Document:

Exhibit

Exhibit 10.59

ADVISORY AGREEMENT

between

KBS STRATEGIC OPPORTUNITY REIT II, INC.

and

KBS CAPITAL ADVISORS LLC

August 12, 2017

TABLE OF CONTENTS

	
				
	 
	 
	Page

	 
	 
	 

	ARTICLE 1 – DEFINITIONS
	3
	

	ARTICLE 2 – APPOINTMENT
	12
	

	ARTICLE 3 – DUTIES OF THE ADVISOR
	12
	

	 
	3.01 Organizational and Offering Services
	13
	

	 
	3.02 Acquisition Services
	13
	

	 
	3.03 Asset Management Services
	14
	

	 
	3.04 Stockholder Services
	16
	

	 
	3.05 Other Services
	17
	

	ARTICLE 4 – AUTHORITY OF ADVISOR
	17
	

	 
	4.01 General
	17
	

	 
	4.02 Powers of the Advisor
	17
	

	 
	4.03 Approval by the Board
	17
	

	 
	4.04 Modification or Revocation of Authority of Advisor
	17
	

	ARTICLE 5 – BANK ACCOUNTS
	18
	

	ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS
	18
	

	ARTICLE 7 – LIMITATION ON ACTIVITIES
	18
	

	ARTICLE 8 – FEES
	19
	

	 
	8.01 Acquisition Fees
	19
	

	 
	8.02 Asset Management Fees
	20
	

	 
	8.03 Disposition Fees
	20
	

	 
	8.04 Subscription Processing Fee
	21
	

	 
	8.05 Subordinated Share of Cash Flows
	21
	

	 
	8.06 Subordinated Incentive Fee
	22
	

	 
	8.07 Changes to Fee Structure
	22
	

	ARTICLE 9 – EXPENSES
	23
	

	 
	9.01 General
	23
	

	 
	9.02 Timing of and Limitations on Reimbursements
	25
	

	ARTICLE 10 – VOTING AGREEMENT
	25
	

	ARTICLE 11 – RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR
	26
	

	 
	11.01 Relationship
	26
	

	 
	11.02 Time Commitment
	26
	

	 
	11.03 Investment Opportunities and Allocation
	26
	

	ARTICLE 12 – THE KBS NAME
	27
	

	ARTICLE 13 – TERM AND TERMINATION OF THE AGREEMENT
	28
	

	 
	13.01 Term
	28
	

	 
	13.02 Termination by Either Party
	28
	

	 
	13.03 Payments on Termination and Survival of Certain Rights and Obligations
	28
	

	ARTICLE 14 – ASSIGNMENT
	29
	

	ARTICLE 15 – INDEMNIFICATION AND LIMITATION OF LIABILITY
	29
	

	 
	15.01 Indemnification
	29
	

	 
	15.02 Limitation on Indemnification
	29
	

i

	
				
	 
	15.03 Limitation on Payment of Expenses
	30
	

	ARTICLE 16 – MISCELLANEOUS
	30
	

	 
	16.01 Notices
	30
	

	 
	16.02 Modification
	31
	

	 
	16.03 Severability
	31
	

	 
	16.04 Construction
	31
	

	 
	16.05 Entire Agreement
	31
	

	 
	16.06 Waiver
	31
	

	 
	16.07 Gender
	31
	

	 
	16.08 Titles Not to Affect Interpretation
	31
	

	 
	16.09 Counterparts
	31
	

ii

ADVISORY AGREEMENT
This Advisory Agreement, dated as of August 12, 2017 (the “Agreement”), is between KBS Strategic Opportunity REIT II, Inc., a Maryland corporation (the “Company”), and KBS Capital Advisors LLC, a Delaware limited liability company (the “Advisor”).
W I T N E S S E T H
WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree to amend and restate the Advisory Agreement as follows:
ARTICLE 1
DEFINITIONS
The following defined terms used in this Agreement shall have the meanings specified below:
“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any property, loan or other potential investment. 
“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property, Loan or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.
“Advisor” means (i) KBS Capital Advisors LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.

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“Affiliate” or “Affiliated” An Affiliate of another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity. 
“Appraised Value” means the value according to an appraisal made by an Independent Appraiser. 
“Asset Management Fee” shall have the meaning set forth in Section 8.02. 
“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.
“Average Issue Price” means the weighted average price at which shares were purchased in the primary portion of an Offering which shall be calculated as of the end of the month preceding the date upon which the calculation is being made.
“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.
“Bylaws” means the bylaws of the Company, as amended from time to time.
“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith). 
“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout or other settlement of any Loan or Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings.

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“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.
“Charter” means the articles of incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
“Company” means KBS Strategic Opportunity REIT II, Inc., a corporation organized under the laws of the State of Maryland.
“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.
“Conflicts Committee” shall have the meaning set forth in the Company’s Charter.
“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property. 
“Contract Sales Price” means the purchase price to be paid in connection with the sale of a Property, Loan or other Permitted Investment less any concessions agreed to in connection with the sale which may include but are not limited to credits for future building or tenant improvements, credits for future free rent given to tenants, credits for future lease up assumptions, or other future rental concessions; or, in the case of a discounted payoff of a Loan, the total funds received by the Company in connection with the payoff, less any expenses related thereto.
“Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments held, directly or indirectly, by the Company or the Partnership, calculated each month on an ongoing basis, and calculated as follows for each investment: the lesser of (i) the amount actually paid or allocated to acquire or fund the Loan or Permitted Investment, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), and (ii) the outstanding principal amount of such Loan or Permitted Investment, including fees and expenses related to the acquisition or funding of such investment (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), as of the time of calculation. With respect to any Loan or Permitted Investment held by the Company or the Partnership through a Joint Venture or partnership of which it is, directly or indirectly, a co-venturer or partner, such amount shall be the Company’s proportionate share thereof. The Cost of Loans and other Permitted Investments is computed without regard to whether any portion of such cost is funded using debt financing secured by, or attributable to, such investments.

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“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to the purchase of Properties, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or a partner, the portion of the amount actually paid or allocated to the purchase of Properties, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget, that is attributable to the Company’s investment in the Joint Venture or partnership. The Cost of Real Estate Investments is computed without regard to whether any portion of such cost is funded using debt financing secured by, or attributable to, the Properties.
“Dealer Manager” means (i) KBS Capital Markets Group LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.
“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.
“Director” means a member of the Board of Directors of the Company.
“Disposition Fee” shall have the meaning set forth in Section 8.03. 
“Distributions” means any distributions (which shall not include stock dividends) 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 Investment Amount” means the amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by the total number of shares repurchased by the Company (excluding the number of shares issued as stock dividends and subsequently repurchased by the Company) multiplied by the Average Issue Price.
“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. 

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“Joint Venture” means any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments.
“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter. 
“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, and including, without limitation, mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.
“Market Value” shall have the meaning set forth in Section 8.06.
“Merger” means any business combination, merger, reorganization or share exchange involving the Company or its subsidiaries into or with another corporation or other legal person (the “Acquiror”) and as a result of such transaction, less than 51% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by those who were Stockholders immediately prior to such transaction (other than the Acquiror or its Affiliates if they owned Shares immediately prior to such transaction). 
“Merger Consideration Amount” means (i) in the case of a Merger in which the consideration consists solely of cash, the total consideration to be received by holders of Shares outstanding immediately prior to the closing of the Merger, (ii) in the case of a Merger in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the Merger and (y) the market value of such securities, 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 consecutive days during which such securities are traded, with such 30-day period ending on the trading day prior to the closing date of the Merger, (iii) in the case of a Merger in which the consideration consist of securities that are not traded on a national securities exchange, the aggregate the fair market value (as of the most recent practicable date) of the securities to be received by the Stockholders as estimated by an independent expert chosen by the Board of Directors, and (iv) in the case of a Merger in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable.
“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof. 
“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets. 
“Offering” means a Private or Public Offering.

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“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 the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.
“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. 
“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner.
“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with 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.
“Partnership” means KBS Strategic Opportunity Limited Partnership II, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.

