreimburse reasonable legal expenses and other costs incurred by the Advisors or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amendedfrom 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 partywho 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) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by theCompany, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification. 

**ARTICLE 16**

**MISCELLANEOUS**

**16.01 Notices**. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unlesssome other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnightdelivery service to the addresses set forth herein: 

To the Company or the Board: 

KBS Legacy Partners Apartment REIT, Inc. 

620 Newport Center Drive, Suite 1300 

Newport Beach, California 92660 

 
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To the Advisor: 

KBS Capital Advisors LLC 

620 Newport Center Drive, Suite 1300 

Newport Beach, California 92660 

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01. 

**16.02 Modification**. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by aninstrument in writing signed by both parties hereto, or their respective successors or permitted assigns. 

**16.03Severability**. 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 beinvalid or unenforceable in whole or in part. 

**16.04 Construction**. The provisions of this Agreement shall be construedand interpreted in accordance with the laws of the State of Delaware. 

**16.05 Entire Agreement**. This Agreement containsthe 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, ofany 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. This Agreement may not be modified oramended other than by an agreement in writing. 

**16.06 Waiver**. Neither the failure nor any delay on the part of a partyto 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 anyother 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 waivershall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 

**16.07Gender**. 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.

**16.08 Titles Not to Affect Interpretation**. The titles of Articles and Sections contained in this Agreement are forconvenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof. 

**16.09 Counterparts**. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears

 
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thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shallbear the signatures of all of the parties reflected hereon as the signatories. 

*[The remainder of this page is intentionallyleft blank.*

*Signature page follows.]*

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

 
KBS LEGACY PARTNERS APARTMENT REIT, INC. By: /s/ C. Preston Butcher   C. Preston Butcher   Chief Executive OfficerKBS CAPITAL ADVISORS LLC By: PBren Investments, L.P., a Manager  By: PBren Investments, LLC, as general partner   By: /s/ Peter M. Bren    Peter M. Bren, Manager By: 
Schreiber Real Estate Investments, L.P., a

Manager
  By: Schreiber Investments, LLC, as general partner   By: /s/ Charles J. Schreiber, Jr.    Charles J. Schreiber, Jr., Manager
 
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