Exhibit 10.6

 

Mortgage Loan No. 12701

 

ENVIRONMENTAL INDEMNIFICATION AGREEMENT

 

THIS ENVIRONMENTAL INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of
June 28, 2012, by KR MML 12701, LLC, a Delaware limited liability company
(“Borrower”), and KILROY REALTY, L.P., a Delaware limited partnership
(“Guarantor”), to and for the benefit of MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY, a Massachusetts corporation (“Lender” and to the extent applicable
under Article 13 of the Loan Agreement, Cornerstone Real Estate Advisers Inc.
“Administrative Agent”) and for the benefit of the Lender Parties (as defined
below).  Borrower and Guarantor are hereinafter collectively referred to as
“Indemnitor”.

 

R E C I T A L S:

 

A.                                   Borrower and Lender entered into that
certain Loan Agreement of even date herewith (as the same may be amended or
modified from time to time, the “Loan Agreement”), which Loan Agreement governs
a loan (the “Loan”) in the stated principal amount of $97,000,000.00 made by
Lender to Borrower, which Loan is evidenced by that certain Promissory Note of
even date herewith (as the same may be amended or modified from time to time,
the “Note”).

 

B.                                     The Loan is secured in part by Borrower’s
interest in and to those certain real properties located in: (1) the City of
Santa Monica, County of Los Angeles and State of California, and (2) the City of
Irvine, County of Orange and State of California, and described in Exhibit A
attached hereto, including all improvements and personal property at any time
existing on or in such real properties, all as more completely described in the
Mortgage (defined below) (collectively, the “Premises”), as evidenced by (i)
those certain Deeds of Trust, Assignments of Leases and Rents, Security
Agreements and Fixture Filings (as the same may be amended or modified from time
to time, individually and collectively, the “Mortgage”) with respect to the
Premises, and (ii) those certain Assignments of Leases and Rents (as the same
may be amended or modified from time to time, individually and collectively, the
“Assignment”) with respect to the Premises. As used herein, the Loan Agreement,
the Note, the Mortgage, the Assignment, and all other instruments evidencing,
securing or pertaining to the Loan, now or from time to time hereafter executed
and delivered to Lender in connection with the Loan, are referred to
collectively herein as the “Loan Documents”.  Unless otherwise defined herein,
all initially capitalized terms shall have the respective meanings ascribed to
such terms in the Loan Agreement.

 

C.                                     Guarantor is a member of Borrower and
will derive substantial benefits from Lender’s consummation of the Loan to
Borrower.

 

D.                                    Lender has required, as a condition to
making the Loan, that Indemnitor indemnify and hold Lender harmless against and
from, and be responsible for paying, certain obligations for which Lender
Parties may incur liability, as herein below set forth.

 

--------------------------------------------------------------------------------

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Indemnitor, intending to be legally bound,
hereby agrees as follows:

 

1.                                       Recitals.  The foregoing recitals are
incorporated into this Agreement by this reference.

 

2.                                       Defined Terms.  As used in this
Agreement, the terms set forth below have the following meanings:

 

“Advances” means all sums, amounts or expenses advanced or paid and all costs
incurred by Lender, as provided in this Agreement or in any other Loan Document,
upon failure of Indemnitor to pay or perform any obligation or covenant
contained herein or in such other Loan Documents.

 

“Borrower Environmental Report” has the meaning assigned to such term in Section
7(b) of this Agreement.

 

“Conditional Rights” has the meaning assigned to such term in Section 26 of this
Agreement.

 

“Environmental Law” means any present or future federal, state or local law,
statute, regulation, rule, decree or ordinance, and any judicial or
administrative order or judgment thereunder, pertaining to human health, or
environmental conditions on, in, under or about the Premises, or regulating or
imposing liability or standards of conduct concerning the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of any hazardous, toxic, or dangerous waste, substance, element,
compound, mixture or material, as now or at any time hereafter in effect,
including, without limitation:  the Comprehensive Environmental Response,
Compensation and Liability Act 1980, 42 U.S.C. §§ 9601 et seq.; the Superfund
Amendments and Reauthorization Act, 42 U.S.C. §§9601 et seq.; the Federal Oil
Pollution Act of 1990; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et
seq.; the Water Pollution Control Act (also known as the Clean Water Act), 33
U.S.C. §§ 1251 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. § 11011, et seq., the Atomic
Energy Act, 42 U.S.C. § 2011 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C. §§136 et seq.; the Safe Drinking Water
Act, as amended, 42 U.S.C. §300f et seq.; the Solid Waste Disposal Act, as
amended, 42 U.S.C. §6901 et seq.; and the River and Harbors Act of 1899, 33
U.S.C. §§401 et seq.

 

“Environmental Litigation” has the meaning assigned to such term in Section 3(b)
of this Agreement.

 

“Environmental Violation” has the meaning assigned to such term in Section 5(d)
of this Agreement.

 

“Equipment” has the meaning assigned to such term in the Mortgage.

 

2

--------------------------------------------------------------------------------

 

“Hazardous Substance” means any material, waste or substance which is or
includes any material, waste or substance which is:

 

(i)                                     included within the definitions of
“hazardous substances”, “hazardous materials”, “toxic substances” or “solid
waste” in or pursuant to any Environmental Law, or is subject to regulation
under any Environmental Law;

 

(ii)                                  listed in the United States Department of
Transportation Optional Hazardous Materials Table, 49 C.F.R. §172.101, as to
date or hereafter amended, or in the United States Environmental Protection
Agency List of Hazardous Substances and Reportable Quantities, 40 C.F.R. Part
302, as to date or hereafter amended; or

 

(iii)                               toxic, explosive, radioactive, infectious or
carcinogenic, including without limitation and whether or not included in such
description, any asbestos containing materials, Microbial Matter, hydrocarbons,
polychlorinated biphenyls, oil, or petroleum products.

 

“Independent Defense Events” has the meaning assigned to such term in Section
3(b) of this Agreement.

 

“Lender Environmental Report” has the meaning assigned to such term in Section
7(a) of this Agreement.

 

“Lender Parties” means Lender, Cornerstone Real Estate Advisers LLC (the
investment advisor to Lender), Cornerstone Real Estate Advisers Inc., any
present and future loan participants, co-lenders, loan servicers, custodians and
trustees, and each of their respective directors, officers, employees,
shareholders, agents, affiliates, heirs, legal representatives, successors and
assigns, excluding any successor to any interest of Lender in or to the
Premises, or any other Person that acquires all or part of the Premises by any
sale, assignment, foreclosure or other exercise of remedies under the Mortgage
or other Loan Documents or by conveyance in lieu thereof that is not Lender, any
of its participants or an affiliate, nominee or designee.

 

“Microbial Matter” means the Release of fungi or bacterial matter which
reproduces through the release of spores or the splitting of cells, including,
mold, mildew and viruses, whether or not such Microbial Matter is living, which
poses a threat to the health, safety or welfare of any Person or adversely
affects the value of the Premises.

 

“Preferential Payment” has the meaning assigned to such term in Section 26 of
this Agreement.

 

“Release” means the actual, threatened or suspected release, deposit, discharge,
emission, leak, spill, seepage, migration, injection, pump, pour, empty, escape,
dump or disposal of a Hazardous Substance at any time, no matter how or by whom
caused, whether intentional or unintentional, foreseeable or unforeseeable.

 

“Remediation” means any response, remedial, removal or corrective action, any
activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any
Hazardous Substance or underground storage tank, any actions to prevent, cure or
mitigate any Release of a Hazardous

 

3

--------------------------------------------------------------------------------

 

Substance, any action to comply with any Environmental Laws or with any permits
issued pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or
evaluation relating to any Hazardous Substances or underground storage tank.