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

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or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or partnership in which it is, directly or indirectly, a co-venturer or partner; or (C) any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or any partnership or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.
“SEC” means the United States Securities and Exchange Commission.
“Settlement” means the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.
“Shares” means the shares of common stock of the Company, par value $.01 per share. 
“Stockholders” means the registered holders of the Shares. 
“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Gross Investment Amount (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 7% Return, Gross Investment Amount shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect shares repurchased by the Company (excluding shares issued as stock dividends and subsequently repurchased by the Company), and shall be calculated net of (1) Distributions of Cash from Sales, Settlements and Financings, and (2) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 7%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year. 
 “Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances, as calculated in Section 8.06.
“Subordinated Performance Fee Due Upon Termination” means a fee payable in the form of a non-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 third-party indebtedness secured by the Company’s Properties, plus the fair market value of all other Loans and Permitted Investments of the Company at the Termination Date, less amounts of third-party indebtedness related to such Loans and Permitted Investments, plus the fair market value of the Company’s other assets and liabilities, plus total Distributions through the Termination Date exceeds (b) the Gross Investment Amount plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 7% Return from inception through the Termination Date. The Company shall repay the Performance Fee Note 

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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, then the Performance Fee Note shall be paid in part from the Cash from Sales and Settlement from the first Sale or Settlement, and in part from the Cash from Sales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full. 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 into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee into Shares at a price per Share equal to the fair market value for the Shares as determined by the Board of Directors based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Loans and Permitted Investments of the Company on the date of election.
“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.05.
“Subscription Processing Fee” has the meaning set forth in Section 8.04. 
“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.
“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.
ARTICLE 2
APPOINTMENT
The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
ARTICLE 3
DUTIES OF THE ADVISOR
The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

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3.01 Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.
3.02 Acquisition Services.
(i) Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;
(ii) Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments;
(iii) Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;
(iv) With respect to prospective investments presented to the Board, prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;
(v) Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; 
(vi) Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and
(vii) Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments.
3.03 Asset Management Services.
(i) Real Estate and Related Services:
(a) Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, 

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custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;
(b) Negotiate and service the Company’s debt facilities and other financings;
(c) Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;
(d) Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;
(e) Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis;
(f) Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;
(g) Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;
(h) Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;
(i) Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget; 
(j) Coordinate and manage relationships between the Company and any co-venturers or partners; and
(k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented to the Board.

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(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 dividend process and payments to Stockholders;
(k) Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;
(l) Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002;

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(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).
ARTICLE 4
AUTHORITY OF ADVISOR
4.01 General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.
4.02 Powers of the Advisor. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power 

15

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 Charter or Maryland General Corporation Law require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.
4.04 Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.
ARTICLE 5
BANK ACCOUNTS
The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.
ARTICLE 6
RECORDS AND FINANCIAL STATEMENTS
The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor 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.

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ARTICLE 7
LIMITATION ON ACTIVITIES
Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given. 
ARTICLE 8
FEES
8.01 Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment (whether an acquisition or origination). With respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor shall equal 2.6% of the sum of the amount actually paid or allocated to fund (including future funding of Loans) the acquisition or origination of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in such Property, Loan or other Permitted Investment, plus significant (as determined in the sole discretion of the Advisor) capital improvement costs budgeted as of the date of acquisition related to the development, construction or improvement of such Property, Loan or other Permitted Investment. With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, the Acquisition Fee payable to the Advisor shall equal 2.6% of the portion of the amount actually paid or allocated to fund (including future funding of Loans) the acquisition or origination of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in such Property, Loan or other Permitted Investment, plus significant (as determined in the sole discretion of the Advisor) capital improvement costs budgeted at the time of acquisition related to the development, construction or improvement of such Property, Loan or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, 

17

the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. Notwithstanding the foregoing, Acquisition Fees calculated based on capital improvement costs budgeted as of the date of acquisition shall be paid at the time funds are disbursed pursuant to a final approved budget upon receipt of an invoice by the Company. However, the Acquisition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Acquisition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
Notwithstanding the foregoing, as compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments with proceeds raised in the Public Offering on or prior to February 16, 2016, the Company shall pay an Acquisition Fee to the Advisor in a manner calculated as described above in the amount of 1.5% instead of 2.6%.
8.02 Asset Management Fees.
(i) Except as provided in Section 8.02(ii) hereof, the Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to the lesser of one-twelfth of (a) 1.0% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments; and (b) 2.0% of the sum of (A) the Cost of Real Estate Investments less the amount of any debt financing secured by, or attributable to, the Properties as of the date of computation hereunder and (B) the Cost of Loans and other Permitted Investments less the amount of any debt financing secured by, or attributable to, such investments as of the date of computation hereunder. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Asset Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
(ii) Notwithstanding anything contained in Section 8.02(i) to the contrary, a Property, Loan or other Permitted Investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances may either be excluded from the calculation of the Cost of Real Estate Investments or the Cost of Loans and other Permitted Investments or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the Conflicts Committee, and the resulting change in the Asset Management Fee with respect to such an investment will be applicable upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a Person other than the Company, its direct or indirect wholly owned subsidiary or a Joint Venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies 

18

related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment. 
8.03 Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”). For a Sale with a Contract Sales Price less than or equal to $50 million, the Disposition Fee will equal 1.5% of the Contract Sales Price. For a Sale with a Contract Sales Price greater than $50 million, the Disposition Fee will equal the sum of $750,000 (which amount is 1.5% of $50 million), plus 1.0% of the amount of the Contract Sales Price in excess of $50 million. Provided, however, that if in connection with such Sales commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties. The payment of any Disposition Fee by the Company shall be subject to the limitations contained in the Company’s Charter. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property, Loan or other Permitted Investment. Substantial assistance in connection with the Sale of a Property includes the Advisor’s preparation of an investment package for the Property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the Advisor in connection with a Sale. The Advisor shall submit an invoice to the Company on or about the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Disposition Fee may or may not be taken, in whole or in part, as to any period in the sole discretion of the Advisor. All or any portion of the Disposition Fees not taken as to any period shall be deferred without interest and may be paid in such other period as the Advisor shall determine.
8.04 Subscription Processing Fee. The Company shall pay the Advisor as compensation for the services described in Section 3.04(iv) hereof a monthly fee (the “Subscription Processing Fee”) in an amount equal to $35 per subscription agreement for Shares received and processed by the Advisor. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subscription Processing Fee for the applicable period. Generally, the Subscription Processing Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Subscription Processing Fee may or may not be taken, in whole or in part, as to any period in the sole discretion of the Advisor. All or any portion of the Subscription Processing Fees not taken as to any period shall be deferred without interest and may be paid in such other period as the Advisor shall determine. The Subscription Processing Fee is an Organization and Offering Expense of the Company and is subject to the limitations on Organization and Offering Expenses in Article 9 hereof.

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8.05 Subordinated Share of Cash Flows. The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the stockholders have received Distributions in an aggregate amount equal to the sum of:
a.    the Stockholders’ 7% Return and
b.    Gross Investment Amount.
Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor. 
If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. For the avoidance of doubt, to the extent the payment of the Subordinated Share of Cash Flows is funded other than from Cash From Sales and Settlements, such amounts shall be included in Operating Expenses and subject to the 2%/25% Guidelines.
8.06 Subordinated Incentive Fee. 
(i)     Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15% of the amount by which (i) the market value of the outstanding Shares of the Company, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders from the Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) Gross Investment Amount and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 7% Return from inception through the date Market Value is determined. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor. 
(ii)    Upon a Merger, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15.0% of the amount by which (i) the Merger Consideration Amount, plus the total of all Distributions paid to Stockholders from the Company’s inception until the date of the closing of the Merger, plus all Distributions declared prior to the Merger but to be paid after the Merger, exceeds (ii) the sum of (A) Gross Investment Amount and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 7% Return from inception through the date of the closing of the Merger. The Company shall have the option to pay such fee in the form of cash or Shares or any combination thereof. In the event the Subordinated Incentive Fee is paid to the Advisor in connection with a Merger, no other performance fee will be paid to the Advisor.
8.07 Changes to Fee Structure. In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity. 

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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) (a)    Organization and Offering Expenses related to the Private Offering that commenced July 3, 2013 without limitation; (b) Organization and Offering Expenses related to the Public Offering that commenced August 12, 2014; provided that no reimbursement shall be made for wholesaling compensation expense; provided further 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 in the Public Offering to exceed 15% of the Gross Proceeds raised in the Public Offering as of the date of the reimbursement and provided further that within 60 days after the end of the month in which the primary portion of the Public Offering terminates, (a) the Advisor and its Affiliates shall reimburse the Company to the extent that Organization and Offering expenses, but excluding selling commissions, the dealer manager fee and the stockholder servicing fee, borne by the Company in connection with the Public Offering exceed 1% of Gross Proceeds raised in the primary portion of the completed Public Offering ; 
(ii) Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;
(iii) The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;
(iv) Interest and other costs for borrowed money, including discounts, points and other similar fees;
(v) Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;
(vi) Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors;
(vii) Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments;

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(viii) All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;
(ix) Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that, (a) other than reimbursement of travel and communication expenses, no reimbursement shall be made for the cost of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees or Disposition Fees and (b) no reimbursement shall be made for the salaries and benefits the Advisor or its Affiliates may pay to the Company’s executive officers;
(x) Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;
(xi) Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board;
(xii) Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances; 
(xiii) Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;
(xiv) Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and
(xv) All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.
9.02 Timing of and Additional Limitations on Reimbursements.
(i) Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter. 
(ii) Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article 9 shall not become reimbursable to the Advisor unless and until the Company has raised $2.0 million in the Initial Public Offering.
(iii) After the Company commences a Public Offering, upon the earlier to occur of four fiscal quarters after (i) the Company’s making of its first investment or (ii) six months 

22

after commencement of the Public Offering, the following limitation on Operating Expenses shall apply: The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does 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, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company. 
ARTICLE 11
RELATIONSHIP OF ADVISOR AND COMPANY;
OTHER ACTIVITIES OF THE ADVISOR
11.01 Relationship. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing 

