Exhibit 10.2

 

Mortgage Loan No.:    12701

 

LOAN AGREEMENT

 

between

 

 

KR MML 12701, LLC,

 

as Borrower

 

 

and

 

 

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

 

as Lender

 

 

Dated as of June 28, 2012

 

 

Relating to Properties Located at:

 

2211 Michelson Drive, Irvine, California

and

2100-2110 Colorado Avenue, Santa Monica, California

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

Article 1. CERTAIN DEFINITIONS

1

Section 1.1

Certain Definitions

1

Section 1.2

Interpretation

15

 

 

 

Article 2. LOAN TERMS

16

Section 2.1

The Loan and The Note

16

Section 2.2

Interest Rate; Late Charge; Default Rate

16

Section 2.3

Terms of Payment

17

Section 2.4

Term of Loan

17

Section 2.5

Prepayment

17

Section 2.6

Security

20

Section 2.7

Payments

20

 

 

 

Article 3. INSURANCE AND CONDEMNATION

21

Section 3.1

Insurance Requirements

21

Section 3.2

Damage, Destruction and Restoration

24

Section 3.3

Condemnation

29

 

 

 

Article 4. ENVIRONMENTAL MATTERS

30

Section 4.1

Environmental Matters; Warranties; Notice; Indemnity

30

Section 4.2

Environmental Matters; Remediation

33

Section 4.3

Environmental Matters; Inspection

34

Section 4.4

No Waiver

35

 

 

 

Article 5. CERTAIN PROPERTY MATTERS

36

Section 5.1

Lease Covenants and Limitations

36

Section 5.2

Management

39

Section 5.3

Impositions

40

 

 

 

Article 6. REPRESENTATIONS, WARRANTIES AND COVENANTS

42

Section 6.1

Organization and Authority

42

Section 6.2

Maintenance of Existence

43

Section 6.3

Title

43

Section 6.4

Mortgage Taxes

44

Section 6.5

Payment of Liens

44

Section 6.6

Costs of Defending and Upholding the Lien

45

Section 6.7

Costs of Enforcement

45

Section 6.8

Indemnification

45

Section 6.9

Estoppel Certificates

45

Section 6.10

ERISA

46

Section 6.11

Terrorism and Anti-Money Laundering

47

Section 6.12

Limited Purpose Entity Requirements

47

Section 6.13

Operating Agreements and Permitted Encumbrances

48

 

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Section 6.14

Compliance with Laws

49

Section 6.15

Business Purpose of Loan

49

Section 6.16

Maintenance of Mortgaged Property

49

Section 6.17

Solvency

50

Section 6.18

Representations Regarding Mortgaged Property

50

Section 6.19

TIC Agreement

53

 

 

 

Article 7. FINANCIAL REPORTING

54

Section 7.1

Financial Statements; Records

54

 

 

 

Article 8. CONVEYANCES, ENCUMBRANCES AND BORROWINGS

57

Section 8.1

Prohibition Against Conveyances, Encumbrances and Borrowing

57

Section 8.2

One-Time Permitted Transfer

58

Section 8.3

Release and Substitution of Release Property

62

 

 

 

Article 9. EVENTS OF DEFAULT

65

Section 9.1

Events of Default

65

Section 9.2

Notice of Event of Default

68

 

 

 

Article 10. REMEDIES

68

Section 10.1

Remedies

68

Section 10.2

Lender’s Right to Perform the Obligations

68

Section 10.3

Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets

69

 

 

 

Article 11. LIMITATIONS ON LIABILITY

69

Section 11.1

Limitation on Liability

69

 

 

 

Article 12. MISCELLANEOUS

72

Section 12.1

Notices

72

Section 12.2

Interest on Advances and Expenses

74

Section 12.3

Successors and Assigns

74

Section 12.4

Joint and Several Liability

74

Section 12.5

Captions

74

Section 12.6

Further Assurances

74

Section 12.7

Severability

74

Section 12.8

Borrower’s Obligations Absolute

74

Section 12.9

Amendments; Consents

75

Section 12.10

Other Loan Documents and Exhibits

75

Section 12.11

Merger

75

Section 12.12

Time of the Essence

75

Section 12.13

Transfer of Loan

75

Section 12.14

Cooperation

76

Section 12.15

Register

77

Section 12.16

Limitation on Interest

77

Section 12.17

Survival

78

Section 12.18

WAIVER OF JURY TRIAL

78

 

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Section 12.19

Governing Law

78

Section 12.20

Consent to Jurisdiction and Venue

79

Section 12.21

Service of Process

79

Section 12.22

Entire Agreement

79

Section 12.23

Counterparts

79

Section 12.24

Pledge and Grant of Security Interest

79

Section 12.25

Costs

80

Section 12.26

Confidentiality

80

Section 12.27

Status of Lenders

81

 

 

 

Article 13. THE ADMINISTRATIVE AGENT

83

Section 13.1

Appointment, Powers and Immunities

83

Section 13.2

Reliance by Borrower on Administrative Agent

83

Section 13.3

Rights as a Lender

83

 

 

 

LIST OF EXHIBITS

 

EXHIBIT A-1

-

LEGAL DESCRIPTION OF PROPERTY A

 

 

 

EXHIBIT A-2

-

LEGAL DESCRIPTION OF PROPERTY B

 

 

 

EXHIBIT B

-

[INTENTIONALLY OMITTED]

 

 

 

EXHIBIT C

-

RENT ROLL

 

 

 

EXHIBIT D

-

[INTENTIONALLY OMITTED]

 

 

 

EXHIBIT E

-

ALLOCATED LOAN AMOUNTS

 

 

 

EXHIBIT F

-

FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

 

 

 

EXHIBIT G-1

-

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

 

 

EXHIBIT G-2

-

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

 

 

EXHIBIT G-3

-

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

 

 

EXHIBIT G-4

-

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

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LOAN AGREEMENT

 

This Loan Agreement (this “Agreement”) is entered into as of June 28, 2012 by
and between KR MML 12701, LLC, a Delaware limited liability company
(“Borrower”), and MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a Massachusetts
corporation (“Lender” and, to the extent applicable pursuant to Article 13,
Cornerstone Real Estate Advisers Inc. “Administrative Agent”).

 

RECITALS:

 

A.                                   Borrower owns certain property and related
land and improvements legally described in Exhibit A-1 and Exhibit A-2 and has
applied to Lender for a loan in a principal amount of $97,000,000.00 which shall
be secured, in part, by all of such assets.

 

B.                                     Lender desires to make the Loan to
Borrower upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the terms and covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and agreed to, the parties hereto agree to be bound as
follows:

 

ARTICLE 1.

 

CERTAIN DEFINITIONS

 

Section 1.1                                      Certain Definitions.  As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1.1:

 

“Acceleration Event” has the meaning assigned to such term in Subsection 2.5(c).

 

“Acceptable Lease” means a New Lease that is either a No-Approval Lease or that
is actually or deemed approved by Lender in accordance with this Agreement.

 

“ACH” has the meaning assigned to such word in Subsection 2.7(a).

 

“Administrative Agent” means Cornerstone Real Estate Advisers Inc. or any
successor pursuant to Article 13 of this Agreement.

 

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

 

“Affiliate” means any Person that is, directly or indirectly, Controlled by, in
Control of or under common Control with any other Person.

 

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“Aggregate Debt Test” means, as of any date, that the aggregate principal amount
of all outstanding Sponsor Indebtedness (determined on a consolidated basis in
accordance with GAAP) as of such date does not exceed sixty percent (60%) of the
sum of, without duplication, (a) Undepreciated Real Estate Assets as of such
date (determined on a consolidated basis in accordance with GAAP); and (b) the
book value of all other assets (excluding accounts receivables and intangibles)
of Sponsor as of such date (determined on a consolidated basis in accordance
with GAAP).  All accounting terms used in the calculation of the Aggregate Debt
Test shall be in accordance with GAAP, applied on a basis consistent (except for
the changes agreed to by Sponsor’s independent public accountants) with the most
recent audited consolidated financial statements of Sponsor delivered to Lender
pursuant to Subsection 7.1(a)(iv); provided that, if Borrower notifies Lender
that Borrower wishes to change the manner in which the Aggregate Debt Test is
calculated to eliminate the effect of any change in GAAP on such calculation (or
if Lender notifies Borrower that Lender wishes to change the manner in which the
Aggregate Debt Test is calculated for such purpose), then the calculation of the
Aggregate Debt Test shall be calculated thereafter on the basis of GAAP in
effect immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or the definition of “Aggregate Debt Test” in
this Agreement is amended in a manner satisfactory to Borrower and Lender.

 

“Aggregate Debt Test Certificate” means each certification of the calculation of
the Aggregate Debt Test provided by Sponsor pursuant to Subsection 7.1(a)(iii).

 

“Agreement” means this Loan Agreement, as amended or modified from time to time.

 

“Allocated Loan Amount” means the portion of the Loan allocated to an Individual
Premises as set forth in Exhibit E.

 

“Amortized Allocated Loan Amounts” mean the Allocated Loan Amounts as adjusted
for actual amortization on a prorata basis (or as otherwise adjusted in
accordance with Section 3.2(a), 3.3 or 8.2 hereof).

 

“Anti-Money Laundering Laws” means the USA Patriot Act of 2001, as amended, the
Bank Secrecy Act, as amended, Executive Order 13324 — Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism, as amended, and other federal laws and regulations and executive
orders administered by OFAC which prohibit, among other things, the engagement
in transactions with, and the provision of services to, certain foreign
countries, territories, entities and individuals (such individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanction and embargo programs), and such
additional laws and programs administered by OFAC which prohibit dealing with
individuals or entities in certain countries regardless of whether such
individuals or entities appear on any of the OFAC lists.

 

“Application” means the Application for Real Estate Mortgage Loan dated April
25, 2012 submitted by or on behalf of Borrower to Lender for the Loan.

 

“Appurtenances” means, individually or collectively, as the applicable context
requires, (i) “Appurtenances” as defined in the Granting Clauses of the Mortgage
with respect to Property

 

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A, and (ii) “Appurtenances” as defined in the Granting Clauses of the Mortgage
with respect to Property B.

 

“Assignment of Leases and Rents” means collectively, each Assignment of Leases
and Rents now or hereinafter entered into by Borrower in favor of Lender in
connection with the Loan, as the same may be amended, modified, consolidated,
extended, substituted or replaced from time to time.

 

“Bankruptcy Proceeding” means any proceeding, action, petition or filing under
the Federal Bankruptcy Code or any similar state or federal law now or hereafter
in effect relating to bankruptcy, reorganization or insolvency, or the
arrangement or adjustment of debts.

 

“Borrower” has the meaning assigned in the introductory paragraph on page one of
this Agreement, any subsequent owner of the Mortgaged Property and its or their
respective permitted successors and assigns.

 

“Borrower Environmental Report” has the meaning assigned to such term in
Subsection 4.3(b).

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
national banks in either the Commonwealth of Massachusetts or the State are not
open for business.

 

“Charter” means the Articles of Restatement of Kilroy Realty Corporation, dated
as of May 23, 2012.

 

“Closed Period Prepayment Premium” has the meaning assigned to such term in
Subsection 2.5(c).

 

“Closed Prepayment Date” has the meaning assigned to such term in Subsection
2.5(a).

 

“Closing Date” means the date that the Loan (or the initial portion thereof) is
advanced to Borrower.

 

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

 

“Collateral” means, individually or collectively, as the applicable context
requires, (i) “Collateral” as defined in the Granting Clauses of the Mortgage
with respect to Property A, and (ii) “Collateral” as defined in the Granting
Clauses of the Mortgage with respect to Property B.

 

“Conditional Resignation” has the meaning assigned to such term in Subsection
6.19(f).

 

“Confidential Information” means information that Borrower, Indemnitor or any
Principal furnishes to Lender, but does not include any such information that is
or becomes generally available to the public other than by way of a breach of
the confidentiality provisions of Section 12.26 or that is or becomes available
to Lender from a source other than Borrower, Indemnitor or any Principal and not
in violation of any confidentiality agreement with respect to such information
that is actually known to Lender.

 

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“Contract Rate” has the meaning assigned to such term in Subsection 2.2(a).

 

“Control” when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract, relation to
individuals or otherwise; and the terms “Controlling” or “Controlled” have
meanings correlative to the foregoing.

 

“Costs” has the meaning assigned to such term in Section 12.25.

 

“Cure Notice” has the meaning assigned to such term in Subsection 9.1(c).

 

“Current Debt Yield” means, as of the date such calculation is made, the ratio,
expressed as a percentage, of (a) the Net Operating Income from the Mortgaged
Property, to (b) the then outstanding principal balance of the Loan.

 

“Debt Yield” means, as of the date such calculation is made, the ratio,
expressed as a percentage, of (a) the Net Operating Income from the Mortgaged
Property, to (b) the then outstanding principal balance of the Loan.

 

“Default Rate” has the meaning assigned to such term in Subsection 2.2(c).

 

“Deficiency Amount” has the meaning assigned to such term in Subsection
3.2(d)(iv).

 

“Dollars” and “$” means lawful money of the United States of America.

 

“Easement Agreements” has the meaning assigned to such term in Section 6.3.

 

“Easements” has the meaning assigned to such term in Section 6.3.

 

“Environmental Indemnification Agreement” means the Environmental
Indemnification Agreement of even date herewith executed by Borrower and
Indemnitor in favor of Lender, as amended from time to time.

 

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

 

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Rodenticide Act, as amended, 7 U.S.C. §§ 136 et seq.; the Safe Drinking Water
Act, as amended, 42 U.S.C. § 300f et seq.; the Solid Waste Disposal Act, as
amended, 42 U.S.C. § 6901 et seq.; and the River and Harbors Act of 1899, 33
U.S.C. § 401 et seq.

 

“Environmental Litigation” has the meaning assigned to such term in Subsection
4.1(g).

