Exhibit 10.56

MEZZANINE LOAN AGREEMENT

This MEZZANINE LOAN AGREEMENT (this “Agreement”), dated as of January 29, 2007,
is between KBS REIT ACQUISITION IX, LLC, a Delaware limited liability company
(“Borrower”), with a mailing address at 620 Newport Center Drive, Suite 1300,
Newport Beach, California 92663, and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Lender”), with a mailing address at 2030 Main Street, Suite 800, Irvine,
California 92614.

R E C I T A L S

 

A. KBS CRESCENT GREEN, LLC, a Delaware limited liability company (“Owner”),
proposes to borrow from Wells Fargo Bank, National Association (“Senior Lender”)
and Senior Lender proposes to lend to Owner the principal sum of Thirty Two
Million Four Hundred Thousand and No/100 Dollars ($32,400,000.00) (the “Senior
Loan”). The Loan is evidenced by a promissory note (as the same may from time to
time be amended, restated or otherwise modified, the “Senior Note”) executed by
Owner, of even date herewith, payable to the order of Senior Lender in the
principal amount of the Senior Loan, and secured by, among other things, a deed
of trust made by Owner for the benefit of Senor Lender (as the same may from
time to time be amended, restated or otherwise modified, “Deed of Trust”),
encumbering all of Owner’s fee and leasehold interest in that certain real
property described on Exhibit A attached hereto (the “Property”).

 

B. Borrower is the owner of one hundred percent (100%) of the membership
interests in Owner.

 

C. Borrower proposes to borrow from Lender and Lender proposes to lend to
Borrower the principal sum of EIGHT MILLION FOUR HUNDRED THOUSAND AND NO/100
DOLLARS ($8,400,000.00) (the “Loan”). The Loan is evidenced by that certain
Promissory Note, of even date herewith, executed by Borrower payable to the
order of Lender (as the same may from time to time be amended, restated or
otherwise modified, the “Note”), and is secured by, among other things, (i) that
certain Pledge and Security Agreement (Membership Interests in Owner), of even
date herewith, executed by Borrower for the benefit of Lender, and (ii) that
certain Pledge and Security Agreement (Membership Interests in Borrower), of
even date herewith, executed by KBS Limited Partnership, a Delaware limited
partnership (“Guarantor”), for the benefit of Lender (together, as the same may
from time to time be amended, restated or otherwise modified, the “Pledge
Agreements”).

 

D. The loan documents include this Agreement, the Note, the Pledge Agreements
and the other documents described in the Note as Loan Documents (collectively,
as the same may from time to time be amended, restated or otherwise modified,
the “Loan Documents”).

NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. DEFINITIONS

 

1.1 DEFINED TERMS. The following capitalized terms generally used in this
Agreement shall have the meanings defined or referenced below. Certain other
capitalized terms used only in specific sections of this Agreement are defined
in such sections.

“ACS Lease” means, individually or collectively, as the context requires, that
certain Lease Agreement dated as of May 26, 2006 by and between ACS and Crescent
1200, L.L.C., a Delaware limited liability company, as amended by that certain
Lease Modification Agreement No. 1 dated as of December 20, 2006 (the “1200
Lease”), and that certain Lease Agreement dated as of June 2, 2006 by and
between ACS and Crescent 1300, L.L.C., a Delaware limited liability company, as
amended by that certain Lease Modification Agreement No. 1 dated as of
December 20, 2006 (the “1300 Lease”).

 

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“ADA” - means the Americans with Disabilities Act of July 26, 1990, Pub. L.
No. 101-336, 104 Stat. 327, 42 U.S.C. §§ 12101 et seq., as now or hereafter
amended or modified.

“Additional Fee” – means Ten Thousand Five Hundred and No/100 Dollars
($10,500.00).

“Affected Lease” - shall have the meaning ascribed to such term in
Section 4.1(b).

“Affiliate” - shall have the meaning ascribed to such term in Section 5.2.

“Agreement” - shall have the meaning ascribed to such term in the preamble
hereto.

“Allocated Share” means at any time, and from time to time, an amount expressed
as a percentage that is calculated by dividing the cost basis of the Property by
the cost basis of all real property owned directly or indirectly by the REIT or
the REIT Operating Partnership.

“Automatic Default” - shall have the meaning ascribed to such term in
Section 7.1.b.

“Bankruptcy Code” - shall have the meaning ascribed to such term in
Section 7.1.b(i).

“Borrower” - shall have the meaning ascribed to such term in the preamble
hereto.

“Business Day” - means a day of the week (but not a Saturday, Sunday or holiday)
on which the offices of Lender are open to the public for carrying on
substantially all of Lender’s business functions. Unless specifically referenced
in this Agreement as a Business Day, all references to “days” shall be to
calendar days.

“Cash Management Agreement” – shall have the meaning ascribed to such term in
Section 6.12.d.

“Claims” - shall have the meaning ascribed to such term in Section 6.11.a.

“Collateral” – means, collectively, the “Collateral” as defined in each of the
Pledge Agreements.

“Cost” - shall have the meaning ascribed to such term in Section 6.12.c.

“Debtor Relief Law” - shall have the meaning ascribed to such term in
Section 7.1.b(i).

“Deed of Trust” - shall have the meaning ascribed to such term in Recital A.

“Default” - shall have the meaning ascribed to such term in Section 7.1.

“Effective Date” - means the date Lender authorizes the Loan proceeds to be
released to or for the benefit of Borrower.

“ERISA” - shall have the meaning ascribed to such term in Section 5.1.aa.

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

 

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“Ground Lease” – means that certain Ground Lease Agreement, dated October 1,
2006, by and between Crescent 1200, L.L.C., a Delaware limited liability
company, and Crescent 1300, L.L.C., a Delaware limited liability company, as the
“Original Tenant,” as amended.

“Guarantor” - shall have the meaning ascribed to such term in Recital C.

“Hazardous Materials” - shall have the meaning ascribed to such term in
Section 6.2.a.

“Hazardous Materials Claims” - shall have the meaning ascribed to such term in
Section 6.2.c.

“Hazardous Materials Laws” - shall have the meaning ascribed to such term in
Section 6.2.b.

“Impounds” - shall have the meaning ascribed to such term in Section 6.12.c.

“Independent Manager” - shall have the meaning ascribed to such term in
Section 5.2.

“Interested Parties” - shall have the meaning ascribed to such term in
Section 6.21.

“Lease Modification” - shall have the meaning ascribed to such term in
Section 4.1.a.

“Leases” – means all present and future leases of the Property or any portion
thereof, all licenses and agreements relating to the management, leasing or
operation of the Property or any portion thereof, and all other agreements of
any kind relating to the use or occupancy of the Property or any portion
thereof, whether such leases, licenses and agreements are now existing or
entered into after the date hereof, including, without limitation, all
guarantees of and security for the tenants’ performance thereunder, and all
amendments, extensions, renewals or modifications thereto which are permitted
hereunder.

“Lender” - shall have the meaning ascribed to such term in the preamble hereof.

“Lender Group” - shall have the meaning ascribed to such term in Section 6.19.

“Loan” – shall have the meaning ascribed to such term in Recital C.

“Loan Amount” - means the principal sum that Lender agrees to lend and Borrower
agrees to borrow pursuant to the terms and conditions of this Agreement: Eight
Million Four Hundred Thousand and No/100 Dollars ($8,400,000.00).

“Loan Documents” - shall have the meaning ascribed to such term in Recital D and
as listed on Exhibit C.

“Loan Fee” – means an amount equal to Forty Two Thousand and No/100 Dollars
($42,000.00).

“Material Adverse Effect” – shall have the meaning ascribed to such term in
Section 7.1.a.

“Maturity Date” - means January 31, 2008.

“New Lease” - shall have the meaning ascribed to such term in Section 4.1.a.

“Note” - shall have the meaning ascribed to such term in Recital C.

“Note Rate” – shall have the meaning ascribed to such term in the Note.

 

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“Obligations” - means all present and/or future obligations of every kind or
nature of Borrower at any time and/or from time to time owed to Lender under any
one or more of the Loan Documents, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or noncontingent, including
obligations of performance as well as obligations of payment, and including
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Borrower.

“Optional Default” - shall have the meaning ascribed to such term in
Section 7.1.a.

“Other Related Documents” – means, collectively, the documents described in Part
2 of Exhibit C of this Agreement.

“Owner” - shall have the meaning ascribed to such term in Recital A.

“Payments” – means the rents, issues, deposits and profits of the Property,
including, without limitation, all amounts payable and all rights and benefits
accruing to Borrower under the Leases.

“Permitted REIT Distributions” means, subject to compliance with the provisions
of Section 6.23 hereof, distributions (directly or indirectly) by Borrower to
the REIT (which indirectly owns 100% of Borrower) to the extent that, if not
distributed to the REIT: (A) the REIT would, as the result of the failure of
Borrower to receive cash from the Property, be unable to distribute all REIT
taxable income with respect to the Property, or (B) the REIT would, solely as a
result of the failure of Borrower to receive cash from the Property, fail to
satisfy its obligations to pay REIT Operating Expenses.

“Person” - means any natural person, corporation, limited partnership, general
partnership, joint stock company, limited liability company, limited liability
partnership, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other organization, whether or not a legal entity,
or any other nongovernmental entity, or any Governmental Authority.

“Plan” - shall have the meaning ascribed to such term in Section 5.1.aa.

“Pledge Agreements” – shall have the meaning ascribed to such term in the
Recital C.

“Projection Period” shall have the meaning set forth in Section 6.23.

“Post-Default Impounds” - shall have the meaning ascribed to such term in
Section 6.12.a.

“Proceeds” - shall have the meaning ascribed to such term in Section 6.11.b.

“Prohibited Equity Transfer” - shall have the meaning ascribed to such term in
Section 6.15.c(i).

“Prohibited Property Transfer” - shall have the meaning ascribed to such term in
Section 6.15.b(i).

“Property” - shall have the meaning ascribed to such term in Recital A.

“Property Debt Service” – means an amount equal to the greater of (a) the sum of
(i) the amount of the Senior Loan multiplied by the actual per annum interest
rate under the Senior Loan, plus (ii) the amount of the Loan multiplied by the
initial per annum interest rate under the Loan and (b) the Total Project Debt
multiplied by six and one quarter percent (6.25%).

“REIT” - means KBS Real Estate Investment Trust, Inc.

 

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“REIT Distribution Notice” - shall have the meaning ascribed to such term in
Section 6.23.

“REIT Operating Expenses” - means the Allocated Share of all actual costs,
expenses and/or amounts incurred by, or payable or reimbursable by, the REIT or
the REIT Operating Partnership for any of the following: (a) charges and fees
charged by banks, audit fees, tax preparation fees, legal fees (not including
any legal fees incurred by Borrower or Senior Borrower at the property level or
in any litigation or legal matter concerning Lender, including a bankruptcy
filing affecting Borrower or Senior Borrower), accounting consulting fees
related to emerging technical pronouncements, tax consulting fees relating to
real estate investment trust issues, due diligence costs and fees arising from
state and local taxes, fees and expenses incurred in connection with annual
corporate filings, and local, state and federal income taxes, (b) professional
fees related to corporate structuring and/or filings, consulting fees and filing
fees arising from SEC reporting requirements, including, without limitation, 10K
filings, 10Q filings, and 8k filings, consulting fees and other fees and costs
related to Sarbanes-Oxley 404 compliance requirements.

“REIT Operating Partnership” means KBS Limited Partnership, a Delaware limited
partnership.

“Required Equity Investment” - means Eight Million One Hundred Forty Thousand
and No/100 Dollars ($8,140,000.00).

“Restricted Party” - shall have the meaning ascribed to such term in
Section 6.15.a.

“Senior Lender” - shall having the meaning ascribed to such term in Recital A.

“Senior Loan” - shall having the meaning ascribed to such term in Recital A.

“Senior Loan Default” - means the occurrence of a default under the Senior Loan
Agreement or any other Senior Loan Document and the expiration of any applicable
grace or cure period.

“Senior Loan Documents” - means the Senior Note, the Deed of Trust and the other
documents defined as “Loan Documents” in the Deed of Trust.

“Senior Note” - shall have the meaning ascribed to such term in Recital A.

“Springing Interest Reserve” - shall have the meaning ascribed to such term in
Section 6.12.b.

“Termination Payment” - shall have the meaning ascribed to such term in
Section 4.1.b.

“Total Project Debt” - means the sum of the outstanding balance of the Loan,
plus the outstanding balance of the Senior Loan, each calculated as of the date
of determination.

“Transfer” - shall have the meaning ascribed to such term in Section 6.15.a.