 

“Subrogation Waiver “ has the meaning assigned to such term in Section 24(a) of
this Agreement.

 

3.                                       Indemnity.

 

(a)                                  Indemnitor shall indemnify, defend and hold
Lender and the Lender Parties harmless from and against, and shall be
responsible for paying, any and all claims, demands, liabilities, losses,
damages, judgments, fines, penalties, costs and expenses (including reasonable
attorneys’ fees, costs and expenses and all costs of collection and enforcement)
directly or indirectly arising out of or attributable to: (i) a breach of any
warranty or representation contained in this Agreement or in any other Loan
Document relating to an Environmental Violation or a Hazardous Substance; (ii)
an action against Indemnitor to enforce any of the provisions of this Agreement,
in which such action Indemnitor is found to have breached any of such
provisions; and (iii) any Release of a Hazardous Substance on, in, under or
about the Premises or any portion thereof; (iv) all costs of any required or
necessary Remediation; (v) all costs of the preparation and implementation of
any plans for Remediation, closure or other required plans; and (vi) all direct,
indirect and consequential damages (excluding punitive damages) arising from or
relating to the items described in the preceding clauses (i) through (v).  The
indemnity provided in this Section 3 shall survive and be unaffected by any
modification, amendment, extension, repayment, foreclosure, or deed in lieu of
foreclosure of the Loan, as well as any transfer of any direct or indirect
interest in Borrower or in the Premises, or the release or extinguishment of the
Lien of the Mortgage.  Notwithstanding anything to the contrary contained
herein, this Indemnity shall not, as to any Indemnified Party, apply to any
losses to the extent that a court of competent jurisdiction has determined by
final and non-appealable judgment that such losses have resulted from the
willful misconduct or gross negligence of such Indemnified Party.

 

(b)                                 Upon written request of any of the Lender
Parties and at their sole option, Indemnitor shall immediately undertake the
defense of the Lender Parties, at Indemnitor’s sole cost and expense, with
counsel reasonably approved by Lender, in connection with any action or
proceeding relating to any obligation set forth in this Agreement for which
Indemnitor has an obligation to protect, indemnify, defend, and hold harmless
the Lender Parties (collectively, “Environmental Litigation”).  In the event
Indemnitor refuses to undertake the defense of the Lender Parties after
receiving such request, or fails to diligently and continuously conduct such
defense after receiving such request, or if Indemnitor is not a party to the
Environmental Litigation, or is a party to the Environmental Litigation and, in
Lender’s reasonable opinion, there is a potential conflict of interest in the
sharing of counsel by Indemnitor and the Lender Parties (collectively, the
“Independent Defense Events”), then the Lender Parties may undertake their own
defense without reducing, limiting or waiving Indemnitor’s obligations to
protect, indemnify and hold harmless the Lender Parties as provided in this
Agreement.  The actual out-of-pocket costs reasonably incurred by the Lender
Parties in undertaking their own defense due to any Independent Defense Event,
including but not limited to reasonable attorneys’ fees, costs

 

4

--------------------------------------------------------------------------------

 

and expenses, shall constitute a portion of the indemnification obligations of
Indemnitor under this Agreement.  In the absence of an Independent Defense
Event, the Lender Parties may elect to engage additional or different counsel at
any time without reducing Indemnitor’s obligations to protect, indemnify and
hold harmless the Lender Parties as provided in this Agreement, except that the
actual attorneys’ fees incurred by the Lender Parties in engaging such
additional or different counsel shall not constitute an indemnification duty of
the Indemnitor under this Agreement.

 

(c)                                  Notwithstanding the foregoing terms of this
Section 3, Indemnitor shall have no liability under this Section 3 for any
violation of any Environmental Laws or any disposal of any Hazardous Substances
based on any action first occurring, or condition first existing, after any
foreclosure or Lender’s acceptance of a deed in lieu of foreclosure of the
Mortgage, unless caused by or arising from the acts or omissions of Indemnitor,
any Upstream Owner or any of their respective Affiliates or agents.  In the
event that Indemnitor disclaims liability under this Agreement based upon the
provisions of this paragraph, Indemnitor shall be responsible, at its sole cost
and expense, to prove such assertion.

 

(d)                                 The obligations of Indemnitor under this
Section 3 shall terminate (other than with respect to any outstanding
unfulfilled obligations or claims that have been made) on a date which is twelve
(12) months after the date when the Loan is timely repaid in full with Borrower
and Indemnitor having satisfied all of their payment and performance obligations
under the Loan Documents, provided each of the following conditions have been
fully satisfied:  (1) Indemnitor delivers to Lender an environmental site
assessment report acceptable to Lender prepared by a properly licensed
environmental consultant acceptable to Lender evidencing no contamination by
Hazardous Substances and no violation of any Environmental Laws with respect to
the Premises; (2) there is no known or suspected contamination of the Premises
due to any Hazardous Substances; and (3) there are no outstanding claims, suits
or demands existing or threatened with respect to any Hazardous Substances or
under any Environmental Laws relating to the Premises.  In all other events,
Indemnitor’s obligations under this Section 3 shall survive to the fullest
extent and for the maximum time period permitted under applicable law.

 

4.                                       Indemnification Separate from the Loan;
No Derogation of Other Available Rights; Survival.

 

(a)                                  This Agreement is given solely to protect
Lender against losses, damages, costs, expenses, charges, claims and
liabilities, and not as additional security for, or as a means of repayment of,
the Loan.  Indemnitor agrees that this Agreement is separate, independent of and
in addition to the undertakings of Indemnitor pursuant to the Note, the Mortgage
and the other Loan Documents.  The obligations of Indemnitor under this
Agreement are independent of, and shall not be measured or affected by (i) any
amounts at any time owing under the Note or secured by the Mortgage, (ii) the
sufficiency or insufficiency of any collateral (including, without limitation,
the Premises) given to Lender to secure the Note, (iii) the consideration given
by Lender or any other party in order to acquire the Premises, (iv) the
modification, expiration or termination of the Mortgage or any other document or
instrument securing or otherwise relating to the loan evidenced by the Note, or
(v) the payment in full or other cancellation of the Note (including, without
limitation, by amounts paid or credit bid at a foreclosure sale or by discharge
in connection with a deed in lieu of foreclosure).

 

5

--------------------------------------------------------------------------------

 

(b)                                 This Agreement is intended to be
supplemental, and not in derogation of, Lender’s rights under California Civil
Code (“Civil Code”) Section 2929.5 and California Code of Civil Procedure
(“CCP”) Sections 564, 726.5 and 736 and any successor sections thereof.  A
separate action may be brought to enforce the provisions hereof, which shall in
no way be deemed to be an action on the Note, whether or not the Loan has been
repaid and whether or not Lender would be entitled to a deficiency judgment
following a judicial foreclosure, trustee’s sale or UCC sale.

 

(c)                                  The obligations of Indemnitor hereunder
shall not be affected by any exculpatory provisions contained in the Note or any
of the other Loan Documents.  Subject to Subsections 3(c) and (d) hereof, this
Agreement, and all rights and obligations hereunder, shall survive performance
and repayment of the obligations evidenced by and arising under the Loan
Documents, surrender of the Note, reconveyance of any Mortgage, release of other
security provided in connection with the Loan, trustee’s sale or foreclosure
under any Mortgage and/or any of the other Loan Documents (whether by deed or
other assignment in lieu of foreclosure, or otherwise), acquisition of the
Premises by Lender, any other transfer of the Premises, and transfer of all of
Lender’s rights in the Loan, the Loan Documents, and the Premises.  Indemnitor’s
obligations under this Agreement are secured by the Mortgage to the extent of
the “Secured Environmental Costs” (as defined in the Mortgage) and are
unsecured, whether by the Mortgage or otherwise, to the extent of the “Unsecured
Environmental Costs” (as defined in the Mortgage).