 

“Environmental Report” means the following environmental site assessment report
or reports relating to the Premises:  (i) Phase I Environmental Site Assessment
for 2211 Michelson Drive, Irvine, California 92612, prepared by URS Corporation
on April 16, 2012 as URS Job No. 38618777, and (ii) Phase I Environmental Site
Assessment for 2100 and 2110 Colorado Avenue, Santa Monica, California, 90404,
prepared by URS Corporation on April 17, 2012 as URS Job No. 38618777.

 

“Environmental Violation” has the meaning assigned to such term in Subsection
4.1(d).

 

“Equipment” has the meaning assigned to such word in the Granting Clauses of the
Mortgage.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same
may be amended from time to time.

 

“Event of Default” means any one or more of the events described in Section 9.1.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Lender or required to be withheld or deducted from a payment to a Lender: (a)
Taxes imposed on or measured by net income (however denominated), franchise
Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such
Lender being organized under the laws of, or having its principal office or its
applicable lending office located in, the jurisdiction imposing such Tax (or any
political subdivision thereof) or (ii) Taxes imposed as a result of a present or
former connection between such Lender and the jurisdiction imposing such Tax
(other than connections arising from such Lender having executed, delivered,
become a party to, performed its obligations under, received payments under,
received or perfected a security interest under, engaged in any other
transaction pursuant to or enforced the Loan Document), (b) withholding Taxes
imposed on amounts payable to or for the account of such Lender with respect to
an applicable interest in the Loan pursuant to a law in effect on the date on
which (i) such Lender acquires such interest in the Loan or (ii) such Lender
changes its lending office, except in each case to the extent that, pursuant to
Section 6.4, amounts with respect to such Taxes were payable either to such
Lender’s assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Lender’s failure to comply with Section 12.26 and (d) any
U.S. federal withholding Taxes imposed under FATCA.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof.

 

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“Federal Bankruptcy Code” means Title 11 of the United States Code, as the same
may be amended from time to time or any successor statute thereto.

 

“Federal Funds Rate” means the rate published in The Wall Street Journal as the
average federal funds rate in the Money Rates section as of the applicable date,
or if The Wall Street Journal is not published on such date because such date is
not a Business Day, on the preceding date on which it was published.  If The
Wall Street Journal ceases to publish such average rates or is no longer in
publication, then any other publication acceptable to Lender in its reasonable
discretion quoting daily market average federal funds rates will be used.

 

“Financial Information” has the meaning assigned to such term in Section 7.1.

 

“Financial Information Fee” has the meaning assigned to such term in Subsection
7.1(c).

 

“Fiscal Year” means each calendar year during the term of this Agreement, or
such other fiscal year of Borrower as Borrower may select from time to time with
the prior consent of Lender (such consent not to be unreasonably withheld,
delayed or conditioned).  During the first year of the term hereof, Borrower’s
Fiscal Year shall be deemed to have commenced on the date of this Agreement and
shall end on the regular Fiscal Year ending date as indicated in the immediately
preceding sentence.

 

“Foreign Lender” means a Lender that is not a U.S. Person.

 

“GAAP” means generally accepted accounting principles.

 

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

 

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

 

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

 

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

 

“Impositions” means all property taxes or payments in lieu of property taxes of
every kind and nature, and assessments, levies, and all other charges imposed
upon or assessed against the Mortgaged Property or any portion thereof
(including the Property Income), any of which

 

6

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might, if unpaid, affect the enforceability of any of the remedies provided in
this Agreement or any other Loan Documents or result in a lien on the Mortgaged
Property or any portion thereof, regardless of to whom assessed.

 

“Improvements” means, individually or collectively, as the applicable context
requires, (i) “Improvements” as defined in the Granting Clauses of the Mortgage
with respect to Property A, and (ii) “Improvements” as defined in the Granting
Clauses of the Mortgage with respect to Property B.

 

“Indebtedness” means the aggregate of all principal and interest payments that
accrue or are due and payable in connection with the Loan, together with all
other obligations and liabilities and all amounts, sums and expenses due Lender
hereunder or under any other Loan Document.

 

“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of Borrower under
any Loan Document.

 

“Indemnitor” means, collectively, Kilroy LP, and any other guarantor or
indemnitor of all or any of Borrower’s obligations or liabilities under the Loan
Documents, including but not limited to Article 11 of this Agreement.

 

“Independent Defense Events” has the meaning assigned to such term in Subsection
4.1(g).

 

“Individual Premises” means each of the properties legally described on Exhibit
A-1 and Exhibit A-2 attached hereto and encumbered by a Mortgage, together with
all rights pertaining to such property and improvements, as more particularly
described in the granting clauses of each such Mortgage and referred to therein
as the “Mortgaged Property”, unless released pursuant to Section 8.3 hereof.  An
“Individual Premises” shall also mean and include any Substitute Property.

 

“Intangibles” has the meaning assigned to such word in the Granting Clauses of
the Mortgage.

 

“Investor” has the meaning assigned to such term in Section 12.13.

 

“Kilroy LP” means Kilroy Realty, L.P., a Delaware limited partnership, and any
successor thereto that is permitted hereunder without the requirement to obtain
Lender’s consent.

 

“Land” means, individually or collectively, as the applicable context requires,
(i) the parcel or parcels of land described in Exhibit A-1 attached to this
Agreement, and (ii) the parcel or parcels of land described in Exhibit A-2
attached to this Agreement.

 

“Late Charge” has the meaning assigned to such term in Subsection 2.2(b).

 

“Lease Approval Package” has the meaning assigned to such term in Subsection
5.1(a)(ii).

 

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“Lease Termination Approval Package” has the meaning assigned to such term in
Subsection 5.1(a)(iii).

 

“Lease Termination Reserve Account” has the meaning assigned to such term in
Subsection 5.1(g).

 

“Leases” has the meaning assigned to such word in the Granting Clauses of the
Mortgage.

 

“Lender” means, collectively, Massachusetts Mutual Life Insurance Company and
any Lender Successor.

 

“Lender Environmental Report” has the meaning assigned to such term in
Subsection 4.3(a).

 

“Lender Parties” means Lender, Cornerstone Real Estate Advisers, LLC,
Cornerstone Real Estate Advisers Inc., and any present and future loan
participants, co-lenders, loan servicers, custodians and trustees, and each of
their respective directors, officers, employees, shareholders, agents,
affiliates, heirs, legal representatives, successors and assigns to the extent
permitted pursuant to Section 12.13 hereof.

 

“Lender Successor” means each holder from time to time of the Note (other than
Massachusetts Mutual Life Insurance Company), and each such holder’s successors
and assigns, in connection with a Transfer or Participation of the Loan made in
accordance with Section 12.13 hereof.

 

“Lien” means any interest, or claim thereof, in the Mortgaged Property securing
an obligation owed to, or a claim by, any Person other than the owner of the
Mortgaged Property, whether such interest is based on common law, statute or
contract, including the lien or security interest arising from a deed of trust,
mortgage, assignment, encumbrance, pledge, security agreement, conditional sale
or trust receipt or a lease, consignment or bailment for security purposes.  The
term “Lien” shall include reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting the Mortgaged Property.

 

“Loan” means the loan to be evidenced by the Note and made by Lender to Borrower
under this Agreement and all other amounts secured by the Loan Documents.

 

“Loan Documents” means collectively, this Agreement, the Note, the Mortgage, the
Assignment of Leases and Rents, the Environmental Indemnification Agreement, the
Recourse Guaranty Agreement, the Uniform Commercial Code Financing Statements
naming Borrower as debtor and Lender as secured party and all other documents
now or hereafter executed by Borrower or any other Person to evidence or secure
the payment of the Indebtedness or the performance of Borrower or otherwise now
or hereafter executed in connection with this Agreement, the Note or the
Mortgage and all amendments, modification, restatements, extensions, renewals
and replacements of the foregoing.

 

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“Loan Term” means the term of the Note from the date of the Note through and
including the Maturity Date.

 

“Loan to Value Ratio” means the ratio, expressed as a percentage, of (a) the
unpaid principal balance of the Loan to (b) the value of the Mortgaged
Property.  Such value shall be determined as specified in the applicable
provisions of this Agreement.

 

“Losses” means all claims, suits, liabilities, actions, proceedings,
obligations, debts, damages, losses, costs, fines, penalties, charges, fees,
expenses, judgments, awards, amounts paid in settlement and damages of every
kind and nature (including, but not limited to, reasonable attorneys’ fees and
the costs and expenses of collection and enforcement).

 

“LPE Requirements” has the meaning assigned to such term in Section 6.12.

 

“Maturity Date” means July 1, 2027.

 

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

 

“Monthly Payment Differential” has the meaning assigned to such term in Section
2.5.

 

“Mortgage” means collectively, each certain Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing and/or each certain Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing, as
applicable, now or hereinafter entered into by Borrower in favor of Lender
securing Borrower’s obligations hereunder and under the other Loan Documents, as
the same may be amended, modified, consolidated, extended, substituted or
replaced from time to time.

 

“Mortgaged Property” means the Premises and the Collateral.

 

“Mortgaged Property A” means the Mortgaged Property relating to Property A.

 

“Mortgaged Property B” means the Mortgaged Property relating to Property B.

 

“Net Operating Income” means, for any date of determination, the difference
between Operating Revenue and Operating Expenses for the twelve (12) month
period following the date of determination.  Borrower shall provide Lender with
Borrower’s proposed calculation of Net Operating Income, certified by the chief
financial officer, general partner or managing member of Borrower, together with
all relevant supporting detail required to determine the same.  Lender shall
then perform Lender’s own independent calculation of Net Operating Income, which
shall be the definitive determination of Net Operating Income.

 

“New Lease” means all Leases entered into after the date of this Agreement.

 

“New Lease Modification” means all amendments, modifications, assignments,
extensions or renewals of any Lease entered into after the date of this
Agreement.

 

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“Note” or “Notes” means the Promissory Note or the Promissory Notes of even date
herewith executed and delivered by Borrower in the original principal amount of
$97,000,000.00, as the same may be modified, amended, split, consolidated,
replaced, substituted or extended from time to time.

 

“OFAC” means the United States Department of the Treasury, Office of Foreign
Assets Control, or any successor or replacement agency.

 

“OFAC Prohibited Person” means, a country, territory, individual or Person (i)
listed on, included within or associated with any of the countries, territories,
individuals or entities referred to on The Office of Foreign Assets Control’s
List of Specially Designated Nationals and Blocked Persons or any other
prohibited person lists maintained by governmental authorities, or otherwise
included within or associated with any of the countries, territories,
individuals or entities referred to in or prohibited by OFAC or any other
Anti-Money Laundering Laws, or (ii) which is obligated or has any interest to
pay, donate, transfer or otherwise assign any property, money, goods, services,
or other benefits from any of the Mortgaged Property directly or indirectly, to
any countries, territories, individuals or entities on or associated with anyone
on such list or in such laws.

 

“Operating Agreements” means any property management agreements or leasing
commission agreements concerning the Mortgaged Property, in each case entered
into from and after the date hereof.

 

“Operating Expenses” means, as of the date of calculation, the projected
ordinary and necessary operating expenses applicable to the Mortgaged Property
for the twelve (12) month period immediately following the date of
determination, including, but not limited to, expenses for utilities,
administration, cleaning, landscaping, security, repairs and maintenance, ground
rent payments, if any, management fees, fully assessed (or estimated fully
assessed) real estate and other taxes and assessments and insurance premiums,
but excluding from any such expenses any deductions for federal, state and other
income taxes, debt service, depreciation or amortization of capital expenditures
(including leasing commissions, tenant improvements, and other leasing costs)
and other similar non-cash items.

 

“Operating Revenue” means, as of the date of calculation, the projected gross
rents, revenues and other income from the operation of the Mortgaged Property,
based on a stabilized property and stabilized expenses, for the twelve (12)
month period immediately following the date of determination, taking into
account both (a) the amount of all such rents, revenues and other income derived
from Acceptable Leases which are expected to continue for at least the following
twelve (12) month period, and (b) the amount of all such rents, revenues and
other income to be derived from Acceptable Leases scheduled either to have
increases in rent or to commence by their terms during the immediately following
twelve (12) month period, in the case of both (a) and (b), after giving effect
to any extension options under such Leases which are reasonably expected to be
exercised, and reduced by the amount of all rents and revenues and other income
from all Leases expiring or terminating or being modified, or reasonably
anticipated to expire, terminate or be modified, during the immediately
following twelve (12) month period.

 

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“Participation” has the meaning assigned to such term in Section 12.13.

 

“Payment Date” means August 1, 2012 and the first Business Day of each calendar
month thereafter to and including the Maturity Date.

 

“Permitted Encumbrances” means with respect to the Premises, only the
outstanding liens, easements, restrictions, security interests and other
exceptions to title expressly set forth in Schedule B to title insurance policy
no. 126746040-X59 and Schedule B to title insurance policy no. 126746041-X59
issued or to be issued promptly following the Closing Date by Chicago Title
Insurance Company insuring the Mortgage for the benefit of Lender, together with
the liens and security interests in favor of Lender created by the Loan
Documents and such other matters as are permitted pursuant to the Loan
Documents.

 

“Person” means and includes any individual, corporation, partnership, joint
venture, limited liability company, association, bank, joint-stock company,
trust, unincorporated organization or government, or an agency or political
subdivision thereof.

 

“Plan Assets Regulation” has the meaning assigned to such term in Section 6.10.

 

“Premises” means the Land, the Improvements and the Appurtenances, including
with respect to any Substitute Property, but excluding any portion of the
Premises released pursuant to Section 8.3 hereof.

 

“Prepayment Date” means the date set forth in Borrower’s written notice to
Lender (as required under Section 2.5) of Borrower’s intention to make a
prepayment of the Loan, or if no such notice is required or provided, the date
of any prepayment of the Loan, in whole or in part.

 

“Prepayment Premium” has the meaning assigned to such term in Subsection 2.5(b).