ARTICLE 2. LOAN

 

1.2 LOAN. By and subject to the terms of this Agreement, Lender agrees to lend
to Borrower and Borrower agrees to borrow from Lender a principal sum equal to
the Loan Amount, said sum to be evidenced by the Note. The Note shall be
secured, in part, by the Pledge Agreements. Borrower will use the proceeds of
the Loan to make its capital contribution to Owner in connection with Owner’s
acquisition of the Property and for such other purposes and uses as may be
permitted under this Agreement and the other Loan Documents.

 

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1.3

LOAN FEE; ADDITIONAL FEE. Borrower shall pay to Lender, on or before the
Effective Date, the Loan Fee. If the Loan has not been repaid in full as of the
date eight (8) months from the Effective Date, Borrower shall pay to Lender on
the first (1st) day of the ninth (9th) month of the term of the Loan,
immediately and without further notice, the Additional Fee.

 

1.4 LOAN DOCUMENTS. Borrower shall deliver to Lender concurrently with this
Agreement each of the Loan Documents, properly executed and in recordable form,
as applicable.

 

1.5 EFFECTIVE DATE. The date of the Loan Documents is for reference purposes
only. The Effective Date shall be the date Lender authorizes the Loan proceeds
to be released to or for the benefit of Borrower.

 

1.6 MATURITY DATE. All sums outstanding under this Agreement and the other Loan
Documents shall be repaid in full on the Maturity Date. All payments due to
Lender under this Agreement, whether at the Maturity Date or otherwise, shall be
paid in immediately available funds.

 

1.7 CREDIT FOR PRINCIPAL PAYMENTS. Any payment made upon the outstanding
principal balance of the Loan shall be credited as of the Business Day received,
provided such payment is received by Lender no later than 12:00 noon (Pacific
Standard Time or Pacific Daylight Time, as applicable) and constitutes
immediately available funds. Any principal payment received after said time or
which does not constitute immediately available funds shall be credited upon
such funds having become unconditionally and immediately available to Lender.

 

1.8 FULL REPAYMENT AND RELEASE. Upon receipt of all sums owing and outstanding
under the Loan Documents, Lender shall execute a release of the Pledge
Agreements and terminate any UCC-1 financing statements filed in connection with
the liens of the Pledge Agreements; provided, however, that all of the following
conditions shall be satisfied at the time of, and with respect to, such release
and terminations: (a) Lender shall have received all escrow, closing and
recording costs, the reasonable costs of preparing and delivering such releases
and terminations, and any sums then due and payable under the Loan Documents;
and (b) Lender shall have received a written release satisfactory to Lender of
any continuing obligation or liability of Lender in connection with the Loan
and/or the Property and Improvements.

ARTICLE 3. DISBURSEMENT

 

1.9 CONDITIONS PRECEDENT. Lender’s obligation to make any disbursements or take
any other action under the Loan Documents shall be subject at all times to
satisfaction of each of the following conditions precedent:

(a) There shall exist no Default, as defined in this Agreement, or Default as
defined in any of the other Loan Documents, or event, omission or failure of
condition which would constitute a Default after notice or lapse of time, or
both; and

(b) Lender shall have received all Loan Documents and all other documents,
instruments, policies, and forms of evidence or other materials required or
requested by Lender under the terms of this Agreement or any of the other Loan
Documents; and

(d) Lender shall have received all Other Related Documents and all other
documents, instruments, policies, and forms of evidence or other materials
required or requested by Lender under the terms of any of the Other Related
Documents; and

 

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(d) Senior Lender shall have made the Senior Loan to Borrower pursuant to the
Senior Loan Documents, each of which shall be in form and substance satisfactory
to Lender, and there shall exist no Senior Loan Default, or event, omission or
failure of condition which would constitute a Senior Loan Default after notice
or lapse of time, or both; and

(e) Prior to the Effective Date, Lender shall have received evidence reasonably
satisfactory to Lender that Borrower has invested, or will invest, as of the
Effective Date, the Required Equity Investment in the Property; and

(f) Lender shall have determined that Total Project Debt does not exceed
eighty-five percent (85%) of the stabilized appraised value of the Property, and
that the ratio of Property Debt Service to actual net operating income of the
Property is not greater than 1.00 to 1.00; and

(g) Lender shall have received evidence of the insurance required under the Loan
Documents, with Lender as an additional insured/loss payee thereunder; and

(h) Lender shall have received and approved the budgets, if any, required to be
submitted to Lender under the Loan Documents; and

(i) There shall have been no material adverse change in the condition of
Borrower, Owner or Guarantor.

 

1.10

FUNDS TRANSFER DISBURSEMENTS. Borrower hereby authorizes Lender to disburse the
proceeds of the Loan pursuant to the Loan Documents as requested by an
authorized representative of the Borrower to any of the accounts designated in
that certain Exhibit b entitled Transfer Authorizer Designation. Borrower agrees
to be bound by any transfer request: (i) authorized or transmitted by Borrower;
or (ii) made in Borrower’s name and accepted by Lender in good faith and in
compliance with these transfer instructions, even if not properly authorized by
Borrower. Borrower further agrees and acknowledges that Lender may rely solely
on any bank routing number or identifying bank account number or name provided
by Borrower to effect a wire or funds transfer even if the information provided
by Borrower identifies a different bank or account holder than named by the
Borrower. Lender is not obligated or required in any way to take any actions to
detect errors in information provided by Borrower. If Lender takes any actions
in an attempt to detect errors in the transmission or content of transfer or
requests or takes any actions in an attempt to detect unauthorized funds
transfer requests, Borrower agrees that no matter how many times Lender takes
these actions, Lender will not in any situation be liable for failing to take or
correctly perform these actions in the future and such actions shall not become
any part of the transfer disbursement procedures authorized under this
provision, the Loan Documents, or any agreement between Borrower and Lender.
Borrower agrees to notify Lender of any errors in the transfer of any funds or
of any unauthorized or improperly authorized transfer requests within fourteen
(14) days after Lender’s confirmation to Borrower of such transfer. Lender will,
in its sole discretion, determine the funds transfer system and the means by
which each transfer will be made. Lender may delay or refuse to accept a funds
transfer request if the transfer would: (i) violate the terms of this
authorization (ii) require use of a bank unacceptable to Lender or prohibited by
government authority; (iii) cause Lender to violate any Federal Reserve or other
regulatory risk control program or guideline, or (iv) otherwise cause Lender or
any Lender to violate any applicable law or regulation. Lender shall not be
liable to Borrower or any other parties for (i) errors, acts or failures to act
of others, including other entities, banks, communications carriers or
clearinghouses, through which Borrower’s transfers may be made or information
received or transmitted, and no such entity shall be deemed an agent of Lender
or any Lender, (ii) any loss, liability or delay caused by fires, earthquakes,
wars, civil disturbances, power surges or failures, acts of government, labor
disputes, failures in communications networks, legal constraints or other events
beyond the control of Lender, or

 

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(iii) any special, consequential, indirect or punitive damages, whether or not
(a) any claim for these damages is based on tort or contract or (b) Lender or
Borrower knew or should have known the likelihood of these damages in any
situation. Lender makes no representations or warranties other than those
expressly made in this Agreement.

 

1.11 LOAN DISBURSEMENTS. All disbursements shall be held by Borrower in trust
and applied by Borrower solely for the purposes for which the funds have been
disbursed. Lender has no obligation to monitor or determine Borrower’s use or
application of the disbursements.

 

1.12 DISBURSEMENT OF LOAN PROCEEDS; LIMITATION OF LIABILITY. Borrower hereby
authorizes Lender to disburse the proceeds of the Loan, after deducting any and
all fees owed by Borrower to Lender in connection with the Loan, to Chicago
Title Company. With respect to such disbursement, Borrower understands and
agrees that Lender does not accept responsibility for errors, acts or omissions
of others, including, without limitation, the escrow company, other banks,
communications carriers or clearinghouses through which the transfer of Loan
proceeds may be made or through which Lender receives or transmits information,
and no such entity shall be deemed Lender’s agent. As a consequence, Lender
shall not be liable to Borrower for any actual (whether direct or indirect),
consequential or punitive damages which may arise with respect to the
disbursement of Loan proceeds, whether or not (a) any claim for such damages is
based on tort or contract, or (b) either Lender or Borrower knew or should have
known of the likelihood of such damages in any situation.

ARTICLE 4. LEASES

 

1.13 COVENANTS-LONG TERM LEASES.

 

  a. Lease Approvals. Borrower may cause Owner to enter into any new lease for
space in the Property (“New Lease”) or modify any existing Lease or any New
Lease (“Lease Modification”) without Lender’s consent, except that Lender’s
prior written consent shall be required if (i) the combined loan to value ratio
of the Loan and the Mezzanine Loan is greater than or equal to eighty percent
(80%) and the New Lease or Lease Modification is for space in the Property that
equals or exceeds 20,000 net rentable square feet; (ii) the combined loan to
value ratio of the Loan and the Mezzanine Loan, is less than eighty percent
(80%) and the Lease Modification relates to either of the ACS Leases and either
(x) the effective rent under such Lease (taking into consideration any tenant
improvement allowances or other concessions) would be less than ninety (90%) of
the current rent under the applicable ACS Lease or (y) such Lease Modification
would reduce the term of the applicable ACS Lease to less than three (3) years
from the date of the Lease Modification; or (iii) a Default has occurred and is
then existing.

 

  b.

Termination Payments. If Borrower or Owner receives any sums in consideration of
a termination, modification or amendment of any Lease or any release or
discharge of any tenant under any Lease (any such terminated, modified or
amended Lease or any Lease from which the tenant is released or discharged is
referred to herein as the “Affected Lease”) from any obligation thereunder (each
a “Termination Payment”), such amounts shall be held in trust or retained by
Borrower or Owner as follows: (i) if such Termination Payment is less than
$100,000, such Termination Payment shall be payable to Borrower or Owner, as
applicable; (ii) if such Termination Payment is equal to or greater than
$100,000, then, subject to the rights of Senior Lender, Borrower or Owner shall
deposit such Termination Payment with Lender to be held by Lender as an impound
in a pledged account. Borrower shall be permitted to withdraw funds from such
impounds to pay leasing costs for re-leasing the space demised under the
Affected Lease when such

 

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costs are incurred. In addition, funds in excess of the projected amount
necessary to pay for such leasing costs may be withdrawn from such reserve and
deposited into the Clearing Account (as defined in the Cash Management
Agreement) on a monthly basis in equal monthly disbursements amortized over the
remaining term of the Affected Lease. In addition, if (i) the space demised
under the Affected Lease is re-leased, in whole or in part, (ii) the new tenant
has commenced occupancy and (iii) the tenant has executed and delivered to
Lender a tenant estoppel certificate reasonably acceptable to Lender using
commercial standards customarily applied by prudent institutional mortgage
lenders for similar loans, then a pro rata portion of the remaining amount of
impounded funds with respect to such space may be deposited into the Clearing
Account based upon the percentage of the subject space which is demised under
the new lease (e.g. if fifty percent (50%) of the subject space is re-leased and
the conditions is clauses (i) through (iii) are satisfied with respect to such
space, then fifty percent (50%) of the remaining amount of funds impounded for
such space shall be disbursed). Notwithstanding the foregoing, Permitted REIT
Distributions shall have priority over the requirement to deposit such funds in
any impound account other than funds arising from any termination, modification
or amendment of either of the ACS Leases.

 

  c. Deemed Approval. With respect to any New Lease and/or Lease Modification
that requires Lender’s consent as provided above, Lender shall not unreasonably
withhold its consent and its failure to respond within five (5) Business Days
following Borrower’s request for Lender’s consent shall be deemed to constitute
Lender’s consent to any such request.

 

  d. Other Lease Affirmation Covenants. At all times during the term of the
Loan, Borrower shall cause Owner to, at Borrower’s and Owner’s sole cost and
expense:

 

  (i) perform all material obligations of the landlord under the Leases;

 

  (ii) promptly upon Lender’s request, deliver to Lender a copy of each
requested Lease and all amendments thereto and waivers thereof.

 

  e. Other Lease Negative Covenants. Unless consented to in writing by Lender or
otherwise permitted under any other provision of the Loan Documents, Borrower
shall not, and shall not permit Owner to:

b.

 

  (i) grant any tenant under any Lease any option, right of first refusal or
other right to purchase all or any portion of the Property under any
circumstances;

 

  (ii) except upon Senior Lender’s request, execute any assignment of landlord’s
interest in any Lease; or

 

  (iii) collect rent or other sums due under any Lease in advance, other than to
collect rent one (1) month in advance of the time when it becomes due without
notice to Lender of the amount of rents collected in advance given concurrently
with such collection.