23

or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.
11.02 Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.
11.03 Investment Opportunities and Allocation. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company. In the event an investment opportunity is located that may be suitable for the Company and other programs sponsored by the Advisor or any of its Affiliates, including KBS Realty Advisors, the Advisor, in its sole discretion, will have to determine the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. This determination must be made in a manner that is fair without favoring any other program or investor. The factors that the Advisor shall consider when determining the program or investor for which an investment opportunity would be the most suitable are the following:
		
	•
	the investment objectives and criteria of each program or investor;

		
	•
	the cash requirements of each program or investor;

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

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

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

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

		
	•
	the size of the investment; and

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

If a subsequent event or development, such as a delay in the closing of a property or investment or a delay in the construction of a property, causes any investment, in the opinion of the Advisor, to be more appropriate for another program or investor, they may offer the investment to 

24

another program or investor. It shall be the duty of the Board to ensure that the allocation method described above is applied fairly to the Company.
ARTICLE 12
THE KBS NAME
The Advisor and its Affiliates have a proprietary interest in the name “KBS.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “KBS” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “KBS” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “KBS” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “KBS.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service 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 a term of one year from August 12, 2017 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 

25

Subordinated Performance Fee Due Upon Termination will be paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee.
(ii) The Advisor shall promptly upon termination:
(a) pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;
(b) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;
(c) deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and
(d) cooperate with the Company to provide an orderly transition of advisory functions.
ARTICLE 14
ASSIGNMENT
This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.
ARTICLE 15
INDEMNIFICATION AND LIMITATION OF LIABILITY
15.01 Indemnification. Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.
Notwithstanding the foregoing, the Company shall not indemnify the Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on 

26

the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.
15.02 Limitation on Indemnification. Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:
(i)    The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.
(ii)    The Advisor or its Affiliates were acting on behalf of or performing services for the Company. 
(iii)    Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates. 
15.03 Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.
ARTICLE 16
MISCELLANEOUS
16.01 Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
To the Company or the Board:
KBS Strategic Opportunity REIT II, Inc. 
800 Newport Center Drive, Suite 700
Newport Beach, California 92660

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To the Advisor:
KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.
16.02 Modification. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.
16.03 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
16.04 Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.
16.05 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
16.06 Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.07 Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
16.08 Titles Not to Affect Interpretation. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
16.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, 

28

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.]

    

29

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

	
			
	 
	 
	

	 
	 
	KBS STRATEGIC OPPORTUNITY REIT II, INC.

 By:    /s/ Keith D. Hall                           
 Keith D. Hall, Chief Executive Officer

KBS CAPITAL ADVISORS LLC

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

By:  GKP Holding LLC, a Manager

By:    /s/ Peter McMillan III    
Peter McMillan III, Manager
            
By:    /s/ Keith D. Hall             
Keith D. Hall, Manager

 

	 
	 
	 

30li3_ex1074.htm

Exhibit 10.74 

 

INVESTMENT AGREEMENT

 

MINERA SALAR BLANCO S.A.;

 

MINERA SALAR BLANCO SpA;

 

MINERA LI ENERGY SPA;

 

LITHIUM POWER INVERSIONES CHILE SpA;

 

AND

 

LITHIUM POWER INTERNATIONAL LIMITED

 

September 12, 2016

 

INVESTMENT AGREEMENT

 

The following Investment Agreement (the "Agreement") is made and entered into this September 12th, 2016, by and among:

 

(i)                 MINERA SALAR BLANCO S.A. ("Salar Blanco") a stock corporation incorporated and in process of formalization under the laws of the Republic of Chile, Tax Payer Number in process, domiciled at Rosario Norte N° 100, of. 403, Las Condes Santiago;

 

(ii)               MINERA SALAR BLANCO SpA (''MSB'') a stock company (sociedad por acciones) organized and existing under the laws of the Republic of Chile, Tax Payer Number 76,319,337-3, domiciled at Rosario Norte N° 100, of. 403, Las Condes Santiago;

 

(iii)             MINERA LI ENERGY SpA (''MLI'') a stock company (sociedad por acciones) organized and existing under the laws of the Republic of Chile, Tax Payer Number 76,102,972-K, domiciled at; Marchant Pereira N" 150, of. 803, Providencia, Santiago;

 

(iv)             LITHIUM POWER INVERSIONES CHILE SpA ("LPI") a stock company (sociedad por acciones) organized and existing under the laws of the Republic of Chile, Tax Payer Number in process, domiciled at El Golf 40, 20th Floor, Las Condes, Santiago; and

 

(v)               LITHIUM POWER INTERNATIONAL LIMITED ("LITHIUM") a company organized and existing under the laws of Australia, Tax Payer Number in process, domiciled at level 7/151 Macquarie Street, Sidney NSW 2000 - Australia.

 

(Safar Blanco, MSB, MLI, LPI AND LITHIUM, hereinafter jointly the "Parties")

 

1.                  RECITALS.

 

WHEREAS, MSB is a company organized by Chilean investors with broad experience on a wide range of investments in different industries.

 

WHEREAS, MSB is the owner (controller) of fifty one percent (51%) of MLI, which is organized to develop, invest in and operate mining assets with focus on Lithium and Potash production in Chile, based on is mining properties at the Maricunga Salar.

 

WHEREAS, LPI is a subsidiary of LITHIUM, a company organized by Australian investors which intends to invest in lithium projects in Chile.

 

WHEREAS, MSB and MLI are in the process of formalizing the incorporation of Salar Blanco under the laws of Chile. The shareholders of Salar Blanco will be:

 

(i)                   MLI, with 537,545,908 shares representing seventy two point eleven percent (72.11%) of the total Shares issued by Salar Blanco; and

 

(ii)                 MSB, with 207,906,745 shares representing twenty seven point eighty nine percent (27.89%) of the total Shares issued by Salar Blanco.

 

	
 

	
2

	
	

 

WHEREAS, MSB and LITHIUM executed on July 14th, 2016, a Term Sheet (the "Term Sheet”), as amended by letter dated August 30th, 2016, setting the general terms and conditions for their joint exploration and development of the Maricunga Assets (as defined below).

 

WHEREAS, as result of the transactions described herein and the execution of the Transaction's Documents, as such terms are defined below, MSB, MLI and LPI will be the sole shareholders of Salar Blanco, whereby LPI will hold fifty percent (50%), MLI will hold thirty six point five percent (36.05%) and MSB will hold thirteen point ninety five percent (13.95%) of the total Shares issued by Salar Blanco.

 

NOW, THEREFORE, the Parties agree as follows:

 

2.                      DEFINITIONS.

 

The following terms have the meanings indicated below, wherever they appear in this Agreement or in the Schedules to this Agreement, except as the context otherwise requires:

 

"Affiliate" means, with respect to any Person, (a) any Person who directly, or indirectly through one or more intermediaries, Controls or is controlled by, or is under common control with, such Person; (b) any Person who is a partner, director or executive officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above.

 

"Agreement" means this Agreement.

 

"Business" means developing, financing, implementing, owning, exploiting and operating lithium and potash assets in Chile, including trading of lithium and potash.

 

"Business Day" means any other than a day on which commercial banks in Santiago, Chile are authorized or required by law to close.

 

"Capital Increase" has the meaning set out in Section 3.

 

"Claim Notice" has the meaning set forth in Section 7.5.1.

 

"Condition Precedent" has the meaning set forth in Section 5.

 

"Contract" means any contract (written or oral), undertaking, commitment, instrument, arrangement, plan or other legally binding agreement or understanding, and all amendments, modifications or supplements thereof.

 

"Control" of a Person means the power, by itself or by means of a formal and binding agreement to act jointly with other third parties, directly or through other individuals or legal entities, (i) to vote or direct the voting of more than fifty percent (50%) of the outstanding voting shares of such Person, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract, ownership of shares (including fifty percent (50%) or less of the outstanding shares of such Person) or otherwise, In partnerships, limited liability companies and joint stock companies, the managing partner shall be deemed as the controller

 

	
 

	
3

	
	

 

"Dollars" and ''USD$'' means the lawful currency of the United States of America.

 

"Environmental Law" means any legal requirement that requires or relates to (i) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the environment; (ii) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the environment; (iii) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (iv) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the environment when used or disposed of; (v) protecting resources, species, or ecological amenities; (vi) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (vii) cleaning up pollutants that have been released, preventing the threat of release. or paying the costs of such clean up or prevention; or (viii) making responsible parties pay private parties, or groups of them, for damages done to their health or the environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

 

"Fifth Shares Subscription Agreement" has the meaning given to it in Section 5.1.5.

 

"First Shares Subscription Agreement" has the meaning given to it in Section 5.1.1.

 

"Fourth Shares Subscription Agreement" has the meaning given to it in Section 5.1.4.

 

''Governmental Entity" means any national, regional, provincial or municipal governmental entity or any court, tribunal or regulatory or administrative agency, or any political or other subdivision or department thereof.

 

"Indemnified Party" means a Person entitled to indemnification pursuant to Section 7 of this Agreement.

 

''Indemnifying Party" means a Party obligated to indemnify an Indemnified Party pursuant to Section 7 of this Agreement.

 

"Law'' means any national or foreign law, statute, code, ordinance, rule, regulation or other requirement enacted, promulgated, issued or entered by any Governmental Entity.