 

5.                                       Warranties and Representations of
Indemnitor; Covenants of Indemnitor.

 

(a)                                  Indemnitor represents and warrants to
Lender regarding the Premises and Equipment as follows:

 

(i)                                     To Indemnitor’s knowledge, Indemnitor
has not installed, used, generated, manufactured, produced, stored, Released,
discharged or disposed of on, in, under or about the Premises, or transported to
or from any portion of the Premises, any Hazardous Substance or allowed any
other Person to do so, except under conditions that could not reasonably be
expected to violate applicable Environmental Laws and except for cleaning
supplies used in reasonable quantities and in the ordinary course of Borrower’s
operation of the Premises so long as the supplies are maintained, used, stored
and disposed of in accordance with all applicable Environmental Laws;

 

(ii)                                  To Indemnitor’s knowledge, there are no
Hazardous Substances or underground storage tanks on, in, under or about the
Premises that could reasonably be expected to violate applicable Environmental
Laws, except those that are both:  (A) in compliance with Environmental Laws and
with permits issued pursuant thereto; and (B) fully disclosed to Lender in
writing in the Environmental Report;

 

(iii)                               To Indemnitor’s knowledge, there are no
past, present or threatened material Releases of any Hazardous Substance on, in,
under or about the Premises except as described in the Environmental Report;

 

6

--------------------------------------------------------------------------------

 

(iv)                              To Indemnitor’s knowledge, there is no threat
of any material Release of Hazardous Substances migrating to or from the
Premises except as described in the Environmental Report;

 

(v)                                 To Indemnitor’s knowledge, there is no
present non-compliance with Environmental Laws, or with permits issued pursuant
thereto, in connection with the Premises or the Equipment, except as described
in the Environmental Report;

 

(vi)                              Indemnitor does not know of, and has not
received, any written notice from any Person (including a governmental entity)
relating to Hazardous Substances or Remediation thereof, of possible liability
of any Person pursuant to any Environmental Law, other environmental conditions
in connection with the Premises or Equipment, or any actual or potential
administrative or judicial proceedings in connection with any of the foregoing;

 

(vii)                           Indemnitor has truthfully and fully made
available to Lender, in writing, any and all material information relating to
environmental conditions on, in, under or about the Premises that is in
Indemnitor’s possession and control, including any reports relating to Hazardous
Substances on, in, under or about the Premises and/or to the environmental
condition of the Premises; and

 

(viii)                        To Indemnitor’s knowledge, except as previously
disclosed to Lender in writing, the Mortgaged Property has not been designated
as a “hazardous waste property” or “border zone property” pursuant to Section
25220, et. seq. of the California Health and Safety Code.

 

(b)                                 Indemnitor shall not install, use, generate,
manufacture, produce, store, Release, discharge or dispose of on, in, under or
about the Premises, or transport to or from any portion of the Premises, any
Hazardous Substance, and Indemnitor shall use commercially reasonable efforts to
not allow any other Person to do so, except under conditions permitted by
applicable Environmental Laws, and except for ordinary and customary cleaning
supplies in reasonable quantities used in the operation of the Premises so long
as the supplies are maintained, used, stored and disposed of in accordance with
all applicable Environmental Laws (provided however, Indemnitor’s failure to
comply with the foregoing provisions shall not result in an Event of Default
unless such failure is in any material respect and following the expiration of
any applicable notice or cure period contemplated in the Loan Agreement). 
Additionally, except with the prior consent of Lender, no portion of the
Premises shall be leased, used or occupied for dry cleaning operations or the
storage of any chemicals used in the dry cleaning process.

 

(c)                                  Indemnitor shall keep and maintain the
Premises in compliance with, and shall use commercially reasonable efforts not
to cause or permit the Premises to be in violation of, applicable Environmental
Laws; provided however, Indemnitor’s failure to comply with this covenant shall
not result in an Event of Default unless such failure is in any material respect
and following the expiration of any applicable notice or cure period
contemplated in the Loan Agreement.

 

7

--------------------------------------------------------------------------------

 

(d)                                 Indemnitor shall promptly provide notice to
Lender of:

 

(i)                                     any proceeding, investigation or inquiry
commenced by any governmental authority with respect to the Release of any
Hazardous Substance on, in, under or about the Premises or the migration of any
Hazardous Substance to or from adjoining property;

 

(ii)                                  all claims made or threatened in writing
by any Person against Indemnitor, any other party occupying the Premises or any
portion thereof, or the Premises, relating to any loss or injury allegedly
resulting from any Hazardous Substance; and

 

(iii)                               the discovery of any occurrence or condition
on the Premises or on any real property adjoining or in the vicinity of the
Premises, of which Indemnitor becomes aware, which is reasonably likely to cause
the Premises or any portion thereof to be in violation of any Environmental Law
or subject to any restriction on ownership, occupancy, transferability or use
under any Environmental Law (each, an “Environmental Violation”); provided,
however, Indemnitor’s failure to provide Lender with prompt notice of any
Environmental Violation shall not result in an Event of Default unless
Indemnitor fails to report any material Environmental Violation and after the
expiration of any applicable notice or cure period contemplated in the Loan
Agreement.

 

(e)                                  Lender may join and participate in, as a
party if it so determines, any legal or administrative proceeding or action
concerning the Premises or Equipment under any Environmental Law.  Indemnitor
shall pay or reimburse Lender on demand for all Advances and actual
out-of-pocket expenses (including reasonable attorneys’ fees, costs and
expenses) reasonably incurred by Lender in connection with any such action or
proceeding.

 

6.                                       Environmental Matters; Remediation.

 

(a)                                  If any investigation, site monitoring,
containment, cleanup, removal, restoration or other Remediation of any kind or
nature is required under any applicable Environmental Law, or reasonably
necessary to protect the health, safety or welfare of any occupant or transient
occupant of the Premises, because of or in connection with the current or future
Release of a Hazardous Substance into the air, soil, ground water, surface
water; or soil vapor on, in, under or about the Premises or any portion thereof,
Indemnitor shall promptly commence and diligently prosecute to completion all
such Remediation.  In all events, such Remediation shall be commenced within
sixty (60) days after any demand therefor by Lender or such shorter period as
may be required under any applicable Environmental Law.

 

(b)                                 All Remediation shall be performed by
qualified, licensed, insured and reputable contractors, and under the
supervision of a consulting engineer, each approved in advance by Lender, such
approval not to be unreasonably withheld, delayed or conditioned.  All actual
out-of-pocket costs and expenses of such Remediation and of Lender’s monitoring
or review of such Remediation (including reasonable attorneys’ fees, costs and
expenses), in each case to the extent reasonably incurred, shall be paid by
Indemnitor.  If Indemnitor does not timely commence and diligently prosecute to
completion the Remediation, Lender may (but shall not be obligated to) cause
such Remediation to be performed.  Indemnitor agrees to bear and shall pay or
reimburse Lender on demand for all Advances and expenses (including reasonable

 

8

--------------------------------------------------------------------------------

 

attorneys’ fees, costs and expenses) relating to or incurred by Lender in
connection with monitoring, reviewing or performing any Remediation.

 

(c)                                  Except with Lender’s prior consent, not to
be unreasonably withheld, conditioned, or delayed, Indemnitor shall not commence
any Remediation, unless required by Section 6(a) above or enter into any
settlement agreement, consent decree or other compromise relating to any
Hazardous Substances or Environmental Laws which might, in Lender’s reasonable
judgment, impair the value of Lender’s security for the Loan.  Lender’s prior
consent, to such Remediation, not to be unreasonably withheld, conditioned or
delayed, shall not be required, however, if the Release of Hazardous Substances
on, in, under or about the Premises poses an immediate threat to the health,
safety or welfare of any Person or is of such a nature that an immediate
remedial response is necessary, and it is not possible to obtain Lender’s prior
consent.  In such event Indemnitor shall notify Lender as soon as practicable of
any action taken.