Any such attempted action in violation of the provisions of this Section shall
be null and void.

 

1.14

ESTOPPEL CERTIFICATES. Within 30 days after request by Lender, Borrower shall
deliver to Lender and to any party designated by Lender, estoppel certificates
relating to the Leases executed by Owner and by each of the tenants, in form and
substance acceptable to Lender;

 

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provided, however, if any tenant shall fail or refuse to so execute and deliver
any such estoppel certificate upon request, Borrower shall use reasonable
efforts to cause such tenant to execute and deliver such estoppel certificate
but such tenant’s continued failure or refusal to do so, despite Borrower’s
reasonable efforts, shall not constitute a default by Borrower under this
Section.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

 

1.15 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender
that, to Borrower’s current actual knowledge after reasonable investigation and
inquiry, the following statements are true and correct as of the Effective Date:

 

  a. Legal Status. Borrower, Guarantor and Owner are duly organized and existing
and in good standing under the laws of the state(s) in which Borrower, Guarantor
and Owner are organized. Borrower, Guarantor and Owner are qualified or licensed
to do business in all jurisdictions in which such qualification or licensing is
required.

 

  b. Permits. Borrower and Owner possess all permits, franchises and licenses
and all rights to all trademarks, trade names, patents and fictitious names, if
any, necessary to enable Borrower and Owner to conduct the business(es) in which
Borrower and Owner are now engaged in compliance with applicable law.

 

  c. Authorization and Validity. The execution and delivery of the Loan
Documents have been duly authorized and the Loan Documents constitute valid and
binding obligations of Borrower, Guarantor, Owner or the party which executed
the same, enforceable in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors’ rights, or by the application of rules
of equity.

 

  d. Violations. The execution, delivery and performance by Borrower, Guarantor
and Owner of each of the Loan Documents and the Senior Loan Documents,
respectively, do not violate any provision of any law or regulation, or result
in any breach or default under any contract, obligation, indenture or other
instrument to which Borrower, Guarantor or Owner is a party or by which
Borrower, Guarantor or Owner is bound.

 

  e. Litigation. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental authority, court or
administrative agency which may adversely affect the financial condition or
operations of Borrower, Guarantor or Owner other than those previously disclosed
in writing by Borrower, Guarantor or Owner to Lender.

 

  f. Financial Statements. The financial statements of Borrower, Guarantor and
Owner, of each general partner (if Borrower, Guarantor or Owner is a
partnership), and of each member (if Borrower, Guarantor or Owner is a limited
liability company), previously delivered by Borrower, Guarantor or Owner to
Lender: (i) are materially complete and correct; (ii) present fairly the
financial condition of such party; and (iii) have been prepared in accordance
with the same accounting standard used by Borrower, Guarantor or Owner to
prepare the financial statements delivered to and approved by Lender in
connection with the making of the Loan, or other accounting standards approved
by Lender. Since the date of such financial statements, there has been no
material adverse change in such financial condition, nor have any assets or
properties reflected on such financial statements been sold, transferred,
assigned, mortgaged, pledged or encumbered except as previously disclosed in
writing by Borrower, Guarantor or Owner to Lender and approved in writing by
Lender.

 

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  g. Reports. All reports, documents, instruments and information delivered to
Lender in connection with the Loan: (i) are correct and sufficiently complete to
give Lender accurate knowledge of their subject matter; and (ii) do not contain
any misrepresentation of a material fact or omission of a material fact which
omission makes the provided information misleading.

 

  h. Income Taxes. There are no pending assessments or adjustments of
Borrower’s, Guarantor’s or Owner’s income tax payable with respect to any year.

 

  i. Subordination. There is no agreement or instrument to which Borrower is a
party or by which Borrower is bound that would require the subordination in
right of payment of any of Borrower’s obligations under the Note to an
obligation owed to another party.

 

  j. Title. Owner lawfully holds and possesses the entire unencumbered leasehold
estate in the Land created by the Ground Lease, and has good and marketable
title to all of the other Property, without limitation on the right to encumber
same except as disclosed in the title insurance policy delivered to Lender in
connection with the Loan. None of the senior exceptions to the Deed of Trust
materially and adversely interferes with the current use of the Property, the
security intended to be provided by the Deed of Trust, the Owner’s ability to
pay the obligations secured by the Deed of Trust when and as due or the value of
the Property.

 

  k. Mechanics’ Liens. There are no mechanics’ or similar liens or claims which
have been filed for work, labor or material (and no rights are outstanding that
under law could give rise to any such liens) affecting the Property.

 

  l. Encroachments. Except as shown in the survey, if any, previously delivered
to Lender, none of the buildings or other improvements which were included for
the purpose of determining the appraised value of the Property lies outside of
the boundaries or building restriction lines of the Property and no buildings or
other improvements located on adjoining properties encroach upon the Property.

 

  m. Leases. Except as disclosed to Lender in a written notice specifically
identifying the same: (i) all existing Leases are in full force and effect and
are enforceable in accordance with their respective terms; (ii) no material
breach or default by any party, or event which would constitute a material
breach or default by any party after notice or the passage of time, or both,
exists under any existing Lease; (iii) none of the landlord’s interests under
any of the Leases, including, but not limited to, rents, additional rents,
charges, issues or profits, has been transferred or assigned; and (iv) no rent
or other payment under any existing Lease has been paid by any tenant for more
than 1 month in advance.

 

  n. Collateral. Borrower and Guarantor have good title to the existing
Collateral, free and clear of all liens and encumbrances except those set forth
in the Owner’s title insurance policy.

 

  o. Condition of Property. Except as shown in the property condition survey or
other engineering reports, if any, previously delivered to or obtained by
Lender, the Property is in good condition and repair and is free from any damage
that would materially and adversely affect the value of the Property or the
intended use of the Property.

 

  p. Hazardous Materials. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by Lender, the Property
is not and has not been a site for the use, generation, manufacture, storage,
treatment, release, threatened release, discharge, disposal, transportation or
presence of Hazardous Materials (as hereinafter defined) except as otherwise
previously disclosed in writing by Borrower to Lender.

 

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  q. Hazardous Materials Laws. Except as disclosed in the environmental
assessment reports delivered to Lender, the Property complies with all Hazardous
Materials Laws (as hereinafter defined).

 

  r. Hazardous Materials Claims. Except as disclosed in the environmental
assessment reports delivered to Lender, there are no pending or threatened
Hazardous Materials Claims (as hereinafter defined).

 

  s. Wetlands. Except as expressly identified in the survey delivered to the
Lender, no part of the Property consists of or is classified as wetlands,
tidelands or swamp and overflow lands.

 

  t. Compliance With Laws. All federal, state and local laws, rules and
regulations applicable to the Property, including, without limitation, all
zoning and building requirements and all requirements of the ADA have been
satisfied or complied with. Borrower is in possession of all certificates of
occupancy and all other licenses, permits and other authorizations required by
applicable law for the existing use of the Property. All such certificates of
occupancy and other licenses, permits and authorizations are valid and in full
force and effect.

 

  u. Property Taxes and Other Liabilities. All taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, and ground rents, if
any, which previously became due and owing in respect of the Property have been
paid or will be paid prior to delinquency.

 

  v. Condemnation. There is no proceeding pending or threatened for the total or
partial condemnation of the Property.

 

  w. Homestead. There is no homestead or other exemption available to Borrower
or Owner.

 

  x. Solvency. None of the transactions contemplated by the Loan will be or have
been made with an actual intent to hinder, delay or defraud any present or
future creditors of Owner, Guarantor or Borrower, and Borrower, on the Effective
Date, will have received fair and reasonably equivalent value in good faith for
the grant of the liens or security interests effected by the Loan Documents. On
the Effective Date, each of Owner, Guarantor and Borrower will be solvent and
will not be rendered insolvent by the transactions contemplated by the Loan
Documents. Each of Owner, Guarantor and Borrower is able to pay its debts as
they become due.

 

  y. Separate Tax Parcel(s). The Property is assessed for the real estate tax
purposes as one or more wholly independent tax parcels, separate from any other
real property, and no other real property is assessed and taxed together with
the Property or any portion thereof.

 

  z. Utilities; Water; Sewer. The Property is served by all utilities required
for the current or contemplated use thereof. All utility service is provided by
public utilities and the Property has accepted or is equipped to accept such
utility service. The Property is served by public water and sewer systems.

 

  aa.

ERISA Matters. Borrower is not an employee benefit plan as defined in
Section 3.(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), which is subject to Title I of ERISA, nor a plan as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (each of the
foregoing hereinafter referred to individually and collectively as a “Plan”).
Borrower’s assets do not constitute “plan assets” of any plan within the meaning
of Department of Labor Regulation Section 2510.3-101. Borrower will not transfer
or convey the Property to a Plan or to a person or entity whose assets
constitute such “plan assets”, and Borrower will not be reconstituted as a Plan
or as an entity whose assets constitute “plan assets”. Borrower will not enter
into any Lease with a Plan or an entity whose assets constitute

 

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such “plan assets” if such Lease is a prohibited transaction without an
exemption to the prohibited transaction rules under ERISA. With respect to the
Loan, Borrower is acting on Borrower’s own behalf and not on account of or for
the benefit of any Plan.

 

  bb. Patriot Act. None of Borrower, Guarantor or Owner nor any of their
respective officers, directors, shareholders, partners, members or affiliates
(including the indirect holders of equity interests in Borrower, Guarantor or
Owner other than holders of stock interests which are publicly available) is or
will be an entity or person: (i) that is listed in the Annex to, or is otherwise
subject to the provisions of Executive Order 13224 issued on September 24, 2001
(“EO13224”); (ii) whose name appears on the United States Treasury Department’s
Office of Foreign Assets Control (“OFAC”) most current list of “Specifically
Designated National and Blocked Persons” (which list may be published from time
to time in various mediums including, but not limited to, the OFAC website,
http://www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports “terrorism”, as that term is defined in EO13224; or (iv) who is
otherwise affiliated with any entity or person listed above.

 

1.16 REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS. Borrower hereby
represents, warrants and covenants to Lender that with respect to both Borrower
and Owner:

 

  a. each such entity was organized solely for the purpose of (i) owning the
Property; (ii) acting as a general partner of a partnership which owns the
Property; or (iii) acting as a member of a limited liability company which owns
the Property;

 

  b. each such entity has not and will not engage in any business unrelated to
(i) the ownership of the Property; (ii) acting as general partner of a
partnership which owns the Property; or (iii) acting as a member of a limited
liability company which owns the Property;

 

  c. each such entity has not and will not have any assets other than the
Property (and personal property incidental to the ownership and operation of the
Property) or its partnership or membership interest in the partnership or
limited liability company which owns the Property;

 

  d. each such entity has not and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger, asset sale, or
transfer of partnership or membership interest as applicable;

 

  e. each such entity has not and will not engage in, seek or consent to any
amendment of its articles of organization, certificate of formation, or
operating agreement, if such amendment would impair the special purpose
bankruptcy remote structure of Borrower or Owner, or result in the violation of
the transfer provisions of Section 6.15 hereof or any other provision of the
Loan Documents;

 

  f. each such entity, without the unanimous consent of all of its general
partners, directors or members, as applicable, shall not file or consent to the
filing of any bankruptcy or insolvency petition or otherwise institute
insolvency proceedings with respect to itself or any other entity in which it
has a direct or indirect legal or beneficial ownership interest;

 

  g.

each such entity has no indebtedness (and will have no indebtedness) other than
(i) with, respect to Owner, the Senior Loan (to the extent it is liable under
the terms of the Senior Loan Documents), and with respect to Borrower, the Loan
(to the extent it is liable under the terms of the Loan Documents); and
(ii) unsecured trade debt and/or operating expenses

 

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(which shall exclude any real estate taxes or insurance premiums) not to exceed
3% (which 3% cap shall not apply to any real estate taxes or insurance premiums)
of the Senior Loan amount in the aggregate with respect to Owner or $10,000 in
the aggregate with respect to Borrower, which is not evidenced by a note and is
incurred in the ordinary course of its business in connection with owning,
operating and maintaining the Property (or its interest in Owner, as applicable)
and is paid within 60 days from the date incurred, or, if later, prior to
delinquency;

 

  h. each such entity has not and will not fail to correct any known
misunderstanding regarding the separate identity of such entity;

 

  i. except for funds deposited into the Restricted Account (as such term is
defined in the Cash Management Agreement) pursuant to the Cash Management
Agreement, each such entity has maintained and will maintain its accounts, books
and records separate from any other person or entity;

 

  j. each such entity has maintained and will maintain its books, records,
resolutions and agreements as official records;

