Document:

KBS SOR II Q3  2014 Exhibit 10.1

Exhibit 10.1

AMENDED AND RESTATED

ADVISORY AGREEMENT

between

KBS STRATEGIC OPPORTUNITY REIT II, INC.

and

KBS CAPITAL ADVISORS LLC

August 12, 2014

TABLE OF CONTENTS

	
				
	ARTICLE 1 – DEFINITIONS
	Page
	

	ARTICLE 2 – APPOINTMENT
	1
	

	ARTICLE 3 – DUTIES OF THE ADVISOR
	10
	

	 
	3.01 Organizational and Offering Services
	10
	

	 
	3.02 Acquisition Services
	10
	

	 
	3.03 Asset Management Services
	11
	

	 
	3.04 Stockholder Services
	14
	

	 
	3.05 Other Services
	14
	

	ARTICLE 4 – AUTHORITY OF ADVISOR
	14
	

	 
	4.01 General
	14
	

	 
	4.02 Powers of the Advisor
	14
	

	 
	4.03 Approval by the Board
	15
	

	 
	4.04 Modification or Revocation of Authority of Advisor
	15
	

	ARTICLE 5 – BANK ACCOUNTS
	15
	

	ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS
	15
	

	ARTICLE 7 – LIMIATION ON ACTIVITIES
	16
	

	ARTICLE 8 – FEES
	16
	

	 
	8.01 Acquisition Fees
	16
	

	 
	8.02 Asset Management Fees
	17
	

	 
	8.03 Disposition Fees
	18
	

	 
	8.04 Subscription Processing Fee
	18
	

	 
	8.05 Subordinated Share of Cash Flows
	19
	

	 
	8.06 Subordinated Incentive Fee
	19
	

	 
	8.07 Changes to Fee Structure
	20
	

	ARTICLE 9 – EXPENSES
	20
	

	 
	9.01 General
	20
	

	 
	9.02 Timing of an Limitations on Reimbursements
	22
	

	ARTICLE 10 – VOTING AGREEMENT
	22
	

	ARTICLE 11 – RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR
	23
	

	 
	11.01 Relationship
	23
	

	 
	11.02 Time Commitment
	23
	

	 
	11.03 Investment Opportunities and Allocation
	23
	

	ARTICLE 12 – THE KBS NAME
	24
	

	ARTICLE 13 – TERM AND TERMINATION OF THE AGREEMENT
	25
	

	 
	13.01 Term
	25
	

	 
	13.02 Termination by Either Party
	25
	

	 
	13.03 Payments on Termination and Survival of Certain Rights and Obligations
	25
	

	ARTICLE 14 – ASSIGNMENT
	26
	

	ARTICLE 15 – INDEMNIFICATION AND LIMITATION OF LIABILITY
	26
	

	 
	15.01 Indemnification
	26
	

i

	
				
	 
	15.02 Limitation on Indemnification
	26
	

	 
	15.03 Limitation on Payment of Expenses
	27
	

	ARTICLE 16 – MISCELLANEOUS
	27
	

	 
	16.01 Notices
	27
	

	 
	16.02 Modification
	28
	

	 
	16.03 Severability
	28
	

	 
	16.04 Construction
	28
	

	 
	16.05 Entire Agreement
	28
	

	 
	16.06 Waiver
	28
	

	 
	16.07 Gender
	28
	

	 
	16.08 Titles Not to Affect Interpretation
	28
	

	 
	16.09 Counterparts
	28
	

ii

AMENDED AND RESTATED  
ADVISORY AGREEMENT
This Amended and Restated Advisory Agreement, dated as of August 12, 2014 (the “Agreement”), is between KBS Strategic Opportunity REIT II, 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 and the Advisor previously entered the Advisory Agreement dated July 3, 2013, as amended by Amendment no. 1 to the Advisory Agreement dated October 11, 2013, (collectively, the “Advisory Agreement”);
WHEREAS, the Company and the Advisor desire to amend and restate the Advisory Agreement to provide certain limitations included in the Company’s charter related to its commencement of an initial public offering; 
WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein; and
WHEREAS, the Advisor is willing 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 to amend and restated the Advisory Agreement as follows:
ARTICLE 1
DEFINITIONS
The following defined terms used in this Agreement shall have the meanings specified below:
“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title 

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insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any property, loan or other potential investment. 
“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property, Loan or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in 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.
“Advisor” means (i) KBS Capital Advisors LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.
“Affiliate or Affiliated” An Affiliate of 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 with the 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 whose outstanding 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 be deemed 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 governing body) of such program is composed of Affiliates of the entity. 
“Appraised Value” means the value according to an appraisal made by an Independent Appraiser. 
“Asset Management Fee” shall have the meaning set forth in Section 8.02. 
“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.
“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.
“Bylaws” means the bylaws of the Company, as amended from time to time.

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“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith). 
“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout or other settlement of any Loan or Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith.  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 and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings.
“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.
“Charter” means the articles of incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
“Company” means KBS Strategic Opportunity REIT II, Inc., a corporation organized under the laws of the State of Maryland.
“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.
“Conflicts Committee” shall have the meaning set forth in the Company’s 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 to provide major repairs or rehabilitation on a Property. 
“Contract Sales Price” means the total consideration received by the Company for the sale of a Property, Loan or other Permitted Investment.
“Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments held, directly or indirectly, by the Company or the 

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Partnership, 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 Loan or Permitted Investment, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), and (ii) the outstanding principal amount of such Loan or Permitted Investment, including fees and expenses related to the acquisition or funding of such investment (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), as of the time of calculation.  With respect to any Loan or Permitted Investment held by the Company or the Partnership through a Joint Venture or partnership of which it is, directly or indirectly, a co-venturer or partner, such amount shall be the Company’s proportionate share thereof.  The Cost of Loans and other Permitted Investments is computed without regard to whether any portion of such cost is funded using debt financing secured by, or attributable to, such investments.
“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to the purchase of Properties, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or a partner, the portion of the amount actually paid or allocated to the purchase of Properties, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget, that is attributable to the Company’s investment in the Joint Venture or partnership. The Cost of Real Estate Investments is computed without regard to whether any portion of such cost is funded using debt financing secured by, or attributable to, the Properties.
“Dealer Manager” means (i) KBS Capital Markets Group LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.
“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.
“Director” means a member of the Board of Directors of the Company.
“Disposition Fee” shall have the meaning set forth in Section 8.03. 
“Distributions” means any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

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“GAAP” means accounting principals generally accepted in the United States.
“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses. 
“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 substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (M.A.I.) or the Society of Real Estate Appraisers (S.R.E.A.) shall be conclusive evidence of such qualification. 
“Invested Capital” means the amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by any amounts paid by the Company to repurchase 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, Loans or other Permitted Investments.
“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter. 
“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, and including, without limitation, mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.
“Market Value” shall have the meaning set forth in Section 8.06.
“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof. 
“Net Income” means, for any period, the total revenues 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 total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets. 
“Offering” means a Private or Public Offering.
“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and 

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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 compliance with 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 estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.
“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and 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 estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. 
“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner.
“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with an Offering and including, to the extent applicable, the qualification, registration and regulatory filings of the Offering and the marketing and distribution of the Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); expenses for printing, engraving and mailing; salaries of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and state laws, including taxes and fees, accountants’ and attorneys’ fees.
“Partnership” means KBS Strategic Opportunity Limited Partnership II, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.

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“Permitted Investments” means all investments (other than Properties, Loans 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 or partnership, pursuant to its Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time.
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Private Offering” means any private offering of Shares pursuant to a confidential Private Placement Memorandum, other than a private offering of shares under a distribution reinvestment plan.
“Private Placement Memorandum” means a confidential private placement memorandum, as supplemented, pursuant to which the Company offers its Shares in a Private Offering.
“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, and/or any real property or properties transferred or conveyed to a Joint Venture or partnership in which the Company is, directly or indirectly, a co-venturer or partner. 
“Property Manager” means an entity that has been retained to perform and carry out property-management services at one or more of the Properties, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.
“Public Offering” means any public offering of Shares pursuant to an effective Registration Statement filed under the Securities Act of 1933, as amended, other than a public offering of Shares under a distribution reinvestment plan.
“Registration Statement” means a registration statement filed by the Company with the SEC on Form S-11, as amended from time to time, in connection with a Public Offering.
“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.
“Sale” or “Sales” means any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with 

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respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (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 Venture or partnership in which it is, directly or indirectly, a co-venturer or partner; or (C) any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or any partnership or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.
“SEC” means the United States Securities and Exchange Commission.
“Settlement” means the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.
“Shares” means the shares of common stock of the Company, par value $.01 per share. 
“Stockholders” means the registered holders of the Shares. 
“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 7% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated and shall be calculated net of (1) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 7%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year and (2) Distributions of Cash from Sales, Settlements and Financings, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 7%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year.
“Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if the Shares are Listed, as calculated in Section 8.06.
“Subordinated Performance Fee Due Upon Termination” means a fee payable in 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 

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Value of the Company’s Properties at the Termination Date, less amounts of all third-party indebtedness secured by the Company’s Properties, plus the fair market value of all other Loans and Permitted Investments of the Company at the Termination Date, less amounts of third-party indebtedness related to such Loans and Permitted Investments, plus the fair market value of the Company’s other assets and liabilities, plus total Distributions (excluding any stock dividend) through the Termination Date exceeds (b) the sum of Invested Capital plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 7% Return from inception through the Termination Date less (2) any prior 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 the Performance 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 Termination Date 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 Settlement from the first Sale or Settlement, and in part from the Cash from Sales 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, its successors 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 of such 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 per Share equal to the fair market value for the Shares as determined by the Board of Directors based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Loans and Permitted Investments of the Company on the date of election.
“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.05.
“Subscription Processing Fee” has the meaning set forth in Section 8.04. 
“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 four consecutive 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.

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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 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, the direction 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 time to 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 engaging an Affiliate or third party, perform the following duties:
3.01 Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.
3.02 Acquisition Services.
(i) Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;
(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 and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments;

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(iii) Perform due diligence on prospective investments and create due diligence reports summarizing 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 of contemplated investments of the Company; 
(vi) Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and
(vii) Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments.
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, corporate fiduciaries, 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 or desirable for the performance of any of the foregoing services;
(b) Negotiate and service the Company’s debt facilities and other financings;
(c) Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;
(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 the various management and operational functions related to the Company’s investments;

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(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, Loans and other Permitted Investments on an overall portfolio basis;
(f) Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;
(g) Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;
(h) Conduct periodic on-site property visits to some 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;
(i) Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget; 
(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 to the Board.
(ii) Accounting and Other Administrative Services:
(a) Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;
(b) From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

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(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, as well as any investments that have been made by the Advisor or any of its Affiliates directly;
(d) Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;
(e) Provide financial and operational planning services;
(f) Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;
(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’s independent auditors and other consultants, on related tax matters; 
(i) Provide the Company with all necessary cash management services;
(j) Manage and coordinate with the transfer agent the dividend process and payments to Stockholders;
(k) Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;
(l) Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including 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 to comply with 

15

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 reasonably necessary for the admission of new Stockholders.
3.05 Other Services. Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).
ARTICLE 4
AUTHORITY OF ADVISOR
4.01 General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.
4.02 Powers of the Advisor. Subject to the express limitations 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 disposing of 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 

16

purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.
4.03 Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the 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, financing or 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 investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.
ARTICLE 5
BANK ACCOUNTS
The Advisor may establish and maintain one or more bank accounts in 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 to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.
ARTICLE 6
RECORDS AND FINANCIAL STATEMENTS
The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor 

