Document:

LOAN AGREEMENT

            THIS LOAN AGREEMENT (the “Loan Agreement”), dated as of February 27, 2009, is made by and among CARACO PHARMACEUTICAL LABORATORIES, LTD., a Michigan corporation, with an address at 1150 Elijah McCoy Drive, Detroit, Michigan 48202
            (“Borrower”), and RBS CITIZENS, N.A., a national association, d/b/a Charter One, with an address of 27777 Franklin Road, Suite 1900, Southfield, Michigan 48034 (together with its successors and assigns, “Bank”).

            W I T N E S S E T H :

            WHEREAS, Borrower desires to obtain certain loans in the amounts and purposes set forth herein; and

            WHEREAS, Bank is willing to make such loans available to Borrower upon the terms and conditions set forth herein.

            NOW, THEREFORE, IN CONSIDERATION of the promises of both parties and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

            SECTION 1.

            DEFINITIONS

                           1.1   Definitions. As used in this Loan Agreement, the following terms shall have the meanings specified below unless the context otherwise requires:

            “Affiliate” when used with respect to any person shall mean any other person which, directly or indirectly, controls or is controlled by or is under common control with such person. For purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common
            control with”), with respect to any person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise.

            “Business Day” means any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Detroit, Michigan and, in the case of a Business Day which relates to Obligations accruing interest by reference to the LIBOR Rate, on which dealings are carried on in the London
            interbank market.

             

            “Capital Lease” means any lease of property, real or personal, the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP.

            “Change In Control” means a reduction in the number of (a) seats on the board of directors nominated by Sun Pharmaceutical Industries Limited, a corporation organized under the laws of India (“Sun”) or any Affiliate of Sun, or (b) shares of stock in Borrower held by Sun or an Affiliate of Sun, in either
            event below a majority of the total outstanding seats or shares, as the case may be.

            “Closing Date” means the date on which the Loan Agreement is executed by Borrower and Bank as first above stated.

            
                	
                             

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

                        

            

             

            
                

                 

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            “Default” means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

            “Distributions” means all cash dividends to shareholders, and all cash distributions to shareholders of Subchapter S corporations, to partners of partnerships, to members of limited liability companies or to beneficiaries of trusts.

             

            “EBITDA” means Borrower’s net income before interest, taxes, depreciation and amortization, during such testing period.

             

            “Funding Date” means the date on which all of the conditions set forth in Section 4.1 have been satisfied and funds are disbursed to Borrower, but in no event prior to March 2, 2009.

             

            “GAAP” means generally accepted accounting principles in effect from time to time in the United States.

            “Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

            “Hedging Contract” means any agreement, device or arrangement providing for payments which are related to fluctuations of interest rates, exchange rates, forward rates, or equity prices, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate
            cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and any agreement pertaining to equity derivative transactions (e.g., equity or equity index swaps, options, caps, floors, collars and forwards), including without limitation any ISDA Master Agreement between Borrower and Bank, and any schedules, confirmations and documents and other confirming evidence between the parties confirming transactions thereunder, all whether now
            existing or hereafter arising, and in each case as amended, modified or supplemented from time to time.

             

            “Hedging Obligations” means any and all obligations of Borrower to Bank or any affiliate of Bank, whether absolute, contingent or otherwise and howsoever and whensoever (whether now or hereafter) created, arising, evidenced or acquired (including all renewals, extensions or modifications thereof and substitutions therefore), under or in
            connection with (i) any and all Hedging Contracts, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Contract.

            
                	
                             

                        	
                             “Income Taxes” means federal, state, local or other taxes based on income.

                        

            

            “Indebtedness” of any person shall mean, as of any date, (a) all obligations of such person for borrowed money, (b) the principal component of the obligations of such person as lessee under any Capital Lease, (c) all obligations which are secured by any Lien existing on any asset or property of such person whether or not the obligation
            secured thereby shall have been assumed by such person, (to the extent of such Lien if such obligation is not assumed), (d) all obligations of such person for the unpaid purchase price for goods, property or services acquired by such person, including notes payable, except for payroll accounts payable that are not past due, and operating leases, (e) all obligations of such person in respect of any interest rate or currency swap, rate cap or other similar transaction (valued in an
            amount equal to the highest termination payment, if any, that would be payable by such person upon termination for any reason on the date of determination), and (f) all obligations of others similar in character to those described in clauses (a) through (h) of this definition for which such person has contingent liability, as obligor, guarantor, surety, accommodation party, partner or in any other capacity, or in respect of which 

             

            
                

                 

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            obligations such person assures a creditor against loss or agrees to take any action to prevent any such loss (other than endorsements of negotiable instruments for collection in the ordinary course of business), including without limitation all reimbursement obligations of such person in respect of letters of credit, surety bonds or similar obligations and all obligations of such person to advance
            funds to, or to purchase assets, property or services from, any other person in order to maintain the financial condition of such other person.

            
                	
                             

                        	
                             “Liabilities” means liabilities as determined in accordance with GAAP.

                        

            

            “Lien” shall mean any security interest in or lien on or against any property arising from any pledge, assignment, hypothecation, mortgage, security interest, deposit arrangement, option, conditional sale or title retaining contract, sale and leaseback transaction, financing statement filing, lessor's or lessee's interest under any lease,
            subordination of any claim or right, or any other type of lien, charge, encumbrance, preferential arrangement or other claim or right. 

            
                	
                             

                        	
                             “Loan” means the Equipment Term Loan.

                        

            

            “Loan Documents” means this Loan Agreement, the Note, the Security Agreement and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.

            “Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Borrower, (b) the ability of Borrower to perform its obligations, when such obligations are required to be performed, under this Loan Agreement or the other Loan Documents or (c) the validity or
            enforceability of this Loan Agreement, any Note or any of the other Loan Documents or the rights or remedies of Bank hereunder or thereunder.

            “Materials of Environmental Concern” means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and
            urea-formaldehyde insulation.

            “Net Income” shall mean, for any period, net income (or net loss, expressed as a negative number) after all taxes actually paid in cash or accrued and all expenses and other charges for such period, determined in accordance with GAAP.

             

            “Net Proceeds” means the gross cash proceeds including cash by way of deferred payment pursuant to a promissory note, receivable or otherwise, (but only as and when received) received from the sale, lease, conveyance, disposition or other transfer of assets, or from a Recovery Event or from the sale, issuance or placement of equity
            securities, Indebtedness for borrowed money or Subordinated Debt, net of (i) transaction costs payable to third parties, (ii) the estimated taxes payable with respect to such proceeds (including, without duplication, withholding taxes, property taxes, transfer taxes and taxes), (iii) Indebtedness (other than Indebtedness of Bank pursuant to the Loan Documents) which is secured by the assets which are the subject of such event to the extent such Indebtedness is paid with a portion of
            the proceeds therefrom, and (iv) any and all costs which may occur as a result of discontinuing operations, shutdowns or otherwise resulting from, the disposition of such assets.

             

            
                	
                             

                        	
                             “Note” means individually, the Equipment Term Note.

                        

            

            
                	
                             

                        	
                             “Obligations” means and includes:

                        

            

             

            
                

                 

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            (i)        All indebtedness and liabilities of whatsoever kind, nature and description owed to Bank by Borrower, whether direct or indirect, absolute or contingent, due or to become due or whether now existing or hereafter arising, and howsoever evidenced or acquired, except any such indebtedness or liabilities acquired by Bank from any third
            party, and whether joint or several, and including, without limitation, the Loan;

            (ii)       All future advances which Bank at any time may, but shall not be required to, make for the protection or preservation of Bank's rights and interests arising hereunder, including, without limitation, advances for taxes, levies, assessments, insurance, and reasonable attorneys' fees;

            (iii)      Any and all obligations and liabilities of any kind, now existing or later incurred, of Borrower to any affiliate of Bank, whether absolute or contingent, whether now existing or hereafter created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) under (a) any Hedging
            Contracts and (b) any and all cancellations, buybacks, reversals, terminations or assignments of the foregoing. 

            
                	
                             

                        	
                            “Permitted Liens” means

                        

            

            (i)        Liens for taxes not delinquent or for taxes being contested in good faith by appropriate proceedings and as to which adequate financial reserves have been established on its books and records;

            (ii)       Liens created and maintained in the ordinary course of business which constitute (A) pledges or deposits under worker's compensation laws, unemployment insurance laws or similar legislation, (B) good faith deposits in connection with bids, tenders, contracts or leases to which Borrower is a party for a purpose other than borrowing money
            or obtaining credit, including rent security deposits, (C) liens imposed by law, such as those of carriers, warehousemen and mechanics, if payment of the obligation secured thereby is not yet due, (D) liens securing taxes, assessments or other governmental charges or levies not yet subject to penalties for nonpayment, and (E) pledges or deposits to secure public or statutory obligations of Borrower, or surety, customs or appeal bonds to which Borrower is a party;

            (iii)      Liens created pursuant to the Security Agreement and liens expressly permitted by the Security Agreement, including that existing security interest of JP Morgan Chase Bank, N.A.; and 

            (iv)      Liens created in favor of Bank or any parent, subsidiary or affiliated company of Bank.