 

  k. each such entity (i) has not and will not commingle its funds or assets
with those of any other entity; and (ii) has held and will hold its assets in
its own name;

 

  l. each such entity has conducted and will conduct its business in its own
name;

 

  m. each such entity has maintained and will maintain its accounting records
and other entity documents separate from any other person or entity;

 

  n. each such entity has prepared and will prepare separate tax returns and
financial statements, or if part of a consolidated group, is shown as a separate
member of such group;

 

  o. each such entity has paid and will pay its own liabilities and expenses out
of its own funds and assets;

 

  p. each such entity has held and will hold regular meetings, as appropriate,
to conduct its business and has observed and will observe all corporate,
partnership or limited liability company formalities and record keeping, as
applicable;

 

  q. each such entity has not and will not assume or guarantee or become
obligated for the debts of any other entity or hold out its credit as being
available to satisfy the obligations of any other entity;

 

  r. each such entity has not and will not acquire obligations or securities of
its partners, members or shareholders;

 

  s. each such entity has allocated and will allocate fairly and reasonably the
costs associated with common employees and any overhead for shared office space
and each such entity has used and will use separate stationery, invoices and
checks;

 

  t. each such entity has not and will not pledge its assets for the benefit of
any other person or entity;

 

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  u. each such entity has held and identified itself and will hold itself out
and identify itself as a separate and distinct entity under its own name and not
as a division or part of any other person or entity;

 

  v. each such entity has not made and will not make loans to any person or
entity;

 

  w. each such entity has not and will not identify its partners, members or
shareholders, or any affiliates of any of the foregoing, as a division or part
of it;

 

  x. each such entity has not entered into and will not enter into or be a party
to, any transaction with its partners, members, shareholders, or any affiliates
of any of the foregoing, except in the ordinary course of its business pursuant
to written agreements and on terms which are intrinsically fair and are no less
favorable to it than would be obtained in a comparable arm’s-length transaction
with an unrelated third party;

 

  y. each such entity has paid and will pay the salaries of its own employees
and has maintained and will maintain a sufficient number of employees in light
of its contemplated business operations;

 

  z. each such entity has maintained and will maintain adequate capital in light
of its contemplated business operations;

 

  aa. each such entity shall be a single member limited liability company which
(i) shall be organized in the State of Delaware and (ii) shall have at least one
springing member which, upon the dissolution of such sole member or the
withdrawal or the disassociation of the sole member from such entity, shall
immediately become the sole member of such entity;

 

  bb. each such entity’s limited liability company operating agreement shall
contain the provisions set forth in this Section 5.2 and any such entity shall
conduct its business and operations in strict compliance with the terms
contained therein;

 

  cc. each such entity will, as a condition to the closing of the Loan, deliver
to Lender a nonconsolidation opinion in form and substance acceptable to Lender;

 

  dd. each such entity has maintained and will continue to maintain at least one
Independent Manager (as defined below); and

 

  ee. each such entity has not caused or allowed and will not cause or allow the
members or managers of such entity to take any action requiring the unanimous
affirmative vote of 100% of the members or managers unless an Independent
Manager shall have participated in such vote.

As used herein, the term “Independent Manager” shall mean an individual who,
except in his or her capacity as an Independent Manager of the company is not,
and has not been during the five (5) years immediately before such individual’s
appointment as an Independent Manager: (i) a stockholder, director, partner,
officer or employee of the corporation or its Affiliates (as defined below);
(ii) affiliated with a customer or supplier of the corporation or its
Affiliates; or (iii) a spouse, parent, sibling, child or other family relative
of any person described by (i) or (ii) above. As used herein, the term
“Affiliate” shall mean any person or entity other than the company which
(iv) owns beneficially, directly or indirectly, any outstanding ownership
interests of the company, or (v) controls, is controlled by or is under common
control with the company. The term “control” shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a person or entity, whether through ownership of voting
securities or interests, by contract or otherwise.

 

15

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ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES

 

1.17 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Borrower shall, and shall
cause Owner to: (a) keep the Property in good condition and repair; (b) complete
or restore promptly and in workmanlike manner the Property or any part thereof
which may be damaged or destroyed; (c) comply and cause the Property to comply
with (i) all laws, ordinances, regulations and standards, (ii) all covenants,
conditions, restrictions and equitable servitudes, whether public or private, of
every kind and character and (iii) all requirements of insurance companies and
any bureau or agency which establishes standards of insurability, which laws,
covenants or requirements affect the Property and pertain to acts committed or
conditions existing thereon, including, without limitation, any work of
alteration, improvement or demolition as such laws, covenants or requirements
mandate; (d) operate and manage the Property at all times in a professional
manner and do all other acts which from the character or use of the Property may
be reasonably necessary to maintain and preserve its value; (e) promptly after
execution, deliver to Lender a copy of any management agreement concerning the
Property and all amendments thereto and waivers thereof; and (f) execute and
acknowledge all further documents, instruments and other papers as Lender deems
necessary or appropriate to preserve, continue, perfect and enjoy the benefits
of this Agreement and perform Borrower’s obligations, including, without
limitation, statements of the amount secured hereby then owing and statements of
no offset. Borrower shall not, and shall not permit Owner to: (g) remove or
demolish all or any material part of the Property; (h) alter either (i) the
exterior of the Property in a manner which materially and adversely affects the
value of the Property or (ii) the roof or other structural elements of the
Property in a manner which requires a building permit except for tenant
improvements required under the Leases; (i) initiate or acquiesce in any change
in any zoning or other land classification which affects the Property;
(j) materially alter the type of occupancy or use of all or any part of the
Property; or (k) commit or permit waste of the Property.

 

1.18 HAZARDOUS MATERIALS. Without limiting any other provision of this
Agreement, Borrower agrees as follows:

 

  a. Prohibited Activities. Borrower shall not cause or permit the Property to
be used as a site for the use, generation, manufacture, storage, treatment,
release, discharge, disposal, transportation or presence of any of the following
(collectively, “Hazardous Materials”): oil or other petroleum products;
flammable explosives; asbestos; urea formaldehyde insulation; radioactive
materials; hazardous wastes; fungus, mold, mildew, pores or other biological or
microbial agents the presence of which may affect human health, impair occupancy
or materially affect the value or utility of the Property; toxic or contaminated
substances or similar materials, including, without limitation, any substances
which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or
“toxic substances” under the Hazardous Materials Laws (defined below) and/or
other applicable environmental laws, ordinances or regulations.

The foregoing to the contrary notwithstanding, (i) Owner may store, maintain and
use on the Property janitorial and maintenance supplies, paint and other
Hazardous Materials of a type and in a quantity readily available for purchase
by the general public and normally stored, maintained and used by owners and
managers of properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property (and, if any tenant is
a retail business, hold in inventory and sell in the ordinary course of such
tenant’s business) Hazardous Materials of a type and quantity readily available
for purchase by the general public and normally stored, maintained and used
(and, if tenant is a retail business, sold) by tenants in similar lines of
business on properties similar to the Property.

 

16

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  b. Hazardous Materials Laws. Borrower shall comply and cause the Property to
comply with all federal, state and local laws, ordinances and regulations
relating to Hazardous Materials (“Hazardous Materials Laws”), including, without
limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (including the Superfund Amendments and
Reauthorization Act of 1986, “CERCLA”), 42 U.S.C. Section 9601 et seq.; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651; the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30
U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f
et seq.; and all comparable state and local laws, laws of other jurisdictions or
orders and regulations.

 

  c. Notices. Borrower shall immediately notify Lender in writing of: (i) the
discovery of any Hazardous Materials on, under or about the Property (other than
Hazardous Materials permitted under Section 1.18(a)); (ii) any knowledge by
Borrower or Owner that the Property does not comply with any Hazardous Materials
Laws; (iii) any claims or actions (“Hazardous Materials Claims”) pending or
threatened against Borrower, Owner or the Property by any governmental entity or
agency or any other person or entity relating to Hazardous Materials or pursuant
to the Hazardous Materials Laws; and (iv) the discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
could cause the Property or any part thereof to become contaminated with
Hazardous Materials.

 

  d. Remedial Action. In response to the presence of any Hazardous Materials on,
under or about the Property, Borrower shall, or shall cause Owner to,
immediately take, at Borrower’s and Owner’s sole expense, all remedial action
required by any Hazardous Materials Laws or any judgment, consent decree,
settlement or compromise in respect to any Hazardous Materials Claims.

 

  e. Inspection By Lender. Upon reasonable prior notice to Borrower, Lender, its
employees and agents, may from time to time (whether before or after the
commencement of a nonjudicial or judicial foreclosure proceeding), enter and
inspect the Property for the purpose of determining the existence, location,
nature and magnitude of any past or present release or threatened release of any
Hazardous Materials into, onto, beneath or from the Property.

 

  f. Legal Effect of Section. Borrower and Lender agree that: (i) this Hazardous
Materials Section is intended as Lender’s written request for information (and
Borrower’s response) concerning the environmental condition of the real property
security as required by California Code of Civil Procedure Section 726.5; and
(ii) each representation and warranty and covenant in this Section (together
with any indemnity applicable to a breach of any such representation and
warranty) with respect to the environmental condition of the Property is
intended by Lender and Borrower to be an “environmental provision” for purposes
of California Code of Civil Procedure Section 736.

 

1.19

COMPLIANCE WITH LAWS. Borrower shall, and shall cause Owner to, comply with all
federal, state and local laws, rules and regulations applicable to the Property,
including, without limitation, all zoning and building requirements and all
requirements of the ADA, as amended from time to time. Borrower shall possess
and maintain or cause Owner to possess and maintain in full force

 

17

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and effect at all times (a) all certificates of occupancy and other licenses,
permits and authorizations required by applicable law for the existing use of
the Property and (b) all permits, franchises and licenses and all rights to all
trademarks, trade names, patents and fictitious names, if any, required by
applicable law for Borrower and Owner to conduct the business(es) in which
Borrower and Owner are now engaged.

 

1.20 LITIGATION. Borrower shall promptly notify Lender in writing of any
litigation pending or threatened against Borrower or Owner claiming damages in
excess of $50,000 and of all pending or threatened litigation against Borrower
or Owner if the aggregate damage claims against Borrower or Owner exceed
$100,000.

 

1.21 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Borrower shall not: (a) merge or
consolidate with any other entity or permit Owner to merge or consolidate with
any other entity; (b) make any substantial change in the nature of Borrower’s
business or structure or permit Owner to make any substantial change in the
nature of Owner’s business or structure (except as expressly provided herein);
(c) acquire all or substantially all of the assets of any other entity or permit
Owner to acquire all or substantially all of the assets of any other entity
(other than Owner’s acquisition of the Property); or (d) sell, lease, assign,
transfer or otherwise dispose of a material part of Borrower’s assets except in
the ordinary course of Borrower’s business or permit Owner to sell, lease,
assign, transfer or otherwise dispose of a material part of Owner’s assets
except in the ordinary course of Owner s business.

 

1.22 ACCOUNTING RECORDS. Borrower shall maintain and cause Owner to maintain
adequate books and records in accordance with the same accounting standard used
by Borrower or Owner to prepare the financial statements delivered to and
approved by Lender in connection with the making of the Loan or other accounting
standards approved by Lender. Borrower shall permit and shall cause Owner to
permit any representative of Lender, at any reasonable time and from time to
time, at Lender’s sole cost and expense, to inspect, audit and examine such
books and records and make copies of same; provided, however, that Lender shall
not be obligated to pay for any expenses incurred by Borrower in connection with
such inspection, audit or examination.

 

1.23 COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Lender the full
amount of all costs and expenses, including, without limitation, reasonable
attorneys’ fees and expenses of Lender’s in-house or outside counsel, incurred
by Lender in connection with: (a) appraisals and inspections of the Property or
Collateral required by Lender as a result of (i) a Transfer or proposed Transfer
(as defined below), or (ii) a Default; (b) appraisals and inspections of the
Property or Collateral required by applicable law, including, without
limitation, federal or state regulatory reporting requirements; and (c) any acts
performed by Lender at Borrower’s request or wholly or partially for the benefit
of Borrower or Owner (including, without limitation, the preparation or review
of amendments, assumptions, waivers, releases, reconveyances, estoppel
certificates or statements of amounts owing under the Loan). In connection with
appraisals and inspections, Borrower specifically (but not by way of limitation)
acknowledges that: (aa) a formal written appraisal of the Property by a state
certified or licensed appraiser may be required by federal regulatory reporting
requirements on an annual or more frequent basis; and (bb) Lender may require
inspection of the Property by an independent supervising architect, a cost
engineering specialist, or both. Borrower shall pay all indebtedness arising
under this Section immediately upon demand by Lender together with interest
thereon following notice of such indebtedness at the rate of interest then
applicable to the principal balance of the Note as specified therein.