17

delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.
ARTICLE 7
LIMITATION ON ACTIVITIES
Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. In the event an action 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 refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given. 
ARTICLE 8
FEES
8.01 Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment (whether an acquisition or origination). With respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor shall equal 1.5% of the sum of the amount actually paid or allocated to fund (including future funding of Loans) the acquisition or origination of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in such Property, Loan or other Permitted Investment, plus significant (as determined in the sole discretion of the Advisor) capital improvement costs budgeted as of the date of acquisition related to the development, construction or improvement of such Property, Loan or other Permitted Investment. With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, the Acquisition Fee payable to the Advisor shall equal 1.5% of the portion of the amount actually paid or allocated to fund (including future 

18

funding of Loans) the acquisition or origination of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in such Property, Loan or other Permitted Investment, plus significant (as determined in the sole discretion of the Advisor) capital improvement costs budgeted at the time of acquisition related to the development, construction or improvement of such Property, Loan or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership. Notwithstanding anything herein to the contrary, the payment of Acquisition 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 following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. Notwithstanding the foregoing, Acquisition Fees calculated based on capital improvement costs budgeted as of the date of acquisition shall be paid at the time funds are disbursed pursuant to a final approved budget upon receipt of an invoice by the Company.  However, the Acquisition 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 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.
8.02 Asset Management Fees.
(i) Except as provided in Section 8.02(ii) hereof, the Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to the lesser of one-twelfth of (a) 1.0% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments; and (b) 2.0% of the sum of (A) the Cost of Real Estate Investments less the amount of any debt financing secured by, or attributable to, the Properties as of the date of computation hereunder and (B) the Cost of Loans and other Permitted Investments less the amount of any debt financing secured by, or attributable to, such investments as of the date of computation hereunder.  The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management 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 Asset 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 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.
(ii) Notwithstanding anything contained in Section 8.02(i) to the contrary, a Property, Loan or other Permitted Investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances may either be excluded from the calculation of the Cost of Real Estate Investments or the Cost 

19

of Loans and other Permitted Investments or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the Conflicts Committee, and the resulting change in the Asset Management Fee with respect to such an investment will be applicable upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a Person other than the Company, its direct or indirect wholly owned subsidiary or a Joint Venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment. 
8.03 Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”). For a Sale with a Contract Sales Price less than or equal to $50 million, the Disposition Fee will equal 1.5% of the Contract Sales Price. For a Sale with a Contract Sales Price greater than $50 million, the Disposition Fee will equal the sum of $750,000 (which amount is 1.5% of $50 million), plus 1.0% of the amount of the Contract Sales Price in excess of $50 million. Provided, however, that if in connection with such Sales commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties. The payment of any Disposition Fee by the Company shall be subject to the limitations contained in the Company’s Charter. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property, Loan or other Permitted Investment. Substantial assistance in connection with the Sale of a Property includes the Advisor’s preparation of an investment package for the Property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the Advisor in connection with a Sale. 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 the closing 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 period in the sole discretion of the Advisor. All or any portion of the Disposition Fees not taken as to any period shall be deferred without interest and may be paid in such other period as the Advisor shall determine.
8.04 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 Processing Fee”) 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 

20

Subscription Processing 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 Subscription Processing Fee may or may not be taken, in whole or in part, as to any period in the sole discretion of the Advisor. All or any portion of the Subscription Processing Fees not taken as to any period shall be deferred without interest and may be paid in such other period 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.
8.05 Subordinated Share of Cash Flows. The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the stockholders have received Distributions in an aggregate amount equal to the sum of:
a.    the Stockholders’ 7% 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 a computation 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 day following the last day of such month. For the avoidance of doubt, to the extent the payment of the Subordinated Share of Cash Flows is funded other than from Cash From Sales and Settlements, such amounts shall be included in Operating Expenses and subject to the 2%/25% Guidelines.
8.06 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 the outstanding 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 after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends) from the Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 7% Return from inception through the date Market Value is determined. 

21

The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing.  In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor. 
8.07 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 or reimburse 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 the Advisor 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 days after the end of the month in which an Offering terminates, (a) 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; the Company 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 fair and commercially reasonable to the Company;
(ii) Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;
(iii) The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;
(iv) Interest and other costs for borrowed money, including discounts, points and other similar fees;

22

(v) Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;
(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, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and 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 the services 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, (a) other than reimbursement of travel and communication expenses, no reimbursement shall be made for the cost 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 and (b) no reimbursement shall be made for the salaries and benefits the Advisor or its Affiliates may pay to the Company’s executive officers;
(x) Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;
(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 or any committee of the Board;
(xii) Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances; 
(xiii) Expenses connected with payments of Distributions 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.

23

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 be reimbursed 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 Article 9 shall not become reimbursable to the Advisor unless and until the Company has raised $2.0 million in the Initial Public Offering.
(iii) After the Company commences a Public Offering, 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 Public Offering, 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 “Expense Year”) 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 was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid 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 by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.
ARTICLE 10
VOTING AGREEMENT
The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the 

24

election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company. 
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 nothing in 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 the Advisor 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 every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.
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 Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.
11.03 Investment Opportunities and Allocation. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company.  In the event an investment opportunity is located that may be suitable for the Company and other programs sponsored by the Advisor or any of its Affiliates, including KBS Realty Advisors, the Advisor, in its sole discretion, will have to determine the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. This determination must be made in a manner that is fair without favoring any other program or investor. The factors that the Advisor shall consider when determining the program or 

25

investor for which an investment opportunity would be the most suitable are the following: 

		
	•
	the investment objectives and criteria of each program or investor;

		
	•
	the cash requirements of each program or investor;

		
	•
	the effect of the investment on the diversification of each program’s or investor’s portfolio by type of investment, risk of investment, type of commercial property, geographic location of properties, and tenants of properties and, in the case of debt-related investments, the characteristics of the underlying property;

		
	•
	the policy of each program or investor relating to leverage;

		
	•
	the anticipated cash flow of the property or asset to be acquired;

		
	•
	the income tax effects of the purchase on each program or investor;

		
	•
	the size of the investment; and

		
	•
	the amount of funds available to each program or investor and the length of time such funds have been available for investment.

If a subsequent event or development, such as a delay in the closing of a property or investment or a delay in the construction of a property, causes any investment, in the opinion of the Advisor, to be more appropriate for another program or investor, they may offer the investment to another program or investor. It shall be the duty of the Board to ensure that the allocation method described above is applied fairly to 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 a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “KBS” during the term of this Agreement. 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 does not 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 of its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “KBS.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service 

26

organizations having “KBS” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.
ARTICLE 13
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 (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by the Conflicts Committee.
13.02 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 the Advisor. The provisions of Articles 1, 10, 12, 13, 15 and 16 shall survive termination of this Agreement. 
13.03 Payments on 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 except it 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 Agreement and (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:
(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 last accounting furnished to the Board;
(c) deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

27

(d) cooperate with the Company to provide an orderly transition of advisory functions.
ARTICLE 14
ASSIGNMENT
This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.
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 Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC 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 the Advisor or its Affiliates for any 

28

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 or liability was in the best interests of the Company.
(ii)    The Advisor or its Affiliates were acting on behalf of or performing services for the Company. 
(iii)    Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates. 
15.03 Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor 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 amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that 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 unless some 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 overnight delivery service to the addresses set forth herein:
To the Company or the Board:

KBS Strategic Opportunity REIT II, Inc. 
620 Newport Center Drive, Suite 1300
Newport Beach, California 92660

To the Advisor:

KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300

29

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 an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.
16.03 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
16.04 Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.
16.05 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
16.06 Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.07 Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
16.08 Titles Not to Affect Interpretation. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
16.09 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 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, shall bear the signatures of all of the parties reflected hereon as the signatories. 

30

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

KBS STRATEGIC OPPORTUNITY REIT II, INC.

		
	By:
	/s/ Keith D. Hall

Keith D. Dall, Chief Executive Officer

KBS CAPITAL ADVISORS LLC

		
	By:
	GKP Holding LLC, a Manager

		
	By:
	/s/ Peter McMillan III

Peter McMillan III, Manager

		
	By:
	/s/ Keith D. Hall

Keith D. Hall, Manager

By: Schreiber Investments, LLC, as general partner

		
	By:
	/s/ Charles J. Schreiber, Jr.

Charles J. Schreiber, Jr., Manager

31KBS SOR II Q3 2014 Exhibit 10.2

Exhibit 10.2
KBS STRATEGIC OPPORTUNITY REIT II, INC.

Up to 180,000,000 Shares of Common Stock

DEALER MANAGER AGREEMENT

August 12, 2014

KBS Capital Markets Group LLC
660 Newport Center Drive, Suite 1200
Newport Beach, California 92660

Ladies and Gentlemen:

KBS Strategic Opportunity REIT II, Inc., a Maryland corporation (the “Company”), has registered for public sale 180,000,000 shares of its common stock, $.01 par value per share (the “Shares”), of which 80,000,000 Shares are intended to be offered pursuant to the Company’s dividend reinvestment plan (the “DRP”).  The Company desires for KBS Capital Markets Group LLC (the “Dealer Manager”) to act as its agent in connection with the offer and sale of the Shares to the public (the “Offering”).  
It is anticipated that the Dealer Manager will enter into Selected Dealer Agreements (in the form attached to this Agreement as Exhibit A) with other broker-dealers participating in the Offering (each participating broker-dealer being referred to herein as a “Dealer”).  The Company shall have the right to approve any material modifications or addendums to the form of the Selected Dealer Agreement.
Except as described in the Prospectus (as defined below) or in Section 5.3 hereof, the Shares are to be sold at a per Share cash price as follows:

	
			
	

Distribution Channel
	Primary
Offering
Shares
	

DRP Shares

	Sales through a Dealer earning transaction-based compensation
	$10.00
	$9.50

	Sales through all other distribution channels as discussed in the Prospectus
	$9.35
	$9.50

        
In connection with the sale of Shares, the Company hereby agrees with you, the Dealer Manager, as follows:
		
	1.
	Representations and Warranties of the Company.  As an inducement to the Dealer Manager to enter into this Agreement, the Company represents and warrants to the Dealer Manager and to each Dealer that:

		
	1.1.
	The Company has prepared and filed with the Securities and Exchange Commission (the “SEC”) a registration statement (Registration No. 333-192331) that has become effective for the registration of the Shares under the Securities 

1

Act of 1933, as amended (the “Securities Act”), and the applicable rules and regulations (the “Rules and Regulations”) of the SEC promulgated thereunder.  Copies of such registration statement as initially filed and each amendment thereto have been or will be delivered to the Dealer Manager.  The registration statement and the prospectus contained therein, as finally amended at the effective date of the registration statement (the “Effective Date”), are respectively hereinafter referred to as the “Registration Statement” and the “Prospectus,” except that if the Company files a prospectus or prospectus supplement pursuant to Rule 424(b) under the Securities Act, or if the Company files a post-effective amendment to the Registration Statement, the term “Prospectus” includes the prospectus filed pursuant to Rule 424(b) or the prospectus included in such post-effective amendment.  The term “Preliminary Prospectus” as used herein shall mean a preliminary prospectus related to the Shares as contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at any time as part of the registration statement. If one or more additional registration statements are filed by the Company and become effective with respect to shares of the Company’s common stock to be sold pursuant to the DRP, the terms “Registration Statement” and “Prospectus” shall refer, with respect to such DRP shares, to each such registration statement and prospectus contained therein from and after the date of effectiveness of each such registration statement, as each such registration statement and prospectus may be amended or supplemented from time to time.
		
	1.2.
	On the Effective Date, on the date of the Prospectus and on the date any post-effective amendment to the Registration Statement becomes effective or any amendment or supplement to the Prospectus is filed with the SEC, the Registration Statement and the Prospectus, as applicable, including the financial statements contained therein, complied or will comply with the Securities Act and the Rules and Regulations.  On the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  On the date of the Prospectus, as amended or supplemented, as applicable, the Prospectus did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding anything contained herein to the contrary, the Company’s representations in this Section 1.2 will not extend to such statements contained in or omitted from the Registration Statement or the Prospectus, as amended or supplemented, that are primarily within the knowledge of the Dealer Manager or any of the Dealers and are based upon information furnished by the Dealer Manager in writing to the Company specifically for inclusion therein.  