 

“Principal” means (a) Borrower, (b) Indemnitor, (c) each person or entity that
directly or indirectly owns ten percent (10%) or more of the equity interests in
Borrower or Indemnitor (a “10% Interest”), and (d) any person or entity that
does not own a 10% Interest but directly or indirectly Controls Borrower or
Indemnitor, excluding in each case any Person who owns an indirect interest in
Borrower as a result of its ownership of common, preferred or other beneficial
ownership interests in Sponsor through the New York Stock Exchange, the NASDAQ
national market, or other national or international exchange.

 

“Proceeds” has the meaning assigned to such word in the Granting Clauses of the
Mortgage.

 

“Processing Fee” has the meaning assigned to such term in Subsection 8.2(a).

 

“Property A” means that certain property located at 2211 Michelson Drive,
Irvine, California 90404, more particularly described on Exhibit A-1.

 

“Property B” means that certain property located at 2100-2110 Colorado Avenue,
Santa Monica, California 90404, more particularly described on Exhibit A-2.

 

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“Property Income” has the meaning assigned to such term in the Granting Clauses
of the Mortgage.

 

“Proposed Transferee” has the meaning assigned to such term in Section 8.2.

 

“Qualified Real Estate Investor” means, with respect to any Proposed Transferee
or its principal or Affiliate, as applicable, any reputable entity which is
domiciled in the U.S. with principals who are U.S. citizens and which is
reasonably determined by Lender to have satisfied all of the following
conditions:  said entity or entities, as applicable (1) have the qualifications
and experience at least equal to that of Borrower and its Sponsor on the Closing
Date; (2) have (a) real estate assets with a current market value of not less
than $750,000,000 (excluding the Mortgaged Property), (b) net worth of not less
than $300,000,000, and (c) liquid assets of not less than $10,000,000, and (3)
is not and has not been, as of the date for the closing of the applicable
transfer or at any time prior thereto, (a) in default on any indebtedness or
loan from Lender or any affiliate of Lender, (b) involved as a debtor or as the
principal of a debtor in any bankruptcy, reorganization or insolvency
proceeding, (c) the subject of any criminal charges or proceedings, (d) involved
in litigation which is deemed significant by Lender, or (e) an OFAC Prohibited
Person.  All of the foregoing conditions must be satisfied as of the date of the
request for approval of transfer of title to the Mortgaged Property as provided
in Section 8.2 and on the date of the proposed closing of said transfer.

 

“Recourse Guaranty Agreement” means that certain Recourse Guaranty Agreement
from Indemnitor for the benefit of Lender, as amended and modified from time to
time.

 

“Register” has the meaning assigned to such term in Section 12.15.

 

“Reinvestment Yield” has the meaning assigned to such term in Section 2.5.

 

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

 

“Release Property” has the meaning assigned to such term in Section 8.3.

 

“Remediation” means and includes any response, remedial, removal or corrective
action, any activity to cleanup, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Substance or underground storage tank, any actions to
prevent, cure or mitigate any Release of a Hazardous Substance, any action to
comply with any Environmental Laws or with any permits issued pursuant thereto,
any inspection, investigation, study, monitoring, assessment, audit, sampling
and testing, laboratory or other analysis, or evaluation relating to any
Hazardous Substances or underground storage tank.

 

“Rents” has the meaning assigned to such word in the Assignment of Leases and
Rents.

 

“Reported Net Operating Income” means the difference between Reported Operating
Revenue and Reported Operating Expenses for the applicable period of time for
which Reported Net Operating Income is being calculated.

 

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“Reported Operating Expenses” means all ordinary and necessary operating
expenses applicable to the Mortgaged Property for a specified period of time,
including, but not limited to, expenses for utilities, administration, cleaning,
landscaping, security, repairs and maintenance, ground rent payments, if any,
management fees, fully assessed (or estimated fully assessed) real estate and
other taxes and assessments, insurance premiums, but excluding from any such
expenses any deductions for federal, state and other income taxes, debt service,
depreciation or amortization of capital expenditures (including leasing
commissions, tenant improvements, and other leasing costs) and other similar
non-cash items.

 

“Reported Operating Revenue” means all of the gross rents, revenues and other
income from the operation of the Mortgaged Property for a specified period of
time.

 

“Reserve Waiver Requirement” has the meaning assigned to such term in Subsection
5.3(d).

 

“Sponsor” means Kilroy Realty Corporation, a Maryland corporation.

 

“Sponsor Indebtedness” means any indebtedness of Sponsor, whether or not
contingent, in respect of: (a) borrowed money or evidenced by bonds, notes,
debentures or similar instruments; (b) indebtedness secured by any lien on any
property or asset owned by Sponsor on a consolidated basis, but only to the
extent of the lesser of (i) the amount of indebtedness so secured and (ii) the
fair market value of the property subject to such lien; (c) reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable; (d) any lease of property by Sponsor on a
consolidated basis as lessee which is required to be reflected on Sponsor’s
balance sheet as a capitalized lease in accordance with GAAP; or (e) to the
extent not otherwise included, any obligation of Sponsor to be liable for, or to
pay, as obligor, guarantor or otherwise (other than for purposes of collection
in the ordinary course of business), indebtedness (of any of the types described
in this definition) of another Person.

 

“State” means the state or commonwealth in which the Land is situated.

 

“Sub-Participant Register” has the meaning assigned to such term in Section
12.13.

 

“Substitute Property” shall have the same meaning assigned to such term in
Section 8.3.

 

“Substitution Debt Yield” means, as of the date such calculation is made, the
ratio, expressed as a percentage, of (a) the Net Operating Income from the
Mortgaged Property (assuming the Release Property has been released and
substituted with the Substitute Property in accordance with Section 8.3 hereof),
to (b) the then outstanding principal balance of the Loan.

 

“Substitution LTV Requirement” has the meaning assigned to such term in
Subsection 8.3(f).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any governmental authority, including any interest, additions to tax
or penalties applicable thereto.

 

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“TIC Agreement” means that certain Tenancy in Common Agreement and Amended and
Restated Agreement Establishing Covenants, Conditions and Restrictions and
Granting Easements for Koll Center Irvine Southwest entered into by and among
Koll Transamerica 5, a California general partnership, formerly known as Koll
Center Irvine, a California general partnership, as declarant, Koll Transamerica
1, a California general partnership, and Koll Transamerica 2, a California
general partnership, dated May 10, 1989 and recorded in the Official Records of
Orange County, California on May 18, 1989 as Instrument No. 89-265502, as
amended by that certain First Amendment to Tenancy in Common Agreement and
Amended and Restated Agreement Establishing Covenants, Conditions and
Restrictions and Granting Easements for Koll Center Irvine Southwest made by
KZ4, a California limited partnership, as successor declarant, dated as of May
10, 1989 and recorded in the Official Records of Orange County on July 11, 1989
as Instrument No. 89-365834, as further amended and supplemented by that certain
Supplement to Tenancy in Common Agreement and Amended and Restated Agreement
Establishing Covenants, Conditions and Restrictions and Granting Easements for
Koll Center Irvine Southwest made by Koll Center Irvine Southwest Owners
Association on April 7, 2000, and recorded in the Official Records of Orange
County, California on April 17, 2000 as Instrument No. 20000196032, as further
amended and supplemented by that certain Second Amendment to Tenancy in Common
Agreement and Amended and Restated Agreement Establishing Covenants, Conditions
and Restrictions and Granting Easements for Koll Center Irvine Southwest made by
Clover Von Karman Corporation, Von Karman Michelson Corporation, CA-18301 Von
Karman Limited Partnership and Crescent Irvine, LLC, dated as of June 10, 2006
and recorded in the Official Records of Orange County on September 8, 2006 as
Instrument No. 2006000602663, as the same may be further amended, supplemented,
restated or replaced from time to time in accordance with the Loan Documents.

 

“Title Transfer” has the meaning assigned to such term in Section 8.2.

 

“Transfer” has the meaning assigned to such term in Section 12.13.

 

“Transfer Debt Yield Requirement” has the meaning assigned to such term in
Subsection 8.2(h).

 

“Transfer Fee” has the meaning assigned to such term in Subsection 8.2(g).

 

“Transfer Loan to Value Ratio Requirement” has the meaning assigned to such term
in Subsection 8.2(i).

 

“Treasury Issue” means United States Treasury issued bills, notes and bond
instruments specifically excluding any strips, inflation indexed issues and
other types of derivative instruments.

 

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.

 

“Undepreciated Real Estate Assets” means, as of any date, the book value of the
real estate assets of Sponsor on a consolidated basis as of such date, without
giving effect to depreciation and amortization of any such real estate assets,
determined on a consolidated basis in accordance with GAAP.

 

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“Upstream Owner” means any Person having a direct or indirect legal, beneficial
or other ownership interest in Borrower (e.g., if Borrower is a limited
liability company, and one of Borrower’s members is a limited partnership, whose
partner is a corporation, then such limited partnership, corporation and the
shareholders of such corporation would each be an Upstream Owner).

 

“Utility Charges” means all sewer rents, charges for water, for setting or
repairing meters and for all other utilities serving the Premises, and
inspection and license fees.

 

“Withholding Agent” means Lender or Administrative Agent, as applicable.

 

“Work” has the meaning assigned to such word in Subsection 3.2(a).

 

Section 1.2                                      Interpretation.

 

For all purposes of this Agreement and each other Loan Document, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:

 

(a)                                  the capitalized terms defined in this
Article have the meanings assigned to them in this Article, include the plural
as well as the singular, and, when used with respect to any instrument, contract
or agreement, include all extensions, modifications, amendments and supplements
from time to time thereto;

 

(b)                                 the words “herein”, “hereof”, and
“hereunder” and other words of similar import refer to this Agreement and each
other Loan Document as a whole and not to any particular Article, Section, or
other subdivision;

 

(c)                                  the words “include” and “including” and
other words of similar import shall be construed as if followed by the phrase “,
without limitation,”;

 

(d)                                 the phrase “satisfactory to any Lender”
means in form and substance satisfactory to such Lender, as the case may be, in
all respects; the phrase “with Lender’s consent” or “with Lender’s approval”
means such consent or approval at Lender’s sole discretion, and the phrase
“acceptable to Lender” means acceptable to Lender in its sole discretion, unless
a different standard for consent or approval is expressly set forth in this
Agreement; and

 

(e)                                  any provision of this Agreement or in the
other Loan Documents permitting the recovery of “attorneys’ fees”, “attorneys’
fees and expenses”, “attorneys’ fees and costs” or “attorneys’ fees, costs and
expenses” or any similar term shall:  (i) include all fees, costs and expenses,
including attorneys’ fees, costs and expenses, in each case, to the extent
reasonably incurred, related or incidental to, or incurred in any judicial,
arbitration, administrative, probate, appellate, bankruptcy, insolvency or
receivership proceeding, as well as in any post-judgment proceeding to collect
or enforce any judgment or order relating to the Indebtedness or any of the Loan
Documents, as well as any defense or assertion of the rights or claims of Lender
in respect of any thereof, by litigation or otherwise; and (ii) be separate and
several and survive merger into judgment.

 

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ARTICLE 2.

 

LOAN TERMS

 

Section 2.1                                      The Loan and The Note.

 

Lender agrees, on the terms and conditions of this Agreement, to make the Loan,
and Borrower agrees to accept the Loan, in the principal amount equal to
NINETY-SEVEN MILLION AND 00/100 DOLLARS ($97,000,000.00), and to repay the Loan
in accordance with this Agreement, the Note and the other Loan Documents.  The
Note evidences the indebtedness of Borrower under the Loan.

 

Section 2.2                                      Interest Rate; Late Charge;
Default Rate.

 

(a)                                  Except for any time when the Default Rate
is applicable pursuant to the terms of this Agreement, the outstanding principal
balance of the Loan (including any amounts added to principal under the Loan
Documents) shall bear interest at a rate equal to FOUR AND 48/100 PERCENT
(4.48%) per annum (the “Contract Rate”).  All interest accruing hereunder shall
be calculated on the basis of a three hundred sixty (360) day year consisting of
twelve (12) months of thirty (30) days each, except that any interest due at any
time for a period of less than a full calendar month shall be calculated by
multiplying the Contract Rate by a fraction, the numerator of which is the
actual number of days elapsed in such partial month and the denominator of which
is three hundred sixty (360).

 

(b)                                 If any regular monthly installment of
principal or interest due under this Agreement, or any monthly deposit for
taxes, ground rent, insurance, replacements and other sums if required under any
Loan Document, shall not be paid as required under this Agreement or any other
Loan Document, as the case may be, within five (5) days following the date the
same is due, Borrower shall pay to Lender a late charge (the “Late Charge”) of
four cents ($0.04) for each dollar so overdue in order to compensate Lender for
its loss of the timely use of the money and frustration of Lender in the meeting
of its financial commitments and to defray part of Lender’s incurred cost of
collection occasioned by such late payment. Any Late Charge incurred shall be
immediately due and payable.  If, however, during any consecutive twelve (12)
month period Borrower on more than two (2) occasions shall pay any such
installments or deposits after the due dates thereof (whether prior to or after
the time that the Late Charge is payable as above), then the time period after
which a Late Charge will be charged and paid shall thereafter be reduced from
five (5) days to two (2) days after the applicable due date.  Nothing herein
contained shall be deemed to constitute a waiver or modification of the due date
for such installments or deposits or the requirement that Borrower make all
payment of installments and deposits as and when the same are due and payable. 
The Late Charge represents the reasonable estimate of Borrower and Lender of a
fair average compensation for loss that may be sustained by Lender as a result
of the failure of Borrower to make timely payments.  Such Late Charge shall be
paid without prejudice to the right of Lender to collect any other amounts
provided to be paid upon a default hereunder or under any other Loan Document,
including without limitation interest at the Default Rate, or to declare a
default hereunder, under the Mortgage or under any other Loan Document.