            “Person” or “person” shall include an individual, a corporation, a limited liability company, an association, a partnership, a trust or estate, a joint stock company, an unincorporated organization, a joint venture, a trade or business (whether or not incorporated), a government (foreign or domestic) and any agency or political
            subdivision thereof, or any other entity.

            “Permitted Acquisition” shall mean any acquisition by Borrower or any subsidiary of Borrower of all or substantially all of the assets of another Person, or of a division or line of business of another Person, or any equity interests of another Person which satisfies and/or is conducted in accordance with the following
            requirements:

            (i)        Such acquisition is of a business or Person engaged in a line of business which is compatible with, or complementary to, the business of the Borrower or such subsidiary;

             

            
                

                 

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            (ii)       If such acquisition is structured as an acquisition of the equity interests of any Person, then the Person so acquired shall become a direct or indirect subsidiary of Borrower;

            
                	
                             

                        	
                            (iii)

                        	
                            acquired directly by Borrower or such subsidiary;

                        

            

            (iv)      Both immediately before and after the consummation of such acquisition, no Default or Event of Default shall have occurred and be continuing;

            (v)       The board of directors (or other Person(s) exercising similar functions) of the seller of the assets or issuer of the equity interests being acquired shall not have disapproved such transaction or recommended that such transaction be disapproved;

            (vi)      All governmental, quasi-governmental, agency, regulatory or similar licenses, authorizations, exemptions, qualifications, consents and approvals necessary under any laws applicable to the Borrower or subsidiary that is making the acquisition, or the acquisition target (if applicable) for or in connection with the proposed acquisition and all
            necessary non-governmental and other third-party approvals which, in each case, are material to such acquisition shall have been obtained, and all necessary or appropriate declarations, registrations or other filings with any court, governmental or regulatory authority, securities exchange or any other Person, which in each case, are material to the consummation of such acquisition or to the acquisition target, if applicable, have been made, and evidence thereof reasonably
            satisfactory in form and substance to Bank shall have been delivered, or caused to have been delivered, by Borrower to Bank;

            (vii)     There shall be no actions, suits or proceedings pending or, to the knowledge of Borrower threatened against or affecting the acquisition target in any court or before or by any governmental department, agency or instrumentality, which could reasonably be expected to be decided adversely to the acquisition target and which, if decided adversely,
            could reasonably be expected to have a material adverse effect on the business, operations, properties or financial condition of the acquisition target and its subsidiaries (taken as a whole) or would materially adversely affect the ability of the acquisition target to enter into or perform its obligations in connection with the proposed acquisition, nor shall there be any actions, suits, or proceedings pending, or to the knowledge of Borrower threatened against Borrower that is
            making the acquisition which would materially adversely affect the ability of Borrower to enter into or perform its obligations in connection with the proposed acquisition; and

            (viii)    The purchase price of such proposed new acquisition, computed on the basis of total acquisition consideration paid or incurred, or required to be paid or incurred, with respect thereto, including the amount of Indebtedness (such Indebtedness being otherwise permitted under this Agreement) assumed or to which such assets, businesses or business or equity
            interests, or any Person so acquired is subject and including any portion of the purchase price allocated to any non-compete agreements, is less than Twenty-Five Million Dollars ($25,000,000) during the term of this agreement.

            “Prime Rate” shall mean the per annum rate announced by Bank from time to time as its “prime rate” (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by Bank to any of its customers), which Prime Rate shall change simultaneously with any change in such announced rate.

            “Recovery Event” means the receipt by Borrower of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets.

             

            
                

                 

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            “Requirement of Law” means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or to which any
            of its material property is subject.

            “Restricted Payment” means (i) any dividend or other distribution (whether in cash, securities or other property) with respect to any shareholder in Borrower (or owner in any subsidiary), or (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase,
            redemption, retirement, acquisition, cancellation or termination of any such shareholder in Borrower (or owner in any subsidiary) or any option, warrant or other right to acquire any such interest of shareholders in Borrower (or owners in any subsidiary). 

            “Security Agreement” shall mean the Security Agreement, UCC Financing Statements, and all other related agreements and documents delivered pursuant to this Loan Agreement or otherwise entered into by any person to secure the obligations of Borrower under this Loan Agreement made by Borrower in favor of Bank under which Borrower grants to
            Bank a first priority security interest in the Collateral.

            “Solvent” means, with respect to Borrower as of a particular date, that on such date (i) such Borrower is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Borrower does not intend to, and does not believe that it
            will, incur debts or liabilities beyond such Borrower's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Borrower's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Borrower is engaged or is to engage, (vi) the fair value of
            the property of such Borrower is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Borrower and (v) the present fair saleable value of the assets of such Borrower is not less than the amount that will be required to pay the probable liability of such Borrower on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed
            at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

            “Subordinated Debt” shall mean Indebtedness of a Borrower for borrowed money which is expressly subordinated in right and priority of payment to Borrowers’ Obligations to Bank on terms and conditions acceptable to Bank as of the date of this Loan Agreement.

            “UCC Financing Statements” means all UCC Financing Statements required by Bank to perfect the security interests granted to Bank under the Security Agreement.

            
                	
                             

                        	
                             1.2

                        	
                            Other Definitional Provisions.

                        

            

            (a)        Unless otherwise specified therein, all capitalized definitional terms defined in this Loan Agreement shall have the defined meanings when used in the Note or other Loan Documents or any certificate or other document made or delivered pursuant hereto.

            (b)       The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement, and Section, subsection, Schedule and Exhibit references are to this Loan Agreement unless
            otherwise specified.

             

            
                

                 

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            (c)        The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

            (d)       For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

                            1.3          Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder
            shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP.

            SECTION 2.

            LOAN FACILITIES

            
                	
                             

                        	
                            2.1

                        	
                            Equipment Term Loan.

                        

            

                                            (a)        Equipment Term Loan. Bank hereby grants an “Equipment Term
            Loan” pursuant to which Bank agrees to make on the Funding Date, a non-revolving advance to Borrower, for the purposes of financing new machinery and equipment and building improvements (the “Assets”), in the amount of Eighteen Million Dollars ($18,000,000). Funding of the loan shall be in accordance with the conditions set forth in Section 4 below.

                                            (b)       Equipment Term Note. The advance of the Equipment Term Loan shall be evidenced by and be repayable to Bank in
            accordance with the terms of the Equipment Term Note, which Borrower shall execute and deliver to Bank simultaneously herewith. All provisions of the Equipment Term Note are incorporated herein by this reference as terms and conditions of this Loan Agreement.

            
                	
                             

                        	
                            2.2

                        	
                            Security. 

                        

            

            (a)        Borrower hereby grants to Bank as security for the Note, a security interest in all fixed assets of Borrower, subject to the priority of all deposits in possession or control JP Morgan Chase Bank, N.A., and subject to the priority of the existing security interest in accounts receivable and inventory granted to JP Morgan Chase Bank,
            N.A., as described in the Security Agreement executed simultaneously hereto. Borrower shall also grant to Bank a mortgage on the real estate and improvements constituting real property located at 1150 Elijah McCoy Drive, Detroit, Michigan, as more particularly described in the Mortgage executed simultaneously hereto.

            All of the specified property in subsection (a) above shall be collectively referred to as the “Collateral”.

            (b)       Borrower shall execute and deliver to Bank such documents in addition to those documents specified in this Loan Agreement, on the Closing Date, Funding Date, and thereafter from time to time, as Bank shall request, for the purpose of perfecting and continuing the perfection of Bank’s security interest and mortgage in the
            Collateral.

            (c)        It is further agreed that any security agreement, mortgage, or other document hereafter executed by Borrower in favor of Bank shall secure repayment of all of the Obligations, whether or not presently contemplated by the parties, including that created under the Loan Agreement of the same date relating to the Note; and, that an
            Event of Default under any note, security agreement, mortgage or other agreement from Borrower to Bank after any applicable grace period shall constitute an Event of Default under all notes, security agreements and other agreements, and that Bank may, at its 

             

            
                

                 

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            option, proceed in exercising its rights thereunder in any order or manner it may choose, the purpose of this Loan Agreement being to cross-collateralize and cross-default all of the Obligations.

            SECTION 3.

            OTHER PROVISIONS RELATING TO CREDIT FACILITIES

                           3.1           Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loan and any other amounts
            owing hereunder or under the other Loan Documents shall bear interest, payable on demand, at a per annum rate (the “Default Rate”) which is equal to the rate which would otherwise be applicable as defined in the Note, plus two percent (2.0%).