		
	1.3.
	No order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for that purpose are pending, threatened or, to the knowledge of the Company, contemplated by the SEC; and, to the knowledge of the Company, no order suspending the offering of the Shares 

2

in any jurisdiction has been issued and no proceedings for that purpose have been instituted or threatened or are contemplated.
		
	1.4.
	The Company intends to use the funds received from the sale of the Shares as set forth in the Prospectus.

		
	1.5.
	The Company has full legal right, power and authority to enter into this Agreement and to perform the transactions contemplated hereby, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws and to the extent that the enforceability of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws that affect creditors’ rights generally or by equitable principles relating to the availability of remedies.

		
	1.6.
	The execution and delivery of this Agreement, the consummation of the transactions contemplated herein and compliance with the terms of this Agreement by the Company will not conflict with or constitute a default or violation under any charter, bylaw, contract, indenture, mortgage, deed of trust, lease, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities law and to the extent that the enforceability of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws that affect creditors’ rights generally or by equitable principles relating to the availability of remedies.

		
	1.7.
	No consent, approval, authorization or other order of any governmental authority is required in connection with the execution or delivery by the Company of this Agreement or the issuance and sale by the Company of the Shares, except as may be required under the Securities Act and the Rules and Regulations thereunder, by the Financial Industry Regulatory Authority (“FINRA”) or under applicable state securities laws.

		
	1.8.
	The Shares have been duly authorized and, when issued and sold as contemplated by the Prospectus and the Company’s charter, as amended and supplemented, and upon payment therefor as provided in the Prospectus and this Agreement, the Shares will be validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Prospectus. 

		
	2.
	Representations and Warranties of the Dealer Manager.  As an inducement to the Company to enter into this Agreement, the Dealer Manager represents and warrants to the Company that:

		
	2.1.
	The Dealer Manager is a member in good standing of FINRA and a broker-dealer registered as such under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Dealer Manager and its employees and representatives have all required licenses and registrations to act under this Agreement.

3

		
	2.2.
	The Dealer Manager represents and warrants to the Company and each person that signs the Registration Statement that the information under the caption “Plan of Distribution” in the Prospectus, as amended and supplemented, and all other information furnished and to be furnished to the Company by the Dealer Manager in writing expressly for use in the Registration Statement, any Preliminary Prospectus or the Prospectus, does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

		
	3.
	Covenants of the Company.  The Company covenants and agrees with the Dealer Manager that:

		
	3.1.
	It will, at no expense to the Dealer Manager, furnish the Dealer Manager with such number of printed copies of the Registration Statement, including all amendments and exhibits thereto, as the Dealer Manager may reasonably request.  It will similarly furnish to the Dealer Manager and others designated by the Dealer Manager as many copies as the Dealer Manager may reasonably request in connection with the offering of the Shares of:  (a) the Prospectus, including any amendments and supplements thereto and (b) this Agreement.

		
	3.2.
	The Company will prepare and file with the appropriate regulatory authorities, on behalf of and at no expense to the Dealer Manager, the printed sales literature or other materials authorized by the Company to be used in the Offering (“Authorized Sales Materials”).  In addition, the Company will furnish the Dealer Manager and others designated by the Dealer Manager, at no expense to the Dealer Manager, with such number of printed copies of Authorized Sales Materials as the Dealer Manager may reasonably request. 

		
	3.3.
	The Company will furnish such information and execute and file such documents as may be necessary for it to qualify the Shares for offer and sale under the securities laws of such jurisdictions as the Dealer Manager may reasonably designate and will file and make in each year such statements and reports as may be required.  The Company will furnish to the Dealer Manager upon request a copy of such papers filed by the Company in connection with any such qualification.

		
	3.4.
	It will:  (a) file every amendment or supplement to the Registration Statement or the Prospectus that may be required by the SEC or any state securities administration and (b) if at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement or any state securities administration shall issue any order or take other action to suspend or enjoin the sale of the Shares, it will promptly notify the Dealer Manager.

		
	3.5.
	If at any time when a Prospectus is required to be delivered under the Securities Act and the Rules and Regulations thereunder any event occurs as a result of which, in the opinion of either the Company or the Dealer Manager, the Prospectus would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in view of the circumstances under which they were made, not misleading, the Company will 

4

promptly notify the Dealer Manager thereof (unless the information shall have been received from the Dealer Manager) and will prepare an amendment or supplement to the Prospectus that will correct such statement or omission.
		
	3.6.
	It will comply with all requirements imposed upon it by the Securities Act and the Exchange Act, by the rules and regulations of the SEC promulgated thereunder and by all securities laws and regulations of those states in which an exemption has been obtained or qualification of the Shares has been effected, to permit the continuance of offers and sales of the Shares in accordance with the provisions hereof and of the Prospectus.

		
	3.7.
	The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (a) the preparation, filing and printing of the Registration Statement as originally filed and of each amendment thereto, (b) the preparation, printing and delivery to the Dealer Manager of this Agreement, the Selected Dealer Agreement and such other documents as may be required in connection with the offer, sale, issuance and delivery of the Shares, (c) the fees and disbursements of the Company’s counsel, accountants and other advisors, (d) the fees and expenses related to the review of the terms and fairness of the Offering by FINRA, (e) the fees and expenses related to the registration and qualification of the Shares under federal and state securities laws, including the fees and disbursements of counsel in connection with the preparation of any Blue Sky survey and any supplement thereto, (f) the printing and delivery to the Dealer Manager of copies of any Preliminary Prospectus and the Prospectus, including any amendments and supplements thereto, (g) the fees and expenses of any registrar, transfer agent or escrow agent in connection with the Shares and (h) the costs and expenses of the Company relating to the preparation and printing of any Authorized Sales Materials and Company-approved investor presentations undertaken in connection with the marketing of the Shares, including, without limitation, expenses associated with the production of slides and graphics, fees and expenses of any consultants engaged in connection with presentations with the prior approval of the Company and travel and lodging expenses of the representatives of the Company and any such consultants.

		
	4.
	Covenants of the Dealer Manager.  The Dealer Manager covenants and agrees with the Company that:

		
	4.1.
	In connection with the Dealer Manager’s participation in the offer and sale of Shares (including, without limitation, any resales and transfers of Shares), the Dealer Manager will comply, and in its agreements with Dealers will require that the Dealers comply, with all requirements and obligations imposed upon any of them by (a) the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated under both such acts, including the obligation to deliver a copy of the Prospectus as amended or supplemented; (b) all applicable state securities laws and regulations as from time to time in effect; (c) the applicable rules of FINRA, including, but not in any way limited to, Rule 2440 of the NASD Conduct Rules and FINRA Rule 2310 and FINRA Rule 5141; (d) all applicable rules and regulations relating to the suitability of the investors, including, without limitation, the provisions of Articles III.C and III.E of the Statement of Policy 

5

regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc. (“NASAA Guidelines”); (e) any other state and federal laws and regulations applicable to the Offering, the sale of Shares or the activities of the Dealer Manager pursuant to this Agreement, including without limitation the privacy standards and requirements of state and federal laws, including the Gramm-Leach-Bliley Act of 1999, and the laws governing money laundering abatement and anti-terrorist financing efforts, including the applicable rules of the SEC and FINRA, the Bank Secrecy Act, as amended, the USA Patriot Act of 2001 and regulations administered by the Office of Foreign Asset Control at the Department of the Treasury; and (f) this Agreement and the Prospectus as amended and supplemented.
		
	4.2.
	The Dealer Manager will not offer the Shares, and in its agreements with Dealers will require that the Dealers not offer Shares, in any jurisdiction unless and until (a) the Dealer Manager has been advised by the Company in writing that the Shares are either registered in accordance with, or exempt from, the securities laws of such jurisdiction and (b) the Dealer Manager and any Dealer offering Shares in such jurisdiction have all required licenses and registrations to offer Shares in that jurisdiction.

		
	4.3.
	The Dealer Manager will make, and in its agreements with Dealers will require that Dealers make, no representations concerning the Offering except as set forth in the Prospectus as amended and supplemented and in the Authorized Sales Materials.

		
	4.4.
	The Dealer Manager will offer Shares, and in its agreements with Dealers will require that the Dealers offer Shares, only to persons who meet the financial qualification and suitability standards set forth in the Prospectus as amended and supplemented or in any suitability letter or memorandum sent to the Dealer Manager by the Company.  The Dealer Manager further agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever and no commission will be paid to the Dealer Manager with respect to the portion of any subscription that is rejected.

The Dealer Manager shall maintain, or in its agreements with Dealers shall require the Dealers to maintain, for at least six years, a record of the information obtained to determine that an investor meets the financial qualification and suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions, including initial enrollments and increased participations in the DRP). 
In making these determinations as to financial qualification and suitability, the Dealer Manager may rely on representations from (i) investment advisers who are not affiliated with a Dealer or (ii) banks acting as trustees or fiduciaries.  With respect to the Dealer Manager’s obligation to maintain records of an investor’s financial qualification and suitability, the Company agrees that the Dealer Manager can satisfy its obligations by contractually requiring such information to be maintained by the investment advisers or banks discussed in the preceding sentence.

6

		
	4.5.
	Except for Authorized Sales Materials, the Company has not authorized the use of any supplemental literature or sales material in connection with the Offering and the Dealer Manager agrees not to use any such material that has not been authorized by the Company.  The Dealer Manager further agrees (a) not to deliver any Authorized Sales Materials to any person unless it is accompanied or preceded by the Prospectus as amended and supplemented, (b) not to show or give to any investor or prospective investor or reproduce any material or writing that is supplied to it by the Company and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public and (c) not to show or give to any investor or prospective investor in a particular jurisdiction any material or writing that is supplied to it by the Company if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.

		
	4.6.
	The Dealer Manager agrees to be bound by the terms of the Escrow Agreement dated May 6, 2014, among UMB Bank, N.A., as escrow agent, the Dealer Manager and the Company, copies of which are attached hereto as Exhibit B and the Dealer Manager further agrees that it will not represent or imply that UMB Bank, N.A., as the escrow agent identified in the Prospectus, has investigated the desirability or advisability of an investment in the Company or has approved, endorsed or passed upon the merits of the Shares or of the Company, nor will the Dealer Manager use the name of said escrow agent in any manner whatsoever in connection with the offer or sale of the Shares other than by acknowledgment that it has agreed to serve as escrow agent.

		
	4.7.
	The Dealer Manager will provide the Company with such information relating to the offer and sale of the Shares by it as the Company may from time to time reasonably request or as may be requested to enable the Company to prepare such reports of sale as may be required to be filed under applicable federal or state securities laws.

		
	4.8.
	The Dealer Manager will permit a Dealer to participate in the Offering only if such Dealer is a member of FINRA.

		
	5.
	Obligations and Compensation of Dealer Manager.

		
	5.1.
	The Company hereby appoints the Dealer Manager as its agent and principal distributor during the Offering Period (as defined in Section 5.2) for the purpose of finding, on a best-efforts basis, purchasers for the Shares for cash through the distribution channels contemplated herein.  The Dealer Manager may also arrange for the sale of Shares for cash directly to clients and customers identified by the Company on the terms and conditions stated herein and in the Prospectus.  The Dealer Manager hereby accepts such agency and distributorship and agrees to use its best efforts to find purchasers for the Shares on said terms and conditions.