 

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(c)                                  Following the occurrence and during the
continuance of an Event of Default, or on the Maturity Date, the unpaid
principal balance of the Loan shall thereafter bear interest at the per annum
interest rate (the “Default Rate”) equal to the lesser of:

 

(i)                                    the highest rate permitted by law to be
charged on a promissory note secured by a commercial mortgage, or

 

(ii)                                 the sum of three percent (3%) plus the
greater of:

 

(x)                                  the Contract Rate; or

 

(y)                                 the Federal Funds Rate.

 

Interest at the Default Rate as provided in this Section shall be immediately
due and payable to Lender and shall constitute additional Indebtedness evidenced
by the Note and secured by the Loan Documents.

 

Section 2.3                                      Terms of Payment.  The Loan
shall be payable by Borrower as follows:

 

(a)                                  On the date the Loan is made, a payment of
interest only shall be due and payable for the period from such date to the
first (1st) day of the next calendar month;

 

(b)                                 Successive monthly installments of interest
(in arrears) only in the amount of Three Hundred Sixty-Two Thousand One Hundred
and Thirty-Three and 33/100 Dollars ($362,133.33), shall be made on the first
(1st) day of August 2012 and on the first day of each calendar month thereafter
up to and including the first day of July 2015;

 

(c)                                  Successive monthly installments of
principal and interest (in arrears), in the constant amount of Four Hundred
Ninety Thousand Three Hundred Thirty-Two and 72/100 Dollars ($490,332.72), shall
be made on the first (1st) day of August 2015 and on the first day of each
calendar month thereafter up to and including the first day of the month
immediately prior to the Maturity Date.  The monthly payments of combined
principal and interest required under this Agreement are based upon a thirty
(30) year amortization period; and

 

(d)                                 On the Maturity Date or on any earlier date
as a result of an Acceleration Event, Borrower shall pay all outstanding
principal, accrued and unpaid interest, and any other amounts due under the Loan
Documents.  Borrower acknowledges that, since the term of the Loan is shorter
than the amortization period, all or a substantial portion of the principal
amount of the Loan will be due on the Maturity Date.

 

Section 2.4                                      Term of Loan.

 

(a)                                  The term of the Loan shall commence on the
date hereof and expire on the Maturity Date.

 

Section 2.5                                      Prepayment.  There are no full
or partial prepayment privileges of the principal amount of the Loan except as
expressly set forth in this Agreement:

 

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(a)                                  Borrower shall have the right to pay the
Loan in full (but not in part, other than in accordance with Sections 8.2 and
8.3 hereof) on any Payment Date on or after, but not prior to July 1, 2015 (the
“Closed Prepayment Date”), provided that Borrower gives Lender at least thirty
(30) days prior written notice of its intention to make any such prepayment, the
date thereof and the amount to be prepaid, and that Borrower also pays to
Lender, as consideration for the privilege of making such prepayment, the
Prepayment Premium.

 

(b)                                 The “Prepayment Premium” shall be equal to
the greater of (x) or (y) where:

 

(x)                                   is equal to the amount to be prepaid
multiplied by one percent (1%); and

 

(y)                                 is the present value of the series of
Monthly Payment Differentials from the date of prepayment to the Maturity Date,
discounted at the Reinvestment Yield on a monthly basis.

 

The “Monthly Payment Differential” means the monthly interest (without
amortization), which would be earned if the prepayment were invested at the
Contract Rate less the monthly interest that would be earned by reinvesting the
prepayment at the Reinvestment Yield.

 

The “Reinvestment Yield” means 25 basis points, plus the yield to maturity of a
Treasury Issue, adjusted from a semi-annual to a monthly rate, which has the
closest maturity (month and year) prior to the Maturity Date, as quoted in The
Wall Street Journal published in print or on-line on the second (2nd) calendar
day immediately preceding the date for prepayment as set forth in Borrower’s
notice of its intention to prepay, but if said second (2nd) day is not a
Business Day, then as quoted on the preceding Business Day.  If more than one
Treasury Issue has the same maturity date, then the Treasury Issue having the
market yield that differs least from the Contract Rate will be used in the
calculations.  If The Wall Street Journal is not in publication on the
applicable date, or ceases to publish such Treasury Issue information in print
or on-line on the applicable date, then any other publication selected by Lender
quoting daily market yields for Treasury Issues will be used.

 

(c)                                  If the Maturity Date is accelerated by
Lender because of the occurrence of an Event of Default or accelerated pursuant
to the provisions in the Loan Documents (an “Acceleration Event”), the
acceleration shall be deemed to be an election on the part of Borrower to prepay
the Loan.  Accordingly, there shall be added to the amount due after an Event of
Default and resulting acceleration, the Prepayment Premium, calculated as set
forth above and using as the Prepayment Date the date on which any tender of
payment is made, and Borrower agrees to pay same.  Any tender of payment made
(or judgment entered) after acceleration by or on behalf of Borrower (including,
without limitation, payment by any guarantor or purchaser at a foreclosure
sale), shall include the Prepayment Premium computed as provided above.  If the
Acceleration Event occurs prior to the Closed Prepayment Date, a Prepayment
Premium (a “Closed Period Prepayment Premium”) shall nevertheless be paid, which
Closed Period Prepayment Premium shall be calculated as set forth in Subsection
2.5(b) above, except that with respect to clause (x), the Closed Period
Prepayment Premium shall equal

 

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the amount to be prepaid multiplied by three percent (3%) (rather than one
percent (1%)), and that with respect to clause (y), the Reinvestment Yield
(calculated as provided for above) shall be reduced by two (2) percentage
points.

 

(d)                                 There will be due with any principal
prepayment, all accrued and unpaid interest and all other fees, charges and
payments due under this Agreement, the Note and the other Loan Documents.

 

(e)                                  No Prepayment Premium shall be required to
be paid in connection with payment of insurance, or condemnation Proceeds to
Lender which Lender requires to be applied to the Indebtedness in accordance
with the provisions of this Agreement, except if such application to the
Indebtedness is after an Event of Default.

 

(f)                                    Borrower acknowledges and agrees that all
of the economic terms set forth in the Loan Documents, including, without
limitation, the Contract Rate, have been agreed to by Lender based on Lender’s
expectation that the Loan will not be repaid prior to the Maturity Date (e.g.,
had Lender anticipated a shorter Loan Term, the Contract Rate may have been a
higher rate of interest).  However, in order to accommodate Borrower, Lender has
agreed to permit Borrower to repay the Loan prior to the Maturity Date in
accordance with, and subject to, the terms set forth above provided that, and as
consideration for such agreement, Borrower agrees to pay Lender the Prepayment
Premium.  Borrower acknowledges and agrees that, even if Lender is able to loan
the amount prepaid by Borrower to another Person on the same terms and
conditions as herein provided, Lender shall not have fully recovered Lender’s
lost profits, costs, expenses and damages suffered as a result of such early
prepayment; therefore, Borrower and Lender have agreed on the Prepayment Premium
as compensation for Lender’s estimated lost profits, costs, expenses and damages
resulting from such prepayment.  The Prepayment Premium shall be paid without
prejudice to the right of Lender to collect any other amounts provided to be
paid under this Agreement, or under the other Loan Documents, or pursuant to the
provisions of law.

 

(g)                                 No Prepayment Premium shall be required to
be paid after January 1, 2027.

 

[Remainder of page intentionally blank.]

 

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(h)                                 TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER HEREBY EXPRESSLY (I) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA
CIVIL CODE SECTION 2954.10 TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT
PENALTY, UPON ACCELERATION OF THE MATURITY DATE, AND (II) AGREES THAT IF, FOR
ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE
NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER
ON ACCOUNT OF ANY DEFAULT BY BORROWER INCLUDING, WITHOUT LIMITATION, ANY
TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE
MORTGAGE, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH
PREPAYMENT THE PREPAYMENT PREMIUM SPECIFIED IN THE FOREGOING PROVISIONS.  BY
INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER HEREBY DECLARES
THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE AT THE INTEREST RATE
AND FOR THE TERM SET FORTH IN THIS AGREEMENT CONSTITUTES ADEQUATE CONSIDERATION,
GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND AGREEMENT.

 

Borrower’s Initials:                        

 

Section 2.6                                      Security.  The Loan shall be
secured by inter alia (1) the Mortgage creating a first priority lien on the
Mortgaged Property, (2) the Assignment of Leases and Rents creating a first
priority lien on the Leases and the Property Income, and (3) the liens and
security interests granted in the other Loan Documents.

 

Section 2.7                                      Payments.

 

(a)                                  All payments of principal, interest and
other amounts to be made by Borrower under this Agreement, the Note and any
other Loan Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to Lender.  All such payments that
are regularly scheduled monthly payments of principal, interest or reserves
shall be made by Borrower by automatic clearing house (“ACH”) debit of a bank
account of Borrower of which Lender has received at least thirty (30) days’
prior written notice.  All other payments from Borrower to Lender shall be made
by wire transfer of immediately available funds to an account designated by
Lender in writing to Borrower.

 

(b)                                 If the due date of any payment under this
Agreement or the Note would otherwise fall on a day that is not a Business Day,
such date shall be extended to the next succeeding Business Day, and interest
shall accrue and be payable for any principal so extended for the period of such
extension.

 

(c)                                  Each payment received by Lender hereunder,
under the Note or any other Loan Document shall be applied in the following
order:

 

(i)                                    First, to the interest due on any
Advances made by Lender under this Agreement or any other Loan Document;

 

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(ii)                                Next, to the principal amount of any
Advances made by Lender under this Agreement or any other Loan Document;

 

(iii)                             Next, to Late Charges, attorneys’ fees or any
other amount due hereunder or under any other Loan Document save for the amounts
described in clauses (iv), (v) and (vi) immediately below;

 

(iv)                             Next, to any Prepayment Premium then due and
payable under this Agreement;

 

(v)                                 Next, to accrued interest due Lender under
this Agreement or any of the other Loan Documents; and

 

(vi)                             Finally, to the principal balance of the Loan.

 

Notwithstanding the foregoing, during the continuance of an Event of Default or
in the event that Borrower does not pay the outstanding principal balance and
accrued interest due under this Agreement, when due, whether on the Maturity
Date or on any earlier date as a result of any Acceleration Event, Lender, at
its option, shall apply any payments it then receives in such order as Lender
deems appropriate in its sole discretion.

 

ARTICLE 3.

 

INSURANCE AND CONDEMNATION

 

Section 3.1                                      Insurance Requirements.

 

(a)                                  Property Insurance.  Borrower shall
maintain either “all risk” or “special form” real and personal property
insurance and “boiler and machinery insurance”, insuring one hundred percent
(100%) of the insurable replacement cost value of the Improvements and the
Equipment, with no coinsurance or similar penalty and covering (i) “business
interruption” (including “rent loss”), in an amount equal to at least eighteen
(18) months of the Property Income (determined as of the most recently concluded
twelve (12) month period for which financial statements are available at the
time of renewal or replacement of such insurance), and an extended period of
indemnity of at least one hundred eighty (180) days and (ii) “extra expenses”. 
Covered perils shall include “acts of terrorism” (whether or not certified),
“windstorm” (including “named windstorm”), “vandalism and malicious mischief”. 
Unless all Improvements continue to comply with all applicable laws, codes and
regulations, Borrower shall maintain “ordinance and law” coverage in the
following minimum percentages of the value of the Improvements:  Coverage A —
one hundred percent (100%); Coverage B, “demolition and debris removal” — ten
percent (10%); and, Coverage C, “increased costs of construction” — ten percent
(10%), and must also insure the right to re-build the Improvements of the same
size and height and with the same parking as the existing improvements.  If the
building is non-conforming due to height, density, parking (“downzoning”), or
such other non-conformity not covered under the ordinance and law provisions,
Lender may require Borrower to purchase a separate policy covering such
non-conformity for the benefit of Lender.  Earthquake insurance is required as
specified in Subsection 3.1(e).  Lender may from time to time also require that
Borrower maintain insurance reasonably acceptable to Lender for “flood” and
“builder’s risk”. 

 

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Notwithstanding anything to the contrary above, any insurance required hereunder
shall only be required to the extent that it is commercially available.

 

(b)                                 Liability Insurance.  Borrower shall also
maintain Commercial General Liability insurance (including contractual liability
and Acts of Terrorism) in an amount equal to at least One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate, with a Per Location aggregate endorsement (in an amount not to exceed
Fifty Million Dollars ($50,000,000) in the aggregate) if multiple properties are
insured under the same policy.  In addition, Borrower shall maintain Umbrella or
Excess Liability insurance in an amount Lender determines to be reasonable from
time to time (in an amount not to exceed Fifty Million Dollars ($50,000,000) per
occurrence and Fifty Million Dollars ($50,000,000) in the aggregate).  Lender
may, from time to time also require that Borrower maintain insurance reasonably
acceptable to Lender for Commercial Auto, Workers Compensation, Environmental
and such other insurance as Lender may require.  Notwithstanding anything to the
contrary above, any insurance required hereunder shall only be required to the
extent that it is commercially available.

 

(c)                                  Evidence of Insurance By Acceptable
Insurers.  Borrower and Lender acknowledge and agree that, prior to the date of
this Agreement, Borrower provided to Lender the following evidences of insurance
(the “Closing Insurance Certificates”):  (i) an ACORD 28 (current version)
Evidence of Property Insurance provided by an authorized insurance agent or
broker confirming coverages are maintained for real and personal property
insurance as required to be carried by Borrower under this Agreement; and (ii)
an ACORD 25 Certificate of Liability Insurance, provided by an authorized
insurance agent, broker or insurance carrier confirming coverages are maintained
for liability insurance as required to be carried by Borrower under this
Agreement.  From and after the date hereof, through and including the Maturity
Date, Borrower shall provide new evidences of insurance to Lender at least ten
(10) days prior to the expiration date of each applicable insurance policy,
which such evidences of insurance shall be subject to Lender’s approval, which
such approval shall not be unreasonably withheld, conditioned or delayed. 
Without limiting the foregoing sentence, each evidence of insurance and
certificate required to be provided during the Loan Term must include a
mortgagee clause and a loss payee clause reasonably satisfactory to Lender, and
any Certificate of Liability Insurance must name Lender as an Additional Insured
for Commercial General Liability with respect to the Premises.  Unless consented
to by Lender, each insurance company providing coverage must have an A. M. Best
rating of A-X or better.