 

"Legal Action" means any action, claim, demand, suit, proceeding, citation, summons, subpoena, inquiry or investigation of any nature, civic, criminal, administrative, regulatory or otherwise, in law or in equity by or before any Governmental Entity.

 

"Liens" means any liens, security interests, encumbrances, pledges, mortgages, attachments ("embargos"), easements (i.e. rights of way) and charges.

 

''LITHIUM" means LITHIUM POWER INTERNATIONAL LIMITED.

 

	
 

	
4

	
	

 

"LITHIUM Shareholders Letter" means the letter dated the date hereof from [•] and [•], shareholders of LITHIUM holding more than fifty percent (50%) of the issued and outstanding shares of LITHIUM with right to vote, and attached hereto as Schedule[•).

 

"Litigation" means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal or administrative) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator.

 

"Loan Agreement" means the loan agreement executed between Salar Blanco, MSB, LPI and LITHIUM on this date, a copy of which attached hereto as Schedule A.

 

"LPI'' means LITHIUM POWER INVERSIONES CHILE SpA.

 

''LPI Shares" means 16,000,000 shares In LITHIUM at the date of subscription of such shares by MSB, provided, however, that the number of LPI Shares shall be adjusted if prior to the issue to MSB LITHIUM issues any shares without payment (whether as a consequence of a stock, spilt, capitalization of profits or otherwise).

 

"LPI Shares Subscription Price" has the meaning set forth in Section 4.2.2 (i)

 

"Maricunga Assets" means jointly the MSB Assets, the MLI Assets and the Optioned Mining Concessions.

 

"Material Adverse Effect" has the meaning set out In Section 6.1.10 of this Agreement.

 

"Material Contract" means the contracts executed by MSB or MLI in favor of the Project and assigned to Salar Blanco on or prior to the date hereof and listed in Schedule 6.1.16 attached hereto.

 

"MSB'' means Minera Salar Blanco SpA.

 

"MSB Assets" means all assets listed in Schedule B.

 

"MLI" means Minera Li Energy SpA.

 

"MLI Assets" means all assets listed in Schedule C.

 

"Notice Period" shall have the meaning given to it In Section 7-5.1.

 

"Option Agreement'' or "Option" means the mining option agreement over the Optioned Mining Concessions, executed between Sociedad de lnversiones Mercedes Limitada and MSB by means of public deed dated December 30, 2014 granted before the Notary Public of Mr. Patricio Raby Benavente and duly registered before the Mining Custodian of Copiapo on page 1, number 1 of the Mortgages and Encumbrances Registry, corresponding to year 2015.

 

"Option Agreement Assignment" means the agreement between MSB and LPI pursuant to which MSB will assign the Option to LPI at a price equivalent to the market value of the LPI Shares at the time of executing such agreement; in terms substantially similar to the draft attached hereto as Schedule 4.2.

 

	
 

	
5

	
	

 

"Option Agreement Assignment Price" shall have the meaning given to it in Section 4.2.1.

 

"Option Exercise Deed" means the draft attached hereto as Schedule 4.2.2(ii).

 

"Optioned Mining Concessions" means the Salamina, Despreciada and San Francisco mining properties, which are individualized in Schedule D.

 

"Ordinary Course of Business" means actions taken by a Person which are (i) consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; (ii) not required to be authorized by the board of directors or shareholders' meeting of such Person; and (iii) similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors or shareholders' meeting, In the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business a such Person,

 

"Owners of the Optioned Mining Concessions'' means Sociedad de Inversiones Mercedes Limitada.

 

"Parties" has the meaning assigned to such term in the recitals.

 

"Permits" mean written permits, licenses, franchises, registrations, variants and approvals obtained from any Governmental Entity, but do not include any notices of self-certifications required to be filed with any Governmental Entity.

 

"Person" means any individual or legal entity, including an association, corporation, partnership, trust, unincorporated association, sole proprietorship, joint venture, limited liability partnership, limited liability company, stock company, fund, estate or any other entity.

 

"Preliminary Resource Report" means the report prepared by Flo Solution and sign by Mr. Frits Reidel showing a preliminary estimation of the resources contained at the Cocina, San Francisco, Salamina, and Despreciada mining Concessions after the drilling campaign has been finished,

 

"Project" means developing, financing, implementing, owning, exploiting and operating lithium and potash assets in Chile's III region, at the Maricunga Salar, including trading of its lithium and potash production, and engage in such business associated therewith as determined by the Board of Directors from time to time.

 

"Representatives" mean as to any Person, its officers, directors and employees.

 

"Salar Blanco's New Shares", means the amount of Shares to be issued pursuant to the Capital Increase to be agreed by MSB and MLI in terms substantially similar to the draft attached hereto as Schedule 3.3.

 

"Salar Blanco's Special Shareholders Meeting" means the extraordinary shareholders' meeting to be held by MLI and MSB armed at Increasing Salar Blanco's capital, in terms substantially similar to the draft attached hereto as Schedule 3.3.

 

	
 

	
6

	
	

 

"Second Shares Subscription Agreement" has the meaning set forth in Section 5.1.2.

 

"Shareholders Agreement" means the agreement that shall be executed among MSB, MLI and LPI concurrently with the execution of the Shares Subscription Agreements, substantially in the form attached hereto as Schedule 5.2.

 

"Shares" means each and all of the shares in the capital stock of Salar Blanco, whether authorized, issued, subscribed or paid for, in whole or in part.

 

“Shares Subscription Agreements” means the First Shares Subscription Agreement, the Second Shares Subscription Agreement, the Third Shares Subscription Agreement, the Fourth Shares Subscription Agreement, and the Fifth Shares Subscription Agreement, collectively.

 

"Sociedades Legales Mineras Litio" mean (i) Sociedad Legal Minera Litio Uno de la Sierra Hoyada de Maricunga; (ii) Sociedad Legal Minera Litio Dos de la Sierra Hoyada de Maricunga; (iii) Sociedad Legal Minera Litio Tres de la Sierra Hoyada de Maricunga; (iv) Sociedad Legal Minera Litio Cuatro de la Sierra Hoyada de Maricunga; (v) Sociedad Legal Minera Litio Cinco de la Sierra Hoyada de Maricunga; and (vi) Sociedad Legal Minera Litio Seis de la Sierra Hoyada de Maricunga,

 

"Sociedades Legates Mineras Litio Mining Concessions'' means the mining concessions listed in Schedule E

 

"Subsidiary" means with respect to any Person, any entity:

 

(i)                   over fifty percent (50%) of whose capital is owned, directly or indirectly, by that Person;

 

(ii)                 for which that Person may nominate or appoint a majority of the members of the board of directors or such other body performing similar functions: or

 

(iii)                which is otherwise effectively Controlled by that Person:

 

"Tax" or "Taxes" means all taxes, levies, charges or fees, including income, corporation, advance corporation, gross receipts, transfer; excise, property, sales, use, value-added, license, payroll, pay-as-you-earn, withholding, social security and franchise or other governmental taxes or charges, imposed by any Governmental Entity, as well as any interest, penalties or additions to tax attributable to any such taxes.

 

"Tax Authority" means any national, regional, local, or municipal or other governmental body or authority of any kind in Chile with the power to impose any Tax.

 

"Third Shares Subscription Agreement" has the meaning set forth in Section 5.1.3.

 

"Transaction Documents" mean the Loan Agreement, the LITHIUM Shareholders Letter and the transaction documents mentioned in Sections 3, 4 and 5 below, and any agreement, document, instrument or certificate to be entered into or executed in connection with this Agreement and the transactions contemplated hereby.

 

	
 

	
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3.                     TRANSACTION.

 

As of this date, the Parties have agreed to the execution of the following documents and agreements:

 

3.1                                        Completion of Salar Blanco Incorporation.

 

MSB and MLI undertake to complete the process of incorporation of Salar Blanco, including the proper and timely registration at the Commerce Registry of the Santiago Real Estate Registrar, the publication in the Official Gazette, the obtaining of the relevant Tax ID number and commencement of commercial activities with the Chilean Tax Authority.

 

3.2                                        Judicial Seizure Release and Assets Registration.

 

3.2.1                           MSB undertakes to own and possess complete and legal title as beneficiary of an option over the Optioned Mining Concessions, which shall be duly registered at the Register of the relevant Mining Custodian. MSB and MLI undertake to completely, fully and legally release the judicial seizure ordered by the 30◦ Civil Court of Santiago on the trial C-31.793-2009 "HUMLID con SERRANO and OTHER", currently affecting the Sociedades Mineras Utio's shares individualized therein. Regarding the Framework Agreement for Development of Mining Project and Purchase of Shares of Sociedad Legal Minera Litio Uno de la Sierra Hoyada de Maricunga y Otras executed between MLI, Jorge Rodlon Barrozo and Others, MLI undertakes to sign the cancellation and termination deed in relation to such agreement within 18 months as from this date.