		
	5.2.
	The “Offering Period” shall mean that period during which Shares may be offered for sale, commencing on the Effective Date of the Registration Statement (but in no event prior to the Effective Date of the Registration Statement), during 

7

which period offers and sales of the Shares shall occur continuously in the jurisdictions in which the Shares are registered or qualified or exempt from registration (as confirmed in writing by the Company to the Dealer Manager) unless and until the Offering is terminated, provided that the Dealer Manager and the Dealers will suspend or terminate offering Shares upon request of the Company at any time and will resume offering Shares upon subsequent request of the Company.  The Offering Period shall in all events terminate upon the sale of all of the Shares.  Upon termination of the Offering Period, the Dealer Manager’s agency and this Agreement shall terminate without obligation on the part of the Dealer Manager or the Company except as set forth in this Agreement. 
		
	5.3.
	Except as may be provided in the “Plan of Distribution” section of the  
Prospectus, which may be amended and supplemented from time to time, as compensation for the services rendered by the Dealer Manager, the Company agrees that it will pay to the Dealer Manager selling commissions plus a dealer manager fee as follows:

	
			
	 
	Selling Commissions

	

Distribution Channel
	Primary
Offering
Shares
	

DRP Shares

	Sales through a Dealer earning transaction-based compensation
	6.5%*
	0.0%*

	Sales through all other distribution channels as described in the Prospectus
	0.0%
	0.0%

*  Except as set forth herein or in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Dealer Manager will reallow all of its selling commissions attributable to a Dealer.
	
			
	 
	Dealer Manager Fee

	

Distribution Channel
	Primary
Offering
Shares
	

DRP Shares

	Sales through a Dealer earning transaction-based compensation
	3.0%*
	0.0%

	Sales through all other distribution channels as described in the Prospectus
	3.0%*
	0.0%

*  Upon the terms set forth herein or in the Prospectus (as amended and supplemented), the Dealer Manager may agree to reallow to any Dealer a portion of its dealer manager fee pursuant to a separate marketing fee agreement.  
Upon the terms set forth in the Prospectus, reduced selling commissions and dealer manager fees will be paid to the Dealer Manager and reduced per share selling prices shall be recovered on large transactions in accordance with the following table, which may be amended and supplemented by the Prospectus:
	
								
	Dollar Volume Shares Purchased
	 
	Sales Commissions (Based on $10.00
Price Per Share)
	Dealer  
Manager Fee 
(Based on $10.00
Price Per Share)
	Price Per Share to
Investor

	$0
	to
	$
	1,000,000
	

	6.5%
	3.0%
	$10.00

	$1,000,001
	to
	$
	2,000,000
	

	5.5%
	3.0%
	$9.90

8

	
								
	$2,000,001
	to
	$
	3,000,000
	

	4.5%
	3.0%
	$9.80

	$3,000,001
	to
	$
	4,000,000
	

	3.5%
	2.5%
	$9.65

	$4,000,001
	to
	

	$10,000,000
	

	2.0%
	2.5%
	$9.50

	$10,000,001
	and above
	 
	1.0%
	2.0%
	$9.35

The reduced selling price, selling commission and dealer manager fee will apply to the entire purchase.  All commission rates and dealer manager fees are calculated assuming a price per share of $10.00.  For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share), selling commissions of $112,500 and dealer manager fees of $75,000.
Upon the terms set forth in the Prospectus, reduced dealer manager fees will be paid to the Dealer Manager and reduced per share selling prices shall be recovered on volume sales of Shares sold net of selling commissions in accordance with the following table, which may be amended and supplemented by the Prospectus:
	
							
	Volume Discount Table for Purchases Made Net of Selling Commissions

	Dollar Volume Shares Purchased
	 
	Dealer Manager Fee 
(Based on $10.00 Price Per Share)
	Price Per Share to Investor

	$3,000,001
	to
	

	$10,000,000
	

	2.5%
	9.30

	$10,000,001
	    and above
	2.0%
	9.25

The Company will also reimburse the Dealer Manager for all items of underwriter compensation referenced in the Prospectus to the extent the Prospectus indicates that they will be paid by the Company, provided that, within 30 days after the end of the month in which the primary offering terminates, the Dealer Manager shall reimburse the Company to the extent that such Company reimbursements cause total underwriting compensation to exceed 10% of gross proceeds from the primary offering.  The Company shall also pay directly or reimburse the Dealer Manager for bona fide invoiced due diligence expenses of the Dealers and non-participating broker-dealers as described in the Prospectus. Notwithstanding anything contained herein to the contrary, no reimbursements made by the Company hereunder shall cause total organization and offering expenses to exceed 15% of gross proceeds from the Offering.
As described in the Prospectus, the Dealer Manager agrees to sell up to 5% of the Shares in the primary offering to persons identified by the Company  pursuant to the Company’s “friends and family” program.  The purchase price for Shares under this program will be $9.35 per share, reflecting that selling commissions will not be payable in connection with such sales.  The Dealer Manager agrees to work together with the Company to implement this program and to execute sales under the program according to the procedures agreed upon by the Dealer Manager and the Company.
In addition, as described in the Prospectus, the Dealer Manager may sell shares to Dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a purchase price of $9.35 

9

per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in consideration of the services rendered by such Dealers and representatives in the Offering.  For purposes of this discount, a family member includes such person’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law.
Notwithstanding the foregoing, no commissions, payments or amounts whatsoever will be paid to the Dealer Manager under this Section 5.3 unless or until the Company raises $2.0 million in the Offering (the “Minimum Offering”).  Until the Minimum Offering is reached, investments will be held in escrow.  Until $2.5 million (the “New York Minimum”) has been raised in the Offering, investments from New York investors will be held in a segregated account held by the escrow agent and no commissions, payments or amounts whatsoever will be paid thereon to the Dealer Manager under this Section 5.3 unless and until the New York Minimum has been reached, and then only with respect to such investments from New York investors as are released to the Company from such escrow.  Until $50.0 million (the “Pennsylvania Minimum”) has been raised in the Offering, investments from Pennsylvania investors will be held in a segregated account held by the escrow agent and no commissions, payments or amounts whatsoever will be paid thereon to the Dealer Manager under this Section 5.3 unless and until the Pennsylvania Minimum has been reached, and then only with respect to such investments from Pennsylvania investors as are released to the Company from such escrow.  Until $40 million (the “Washington Minimum”) has been raised in the Offering, investments from Washington investors will be held in a segregated account held by the escrow agent and no commissions, payments or amounts whatsoever will be paid thereon to the Dealer Manager under this Section 5.3 unless and until the Washington Minimum has been reached, and then only with respect to such investments from Washington investors as are released to the Company from such escrow.  If the Minimum Offering is not reached within the time period specified in the Prospectus, investments will be returned to the investors in accordance with the Prospectus.  If the New York Minimum is not obtained within the time period specified in the Prospectus, the investments from New York investors will be returned to New York investors in accordance with the Prospectus. If the Pennsylvania Minimum is not obtained within the time period specified in the Prospectus, the investments from Pennsylvania investors will be returned or held for subsequent escrow periods in accordance with the Prospectus.  If the Washington Minimum is not obtained within the time period specified in the Prospectus, the investments from Washington investors will be returned to Washington investors in accordance with the Prospectus.
The Company will not be liable or responsible to any Dealer for direct payment of commissions to such Dealer; it is the sole and exclusive responsibility of the Dealer Manager for payment of commissions to Dealers.  Notwithstanding the above, at its discretion, the Company may act as agent of the Dealer Manager by making direct payment of commissions to such Dealers without incurring any liability therefor.

10

		
	6.
	Indemnification.

		
	6.1.
	To the extent permitted by the Company’s charter and the provisions of Article II.G of the NASAA Guidelines, and subject to the limitations below, the Company will indemnify and hold harmless the Dealers and the Dealer Manager, their officers and directors and each person, if any, who controls such Dealer or Dealer Manager within the meaning of Section 15 of the Securities Act (the “Indemnified Persons”) from and against any losses, claims, damages or liabilities (“Losses”), joint or several, to which such Indemnified Persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or (ii) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “Blue Sky Application”) or (iii) in any Authorized Sales Materials, or (b) the omission or alleged omission to state in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  The Company will reimburse each Indemnified Person for any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending such Loss.

Notwithstanding the foregoing provisions of this Section 6.1, the Company will not be liable in any such case to the extent that any such Loss or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished (x) to the Company by the Dealer Manager or (y) to the Company or the Dealer Manager by or on behalf of any Dealer specifically for use in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them, any Blue Sky Application or any Authorized Sales Materials, and, further, the Company will not be liable in any such case if it is determined that such Dealer or the Dealer Manager was at fault in connection with the Loss, expense or action.
The foregoing indemnity agreement of this Section 6.1 is subject to the further condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in the Prospectus (or amendment or supplement thereto) that was eliminated or remedied in any subsequent amendment or supplement thereto, such indemnity agreement shall not inure to the benefit of an Indemnified Party from whom the person asserting any Losses 

11

purchased the Shares that are the subject thereof, if a copy of the Prospectus as so amended or supplemented was not sent or given to such person at or prior to the time the subscription of such person was accepted by the Company, but only if a copy of the Prospectus as so amended or supplemented had been supplied to the Dealer Manager or the Dealer prior to such acceptance.  
		
	6.2.
	The Dealer Manager will indemnify and hold harmless the Company, its officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each other person who has signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act (the “Company Indemnified Persons”), from and against any Losses to which any of the Company Indemnified Persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or (ii) in any Blue Sky Application or (iii) in any Authorized Sales Materials; or (b) the omission or alleged omission to state in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that clauses (a) and (b) apply, to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Dealer Manager specifically for use with reference to the Dealer Manager in the preparation of the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in preparation of any Blue Sky Application or Authorized Sales Materials; or (c) any use of sales literature not authorized or approved by the Company or any use of "broker-dealer use only" materials with members of the public by the Dealer Manager in the offer and sale of the Shares or any use of sales literature in a particular jurisdiction if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction; or (d) any untrue statement made by the Dealer Manager or its representatives or agents or omission to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares; or (e) any material violation of this Agreement; or (f) any failure to comply with applicable laws governing privacy issues, money laundering abatement and anti-terrorist financing efforts, including applicable rules of the SEC, FINRA and the USA PATRIOT Act of 2001; or (g) any other failure to comply with applicable rules of FINRA or federal or state securities laws and the rules and regulations promulgated thereunder. The Dealer Manager will reimburse the aforesaid parties for any legal or other expenses reasonably incurred by them in connection with investigating or 

12

defending such Loss, expense or action.  This indemnity agreement will be in addition to any liability that the Dealer Manager may otherwise have.
		
	6.3.
	Each Dealer severally will indemnify and hold harmless the Company, the Dealer Manager, each of their officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each other person who has signed the Registration Statement and each person, if any, who controls the Company or the Dealer Manager within the meaning of Section 15 of the Securities Act (the “Dealer Indemnified Persons”) from and against any Losses to which a Dealer Indemnified Person may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or (ii) in any Blue Sky Application or (iii) in any Authorized Sales Materials; or (b) the omission or alleged omission to state in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that clauses (a) and (b) apply, to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company or the Dealer Manager by or on behalf of the Dealer specifically for use with reference to the Dealer in the preparation of the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in preparation of any Blue Sky Application or Authorized Sales Materials; or (c) any use of sales literature not authorized or approved by the Company or any use of "broker-dealer use only" materials with members of the public by the Dealer in the offer and sale of the Shares or any use of sales literature in a particular jurisdiction if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction; or (d) any untrue statement made by the Dealer or its representatives or agents or omission to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares; or (e) any material violation of this Agreement or the Selected Dealer Agreement entered into between the Dealer Manager and the Dealer; or (f) any failure to comply with applicable laws governing privacy issues, money laundering abatement and anti-terrorist financing efforts, including applicable rules of the SEC, FINRA and the USA PATRIOT Act of 2001; or (g) any other failure to comply with applicable rules of FINRA or federal or state securities laws and the rules and regulations promulgated thereunder.  Each such Dealer will reimburse each Dealer Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss, expense or action.  