 

(d)                                 Blanket Insurance Policies.  Borrower’s
insurance requirements under this Article 3 may be satisfied by maintaining
either individual policies covering only the Premises, or blanket insurance
policies covering multiple properties, provided that with respect to any blanket
insurance policies Borrower also covenants to either reinstate, as soon as
practicable, any limits and coverages which are used, reduced or cancelled back
up to the blanket policy limits approved by Lender in its reasonable discretion
with deductibles or self insurance which are customary for similarly capitalized
companies and with a deductible of up to ten percent (10%) for earthquake
insurance, provided such insurance is commercially available, or to secure
individual policy coverages for the Premises satisfying these insurance
requirements with a deductible of up to five percent (5%) for earthquake
insurance, provided such insurance is commercially available.  Borrower will
deliver to Lender a Schedule of Locations Insured on a

 

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regional basis under any blanket insurance policy applicable to the Mortgaged
Property together with the related certificates of insurance.

 

(e)                                  Earthquake Insurance.  Notwithstanding the
requirement in Subsection 3.1(a) above that Borrower carry earthquake insurance
during the entire Loan Term provided that such earthquake insurance is
commercially available, such requirement shall be deemed satisfied by the
earthquake coverage provided by Sponsor’s blanket insurance policies meeting the
requirements of Subsection 3.1(d) above, but only for so long as the Aggregate
Debt Test is satisfied as of the last day each fiscal quarter during the Loan
Term.  In the event that any quarterly calculation of the Aggregate Debt Test
provided by Sponsor in accordance with Subsection 7.1(a)(iii) hereof reflects
that the Aggregate Debt Test is not satisfied as of the most recently concluded
fiscal quarter, or in the event Sponsor does not provide any such quarterly
calculation of the Aggregate Debt Test, Borrower shall have a period not to
exceed sixty (60) days following the delivery of the Aggregate Debt Test
Certificate, or the date such Aggregate Debt Test Certificate was to have been
delivered, as applicable, to either (x) provide evidence reasonably acceptable
to Lender that the Aggregate Debt Test has been restored to the required level
or remains satisfied, as applicable, or (y) provide a reasonably acceptable
individual policy with respect to the Premises for insurance against earthquake
loss in an amount equal to the product of (A) the Scenario Upper Loss for each
of Property A and Property B multiplied by (B) the aggregate replacement cost of
Property A and Property B and less a five percent (5%) deductible.

 

(f)                                    Miscellaneous Insurance Requirements.

 

(i)                                     All insurance policies and endorsements
required pursuant to this Agreement shall:  (w) be endorsed to name Lender as a
primary additional insured thereunder, as its interest may appear, with loss
payable to Lender, without contribution, under a long-form, non-contributory
mortgagee clause, or otherwise endorsed as Lender may reasonably require; (x) be
fully paid for and contain such provisions and expiration dates and be in such
form and issued by such insurance companies licensed to do business in the
State; (y) without limiting the foregoing, provide that such policy or
endorsement may not be canceled except upon at least thirty (30) days’ prior
written notice of intention of non-renewal or cancellation to Lender, and that
no act or thing done by Borrower or Lender shall invalidate the policy as
against Lender; and (z) subject to Subsection 3.1(f)(ii) hereof, be in form and
content satisfactory to Lender in its reasonable discretion, including, without
limitation, the coverages, limits and deductibles of such insurance policies and
endorsements.

 

(ii)                                  If an Event of Default has occurred and is
continuing or a casualty with respect to the Premises and/or Equipment has
occurred, within ten (10) Business Days following a request by Lender, Borrower
shall deliver to Lender copies of all then current policies and endorsements
required hereunder, certified by the insurance company or authorized agent as
being true copies, together with any other insurance policy information and
other related information (such as Probable Maximum Loss or Scenario Upper Limit
studies) Lender requests from time to time, so that Lender may determine that
insurance continues to be acceptable to it and satisfies all insurance
requirements set forth in this Agreement; provided, however, Lender shall not
require Borrower to obtain any insurance coverage in addition to the coverages
described in the Closing Insurance Certificates, or to adjust the limits or
deductibles of any

 

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insurance policies from the limits and deductibles of the applicable insurance
policies described in the Closing Insurance Certificates, unless, in each
instance, such additional insurance coverage or such adjusted limits or
deductibles is attributable to the specific location and then-current
characteristics of the Premises (specifically excluding Earthquake insurance,
which shall only be required in accordance with Subsection 3.1(e) above), and
such requirement is generally being imposed  by portfolio lenders similar to
Lender in connection with loans of a similar size and type as the Loan that are
secured by properties of similar type and location as the Mortgaged Property. 
Borrower may request an extension of time not exceeding sixty (60) days to
deliver the foregoing certified copies of the then current policies and
endorsements if Borrower has done all things necessary to obtain the issuance
thereof, including the payment of all premiums therefor, and Borrower has
delivered to Lender within the above ten (10) Business Day period evidence of
insurance satisfactory to Lender in its reasonable discretion issued by the
approved insurer showing all required coverage to be in full force and effect
for the succeeding twelve (12) month period, along with evidence satisfactory to
Lender in its reasonable discretion of payment in full of all premiums.  If
Borrower fails to maintain insurance in compliance with this Agreement, Lender
may (but shall not be obligated to) obtain such insurance and pay the premium
therefor and Borrower shall reimburse Lender on demand for all such Advances.

 

(iii)                               Notwithstanding anything to the contrary
contained herein or in any provision of law, the Proceeds of insurance policies
coming into the possession of Lender shall not be deemed trust funds and Lender
shall be entitled to dispose of such Proceeds as hereinafter provided.

 

Section 3.2                                      Damage, Destruction and
Restoration.

 

(a)                                  In the event of any damage to or
destruction of the Premises and/or Equipment, Borrower shall give prompt written
notice to Lender and shall promptly commence and diligently continue to
completion the repair, restoration and rebuilding of the Premises and/or
Equipment so damaged or destroyed in full compliance with all legal requirements
and with the provisions of Subsections 3.2(e), (f) and (h), and free and clear
from any and all liens and claims other than Permitted Encumbrances.  Such
repair, restoration and rebuilding of the Premises are sometimes hereinafter
collectively referred to as the “Work”.  Except as expressly permitted under
Subsection 3.2(h), Borrower shall not adjust, compromise or settle any claim for
insurance Proceeds without the prior consent of Lender, such consent not to be
unreasonably withheld, delayed or conditioned.  Except as provided in Subsection
3.2(d), Lender shall have the option in its sole discretion to apply any
insurance Proceeds (other than Proceeds of any business interruption insurance)
it may receive pursuant to this Agreement (less any reasonably incurred cost to
Lender of recovering and paying out such Proceeds, including reasonable
attorneys’ fees, costs and expenses) to the payment of the Indebtedness or to
allow all or a portion of such Proceeds to be used for the Work.  If any
insurance Proceeds are applied to reduce the Indebtedness, provided no Event of
Default shall have occurred and be continuing, Lender shall apply the same,
without any Prepayment Premium, in accordance with the provisions of Subsection
2.7(c) of this Agreement and the portion of the Proceeds applied to reduce the
outstanding principal balance of the Loan shall be applied to reduce the
Amortized Allocated Loan Amount associated with the Individual Premises that has
suffered the casualty and any remaining Proceeds shall be applied pro-rata to
reduce the Amortized Allocated Loan Amounts for each other Individual Premises.
Notwithstanding the foregoing, if an Event of Default shall

 

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have occurred and be continuing, Lender, at its option, may apply any insurance
Proceeds to the Indebtedness in such order and priority as Lender deems
appropriate in its sole discretion and a Prepayment Premium or Closed Period
Prepayment Premium shall be due and payable in accordance with the terms of
Subsections 2.5(b) and (c) in connection with any such prepayment.

 

(b)                                 In the event of the foreclosure of the
Mortgage or other transfer of title to or assignment of the Mortgaged Property
in extinguishment of the Indebtedness in whole or in part and to the extent
permitted pursuant to the individual insurance policies, all right, title and
interest of Borrower in and to all policies of insurance required by this
Agreement and any insurance Proceeds shall inure to the benefit of and pass to
Lender or any purchaser or transferee at the foreclosure sale of the Mortgaged
Property.

 

(c)                                  Borrower hereby irrevocably appoints Lender
its attorney-in-fact, coupled with an interest, to apply and make claims for
insurance Proceeds under all insurance policies, to prosecute and settle such
claims and to endorse any checks, drafts or other instruments representing any
insurance Proceeds whether payable by reason of loss thereunder or otherwise. 
Additionally, Lender may notify any and all insurers under casualty and
liability insurance policies that Lender has a security interest pursuant to the
provisions of this Agreement in and to such insurance policies and any proceeds
thereof, and that any payments under those insurance policies are to be made
directly to Lender.  Lender’s rights under this Section 3.2 may be exercised by
Lender or a court appointed receiver appointed upon the request of Lender and
irrespective of whether or not an Event of Default (or any matter which, after
notice or passage of time or both, would constitute an Event of Default) shall
have occurred under this Agreement.

 

(d)                                 Notwithstanding the provisions of Subsection
3.2(a) or Subsection 3.3, if in Lender’s reasonable judgment the cost of the
Work shall not exceed fifty percent (50%) of the then outstanding principal
balance of the Allocated Loan Amount of the damaged Individual Premises, then
Lender shall, upon request by Borrower, permit Borrower to use the Proceeds for
the Work (subject to the provisions of, and less Lender’s costs described in,
Subsection 3.2(e)), so long as:

 

(i)                                   no Event of Default shall then exist nor
any matter(s) exist which, after notice of default or passage of time or both,
would constitute an Event of Default;

 

(ii)                                the Work can be completed, as determined by
Lender in its reasonable discretion, by the date is twelve (12) months prior to
the Maturity Date;

 

(iii)                             except to the extent compensated pursuant to
applicable business interruption insurance Proceeds, none of the Leases in
effect immediately prior to the damage or destruction shall have been canceled
or terminated nor shall any such Leases contain any still exercisable right to
cancel or terminate, in each case as a result of such damage or destruction;

 

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(iv)                             all sums necessary to effect the Work over and
above any available Proceeds (the “Deficiency Amount”) shall be at the sole cost
and expense of Borrower and, at Lender’s request, Borrower shall deposit the
Deficiency Amount, as estimated by Lender in its reasonable discretion, with
Lender prior to commencing any Work and at all times thereafter;

 

(v)                                 at all times during any such Work, Borrower
shall maintain (or cause to be maintained), at its sole cost and expense (or at
the cost and expense of the Person maintaining such insurance), workers’
compensation, builders risk and public liability insurance in amounts
satisfactory to Lender in its reasonable discretion and in accordance with the
provisions of this Section 3.2;

 

(vi)                             at all times during any such Work, business
income and extra expense including rental value insurance shall be in full force
and effect and available to cover any loss of business income and rents
resulting from the damage to or destruction of the Premises and/or Equipment.

 

(vii)                          the Improvements shall be restored to
substantially the same size, character and condition that existed prior to the
damage or destruction except for immaterial changes as determined by Lender in
its reasonable judgment or such other changes as are consented to by Lender,
such consent not to be unreasonably withheld, delayed or conditioned.

 

(e)                                  If any insurance Proceeds are to be used
for the Work, then, except for Work that is described in Subsection 3.2(h)
below, such Proceeds together with any Deficiency Amount shall be held by Lender
and shall be paid out from time to time to Borrower as the Work progresses (less
any actual, out-of-pocket cost to Lender reasonably incurred in recovering and
paying out such Proceeds and/or Deficiency Amount, including reasonable
attorneys’ fees, costs and expenses and costs allocable to inspecting the Work
and the plans and specifications therefor), subject to each of the following
conditions:

 

(i)                                    the Work shall be conducted under the
supervision of a certified and registered architect or engineer satisfactory to
Lender in its reasonable discretion.  Before Borrower commences any Work, other
than temporary work to protect property or prevent interference with business,
Lender shall have approved the plans and specifications for the Work, which
approval shall not be unreasonably withheld, delayed or conditioned, it being
nevertheless understood that such plans and specifications shall provide for
Work so that, upon completion thereof, the Premises shall be at least equal in
value and general utility to the Premises immediately prior to the damage or
destruction;

 

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(ii)                                each request for payment shall be made on
not less than seven (7) Business Days prior notice to Lender and shall be
accompanied by a certificate of the architect or engineer in (i) above stating: 
(A) that all of the Work completed has been done in compliance with the approved
plans and specifications, if required under (i) above; (B) that the sum
requested is justly required to reimburse Borrower for payments by Borrower, or
is justly due to the contractor, subcontractors, materialmen, laborers,
engineers, architects or other Persons rendering services or materials for the
Work (giving a brief description of such services and materials), and that when
added to all sums previously paid out by Lender does not exceed the value of the
Work done to the date of such certificate:  (C) if the sum requested is to cover
payment relating to repair and restoration of Equipment required or relating to
the Premises, that title to the items of Equipment covered by the request for
payment is vested in Borrower; and (D) that the amount of such Proceeds together
with any Deficiency Amount remaining in the hands of Lender will be sufficient
on completion of the Work to pay for the same in full (giving in such reasonable
detail as Lender may require an estimate of the cost of such completion). 
Additionally, each request for payment shall contain a statement signed by
Borrower approving both the Work done to date and the Work covered by the
request for payment in question;

 

(iii)                             each request for payment shall be accompanied
by waivers of lien satisfactory to Lender in its reasonable discretion covering
that part of the Work for which payment or reimbursement is being requested and,
if required by Lender, a search prepared by a title insurance company or
licensed abstractor, or by other evidence satisfactory to Lender in its
reasonable discretion that there has not been filed with respect to the Premises
any mechanics’ or other lien relating to any part of the Work not discharged of
record.  Additionally, as to any Equipment covered by the request for payment,
Lender shall be provided with evidence of payment therefor and such further
evidence satisfactory to Lender in its reasonable discretion to assure Lender of
its valid first lien on the Equipment;

 

(iv)                             Lender shall have the right to inspect the Work
at all reasonable times and may condition any disbursement of Proceeds upon the
satisfactory completion, as determined in Lender’s reasonable discretion, of any
portion of the Work for which payment or reimbursement is being requested. 
Neither the approval by Lender of the plans and specifications for the Work nor
the inspection by Lender of the Work shall make Lender responsible for the
preparation of such plans and specifications or the compliance of

 

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such plans and specifications, or of the Work, with any applicable law,
regulation, ordinance, covenant or agreement;

 

(v)                                 Proceeds shall not be disbursed more
frequently than every thirty (30) days;

 

(vi)                              any request for payment made after the Work
has been completed shall be accompanied by a copy or copies of any certificate
or certificates required by law to render occupancy and full operation of the
Premises legal;

 

(f)                                    Upon any failure on the part of Borrower
to promptly commence the Work or to proceed diligently and continuously to
completion of the Work or if any Event of Default has occurred and is
continuing, Lender, at its sole option, shall be entitled to apply at any time
all or any portion of the Proceeds it then or thereafter holds to the repayment
of the Indebtedness or to the curing of any Event of Default.