                           3.2           Taxes. Except as provided below in this subsection, all payments made by Borrower under this Loan Agreement and any Note shall be made free and clear of, and without deduction or
            withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding taxes measured by or imposed upon the overall net income of Bank or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall
            capital or net worth of any Bank or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Bank, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection
            between the jurisdiction imposing such tax and such Bank, applicable lending office, branch or affiliate other than a connection arising solely from such Bank having executed, delivered or performed its obligations, or received payment under or enforced, this Loan Agreement or any Note. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) are required
            to be withheld from any amounts payable to Bank hereunder or under any Note, (A) the amounts so payable to Bank shall be increased to the extent necessary to yield to Bank (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Loan Agreement and any Note, provided, however, that Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any
            such amounts payable to any Bank that is not organized under the laws of the United States of America or a state thereof if such Bank fails to comply with the requirements of paragraph (ii) of this subsection whenever any Non-Excluded Taxes are payable by Borrower, and (B) as promptly as possible thereafter Borrower shall send to Bank, a certified copy of an original official receipt received by Borrower showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes when
            due to the appropriate taxing authority or fails to remit to Bank the required receipts or other required documentary evidence, Borrower shall indemnify Bank for any incremental taxes, interest or penalties that may become payable by Bank as a result of any such failure. The agreements in this subsection shall survive the termination of this Loan Agreement and the payment of the Loan and all other amounts payable hereunder.

                           3.3           Place and Manner of Payments. Except as otherwise specifically provided herein, all payments hereunder shall be made to Bank in United States Dollars in immediately available funds,
            without offset, deduction, counterclaim or withholding of any kind, at Bank's office specified herein not later than 11:00 A.M. (Eastern Standard Time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. Bank may, at Borrower's request, debit the amount of any such payment which is not made by such time to any account maintained by Borrower with Bank or any other account which may be maintained by
            Borrower with Bank and designated for such purpose by Borrower. Borrower shall, at the time it makes any payment under this Loan Agreement, specify to Bank the  

             

            
                

                 

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            Loan, fees or other amounts payable by Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, Bank shall apply such payment to the Loan in such manner as Bank may determine to be appropriate in respect of obligations owing by Borrower hereunder. Whenever any payment hereunder shall be
            stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension). Except as expressly provided otherwise herein, all computations of except that interest accruing by reference to the Prime Rate shall accrue on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be interest and fees shall be made on the
            basis of actual number of days elapsed over a year of 360 days. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

            SECTION 4.

            CONDITIONS

                           4.1           Conditions to Closing Date; Funding Date. The Loan shall close and the proceeds advanced upon satisfaction of the following conditions precedent:

                                            (a)       Execution of Loan Documents. Bank shall have received (i) this Loan Agreement, (ii) the Note, (iii) the Security
            Agreement, (iv) the Borrowing Resolution, (v) the Closing Certificate, (vi) the Mortgage, (vii) any Hedging Contracts and related documentation to hedge the interest rate fluctuations of the Equipment Term Note, and such other documents and certificates reasonably required by Bank, in each case conforming to the requirements of this Loan Agreement and executed by a duly authorized officer of Borrower. Notwithstanding the foregoing, and without waiving the condition in subsection
            (vii) above, Bank may advance funds at the request of Borrower with the continued obligation that Borrower enters into a Hedging Contract with Bank’s trading desk by March 16, 2009, otherwise such failure to fix the variable rate of interest through a Hedging Contract shall be deemed an Event of Default hereunder.

                                            (b)       Insurance. At its own cost, Borrower shall obtain and maintain, and cause to be obtained and maintained by Borrower
            insurance against (i) loss, destruction or damage to its property and business of the kinds and in the amounts customarily insured against by businesses with established reputations engaged in the same or similar business as Borrower and, in any event, sufficient to fully protect Bank’s interest in the Collateral, and (ii) insurance against public liability and third party property damage of the kinds and in the amounts customarily insured against by businesses with
            established reputations engaged in the same or similar business as Borrower. All such policies shall (1) be issued by financially sound and reputable insurers, (2) name Bank as lender and additional insured and, where applicable, as loss payee under a Bank loss payable endorsement satisfactory to Bank, and (3) shall provide for thirty (30) days written notice to Bank before such policy is altered or canceled. All of the insurance policies required hereby shall be evidenced by one or
            more Certificates of Insurance delivered to Bank by Borrower on the Closing Date and at such other times as Bank may request from time to time. So long as Borrower is not then in default, Borrower shall be permitted to restore any damage and Bank shall apply insurance proceeds to such restoration costs provided such insurance proceeds are sufficient to cover such costs or Borrower has otherwise reasonably demonstrated resources necessary to cover the restoration costs, otherwise
            Bank may apply same to the Indebtedness.

             

                                            (c)       Fees and Expenses. Borrower shall have either paid, or reimbursed Bank, for all fees and expenses, including
            attorneys' fees and expenses for the negotiation and preparation of the Loan Documents, incurred by Bank and in making the Loan.

            

            

            

            
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            (d)       Asset Purchase Documentation. Borrower shall provide to Bank reasonable evidence or documentation concerning the purchase of the Assets or other machinery and equipment contemplated in this Loan Agreement, together with an appraisal or other verification of
            value/cost acceptable to Bank. 

                                           (e)       Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Loan
            Agreement shall be reasonably satisfactory in form and substance to Bank.

            SECTION 5.

            REPRESENTATIONS AND WARRANTIES

            To induce Bank to enter into this Loan Agreement and to make the advance of the Loan herein provided for, Borrower hereby represents and warrants to Bank that as of the Closing Date (except as specifically set forth below in this Section 5).

                           5.1            Financial Statements. Prior to the Closing Date Borrower has or will have furnished to Bank financial statements which shall be correct and complete and fairly presents the
            financial condition of Borrower as of the date of the financial statements, subject to the absence of footnotes, audit and normal year-end adjustments.

                           5.2           Ownership and Condition of Collateral; Liens and Encumbrances. Borrower has, or will have at the time of purchase, good and marketable title to the Assets free of any Liens except
            Permitted Liens, and all other property reflected on the balance sheet of Borrower furnished to Bank, except property sold or otherwise disposed of in the ordinary course of business subsequent to such date. All real estate, improvements thereon, and equipment of Borrower used in Borrower's business are in good operating condition, repair and working order subject to ordinary wear and tear and, to Borrower's knowledge, conform to all applicable laws, ordinances and regulations the
            violation of which would have a Material Adverse Effect. Borrower possesses adequate trademarks, trade names, copyrights, patents, service marks and licenses, or rights thereto, for the present and planned future conduct of its business substantially as now conducted, without any known conflict with the rights of others the absence of which would result in a Material Adverse Effect. 

                           5.3           Entity Existence; Compliance with Law. Borrower (a) is in good standing under the laws of the State of Michigan, (b) has the power and authority and the legal right to own and operate
            all its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing would not, in the aggregate, reasonably be expected to have a Material Adverse
            Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

                           5.4           Entity Power; Authorization; Enforceable Obligations. Borrower has full power and authority and the legal right to make, deliver and perform the Loan Documents to which it is party and
            has taken all necessary corporate action to authorize the execution, delivery and performance by it of the Loan Documents to which it is party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of any Loan Document by Borrower (other than those which have been obtained, including without
            limitation those required under Section 4.1(e) or in connection with the perfection of Liens in favor of Bank hereunder) or with the validity or  

             

            
                

                 

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            enforceability of any Loan Document against Borrower (except such filings as are necessary in connection with the perfection of the Liens created by such Loan Documents). Each Loan Document to which it is a party has been duly executed and delivered on behalf of Borrower. Each Loan Document to which it is a party constitutes a legal, valid and binding obligation of Borrower, enforceable against
            Borrower in accordance with its terms.

                           5.5           No Legal Bar; No Default. The execution, delivery and performance of the Loan Documents, the borrowings thereunder and the use of the proceeds of advance of the Loan will not violate any
            Requirement of Law the violation of which would reasonably be expected to have a Material Adverse Effect or any contractual obligation of Borrower the violation of which would reasonably be expected to have a Material Adverse Effect (except those as to which waivers or consents have been obtained), and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or contractual
            obligation other than the Liens arising under or contemplated in connection with the Loan Documents. Borrower is not in default under or with respect to any of its contractual obligations in any respect which would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

                           5.6           No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of Borrower, threatened by
            or against Borrower or against any of its properties or revenues except as disclosed in Borrower’s quarterly reports filed with the SEC or which in the aggregate would not reasonably be expected to have a Material Adverse Effect. 

                           5.7           Investment Company Act. Borrower is not an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the
            Investment Company Act of 1940, as amended.