13

This indemnity agreement will be in addition to any liability that such Dealer may otherwise have.
		
	6.4.
	Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6, notify in writing the indemnifying party of the commencement thereof.  The failure of an indemnified party to so notify the indemnifying party will relieve the indemnifying party from any liability under this Section 6 as to the particular item for which indemnification is then being sought, but not from any other liability that it may have to any indemnified party.  In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel.  Such participation shall not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses (subject to Section 6.5) incurred by such indemnified party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of the claim in respect of which indemnity is sought.  Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party.  Any indemnified party shall not be bound to perform or refrain from performing any act pursuant to the terms of any settlement of any claim or action effected without the consent of such indemnified party.

		
	6.5.
	The indemnifying party shall pay all legal fees and expenses of the indemnified party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obliged to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one indemnified party.  If such claims or actions are alleged or brought against more than one indemnified party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm that has been selected by a majority of the indemnified parties against which such action is finally brought; and in the event a majority of such indemnified parties are unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an indemnified party against the action or claim.  Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.

		
	7.
	Survival of Provisions.

		
	7.1.
	The respective agreements, representations and warranties of the Company and the Dealer Manager set forth in this Agreement shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of the 

14

Dealer Manager or any Dealer or any person controlling the Dealer Manager or any Dealer or by or on behalf of the Company or any person controlling the Company and (b) the acceptance of any payment for the Shares. 
		
	7.2.
	The respective agreements and obligations of the Company and the Dealer Manager set forth in Sections 3.7, 4.1, 4.4, 4.6, 4.7, 5.3, 6 through 10 and 12 through 13 of this Agreement shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of the Dealer Manager or any Dealer or any person controlling the Dealer Manager or any Dealer or by or on behalf of the Company or any person controlling the Company, (b) the acceptance of any payment for the Shares and (c) the termination of this Agreement.

		
	8.
	Applicable Law and Invalid Provision.  

		
	8.1.
	This Agreement shall be governed by the laws of the State of Maryland; provided, however, that causes of action for violations of federal or state securities laws shall not be governed by this Section 8.1, but rather by the applicable federal or state securities law.

		
	8.2.
	The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.

		
	9.
	Counterparts.  This Agreement may be executed in any number of counterparts.  Each counterpart, when executed and delivered, shall be an original contract, but all counterparts, when taken together, shall constitute one and the same agreement.

		
	10.
	Successors and Assigns. 

		
	10.1.
	This Agreement shall inure to the benefit of and be binding upon the Dealer Manager and the Company and their respective successors and permitted assigns.  This Agreement shall inure to the benefit of the Dealers to the extent set forth in Sections 1, 3 and 6 hereof. Nothing in this Agreement is intended or shall be construed to give to any other person any right, remedy or claim, except as otherwise specifically provided herein.  

		
	10.2.
	No party shall assign this Agreement or any right, interest or benefit under this Agreement without the prior written consent of the other party.

		
	11.
	Amendments.  This Agreement may only be amended by the written agreement of the Dealer Manager and the Company, except as set forth in Section 5 hereof.

		
	12.
	Term.  

		
	12.1.
	Any party to this Agreement shall have the right to terminate this Agreement on 60 days’ written notice or immediately upon notice to the other party in the event that such other party shall have failed to comply with any material provision hereof.  If not sooner terminated, the Dealer Manager’s agency and this Agreement shall terminate upon termination of the Offering Period without 

15

obligation on the part of the Dealer Manager or the Company, except as set forth in this Agreement.  Upon termination of this Agreement, (a) the Company shall pay to the Dealer Manager all accrued amounts payable under Section 5 hereof at such time as such amounts become payable and (b) the Dealer Manager shall promptly deliver to the Company all records and documents in its possession that relate to the Offering and that are not designated as “dealer” copies.
		
	12.2.
	The term of this Agreement shall be extended to cover offerings of shares of the Company’s common stock pursuant to the DRP which are offered pursuant to one or more additional registration statements (each, a “DRP Registration Statement”) and prospectus contained therein.  Upon the effectiveness of any such DRP Registration Statement, this Agreement shall automatically be deemed to cover the offering of such DRP shares, and the terms “Shares,” “Offering,” “Registration Statement” and “Prospectus” set forth herein shall be deemed to include the newly registered DRP shares, the DRP Registration Statement and the prospectus contained in the DRP Registration Statement, as applicable, as such DRP Registration Statement and prospectus may be amended or supplemented from time to time.

		
	13.
	Customer Complaints.  Each party herby agrees to promptly provide to the other party copies of any written or otherwise documented complaints from customers of the Dealer Manager or any Dealer received by such party relating in any way to the Offering (including, but not limited to, the manner in which the Shares are offered by the Dealer Manager or the Dealer).

		
	14.
	No Partnership.  Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager as in association with or in partnership with the Company; instead, this Agreement shall only constitute the Dealer Manager as a dealer authorized by the Company to sell and to manage the sale by others of the Shares according to the terms set forth in the Registration Statement and the Prospectus as amended or supplemented and in this Agreement.

		
	15.
	Submission of Orders.

		
	15.1.
	Those persons who purchase Shares will be instructed by the Dealer Manager or the Dealer to make their checks payable to “UMB Bank, N.A.,  as escrow agent for KBS Strategic Opportunity REIT II, Inc.” or, after the Minimum Offering has been achieved, to the Company, except with respect to New York, Pennsylvania and Washington investors.  Checks from New York, Pennsylvania and Washington investors must be made payable to “UMB Bank, N.A., as escrow agent for KBS Strategic Opportunity REIT II, Inc.” until the New York Minimum, Pennsylvania Minimum and Washington Minimum, respectively, have been achieved.  The Dealer Manager, any agent of the Dealer Manager and any Dealer receiving a check not conforming to the foregoing instructions shall return such check directly to such subscriber not later than the end of the next business day following its receipt.  Checks received by the Dealer Manager, any agent of the Dealer Manager or a Dealer that conform to the foregoing instructions shall be 

16

transmitted for deposit pursuant to one of the methods described in this Section 15.
		
	15.2.
	Where, pursuant to a Dealer’s internal supervisory procedures, internal supervisory review is conducted at the same location at which subscription documents and checks are received from subscribers, checks will be transmitted by the end of the next business day following receipt by the Dealer for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from New York, Pennsylvania and Washington investors.  The Dealer will transmit checks from New York investors for deposit to the escrow agent for the Company or, after the New York Minimum has been achieved, to the Company or its agent.  The Dealer will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent.  The Dealer will transmit checks from Washington investors for deposit to the escrow agent for the Company or, after the Washington Minimum has been achieved, to the Company or its agent.

		
	15.3.
	Where, pursuant to a Dealer’s internal supervisory procedures, final internal supervisory review is conducted at a different location, checks will be transmitted by the end of the next business day following receipt by the Dealer to the office of the Dealer conducting such final internal supervisory review (the “Final Review Office”).  The Final Review Office will in turn by the end of the next business day following receipt by the Final Review Office, transmit such checks for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from New York, Pennsylvania and Washington investors.  The Final Review Office will transmit checks from New York investors for deposit to the escrow agent for the Company or, after the New York Minimum has been achieved, to the Company or its agent.  The Final Review Office will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent.  The Final Review Office will transmit checks from Washington investors for deposit to the escrow agent for the Company or, after the Washington Minimum has been achieved, to the Company or its agent.

		
	15.4.
	Where the Dealer Manager (or its agent) receives investor proceeds, checks will be transmitted by the Dealer Manager (or its agent) for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent (except for investments from New York, Pennsylvania and Washington investors) as soon as practicable but in any event by the end of the second business day following receipt by the Dealer Manager (or its agent).  The Dealer Manager (or its agent) will transmit checks from New York investors for deposit to the escrow agent for the Company or, after the New York Minimum has been achieved, to the Company or its agent.  The Dealer Manager (or its agent) will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent.  The Dealer Manager (or its agent) will transmit checks from Washington investors for deposit to the escrow agent for the Company or, 

17

after the Washington Minimum has been achieved, to the Company or its agent. Checks of rejected potential investors will be promptly returned to such potential investors.
		
	15.5.
	Notwithstanding the above, the Dealer Manager may authorize certain Dealers that are “$250,000 broker-dealers” to instruct their customers to make their checks for Shares subscribed for payable directly to the Dealer or authorize a debit from the customer’s account maintained with the Dealer for the amount of shares subscribed for by the customer.  In such case, the Dealer will collect the proceeds of the subscribers’ checks and debits and wire funds to the escrow agent or, if instructed by the Dealer Manager, issue a check for the aggregate amount of the subscription proceeds made payable to the order of the escrow agent, or if instructed by the Dealer Manager, made payable to “KBS Strategic Opportunity REIT II, Inc.”  The procedures for the transmittal of checks and wiring of funds of $250,000 broker-dealers will be set forth in the agreements between the $250,000 broker-dealer and the Dealer Manager.

[signature page follows]

18

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter and your acceptance shall constitute a binding agreement between us as of the date first above written.

Very truly yours,

KBS STRATEGIC OPPORTUNITY REIT II, INC.

		
	By:
	_/s/ David E. Snyder __________________

Name: David E. Snyder
Title:   Chief Financial Officer

Accepted and agreed as of the
date first above written.

KBS CAPITAL MARKETS GROUP LLC

		
	By:
	_/s/ Hans Henselman________________________

Name: Hans Henselman
Title: Chief Operating Officer, Chief Compliance Officer

19

KBS STRATEGIC OPPORTUNITY REIT II, INC.

Up to 180,000,000 Shares of Common Stock

FORM OF SELECTED DEALER AGREEMENT

Ladies and Gentlemen:

KBS Capital Markets Group LLC, as the dealer manager (the “Dealer Manager”) for KBS Strategic Opportunity REIT II, Inc. (the “Company”), a Maryland corporation, invites you (the “Dealer”) to participate in the distribution of shares of common stock (the “Shares”) of the Company subject to the following terms.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Dealer Manager Agreement between the Dealer Manager and the Company, dated August 12, 2014, in the form attached hereto as Exhibit A (the “Dealer Manager Agreement”).
		
	I.
	Dealer Manager Agreement

By your acceptance of this Agreement, you will become one of the Dealers referred to in the Dealer Manager Agreement and will be entitled and subject to the provisions contained in such Dealer Manager Agreement related to the Dealers, including the representations and warranties of the Company contained in Section 1 of the Dealer Manager Agreement and the indemnification provisions contained in Section 6 of the Dealer Manager Agreement, including specifically the provisions of such Dealer Manager Agreement (Section 6.3) wherein each Dealer severally agrees to indemnify and hold harmless the Company, the Dealer Manager and each their officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each person who signed the Registration Statement and each person, if any, who controls the Company and the Dealer Manager within the meaning of Section 15 the Securities Act of 1933, as amended (the “Securities Act”).  The indemnification agreements contained in Section 6 of the Dealer Manager Agreement shall survive the termination of this Agreement and the Dealer Manager Agreement. 
		