 

1.24

LIENS, ENCUMBRANCES AND CHARGES. Borrower shall immediately discharge by bonding
or otherwise any lien, charge or other encumbrance which attaches to the
Property in violation of Section 1.31. Subject to Borrower’s right to contest
such matters under this Agreement or as expressly permitted in the Loan
Documents or in the Senior Loan Documents, Borrower shall pay

 

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when due all obligations secured by or reducible to liens and encumbrances which
shall now or hereafter encumber or appear to encumber all or any part of the
Property or any interest therein, whether senior or subordinate hereto,
including, without limitation, all claims for work or labor performed, or
materials or supplies furnished, in connection with any work of demolition,
alteration, repair, improvement or construction of or upon the Property, except
such as Borrower may in good faith contest or as to which a bona fide dispute
may arise (provided provision is made to the satisfaction of Lender for eventual
payment thereof in the event that Borrower is obligated to make such payment and
that any recorded claim of lien, charge or other encumbrance against the
Property is immediately discharged by bonding or otherwise).

 

1.25 TAXES AND OTHER LIABILITIES. Subject to Borrower’s right to contest the
same as provided in this Agreement, Borrower shall pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Borrower shall promptly provide to Lender copies
of all tax and assessment notices pertaining to the Property. Borrower hereby
authorizes Lender to obtain, at Borrower’s expense, a tax service contract which
shall provide tax information on the Property to Lender for the term of the Loan
and any extensions or renewals of the Loan.

 

1.26 INSURANCE COVERAGE. Borrower shall cause Owner to obtain and maintain all
insurance coverage required pursuant to that certain Agreement Regarding
Required Insurance dated as of the date hereof by and between Owner and Senior
Lender.

 

1.27 CONDEMNATION AND INSURANCE PROCEEDS.

 

  a. Assignment of Claims. Subject to Senior Lender’s rights under the Deed of
Trust, Borrower absolutely and irrevocably assigns to Lender all of the
following rights, claims and amounts (collectively, “Claims”), all of which
shall be paid to Lender: (i) all awards of damages and all other compensation
payable directly or indirectly by reason of a condemnation or proposed
condemnation for public or private use affecting all or any part of, or any
interest in, the Property; (ii) all other claims and awards for damages to or
decrease in value of all or any part of, or any interest in, the Property;
(iii) all proceeds of any insurance policies payable by reason of loss sustained
to all or any part of the Property; and (iv) all interest which may accrue on
any of the foregoing. Borrower shall give Lender prompt written notice of the
occurrence of any casualty affecting, or the institution of any proceedings for
eminent domain or for the condemnation of, the Property or any portion thereof.
So long as no Default has occurred and is continuing at the time, (i) Borrower
shall have the right to adjust, compromise and settle any Claim or group of
related Claims of $100,000 or less without the participation or consent of
Lender and (ii) Lender shall have the right to participate in and consent to any
adjustment, compromise or settlement of any Claim or group of related Claims
exceeding $100,000. If a Default has occurred and is continuing at the time,
Borrower hereby irrevocably empowers Lender, in the name of Borrower and Owner,
as Borrower’s and Owner’s true and lawful attorney in fact, to commence, appear
in, defend, prosecute, adjust, compromise and settle all Claims; provided,
however, Lender shall not be responsible for any failure to undertake any or all
of such actions regardless of the cause of the failure. Subject to Senior
Lender’s rights under the Deed of Trust, all awards, proceeds and other sums
described herein shall, in all cases, be payable to Lender.

 

  b. Application of Proceeds; No Default. So long as no Default has occurred and
is continuing at the time of Lender’s receipt of the proceeds of the Claims
(“Proceeds”) and no Default occurs thereafter, the following provisions shall
apply:

 

  (i)

Condemnation. If the Proceeds are the result of Claims described in clauses
6.11.a (i) or (ii) above, or interest accrued thereon, Lender shall apply the
Proceeds in the

 

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following order of priority: First, to Lender’s expenses in settling,
prosecuting or defending the Claims; Second, to the repair or restoration of the
portion of the Property, if any, not condemned or proposed for condemnation and
not otherwise the subject of a claim or award; and Third, to the Obligations in
any order without suspending, extending or reducing any obligation of Borrower
to make installment payments.

 

  (ii) Insurance. If the Proceeds are the result of Claims described in clause
6.11.a (iii) above or interest accrued thereon, Lender shall apply the Proceeds
in the following order of priority: First, to Lender’s expenses in settling,
prosecuting or defending the Claims; Second, to the repair or restoration of the
Property; and Third, (aa) if the repair or restoration of the Property has been
completed and all costs incurred in connection with the repair or restoration
have been paid in full, to Borrower or (bb) in all other circumstances, to the
Obligations in any order without suspending, extending or reducing any
obligation of Borrower to make installment payments.

 

  (iii) Restoration. Notwithstanding the foregoing Sections 6.11.b (i) and (ii),
Lender shall have no obligation to make any Proceeds available for the repair or
restoration of all or any portion of the Property unless and until all the
following conditions have been satisfied: (aa) delivery to Lender of the
Proceeds plus any additional amount which is needed to pay all costs of the
repair or restoration (including, without limitation, taxes, financing charges,
insurance and rent during the repair period); (bb) establishment of an
arrangement for lien releases and disbursement of funds acceptable to Lender;
(cc) delivery to Lender in form and content acceptable to Lender of all of the
following: (1) plans and specifications for the work; (2) a contract for the
work, signed by a contractor acceptable to Lender; (3) a cost breakdown for the
work; (4) if required by Lender, a payment and performance bond for the work;
(5) evidence of the continuation of all Leases unless consented to in writing by
Lender; (6) evidence that, upon completion of the work, the size, capacity,
value, and income coverage ratios for the Property will be at least as great as
those which existed immediately before the damage or condemnation occurred;
(7) evidence that the work can reasonably be completed on or before that date
which is 6 months prior to the Maturity Date; and (8) evidence of the
satisfaction of any additional conditions that Lender may reasonably establish
to protect Lender’s security. Borrower acknowledges that the specific conditions
described above are reasonable.

 

  c. Application of Proceeds; Default. If a Default has occurred and is
continuing at the time of Lender’s receipt of the Proceeds or if a Default
occurs at any time thereafter, Lender may, at Lender’s absolute discretion and
regardless of any impairment of security or lack of impairment of security, but
subject to applicable law governing use of the Proceeds, if any, apply all or
any of the Proceeds to Lender’s expenses in settling, prosecuting or defending
the Claims and then apply the balance to the Obligations in any order without
suspending, extending or reducing any obligation of Borrower to make installment
payments, and may release all or any part of the Proceeds to Borrower upon any
conditions Lender chooses.

The foregoing provisions of this Section 6.11 shall be subject to Borrower’s
right to Permitted REIT Distributions.

 

1.28 IMPOUNDS; CASH MANAGEMENT.

 

  a.

Post-Default Impounds. If required by Lender at any time while a Default exists,
Borrower shall deposit with Lender such amounts (“Post-Default Impounds”) on
such dates (determined

 

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by Lender as provided below) as will be sufficient to pay any or all “Costs” (as
defined below) specified by Lender to the extent, and only to the extent,
required by the terms and conditions of the Loan Documents and further subject
to Borrower’s right to receive Permitted REIT Distributions. Lender in its
reasonable discretion shall estimate the amount of such Costs that will be
payable or required during any period selected by Lender not exceeding 1 year
and shall determine the fractional portion thereof that Borrower shall deposit
with Lender on each date specified by Lender during such period. If the
Post-Default Impounds paid by Borrower are not sufficient to pay the related
Costs, Borrower shall deposit with Lender upon demand an amount equal to the
deficiency. All Post-Default Impounds shall be payable by Borrower in addition
to (but without duplication of) any other Impounds (as defined below). Once any
account is opened in which Post-Default Impounds are deposited, such account
shall remain open during the term of the Loan. Borrower shall maintain a minimum
account balance of $1,000 in any such account at all times any such account
remains open.

 

  b. Springing Interest Reserve. If Lender determines at any time during the
term of the Loan that the ratio of the actual debt service on the Loan and the
Senior Loan to the actual net operating income of the Property on a cash basis
exceeds 1.0 to 1.0, then within thirty (30) days of Lender’s demand, Borrower
shall establish an interest reserve (the “Springing Interest Reserve”) under the
sole dominion and control of Lender into which Borrower shall make a deposit in
an amount equal to the Property Debt Service for a three (3) month period, as
determined by Lender. Lender shall have the right to withdraw funds from the
Springing Interest Reserve to pay debt service under the Loan and/or the Senior
Loan. From and after opening, and until Lender determines that the ratio of
actual debt service on the Loan and the Senior Loan to the actual net operating
income of the Property on a cash basis is equal to or less than 1.0 to 1.0,
Borrower shall continue to deposit funds into the Springing Interest Reserve
from time to time within five (5) Business Days of demand by Lender in any
amount necessary to cause the balance in the Springing Interest Reserve to equal
not less than the actual debt service on the Loan and the Senior Loan for three
(3) months, as determined by Lender.

 

  c. All Impounds. Post-Default Impounds, the Springing Interest Reserve and any
other impounds that may be payable by Borrower under the Note are collectively
called “Impounds”. All Impounds shall be deposited into one or more segregated
accounts maintained by Lender or its servicing agent. Except as otherwise
provided in the Note, such account(s) shall not bear interest. Lender shall not
be a trustee, special depository or other fiduciary for Borrower with respect to
such account, and the existence of such account shall not limit Lender’s rights
under this Agreement, any other agreement or any provision of law. If a Default
exists, subject to Borrower’s right to receive Permitted REIT Distributions,
Lender may apply any or all Impounds to any Obligation and/or to cure such
Default, whereupon Borrower shall restore all Impounds so applied and cure all
Defaults not cured by such application. The obligations of Borrower hereunder
shall not be diminished by deposits of Impounds made by Borrower, except to the
extent that such obligations have actually been met by application of such
Impounds. Upon any assignment of this Agreement, Lender may assign all Impounds
in its possession to Lender’s assignee, whereupon Lender shall be released from
all liability with respect to such Impounds. Within 60 days following full
repayment of the Obligations (other than as a consequence of foreclosure or
conveyance in lieu of foreclosure) or at such earlier time as Lender may elect,
Lender shall pay to Borrower all Impounds in its possession, and no other party
shall have any right or claim thereto. “Costs” means (i) all taxes and other
liabilities payable by Borrower under Section 1.25, (ii) all insurance premiums
payable by Borrower under Section 1.26, and (iii) all other costs and expenses
for which Impounds are required under the Note. Borrower shall deliver to
Lender, promptly upon receipt, all bills for Costs for which Lender has required
Post-Default Impounds.

 

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  d. Cash Management. Borrower shall enter into that certain Cash Management
Agreement (Springing Hard) dated as of even date herewith (the “Cash Management
Agreement”) among Borrower, Lender, as “Lender”, and Lender, as “Depository,”
which shall govern the collection and disbursement of all Gross Income (as
defined in the Cash Management Agreement).

 

  e. General. Borrower shall pay to Lender all reasonable fees, costs and
expenses charged, paid or incurred by Lender from time to time in connection
with any request of Borrower for a disbursement of funds from the Impounds.
Borrower authorizes Lender to disburse directly to Lender, from the Impounds or
from funds to be disbursed to Borrower from the Impounds, such sums as may be
necessary, at any time and from time to time, to pay all such fees, costs and
expenses. Notwithstanding anything stated to the contrary in the Loan Documents,
the funding of all Impounds and reserves required hereunder shall be subject to
Permitted REIT Distributions.

 

1.29 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Borrower shall protect,
preserve and defend the Collateral, the Property and title to and right of
possession of the Collateral and the Property, the security of the Pledge
Agreements, and the rights and powers of Lender hereunder at Borrower’s sole
expense against all adverse claims, whether the claim: (a) is against a
possessory or non-possessory interest; (b) arose prior or subsequent to the
Effective Date; or (c) is senior or junior to Borrower’s or Lender’s rights.
Borrower shall give Lender prompt notice in writing of the assertion of any
claim, of the filing of any action or proceeding, of the occurrence of any
damage to the Property and of any condemnation offer or action.

 

1.30 RIGHT OF INSPECTION. Lender and its independent contractors, agents and
employees may enter the Property from time to time at any reasonable time for
the purpose of inspecting the Property and ascertaining Borrower’s compliance
with the terms of this Agreement. Lender shall use reasonable efforts to assure
that Lender’s entry upon and inspection of the Property shall not materially and
unreasonably interfere with the business or operations of Owner or Owner’s
tenants on the Property.