 

7.                                       Environmental Matters; Inspection.

 

(a)                                  Upon at least five (5) days advance notice,
which shall include (i) the submission of a written invasive investigation plan
for Indemnitor’s review and approval, which approval shall not be unreasonably
withheld, conditioned or delayed, and (ii) proof that Indemnitor has been named
as an additional insured on the applicable insurance policy of Lender or its
agents, Lender or its agents shall have the right to enter upon and inspect all
or any portion of the Premises to conduct customary environmental tests,
assessments, audits and soil borings.  Except in an emergency, such entry shall
be at reasonable times, with the advance notice described above, and subject to
the rights of tenants of the Premises.  Any damage to the Premises as a result
of such tests or borings will be promptly and fully repaired by Lender or its
agents.  Lender may select a consulting engineer to conduct and prepare reports
of such inspections, tests, assessments, audits and soil borings (a “Lender
Environmental Report”).  The inspection rights granted to Lender in this Section
7 shall be in addition to, and not in limitation of, any other inspection rights
granted to Lender in this Agreement or the other Loan Documents.

 

(b)                                 If an Event of Default has occurred and is
continuing or Lender has reasonable cause to believe that there has been a
Release of a Hazardous Substance on, in, under or about the Premises or any
Environmental Violation exists or any Hazardous Substance is migrating to or
from adjoining property), promptly upon the written request of Lender,
Indemnitor shall provide Lender with an environmental site assessment or
environmental audit report prepared by an environmental engineering firm
acceptable to Lender in its reasonable discretion (a “Borrower Environmental
Report”), to assess with a reasonable degree of certainty whether or not any
Release exists or has occurred, along with a reasonably detailed description of
the potential scope of remediation and of the potential costs that may be
incurred in connection with abatement, cleanup or removal of any Hazardous
Substance found on, in, under, at, or within the Premises.

 

(c)                                  Indemnitor shall pay or reimburse Lender on
demand for all Advances and actual out-of-pocket expenses (including reasonable
attorneys’ fees, costs and expenses) reasonably incurred by Lender in connection
with any Lender Environmental Report and any

 

9

--------------------------------------------------------------------------------

 

Borrower Environmental Report required or permitted under this Agreement in the
following situations:

 

(i)                                     if Lender has reasonable grounds to
believe, at the time any Lender Environmental Report is ordered or any Borrower
Environmental Report is requested, that there exists any Environmental
Violation, or there is a Release of a Hazardous Substance on, in, under or about
the Premises or any Hazardous Substance is migrating to or from adjoining
property, except under conditions permitted by applicable Environmental Laws and
not prohibited by any Loan Document;

 

(ii)                                  if any such inspection reveals a violation
of an Environmental Law or that a Hazardous Substance is present on, in, under
or about the Premises or is migrating to or from adjoining property, except
under conditions permitted by applicable Environmental Laws and not prohibited
by any Loan Document;

 

(iii)                               if Lender has reasonable grounds to believe
that there is a material adverse change in the status of any Release of any
Hazardous Substance on, in, under or about the Premises;

 

(iv)                              if Lender has reasonable grounds to believe
that a material adverse change in the compliance of the Premises with any
Environmental Law has occurred;

 

(v)                                 if Lender is not reasonably satisfied with
the results or quality of an environmental site assessment or an environmental
audit report which has been prepared in connection with the Premises, with the
exception of the Environmental Report required by Lender in conjunction with the
making of the Loan; or

 

(vi)                              if an Event of Default exists at the time such
Lender Environmental Report is ordered or at the time the request is made for a
Borrower Environmental Report.

 

8.                                       Attorneys’ Fees.  In addition to all
other amounts payable by Indemnitor hereunder, Indemnitor hereby agrees to pay
to Lender upon demand any and all reasonable Costs incurred by Lender in
connection with the collection or enforcement of this Agreement, including
probate, appellate and bankruptcy proceedings, any post-judgment proceedings to
collect or enforce any judgment or order relating to this Agreement, and all
such Costs shall be included as additional Indebtedness bearing interest at the
Default Rate set forth in the Loan Agreement until paid.  In any action to
enforce Lender’s rights and remedies hereunder, there shall be allowed and
included as additional Indebtedness all Costs which may be paid or incurred by
or on behalf of Lender.  For the purposes hereof “Costs” means all expenditures
and expenses reasonably incurred by or on behalf of Lender including reasonable
attorneys’ fees (including reasonable fees of Lender’s inside counsel),
receivers’ fees, independent consultants’ fees (including environmental
consultants), all costs and expenses reasonably incurred in connection with any
of the foregoing.  Further, all “Costs” shall include such other costs, expenses
and fees as may be reasonably incurred by Lender in the protection of the
Mortgaged Property in connection with this Agreement, including, reasonable
attorneys’ fees, expenses and costs in any litigation or proceeding affecting
this Agreement, including probate, appellate, and bankruptcy

 

10

--------------------------------------------------------------------------------

 

proceedings, and any post-judgment proceedings to collect or enforce any
judgment or order relating to this Agreement, to obtain any court order or the
appointment of a receiver to enforce Lender’s rights pursuant to Section 564 of
the California Code of Civil Procedure and/or Section 2929.5 of the California
Civil Code or in preparation for the commencement or defense of any action or
proceeding, shall be immediately due and payable to Lender, with interest
thereon at the Default Rate.  This provision is separate and several, and shall
survive the merger of this provision into any judgment.

 

9.             Joint and Several Liability.  If more than one party is executing
this Agreement as an Indemnitor, then each party that executes this Agreement
shall be jointly and severally responsible for any and all obligations of any
Indemnitor hereunder.

 

10.           Interest.  In the event that Lender or Administrative Agent incurs
any obligations, reasonable costs or expenses under this Agreement, Indemnitor
shall pay Lender such costs immediately, on demand. If such payment is not
received within ten (10) Business Days after demand therefor, interest on such
amount shall, after the expiration of such ten (10) Business Day period, accrue
at the Default Rate until such amount, plus interest, is paid in full.

 

11.           Consent to Jurisdiction and Venue.  Indemnitor hereby submits to
personal jurisdiction in the state in which the Premises are located for the
enforcement of the provisions of this Agreement and irrevocably waives any and
all rights to object to such jurisdiction for the purposes of litigation to
enforce any provision of this Agreement.  Indemnitor hereby consents to the
jurisdiction of and agrees that any action, suit or proceeding to enforce this
Agreement may be brought in any state or federal court in the state in which the
Premises are located.  Indemnitor hereby irrevocably waives any objection that
it may have to the laying of the venue of any such actions, suit, or proceeding
in any such court and hereby further irrevocably waives any claim that any such
action, suit or proceeding brought in such a court has been brought in an
inconvenient forum.

 

12.           Service of Process.  In its filings with the Secretary of State of
the State of California, Indemnitor has appointed Paracorp Incorporated, with an
address at 2804 Gateway Oaks Drive, Suite 200, Sacramento, California 95833, as
its authorized agent to accept and acknowledge on its behalf service of any and
all process which may be served in any such suit, action or proceeding in any
federal or state court and agrees that service of process upon said agent at
said address and written notice of said service, and a full copy of all
documents that were served, mailed or delivered to Indemnitor in the manner
provided herein shall be deemed in every respect effective service of process
upon Indemnitor, in any such suit, action or proceeding in connection with this
Agreement.  Indemnitor (a) shall give prompt notice to Lender of any change of
address of its authorized agent hereunder, (b) may at any time and from time to
time designate a substitute authorized agent with an office in the State where
the Premises are located (which substitute agent and office shall be designated
as the person and address for service of process), and (c) shall promptly
designate such a substitute if its authorized agent ceases to have an office the
State where the Premises are located or is dissolved without leaving a
successor.