	II.
	Submission of Orders

Those persons who purchase Shares will be instructed by the Dealer to make their checks payable to “UMB Bank, N.A., as escrow agent for KBS Strategic Opportunity REIT II, Inc.” or, after the Minimum Offering has been achieved, to the Company, except with respect to New York, Pennsylvania and Washington investors.  Checks from New York, Pennsylvania and Washington investors must be made payable to “UMB Bank, N.A., as escrow agent for KBS Strategic Opportunity REIT II, Inc.” until the New York Minimum, Pennsylvania Minimum and Washington Minimum, respectively, have been achieved.  The Dealer will return any check it receives not conforming to the foregoing instructions directly to such subscriber not later than the end of the next business day 

A-1

following its receipt.  Checks received by the Dealer that conform to the foregoing instructions shall be transmitted for deposit pursuant to one of the following methods:
Where, pursuant to the Dealer’s internal supervisory procedures, internal supervisory review is conducted at the same location at which subscription documents and checks are received from subscribers, checks will be transmitted by the end of the next business day following receipt by the Dealer for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from New York, Pennsylvania and Washington investors.  The Dealer will transmit checks from New York investors for deposit to the escrow agent for the Company or, after the New York Minimum has been achieved, to the Company or its agent.  The Dealer will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent.  The Dealer will transmit checks from Washington investors for deposit to the escrow agent for the Company or, after the Washington Minimum has been achieved, to the Company or its agent. 
Where, pursuant to the Dealer’s internal supervisory procedures, final internal supervisory review is conducted at a different location, checks will be transmitted by the end of the next business day following receipt by the Dealer to the office of the Dealer conducting such final internal supervisory review (the “Final Review Office”).  The Final Review Office will in turn by the end of the next business day following receipt by the Final Review Office transmit such checks for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from New York, Pennsylvania and Washington investors.  The Final Review Office will transmit checks from New York investors for deposit to the escrow agent for the Company or, after the New York Minimum has been achieved, to the Company or its agent.  The Final Review Office will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent.  The Final Review Office will transmit checks from Washington investors for deposit to the escrow agent for the Company or, after the Washington Minimum has been achieved, to the Company or its agent.
		
	III.
	Pricing

Except as otherwise provided in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Shares are to be sold at a per Share cash price as follows:
	
			
	

Distribution Channel
	Primary
Offering
Shares
	

DRP Shares

	Sales through a Dealer earning transaction-based compensation
	$10.00
	$9.50

	Sales through all other distribution channels as described in the Prospectus
	$9.35
	$9.50

A-2

Upon the terms set forth in the Prospectus, pursuant to the Company’s volume discount program, Shares shall be sold at reduced prices in accordance with the following table, which may be amended and supplemented by the Prospectus: 
	
									
	Dollar Volume Shares Purchased
	 
	Price Per Share to
Investor

	$
	0
	

	 
	to
	$
	1,000,000
	

	$10.00

	$
	1,000,001
	

	 
	to
	$
	2,000,000
	

	$9.90

	$
	2,000,001
	

	 
	to
	$
	3,000,000
	

	$9.80

	$
	3,000,001
	

	 
	to
	$
	4,000,000
	

	$9.65

	$
	4,000,001
	

	 
	to
	

	$10,000,000
	

	$9.50

	$
	10,000,001
	

	 
	and above
	$9.35

The reduced selling price (and the applicable selling commission and dealer manager fee under the volume discount program) will apply to the entire purchase.  For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share).
Upon the terms set forth in the Prospectus, reduced dealer manager fees will be paid to the Dealer Manager and reduced per share selling prices shall be recovered on volume sales of Shares sold net of selling commissions in accordance with the following table, which may be amended and supplemented by the Prospectus:

	
							
	Volume Discount Table for Purchases Made Net of Selling Commissions

	Dollar Volume Shares Purchased
	 
	Dealer Manager Fee 
(Based on $10.00 Price Per Share)
	Price Per Share to Investor

	$3,000,001
	to
	

	$10,000,000
	

	2.5%
	9.30

	$10,000,001
	    and above
	2.0%
	9.25

In addition, as described in the Prospectus, the Dealer Manager may sell shares to the Dealer, its retirement plans, its representatives and the family members, IRAs and the qualified plans of its representatives at a purchase price of $9.35 per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in consideration of the services rendered by the Dealer and its representatives in the Offering.  For purposes of this discount, a family member includes such person’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law.  
		
	IV.
	Dealer’s Commissions

Except for discounts described in or as otherwise provided in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Dealer’s selling commission applicable to the public offering price of the Shares sold by the Dealer, which it is authorized to sell hereunder, is as follows:
	
			
	 
	Selling Commissions

	

Distribution Channel
	Primary
Offering
Shares
	

DRP

	Sales through a Dealer earning transaction-based compensation
	6.5%
	0.0%

	Sales through all other distribution channels as discussed in the Prospectus
	0.0%
	0.0%

A-3

The preceding commission (for the Dealer distribution channel) shall be adjusted for sales under the volume discount program in accordance with the following table, which may be amended and supplemented by the Prospectus: 
	
							
	Dollar Volume Shares Purchased
	 
	Sales Commissions (Based on $10.00
Price Per Share)
	Dealer  
Manager Fee 
(Based on $10.00
Price Per Share)

	$0
	to
	$
	1,000,000
	

	6.5%
	3.0%

	$1,000,001
	to
	$
	2,000,000
	

	5.5%
	3.0%

	$2,000,001
	to
	$
	3,000,000
	

	4.5%
	3.0%

	$3,000,001
	to
	$
	4,000,000
	

	3.5%
	2.5%

	$4,000,001
	to
	

	$10,000,000
	

	2.0%
	2.5%

	$10,000,001
	and above
	 
	1.0%
	2.0%

The reduced selling commission and dealer manager fee will apply to the entire purchase.  All commission rates and dealer manager fees are calculated assuming a price per share of $10.00.  For example, a purchase of 250,000 shares in a single transaction would result in selling commissions of $112,500 and dealer manager fees of $75,000.
All selling commissions shall be based on Shares sold by Dealer and accepted and confirmed by the Company, which commission will be paid by the Dealer Manager.  For these purposes, a “sale of Shares” shall occur if and only if a transaction has closed with a subscriber for Shares pursuant to all applicable offering and subscription documents, payment for the Shares has been received in full in the manner provided in Section II hereof, the Company has accepted the subscription agreement of such subscriber, the Minimum Offering, the NY Minimum, the PA Minimum or the WA Minimum, as applicable, has been achieved, and the Company has thereafter distributed the commission to the Dealer Manager in connection with such transaction.  The Dealer affirms that the Dealer Manager’s liability for commissions payable is limited solely to the proceeds of commissions receivable from the Company and the Dealer hereby waives any and all rights to receive payment of commissions due until such time as the Dealer Manager is in receipt of the commission from the Company.
In addition, upon the terms set forth herein or in the Prospectus (as amended and supplemented), the Dealer Manager may agree to reallow to any Dealer a portion of its dealer manager fee pursuant to a separate marketing fee agreement.  For volume discount sales of $3,000,001 or more, the dealer manager fee is reduced as set forth above. The amount of the dealer manager fee reallowed to a Dealer in that instance will be negotiated on a transaction by transaction basis.  The Dealer Manager or, in certain cases at the option of the Company, the Company, will pay or reimburse bona fide invoiced due diligence expenses of Dealer unless such payment would cause the aggregate of such reimbursements to Dealer and other broker-dealers, together with all other organization and offering expenses, to exceed 15% of the Company’s gross proceeds from the Offering.

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The parties hereby agree that the foregoing commission is not in excess of the usual and customary distributors’ or sellers’ commission received in the sale of securities similar to the Shares, that Dealer’s interest in the Offering is limited to such commission from the Dealer Manager and Dealer’s indemnity referred to in Section 6 of the Dealer Manager Agreement and that the Company is not liable or responsible for the direct payment of such commission to the Dealer.

		
	V.
	Payment

Payment of selling commissions or any reallowance of a portion of the dealer manager fee will be made by the Dealer Manager (or by the Company as provided in the Dealer Manager Agreement) to the Dealer within 30 days of the receipt by the Dealer Manager of the gross commission payments from the Company.  Dealer acknowledges that, if the Company pays selling commissions to the Dealer Manager, the Company is relieved of any obligation for selling commissions to the Dealer.  The Company may rely on and use the preceding acknowledgment as a defense against any claim by the Dealer for selling commissions the Company pays to Dealer Manager but that Dealer Manager fails to remit to the Dealer.
		
	VI.
	Right to Reject Orders or Cancel Sales

All orders, whether initial or additional, are subject to acceptance by and shall only become effective upon confirmation by the Company.  The Dealer agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever, and no commission will be paid to the Dealer with respect to the portion of any subscription that is rejected.   Orders not accompanied by a subscription agreement with the signature page and the required check in payment for the Shares may be rejected.  Issuance and delivery of the Shares will be made only after actual receipt of payment therefor.  If any check is not paid upon presentment, or if the Company is not in actual receipt of clearinghouse funds or cash, certified or cashier’s check or the equivalent in payment for the Shares, the Company reserves the right to cancel the sale without notice.  In the event an order is rejected, canceled or rescinded for any reason, the Dealer agrees to return to the Dealer Manager any commission theretofore paid with respect to such order within 30 days thereafter and, failing to do so, the Dealer Manager shall have the right to offset amounts owed against future commissions due and otherwise payable to the Dealer.
		
	VII.
	Covenants of the Dealer

Dealer covenants and agrees with the Dealer Manager and the Company that:
		
	7.1
	Dealer will use its best efforts to sell the Shares for cash on the terms and conditions set forth in this Agreement and the Prospectus as amended and supplemented.

		
	7.2
	In connection with the Dealer’s participation in the offer and sale of Shares (including, without limitation, all initial and additional 

A-5

subscriptions for Shares and any resales and transfers of Shares), the Dealer will comply with all requirements and obligations imposed upon it by (a) the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the SEC promulgated under both such acts; (b) all applicable state securities laws and regulations as from time to time in effect; (c) the applicable rules of FINRA, including, but not in any way limited to, Rule 2420 and Rule 2440 of the NASD Conduct Rules and FINRA Rule 2310 and FINRA Rule 5141; (d) all applicable rules and regulations relating to the suitability of investors, including, without limitation, the provisions of Articles III.C. and III.E of the Statement of Policy regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc. (the “NASAA Guidelines”); (e) any other state and federal laws and regulations applicable to the Offering, the sale of Shares or the activities of the Dealer pursuant to this Agreement, including without limitation the privacy standards and requirements of state and federal laws, including the Gramm-Leach-Bliley Act of 1999, and the laws governing money laundering abatement and anti-terrorist financing efforts, including the applicable rules of the SEC and FINRA, the Bank Secrecy Act, as amended, the USA Patriot Act of 2001, and regulations administered by the Office of Foreign Asset Control at the Department of the Treasury; and (f) this Agreement and the Prospectus as amended and supplemented.
		
	7.3
	The Dealer will not offer Shares in any jurisdiction unless and until (a) the Dealer has been advised in writing by the Company or the Dealer Manager that the Shares are either registered in accordance with, or exempt from, the securities laws of such jurisdiction and (b) the Dealer has all required licenses and registrations to offer shares in that jurisdiction.

		
	7.4
	The Dealer will offer Shares (both at the time of an initial subscription and at the time of any additional subscription, including initial enrollments and increased participations in the DRP) only to persons who meet the financial qualifications and suitability standards set forth in the Prospectus as amended or supplemented or in any suitability letter or memorandum sent to the Dealer by the Company or the Dealer Manager.  Nothing contained in this section shall be construed to relieve the Dealer of the Dealer’s suitability obligations under FINRA Rule 2111 or FINRA Rule 2310.  Dealer shall not purchase any Shares for a discretionary account without obtaining the prior written approval of Dealer’s customer and his or her signature on a subscription agreement.  

		
	7.5
	The Dealer agrees to comply with the record-keeping requirements imposed by (a) federal and state securities laws and the rules and regulations thereunder, (b) the applicable rules of FINRA and (c) the NASAA Guidelines, including the requirement to maintain records (the “Suitability Records”) of the information used to determine that an 

A-6

investment in Shares is suitable and appropriate for each subscriber for a period of six years from the date of the sale of the Shares.   The Dealer further agrees to make the Suitability Records available to the Dealer Manager and the Company upon request and to make them available to representatives of the SEC and FINRA and applicable state securities administrators upon the Dealer’s receipt of a subpoena or other appropriate document request from such agency.  
		