 

3.2.2                            MSB and MLI undertake to, immediately following the incorporation of Salar Blanco, complete the due registration in Salar Blanco's name, before the relevant Registrars, of the MLI Assets, the MSB Assets and the Sociedades Legales Mineras Litio Mining Concessions to be contributed to Salar Blanco in the act of incorporation of said company,

 

3.3                                       Capita Increase - Salar Blanco' Special Shareholders Meeting.

 

MSB and MLI, as Salar Blanco's shareholders, undertake to summon and hold a special shareholders meeting of Salar B1anco (the “Salar Blanco's Special Shareholders Meeting”) whereby it shall be resolved:

 

(i)                 to increase the capital of Salar Blanco to the amount of USD$ [•] by means of issuing [•] shares (the "Salar Blanco's New Shares"), representing fifty percent (50%) of Salar Blanco's total shares (the “capital Increase''); and

 

(ii)               MSB and MLI shall waive their preemptive right to subscribe for Salar Blanco's New Shares for the benefit of LPI.

 

All of the foregoing in terms substantially similar to those in Schedule 3.3.

 

	
 

	
8

	
	

 

The Capital Increase shall be properly and timely registered at the Commerce Registry of the Santiago Real Estate Registrar and published in the Official Gazzette.

 

Undertakings under sections 3.1, 3.2 and 3.3 shall be fulfilled no later than September 30, 2016.

 

4.                     EXECUTION DATE

 

On or before October 15th, 2016 the following actions shall occur:

 

4.1                           LPI's Notice.

 

LPI shall notify MSB whether LITHIUM has been able to raise the necessary funds to proceed with the Transaction as detailed in this Agreement.

 

In the negative case, this Agreement shall immediately terminate and no Party will be liable to any other Party as a result of the termination and the Parties will not be entitled to any indemnification whatsoever due to such termination.

 

On the contrary, if the notice is affirmative, section 4.2 and following will be applicable. Failure by LPI to deliver the notice referred to in this section shall be deeming as a notification by LPI that it has raised the funds and is proceeding with the transactions set forth herein.

In addition to the foregoing LITHIUM shall cause its shareholders to hold a general meeting and approve the issuance and subscription by MSB of the LPI Shares on or before November 30, 2016. The subscription price shall be the amount equivalent to the market value of the LPI shares at the time of executing the Option Agreement Assignment (the "LPI Shares Subscription Price"), which shall be payable on the later of (a) satisfaction of the Condition Precedent; and (b) five (5) Business Days after LITHIUM's general shareholders meeting which approves the Issuance of the LPI Shares and the transactions set forth herein. If for any reason LITHIUM and LPI do not allow MSB to subscribe the LPI Shares or do not deliver the LPI Shares on or before the date set forth herein, Section 5.1.6 shall apply.

 

4.2                              Option Agreement Assignment and Exercise

 

4.2.1                            MSB and LPI shall execute the Option Agreement Assignment; with the consent of the Owners of the Optioned Mining Concessions at a price which is the equivalent of the market value of the LPI Shares at tf1e date of execution of the Option Agreement Assignment (the ''Option Agreement Assignment Price"), no later than October 15, 2016, with the effect that LPI shall become the beneficiary of said option. The Option Agreement Assignment Price shall be payable upon the later of (a) satisfaction of the Condition Precedent; and (b) five (5) Business Days after LITHIUM's general shareholders meeting which approves the issuance of the LPI Shares and the transactions set forth herein.

 

Pursuant to the Option Agreement, LPI shall become the beneficiary of a mining option, in terms of Article 169 of the Chilean Mining Code, to acquire the Optioned Mining Concessions which shall be exercised no later than October 15th, 2016 and the purchase price of the Optioned Mining Concessions shall be USD 5,220,000.

 

The Option Agreement Assignment shall be excited on the third (3rd) Business Day following receipt by MSB of a written notice from LPI at the offices of LPI's lawyers in Santiago, Chile.

 

	
 

	
9

	
	

 

4.2.2                            Upon the execution of the Option Agreement Assignment, LPI (and LITHIUM, as the case maybe) undertakes to:

 

(i)                                                                   to concurrently exercise the option contained in the Option Agreement by means of a public deed in terms substantially similar to the draft attached hereto as Schedule 4.2.2 (ii) (the ''Option Exercise Deed"); and

 

(ii)                                                                  to pay five million two hundred and twenty thousand Dollars (USD$5,220,000) (the "Option Exercise Price''); to the Owners of the Optioned Mining Concessions jointly with the exercise of the same, in terms and conditions set forth in the Option Agreement.

 

4.2.3                           Novation and Setoff. The Parties hereby agree that the Option Agreement Assignment Price will be setoff and satisfied in full with the LPI Shares Subscription Price. For that purposes LITHIUM assume the payment of the Option Agreement Assignment Price by novation and such obligation shall be setoff with MSB obligation to pay the LPI Shares. A draft of the novation and setoff deed is attached hereto as Schedule 4.2.3.

 

5.                     CLOSING

 

Subject to the terms and conditions of this Agreement, the closing (the "Closing Date" or "Closing") shall take place at 11:00 a.m., Santiago, Chile time, on the third Business Day after the Optioned Mining Concessions have been registered in the name of LPI (the "Condition Precedent"). The Closing shall take place at the offices of PPU, at El Golf 40, floor 20th, Las Condes, Santiago, Chile, or at such other time or place as the Pares may agree in writing. At Closing, except as otherwise specifically provided herein, the following actions shall occur, and all such actions shall be deemed to occur simultaneously and none of the following actions shall be legally effective unless all such actions have been taken:

 

5.1                   Shares Subscription Agreements.

 

5.1.1                           First Shares Subscription Agreement. On the Closing Date Salar Blanco and LPI will execute the first shares subscription agreement (the "First Shares Subscription Agreement"), Pursuant to the First Shares Subscription Agreement LPI shall subscribe such amount of Salar Blanco's New Shares that represent the aggregate amount of three million five hundred thousand Dollars (USD 3,500,000), and shall pay such shares upon execution of the agreement through (a) the capitalization of the loans disbursed to Salar Blanco under the Loan Agreement until such date, valued at par; and (b) the balance shall be contributed in Dollars in immediately available funds, and capitalized on the same date. A draft of the First Shares Subscription Agreement is attached hereto as Schedule 5.1.1.

 

5.1.2                           Second Shares Subscription Agreement. Concurrently with the execution of the First Share Subscription Agreement, Salar Blanco and LPI will execute the second shares subscription agreement (the "Second Shares Subscription Agreement"), Pursuant to the Second Shares Subscription Agreement, LPI shall subscribe such amount of Salar Blanco's New Shares that represent an amount equivalent to Option Agreement Assignment Price plus five million two hundred twenty thousand Dollars (USD 5,220,000), and shall pay such shares through the contribution of the Optioned Mining Concessions, apprising the Optioned Mining Concessions to be contributed by LPI to the Salar Blanco in the amount of five million two hundred twenty thousand Dollars (USD 5,220,000) plus the Option Agreement Assignment Price. This payment will not be deemed made until the Optioned Mining Concessions are duly registered under the Company's name before the relevant Mining Custodian free and clear of any Liens. Salar Blanco and LPI shall use reasonable commercial efforts In having the Optioned Mining Concessions registered in the name of the Company as soon as practicable. A draft of the Second Shares Subscription Agreement is attached hereto as Schedule 5.1.2.

 

	
 

	
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5.1.3                           Third Shares Subscription Agreement. Concurrently with the execution of title First Share Subscription Agreement. Salar Blanco and LPI will execute the third shares subscription agreement (the ''Third Shares Subscription Agreement"), pursuant to which LPI shall subscribe such amount of Salar Blanco's New Shares equivalent to three millon five hundred thousand Dollars (USD 3,500,000) and shall pay such shares on November 30, 2016, in Dollars in Immediately available funds. A draft of the Third Shares Subscription Agreement is attached hereto as Schedule 5.1.3.

 

The Parties acknowledge and agree that upon full payment of the First Shares Subscription Agreement, the Second Shares Subscription Agreement and the Third Shares Subscription Agreement; the total and duly paid cumulative equity that LPI will hold in Salar Blanco will represent twenty five percent (25%) of the total shares of Salar Blanco.

 

5.1.4                            Fourth Shares Subscription Agreement. Concurrently with the execution of the First Share Subscription Agreement, Salar Blanco and LPI will execute the fourth shares subscription agreement (the "Fourth Shares Subscription Agreement"), pursuant to which LPI shall subscribe [•] Salar Blanco's New Shares representing fifteen percent (15%) of the total shares of Salar Blanco for an aggregate amount of nine million Dollars (USD 9,000,000), and shall pay such shares, on April 1st, 2017, in Dollars in immediately available funds. Article VII of the Shareholders Agreement shall apply upon LPI's failure to pay for its subscribed Shares. A draft of the Fourth Shares Subscription Agreement is attached hereto as Schedule 5.1.4.

 

Notwithstanding the above, LPI may pay the amount required under the Fourth Shares Subscription Agreement in two installments of USD 4,500,000 each; whereby the first one is paid on April 1st, 2017 and the latter upon request of Salar Blanco and no later than June 30th, 2017.