 

1.31 DUE ON SALE/ENCUMBRANCE.

 

  a. Definitions. The following terms shall have the meanings indicated:

“Restricted Party” shall mean each of (i) Borrower, (ii) Owner, (iii) Guarantor,
and (iv) any entity obligated under any guaranty or indemnity made in favor of
Lender in connection with the Loan.

“Transfer” shall mean any sale, installment sale, exchange, mortgage, pledge,
hypothecation, assignment, encumbrance or other transfer, conveyance or
disposition, whether voluntarily, involuntarily or by operation of law or
otherwise.

 

  b. Property Transfers.

 

  (i) Prohibited Property Transfers. Borrower shall not cause or permit any
Transfer of all or any part of or any direct or indirect legal or beneficial
interest in the Property or the Collateral (collectively, a “Prohibited Property
Transfer”), including, without limitation, (A) a Lease or all or a material part
of the Property for any purpose other than actual occupancy by a space tenant;
and (B) the Transfer of all or any part of Borrower’s right, title and interest
in and to any Leases or Payments.

 

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  (ii) Permitted Property Transfers. Notwithstanding the foregoing, none of the
following Transfers shall be deemed to be a Prohibited Property Transfer and are
expressly permitted: (A) a Transfer which is expressly permitted under the Note;
and (B) a Lease which is permitted under Article 4.

 

  c. Equity Transfers.

 

  (i) Prohibited Equity Transfers. Borrower shall not cause or permit any
Transfer of any direct or indirect legal or beneficial interest in a Restricted
Party (collectively, a “Prohibited Equity Transfer”), including without
limitation, (A) if a Restricted Party is a corporation, any merger,
consolidation or other Transfer of such corporation’s stock or the creation or
issuance of new stock in one or a series of transactions; (B) if a Restricted
Party is a limited partnership, limited liability partnership, general
partnership or joint venture, any merger or consolidation or the change,
removal, resignation or addition of a general partner or the Transfer of the
partnership interest of any general or limited partner or any profits or
proceeds relating to such partnership interests or the creation or issuance of
new limited partnership interests; (C) if a Restricted Party is a limited
liability company, any merger or consolidation or the change, removal,
resignation or addition of a managing member or non-member manager (or if no
managing member, any member) or any profits or proceeds relating to such
membership interest, or the Transfer of a non-managing membership interest or
the creation or issuance of new non-managing membership interests; or (D) if a
Restricted Party is a trust, any merger, consolidation or other Transfer of any
legal or beneficial interest in such Restricted Party or the creation or
issuance of new legal or beneficial interests.

 

  (ii) Permitted Equity Transfers. Notwithstanding the foregoing, none of the
following Transfers shall be deemed to be a Prohibited Equity Transfer and shall
be expressly permitted: (A) a Transfer of the direct or indirect ownership
interests of KBS Limited Partnership and KBS Real Estate Investment Trust, Inc.,
so long as: (i) KBS Capital Advisors LLC, or (ii) an entity owned by Peter Bren
and/or Charles Schrieber, Jr. remains the sole asset manager of KBS Real Estate
Investment Trust, Inc.; (B) a Transfer by a natural person who is a member,
partner or shareholder of a Restricted Party to a revocable inter vivos trust
having such natural person as both Borrower and trustee of such trust and one or
more immediate family members of such natural person as the sole beneficiaries
of such trust; (C) a Transfer by devise or descent or by operation of law upon
the death of a member, partner or shareholder of a Restricted Party where such
Transfer does not result in a Default under Section 7.1a(vi) below; (D) a
Transfer, in one or a series of transactions, of not more than 49% of the stock,
limited partnership interests or non-managing membership interests (as the case
may be) in a Restricted Party where such Transfer does not result in a change in
management control in the Restricted Party; and (E) a Transfer of interests in
Guarantor or in any entity which directly or indirectly owns an interest in
Guarantor.

 

  (iii) SPE Status. Nothing contained in this Section 6.15c shall be construed
to permit any Transfer which would result in a breach of any representation,
warranty or covenant of Borrower under Section 5.2 above.

 

  d. Certificates of Ownership. Borrower shall deliver to Lender, at any time
and from time to time, not more than 5 days after Lender’s written request
therefore, a certificate, in form acceptable to Lender, signed and dated by
Borrower and Owner, listing the names of all persons and entities holding direct
legal or beneficial interests in the Property or any Restricted Party and the
type and amount of each such interest.

 

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1.32 SENIOR LOAN. Borrower shall cause Owner to perform its obligations under
the Senior Loan. Borrower shall not permit Owner to enter into any amendments,
modifications, extensions or supplements to the Senior Loan without Lender’s
prior written consent. Borrower shall deliver to Lender copies of all notices
delivered to or sent by Owner under the Senior Loan and all reports, statements
and other information required under the Senior Loan.

 

1.33 INTENTIONALLY OMITTED.

 

1.34 EXCULPATION. Lender shall not directly or indirectly be liable to Borrower,
Owner or any other person as a consequence of: (a) the exercise of the rights,
remedies or powers granted to Lender in this Agreement; (b) the failure or
refusal of Lender to perform or discharge any obligation or liability of
Borrower under any agreement related to the Property or under this Agreement; or
(c) any loss sustained by Borrower or any third party resulting from Lender’s
failure to lease the Property after a Default (hereafter defined) or from any
other act or omission of Lender in managing the Property after a Default unless
the loss is caused by the willful misconduct and bad faith of Lender and no such
liability shall be asserted or enforced against Lender, all such liability being
expressly waived and released by Borrower.

 

1.35

INDEMNITY. Without in any way limiting any other indemnity contained in this
Agreement, Borrower agrees to defend, indemnify and hold harmless the Lender
Group (as defined below) from and against any claim, loss, damage, cost, expense
or liability directly or indirectly arising out of: (a) the making of the Loan,
except for violations of banking laws or regulations by the Lender Group;
(b) this Agreement; (c) the execution of this Agreement or the performance of
any act required or permitted hereunder or by law; (d) any failure of Borrower
to perform Borrower’s obligations under this Agreement or the other Loan
Documents; (e) any alleged obligation or undertaking on the Lender Group’s part
to perform or discharge any of the representations, warranties, conditions,
covenants or other obligations contained in any other document related to the
Property; (f) any act or omission by Borrower or any contractor, agent, employee
or representative of Borrower with respect to the Property; or (g) any claim,
loss, damage, cost, expense or liability directly or indirectly arising out of:
(i) the use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant, representation or warranty of Borrower under
Sections 5.1.p, 5.1.q, 5.1.r, or 1.18 above. The foregoing to the contrary
notwithstanding, this indemnity shall not include any claim, loss, damage, cost,
expense or liability directly or indirectly arising out of the gross negligence
or willful misconduct of any member of the Lender Group, or any claim, loss,
damage, cost, expense or liability incurred by the Lender Group arising from any
act or incident on the Property occurring after the full reconveyance and
release of the liens of the Pledge Agreements, or with respect to the matters
set forth in clause (g) above, any claim, loss, damage, cost, expense or
liability incurred by the Lender Group resulting from the introduction and
initial release of Hazardous Materials on the Property occurring after the
transfer of ownership of the membership interests of Borrower or Owner at a
foreclosure sale under the Pledge Agreements, either pursuant to judicial decree
or the power of sale, or by assignment in lieu of such foreclosure. This
indemnity shall include, without limitation: (aa) all consequential damages
(including, without limitation, any third party tort claims or governmental
claims, fines or penalties against the Lender Group); (bb) all court costs and
reasonable attorneys’ fees (including, without limitation, expert witness fees)
paid or incurred by the Lender Group; and (cc) the costs, whether foreseeable or
unforeseeable, of any investigation, repair, cleanup or detoxification of the
Property which is required by any governmental entity or is otherwise necessary
to render the Property in compliance with all laws and regulations pertaining to
Hazardous Materials. “Lender Group”, as used herein,

 

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shall mean (1) Lender (including, without limitation, any participant in the
Loan), (2) any entity controlling, controlled by or under common control with
Lender, (3) the directors, officers, employees and agents of Lender and such
other entities, and (4) the successors, heirs and assigns of the entities and
persons described in foregoing clauses (1) through (3), other than a purchaser
of the Loan through foreclosure. Borrower shall pay immediately upon Lender’s
demand any amounts owing under this indemnity together with interest from the
date the indebtedness arises until paid at the rate of interest applicable to
the principal balance of the Note as specified therein. Borrower agrees to use
legal counsel reasonably acceptable to the Lender Group in any action or
proceeding arising under this indemnity. THE PROVISIONS OF THIS SECTION SHALL
SURVIVE THE REPAYMENT IN FULL OF THE LOAN, BUT BORROWER’S LIABILITY UNDER THIS
INDEMNITY SHALL BE SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE ENTITLED
“BORROWER’S LIABILITY.”

 

1.36 INTENTIONALLY OMITTED.

 

1.37 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice
to or the consent, approval or agreement of any persons or entities having any
interest at any time in the Property or in any manner obligated under the
Obligations (“Interested Parties”), Lender may, from time to time: (a) fully or
partially release any person or entity from liability for the payment or
performance of any Obligation; (b) extend the maturity of any Obligation;
(c) make any agreement with Borrower increasing the amount or otherwise altering
the terms of any Obligation; (d) accept additional security for any Obligation;
or (e) release all or any portion of the Property, Collateral and other security
for any Obligation. None of the foregoing actions shall release or reduce the
personal liability of any of said Interested Parties.

 

1.38 SALE OR PARTICIPATION OF LOAN. Lender may at any time sell, assign,
participate or securitize all or any portion of Lender’s rights and obligations
under the Loan Documents, and that any such sale, assignment, participation or
securitization may be to one or more financial institutions or other entities,
to private investors, or into the public securities market, in Lender’s sole
discretion. Borrower further agrees that Lender may disseminate to any such
actual or potential purchaser(s), assignee(s) or participant(s) (and to any
investment banking firms, rating agencies, accounting firms, law firms and other
third party advisory firms and investors involved with the Loan and the Loan
Documents or the applicable sale, assignment, participation or securitization)
all documents and financial and other information heretofore or hereafter
provided to or known to Lender with respect to: (a) the Property and its
operation; (b) any party connected with the Loan (including, without limitation,
Owner, Borrower, any partner or member of Borrower, any constituent partner or
member of Borrower, any guarantor and any nonborrower Borrower). In the event of
any such sale, assignment, participation or securitization, Lender and the other
parties to the same shall share in the rights and obligations of Lender set
forth in the Loan Documents as and to the extent they shall agree among
themselves. In connection with any such sale, assignment, participation or
securitization, Borrower further agrees that the Loan Documents shall be
sufficient evidence of the obligations of Borrower to each purchaser, assignee
or participant, and Borrower shall, within 15 days after request by Lender;
(c) deliver to Lender such information and documents relating to Borrower, the
Property and its operation and any party connected with the Loan as Lender or
any rating agency may request; (d) deliver to Lender an estoppel certificate for
the benefit of Lender and any other party designated by Lender verifying the
status and terms of the Loan, in form and content satisfactory to Lender;
(e) enter into such amendments to the Loan Documents as may be requested in
order to facilitate any such sale, assignment, participation or securitization
without impairing Borrower’s rights or increasing Borrower’s obligations or
liabilities, or causing Borrower to incur any material expense; and (f) if, as a
condition to the closing of the Loan, Borrower was required to be a
special-purpose bankruptcy-remote entity, enter into such amendments to the
organizational documents of Borrower as any rating agency may request to
preserve or enhance Borrower’s special-purpose bankruptcy-remote status. The
indemnity obligations of Borrower under the Loan Documents shall also apply with
respect to any purchaser, assignee or participant.