                           5.8           Federal Regulations. No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions
            of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. Borrower does not own “margin stock”.

            5.9           ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” within the meaning of Section 412 of the Code (or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or
            deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, except to the extent that any such occurrence or failure to comply would not reasonably be expected to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred resulting in any liability that has remained underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period which would
            reasonably be expected to have a Material Adverse Effect. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount which, as determined in accordance with GAAP, would reasonably be expected to have a Material
            Adverse Effect. Neither Borrower nor any Commonly Controlled Entity is currently subject to any liability for a complete or partial withdrawal from a Multiemployer Plan which would reasonably be expected to have a Material Adverse Effect. For purposes of this Section only, the parties hereto agree that “Material Adverse Effect” shall include any event referred to in this Section which would or could be reasonably expected to cause a reduction in Borrower’s Net
            Worth of five percent (5%) or more. 

             

            
                

                 

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                                           5.10

                        	
                            Environmental Matters. 

                        

            

            (a)        To the best knowledge of Borrower, the facilities and assets owned, leased or operated by Borrower (the “Properties”) do not contain any Materials of Environmental Concern in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to
            liability under, any Environmental Law.

            (b)       To the best knowledge of Borrower, the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to
            the Properties or the business operated by Borrower (the “Business”).

            (c)        Borrower has not received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does Borrower have knowledge or reason to believe that any such notice will be received
            or is being threatened, except for the notice received from the City of Detroit in December 2008.

            (d)       To the best knowledge of Borrower, Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could give rise to liability under any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of
            at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law.

            (e)        No judicial proceeding or governmental or administrative action is pending or, to the knowledge of Borrower, threatened, under any Environmental Law to which Borrower is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative
            orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business.

            (f)        To the best knowledge of Borrower, there has been no unremediated release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Borrower in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a
            manner that could give rise to liability under Environmental Laws.

                           5.11        Use of Proceeds. The advance of the Loan hereunder shall be used only for business purposes, including the acquisition and refinancing of machinery, equipment and the construction of building
            improvements used in Borrower’s operations. 

                           5.12        Taxes. Borrower has filed, or caused to be filed, all material tax returns (federal, state, local and foreign) required to be filed and paid all taxes shown thereon to be due (including interest and
            penalties) and has paid or caused to be paid all other taxes, fees, assessments and other governmental charges (including but not limited to MBT, MESC and other taxes) owing or necessary to preserve any Liens in favor of Bank by them, except for such taxes (i) which are not yet delinquent or (ii) as are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP. Borrower is not aware of any proposed
            material tax assessments against Borrower.

             

            
                

                 

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                           5.13        Solvency. Borrower is, and after execution of this Loan Agreement and the Funding Date and after giving effect to the Obligations incurred hereunder will be, Solvent.

                           5.14        Accuracy of Information. All information furnished by Borrower to Bank is correct and complete in all material respects as of the date furnished and does not contain any untrue statement of a material
            fact or omit to state a material fact necessary to make such information not misleading.

            SECTION 6.

            AFFIRMATIVE COVENANTS

            Borrower hereby covenants and agrees that on the Closing Date, Funding Date, and thereafter for so long as this Loan Agreement is in effect and until no Note remains outstanding and unpaid and the Obligations, together with interest, fees and all other amounts owing to Bank hereunder, are paid in full, Borrower shall:

                           6.1        Financial Reports. Maintain a standard and modern system for accounting and shall furnish to Bank:

             

            (i)          On or before 120 days of each fiscal year, copies of Borrower’s financial statements in a form reasonably acceptable to Bank, audited by a certified public accountant reasonably acceptable to Bank;

             

            (ii)         Within 30 days after the end of each fiscal quarter, a copy of all of Borrower’s internally prepared financial statements in a form reasonably acceptable to Bank, prepared and certified as complete and correct by Borrower;

             

            (iii)        Within 30 days after each fiscal quarter, a covenant compliance certificate in a form reasonably acceptable to Bank, setting forth compliance with the terms and conditions of the financial covenants stated in this Loan Agreement, and such other reports as reasonably requested by Bank from time-to-time.

             

            All of the statements referred to above shall be in conformance with reasonable GAAP accounting methods consistently applied in accordance with past practices and give representatives of Bank access thereto at all reasonable times, including permission to examine, copy and make abstracts from any such books and records and such other information which might
            be helpful to Bank in evaluating the status of the Loan as it may reasonably request from time to time.

                           6.2         Payment of Obligations; Taxes. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, in accordance with industry practice (subject, where
            applicable, to specified grace periods) all its material obligations of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, except when the amount or validity of such obligations and costs is currently being contested in good faith by appropriate proceedings and reserves, if applicable, in conformity with GAAP with respect thereto have been provided on the books of Borrower. Borrower shall
            pay when due all taxes, assessments and other governmental charges imposed upon it or its assets, franchises, business, income or profits before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which by law might be a lien or charge upon any of its assets, provided that (unless any material item or property would be lost, forfeited or materially damaged as a result thereof) no such
            charge or claim need be paid if it is being diligently contested in good faith, and if Borrower establishes an adequate reserve or other appropriate provision required by GAAP and deposits with Bank cash or bond in an amount acceptable to Bank. 

             

            
                

                 

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                           6.3          Conduct of Business and Maintenance of Existence. Except as otherwise permitted by Section 7.3, continue to engage in business of the same general type as now conducted by it on the date
            hereof and preserve, renew and keep in full force and effect its entity existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; comply with all contractual obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect.

                           6.4          Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted); compliance with any leases, and
            maintain insurance described in Section 4.1 (b).

             

                           6.5          Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law
            shall be made of all dealings and transactions in relation to its businesses and activities; and permit, during regular business hours and upon reasonable notice by Bank, and, after the occurrence and during the continuance of a Default or an Event of Default, Bank to visit and inspect any of its properties and examine and make abstracts from any of its books and records (other than materials protected by the attorney-client privilege and materials which Borrower may not disclose
            without violation of a confidentiality obligation binding upon it) at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of Borrower with officers and employees of Borrower and with its independent certified public accountants.

            
                	
                                           6.6

                        	
                            Notices. Give notice to Bank of:

                        

            

            (a)        promptly (and in any event within two (2) Business Days) after Borrower knows or has reason to know thereof, the occurrence of any Default or Event of Default;

            (b)       promptly, any default under any leases of Borrower’s Properties except where such default would not reasonably be expected to have a Material Adverse Effect;

            (c)        promptly, any default or event of default under any contractual obligation of Borrower which would reasonably be expected to have a Material Adverse Effect;

            (d)       promptly, any litigation, or any investigation or proceeding (including, without limitation, any environmental proceeding) known to Borrower, affecting Borrower which, if adversely determined, would reasonably be expected to have a Material Adverse Effect; 

            (e)        promptly, any other development or event which would reasonably be expected to have a Material Adverse Effect.

            Each notice pursuant to this subsection shall be accompanied by a statement of a responsible officer setting forth details of the occurrence referred to therein and stating what action Borrower proposes to take with respect thereto.

            
                	
                             

                        	
                            6.7

                        	
                                Compliance with Law; Generally.

                        

            

            (a)        Comply in all material respects with, all applicable Laws and obtain and comply in all material respects with and maintain, and ensure that the employees obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Laws except to the
            extent that, with respect to all of the above, failure to do so would not reasonably be expected to have a Material Adverse Effect;

             

            
                

                 

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            (b)       Borrower shall comply with all other federal, state and local laws, regulations and orders applicable to Borrower or its assets in all respects material to Borrower’s business, assets or prospects and shall promptly notify Bank of any violation of any rule, regulation, statute, ordinance, order or law relating to any complaint or
            notifications received by Borrower regarding any rule, regulation, statute, ordinance or law that is expected to have a Material Adverse Effect, including reasonable good faith efforts to satisfy any and all issues raised by the Food and Drug Administration (“FDA”) in any past or future warning letters. Borrower acknowledges and agrees that any enforcement action taken by the FDA, including but not limited to an injunction prohibiting continued operations in facility of
            Borrower referenced in Section 2.2(a), shall be deemed to have a Material Adverse Effect and shall constitute a default hereunder. Borrower shall also obtain and maintain any and all licenses, permits, franchises, governmental authorizations, patents, trademarks, copyrights or other rights necessary for the ownership and operation of its business and the advantageous conduct of its business and as may be required from time to time by applicable law except where the failure to do so
            would not reasonably be excepted to have a Material Adverse Effect.