 

Nevertheless, if the Preliminary Resource Report has not been delivered to Salar Blanco by March 30th 2017, the first USD 4,500,000 installment can be postponed until such date that is one month after the Preliminary Resource Report has been delivered. In any case, LPI shall pay for such amounts not exceeding USD 4,500,000, as required for Salar Blanco, to fulfill the approved Project Budget - as this term ls defined in the Shareholders Agreement, immediately upon request of Salar Blanco's Board of Directors.

 

5.1.5                           Fifth Shares Subscription Agreement. Concurrently with the execution of the First Share Subscription Agreement, Salar Blanco and LP (will execute the fifth shares subscription agreement (the "Fifth Shares Subscription Agreement"), pursuant to which LPI shall subscribe [•] Salar Blanco's New Shares representing ten percent (10%) of the total shares of Salar Blanco for an aggregate amount of six million Dollars (USD 6,000,000), and shall pay such shares, on December 30, 2017, in Dollars in immediately available funds. Article VII of the Shareholders Agreement shall apply upon LPI's failure to pay for its subscribed Shares. A draft of the Fifth Shares Subscription Agreement is attached hereto as Schedule 5.1.5.

 

Notwithstanding the above, LPI may pay the amount required under the Fifth Shares Subscription Agreement in two installments of USD 3,000,000 each; whereby the first one is paid on December 31st, 2017 and the latter upon request of Salar Blanco and no later than August 30th, 2018.

 

Nevertheless, if Salar Blanco has not finalized the preparation of the Environmental Impact Assesment (EIA) by December 31st, 2017, the first USD 3,000,000 installment can be postponed until such date that is one month after the EIA has been finalized. In any case, LPI shall pay for such amounts not exceeding USD 3,000,000, as required for Salar Blanco, to fulfill the approved Project Budget - as this term is defined in the Shareholders Agreement, immediately upon request of Salar Blanco's Board of Directors.

 

	
 

	
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5.1.6                           Failure of the Condition Precedent or Deliver of the LPI Shares.

 

5.1.6.1                           Failure of Condition Precedent.

 

If on or before November 30, 2016, the Condition Precedent is not fulfilled for any reason, this Agreement shall immediately terminate and the Parties will not be entitled to any indemnification whatsoever due to such termination.

 

In such case, LPI shall assign back to MSB any right it may have under the Option Agreement and the Option Agreement Assignment shall be deemed to be terminated and there will be no obligations between the Parties in connection therewith.

 

It is expressly stated and agreed that LPI will not be liable for the failure of the Condition Precedent, provided it has duly exercised the Option, filed it for registration before the relevant Mining Custodian and use commercially reasonable efforts to have the Optioned Mining Concessions registered in LPI's name.

 

5.1.6.2                           Failure to Deliver LPI Shares.

 

Should the Condition Precedent be fulfilled and (a) LPI failed to execute the Shares Subscription Agreements after it has given the positive notice referred to in Section 4.1. above, or (b) LITHIUM and/or LPI do not allow MSB to subscribe the LPI Shares or do not deliver the LPI Shares to MSB by November 30 2016, this Agreement shall be deemed terminated and MSB shall have the option to acquire the Optioned Mining Concessions and all Shares subscribed by LPI, if any, in each case free and clear of any Liens, by reimbursing any amounts paid by LPI under the Shares Subscription Agreements and all amounts paid by LPI to the Owners of the Optioned Mining Concess1ons under the Option Exercise Deed. In this case the Option Agreement Assignment shall be deemed to be terminated and there will be no obligations between the Parties in connection therewith.

 

5.2                           Shareholders Agreement. MSB, MLI and LPI shall execute the Shareholders Agreement concurrently with the execution of all Shares Subscription Agreements, A draft of the Shareholders Agreement is attached hereto as Schedule 5.2.

 

	
 

	
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6.                                          REPRESENTATIONS AND WARRANTIES.

 

6.1                           Representations and Warranties Regarding Salar Blanco. Each of MSB and MLI, severally and not jointly, represents and warrants to LPI that on the date hereof.

 

6.1.1                           Salar Blanco is in process of being incorporated. The incorporation of Salar Blanco was validly approved by MSB and MLI shareholders meetings, held on [•] and on August 30, 2016, respectively and was materialized by means of public deed dated [•] granted before [•].

 

6.1.2                            On the date of incorporation of Salar Blanco, MLI and MSB will be the record and beneficial owners of all of the Shares issued in the Salar Blanco, and will have good and marketable title to such shares and such ownership is free and clear of any Liens.

 

6.1.3                           Upon incorporation of Salar Blanco there will be no pending options or subscriptions for shares or rights or convertible options, rights or securities committing Salar Blanco to issue new shares or equity interests, other than pursuant to this Agreement.

 

6.1.4                           Upon its incorporation Salar Blanco will not have other Subsidiaries nor any equity interests in other companies.

 

6.1.5                           The drafts of the Salar Blanco organizational documents made available to LPI are true, complete and correct, and no amendments thereto are pending.

 

6.1.6                           Before giving effect to the Capital Increase, Salar Blanco's capital will be the amount of [•], divided into [•] nominative shares, with no par value, all fully subscribed and paid for, of which [•] shares will belong to MSB, equivalent to twenty seven point eight nine percent (27.89%) of Salar Blanco's capital ("MSB's Shares'') and [•] shares will be the property of MLI, representative of the outstanding seventy two point eleven percent (72.11%) of the Salar Blanco's capital ("MLI Shares").

 

MSB's Shares will be paid by means of MSB's contribution of the MSB Assets. The property of the same under the name of Salar Blanco is in process of registration.

 

On its turn, the MLI Shares will be paid by MLI's contribution of the MLI Assets. The property of the same under the name of Salar Blanco is the process of registration.

 

6.1.7                           After the registration of the MSB Assets and the MLI Assets under the name of Salar Blanco, the latter will have valid title over the same free and clear of any Liens.

 

6.1.8                           Sociedades Legales Mineras Litio Mining Concessions are all in force and do not overlap with any mining concessions pertaining to third parties that could enable that third party to explore or exploit any mining substance on the same land.

 

6.1.9                           Sociedades Legales Mineras Litio Mining Concessions were acquired in accordance with applicable laws, regulations and all other and the transfers of ownership regarding them have been undertaken legally and nobody is able to successfully claim any rights or report any material defects. Additionally, the applicable mining licenses have been paid on time. Finally, there are no lawsuits or claims pending to which Sociedades Legales Mineras Litio Mining Concessions, MLB, MLI or Salar Blanco are party or participate as third parties which relate to the Sociedades Legales Mineras Litio Ml11ing Concessions, MSB Assets and MLI Assets and neither are MSB or MLI aware of any lawsuits pending that could affect them, specially but not limited to potential mining or environmental liabilities.

 

	
 

	
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6.1.10                           Regarding MSB Assets, MLI Assets and the Sociedades Legales Mineras Litio Mining Concessions, there has been no notice of: /I/ any expropriation for a public utility or other similar proceeding or claim for expropriation, confiscation or other transfer imposed compulsorily by the authority, whether pending or about to be decreed, or to any use, state or condition of a property or asset that violates any applicable law, regulation or rule, including environmental regulations. There is no knowledge of any actual or potential breach of law that might have or come to have a Material Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means any event, occurrence, fact, condition or change that is materially adverse to the business, result of operations, final condition or assets of Salar Blanco.

 

6.1.11                           The municipal license, real estate and mining taxes assessed or to be paid in relation to the MSB Assets the MLI Assets and the Sociedades Legales Mineras Litio Mining Concessions, accrued or arising through the date hereof, have been duly paid when due and there is no fax, revenue or municipal debt. MSB and MLI shall be liable for, and shall therefore bear exclusively and solely the expense of, any tax and tax liability payable or accrued up to the Closing Date.

 

6.1.12                           Salar Blanco will comply in all material respects with all applicable laws in relation to its formation and the carrying of its business.

 

6.1.13                           Salar Blanco will not own any patents, trademarks, trade names, service marks, service names, copyrights, accounting records, books records, formal records of tax returns, maps, computer software and programs owned thereby; including applications, licenses and other rights in respect thereof ("Intellectual Property"), other than the Salar Blanco trademark which will be registered in its name. There is no material conflict in this respect with third-party rights.

 

6.1.14                           Salar Blanco will comply until the Closing Date with Chilean labor laws with respect to its employees all material respects and it is not party to any collective bargaining agreement or any another similar agreement.

 

6.1.15                           The MSB Assets and the MLI Assets are in compliance with all Environmental Laws in all material respects and have not received from any person any (i) environmental notice or environmental claim, or (ii) written request for Information pursuant to Environmental Law.

 

6.1.16                           Disclaimer of Other Representations and Warranties. Except as expressly set forth in this Section, MSB, MLI and Salar Blanco make no representation or warranty, express or implied, at law or in equity, in respect of Salar Blanco or any of its assets, liabilities, operations. Including with respect to merchantability or fitness for any particular purpose, and any such other representations or warranties are hereby expressly disclaimed.