 

(g)                                 Upon completion of the Work and payment in
full therefor any unexpended Proceeds (and for purposes of this provision, any
insurance Proceeds shall be deemed applied to the cost of completion of the Work
prior to application of any Deficiency Amount), shall be either paid over to
Borrower or, at Lender’s option if an Event of Default has occurred and is
continuing, applied to the reduction of the Indebtedness without any Prepayment
Premium that would otherwise be applicable to a prepayment of the Loan at that
time.

 

(h)                                 Notwithstanding any other provision of this
Section 3.2, if no Event of Default shall exist and be continuing (nor any
matters have occurred which, after notice or passage of time or both, would
constitute an Event of Default) and in Lender’s reasonable judgment the cost of
the Work is less than Three Million Five Hundred Thousand Dollars ($3,500,000)
and the Work can be completed in less than twelve (12) months, but in any event,
no later than twelve (12) months prior to the Maturity Date, then Lender shall,
upon request by Borrower, permit Borrower to apply for and receive the insurance
Proceeds directly from the insurer (and Lender shall advise the insurer to pay
over such Proceeds directly to Borrower), provided that Borrower shall apply
such insurance Proceeds solely to the prompt and diligent commencement and
completion of such Work.

 

[Reminder of page intentionally blank]

 

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(i)                                     BORROWER HEREBY ACKNOWLEDGES AND AGREES
THAT IT IS AWARE OF AND UNDERSTANDS SCHOOLCRAFT V. ROSS (81 CAL. APP. 3D 75
(1981)) AND ITS PROGENY AS WELL AS CALIFORNIA CIVIL CODE SECTION 2924.7 AND
FINANCIAL CODE SECTIONS 1227.3 AND 7462, WHICH PERMIT LENDER TO REQUIRE
INSURANCE BUT OBLIGATE LENDER TO ALLOW BORROWER TO USE CASUALTY INSURANCE
PROCEEDS FOR THE PURPOSE OF REPAIRING OR RESTORING THE PREMISES PLEDGED AS
SECURITY FOR THE BORROWER’S OBLIGATIONS TO LENDER UNLESS LENDER’S SECURITY HAS
BEEN IMPAIRED.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT, IN THE EVENT OF A
CASUALTY TO THE PREMISES, IF BORROWER FAILS TO REPAIR OR RESTORE THE PREMISES IN
A MANNER CONSISTENT WITH THE PROVISIONS OF THIS AGREEMENT, REGARDLESS OF WHETHER
SUCH FAILURE IS THE RESULT OF ANY VOLUNTARY ACTION OR INACTION BY BORROWER, OR
ANY ACT OR DETERMINATION OF ANY GOVERNMENTAL AUTHORITY (WHETHER PURSUANT TO ANY
ZONING, LAND USE OR OTHER ORDINANCE, CODE, REGULATION OR REQUIREMENT OR
OTHERWISE), SUCH FAILURE IS AND SHALL BE DEEMED A SUBSTANTIAL IMPAIRMENT OF THE
MORTGAGED PROPERTY ENTITLING LENDER TO APPLY THE NET INSURANCE PROCEEDS TO THE
INDEBTEDNESS IN SUCH ORDER AND MANNER AS LENDER MAY ELECT, WHETHER OR NOT DUE
AND PAYABLE, WITH ANY EXCESS PAID TO BORROWER. BY INITIALING THIS PROVISION IN
THE SPACE PROVIDED BELOW, BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT THE TERMS
OF THIS PROVISION HAVE BEEN SPECIFICALLY BARGAINED FOR AND ARE A MATERIAL
INDUCEMENT FOR LENDER TO MAKE THE LOAN AND WITHOUT WHICH LENDER WOULD NOT MAKE
THE LOAN.

 

BORROWER’S INITIALS                     

 

Section 3.3                                      Condemnation.  Borrower shall
notify Lender immediately of the actual or, to Borrower’s knowledge, written
threatened commencement of any proceedings for the condemnation or taking of the
Premises or any portion thereof and shall deliver to Lender copies of any and
all papers served in connection with such proceedings.  Lender may participate
in such proceedings and Borrower shall deliver to Lender all instruments
requested by Lender to permit such participation.  Lender is hereby irrevocably
appointed as Borrower’s attorney-in-fact, coupled with an interest, with
exclusive power to collect, receive and retain the Proceeds of any such
condemnation and to make any compromise or settlement in connection with such
proceedings, subject to the provisions of this Agreement.  Borrower shall not
adjust, compromise, settle or enter into any agreement with respect to such
proceedings without the prior consent of Lender, such consent not to be
unreasonably withheld, delayed or conditioned.  All Proceeds of any
condemnation, or purchase in lieu thereof, of the Premises or any portion
thereof are hereby assigned to and shall be paid to Lender, subject to the
provisions of this Agreement.  Borrower hereby authorizes Lender to collect and
receive such Proceeds, to give proper receipts and acquittances therefor and,
except as otherwise provided in Subsection 3.2(d), to apply such Proceeds (less
any actual, out-of-pocket cost to Lender reasonably incurred in

 

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recovering and paying out such Proceeds, including reasonable attorneys’ fees,
costs and expenses allocable to inspecting any repair, restoration or rebuilding
work and the plans and specifications therefor) toward the payment of the
Indebtedness or to the repair, restoration or rebuilding of the Premises in the
manner and subject to the conditions set forth in Section 3.2.  If the Proceeds
are used to reduce the Indebtedness, they shall be applied in the order provided
in Subsection 2.7(c), without any Prepayment Premium, and the portion of the
Proceeds applied to reduce the outstanding principal balance of the Loan shall
be applied to reduce the Amortized Allocated Loan Amount associated with the
Individual Premises that is the subject of the condemnation and any remaining
Proceeds shall be applied pro-rata to reduce the Amortized Allocated Loan
Amounts for each other Individual Premises.  Borrower shall promptly execute and
deliver all instruments reasonably requested by Lender for the purpose of
confirming the assignment of the condemnation Proceeds to Lender.

 

ARTICLE 4.

 

ENVIRONMENTAL MATTERS

 

Section 4.1                                      Environmental Matters;
Warranties; Notice; Indemnity.

 

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

 

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

 

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

 

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

 

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Release of Hazardous Substances migrating to or from the Premises except as
described in the Environmental Report;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                    Borrower shall indemnify, defend and hold
Lender and the Lender Parties harmless from and against, and shall be
responsible for paying, any and all claims, demands, liabilities, losses,
damages, judgments, fines, penalties, costs and expenses (including reasonable
attorneys’ fees, costs and expenses and all costs of collection and enforcement)
directly or indirectly arising out of or attributable to:  (i) any breach of any
warranty or representation contained in this Article 4 or in any other Loan
Document relating to an Environmental Violation or a Hazardous Substance; (ii)
any action against Borrower to enforce any of the provisions of this Article 4,
in which such action Borrower is found to have breached any of such provisions;
and (iii) any Release of a Hazardous Substance on, in, under, or about the
Premises or any portion thereof including; (iv) all costs of any required or
necessary Remediation; and (v) all costs of the preparation and implementation
of any plans for Remediation, closure or other required plans; and (vi) all
direct, indirect and consequential damages (excluding punitive damages) arising
from or relating to the items described in the preceding clauses (i) through
(v).  The indemnity provided in this Section 4.1 shall survive and be unaffected
by any modification, amendment, extension, repayment, foreclosure, or deed in
lieu of foreclosure of the Loan, as well

 

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as any transfer of any direct or indirect interest in Borrower or in the
Premises, or the release or extinguishment of the Lien of the Mortgage. 
Notwithstanding anything to the contrary contained herein, the indemnity
provided for in this Section 4.1 shall not, as to Lender or any Lender Party,
apply to any losses to the extent that a court of competent jurisdiction has
determined by final and non-appealable judgment that such losses have resulted
from the willful misconduct or gross negligence of Lender or such Lender Party.

 

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

 

Section 4.2                                      Environmental Matters;
Remediation.

 

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

 

(b)                                 All Remediation shall be performed by
qualified, licensed, insured and reputable contractors, and under the
supervision of a consulting engineer, each approved in advance by Lender, such
approval not to be unreasonably withheld, delayed or conditioned.  All actual
out-of-pocket costs and expenses of such Remediation and of Lender’s monitoring
or review of such Remediation (including reasonable attorneys’ fees, costs and
expenses), in each

 

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case to the extent reasonably incurred, shall be paid by Borrower.  If Borrower
does not timely commence and diligently prosecute to completion the Remediation,
Lender may (but shall not be obligated to) cause such Remediation to be
performed.  Borrower agrees to bear and shall pay or reimburse Lender on demand
for all Advances and expenses (including reasonable attorneys’ fees, costs and
expenses) relating to or incurred by Lender in connection with monitoring,
reviewing or performing any Remediation.

 

(c)                                  Except with Lender’s prior consent, not to
be unreasonably withheld, conditioned, or delayed, Borrower shall not commence
any Remediation, unless required by Section 4.2(a) above, or enter into any
settlement agreement, consent decree or other compromise relating to any
Hazardous Substances or Environmental Laws which might, in Lender’s reasonable
judgment, impair the value of Lender’s security for the Loan.  Lender’s prior
consent to such Remediation, not to be unreasonably withheld, conditioned or
delayed, shall not be required, however, if the Release of Hazardous Substances
on, in, under or about the Premises poses an immediate threat to the health,
safety or welfare of any person or is of such a nature that an immediate
remedial response is necessary, and it is not possible to obtain Lender’s prior
consent.  In such event Borrower shall notify Lender as soon as practicable of
any action taken.

 

Section 4.3                                      Environmental Matters;
Inspection.

 

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

 

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

 

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(c)                                  Borrower shall pay or reimburse Lender on
demand for all Advances and actual out-of-pocket expenses (including reasonable
attorneys’ fees, costs and expenses) reasonably incurred by Lender in connection
with any Lender Environmental Report and any Borrower Environmental Report
required or permitted under this Agreement in the following situations:

 

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

 

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

 

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

 

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

 

(v)                                if Lender is not reasonably satisfied with
the results or quality of an environmental site assessment or an environmental
audit report which has been prepared in connection with the Premises; or

 

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

 

Section 4.4                                      No Waiver.  Notwithstanding any
provision in this Article 4 or elsewhere in the Loan Documents, or any rights or
remedies granted by the Loan Documents, Lender does not waive and expressly
reserves all rights and benefits now or hereafter accruing to Lender under the
“security interest” or “secured creditor” exception under applicable
Environmental Laws, as the same may be amended.  No action taken by Lender
pursuant to the Loan Documents shall be deemed or construed to be a waiver or
relinquishment of any such rights or benefits under the “security interest
exception”.

 

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ARTICLE 5.

 

CERTAIN PROPERTY MATTERS

 

Section 5.1             Lease Covenants and Limitations.

 

(a)           (i)            Except as expressly contemplated by or permitted
under Leases approved by Lender or New Leases or New Lease Modifications not
requiring Lender’s approval in accordance with Subsection 5.1(c) (such New Lease
or New Lease Modification, as applicable, a “No-Approval Lease”), all New
Leases, New Lease Modifications and terminations of Leases in excess of ten
thousand (10,000) net rentable square feet (other than any termination of any
such Lease at the end of the applicable lease term in accordance with the terms
thereof or any termination of any such Lease on account of the applicable
tenant’s default thereunder) shall be subject to the prior review and approval
of Lender as provided in Subsection 5.1(a)(ii) and (iii) below, at Borrower’s
expense.  Borrower shall provide Lender with executed copies of all New Leases
and New Lease Modifications within sixty (60) days after the end of the first
three (3) fiscal quarters of each Fiscal Year during the Loan Term, but only if
requested by Lender, and within one hundred five (105) days after the end of
each Fiscal Year, in accordance with Subsection 7.1(a)(i) hereof.  For each New
Lease permitted hereunder, upon Lender’s written request, Borrower shall use
commercially reasonable efforts to provide Lender with (A) a tenant estoppel
certificate (which request shall not be made with respect to any New Lease more
than once each calendar year unless an Event of Default shall have occurred and
be continuing), executed by the tenant thereunder either on a Lender
pre-approved form of tenant estoppel certificate or such other form as Lender
shall reasonably approve, and (B) with respect to a New Lease in excess of seven
thousand (7,000) net rentable square feet, unless previously provided and still
in effect with respect to such New Lease, a subordination, non-disturbance and
attornment agreement executed by the tenant thereunder in the form attached as
Exhibit F to this Agreement or such other form as Lender shall approve in its
reasonable discretion.