	7.6
	The Dealer will provide the Dealer Manager with such information relating to the offer and sale of the Shares by it as the Dealer Manager may from time to time reasonably request or as may be requested to enable the Dealer Manager or the Company, as the case may be, to prepare such reports of sale as may be required to be filed under applicable federal or state securities laws and the rules and regulations thereunder.

		
	VIII.
	Prospectus and Sales Literature

Dealer is not authorized or permitted to give, and will not give, any information or make any representation (written or oral) concerning the Shares except as set forth in the Prospectus as amended and supplemented or in the Authorized Sales Materials. The Dealer Manager will supply Dealer with reasonable quantities of the Prospectus, including amendments of and supplements to the Prospectus, and any Authorized Sales Materials, for delivery to investors, and Dealer will deliver a copy of the Prospectus, including any amendments and supplements thereto, as required by the Securities Act, the Exchange Act and the rules and regulations promulgated under both.  The Dealer agrees that (a) it will deliver a copy of the Prospectus as amended and supplemented to each investor to whom an offer is made prior to or simultaneously with the first solicitation of an offer to sell the Shares to an investor and (b) it will not send or give any Authorized Sales Materials to an investor unless the Authorized Sales Materials are accompanied by or preceded by the Prospectus as amended and supplemented.
Except for the Authorized Sales Materials, the Company has not authorized the use of any supplemental literature or sales materials in connection with the Offering and the Dealer agrees not to use any material unless it has been authorized by the Company and provided to the Dealer by the Dealer Manager.  Dealer agrees that it will not show or give to any investor or prospective investor or reproduce any material or writing that is supplied to it by the Dealer Manager and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public. Dealer agrees that it will not show or give to any investor or prospective investor in a particular jurisdiction any material or writing that is supplied to it by the Dealer Manager if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.  Dealer agrees that it will not use in connection with the offer or sale of Shares any material or writing that relates to another company supplied to it by the Company or the Dealer Manager bearing a legend that states that such material may not be used in connection with the offer or sale of any securities of the Company.  

A-7

Dealer agrees to furnish a copy of the Prospectus (as amended and supplemented) required for compliance with the provisions of federal and state securities laws and the rules and regulations thereunder, including Rule 15c2-8 under Exchange Act. Regardless of the termination of this Agreement, Dealer will deliver a Prospectus (as amended and supplemented) in transactions in the Shares for a period of 90 days from the effective date of the Registration Statement or such other period as may be required by the Exchange Act or the rules and regulations thereunder.  
		
	IX.
	License and Association Membership

Dealer represents and warrants to the Company and the Dealer Manager that it is a properly registered or licensed broker-dealer, duly authorized to offer and sell Shares under federal securities laws and regulations and the securities laws and regulations of all states where it offers or sells Shares and that it is a member of FINRA in good standing.  This Agreement shall automatically terminate if the Dealer ceases to be a member of FINRA in good standing or is subject to a FINRA suspension or if the Dealer’s registration or license under the Exchange Act or any state securities laws or regulations is terminated or suspended; the Dealer agrees to notify the Dealer Manager immediately if any of these events occur. 
		
	X.
	Anti-Money Laundering Compliance Programs

Dealer’s acceptance of this Agreement constitutes a representation to the Company and the Dealer Manager that the Dealer has established and implemented an anti-money laundering and customer identification compliance program (“AML Program”) in accordance with applicable laws and regulations, including federal and state securities laws, applicable rules of FINRA, and the Bank Secrecy Act, Title 31 U.S.C. Sections 5311-5355, as amended by the USA Patriot Act of 2001, and related regulations (31 C.F.R. Part 103), and will continue to maintain its AML Program consistent with applicable laws and regulations during the term of this Agreement.  
In accordance with these applicable laws and regulations and its AML Program, Dealer agrees to verify the identity of its new customers; to maintain customer records; to check the names of new customers against government watch lists, including the Office of Foreign Asset Control’s (“OFAC”) list of Specially Designated Nationals and Blocked Persons.  Additionally, Dealer will monitor account activity to identify patterns of unusual size or volume, geographic factors and any other “red flags” described in the USA Patriot Act as potential signals of money laundering or terrorist financing.  Dealer will submit to the Financial Crimes Enforcement Network any required suspicious activity reports about such activity and further will disclose such activity to applicable federal and state law enforcement when required by law.  Upon request by the Dealer Manager at any time, the Dealer hereby agrees to furnish (a) a copy of its AML Program to the Dealer Manager for review, and (b) a copy of the findings and any remedial actions taken in connection with Dealer’s most recent independent testing of its AML Program.

A-8

		
	XI.
	Effectiveness, Termination and Amendment

This Agreement shall become effective upon the execution hereof by the Dealer and the receipt of this executed Agreement by the Dealer Manager.  Dealer will immediately suspend or terminate its offer and sale of Shares upon the request of the Company or the Dealer Manager at any time and will resume its offer and sale of Shares hereunder upon subsequent request of the Company or the Dealer Manager.  In addition to termination pursuant to Section IX, any party may terminate this Agreement by written notice, which termination shall be effective 48 hours after such notice is given.  Upon the sale of all of the Shares or the termination of the Dealer Manager Agreement, this Agreement shall terminate without obligation on the part of the Dealer or the Dealer Manager, except as set forth in this Agreement.  The indemnification agreements contained in Section 6 of the Dealer Manager Agreement shall survive the termination of this Agreement and the Dealer Manager Agreement, and the respective agreements and obligations of the Dealer Manager and the Dealer set forth in Sections IV, V, VI, 7.2, 7.5, 7.6, VIII and XI through XXI of this Agreement shall remain operative and in full force and effect regardless of the termination of this Agreement.
This Agreement may be amended at any time by the Dealer Manager by written notice to the Dealer.  Any such amendment shall be deemed accepted by the Dealer upon the Dealer placing an order for the sale of Shares after it has received such notice.
		
	XII.
	Privacy Laws

The Dealer Manager and Dealer (each referred to individually in this section as a “party”) agree as follows:
		
	12.1
	Each party agrees to abide by and comply in all respects with (a) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (“GLBA”) and applicable regulations promulgated thereunder, (b) the privacy standards and requirements of any other applicable federal or state law, including the Fair Credit Reporting Act (“FCRA”) and (c) its own internal privacy policies and procedures, each as may be amended from time to time.

		
	12.2
	Dealer shall not disclose nonpublic personal information (as defined under the GLBA) of all customers who have opted out of such disclosures, except to service providers (when necessary and as permitted under the GLBA) or as otherwise required by applicable law; 

		
	12.3
	Except as expressly permitted under the FCRA, Dealer shall not disclose any information that would be considered a “consumer report” under the FCRA; and 

		
	12.4
	Dealer shall be responsible for determining which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving a list of such customers (the “List”) to identify customers that have exercised their opt-out rights.  In the event 

A-9

either party expects to use or disclose nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party must first consult the List to determine whether the affected customer has exercised his or her opt-out rights.  Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
		
	XIII.
	Customer Complaints

Each party agrees to promptly provide to the other party copies of any written or otherwise documented complaints from customers of the Dealer received by such party relating in any way to the Offering (including, but not limited to, the manner in which the Shares are offered by the Dealer).
		
	XIV.
	Notice

All notices to the Dealer Manager shall be in writing addressed to the Dealer Manager at the address set forth below.  All notices to Dealer shall be in writing addressed to the Dealer at the address specified by the Dealer at the end of this Agreement.  Notices addressed to the intended recipient as described above will be duly given (a) when personally delivered or by commercial messenger, (b) one business day following deposit with a recognized overnight courier service, provided such deposit occurs prior to the deadline imposed by such service for overnight delivery; or (c) when transmitted to Dealer, if sent by facsimile copy (provided confirmation of receipt is received by sender) or electronic transmission (e-mail) and in each case such notice is also followed contemporaneously by the method provided under either (a) or (b) above.

To the Dealer Manager:
KBS Capital Markets Group LLC
660 Newport Center Drive, Suite 1200
Newport Beach, California 92660
		
	XV.
	Confidentiality

In connection with the Dealer’s due diligence review of the Offering, the Dealer (or its agent performing due diligence) may request receipt of confidential information regarding the Offering, the Company, the Company’s sponsor or the sponsor’s affiliates. The Company and the Dealer Manager will reasonably cooperate with such Dealer to accommodate such request; provided, however, any such information provided to Dealer or its agent will be subject to the terms of the confidentiality agreement attached as Appendix A to this Agreement. The parties hereto acknowledge and agree that the terms of the confidentiality agreement attached as Appendix A hereto are also intended to directly benefit the Company and KBS Capital Advisors LLC (“KBS CA”), its subsidiaries and/or affiliates (which group includes, but is not limited to, the Dealer Manager, KBS Holdings LLC (“KBS Holdings”), and investment programs sponsored by KBS Holdings and/or its respective subsidiaries and/or affiliates (whether such programs are sponsored directly or through joint 

A-10

ventures)), and joint venture partners of KBS Holdings and KBS CA and their affiliates, including, without limitation, Legacy Partners Residential Realty LLC, all of which are intended third-party beneficiaries of the Dealer’s obligations under the confidentiality agreement attached as Appendix A hereto and each of which has the right to enforce its terms at law or at equity, including the right to seek injunctive relief, against the Dealer.
		
	XVI.
	Confirmation

The Dealer Manager hereby acknowledges that the Dealer Manager has assumed the duty to confirm on behalf of the Dealers all orders for purchases of Shares accepted by the Company.  Such confirmations will comply with the rules of the SEC and FINRA and will comply with the applicable laws of such other jurisdictions to the extent that the Dealer Manager is advised of such laws in writing by the Dealer.
		
	XVII.
	Entire Agreement

This Agreement and the exhibits hereto are the entire agreement of the parties and supersede all prior agreements, if any, relating to the subject matter hereof between the parties hereto.
		
	XVIII.
	Successors and Assigns

No party shall assign this Agreement or any right, interest or benefit under this Agreement without the prior written consent of the other party.  This Agreement shall be binding upon the Dealer Manager and the Dealer and their respective successors and permitted assigns.  
		
	XIX.
	Arbitration, Attorney’s Fees, Jury Trial and Applicable Law

In the event of a dispute concerning any provision of this Agreement (including any provisions of the Dealer Manager Agreement incorporated into this Agreement), either party may require the dispute to be submitted to binding arbitration, conducted on a confidential basis, under the then current commercial arbitration rules of FINRA or the American Arbitration Association (at the discretion of the party requesting arbitration) in accordance with the terms of this Agreement (including the governing law provisions of this section) and pursuant to the Federal Arbitration Act (9 U.S.C. §§ 1 – 16).  The parties will request that the arbitrator or arbitration panel (“Arbitrator”) issue written findings of fact and conclusions of law.   The Arbitrator shall not be empowered to make any award or render any judgment for punitive damages, and the Arbitrator shall be required to follow applicable law in construing this Agreement, making awards, and rendering judgments.  The decision of the arbitration panel shall be final and binding, and judgment upon any arbitration award may be entered by any court having jurisdiction.  All arbitration hearings will be held at the Los Angeles FINRA District Office or at another mutually agreed upon site.  The parties may agree on a single arbitrator, or, if the parties cannot so agree, each party will have the right to choose one arbitrator, and the selected arbitrators will choose a third arbitrator.  Each arbitrator must have experience and education that qualify him or her to competently address the specific issues to be 

A-11

designated for arbitration.  Notwithstanding the preceding, no party will be prevented from immediately seeking provisional remedies in courts of competent jurisdiction, including but not limited to, temporary restraining orders and preliminary injunctions, but such remedies will not be sought as a means to avoid or stay arbitration.  Except as provided otherwise in Section 6 of the Dealer Manager Agreement, in any action or arbitration to enforce the provisions of this Agreement or to secure damages for its breach, the prevailing party shall recover its costs and reasonable attorney’s fees.  Each party to this Agreement hereby waives a trial by jury in any legal action or proceeding relating to this Agreement.  This Agreement shall be construed under the laws of the State of California; provided, however, that the governing law for causes of action for violations of federal or state securities law shall be governed by the applicable federal or state securities law.
		