            6.8         Minimum Fixed Charge Coverage Ratio. Borrower shall not permit the ratio, determined as of the end of each fiscal quarter of Borrower, of:

            (a) the net income (or loss) of Borrower and its subsidiaries plus, to the extent deducted from revenues in determining such net income, (i) the interest expense of Borrower and its subsidiaries, (ii) expenses for taxes paid or accrued net of tax refunds, (iii) depreciation, (iv) amortization, (v) non-cash research and development expense, and (vi) extraordinary non-cash losses
            (as determined in accordance with GAAP) incurred other than in the ordinary course of business, minus (A) to the extent included in such net income, extraordinary gains (as determined in accordance with GAAP) realized other than in the ordinary course of business, (B) capital expenditures of Borrower and its subsidiaries which are not financed with permitted long term debt, (C) taxes, and (D) Restricted Payments, to

            (b) the cash interest expense of Borrower and its subsidiaries plus the scheduled and any other required principal payments paid or payable on Indebtedness, all as calculated for the most recently ended four fiscal quarters and for Borrower and its subsidiaries on a consolidated basis, determined as of the end of each of its fiscal quarter for the then most recently ended fiscal
            quarter, to be less than 1.20 to 1.0 as of the end of any fiscal quarter.

            6.9          Minimum EBITDA. Borrower shall not permit its trailing twelve (12) month EBITDA to be less than Sixteen Million Dollars ($16,000,000) as of the end of each calendar quarter, as indicated on Borrower’s financial statements, while the Obligations are
            outstanding.

            6.10       Bank Accounts. Borrower agrees, as long as any Obligations are outstanding, Borrower shall maintain a deposit account with Bank with a minimum balance of One Hundred Fifty Thousand Dollars ($150,000) at all times, and offer Bank the opportunity to provide other banking services
            required by Borrower and its Affiliates. 

            SECTION 7.

            NEGATIVE COVENANTS

            Borrower agrees that on the Closing Date, Funding Date, and thereafter for so long as this Loan Agreement is in effect, no Note remains outstanding and unpaid and the Obligations, together with interest, fees and all other amounts owing to Bank hereunder, are paid in full, that:

                           7.1        Liens. Borrower will not contract, create, incur, assume or permit to exist any Lien with respect to the Collateral without the consent of the Bank, except for (a) Permitted Liens, (b) existing
            

             

            
                

                 

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            Liens in favor of JPMorgan Chase Bank, N.A., (c) Liens disclosed on the attached Schedule 7.1, (d) purchase money liens and capital Leases limited to the acquired property and (e) additional Liens securing not more than $2,000,000 at any one time.

                           7.2          Nature of Business. Except as otherwise permitted by Section 7.3, Borrower will continue to engage in its and not otherwise alter the character of the business and operations substantially as
            conducted immediately prior to the Closing Date.

            
                	
                                           7.3

                        	
                                 Dissolution, Consolidation, Merger Sale or Purchase of Assets, Etc. Borrower will not:

                        

            

            (a)        dissolve, liquidate or wind up its affairs, sell, transfer, lease or otherwise dispose of substantially all of its property or assets outside of the ordinary course of business or agree to do so at a future time except where such transaction is the result of a Recovery Event and the Net Proceeds therefrom are used to repair or
            replace damaged property or to purchase or otherwise acquire new assets or property provided that such purchase or acquisition is committed to within 120 days of receipt of the Net Proceeds from the Recovery Event and such purchase or acquisition is consummated within 180 days of such receipt; or

            (b)       change its name or capital structure, consolidate with or merge into any other entity or permit any other entity to merge into it; or 

            (c)        acquire substantially all of the assets of any other entity other than Permitted Acquisitions without Bank’s prior consent, not to be unreasonably withheld. 

                           7.4          Fiscal Year. Borrower will not change its fiscal year, except with the prior written consent of Bank.

            7.5          Advances, Investments and the Loan. Borrower will not lend money or extend credit or make advances to any Person, or purchase or acquire any stock, or re-purchase, redemption or retirement of stock or other ownership interest of Borrower, obligations or
            securities of, or any other interest in, or make any capital contribution to, any Person, other than advances, loans and extensions of credit in the ordinary course of business, or otherwise exceed seventy-five percent (75%) of Borrower’s liquid assets in excess of $5,000,000 at any given time when combined with the obligations in Section 7.6. 

             

            7.6          Guaranty Obligations. Borrower will not contract, create, incur, assume or permit to exist any guaranty obligations, other than those securing other Indebtedness to Bank; provided, however, that the foregoing shall not apply to endorsement of instruments or items
            of payment for deposit or collection in the ordinary course of business, or otherwise exceed seventy-five percent (75%) of Borrower’s liquid assets in excess of $5,000,000 at any given time when combined with the obligations in Section 7.5.

             

                           7.7          Subsidiaries. Borrower will not create, form or acquire any subsidiary unless said subsidiary becomes and obligor of Borrower’s Indebtedness to the Bank, and any Collateral held by said
            subsidiary is granted to Bank upon being transferred into such subsidiary without affecting Bank’s priority of interest therein.

            
                	
                                           7.8

                        	
                                 Prepayments of Other Indebtedness, Etc. Borrower will not:

                        

            

             

            
                

                 

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            (a)        after the issuance thereof, amend or modify, or permit the amendment or modification of, any of the terms of subordination or other terms or provisions relating to any Subordinated Debt;

            (b)       make (or give notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value (including, without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due) or exchange of any Subordinated Debt;

            (c)        make any prepayment, redemption, acquisition for value of (including, without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due) refund, refinance or exchange of any Subordinated Debt.

            7.9           Increase of Other Indebtedness.Borrower shall not increase its line of credit obligations with JPMorgan Chase Bank, N.A., or borrow money or accept credit from any other lender, in excess of $2,000,000 above the limits shown on Borrower’s September
            30, 2008 financial statements.

            SECTION 8.

            EVENTS OF DEFAULT; ACCELERATION; ETC.

            8.1           Events of Default. If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then prior to such notice or lapse of time,
            “Defaults”) shall occur:

            (a)        Borrower shall fail to pay any principal or interest on any note payable to Bank, or any fee or other amount payable under any note or hereunder, within three (3) Business Days of when due in accordance with the terms thereof or hereof; 

            (b)       Any representation or warranty made or deemed made by Borrower herein, in the Security Agreement, Mortgage or in any of the other Loan Documents or which is contained in any certificate, document or financial or other statement furnished by Borrower at any time under or in connection with this Loan Agreement shall prove to have been
            incorrect, false or misleading in any material respect on or as of the date made or deemed made and if such default is subject to cure, such default remains unremedied for a period of thirty (30) days after Borrower obtains knowledge thereof; 

            (c)        Borrower shall default in the observance or performance of any other term, covenant or agreement contained herein, in the Security Agreement, the Mortgage, Hedging Contracts, or in any of the other Loan Documents (other than as described in subsections 8.1(a) or (b) above which shall immediately become an Event of Default), and such
            default shall continue unremedied for a period of thirty (30) days or more after written notice thereof from Bank; 

            (d)       Borrower shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Note) in an amount outstanding of at least $2,500,000 beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created and such Indebtedness has matured by
            its terms or is accelerated or is overtly threatened to be accelerated (except any such Indebtedness which Borrower is disputing in good faith and for which they have established adequate reserves); or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness in an amount outstanding of at least $2,500,000 for Borrower or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event
            shall occur or condition exist, the effect of which default or other event or condition is to cause, or the holder or holders of such Indebtedness to become payable; 

             

            
                

                 

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            (e)        Borrower shall: (i) commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
            or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Borrower shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Borrower proceeding or other action of a nature referred to
            in clause (i) above which (X) results in the entry of an order for relief or any such adjudication or appointment or (Y) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against Borrower proceeding other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not
            have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Borrower shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; 

            (f)        One or more judgments or decrees shall be entered against Borrower and such judgments or decrees shall not have been paid and satisfied, vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof and involve in the aggregate a liability (to the extent not paid when due or covered by insurance)
            of $1,000,000 or more, or that result in any enforcement action taken by the FDA, including but not limited to an injunction prohibiting continued operations in any facility of Borrower described in Section 2.2(a); or

            (g)       Any of the Loan Document shall fail to be in full force and effect or to give Bank the security interests, liens, rights, powers and privileges reasonably purported to be created thereby; 

            
                	
                             

                        	
                            (h)

                        	
                            a Change In Control of Borrower shall have occurred;

                        

            

            (i)        Borrower fails to enter into a Hedging Contract within the time provided in Section 4.1(a), without further notice or time to cure;

            then, and in any such event, so long as the same may be continuing, Bank may by notice in writing to Borrower declare all amounts owing with respect to this Loan Agreement, the Note and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by
            Borrower; provided that in the event of any Event of Default specified in Section 8.1(g), all such amounts shall become immediately due and payable automatically and without any requirement of notice from Bank.

                           8.2          Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, Bank may exercise any remedy permitted by this Agreement, the other Loan Documents or law. No
            remedy herein conferred upon Bank is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or equity or by statue or any other provision of law or equity.