 

	
 

	
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6.2                           Representations and Warranties Regarding MSB and MLI. Each of MSB and MLI represents and warrants to LPI as to itself that at the date hereof:

 

6.2.1                           Organization and Authority. (a) Is a sociedad por acciones duly organized, validly existing and in good standing under the laws of Chile and has all requisite powers and corporate authorities and has taken all actions necessary in order to execute, deliver and prior its obligations under this Agreement. (b) This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (c) The execution, delivery and performance of this Agreement by it does not, and the consummation by it of the transactions contemplated hereby will not, constitute or result in a breach or violation of, or a default under its certificate of incorporation, bylaws, shareholders' agreements, any of its constitutional documents or any other agreement with third parties.

 

6.2.2                           Consents and Approvals. No filings, permits, authorizations, consents approvals and/or notices are required to be made or obtained by it with or from, as the case may be, any Governmental Entity, in connection with the execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby.

 

6.2.3                           Litigation. There is no Litigation pending or, to its knowledge, threatened against it, which would be reasonably likely to have a Material Adverse Effect on its business or financial condition or would be reasonably likely to prevent, delay or otherwise impair the transactions contemplated hereby.

 

6.3                           Representations and Warranties Regarding LPI and LITHIUM. Each of LITHIUM and LPI represents and warrants to MSB and MLI that at the date hereof:

 

6.3.1                           Organization and Authority. (a) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite powers and authorities and has taken all actions necessary in order to execute, deliver and perform its obligations under this Agreement. (b) This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (c) The execution, delivery and performance of this Agreement by it does not, and the consummation by it the transactions contemplated hereby will not, constitute or result in a breach or violation of, or a default under its certificate of incorporation or bylaws or any of its constitutional documents.

 

6.3.2                           Consents and Approvals. No filings, permits, authorizations, consents, approvals and/or notices are required to be made or obtained by it with or from, as the case may be, any Governmental Entity, in connection with the execution, delivery and performance of this Agreement by it and the consummation by it of the transactions contemplated hereby.

 

6.3.3                           Litigation. There is no Litigation pending or, to its knowledge, threatened against it, which would be reasonably likely to have a material adverse effect on its business or financial condition or would be reasonably likely to prevent, delay or otherwise impair the transactions contemplated hereby.

 

	
 

	
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6.4.                           Conduct of Business. As from Salar Blanco's incorporation and until the date of execution of the Shares Subscription Agreements; MSB and MLI must ensure that the business of Salar Blanco shall be conducted solely in the Ordinary Course of Business, except for purposes of complying with this Agreement, the Capital increase and carrying out the Project in accordance with the proposed budget and business plan, and shall make reasonable commercial efforts to avoid any Material Adverse Effect that may affect Salar Blanco, and, in particular that Salar Blanco does not:

 

(i)                   sell, transfer or grant a Lien over any of its shares or material assets, including the MSB Assets and MLI Assets;

 

(ii)                 enter into any material contract, other than the Loan Agreement with LPI;

 

(iii)                inccur any debt, other than under the Loan Agreement with LPI;

 

(iv)                hire any employee other than employees of MLI and MSB which Salar Blanco may employ recognizing their seniority;

 

(v)                 enter into any joint venture, partnership or similar arrangements; or

 

(vi)                terminate or fails to renew any of its authorizations; including its mining concessions, without LPI's prior written consent.

 

6.5 Prohibition. From this date and until the date the Shareholders Agreement is executed MSB and MLI undertake no to transfer or in any way dispose of their Shares, either directly or indirectly and undertake not to establish any Liens over the same,

 

6.6 LPI Shares Lock-Up Period. From the date that MSB subscribes the LPI Shares and until June 24, 2018, MSB undertakes no to transfer or in any way dispose of the LPI Shares, either directly or indirectly and undertakes not to establish any Liens over the same, provided that this covenant will not restrict MSB from disposing of its LPI Shares (a) if a third party launches a tender offer for the shares of LITHIUM, or (b) If the shareholders of LITHIUM executing the LITHIUM Shareholders Letter sell any of their shares in LITHIUM.

 

7.                                          INDEMNIFICATION.

 

7.1                           Each of MSB and MLI shall defend, Indemnify and hold LPI, LITHIUM and Salar Blanco and their respective Representatives harmless from and against, and pay or reimburse them for, any and all damages, losses, fines, liabilities, obligations, claims of any kind, interest or expenses (including, without limitation, reasonable attorneys' fees and expenses, and reasonable costs and expenses incurred in recovering Losses from any Person) (collectively, "Losses") resulting from or arising out of; (i) any Inaccuracy of any representation or warranty made by it in Section 6.1 and Section 6.2; (ii) failure to comply with Sections 6.4 and 6.5; and (iii) any failure of it to perform any covenant or agreement contained in this Agreement or any other Transaction Document. LPI, LITHIUM and Salar Blanco may not make a claim under Section 7.1(i) for events or circumstances disclosed to it during the due diligence.

 

7.2                           Each of LPI and LITHIUM shall defend, Indemnify and hold MSB, MLI and Salar Blanco and their respective Representatives harmless from and against, and pay or reimburse them for, any and all Losses resulting from or arising out of; (i) any inaccuracy of any representation or warranty made by it in Section 6.3; and (ii) any failure of it to perform any covenant or agreement contained in this Agreement or any other Transaction Document.

 

	
 

	
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7.3                            (a)      Except for claims based on fraud or willful misconduct and for those cases in which this Agreement contemplates a specific remedy, the obligations to indemnify and hold harmless pursuant to this Section 7 shall be the only remedy available to the Parties for any misrepresentation in, or breach of this Agreement. The Parties acknowledge and agree that the indemnification provisions in this Section 7 shall be their exclusive remedy with respect to the transactions contemplated by this Agreement and waive any remedies allowing the resolution of this Agreement or the transaction contemplated hereunder after the date the Option Agreement Assignment is executed. The Parties declare and acknowledge that the rules set forth in Paragraph 8, Title XXIII, Book Four of the Civil Code, regarding latent defects (vicios redhibitorios) shall not be applicable to this Agreement and are hereby expressly and irrevocably waived.

 

(b)      Except for claims based on fraud or willful misconduct claims for any breach of the representations and warranties of any of the Parties shall be made by the Indemnified Party only until 1 year following the date hereof and for an aggregate amount not exceeding USD $2,000,000, except in case of gross negligence and fraud, in which case there shall be no time nor amount limit. Claims resulting from, arising out of, relating to, in the nature of, or caused by the breach of any covenant of any of the Parties contained in this Agreement or in any Transaction Document may be made by the Indemnified Party until the expiration of the applicable statute of limitations past thirty (30) days (including any extension thereto).

 

(c)      The liability of each of the parties is several and not joint.

 

7.4                           No Person will be entitled to lost of profits, indirect, incidental, consequential, punitive or moral damages arising from a breach of this Agreement.

 

7.5                           Indemnification Procedures.

 

7.5.1                           Third Party Claims. If any claim is asserted by a third party against an Indemnified Party, copy of the respective notice and the amount which payment is sought thereunder, if any, or the non-binding estimated amount thereof (the "Claim Notice") shall be given by the Indemnified Party to the Indemnifying Party promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement, except to the extent that such failure results in a lack of actual notice to the Indemnifying Party and such Indemnifying Party is materially prejudiced as a result of such failure to give notice. The Indemnifying Party shall have 30 days from receipt of the Claim Notice (the "Notice Period") to notify the Indemnified Party whether or not it elects to assume the defense of the Indemnified Party against such claim or demand.

 

7.5.2                           Control of Defense of Claim. (i) If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it elects to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense and to negotiate, settle or otherwise deal with such claim or demand, provided that, except with the prior written consent of the Indemnified Party, no Indemnifying Party, in the defense of such claim or demand, shall consent to the entry of any judgment or enter into any settlement that provides for injunctive or non-monetary relief affecting the Indemnified Party. (ii) if the Indemnifying Party does not accept the defense of a matter that it should indemnify pursuant to the terms of this Section 7, all costs and expenses, including reasonable attorneys' fees, incurred by the Indemnified Party in defending such claim or demand shall be a liability of, and shall be paid as incurred by, the indemnifying Party and the Indemnified Party shall have the full right to defend against any such c1aim or demand, but shall not be entitled to settle or agree to pay in full such claim or demand, unless it has prior authorization to do so from the indemnifying Party.

 

	
 

	
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7.5.3                           Access to Business Records. If the Indemnifying Party were to direct, control or participate in the defense or settlement of any third-party claim or demand, the Indemnified Party will give the Indemnifying Party and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them of consult with and involve as witnesses the employees and counsel of the Indemnified Party.

 

7.5.4 Non-Third Party Claims. If an Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a claim or demand being asserted by a third party, the Indemnified Party shall send a Claim Notice to the Indemnifying Party immediately following its discovery of the existence of the facts giving rise to such claim. The Indemnifying Party shall have fifteen (15) Business Days from the date such Claim Notice is received to notify the Indemnified Party in writing of any objections it has to the Indemnified Party's notice or claims for indemnification. If the Indemnifying Party does not deliver such written notice of objection within such fifteen (15) day period, the Indemnifying Party shall be deemed to have accepted the claim. If the Indemnifying Party accepts the claim, it shall have fifteen (15) Business Days from the date of acceptance to pay such claim; if the Indemnifying Party rejects the claim, the Indemnified Party shall have the right to require that the claim be resolved by means of arbitration pursuant to Section 12.2.