 

(ii)           With respect to any New Lease or New Lease Modification other
than a No-Approval Lease, if, within ten (10) Business Days after Lender’s
receipt of Borrower’s written request for such approval stating in bold
uppercase letters at the top of such notice “PURSUANT TO THE TERMS OF
SUBSECTION 5.1(a)(ii) OF THE LOAN AGREEMENT DATED JUNE 28, 2012, BORROWER
REQUESTS APPROVAL OF A NEW LEASE OR NEW LEASE MODIFICATION.  ANY FAILURE OF
LENDER TO RESPOND TO BORROWER’S REQUEST FOR SUCH APPROVAL WITHIN TEN
(10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE SHALL BE DEEMED TO BE LENDER’S
APPROVAL OF SUCH NEW LEASE OR NEW LEASE MODIFICATION”, together with the
following, all delivered in accordance with the notice requirements set forth in
Section 12.1: (w) a true, correct and complete copy of any proposed final New
Lease or New Lease Modification, as applicable, including all exhibits, (x) for
a New Lease, a blackline copy of the final New Lease showing differences from a
standard lease form previously approved by Lender, (y) a lease summary
describing in reasonable detail all material terms of the New Lease or New Lease
Modification, and (z) to the extent available and permitted by any
confidentiality agreement with the tenant, a description of tenant’s business
and owners, the tenant’s most recent financial statements, and a credit report
(collectively, the “Lease Approval Package”), Lender shall fail to approve or
disapprove such New Lease or New Lease Modification (which such disapproval
shall include

 

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the reasons therefor), then such New Lease or New Lease Modification, as
applicable, shall be deemed approved by Lender.

 

(iii)          With respect to any termination of any Lease for which Lender’s
prior approval is required, if, within ten (10) Business Days after Lender’s
receipt of Borrower’s written request for such approval stating in bold
uppercase letters at the top of such notice “PURSUANT TO THE TERMS OF
SUBSECTION 5.1(a)(iii) OF THE LOAN AGREEMENT DATED JUNE 28, 2012, BORROWER
REQUESTS APPROVAL OF THE TERMINATION OF A LEASE.  ANY FAILURE OF LENDER TO
RESPOND TO BORROWER’S REQUEST FOR SUCH APPROVAL WITHIN TEN (10) BUSINESS DAYS OF
RECEIPT OF THIS NOTICE SHALL BE DEEMED TO BE LENDER’S APPROVAL OF SUCH
TERMINATION OF A LEASE”, together with the following, all delivered in
accordance with the notice requirements set forth in Section 12.1: (x) a true,
correct and complete copy of any lease termination agreement, including any
amendments and supplements relating thereto, (y) a reasonably detailed
description of all material terms of the lease termination, including disclosure
of any and all consideration to be exchanged between parties and their
respective affiliates, including a description of any potential new lease that
may be entered into between or among affiliates of Borrower and tenant in
another property, and (z) a written request that Lender approve the Lease
Termination (collectively, the “Lease Termination Approval Package”), Lender
shall fail to approve or disapprove such Lease termination (which such
disapproval shall include the reasons therefor), then such Lease termination
shall be deemed approved by Lender.

 

(b)           Borrower shall perform all obligations as lessor under all Leases
and shall enforce all of the terms, covenants and conditions contained therein
upon the part of the lessee thereunder to be performed or observed, short of
termination thereof; provided, however, Borrower’s failure to comply with this
sentence shall not result in an Event of Default unless such failure is in any
material respect and following the expiration of any applicable notice or cure
period contemplated herein.  Except as permitted pursuant to Subsection
5.1(a) above, Borrower shall not take any action which would cause any Lease to
cease to be in full force and effect.  Except with the prior written consent of
Lender or with respect to any No-Approval Leases.  Borrower shall not: 
(i) cancel, terminate, surrender, sublet or assign any Lease or consent to any
cancellation, termination, surrender, subletting or assignment thereof (except
as permitted pursuant to the terms of any such Lease; (ii) enter into any
consensual document or agreement to subordinate any Lease to any mortgage, deed
of trust or other security interest that is subordinate to the Mortgage;
(iii) enter into any new Lease or amend, modify or renew any existing Lease
(except as permitted in Subsection 5.1(c)); (iv) waive any default under or
breach of any Lease (except as permitted in Subsection 5.1(c)); (v) consent to
or accept any prepayment or discount of rent or advance rent under any Lease
(except as permitted in Subsection 5.1(c)); (vi) take any other action in
connection with any Lease which could reasonably be expected to impair or
jeopardize the validity of such Lease or Lender’s interest therein; or
(vii) alter, modify or change the terms of any guaranty, letter of credit or
other credit support with respect to any Lease or cancel or terminate such
guaranty, letter of credit or other credit support (except as permitted in
Subsection 5.1(c)).

 

(c)           Notwithstanding Subsection 5.1(a) or 5.1(b), so long as no Event
of Default shall have occurred and be continuing, Lender’s approval shall not be
required for Borrower to enter into any New Lease or any New Lease Modification
(other than any New

 

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Lease Modification that adds or amends in any material respect any lease
termination options), provided that each of the following conditions are
satisfied:  (i) the New Lease or the existing Lease as modified by the New Lease
Modification, as applicable, covers less than (A) fifty thousand (50,000) net
rentable square feet of the Improvements located on Property A or
(B) twenty-five thousand (25,000) net rentable square feet of the Improvements
located on Property B, including, in either case, any square feet at Property A
or Property B, as applicable, provided for in any expansion options and other
space already leased to the subject tenant; (ii) only with respect to any New
Lease that covers more than seven thousand (7,000) net rentable square feet,
such New Lease is written on a standard form approved by Lender, in advance and
in writing, and without material modification; (iii) the New Lease or the New
Lease Modification, as applicable, is an arm’s-length transaction with a bona
fide, independent third party tenant; (iv) the New Lease or New Lease
Modification provides for rental rates and terms comparable to existing local
market rates and terms; (v) the New Lease or the New Lease Modification, as
applicable, will not violate any provision of any other Lease, restriction,
covenant or public or private agreement affecting the Premises or this Agreement
or any other Loan Document, including Subsection 4.1(b); (vi) the New Lease or
the New Lease Modification, as applicable, imposes no tenant improvement
obligations on Borrower beyond the initial lease-up and occupancy by the tenant
in excess of the lesser of Thirty-Five Dollars per square foot ($35/sq.ft.) or
Three Hundred Fifty Thousand Dollars ($350,000) for costs associated with
expansion or extension options; (vii) the New Lease or the New Lease
Modification, as applicable, contains no right of the tenant to acquire any
ownership interest in any of the Mortgaged Property; (viii) if the New Lease is
in excess of seven thousand (7,000) net rentable square feet, such New Lease
provides that the tenant will unconditionally attorn to a foreclosing lender
without requiring Lender to execute a non-disturbance agreement, or the subject
tenant agrees to execute a subordination, non-disturbance and attornment
agreement in connection therewith in the form attached hereto as Exhibit F or
such other form acceptable to Lender in its reasonable discretion, subject to
verification by Lender that the New Lease or New Lease Modification, as
applicable, otherwise qualifies as a No-Approval Lease.  If any of the aforesaid
conditions are not satisfied, then Lender’s prior consent to such New Lease or
such New Lease Modification, as applicable, shall be required.  If the New Lease
is less than seven thousand (7,000) net rentable square feet, and otherwise
qualifies as a No-Approval Lease, then if requested by the tenant thereunder,
Lender will provide a subordination, non-disturbance and attornment agreement in
the form attached hereto as Exhibit F, or such other form acceptable to Lender
in its reasonable discretion  Notwithstanding Subsection 5.1(c)(iii), a Lease
between Borrower, as landlord, and Sponsor, or an Affiliate of Sponsor, as
tenant, covering no more than to seven thousand (7,000) net rentable square feet
shall be exempt from the restriction in Subsection 5.1(c)(iii).  If requested by
Lender, Borrower shall provide a true copy of each such New Lease and each such
New Lease Modification within one hundred five (105) days after the end of each
Fiscal Year, in accordance with Subsection 7.1(a)(i) hereof.  In determining
under clause (i) above whether a New Lease, or an existing Lease as modified by
a New Lease Modification, is for fifty thousand (50,000) net rentable square
feet of building area of the Improvements located on Property A or twenty-five
thousand (25,000) net rentable square feet of building area of the Improvements
located on Property B, all space leased to any one tenant (whether pursuant to
one or more Leases) in the Improvements located on Property A or the
Improvements located on Property B, as applicable, shall be aggregated.

 

(d)           [Intentionally Omitted.]

 

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(e)           Upon Lender’s request, at any time following the occurrence and
during the continuance of an Event of Default, Borrower shall transfer and
assign to Lender any or all of the tenant security deposits, including any
letters of credit securing tenant obligations, under the Leases, together with: 
(i) any assignment of the proceeds of such security deposits; (ii) any
assignment and transfer of such letters of credit or the proceeds thereof; and
(iii) to the extent required pursuant to the applicable Lease and, so long as
the same can be obtained with commercially reasonable efforts, any tenants’
consents to assignment of such security deposits and assignment and transfer of
such letters of credit, in each case under clause (i) through (iii), as Lender
shall reasonably request.  All security deposits delivered to Lender shall be
held without interest and may be commingled with Lender’s other funds (unless
the payment of interest thereon and the maintenance of a separate account
therefor is required under applicable tenant leases or by applicable law).

 

(f)            Following the occurrence and during the continuance of an Event
of Default, Lender may, with or without exercising any other rights or
remedies:  (i) give or require Borrower to give notice to any or all tenants
under the Leases and all Lease guarantors authorizing and directing them to pay
all Property Income under the Leases directly to Lender and to continue to do so
until the tenants and Lease guarantors are otherwise notified by Lender in
writing; and (ii) apply for the appointment of a receiver of the Mortgaged
Property to which appointment Borrower hereby consents, whether or not
foreclosure proceedings have been commenced under any of the Mortgage and
whether or not a foreclosure sale has occurred.

 

(g)           Without limiting Lender’s approval rights under Subsection 5.1(a),
if any tenant is required to pay a lease termination, cancellation or
contraction fee in excess of One Million Dollars ($1,000,000) as a result of
such tenant terminating its Lease, and Borrower has not re-let the space vacated
as a result of such Lease termination on or prior to the date of such Lease
termination, then upon such Lease termination, the amount so required to be paid
by such tenant shall be collaterally assigned to Lender as additional collateral
for the Loan and deposited with Lender in an interest bearing account (the
“Lease Termination Reserve Account”), with interest accruing for the benefit of
Borrower.  So long as no Event of Default shall have occurred and be continuing,
(i) upon the execution of an Acceptable Lease for the space, or a portion of the
space, vacated as a result of the Lease termination, half of the allocable
amount of the Lease Termination Reserve Account relating to the Lease
termination payment for the applicable space (inclusive of interest attributable
thereto) shall be refunded to Borrower and (ii) upon the occupancy by the tenant
under such Acceptable Lease for such space, or a portion of such space, vacated
as a result of such Lease termination, the remaining half of the allocable
amount of the Lease Termination Reserve Account relating to the Lease
termination payment for such space (inclusive of interest attributable thereto)
shall be refunded to Borrower.  Should an Event of Default occur prior to any
such release, all funds in the Lease Termination Reserve Account may, during the
continuance of such Event of Default, be applied in payment of the charges for
which such funds shall have been deposited or to the payment of the Indebtedness
or any other charges affecting the Mortgaged Property, as Lender in its sole
discretion may determine, but no such application shall be deemed to have been
made by operation of law or otherwise until actually made by Lender as herein
provided.

 

Section 5.2             Management.  At all times prior to the payment in full
of the Indebtedness, the Mortgaged Property shall be managed by a management
company satisfactory

 

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to Lender in its reasonable discretion, and for any management company other
than Kilroy LP, pursuant to a management agreement satisfactory to Lender in its
reasonable discretion.  In addition, any leasing commissions agreement affecting
the Mortgaged Property must be satisfactory to Lender in its reasonable
discretion.  Such management agreement and leasing commissions agreement shall
be subordinate to the Lien of the Mortgage.  Lender approves Kilroy LP as
manager of the Mortgaged Property, reserving the right, however, to revoke such
approval in accordance with the following sentence.  If at any time the
management company, management agreement or leasing commissions agreement is not
satisfactory to Lender, Borrower shall have a reasonable period, not exceeding
sixty (60) days after notice to Borrower of Lender’s disapproval, to obtain a
management company, management agreement and/or leasing commissions agreement
approved by and satisfactory to Lender, in each case, not to be unreasonably
withheld, delayed or conditioned.  As a condition to Lender’s approval of any
such management agreement or leasing commissions agreement, Borrower, Lender and
the applicable management company or leasing agent, shall execute and deliver an
Assignment and Subordination of Management Agreement or an Assignment and
Subordination of Leasing Commissions Agreement, as applicable, which shall be
prepared on Lender’s then current form and which shall otherwise be in form and
content satisfactory to Lender in its reasonable discretion.

 

Section 5.3             Impositions and Utility Charges.

 

(a)           Borrower shall pay and discharge all Impositions and Utility
Charges prior to delinquency, and shall provide to Lender validated receipts or
other evidence satisfactory to Lender in its reasonable discretion showing the
payment of all such Impositions within fifteen (15) days after the same would
otherwise have become delinquent. Borrower’s obligation to pay such Impositions
pursuant to this Agreement shall include, to the extent permitted by applicable
law, taxes resulting from changes in law after the date of this Agreement which
impose upon Lender an obligation to pay any property taxes or other Impositions
or which otherwise adversely affect Lender’s interests in the Mortgaged Property
or otherwise with respect to the Loan.  Should Borrower default in the payment
of any of such Impositions or Utility Charges, Lender may (but shall not be
obligated to) pay such item or any portion thereof and Borrower shall reimburse
Lender on demand for all such Advances.