             

                           8.3          Distribution of Collateral Proceeds. In the event that following the occurrence or during the continuance of any Default or Event of Default, Bank receives any monies in connection with the
            enforcement of the Security Agreement, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows:

             

            
                

                 

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            (a)        First, to the payment of, or (as the case may be) the reimbursement of Bank for or in respect of all actual costs, expenses and disbursements which shall have been incurred by Bank in connection with the collection of such monies by Bank, for the exercise, protection or enforcement by Bank of all or any of the rights, remedies,
            powers and privileges of Bank under this Loan Agreement, the Note or any of the other Loan Documents or in respect of the Collateral and to provide adequate indemnity to Bank against all taxes or liens which by law shall have, or may have, priority over the rights of Bank to such monies;

            (b)       Second, to all other Obligations in such order or preference as Bank may determine; provided, however, that Bank may in its discretion make proper allowance to take into account any Obligations not then due and payable;

            (c)        Third, the excess, if any, shall be returned to Borrower or to such other Persons as are entitled thereto.

             

            SECTION 9.

            MISCELLANEOUS

                           9.1          Amendments, Waivers and Release of Collateral. Neither this Loan Agreement, nor any Note, nor any of the other Loan Documents, nor any terms hereof or thereof may be amended, supplemented,
            waived or modified except by a writing signed by the Bank and Borrower nor may collateral be released except as specifically provided herein or in the Security Agreement or in any event by a writing signed by Bank.

                           9.2          Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing, and, unless otherwise expressly provided herein, shall be deemed to have
            been duly given or made (i) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (ii) the third Business Day following the day on which the same is sent by first-class mail, postage prepaid, in each case, addressed to such party as indicated on the first page hereof (or to such other address as may be hereafter notified by the respective parties
            hereto.            

             

                           9.3          No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of Bank, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor
            shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

                           9.4          Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith
            shall survive the execution and delivery of this Loan Agreement and the Note and the making of the Loan, provided that all such representations and warranties shall terminate on the date upon which all amounts owing hereunder and under any Note have been paid in full.

            
                	
                             

                        	
                            9.5

                        	
                            Payment of Expenses and Taxes. Borrower agrees:

                        

            

            (a)        to pay for all of the out-of-pocket costs and expenses incurred by Bank in connection with the preparation of the Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, together with the reasonable fees and expenses of
            Bank’s outside counsel in connection with the 

             

            
                

                 

                19

                

                 

                

            

             

            
                

            

            negotiation, preparation and execution of the Loan Documents, and expenses such as filing fees and appraisals as they relate to the Collateral;

            (b)       to pay or reimburse Bank for all Bank’s costs and expenses incurred in connection with the enforcement or preservation of any rights under this Loan Agreement and any other Loan Documents, including, without limitation, the reasonable fees and expenses of Bank’s outside counsel (including reasonable allocated costs of in-house
            legal counsel, if any);

            (c)        on demand, to pay, indemnify, and hold Bank harmless from, any and all filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or
            administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Loan Documents and any such other documents; and 

            (d)       to pay, indemnify, and hold Bank and its Affiliates, officers, directors, shareholders, members, managers, employees and agents harmless from and against, any and all other claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever
            (including reasonable attorneys' fees) which Bank may incur or be subject to, directly or indirectly, with respect to the execution, delivery, enforcement, performance and administration of the Loan Documents and any such other documents and the use, or proposed use, of proceeds of the Loan (all the foregoing, collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation
            hereunder to Bank with respect to Indemnified Liabilities arising from (A) the gross negligence or willful misconduct of Bank, or (B) the violation by Bank of an express provision of the Loan Documents, if so determined by a final judgment of a court of competent jurisdiction. 

            The obligations and responsibilities in this Section 9.5 shall survive repayment of the Loan, Note and all other amounts payable hereunder.

             

            
                	
                             

                        	
                            9.6

                        	
                            Successors and Assigns; Participations.

                        

            

            (a)        This Loan Agreement shall be binding upon and inure to the benefit of Borrower, Bank, all future holders of the Note and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Loan Agreement or the other Loan Documents without the prior written consent of
            Bank or successor and assigns thereof which may be unreasonably withheld by Bank, however Bank may assign or transfer any of its rights or obligations under this Loan Agreement or the other Loan Documents without the prior written consent of Borrower.

            (b)       Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law and, without the consent of Borrower, at any time sell to one or more banks or other entities participating interests in any Loan, any Note, or any other interest hereunder.

            (c)        Nothing herein shall prohibit Bank from pledging or assigning any of its rights under this Loan Agreement (including, without limitation, any right to payment of principal and interest under any Note) to any Federal Reserve Bank in accordance with applicable laws.

                           9.7           Set-off. In addition to any rights and remedies of Bank provided by law (including, without limitation, other rights of setoff), Bank shall have the right, without prior notice to Borrower,
            any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon the occurrence and during the continuance of any Event of Default, to setoff and appropriate and apply any 

             

            
                

                 

                20

                

                 

                

            

             

            
                

            

            and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Bank or any branch or agency thereof to or for the credit or the account of Borrower, or any part thereof in such amounts as such
            Bank may elect, against and on account of the obligations and liabilities of Borrower to Bank hereunder and claims of every nature and description of Bank against Borrower, in any currency, whether arising hereunder, under the Note or under any documents contemplated by or referred to herein or therein, as Bank may elect, whether or not Bank has made any demand for payment. Bank agrees promptly to notify Borrower after any such setoff and application made by Bank; provided, however,
            that the failure to give such notice shall not affect the validity of such setoff and application.

                           9.8          Section Headings. The Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Loan Agreement.

                           9.9          Counterparts. This Loan Agreement may be executed by one or more of the parties to this Loan Agreement on any number of separate counterparts, and all of said counterparts taken together shall
            be deemed to constitute one and the same instrument. A set of the copies of this Loan Agreement signed by all the parties shall be lodged with Borrower and Bank.

                           9.10         Severability. Any provision of this Loan Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
            unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

                           9.11        Integration. This Loan Agreement, the Note and the other Loan Documents represent the agreement of Borrower and Bank with respect to the subject matter hereof, and there are no promises, undertakings,
            representations or warranties by Borrower or Bank relative to the subject matter hereof not expressly set forth or referred to herein or in the Note.

                           9.12        Governing Law. This Loan Agreement and the Note and the rights and obligations of the parties under this Loan Agreement and the Note shall be governed by, and construed and interpreted in accordance
            with, the internal laws of the State of Michigan without giving effect to its conflicts of law provisions.

                           9.13         Consent to Jurisdiction and Venue. All judicial proceedings brought against Borrower with respect to this Loan Agreement, any Note or any of the other Loan Documents shall be brought in a Michigan
            court in Oakland County or the United States District Court for the Eastern District of Michigan, and, by execution and delivery of this Loan Agreement, Borrower accepts, for itself and in connection with its properties, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Loan Agreement from which no appeal has been taken or is available. Borrower and Bank
            irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall limit the right of any Bank to bring proceedings against Borrower in the court of any other jurisdiction.

            
                	
                                           9.14

                        	
                            Acknowledgments. Borrower hereby acknowledges that:

                        

            

            (a)        it has been advised by legal counsel in the negotiation, execution and delivery of each Loan Document;

             

            
                

                 

                21

                

                 

                

            

             

            
                

            

            (b)       Bank does not have any fiduciary relationship with or duty to Borrower arising out of or in connection with this Loan Agreement and the relationship between Bank, on one hand, and Borrower, on the other hand, in connection herewith is solely that of debtor and creditor; and

            
                	
                             

                        	
                            (c)

                        	
                            no joint venture exists among Borrower and Bank.

                        

            

                           9.15        Waivers of Jury Trial. BORROWER AND BANK HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LOAN
            AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

                           9.16        Limitation of Liability. BORROWER AND BANK HEREBY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER FROM THE OTHER PARTY ANY EXEMPLARY OR PUNITIVE DAMAGES OR CONSEQUENTIAL DAMAGES.

            EACH OF THE PARTIES HERETO has caused this Loan Agreement to be duly executed and delivered as of the date first above written.