 

8.                                          GUARANTY.

 

(a)                Guaranty. LITHIUM hereby unconditionally and irrevocably guarantees to MSB and MLI (each a "Beneficiary"), on the terms and conditions set forth in this Section 8, the prompt performance, when due, of those LPI's obligations under this Agreement (the "Guaranty" and the obligations guaranteed under the Guaranty, the "Guaranteed Obligations"). LITHIUM furthermore undertakes to call and convene shareholders meetings of LITHIUM for the approval of the consummation of the transactions contemplated by this Agreement and the issuance and subscription by MSB of the LPI Shares in accordance with the terms of this Agreement.

 

(b)               Demand. If LPI fails to fulfil any of the Guaranteed Obligations, when and as the same shall become due, then any Beneficiary shall be entitled to make a demand upon LITHIUM hereunder in writing specifying in reasonable detail (i) the provision of this Agreement or any Transaction Document of which LPI is in breach, (ii) in what manner and in what amount LPI has failed to perform pursuant to this Agreement or any Transaction Document; and (iii) an explanation of why such payment is due with a specific statement by an officer of the Beneficiary that the Beneficiary is demanding performance by LITHIUM under the Guaranty (hereinafter referred to as a "Demand"). A single written Demand shall be effective as to any specific default during the continuance of such default, until LPI or LITHIUM have cured such default, and additional written Demands concerning such default shall not be required unless such default Is cured and subsequently recurs.

 

	
 

	
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(c)                Payment, LITHIUM shall within ten (10) Business Days following receipt of a Demand, fully pay and perform such Guaranteed Obligations then due and owing as set forth in the Demand to such account as the Beneficiary may specify in writing to LITHIUM from time to time. Any payment made by LITHIUM hereunder shall, to the extent so made, discharge the obligations of LITHIUM hereunder with respect to such amounts paid.

 

(d)               LITHIUM Obligations Unconditional. The obligations of Lithium hereunder shall remain in full force and effect notwithstanding any act, omission, event or circumstance whatsoever, until full, valid and proper performance of the Guaranteed Obligations.

 

(e)                Independent Obligations. The obligations of LITHIUM hereunder are independent of the obligations of LPL.

 

(f)                Waiver of Notice. LITHIUM unconditionally waives: (i) demands, protests, or notices as the same pertain to the Beneficiaries; (ii) any right to require the Beneficiaries to proceed against LPI or to exhaust any security held by the Beneficiaries or to pursue any to the remedy; and (iii) any defense based upon an election of remedies by the Beneficiaries, unless the same would excuse performance by LPI under this Agreement.

 

(g)                Subrogation. LITHIUM agrees with respect to the Guaranty that it shall have no right of subrogation, reimbursement contribution or indemnity, nor any right of repurpose to security for the Guaranteed Obligations until all of the Guaranteed Obligations have been paid in full.

 

(h)               Discharge; Reinstatement; Preference. If at any time any payment by or on behalf of LPI in respect of the Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the Insolvency, bankruptcy or reorganization of LPI or otherwise, LITHIUM's obligations with respect to such payment shall be reinstated at such time as though such payment had been made but not made at such time. If any payment by LPI or LITHIUM to the Beneficiaries is held to constitute a preference under any applicable bankruptcy laws, or if under applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws of general application-on with respect to creditors, any Beneficiary is required to refund part or all of any payment or pay the amount thereof to any other party, such payment to the Beneficiaries shall not constitute a release from any liability hereunder, and LITHIUM'S liability hereunder shall be reinstated to the extent of such refund or payment to another party.

 

9.                     ENTIRE AGREEMENT.

 

This Agreement, together with the Transaction Documents, and their Schedules, documents, certificates and instruments referred to herein or therein, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement and the Transaction Documents. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such transactions.

 

	
 

	
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10.                                      MISCELLANEOUS PROVISIONS.

 

10.1                           Termination. This Agreement may be terminated by common agreement of all Parties and in case of occurrence of the termination events contemplated in the present Agreement. MSB may also terminate this Agreement if LPI does not execute the Option Agreement Assignment pursuant to the terms of this Agreement.

 

10.2                           Amendment and Modification. This Agreement may be amended, modified or supplemented only by a written agreement signed by the duly authorized representatives of all the Parties hereto.

 

10.3                           Waiver of Compliance: Consents. Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant or agreement herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant or agreement shall not operate as a waiver of, or estoppel with respect to; any subsequent or other failure. Same rule applies to conditions and terms established in benefit only of one of the Parties.

 

10.4                           Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the signor hereto and their respective successors but neither this Agreement nor any of the rights, Interests or obligations hereunder shall be assigned by any signor hereto, including by operation of law, without the prior written consent of all other signors, nor is this Agreement intended to confer upon any other Person except the signors hereto any rights or remedies hereunder. Notwithstanding the foregoing, the Parties expressly authorize MLI to assign its rights and obligations under this Agreement to its shareholders upon its dissolution.

 

10.5                           Interpretation. The article and section headings contained ln this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

 

10.6                           Schedules. All Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement.

 

10.7                           Partial Invalidity. If any provisions of this Agreement, or the application of a provision to any Person or circumstance, shall be held invalid, the validity or legality of the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected or become unenforceable by virtue of violation of norms of public order, the remaining provisions shall not be affected and shall remain in full force and effect, and in such a case the parties shall be obliged to replace the unenforceable provision by other or others which provide the economic purpose envisaged by such provision.

 

10.8                           Counterparts. This Agreement is executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

 

	
 

	
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10.9                           Expenses. Salar Blanco shall bear the costs, fees and expenses of in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby including fees, commissions and expenses payable to brokers, finders, investment bankers, consultants, exchange or transfer agents, attorneys, accountants and other professionals, whether or not the transactions contemplated herein are consummated or terminated. Each Party shall bear and shall be responsible for its tax obligations arising from the execution and performance of this Agreement and the consummation of the transactions contemplated hereby.

 

10.10                           No Third Party Beneficiaries. Nothing in this Agreement shall entitle any Person or entity (other than a party hereto and his, her or its respective successors and assigns permitted hereby) to any claim, cause of action, remedy or right of any kind.

 

10.11                           Survival. If this Agreement is terminated, for whatever reason, Sections 10, 11 and 12 shall remain effective.

 

10.12                           Exclusivity. Parties agree that from the present date and up to the date that LPI subscribes the Salar Blanco New Shares; MSB, MLI and Salar Blanco shall refrain from negotiating with third parties any bids or offers for the Project, its assets or shares in Salar Blanco in the same terms as this has been agreed in the Term Sheet, hence being the same penalties applicable to a breach of this undertaking. Likewise, LPI and Lithium will not engage in the Business or otherwise compete with the Project while this Agreement is effect.

 

11.                                      NOTICES.

 

11.1                           All notifications or communications to be made by the Parties by virtue of this Agreement, shall be in writing by letter delivered personally with acknowledgment of receipt or by registered mail dispatched by a Notary Public certifying the delivery. Such communications should be sent simultaneously by email to the other Party.

 

If to LPI:

 

Attention: Mr. Martin C. Holland

Email: holland@lithiumpowerinternational.com

Tel: +61 2 9276 1235

 

If to MSB:

 

Attention: Mr. Cristobal Garcia-Huldobro / Mr. Francisco Bartucevic

Email: cgh@msblanco.com / fbartucevic@msblanco.com

Tel: +562 2 5827200

 

If to MLI:

 

Attention: Mr. Cristobal Garcia-Huldobro / Mr. Francisco Bartucevic

Email: cgh@msblanco.com / fbartucevic@msblanco.com

Tel: +562 2 5827200

 

	
 

	
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11.2                           Except when indicated otherwise, all notices shall be deemed given, and the terms contemplated in this Agreement shall start running for each party, upon actual receipt of such notice when delivered by a notary public in the address given above, or three (3) days Business Days after the date of delivery of such notice to a courier of international reputation.

 

12.                                      GOVERNING LAW AND ARBITRATION.

 

12.1                           Governing Law. This Agreement and my claim if a party hereunder, or otherwise, shall be governed by and construed in accordance With the laws of Chile without giving effect to the principles of the conflict of laws provisions of Chile that would direct the general applicability of laws of another Jurisdiction.

 

12.2                           Arbitration.

 

Any difficulty or controversy arising among the parties to the contract with respect to the application, interpretation, duration, validity or execution of the contract, or for any other reason, shall be submitted to arbitration pursuant to the Rules of Arbitration Procedure of the Santiago Arbitration and Mediation Center in effect at the time of its initiation.

 

The parties confer an irrevocable special power of attorney upon the Santiago Chamber of Commerce so that it may, at the written request of any of the parties, appoint an arbitrator from among the members of the arbitration corps of the Santiago Arbitration and Mediation Center, who will be empowered to act as arbitrator-at-law with regard to the substance of the dispute and as ex aequo et bono with regard to the procedure (arbitro mixto).

 

There shall be no remedy against the arbitrator's resolutions. The arbitrator is especially empowered to resolve any matter relating to his/her competence and/or Jurisdiction.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective duly authorized representatives as at the date first above written.

 

	
 

	
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