	XX.
	Severability

The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.
		
	XXI.
	Counterparts

This Agreement may be executed in any number of counterparts.  Each counterpart, when executed and delivered, shall be an original contract, but all counterparts, when taken together, shall constitute one and the same agreement.
		
	XXII.
	No Partnership

Nothing in this Agreement shall be construed or interpreted to constitute the Dealer as an employee, agent or representative of, or in association with or in partnership with, the Dealer Manager, the Company or the other Dealers; instead, this Agreement shall only constitute the Dealer as a dealer authorized by the Dealer Manager to sell the Shares according to the terms set forth in the Registration Statement and the Prospectus as amended and supplemented and in this Agreement.

[signature page follows]

A-12

THE DEALER MANAGER:

Attest:                        KBS CAPITAL MARKETS GROUP LLC    

		
	By:
	________________________    By:    ________________________

		
	Name
	Name

________________________    ________________________
		
	Title
	Title

We have read the foregoing Agreement and we hereby accept and agree to the terms and conditions set forth therein.  We hereby represent that the list below of jurisdictions in which we are registered or licensed as a broker or dealer and are fully authorized to sell securities is true and correct, and we agree to advise you of any change in such list during the term of this Agreement.
1.    Identity of Dealer:

Name:___________________________________________________________

Type of entity:_____________________________________________________
                (corporation, partnership or proprietorship)
                            

Organized in the State of:____________________________________________
                              (State)

Licensed as broker-dealer in the following States:_________________________

_________________________________________________________________
            
Tax I.D. #:________________________________________________________

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2.    Person to receive notice pursuant to Section XIV:

Name:___________________________________________________________

Company:_________________________________________________________

Address:__________________________________________________________

City, State and Zip Code:____________________________________________

Telephone No.:  (        )                                

Telefax No.:       (        )                                

E-mail Address:                                      

AGREED TO AND ACCEPTED BY THE DEALER:

___________________________________________
(Dealer’s Firm Name)

By:________________________________________
Authorized Signature

Title:_______________________________________

A-14

APPENDIX A

Dealer Confidentiality Agreement

KBS Capital Advisors LLC (“KBS CA”), its subsidiaries and/or affiliates  (which group includes, but is not limited to, KBS Capital Markets Group LLC (“Dealer Manager”), KBS Holdings LLC (“KBS Holdings”) and investment programs sponsored by KBS Holdings and/or its respective subsidiaries and/or affiliates (whether such programs are sponsored directly or through joint ventures)), and joint venture partners of KBS Holdings  and KBS CA and their affiliates including, without limitation, Legacy Partners Residential Realty LLC (“Legacy”) (collectively, “KBS”), may disclose Confidential Information (as defined below) to Dealer and its Representatives (as defined below), in connection with their due diligence efforts in respect of one or more offerings of securities sponsored by KBS (the “Offerings”).  This Appendix A constitutes part of the Selected Dealer Agreement between Dealer Manager and Dealer (the “Selected Dealer Agreement”) and sets forth the agreements and understandings among the Dealer Manager, Dealer and KBS with respect to the disclosure of Confidential Information.
1.    General.  As a condition to receiving such Confidential Information, Dealer hereby agrees that it and its Representatives will: (i) hold all such Confidential Information in trust and in the strictest confidence, (ii) protect such Confidential Information from disclosure in accordance with a standard of care that shall be no less than the care such party uses to protect its own confidential information of like importance but in no event with less than reasonable care, (iii) treat all such Confidential Information in accordance with the provisions of this Appendix A and (iv) take or abstain from taking certain other actions hereinafter set forth.  
Prior to the receipt of any Confidential Information, each Representative shall have been made aware of and have agreed to be bound by the terms set forth in this Appendix A.  Neither the Dealer nor any of its Representatives shall use, copy, disclose, disseminate, or permit any unauthorized person access to, any Confidential Information without KBS’s prior written consent. The Dealer and its Representatives may, with KBS’s prior written consent, communicate Confidential Information to another broker-dealer that has entered into a separately-negotiated confidentiality agreement with KBS (which agreement with KBS shall be in substantially the form hereof). Any such Confidential Information disseminated pursuant to the immediately preceding sentence shall remain confidential notwithstanding any such communication to another person. To the extent Confidential Information is provided by Dealer pursuant to the terms hereof, the Dealer and each Representative shall ensure that any existing confidentiality notices included on or with the Confidential Information are included in any such disclosures or, if no such notices are included, “Confidential” or some similar notice is stamped on the Confidential Information.  
For purposes of this Appendix A, the term “Representative” shall include an officer, director, manager, employee, owner, member or partner of Dealer performing a due diligence review of KBS, a consultant, due diligence provider, accountant or attorney of Dealer performing a due diligence review of KBS on behalf of Dealer, and any person or committee, as the case may be, responsible for determining whether Dealer will participate in the Offerings, provided that in each case, such person has a need to know such information; provided further that, in no event, may such information be shared with any person involved in retail selling efforts related to any Offerings.

A-1

2.    Confidential Information.  For purposes hereof, “Confidential Information” means all information concerning the business, financial condition, operations, prospects, assets and liabilities of KBS (including materials and matters provided to and discussed by the board of directors of KBS and the committees of the board) that KBS believes is either confidential, proprietary or otherwise not generally available to the public, whether prepared by KBS, its advisors or otherwise (including information received by KBS from third parties under confidential conditions) and which is furnished to Dealer or any of its Representatives in writing, orally or by any other means in connection with the Offerings, and includes all analyses, notes, compilations, summaries, studies or other documents, records or data prepared by Dealer or its Representatives which contain, reflect or are generated from, such information.  However, Confidential Information shall not include information that: (A) is generally available to the public other than as a result of a disclosure by the Dealer or its Representatives in breach of this Appendix A; (B) is known to the Dealer or its Representatives prior to the date of the Selected Dealer Agreement; provided, that, such information is not known by the Dealer or its Representatives to be subject to another confidentiality agreement with, or other obligation or undertaking of secrecy to KBS; (C) is independently disclosed to the Dealer or its Representatives by a third-party which the Dealer or its Representative reasonably believes has a bona fide right to do so without violating any obligation of confidentiality or (D) is developed by the Dealer or any of its Representatives completely independent of any information disclosed to the Dealer or any of its Representatives in connection with their due diligence review.  
3.    Legally Required Disclosures.  In the event that the Dealer or any of its Representatives is requested or required (by deposition, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) by any court or governmental agency or authority or other supervisory body, or by application of law, regulation or legal or regulatory process to disclose any of the Confidential Information, the Dealer shall: (A) provide KBS with prompt written notice of any such request or requirement so that KBS may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Appendix A, (B) if the Dealer or any of its Representatives is required based upon the advice of their respective legal counsel, to disclose Confidential Information, the Dealer or such Representative may, without liability hereunder, disclose only that portion of the Confidential Information which such legal counsel advises is legally required to be disclosed; provided, that, the Dealer or such Representative exercises reasonable efforts to otherwise preserve the confidentiality of the Confidential Information and (C) upon reasonable notice, the Dealer and its Representatives will cooperate with KBS in obtaining a protective order or other appropriate remedy reasonably limiting disclosure to appropriate parties relating to the applicable proceeding; provided, that, the foregoing (i) shall not require the Dealer or its Representatives to delay production of any Confidential Information and (ii) shall apply only to the extent that KBS bears all costs and expenses of such cooperation, including, but not limited to, payment to the Dealer or its Representative, as applicable, for time expended by its staff relating to any such efforts at its then current billing rates and reimbursement of all reasonable attorney’s fees and costs of legal counsel associated therewith.  Neither the Dealer nor any of its Representatives is required to take any action pursuant to clause (C) of the immediately preceding sentence without reasonable assurances from KBS that such payment and reimbursement will be provided.
4.    Ownership of Confidential Information.  Confidential Information, including any copies, printouts and summaries thereof, shall remain the property of KBS and all applicable 

A-2

rights in patents, copyrights, trade secrets and similar intellectual property rights embodied in the Confidential Information shall remain in KBS.
5.    Return of Confidential Information.  Except for due diligence files and copies maintained to comply with applicable rules and regulations upon advice of counsel, Dealer agrees promptly upon KBS’s written request to return all written material, including copies or printouts and summaries thereof, and destroy all material held by Dealer or any of its Representatives in electronic form (including material on disks or tapes) containing Confidential Information, submitted to Dealer or its Representatives or prepared by Dealer or its Representatives based upon such Confidential Information.  Notwithstanding the return or destruction of Confidential Information, Dealer and its Representatives will continue to hold in confidence all Confidential Information and be bound by their respective obligations under the terms of this Appendix A.
6.    Remedies.  Each party agrees that the obligations hereunder are necessary and reasonable in order to protect KBS and its business, and expressly agrees that monetary damages would not be a sufficient remedy for any violation of the terms of this Appendix A and, accordingly, KBS shall be entitled to seek equitable relief, including, but not limited to, specific performance and injunctive relief as remedies for any violation, including, without limitation, the actual or threatened disclosure of Confidential Information without the prior written consent of KBS.  Such remedies shall not be deemed to be exclusive remedies for a violation of the terms of this Appendix A, but shall be in addition to all other remedies available to KBS at law or equity.  The Dealer agrees that neither it nor any of its Representatives will raise the defense of an adequate remedy at law in any action seeking equitable relief.  The Dealer shall indemnify and hold harmless KBS from and against all liabilities, obligations, claims, damages, penalties, causes of action costs and expenses (including reasonable attorneys’ fees and expenses actually incurred) imposed upon or incurred by or asserted against KBS by reason of a violation of the terms of this Appendix A by the Dealer or any of its Representatives.
7.    Waiver.  No delay or failure in exercising any rights hereunder shall be construed to be a waiver of such rights, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right hereunder.
8.    Governing Law.  THIS APPENDIX A SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  EACH OF THE PARTIES HEREBY AGREE AND SUBMIT TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED WITHIN THE STATE OF CALIFORNIA FOR THE RESOLUTION OF ANY DISPUTE THAT MAY ARISE UNDER THIS APPENDIX A, AND THAT THE STATE AND FEDERAL COURTS LOCATED WITHIN THE STATE OF CALIFORNIA HAVE EXCLUSIVE JURISDICTION FOR ANY SUCH DISPUTES.
9.    Severability.  If for any reason any provision of this Appendix A shall be declared void or invalid, such declaration shall not affect the validity of the remainder of this Appendix A which shall remain in full force and effect as if executed with the void or invalid provision eliminated.
10.    Binding Agreement.  This Appendix A shall be binding upon, and shall inure to the benefit of KBS (including each of the entities included in the definition of “KBS” in the 

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preamble to this Agreement including, without limitation, Legacy), the Dealer and their respective successors in interest.
11.    Non-Assignment.  This Appendix A, and the rights and obligations hereby created, may not be assigned by the Dealer without the express written consent of KBS.
12.    Entire Agreement.  This Appendix A constitutes the entire agreement and supersedes and replaces any prior or existing agreement relating to treatment of Confidential Information relating to KBS and the Offerings.  
13.    Captions.  The captions contained in this Appendix A are for convenience only, form no part of this Appendix A and shall not in any manner amplify, limit, modify or otherwise affect the interpretation of this Appendix A.

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