             

            
                	
                             

                        	
                            BORROWER:

                        

            

            CARACO PHARMACEUTICAL LABORATORIES, LTD., a Michigan corporation 

             

            
                	
                             

                        	
                            By: /s/ Daniel H. Movens                                          

                        
	
                        	
                            Name:  Daniel H. Movens                                         

                        
	
                        	
                            Its:       Chief Executive Officer                                 

                        

            

             

             

            
                	
                             

                        	
                            By: /s/  Mukul Rathi                                                 
                               

                        
	
                        	
                            Name:  Mukul
                            Rathi                                                  

                        
	
                        	
                            Its:       Interim Chief Financial Officer                     

                        

            

             

             

            
                	
                             

                        	
                            BANK:

                        

            

            
                	
                             

                        	
                            RBS CITIZENS, N.A., a national association

                        

            

             

             

            
                	
                             

                        	
                            By: /s/  John G. Sherman                                          

                        
	
                        	
                            Name:  John G.
                            Sherman                                          

                        
	
                        	
                            Its:        Senior Vice President                                          
                            

                        

            

             

            
                

                 

                22Advisory Agreement

 Exhibit 10.1 
 ADVISORY AGREEMENT 
 between 
 KBS REAL ESTATE INVESTMENT TRUST II, INC. 
 and 
 KBS CAPITAL ADVISORS LLC 
 May 21, 2009 

 TABLE OF CONTENTS 
  

			
	 	  	Page
		
	 ARTICLE 1 - DEFINITIONS
	  	1
	 ARTICLE 2 - APPOINTMENT
	  	9
	 ARTICLE 3 - DUTIES OF THE ADVISOR
	  	9
	 3.01 Organizational and Offering Services
	  	9
	 3.02 Acquisition Services
	  	10
	 3.03 Asset Management Services
	  	10
	 3.04 Stockholder Services
	  	13
	 3.05 Other Services
	  	13
	 ARTICLE 4 - AUTHORITY OF ADVISOR
	  	14
	 4.01 General
	  	14
	 4.02 Powers of the Advisor
	  	14
	 4.03 Approval by the Board
	  	14
	 4.04 Modification or Revocation of Authority of Advisor
	  	14
	 ARTICLE 5 - BANK ACCOUNTS
	  	14
	 ARTICLE 6 - RECORDS AND FINANCIAL STATEMENTS
	  	15
	 ARTICLE 7 - LIMITATION ON ACTIVITIES
	  	15
	 ARTICLE 8 - FEES
	  	16
	 8.01 Acquisition Fees
	  	16
	 8.02 Origination Fees
	  	16
	 8.03 Asset Management Fees
	  	17
	 8.04 Disposition Fees
	  	17
	 8.05 Subscription Processing Fee
	  	17
	 8.06 Subordinated Share of Cash Flows
	  	18
	 8.07 Subordinated Incentive Fee
	  	18
	 8.08 Changes to Fee Structure
	  	18
	 ARTICLE 9 - EXPENSES
	  	19
	 9.01 General
	  	19
	 9.02 Timing of and Limitations on Reimbursements
	  	20
	 ARTICLE 10 - VOTING AGREEMENT
	  	21
	 ARTICLE 11 - RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR
	  	21
	 11.01 Relationship
	  	21
	 11.02 Time Commitment
	  	22
	 11.03 Investment Opportunities and Allocation
	  	22
	 ARTICLE 12 - THE KBS NAME
	  	22
	 ARTICLE 13 - TERM AND TERMINATION OF THE AGREEMENT
	  	23
	 13.01 Term
	  	23
	 13.02 Termination by Either Party
	  	23
	 13.03 Payments on Termination and Survival of Certain Rights and Obligations
	  	23
	 ARTICLE 14 - ASSIGNMENT
	  	24
	 ARTICLE 15 - INDEMNIFICATION AND LIMITATION OF LIABILITY
	  	24

  

 i 

			
	 15.01 Indemnification
	  	24
	 15.02 Limitation on Indemnification
	  	25
	 15.03 Limitation on Payment of Expenses
	  	25
	 ARTICLE 16 - MISCELLANEOUS
	  	25
	 16.01 Notices
	  	25
	 16.02 Modification
	  	26
	 16.03 Severability
	  	26
	 16.04 Construction
	  	26
	 16.05 Entire Agreement
	  	26
	 16.06 Waiver
	  	26
	 16.07 Gender
	  	26
	 16.08 Titles Not to Affect Interpretation
	  	26
	 16.09 Counterparts
	  	27

  

 ii 

 ADVISORY AGREEMENT 
 This Advisory Agreement, dated as of May 21, 2009 (the “Agreement”), is between KBS Real Estate Investment Trust 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 desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to
the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the Board of Directors of the Company, all as provided herein; and 
 WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board of Directors of the Company, on the terms
and conditions hereinafter set forth. 
 NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows: 
 ARTICLE 1 
 DEFINITIONS 
 The following defined terms used in this Agreement shall have the
meanings specified below: 
 “Acquisition 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, and title
insurance premiums. 
 “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 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 

  

 1 

 
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. 
 “Articles of Incorporation” means the Articles of Incorporation of the Company under Title 2 of the Corporations and Associations Article of
the Annotated Code of Maryland, as amended from time to time. 
 “Asset Management Fee” shall have the meaning set forth in
Section 8.03. 
 “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 the persons holding
such office, as of any particular time, under the Articles of Incorporation of the Company, whether they be the Directors named therein or additional or successor Directors. 
 “Bylaws” means the bylaws of the Company, as amended from time to time. 
 “Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted
Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith). 
 “Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any 

  

 2 

 
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. 
 “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 Real Estate Investment Trust 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 Articles of Incorporation. 
 “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 Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by
the Company, the amount actually paid or allocated to the purchase, development, construction or improvement of Properties, inclusive of expenses related thereto, plus the amount of any outstanding debt attributable to such Properties and
(ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner, the portion of the amount actually paid or allocated to the purchase,
development, construction or improvement of Properties, inclusive of expenses related thereto, plus the amount of any outstanding debt associated with such Properties that is attributable to the Company’s investment in the Joint Venture or
partnership. 
 “Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments
held by the Company, calculated each month on an 

  

 3 

 
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 (inclusive of expenses related thereto and the amount of any debt associated with or used to acquire or fund such investment) and (ii) the outstanding principal amount of such Loan or Permitted Investment, as of the time of
calculation. With respect to any Loan or Permitted Investment held by the Company through a Joint Venture or partnership of which it is, directly or indirectly, a co-venturer, such amount shall be the Company’s proportionate share thereof.

 “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 8.04. 
 “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. 
 “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. 
 “Initial Public Offering” means the initial public offering of Shares registered on Registration Statement No. 333-146341 on Form S-11. 
 “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. 
  

 4 

 “Joint Venture” means any joint venture, limited liability company or other Affiliate of the
Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments. 
 “Listed”
or “Listing” shall have the meaning set forth in the Company’s Articles of Incorporation. 
 “Loans” means mortgage
loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, and including, 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. 
 “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 any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan. 

“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest
payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and
other such expenses and 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 resale of property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions
on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. 
 “Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to
the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and 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 

  

 5 

 
paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on resale of
property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure,
insurance premiums, legal services, maintenance, repair and improvement of property. 
 “Operating 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 or in preparing the Company for registration of and subsequently offering and distributing its Shares to the
public, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance
granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by the Company; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of transfer agents,
registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees. 
 “Origination Fees” means the fee payable to the Advisor pursuant to Section 8.02 plus all other fees and commissions, excluding
Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Loan by the Company. 
 “Partnership” means KBS Limited Partnership II, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company. 
 “Permitted Investments” means all investments (other than Properties and Loans) in which the Company may acquire an interest, either directly
or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Articles of Incorporation, Bylaws and the investment objectives and policies adopted by the Board from time to time, other than short-term
investments acquired for purposes of cash management. 
 “Person” 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. 
  

 6 

 “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 at one or more of the Properties
property-management services, 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. 
 “Registration Statement” means the registration statement filed by the Company with the SEC on
Form S-11 (Reg. No. 333-146341), as amended from time to time, in connection with the Initial Public Offering. 
 “REIT” means
a “real estate investment trust” under Sections 856 through 860 of the Code. 
 “Sale or Sales” means (i) any
transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of
any Property that is the subject of a ground lease, and including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company
or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the 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, but (ii) not including any transaction or
series of transactions specified in clause (i) (A), (i) (B), or (i) (C) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Properties, Loans or other Permitted Investments
within 180 days thereafter. 
 “SEC” means the United States Securities and Exchange Commission. 
 “Settlement” means (i) the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof
owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, but (ii) not including any transaction or
series of transactions specified in clause (i) (A) or (i) (B) above in which the proceeds of such prepayment, maturity, workout or other settlement are reinvested in one or more Properties, Loans or other Permitted Investments
within 180 days thereafter. 
  

 7 

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

“Stockholders” means the registered holders of the Shares. 
 “Stockholders’ 8% Return” means, as of any date, an aggregate amount equal to an 8% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based
on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 8% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 8% Return is being calculated and shall be
calculated net of (1) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 8%, as such amounts are computed on a daily basis based on a
three hundred sixty-five day year and (2) Distributions of Cash from Sales, Settlements and Financings, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a
cumulative, non-compounded, annual return of 8%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year. 
 “Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if the Shares are Listed, as calculated in Section 8.07. 
 “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 Value of the Company’s Properties at the Termination Date, less amounts of all 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 indebtedness related to such Loans and Permitted Investments, 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’ 8% 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 Settlements 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 

  

 8 

 
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 8.06. 
 “Subscription Processing Fee” has the meaning set forth in Section 8.05. 
 “Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof. 
 “2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of 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. 
 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 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 or private sale of the Company’s securities, other than
services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state. 
  