 

13.           Notice.  All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by:
(i) certified or registered United States mail, postage

 

11

--------------------------------------------------------------------------------

 

prepaid, return receipt requested; or (ii) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted
delivery; addressed in either case as follows:

 

If to Lender, at the following address:

 

Massachusetts Mutual Life Insurance Company

c/o Cornerstone Real Estate Advisers LLC

One Financial Plaza

Hartford, Connecticut 06103

Attention:  Paralegal, Finance Group

 

With a copy to:

 

Massachusetts Mutual Life Insurance Company

c/o Cornerstone Real Estate Advisers Inc.

5000 Birch Street, Suite 7500

Newport Beach, California 92660

Attention:  Managing Director

 

If to Borrower, at the following address:

 

KR MML 12701, LLC

12200 West Olympic Boulevard, Suite 200

Los Angeles, California  90064

Attention:  Corporate Finance

 

With a copy to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, CA  90071-1560

Attention:  Glen B. Collyer

 

12

--------------------------------------------------------------------------------

 

If to Guarantor, at the following address:

 

Kilroy Realty, L.P.

12200 West Olympic Boulevard, Suite 200

Los Angeles, California 90064

Attention:  Corporate Finance

 

With a copy to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, CA  90071-1560

Attention:  Glen B. Collyer

 

or to such other address and person as shall be designated from time to time by
Lender, Borrower or Guarantor, as the case may be, in a written notice to the
other parties in the manner provided for in this Section 13.  A notice shall be
deemed to have been given:  in the case of hand delivery, at the time of actual
delivery; in the case of registered or certified mail, three (3) Business Days
after deposit in the United States mail; in the case of expedited prepaid
delivery, upon the first attempted delivery on a Business Day.  A party
receiving a notice that does not comply with the technical requirements for
notice under this Section 13 may elect to waive any deficiencies and treat the
notice as having been properly given.

 

14.           Waivers.

 

(a)           TO THE EXTENT PERMITTED BY APPLICABLE LAW, INDEMNITOR AND LENDER
EACH HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT.  THIS WAIVER IS
KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY INDEMNITOR AND LENDER, AND
EACH PARTY ACKNOWLEDGES THAT THE OTHER PARTY HAS NOT MADE ANY REPRESENTATIONS OF
FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT.  INDEMNITOR FURTHER ACKNOWLEDGES THAT INDEMNITOR HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT BY INDEPENDENT LEGAL COUNSEL SELECTED BY INDEMNITOR AND THAT
INDEMNITOR HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

(b)           Indemnitor hereby waives to the fullest extent not prohibited by
law:

 

(i)            Presentment, demand, protest, notice of protest, notice of
dishonor and notice of non-payment, non-performance or non-observance, and
notice of acceptance of this instrument, other than any notice required to be
given hereunder;

 

(ii)           The right, if any, to the benefit of, or to direct the
application of, any security held by Lender, including the Premises; and, until
all of the indebtedness evidenced by the Note has been paid in full, all rights
of subrogation, any right to enforce any remedy

 

13

--------------------------------------------------------------------------------

 

which Lender now has or hereafter may have against Indemnitor, and any right to
participate in any security now or hereafter held by Lender;

 

(iii)          The right to require any Lender Parties to proceed against any
Borrower or Indemnitor or any other person or party, or to proceed against any
security now or hereafter held by Lender, or to pursue any other remedy in
Lender’s power;

 

(iv)          The benefits, if Indemnitor is entitled to any benefits, of any or
all anti-deficiency statutes or single-action legislation;

 

(v)           Any defense arising out of the absence, impairment, or loss of any
right of reimbursement or subrogation or other right or remedy of Indemnitor
against any security resulting from the exercise of election of any remedies by
Lender, including a judicial foreclosure or the exercise of any power of sale,
and any defense arising by reason of any disability or other defense of
Indemnitor or by reason of the cessation, from any cause, of the liability of
Indemnitor; and

 

(vi)          Any suretyship defense that may be available to such Indemnitor.
Without limiting the generality of the foregoing, each Indemnitor also waives
(A) any defense based upon Lender’s election to waive its lien as to all or any
security for the Loan pursuant to CCP Section 726.5 or otherwise, and (B) any
and all benefits which might otherwise be available to such Indemnitor under
Civil Code Sections 2809, 2810, 2815, 2819, 2839, 2845 through 2850, 2899 and
3433.

 

Each Indemnitor understands and acknowledges that if this Agreement ever becomes
or is deemed secured by real property security and Lender forecloses judicially
or nonjudicially against any real property security for this Agreement, that
foreclosure could impair or destroy any ability that such Indemnitor may have to
seek reimbursement, contribution or indemnification from Borrower or others
based on any right such Indemnitor may have of subrogation, reimbursement,
contribution or indemnification for any amounts paid by such Indemnitor under
this Agreement.  Each Indemnitor further understands and acknowledges that in
the absence of this provision, the potential impairment or destruction of such
Indemnitor’s rights, if any, may entitle such Indemnitor to assert a defense to
this Agreement based on CCP Section 580d as interpreted in Union Bank vs.
Gradsky.  By executing this Agreement, each Indemnitor freely, irrevocably and
unconditionally:  (i) waives and relinquishes that defense, and agrees that such
Indemnitor will be fully liable under this Agreement, even though Lender may
foreclose judicially or nonjudicially against any real property security for
this Agreement; (ii) agrees that such Indemnitor will not assert that defense in
any action or proceeding that Lender may commence to enforce this Agreement;
(iii) acknowledges and agrees that the rights and defenses waived by such
Indemnitor under this Agreement include any right or defense that such
Indemnitor may have or be entitled to assert based upon or arising out of any
one or more of the following: (A) CCP Sections 580a (which if such Indemnitor
had not given this waiver, would otherwise limit such Indemnitor’s liability
after any nonjudicial foreclosure sale to the difference between the obligations
for which such Indemnitor is liable and the fair market value of the property or
interests sold at such nonjudicial foreclosure sale rather than the actual
proceeds of such sale), 580b and 580d (which if such Indemnitor had not given
this waiver, would otherwise limit Lender’s right to recover a deficiency
judgment with respect to purchase money obligations

 

14

--------------------------------------------------------------------------------

 

and after any nonjudicial foreclosure sale, respectively), or 726 (which, if
such Indemnitor had not given this waiver, among other things, would otherwise
require Lender to exhaust all of its security before a personal judgment may be
obtained for a deficiency); or (B) Civil Code Section 2848; and
(iv) acknowledges and agrees that Lender is relying on this waiver in making the
Loan, and that this waiver is a material part of the consideration that Lender
is receiving for making the Loan.  WITHOUT LIMITING THE FOREGOING, EACH
INDEMNITOR WAIVES ALL RIGHTS AND DEFENSES THAT INDEMNITOR MAY HAVE BECAUSE THIS
AGREEMENT IS DEEMED OR BECOMES SECURED BY REAL PROPERTY.  THIS MEANS, AMONG
OTHER THINGS:

 

(vii)         LENDER MAY COLLECT FROM SUCH INDEMNITOR WITHOUT FIRST FORECLOSING
ON ANY REAL OR PERSONAL PROPERTY COLLATERAL PLEDGED BY BORROWER; AND

 

(viii)        IF LENDER FORECLOSES ON ANY REAL PROPERTY COLLATERAL PLEDGED BY
BORROWER:

 

(1)           THE AMOUNT OF LENDER’S CLAIM HEREUNDER MAY BE REDUCED ONLY BY THE
PRICE FOR WHICH THAT COLLATERAL IS SOLD AT THE FORECLOSURE SALE, EVEN IF THE
COLLATERAL IS WORTH MORE THAN THE SALE PRICE; AND

 

(2)           LENDER MAY COLLECT FROM SUCH INDEMNITOR EVEN IF LENDER, BY
FORECLOSING ON THE REAL PROPERTY COLLATERAL, HAS DESTROYED ANY RIGHT SUCH
INDEMNITOR MAY HAVE TO COLLECT FROM BORROWER.