 

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1.39 PERMITTED REIT DISTRIBUTIONS. Borrower’s right to make Permitted REIT
Distributions shall be subject to the following terms and conditions. At least
14 days prior to the end of the then current Projection Period (as defined
below), Borrower shall deliver to Lender: (a) written notice setting forth an
estimate of the REIT’s taxable income for the Property and the Permitted REIT
Operating Expenses (the “REIT Distribution Notice”) for the immediate succeeding
period of no less than one fiscal quarter and no more than one fiscal year
(each, a “Projection Period”), which REIT Distribution Notice shall also set
forth the amount of cash flow from the Property needed to make Permitted REIT
Distributions related to such Projection Period, and (b) written confirmation
from Ernst & Young or another “Big 4” accounting firm that the estimate of the
REIT’s taxable income generated by the Property for the applicable Projection
Period, as reflected in the REIT Distribution Notice, is a reasonable estimate
of the same, all in form and substance reasonably acceptable to Lender. Such
estimate shall be based on (1) the REIT’s actual taxable income for the Property
and the actual Permitted REIT Operating Expenses for the then current calendar
year and (2) the REIT’s projected taxable income for the Property and the
projected Permitted REIT Operating Expenses for the remainder of such calendar
year. Within 30 days following the end of each fiscal quarter, Borrower shall
deliver to Lender a statement of the REIT’s actual taxable income for the
Property and the actual Permitted REIT Operating Expenses for the immediately
ended fiscal quarter and evidence supporting such statement and (A) if the
Permitted REIT Distributions made for such fiscal quarter exceeded the estimate
set forth in the REIT Distribution Notice applicable to such fiscal quarter, the
estimate of the Permitted REIT Distributions for the immediately succeeding
fiscal quarter shall be adjusted to reduce the estimated amount of the Permitted
REIT Distributions by the amount of such excess and (B) if the Permitted REIT
Distributions made for such fiscal quarter was less than the estimate set forth
in the REIT Distribution Notice applicable to such fiscal quarter, the estimate
of the Permitted REIT Distributions for the immediately succeeding fiscal
quarter shall be adjusted to increase the estimated amount of the Permitted REIT
Distributions by the amount of such shortfall. Notwithstanding anything stated
to the contrary in this section, Lender acknowledges and agrees that, at all
times prior to the Maturity Date except as expressly provided in the Loan
Agreement, the funding of all reserves and other amounts under this Agreement
are expressly subject to the provisions permitting disbursement to Borrower of
Permitted REIT Distributions as provided herein.

 

1.40 USA PATRIOT ACT NOTICE. COMPLIANCE. The USA Patriot Act of 2001 (Public Law
107-56) and federal regulations issued with respect thereto require all
financial institutions to obtain, verify and record certain information that
identifies individuals or business entities which open an “account” with such
financial institution. Consequently, Lender may from time-to-time request, and
Borrower shall provide to Lender, Borrower’s or any of its Affiliates’ name,
address, tax identification number and/or such other identification information
as shall be necessary for Lender to comply with federal law. An “account” for
this purpose may include, without limitation, a deposit account, cash management
service, a transaction or asset account, a credit account, a loan or other
extension of credit, and/or other financial services product.

 

1.41 TAX SHELTER REGULATIONS. Neither Borrower, nor any Affiliate of any of the
foregoing intends to treat the Loan or the transactions contemplated by this
Agreement and the other Loan Documents as being a “reportable transaction”
(within the meaning of Treasury Regulation Section 1.6011-4). If Borrower or any
Affiliate of any of the foregoing or any other party to the Loan determines to
take any action inconsistent with such intention, Borrower will promptly notify
Lender thereof. If Borrower so notifies Lender, Borrower acknowledges that
Lender may treat the Loan as part of a transaction that is subject to Treasury
Regulation Section 301.6112-1, and Lender will maintain the lists and other
records, including the identity of the applicable party to the Loan as required
by such Treasury Regulation.

 

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1.42 FINANCIAL STATEMENTS REQUIRED. During the term of the Loan and while any
liabilities of Borrower to Lender under any of the Loan Documents remain
outstanding and unless Lender otherwise consents in writing, Borrower shall
provide to Lender the following:

 

  a. Operating Statement. Not later than 10 days after and as of the end of each
calendar month, an operating statement, signed and dated by Borrower, showing
all revenues and expenses during such month or quarter and year-to-date,
relating to the Property, including, without limitation, all information
requested under any of the Loan Documents. Borrower shall also provide the REIT
Distribution Notices required under Section 6.23 above;

 

  b. Rent Roll. Not later than 10 days after and as of the end of each calendar
month, a rent roll signed and dated by Borrower, showing the following lease
information with regard to each tenant: the name of the tenant, monthly or other
periodic rental amount, dates of commencement and expiration of the lease, and
payment status;

 

  c. Balance Sheet. If requested by Lender, not later than 90 days after and as
of the end of each fiscal year, a balance sheet, signed and dated by Borrower,
showing all assets and liabilities of Borrower and Senior Borrower; and

 

  d. Other Information. From time to time, upon Lender’s delivery to Borrower of
at least 10 days’ prior written notice, such other information with regard to
Borrower, Senior Borrower, Guarantor, principals of Borrower, or the Property as
Lender may reasonably request in writing.

 

1.43 FORM; WARRANTY. Borrower agrees that all financial statements to be
delivered to Lender pursuant to Section 1.42 shall: (a) be complete and correct;
(b) present fairly the financial condition of the party; (c) disclose all
liabilities that are required to be reflected or reserved against; and (d) be
prepared in accordance with the same accounting standard used by Borrower to
prepare the financial statements delivered to and approved by Lender in
connection with the making of the Loan or other accounting standards acceptable
to Lender. Borrower shall be deemed to warrant and represent that, as of the
date of delivery of any such financial statement, there has been no material
adverse change in financial condition, nor have any assets or properties been
sold, transferred, assigned, mortgaged, pledged or encumbered since the date of
such financial statement except as disclosed by Borrower in a writing delivered
to Lender. Borrower agrees that all rent rolls and other information to be
delivered to Lender pursuant to this Loan Agreement shall not contain any
misrepresentation or omission of a material fact.

ARTICLE 7. DEFAULT

 

1.44 DEFAULT. For all purposes hereof, “Default” shall mean either an “Optional
Default” (as defined below) or an “Automatic Default” (as defined below).

 

  a. Optional Default. An “Optional Default” shall occur, at Lender’s option,
upon the occurrence of any of the following events:

 

  (i) Monetary. Borrower shall fail to (aa) pay when due any sums which by their
express terms require immediate payment without any grace period or sums which
are payable on the Maturity Date, or (bb) pay within 5 days when due any other
sums payable under the Note, this Agreement or any of the other Loan Documents,
including without limitation, any monthly payment due under the Note.

 

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  (ii) Failure to Perform. Borrower shall fail to observe, perform or discharge
any of Borrower’s obligations, covenants, conditions or agreements, other than
Borrower’s or Guarantor’s payment obligations, under the Note, this Agreement or
any of the other Loan Documents, and (aa) such failure shall remain uncured for
30 days after written notice thereof shall have been given to Borrower by Lender
or (bb) if such failure is of such a nature that it cannot be cured within such
30 day period, Borrower shall fail to commence to cure such failure within such
30 day period or shall fail to diligently prosecute such curative action
thereafter.

 

  (iii) Representations and Warranties. Any representation, warranty,
certificate or other statement (financial or otherwise) made or furnished by or
on behalf of Borrower, Owner, or Guarantor to Lender or in connection with any
of the Loan Documents, or as an inducement to Lender to make the Loan, shall be
false, incorrect, incomplete or misleading in any material respect when made or
furnished and shall cause a Material Adverse Effect (as hereinafter defined).

 

  (iv) Condemnation; Attachment. The condemnation, seizure or appropriation of
any material portion (as reasonably determined by Lender) of the Property; or
the sequestration or attachment of, or levy or execution upon any of the
Property, the Collateral or any other collateral provided by Borrower or Owner
under any of the Loan Documents, or any material portion of the other assets of
Borrower or Owner, which sequestration, attachment, levy or execution is not
released or dismissed within 60 days after its occurrence; or the sale of any
assets affected by any of the foregoing.

 

  (v) Uninsured Casualty. The occurrence of an uninsured casualty with respect
to any material portion (as reasonably determined by Lender) of the Property
unless: (aa) no other Default has occurred and is continuing at the time of such
casualty or occurs thereafter; (bb) Borrower promptly notifies Lender of the
occurrence of such casualty; and (cc) not more than 45 days after the occurrence
of such casualty, Borrower delivers to Lender immediately available funds in an
amount sufficient, in Lender’s reasonable opinion, to pay all costs of the
repair or restoration (including, without limitation, taxes, financing charges,
insurance and rent during the repair period). So long as no Default has occurred
and is continuing at the time of Lender’s receipt of such funds and no Default
occurs thereafter, Lender shall make such funds available for the repair or
restoration of the Property. Notwithstanding the foregoing, Lender shall have no
obligation to make any funds available for repair or restoration of the Property
unless and until all the conditions set forth in clauses (bb) and (cc) of
Section 1.27b(iii) of this Agreement have been satisfied. Borrower acknowledges
that the specific conditions described above are reasonable.

 

  (vi) Senior Loan Default. A “Default” shall occur under the Deed of Trust, the
Senior Note or any other Senior Loan Document.

 

  (vii) Adverse Judgment. If final judgment for the payment of money shall have
been rendered by any court of competent jurisdiction against Owner, Guarantor or
Borrower, and the same shall not have been discharged or execution thereunder
stayed, whether pursuant to appeal or otherwise, within sixty (60) calendar days
of the entry thereof.

For the purposes of this Section 7.1(a), the term “Material Adverse Effect”
shall mean the occurrence or existence of a condition or event which would have
a material adverse effect on (i) the business, profits, operations or financial
condition of Borrower

 

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or Owner, (ii) the ability of Borrower or Owner to pay any amounts under the
Loan Documents or the Senior Loan Documents as they become due, or (iii) the
value of the Property.

 

  b. Automatic Default. An “Automatic Default” shall occur automatically upon
the occurrence of any of the following events:

 

  (i) Voluntary Bankruptcy, Insolvency, Dissolution. (aa) Borrower’s filing a
petition for relief under the Bankruptcy Reform Act of 1978, as amended or
recodified (“Bankruptcy Code”), or under any other present or future state or
federal law regarding bankruptcy, reorganization or other relief to debtors
(collectively, “Debtor Relief Law”); or (bb) Borrower’s filing any pleading in
any involuntary proceeding under the Bankruptcy Code or other Debtor Relief Law
which admits the jurisdiction of a court to regulate Borrower or the Property or
the petition’s material allegations regarding Borrower’s insolvency; or (cc)
Borrower’s making a general assignment for the benefit of creditors; or (dd)
Borrower’s applying for, or the appointment of, a receiver, trustee, custodian
or liquidator of Borrower or any of its property; or (ee) the filing by or
against Borrower of a petition seeking the liquidation or dissolution of
Borrower or the commencement of any other procedure to liquidate or dissolve
Borrower.

 

  (ii) Involuntary Bankruptcy. Borrower’s failure to effect a full dismissal of
any involuntary petition under the Bankruptcy Code or other Debtor Relief Law
that is filed against Borrower or in any way restrains or limits Borrower or
Lender regarding the Loan or the Property, prior to the earlier of the entry of
any order granting relief sought in the involuntary petition or 60 days after
the date of filing of the petition.

 

  (iii) Owner, Guarantors. The occurrence of an event specified in Sections
(i) or (ii) as to Owner, Guarantor, any general partner or managing member of
Owner or Guarantor, or any guarantor or other person or entity in any manner
obligated to Lender under the Loan Documents.

 

1.45 ACCELERATION. Upon the occurrence of an Optional Default, Lender may, at
its option, declare all sums owing to Lender under the Note and the other Loan
Documents immediately due and payable. Upon the occurrence of an Automatic
Default, all sums owing to Lender under the Note and the other Loan Documents
shall automatically become immediately due and payable.

 

1.46 RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 1.45
above, at any time after a Default, Lender shall have all of the following
rights and remedies:

 

  a. Rights to Collateral. To exercise all rights Lender may have with respect
to the Collateral under this Agreement, the Pledge Agreements, the UCC or
otherwise at law; and

 

  b. Other Rights. To exercise such other rights as Lender may have at law or in
equity or pursuant to the terms and conditions of this Agreement or any of the
other Loan Documents.

 

1.47 INTENTIONALLY OMITTED.

 

1.48 INTENTIONALLY OMITTED.

 

1.49 INTENTIONALLY OMITTED.

 

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1.50 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower agrees to pay to
Lender immediately and upon demand all costs and expenses incurred by Lender in
the enforcement of the terms and conditions of this Agreement (including,
without limitation, statutory trustee’s fees, court costs and reasonable
attorneys’ fees, whether incurred in litigation or not) with interest from the
date of expenditure until said sums have been paid at the rate of interest
applicable to the principal balance of the Note as specified therein.

1.51 POWER TO FILE NOTICES AND CURE DEFAULTS. Borrower hereby irrevocably
appoints Lender and its successors and assigns, as its attorney-in-fact, which
agency is coupled with an interest, to perform any obligation of Borrower
hereunder upon the occurrence of an event, act or omission which, with notice or
passage of time or both, would constitute a Default, provided, however, that:
(a) Lender as such attorney-in-fact shall only be accountable for such funds as
are actually received by Lender; and (b) Lender shall not be liable to Borrower
or any other person or entity for any failure to act under this Section.