 9 

 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; 
 (iii)  Perform due diligence on prospective investments and create due diligence reports
summarizing the results of such work; 
 (iv)  Prepare reports regarding 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 

  

 10 

 
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; 
 (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, 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 
  

 11 

 (k)  Consult with the Company’s officers and the Board and provide
assistance with the evaluation and approval of potential asset dispositions, sales and refinancings. 
 (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; 
 (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 monthly dividend process and payments to Stockholders; 
  

 12 

 (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 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). 
  

 13 

 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 Articles of Incorporation. 
 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 shall be vested in the Advisor, which shall have the power
by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings
that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement. 
 4.03
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 Articles of Incorporation or Maryland
General Corporation Law require the prior approval of the Board. The Advisor will deliver to the Board all documents required by it to evaluate a proposed investment (and any related financing). 
 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 

  

 14 

 
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 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 Articles of Incorporation 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. 
  

 15 

 ARTICLE 8 
 FEES 
 8.01 Acquisition Fees.  As compensation for the investigation, selection and acquisition
(by purchase, investment or exchange) of Properties and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment. With respect to the acquisition of a Property to be wholly owned by the Company,
the Acquisition Fee payable to the Advisor shall equal 0.75% of the sum of the amount actually paid or allocated to the purchase, development, construction or improvement of such Property, inclusive of the Acquisition Expenses associated with such
Property, and the amount of any debt attributable to such Property. With respect to other wholly owned Permitted Investments, the Acquisition Fee payable to the Advisor shall equal 0.75% of the cost of such investment, inclusive of Acquisition
Expenses associated with such investment, and the amount of any debt attributable to such Permitted Investment. With respect to the acquisition of a Property or other Permitted Investment through any Joint Venture or any partnership in which the
Company is, directly or indirectly, a co-venturer or partner, the Acquisition Fee payable to the Advisor shall equal 0.75% of the portion of the amount actually paid or allocated to the purchase, development, construction or improvement of the
Property or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property or Permitted Investment, plus the amount of any outstanding debt associated with such Property or Permitted Investment that is attributable
to the Company’s investment in the Joint Venture or partnership. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations contained in the Company’s Articles of
Incorporation. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition, accompanied by a computation of the Acquisition Fee. The Acquisition Fee payable to the Advisor shall be paid at the closing of
the acquisition upon receipt of the invoice by the Company. The Company will not pay an Acquisition Fee to the Advisor with respect to any transaction in which the Company is required to pay an Origination Fee to the Advisor pursuant to the
provisions of Section 8.02 below. 
 8.02 Origination Fees.  As compensation for the investigation, selection, sourcing and
acquisition or origination of Loans, the Company shall pay an Origination Fee to the Advisor for each such acquisition or origination. With respect to the acquisition or origination of a Loan to be wholly owned by the Company, the Origination Fee
payable to the Advisor shall equal 1% of the amount funded by the Company to acquire or originate the Loan, including any Acquisition Expenses related to such investment and any debt used to fund the acquisition or origination of the Loan. With
respect to the acquisition of a Loan through any Joint Venture or any partnership in which the Company is, directly or indirectly, a co-venturer or partner, the Origination Fee payable to the Advisor shall equal 1% of the portion of the amount
actually paid or allocated to acquire or originate the Loan, inclusive of the Acquisition Expenses associated with such Loan, plus the amount of any outstanding debt associated with such Loan that is attributable to the Company’s investment in
the Joint Venture or partnership. The Company will not pay an Origination Fee to the Advisor with respect to any transaction 

  

 16 

 
pursuant to which the Company is required to pay the Advisor an Acquisition Fee. Notwithstanding anything herein to the contrary, the payment of Origination
Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Articles of Incorporation. The Advisor shall submit an invoice to the Company following the closing or closings of each
Loan, accompanied by a computation of the Origination Fee. The Origination Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. 
 8.03 Asset Management Fees.  The Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly
fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 0.75% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments. The Advisor shall submit a monthly invoice to the Company,
accompanied by a computation of the Asset Management Fee for the applicable period. The Asset Management Fee shall be payable on the last day of such month, or the first business day following the last day of such month. 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 period shall be deferred without interest and may be paid in such other fiscal period
as the Advisor shall determine. 
 8.04 Disposition Fees.  If the Advisor or any of its Affiliates provide a substantial amount of
services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1.0% of the Contract Sales Price; provided, however, that no
Disposition Fee shall be payable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a
Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above). The payment of any Disposition Fees by the Company shall be subject to the
limitations contained in the Company’s Articles of Incorporation. Any Disposition Fee payable under this Section 8.04 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such
Disposition Fee) paid to all Persons by the 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.
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 year in the sole
discretion of the Advisor. 
 8.05 Subscription Processing Fee.  The Company shall pay the Advisor as compensation for the services
described in Section 3.04(iv) hereof a monthly fee (the 

  

 17 

 
“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 Subscription Processing Fee for the applicable period. Generally, the Subscription Processing Fee shall be paid on the last day of such month, or
the first business day following the last day of such month. 
 8.06 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 of Operating Cash Flow and of Cash from Sales,
Settlements and Financings such that the owners of all outstanding Shares have received Distributions in an aggregate amount equal to the sum of: 
  

	 	a.	the Stockholders’ 8% Return and 

	 	b.	Invested Capital. 

 When determining whether the above threshold has been
met: 
  

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

  

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

 Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor. 
 8.07 Subordinated Incentive Fee.  Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15.0% of
the amount by which (i) the market value of the outstanding Shares 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’ 8% Return from inception through the date Market Value is
determined. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payment to the Advisor of a
Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor. 
 8.08 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. 
  

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 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, 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 the Conflicts Committee determines are not fair and commercially reasonable to the Company; 
 (ii)  Acquisition Fees, Origination 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, Origination Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Articles of Incorporation; 
 (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; 
 (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 

  

 19 

 
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 no reimbursement shall be made for costs
of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees, Origination Fees or Disposition Fees; 
 (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, the Conflicts
Committee or any other 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 Articles of Incorporation or the Bylaws; and 
 (xv)  All
other out-of-pocket costs incurred by the Advisor in performing its duties hereunder. 
 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 

  

 20 

 
Advisor unless and until the Company has raised $2.5 million in the Initial Public Offering. 
 (iii)  Commencing upon the earlier to occur of four fiscal quarters after (i) the Company’s acquisition of its first
real estate asset or (ii) October 22, 2008 (which is six months after commencement of the Initial 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 not 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 or (ii) any transaction between the Company and
the Advisor or any of its Affiliates. This voting restriction shall survive until such time that the Advisor is 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 

  

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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, the allocation procedure set forth under the caption “Conflicts of Interest – Certain Conflict Resolution Measures – Allocation of Investment Opportunities” in the
Registration Statement shall govern the allocation of the opportunity among the Company and Affiliates of the Advisor. 
 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 

  

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relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks
or other marks necessary to remove any references to 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 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 

  

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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 
 (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 Advisors 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 

  

 24 

 
Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Company were offered
or sold as to indemnification for violations of securities laws. 
 15.02 Limitation on Indemnification.  Notwithstanding the
foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of
the following conditions are met: 
 (i)  The Advisor or its Affiliates have determined, in good faith, that the
course of conduct that caused the loss 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 Advisors or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General
Corporation Law, as 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 Articles of Incorporation, 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 Real Estate Investment Trust II, Inc. 
 620 Newport Center Drive, Suite 1300 
 Newport Beach, California 92660 
  

 25 

 To the Advisor: 
 KBS Capital Advisors LLC 
 620 Newport Center Drive, Suite 1300 
 Newport Beach, California 92660 
 Either
party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01. 
 16.02 Modification.  This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by 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. 
  

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 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. 
 [The remainder of
this page is intentionally left blank. 
 Signature page follows.] 
  

 27 

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

									
	KBS REAL ESTATE INVESTMENT TRUST II, INC.
			
		 	By: 	 	/s/ Charles J. Schreiber, Jr.
		 		 	Charles J. Schreiber, Jr., Chief Executive Officer
	
	KBS CAPITAL ADVISORS LLC
			
		 	By:	 	  PBren Investments, L.P., a Manager
				
		 		 	  By:	 	   PBren Investments, LLC, as general
   partner

					
		 		 		 	  By: 	 	/s/ Peter M. Bren
		 		 		 		 	Peter M. Bren, Manager
			
		 	By:	 	   Schreiber Real Estate Investments, L.P., a
   Manager

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

  

 28

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