 

THIS IS AN UNCONDITIONAL AND IRREVOCABLE WAIVER OF ANY RIGHTS AND DEFENSES SUCH
INDEMNITOR MAY HAVE IF THIS AGREEMENT IS DEEMED OR BECOMES SECURED BY REAL
PROPERTY.  THESE RIGHTS AND DEFENSES INCLUDE, BUT ARE NOT LIMITED TO, ANY RIGHTS
OR DEFENSES BASED UPON CCP SECTIONS 580a, 580b, 580d, OR 726.

 

(c)           The failure of Lender to insist upon strict compliance with any of
the terms hereof shall not be considered to be a waiver of any such terms, nor
shall it prevent Lender from insisting upon strict compliance with this
Agreement or any of the other Loan Documents at any time thereafter.

 

15.           Severability.  All rights, powers and remedies provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable law, and are intended to be limited to the extent (but
only to the extent) necessary so that they will not render this Agreement
invalid or unenforceable.  If any term, covenant, condition, or provision of
this Agreement or the application thereof to any person or circumstances shall,
to any extent, be invalid or unenforceable, the remaining terms, covenants,
conditions and provisions of this Agreement, or the application of such term,
covenant, condition or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby, and
each term, covenant, condition and provision of this Agreement shall be

 

15

--------------------------------------------------------------------------------

 

modified and/or limited to the extent necessary to render the same valid and
enforceable to the fullest extent permitted by law.

 

16.           Inconsistencies Among the Loan Documents.  Nothing contained
herein is intended to modify in any way the obligations of Indemnitor under the
Loan Agreement, the Note, the Mortgage or any other Loan Document.  Any
inconsistencies, subject to the prior sentence, among the Loan Documents shall
be construed, interpreted and resolved so as to benefit Lender, and Lender’s
election of which interpretation or construction is for Lender’s benefit shall
govern.

 

17.           Successors and Assigns.  This Agreement shall be binding upon
Indemnitor’s successors and assigns and shall inure to the benefit of Lender,
the Lender Parties and their respective successors and assigns, and shall
survive payment of the Loan, foreclosure, deed-in-lieu of foreclosure and any
other transfer of the Premises or any interest therein, subject to Subsections
3(c) and (d), hereof.

 

18.           Governing Law.  In all respects, including, without limitation,
matters of construction and performance of this Agreement and the obligations
arising hereunder, this Agreement shall be governed by, and construed in
accordance with, the laws of the state in which the Premises is located
applicable to contracts and obligations made and performed in such state and any
applicable laws of the United States of America.  Interpretation and
construction of this Agreement shall be according to the contents hereof and
without presumption or standard of construction in favor of or against
Indemnitor or Lender.

 

19.           Time of the Essence.  Time shall be of the essence in the
performance of all obligations of Indemnitor under this Agreement and every
other Loan Document.

 

20.           Legal Construction.

 

(a)           All terms contained herein shall be construed, whenever the
context of this agreement so requires, so that the singular number shall include
the plural, and the plural the singular, and the use of any gender shall include
all genders.

 

(b)           The terms “include” and “including” as used in this Agreement
shall be construed as if followed by the phrase “without limitation”.

 

(c)           Any provision of this Agreement permitting the recovery of
attorneys’ fees and costs shall be deemed to include such fees and costs
incurred in all appellate proceedings.

 

21.           Unimpaired Liability.  The liability of Indemnitor under this
Agreement shall in no way be limited or impaired by, and subject to the proviso
in Section 23(b) of this Agreement, Indemnitor hereby consents to and agrees to
be bound by, any amendment or modification of the provisions of the Note, the
Loan Agreement, the Mortgage or any other Loan Document.  In addition, the
liability of Indemnitor under this Agreement shall in no way be limited or
impaired by (i) any extensions of time for performance required by the Note, the
Loan Agreement, the Mortgage or any of the other Loan Documents, (ii) any sale
or transfer of all or part of the Premises, (iii) any exculpatory provision in
the Note, the Loan Agreement, the Mortgage, or any

 

16

--------------------------------------------------------------------------------

 

other Loan Document limiting Lender Parties’ recourse to the Premises or to any
other security for the Loan, or limiting Lender Parties’ rights to a deficiency
judgment against Borrower or Indemnitor, (iv) the accuracy or inaccuracy of the
representations and warranties made by any Indemnitor or Borrower under the this
Agreement, the Note, the Loan Agreement, the Mortgage or any other Loan
Document, (v) the release of Indemnitor or any other person or party from
performance or observance of any of the agreements, covenants, terms or
condition contained in any other Loan Document by operation of law, Lender’s
voluntary act, or otherwise, (vi) the release or substitution in whole or in
part of any security for the Loan, or (vii) Lender’s failure to record the
Mortgage or file any UCC financing statements (or Lender’s improper recording or
filing of any thereof) or to otherwise perfect, protect, secure or insure any
security interest or lien given as security for the Loan; and, in any such case,
whether with or without notice to Indemnitor and with or without consideration. 
Any one or more parties liable upon or in respect of this Agreement may be
released without affecting the liability of any Indemnitor not so released.

 

22.           Availability of Other Remedies.  It is understood and agreed by
Indemnitor that:  any rights and remedies Lender Parties may have under this
Agreement, as well as any duties and obligations of Indemnitor under this
Agreement, are each in addition to and independent of and shall not in any
manner whatsoever supersede, replace, diminish, toll or abrogate, or be
superseded, replaced, diminished, tolled or abrogated by any (A) rights and
remedies Lender Parties may at any time have under this or any other documents
or agreements or insurance policies, or as may be generally available at law or
in equity, including, but not limited to, the right to contribution which Lender
Parties may have against Indemnitor, or any other person or party, under any
applicable Environmental Law, including but not limited to CERCLA and SARA, as
amended from time to time, or any other applicable federal, State or local laws,
rules or regulations, or (B) any duties and obligations of any one or more of
Indemnitor under this or any other documents or agreements or insurance
policies, or as may be generally imposed by law or in equity.

 

23.           Bankruptcy.

 

(a)           The obligations of Indemnitor hereunder shall remain in full force
and effect without regard to, and shall not be affected or impaired by any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Borrower, Indemnitor, any other
guarantor (which term shall include any other party at any time directly or
contingently liable for any of Borrower’s obligations under the Loan Documents)
or any affiliate of Borrower or any action taken with respect to this Agreement
by any trustee or receiver, or by any court, in any such proceeding, whether or
not Indemnitor shall have had notice or knowledge of any of the foregoing.

 

(b)           Notwithstanding any modification, discharge or extension of the
maturity date of the Loan, or any amendment, modification, stay or cure of
Lender’s rights under the Loan Agreement, the Note, Mortgage or any other Loan
Document which may occur in any bankruptcy or reorganization case or proceeding
affecting Borrower, whether permanent or temporary, and whether or not assented
to by Lender, Indemnitor hereby agrees that Indemnitor shall be obligated
hereunder to pay the amounts due hereunder in accordance with the terms of this
Agreement as in effect on the date hereof; provided that no such amendment or
modification

 

17

--------------------------------------------------------------------------------

 

of any provisions affecting the obligations and liabilities for which Indemnitor
may be required to indemnify hereunder shall be binding on Indemnitor unless
Indemnitor has consented to such amendment or modification.