1.52 REMEDIES CUMULATIVE. All rights and remedies of Lender under this Agreement
and the other Loan Documents are cumulative and are in addition to all rights
and remedies provided by applicable law. Lender may enforce any one or more
remedies or rights under the Loan Documents either successively or concurrently.

ARTICLE 8. MISCELLANEOUS PROVISIONS

 

1.53 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Lender and contain further agreements and affirmative
and negative covenants by Borrower which apply to this Agreement and to the
Collateral and the Property and such further rights and agreements are
incorporated herein by this reference. THE OBLIGATIONS AND LIABILITIES OF
BORROWER UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE
PROVISIONS OF THE SECTION IN THE NOTE ENTITLED “BORROWER’S LIABILITY.”

 

1.54 NON-WAIVER. By accepting payment of any amount secured hereby after its due
date or late performance of any other Obligation, Lender shall not waive its
right against any person obligated directly or indirectly hereunder or on any
Obligation, either to require prompt payment or performance when due of all
other sums and obligations so secured or to declare default for failure to make
such prompt payment or performance. No exercise of any right or remedy by Lender
hereunder shall constitute a waiver of any other right or remedy herein
contained or provided by law. No failure by Lender to exercise any right or
remedy hereunder arising upon any Default shall be construed to prejudice
Lender’s rights or remedies upon the occurrence of any other or subsequent
Default. No delay by Lender in exercising any such right or remedy shall be
construed to preclude Lender from the exercise thereof at any time while that
Default is continuing. No notice to nor demand on Borrower shall of itself
entitle Borrower to any other or further notice or demand in similar or other
circumstances.

 

1.55 INTENTIONALLY OMITTED.

 

1.56

PERMITTED CONTESTS. After prior written notice to Lender, Borrower may contest,
by appropriate legal or other proceedings conducted in good faith and with due
diligence, the amount, validity or application, in whole or in part, of any
lien, levy, tax or assessment, or any lien of any laborer, mechanic,
materialman, supplier or vendor, or the application to Borrower or the Property
of any law or the validity thereof, the assertion or imposition of which, or the
failure to pay when due, would constitute a Default; provided that (a) Borrower
pursues the contest diligently, in a manner which Lender determines is not
prejudicial to Lender, and does not impair the lien of the Deed of Trust;
(b) the Property, or any part hereof or estate or interest therein, shall not be
in any danger of

 

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being sold, forfeited or lost by reason of such proceedings; (c) in the case of
the contest of any law or other legal requirement, Lender shall not be in any
danger of any civil or criminal liability; and (d) if required by Lender,
Borrower deposits with Lender any funds or other forms of assurance (including a
bond or letter of credit) satisfactory to Lender to protect Lender from the
consequences of the contest being unsuccessful. Borrower’s right to contest
pursuant to the terms of this provision shall in no way relieve Borrower or
Borrower of its obligations under the Loan or to make payments to Lender as and
when due.

 

1.57 FURTHER ASSURANCES. Borrower shall, upon demand by Lender, execute,
acknowledge (if appropriate) and deliver any and all documents and instruments
and do or cause to be done all further acts reasonably necessary or appropriate
to effectuate the purposes of the Loan Documents and to perfect any assignments
contained therein.

 

1.58 ATTORNEYS’ FEES. If any legal action, suit or proceeding is commenced
between Borrower and Lender regarding their respective rights and obligations
under this Agreement or any of the other Loan Documents, the prevailing party
shall be entitled to recover, in addition to damages or other relief, costs and
expenses, reasonable attorneys’ fees (including, without limitation, bankruptcy
and appellate fees) and court costs (including, without limitation, expert
witness fees). As used herein the term “prevailing party” shall mean the party
which obtains the principal relief it has sought, whether by compromise
settlement or judgment. If the party which commenced or instituted the action,
suit or proceeding shall dismiss or discontinue it without the concurrence of
the other party, such other party shall be deemed the prevailing party.

 

1.59 BORROWER AND LENDER DEFINED. The term “Borrower” includes both the original
Borrower and any subsequent owner or owners of any of the Property, and the term
“Lender” includes the original Lender and any future owner or holder, including
assignees, pledges and participants, of the Note or any interest therein.

 

1.60 DISCLAIMERS.

 

  a. Intentionally Omitted.

 

  b. Relationship. The relationship of Borrower and Lender under this Agreement
and the other Loan Documents is, and shall at all times remain, solely that of
borrower and lender; and Lender neither undertakes nor assumes any
responsibility or duty to Borrower or to any third party with respect to the
Collateral or the Property. Notwithstanding any other provisions of this
Agreement and the other Loan Documents: (i) Lender is not, and shall not be
construed to be, a partner, joint venturer, member, alter ego, manager,
controlling person or other business associate or participant of any kind of
Borrower, and Lender does not intend to ever assume such status; (ii) Lender’s
activities in connection with this Agreement and the other Loan Documents shall
not be “outside the scope of activities of a lender of money” within the meaning
of California Civil Code Section 3434 or any other similar provision under New
York law, as amended or recodified from time to time, and Lender does not intend
to ever assume any responsibility to any person for the quality, suitability,
safety or condition of the Collateral or the Property; and (iii) Lender shall
not be deemed responsible for or a participant in any acts, omissions or
decisions of Borrower.

 

  c.

No Liability. Lender shall not be directly or indirectly liable or responsible
for any loss, claim, cause of action, liability, indebtedness, damage or injury
of any kind or character to any person or property arising from any construction
on, or occupancy or use of, the Property, whether caused by or arising from:
(i) any defect in any building, structure, grading, fill, landscaping or other
improvements thereon or in any on-site or off-site improvement or other facility
therein or thereon; (ii) any act or omission of Borrower, Owner or any of their

 

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respective agents, employees, independent contractors, licensees or invitees;
(iii) any accident in or on the Property or any fire, flood or other casualty or
hazard thereon; (iv) the failure of Borrower, Owner or any of their respective
licensees, employees, invitees, agents, independent contractors or other
representatives to maintain the Property in a safe condition; or (v) any
nuisance made or suffered on any part of the Property.

 

1.61 SEVERABILITY. If any term of this Agreement or any other Loan Document, or
the application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or such other Loan
Document, or the application of such term to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term of this Agreement or such other Loan Document shall be valid and
enforceable to the fullest extent permitted by law.

 

1.62 INTENTIONALLY OMITTED.

 

1.63 INTENTIONALLY OMITTED.

 

1.64 OBLIGATIONS OF BORROWER, JOINT AND SEVERAL. If more than one person has
executed this Agreement as “Borrower”, the obligations of all such persons
hereunder shall be joint and several.

 

1.65 SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this
Agreement as a “Borrower” agrees that any money judgment which Lender obtains
pursuant to the terms of this Agreement or any other obligation of that married
person governed by this Agreement may be collected by execution upon any
separate property or community property of that person.

 

1.66 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated therein and supersede all prior negotiations or agreements,
written or oral. The Loan Documents shall not be modified except by written
instrument executed by all parties. Any reference in any of the Loan Documents
to the Property or Collateral shall include all or any part of the Property or
Collateral. Any reference to the Loan Documents includes any amendments,
renewals or extensions now or hereafter approved by Lender in writing. When the
identity of the parties or other circumstances make it appropriate, the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural.

 

1.67 CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.

 

1.68 SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties. The foregoing
sentence shall not be construed to permit Borrower to assign the Loan except as
otherwise permitted under the Note or the other Loan Documents.

 

1.69 GOVERNING LAW. In all respects, including, without limiting the generality
of the foregoing, matters of construction, validity, enforceability and
performance, this Agreement, the Note and the other Loan Documents and the
obligations arising hereunder and thereunder shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
made and performed in such state and any applicable law of the United States of
America. Except as provided in the immediately preceding sentence, Borrower
hereby unconditionally and irrevocably waives, to the fullest extent permitted
by law, any claim to assert that the law of any jurisdiction other than New York
governs this Agreement, the Note and other Loan Documents.

 

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1.70 CONSENT TO JURISDICTION. Borrower irrevocably submits to the jurisdiction
of: (a) any state or federal court sitting in the State of New York or
California over any suit, action, or proceeding, brought by Borrower against
Lender, arising out of or relating to this Agreement, the Note or the Loan; and
(b) any state or federal court sitting in the state in which Borrower’s
principal place of business is located over any suit, action or proceeding,
brought by Lender against Borrower, arising out of or relating to this
Agreement, the Note or the Loan or to enforce its rights with respect to the
Collateral. Borrower irrevocably waives, to the fullest extent permitted by law,
any objection that Borrower may now or hereafter have to the laying of venue of
any such suit, action, or proceeding brought in any such court and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum.

 

1.71 EXHIBITS. Exhibits A and B are incorporated into this Agreement by this
reference.

 

1.72 ADDRESSES; REQUEST FOR NOTICE. All notices and other communications that
are required or permitted to be given to a party under this Agreement or the
other Loan Documents shall be in writing, refer to the Loan number, and shall be
sent to such party, either by personal delivery, by overnight delivery service,
by certified first class mail, return receipt requested, or by facsimile
transmission to the addressee or facsimile number below (provided that facsimile
transmission is confirmed by delivery by one other permitted method within one
day thereafter). All such notices and communications shall be effective upon
receipt of such delivery or facsimile transmission. The addresses of the parties
are set forth on page 1 of this Agreement and the facsimile numbers for the
parties are as follows:

 

Lender:

 

Wells Fargo Bank, N.A.

2030 Main Street, Suite 800

Irvine, CA 92614

Loan No. 104026 Attention: Spenser Robinson

FAX No.: (949) 251-4498

  

With additional copies to:

 

Bruce W. Fraser

Sidley Austin LLP

555 W. Fifth Street, 40th Floor

Los Angeles, CA 90013

FAX No.: (213) 896-6600

With additional copies to:

 

Wells Fargo Bank, N.A.

2030 Main Street, Suite 800

Irvine, CA 92614

Loan No. 104026

Attention: Sherry Courtney-Sanders

FAX No.: (949) 833-1182

  

 

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Borrower:

 

KBS REIT Acquisition IX, LLC

620 Newport Center Drive, Suite 1300

Newport Beach, CA 92660

FAX No.: (949) 417-6518

  

With additional copies to:

 

Peter Potrykus

KBS Capital Advisors LLC

1133 21st Street NW, Suite 400

Washington, DC 20036

FAX No.: (202) 822-1340

With a copy to:

 

Stacie Yamane

KBS Capital Advisors LLC

620 Newport Center Drive, Suite 1300

Newport Beach, CA 92660

FAX No.: (949) 417-6520

  

L. Bruce Fischer

Morgan, Lewis & Bockius LLP

5 Park Plaza, Suite 1750

Irvine, CA 92614

FAX No.: (949) 399-7001

Borrower’s principal place of business is at the address set forth on page 1 of
this Agreement.

Any Borrower whose address is set forth on page 1 of this Agreement hereby
requests that a copy of notice of default and notice of sale be delivered to it
at that address. Failure to insert an address shall constitute a designation of
Borrower’s last known address as the address for such notice. Any party shall
have the right to change its address for notice hereunder to any other location
within the continental United States by giving 30 days notice to the other
parties in the manner set forth above.

 

1.73 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, will be deemed an original and all
of which taken together, will be deemed to be one and the same instrument.

 

1.74 WAIVER OF JURY TRIAL. TO THE EXTENT NOW OR HEREAFTER PERMITTED BY
APPLICABLE LAW, LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT.

 

1.75 LIMITATION ON LIABILITY. Notwithstanding anything stated to the contrary in
this Agreement or in any of the other Loan Documents, none of the constituent
members or partners in Borrower, including, without limitation, KBS Limited
Partnership (but expressly excluding the obligations and liabilities under the
separate guarantees and indemnitees under the Loan) shall have any liability
whatsoever for the payment or performance of Borrower’s obligations under this
Agreement.

[signatures on following page]

 

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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal
as of the day and year set forth above.

 

BORROWER:

KBS REIT ACQUISITION IX, LLC,

a Delaware limited liability company

By:  

KBS Limited Partnership,

a Delaware limited partnership,

its sole member

  By:  

KBS Real Estate Investment Trust, Inc.,

a Maryland corporation,

its general partner

    By:  

/s/ Charles J. Schreiber, Jr.

      Charles J. Schreiber, Jr.       Chief Executive Officer LENDER:

WELLS FARGO BANK, NATIONAL

ASSOCIATION

By:  

/s/ Authorized Signatory

Name:  

 

Its:  

 

 

35