 

(c)           Indemnitor agrees that to the extent that Borrower makes a payment
or payments to Lender with respect to any claim indemnified against Indemnitor
herein, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set side or required,
for any of the foregoing reasons or for any other reasons, to be repaid or paid
over to a custodian, trustee, receiver or any other party under any bankruptcy
act, state or federal law, common law or equitable cause, then to the extent of
such payment or repayment, the obligation or part thereof intended to be
satisfied shall be revived and continue in full force and effect as if such
payment had not been made and Indemnitor shall be primarily liable for this
obligation.

 

24.           Subrogation Waiver/Subordination.

 

(a)           Notwithstanding any provision to the contrary contained in the
other Loan Documents or this Agreement, Indemnitor hereby unconditionally and
irrevocably waives until all obligations under the Loan Documents have been paid
and performed in full and all applicable preference periods and fraudulent
transfer periods have expired, (i) any and all rights of subrogation (whether
arising under contract, 11 U.S.C. §509 or otherwise), to the claims, whether
existing now or arising hereafter, Lender may have against Borrower, and
(ii) any and all rights of reimbursement, contribution or indemnity against
Borrower or any future guarantors of any obligations under the Loan Documents)
which may have heretofore arisen or may hereafter arise in connection with any
guaranty or pledge or grant of any lien or security interest made in connection
with any obligations under the Loan Documents.  Indemnitor hereby acknowledges
that the waiver contained in the preceding sentence (the “Subrogation Waiver”)
is given as an inducement to Lender to enter into the Loan Documents and, in
consideration of Lender’s willingness to enter into the Loan
Documents, Indemnitor agrees not to amend or modify in any way the Subrogation
Waiver without Lender’s prior written consent.  If any amount shall be paid to
Indemnitor on account of any claim set forth at any time when all of the
obligations under the Loan Documents shall not have been paid or performed in
full, such amount shall be held in trust by Indemnitor for Lender’s benefit,
shall be segregated from the other funds of Indemnitor and shall forthwith be
paid over to Lender to be applied in whole or in part by Lender against such
obligations, whether matured or unmatured in accordance with Section 2.7(c) of
the Loan Agreement.  Nothing contained herein is intended or shall be construed
to give to Indemnitor any rights of subrogation or right to participate in any
way in Lender’s rights, title or interest in the Loan Documents, notwithstanding
any payments made by Indemnitor under this Agreement, all such rights of
subrogation and participation being hereby expressly waived and released until
all obligations under the Loan Documents have been paid and performed in full
and all applicable preference periods and fraudulent transfer periods have
expired.

 

(b)           In the event that Indemnitor shall advance or become obligated to
pay any sums with respect to any obligation hereby guaranteed or in the event
that for any reason whatsoever Borrower or any subsequent owner of the
collateral securing the Loan is now, or shall hereafter become, indebted to
Indemnitor, Indemnitor agrees that the amount of such sums

 

18

--------------------------------------------------------------------------------

 

and of such indebtedness together with all interest thereon, shall at all times
be subordinate as to the lien, time of payment and in all other respects, to all
sums, including principal, interest and other amounts, at any time owing to
Lender under any of the Loan Documents and that Indemnitor shall not be entitled
to enforce or receive payment thereof until all such sums owing to Lender have
been paid.  Nothing herein contained is intended or shall be construed to give
to Indemnitor any right to participate in any way in the right, title or
interest of Lender in or to the collateral securing the Loan, notwithstanding
any payments made by Indemnitor under this Agreement, all such rights of
participation being hereby expressly waived and released.

 

25.           No Third Party Beneficiary.  The terms of this Agreement are for
the sole and exclusive protection and use of the Lender Parties.  Except as
provided herein, no party shall be a third-party beneficiary hereunder, and no
provision hereof shall operate or inure to the use and benefit of any
third-party.

 

26.           Indemnitor’s Subordination.  From and after the date that any
claim hereunder shall have been made by any of the Lender Parties, and
continuing until any such claim shall have been paid in full or there has been a
final determination (which shall mean a non appealable determination, or where
any right of appeal exists, it has been allowed to lapse) that such claim is not
valid, notwithstanding any other provision of this Agreement to the
contrary, Indemnitor hereby subordinates to Lender Parties’ rights under this
Agreement and the other Loan Documents, any claim or other rights which
Indemnitor may now have or hereafter acquire against Borrower or any guarantor
of all or any of the Loan that arise from the existence or performance of
Indemnitor’s obligations under this Agreement (all such claims and rights are
referred to as Indemnitor’s “Conditional Rights”), including, without
limitation, any right of subrogation, reimbursement, contribution, or
indemnification, and any right to participate in any claim or remedy of Lender
Parties against Borrower or any collateral which Lender Parties now have or
hereafter acquire, whether or not such claim, remedy or right of Indemnitor
arises by contract or in equity or under law, by virtue of any payment made by
Indemnitor hereunder, including without limitation, the right to take or receive
from Indemnitor, directly or indirectly, in cash or other property or by setoff
or in any other manner, payment or security on account of such claim or other
rights.  If, notwithstanding the foregoing provisions, any amount shall be paid
to Indemnitor hereunder on account of any such Indemnitor’s Conditional Rights
and either (i) such amount is paid to such Indemnitor at any time when the Loan
shall not have been paid or performed in full, or (ii) regardless of when such
amount is paid to such Indemnitor, any payment made by Indemnitor to Lender is
at any time determined to be a preference or a Preferential Payment (hereinafter
defined) under the terms of any bankruptcy or insolvency laws, rules,
regulations, orders or decrees, then such amount paid to Indemnitor shall be
held in trust for the benefit of Lender and shall forthwith be paid to Lender to
be credited and applied upon the Loan, whether matured or unmatured, in
accordance with Section 2.7(c) of the Loan Agreement.  As used herein, the term
“Preferential Payment” shall mean any payment all or any part of which is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid by Lender or paid over to a trustee, receiver or any
other entity, whether pursuant to any bankruptcy or fraudulent transfer act or
other similar act or law.

 

27.           Subrogation. Indemnitor shall take any and all reasonable actions,
including institution of legal action against third parties, necessary or
appropriate to obtain reimbursement, payment or compensation from such persons
responsible for the presence of any Hazardous

 

19

--------------------------------------------------------------------------------

 

Substances at, in, on, under or near the Premises, or for which it might
otherwise obligated by law to bear the cost.  Lender Parties shall be and hereby
are subrogated to all of Indemnitor’s rights now or hereafter in such claims.

 

28.           Counterparts.  This Agreement may be executed in counterparts,
which together shall constitute one and the same original agreement.

 

[No Further Text On This Page]

 

20

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Indemnitor has executed this Agreement as of the date first
above written.

 

 

 

 

 

 

BORROWER:

 

KR MML 12701, LLC,

 

 

a Delaware limited liability company

 

 

 

 

 

 

By:

Kilroy Realty, L.P.,

 

 

 

a Delaware limited partnership,

 

 

 

its sole managing member

 

 

 

 

 

 

 

 

By:

Kilroy Realty Corporation,

 

 

 

 

a Maryland corporation,

 

 

 

 

its general partner

 

 

 

 

 

 

 

By:

/s/Joseph E. Magri

 

 

 

Name:

Joseph E. Magri

 

 

 

Its:

Vice President and Corporate Counsel

 

 

 

 

 

 

 

 

 

 

 

By:

/s/Michelle Ngo

 

 

 

Name:

Michelle Ngo

 

 

 

Its:

Vice President and Treasurer

 

 

 

 

 

GUARANTOR:

 

KILROY REALTY, L.P.,

 

 

a Delaware limited partnership

 

 

 

 

 

By:

Kilroy Realty Corporation,

 

 

 

a Maryland corporation,

 

 

 

its general partner

 

 

 

 

 

 

By:

/s/Joseph E. Magri

 

 

 

Name:

Joseph E. Magri

 

 

 

Its:

Vice President and Corporate Counsel

 

 

 

 

 

 

 

 

 

By:

/s/Michelle Ngo

 

 

 

Name:

Michelle Ngo

 

 

 

Its:

Vice President and Treasurer

 

S-1

--------------------------------------------------------------------------------

 

EXHIBIT A

 

PREMISES

 

SANTA MONICA, CA

 

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

 

PARCEL 1:

 

LOT 7 OF TRACT NO. 49694, IN THE CITY OF SANTA MONICA, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1175 PAGES 37 TO 40 INCLUSIVE
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

PARCEL 2:

 

EASEMENTS FOR SURFACE PARKING, ACCESS, PARKING OPERATIONS SYSTEM, SERVICE
DRIVEWAYS, TRUCK DOCK, MAINTENANCE AND REPAIR, COURTYARD SECURITY AND FENCE,
PARKING WITHIN THE SMNSA GARAGE, WATER TREATMENT FACILITY, AN ART GATE, AND
ADDITIONAL EASEMENTS, AS DEFINED AND PROVIDED IN ARTICLE 5 OF THAT CERTAIN
DOCUMENT ENTITLED “SECOND DECLARATION OF PROTECTIVE COVENANTS AND RESTRICTIONS
AND RECIPROCAL EASEMENT AGREEMENT FOR THE ARBORETUM”, RECORDED NOVEMBER 23, 1994
AS INSTRUMENT NO. 94-2115484 AND AMENDED MAY 2, 1995 AS INSTRUMENT NO.
95-717712, ALL OF OFFICIAL RECORDS, WITHIN PORTIONS OF LOTS 1 TO 6, INCLUSIVE,
OF SAID TRACT NO. 49694, AS DESCRIBED IN SAID DOCUMENT.

 

A-1

--------------------------------------------------------------------------------

 

IRVINE, CA

 

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF ORANGE, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

 

PARCEL A:

 

PARCEL 4, IN THE CITY OF IRVINE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN
ON PARCEL MAP NO. 84-601 RECORDED IN BOOK 191, PAGES 18 THROUGH 21 INCLUSIVE OF
PARCEL MAPS, OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.

 

EXCEPT ANY AND ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS
AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM, AND ALL
PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE
LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND
OPERATING THEREFORE AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY
OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE
FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND
SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH
OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP,
MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER,
THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE
UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED IN DEED FROM BERTEA
CORPORATION, RECORDED NOVEMBER 29, 1978 IN BOOK 12941, PAGE 977 OF OFFICIAL
RECORDS.

 

PARCEL B:

 

AN UNDIVIDED 22.46 PERCENT INTEREST IN AND TO PARCEL 5, IN THE CITY OF IRVINE,
COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 84-601
RECORDED IN BOOK 191, PAGES 18 THROUGH 21 INCLUSIVE OF PARCEL MAPS, OFFICIAL
RECORDS OF ORANGE COUNTY, CALIFORNIA.

 

EXCEPT ANY AND ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS
AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM, AND ALL
PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE
LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND
OPERATING THEREFORE AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY
OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE
FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND
SHAFTS INTO, THROUGH OR

 

A-2

--------------------------------------------------------------------------------

 

ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR
DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE
EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,
DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO
DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500
FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED IN DEED FROM BERTEA CORPORATION,
RECORDED NOVEMBER 29, 1978 IN BOOK 12941, PAGE 977 OF OFFICIAL RECORDS.

 

PARCEL C:

 

AN EXCLUSIVE EASEMENT FOR THE MAINTENANCE OF TREES, SHRUBS AND OTHER LANDSCAPING
OVER AND ACROSS THE SOUTHWESTERLY 3.00 FEET OF PARCEL A ON PARCEL MAP NO.
81-602, RECORDED IN BOOK 165, PAGES 18 THROUGH 21, INCLUSIVE, OF PARCEL MAPS, AS
CREATED BY THE GRANT DEED RECORDED MARCH 9, 1983 AS INSTRUMENT NO. 83-102679, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

PARCEL D:

 

AN APPURTENANT, NON-EXCLUSIVE EASEMENT OVER, UNDER AND ACROSS THE COMMON AREAS
AS DEFINED IN THAT CERTAIN TENANCY IN COMMON AGREEMENT AND AMENDED AND RESTATED
AGREEMENT OF ESTABLISHMENT OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT
OF EASEMENTS FOR KOLL CENTER IRVINE DATED AS OF MAY 10, 1989 AND RECORDED
MAY 18, 1989 AS INSTRUMENT NO. 89-265502, IN THE OFFICIAL RECORDS OF ORANGE
COUNTY, CALIFORNIA, AS AMENDED BY INSTRUMENTS RECORDED JULY 11, 1989 AS
INSTRUMENT NO. 89-365834, APRIL 17, 2000 AS INSTRUMENT NO. 20000196032 AND
SEPTEMBER 8, 2006 AS INSTRUMENT NO. 2006000602663, ALL OF OFFICIAL RECORDS
(COLLECTIVELY, THE “AGREEMENT”), FOR THE CONSTRUCTION, MAINTENANCE AND USE OF
UTILITIES AS MORE FULLY DESCRIBED IN ARTICLE 8.01(A) OF THE AGREEMENT.

 

PARCEL E:

 

AN APPURTENANT, NON-EXCLUSIVE EASEMENT OVER, UNDER AND ACROSS THE COMMON AREAS
FOR ACCESS, INGRESS AND EGRESS OVER AND ACROSS ALL ACCESS WAYS SUFFICIENT TO
GUARANTEE ACCESS TO AND FROM ALL PARKING FACILITIES (AS DEFINED IN THE
AGREEMENT) AND FROM ADJACENT PUBLIC STREETS AS MORE FULLY DESCRIBED IN
SECTION 8.01(B) OF THE AGREEMENT.

 

PARCEL F:

 

AN APPURTENANT NON-EXCLUSIVE EASEMENT OVER, UNDER AND ACROSS THE COMMON AREAS
FOR PARKING OF VEHICLES AS MORE FULLY DESCRIBED IN

 

A-3

--------------------------------------------------------------------------------

 

ARTICLE 8.01(D) OF THE AGREEMENT, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH
IN SUCH ARTICLE 8.01(D).

 

PARCEL G:

 

AN EASEMENT FOR THE PURPOSE OF CONSTRUCTION, INSTALLATION, MAINTENANCE, REMOVAL,
REPLACEMENT, OPERATION AND USE OF AN EMERGENCY GENERATOR (AND ITS ASSOCIATED
UTILITY LINES AND CONDUITS) AS CREATED BY THAT CERTAIN SECOND AMENDMENT TO
TENANCY IN COMMON AGREEMENT AND AMENDED AND RESTATED AGREEMENT ESTABLISHING
COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANTING EASEMENTS FOR KOLL CENTER
IRVINE SOUTHWEST, SUBJECT TO ALL THE TERMS, PROVISIONS AND CONDITIONS THEREIN
CONTAINED, RECORDED SEPTEMBER 8, 2006 AS INSTRUMENT NO. 06-602663, OFFICIAL
RECORDS.

 

A-4

--------------------------------------------------------------------------------