 

(b)           Borrower shall not be required to pay, discharge or remove any
Imposition or Utility Charge so long as Borrower contests in good faith such
Imposition or Utility Charge or the validity, applicability or amount thereof by
an appropriate legal proceeding which operates to prevent the collection of such
amounts and the sale of the Mortgaged Property or any portion thereof; provided,
however, that, solely with respect to Impositions, such contest will not result
in a tax certificate or other sale of the tax lien and prior to the date on
which such Imposition would otherwise have become delinquent Borrower shall
have: (i) given Lender prior notice of such contest; and (ii) deposited with
Lender, and shall deposit such additional amounts as are necessary to keep on
deposit at all times, an amount equal to at least one hundred ten percent (110%)
of the total of:  (A) the balance of such Imposition then remaining unpaid; and
(B) all interest, penalties, costs and charges accrued or accumulated thereon. 
Any such contest shall be prosecuted with due diligence, and Borrower shall
promptly pay the amount of such Imposition as finally determined, together with
all interest, penalties, costs and charges payable in connection therewith. 
Lender shall have full power and authority to apply any amount deposited

 

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with Lender under this Subsection 5.3(b) to the payment of any unpaid Imposition
to prevent the sale of any tax lien or the sale or forfeiture of the Mortgaged
Property (or any portion thereof) for non-payment thereof.  Lender shall have no
liability, however, for failure to so apply any amount deposited unless Borrower
requests the application of such amount to the payment of the particular
Imposition for which such amount was deposited.  Any surplus retained by Lender
after payment of the Imposition for which a deposit was made shall be repaid to
Borrower unless an Event of Default shall have occurred, in which case said
surplus may be retained by Lender to be applied to the Indebtedness. 
Notwithstanding any provision of this Subsection 5.3(b) to the contrary,
Borrower shall pay any Imposition which it might otherwise be entitled to
contest if, in the reasonable opinion of Lender, failure to pay will result in a
tax certificate or other sale of the tax lien or the Mortgaged Property (or any
portion thereof) is in jeopardy or in danger of being forfeited or foreclosed. 
If Borrower refuses to pay any such Imposition, Lender may (but shall not be
obligated to) make such payment and Borrower shall reimburse Lender on demand
for all such Advances.  Additionally, in such event, if Lender is prevented by
law or judicial or administrative order from paying such Imposition, then
Lender, at its option, may declare the entire Indebtedness immediately due and
payable.

 

(c)           Borrower shall deposit with Lender, monthly, on the due date of
each monthly installment under the Note, 1/12th of the annual charges (as
estimated by Lender in its reasonable discretion) for Impositions with respect
to the Mortgaged Property.  If required by Lender, Borrower shall also deposit
with Lender, simultaneously with such monthly deposits and/or the execution of
this Agreement, a sum of money which together with such monthly deposits will be
sufficient to make the payment of each such charge at least thirty (30) days
prior to the date initially due.  Should such charges not be ascertainable at
the time any deposit is required to be made, the deposit shall be made on the
basis of the charges for the prior year or payment period, as reasonably
estimated by Lender.  When the charges are fixed for the then current year or
period, Borrower shall deposit any deficiency on demand.  All funds deposited
with Lender shall be held without interest (unless the payment of interest
thereon is required under applicable law), may be commingled with Lender’s other
funds, and shall be applied in payment of the foregoing charges when and as
payable provided that no Event of Default shall have occurred and be
continuing.  Upon the occurrence and during the continuance of an Event of
Default, the funds so deposited may be applied in payment of the charges for
which such funds shall have been deposited or to the payment of the Indebtedness
or any other charges affecting the Mortgaged Property, as Lender in its sole
discretion may determine, but no such application shall be deemed to have been
made by operation of law or otherwise until actually made by Lender as herein
provided.  Borrower shall provide Lender with bills and all other documents
necessary for the payment of the foregoing charges promptly following Borrower’s
receipt of the same, but in any event at least fifteen (15) days prior to the
date on which each payment thereof shall first become due.

 

(d)           Notwithstanding the requirements of Subsection 5.3(c) above,
Lender shall waive the requirement for Borrower to make the monthly deposits of
the annual charges for Impositions with respect to the Mortgaged Property so
long as each of the following terms and conditions continues to be satisfied, as
determined by Lender in its reasonable discretion (each of the following, a
“Reserve Waiver Requirement” and, collectively, the “Reserve Waiver
Requirements”):

 

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(i)                   Borrower shall pay and discharge all Impositions affecting
the Mortgaged Property on or prior to the last date on which such Impositions
may be paid without payment of any interest, late fee or penalty, and shall
provide to Lender validated receipts or other evidence satisfactory to Lender in
its reasonable discretion showing the timely payment of such Impositions;

 

(ii)                 No uncured monetary default shall exist, nor shall any
Event of Default have occurred and be continuing, under the Loan Documents;

 

(iii)                The original named Borrower as of the Closing Date must
still hold sole title to the Mortgaged Property and shall not have exercised its
rights pursuant Section 8.3 below;

 

(iv)               No other transfer of any interest in the Mortgaged Property
has occurred, other than as expressly permitted by Article 8 hereof; and

 

(v)                 There does not exist any subordinate, mezzanine or other
indebtedness prohibited by any of the Loan Documents, whether or not such
indebtedness is secured by any of the Mortgaged Property.

 

In the event that Borrower fails, at any time during which a waiver of the
requirements of Subsection 5.3(c) is in effect, to satisfy any one or more of
the Reserve Waiver Requirements, Borrower shall immediately commence making the
monthly deposits of annual charges for Impositions with respect to the Mortgaged
Property pursuant to the terms of Subsection 5.3(c), and shall continue to make
such deposits for the remainder of the Loan Term, notwithstanding any subsequent
satisfaction of such Reserve Waiver Requirements.

 

ARTICLE 6.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Borrower, jointly and severally (if applicable), represents, warrants and
covenants that:

 

Section 6.1             Organization and Authority.

 

(a)           The execution and delivery of the Note, this Agreement, the
Mortgage and the other Loan Documents have been duly authorized and there is no
provision in Borrower’s organizational documents, as amended, requiring further
consent for such action by any other Person.

 

(b)           Borrower is duly organized, validly existing and in good standing
under the laws of the state of its formation.

 

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(c)           Borrower has all necessary franchises, licenses, authorizations,
registrations, permits and approvals and full power and authority to own and
operate its properties, including the Mortgaged Property, and is qualified to
carry on its business as now conducted in each jurisdiction where failure to be
so qualified could reasonably be expected to have a material adverse effect on
the financial condition of Borrower or Borrower’s ability to perform its
material obligations under the Loan Documents.

 

(d)           The execution and delivery of and performance of its obligations
under the Loan Documents:  (i) will not result in Borrower being in default
under any provision of its organizational documents, as amended, any court
order, or any mortgage, deed of trust or other agreement to which it is a party;
and (ii) do not require the consent of or any filing with any governmental
authority.

 

(e)           All necessary actions have been duly taken by and on behalf of
Borrower to make and constitute the Loan Documents to which Borrower is a party,
and the Loan Documents to which Borrower is a party constitute, legal, valid and
binding obligations enforceable in accordance with their respective terms,
subject only to the application of bankruptcy and other laws affecting the
rights of creditors and general principles of equity.

 

Section 6.2             Maintenance of Existence.  So long as it owns the
Mortgaged Property, Borrower shall do all things necessary to preserve and keep
in full force and effect its existence and all necessary franchises, licenses,
authorizations, registrations, permits and approvals under the laws of the state
of its formation and the State to carry on its business as now conducted and
shall comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental authority or court now or hereafter applicable to
Borrower or to the Mortgaged Property or any portion thereof; provided, however,
Borrower’s failure to so comply with such regulations, rules, ordinances,
statutes, orders and decrees shall not result in an Event of Default unless such
failure is in any material respect and after the expiration of any applicable
notice or cure period contemplated herein.

 

Section 6.3             Title.  Borrower has good, marketable and insurable fee
simple title to the Premises and good indefeasible title to the balance of the
Mortgaged Property, free and clear of all Liens whatsoever, except the Permitted
Encumbrances.  The Mortgage creates (1) a valid, perfected Lien on the Mortgaged
Property, subject only to Permitted Encumbrances and (2) perfected security
interests in and to, and perfected collateral assignments of, all Collateral
(including the Leases), all in accordance with the terms thereof, in each case
subject only to any applicable Permitted Encumbrances and such other Liens as
are permitted pursuant to the Loan Documents.  Borrower will preserve such title
and will forever warrant and defend the same and validity and priority of the
lien hereof to Lender against all claims whatsoever.  Borrower is the owner of
all easements and other rights (collectively, the “Easements”) created under the
documents expressly set forth in Schedule B to title insurance policy
no. 126746040-X59 and Schedule B to title insurance policy no. 126746041-X59
with respect to the Mortgaged Property (collectively the “Easement
Agreements”).  The Easement Agreements and the Easements created thereunder have
not been modified or amended and are in full force and effect.  No defaults have
occurred under the Easement Agreements, and no event has occurred which with
notice or the passage of time would constitute an event of default under the
Easement Agreements.  Borrower has not sent, and is not in receipt of, any
notice alleging or asserting the

 

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occurrence of any default under the Easement Agreements or the occurrence of any
event which with notice or the passage of time would constitute an event of
default thereunder.

 

Section 6.4             Mortgage Taxes.

 

(a)           Borrower shall pay any and all Indemnified Taxes, charges, filing,
registration and recording fees, excises and levies imposed upon Lender by
reason of its ownership of, or measured by amounts payable under, the Note, this
Agreement, the Mortgage or any other Loan Document, and shall pay all stamp
taxes and Indemnified Taxes required to be paid on the Note, the Mortgages, this
Agreement or the other Loan Documents.  If Borrower fails to make such payment
within ten (10) Business Days after notice thereof from Lender, Lender may (but
shall not be obligated to) pay the amount due, and Borrower shall reimburse
Lender on demand for all such Advances.

 

(b)           If any applicable law (as determined in the good faith discretion
of Borrower or Withholding Agent, as applicable) requires the deduction or
withholding of any Tax from any payments under the Note, this Agreement, the
Mortgage or any other Loan Document, then Borrower or Withholding Agent shall be
entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant governmental authority in accordance
with applicable law and, if such Tax is an Indemnified Tax, then the sums
payable by Borrower under the Note, this Agreement, the Mortgage or any other
Loan Documents shall be increased as necessary so that after such deduction or
withholding has been made (including such deductions and withholdings applicable
to additional sums payable under this Section 6.4), Lender receives an amount
equal to the sum it would have received had no such deduction or withholding
been made.

 

Section 6.5             Payment of Liens.  Borrower shall pay when due all
payments and charges due under or in connection with any Liens and encumbrances
on and security interests in the Mortgaged Property or any portion thereof, all
rents and charges under any ground leases and other leases forming a part of the
Mortgaged Property, and all claims and demands of mechanics, materialmen,
laborers and others which, if unpaid, could reasonably be expected to result in
or permit the creation of a Lien on the Mortgaged Property or any portion
thereof (excluding any Lien imposed solely on any tenant’s interest in the
Mortgaged Property) and shall cause the prompt (but in no event later than
thirty (30) days after imposition), full and unconditional discharge of all
Liens imposed on or against the Mortgaged Property or any portion thereof;
provided that Borrower shall not be required to pay, discharge or remove any
such Lien so long as Borrower contests in good faith such Lien or the validity,
applicability or amount thereof in the manner described in Subsection 5.3(b), so
as to prevent the sale of the Mortgaged Property or any portion thereof. 
Borrower shall do or cause to be done, at the sole cost of Borrower, everything
necessary to fully preserve the initial priority of the Lien of the Mortgage. 
If Borrower fails to make any such payment or if a Lien attaches to the
Mortgaged Property or any portion thereof and is not discharged within said
thirty (30) days or contested in good faith in the manner described in
Subsection 5.3(b), Lender may (but shall not be obligated to) make such payment
or discharge such lien and Borrower shall reimburse Lender on demand for all
such Advances.

 

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Section 6.6             Costs of Defending and Upholding the Lien.  Lender may,
after notice to Borrower:  (a) appear in and defend any action or proceeding, in
the name and on behalf of either Lender or Borrower, in which Lender is named or
which Lender in its reasonable discretion determines may adversely affect the
Mortgaged Property, the Mortgage, the Lien thereof or any other Loan Document;
and (b) institute any action or proceeding which Lender in its reasonable
discretion determines should be instituted to protect its interest in the
Mortgaged Property or its rights under this Agreement or any other Loan
Document, including foreclosure proceedings.  Borrower shall pay or reimburse
Lender on demand for all Advances and actual out-of-pocket expenses (including
reasonable attorneys’ fees, costs and expenses) reasonably incurred by Lender in
connection with any such action or proceeding.

 

Section 6.7             Costs of Enforcement.  If an Event of Default has
occurred and is continuing, Borrower shall pay or reimburse Lender on demand for
all Advances, costs and expenses (including reasonable attorneys’ and
appraisers’ fees, costs and expenses and the expenses and reasonable fees of any
receiver or similar official)  related or incidental to the collection of the
Indebtedness, any foreclosure of the Mortgage or any other Loan Document, any
enforcement, compromise or settlement of the Mortgage, this Agreement, any other
Loan Document or the Indebtedness in any in any judicial, arbitration,
administrative, probate, appellate, bankruptcy, insolvency or receivership
proceeding, as well as in any post-judgment proceeding to collect or enforce any
judgment or order relating to the Indebtedness or any of the Loan Documents, as
well as any defense or assertion of the rights or claims of Lender in respect of
any thereof, by litigation or otherwise.

 

Section 6.8             Indemnification.  Borrower shall indemnify, defend and
hold Lender and the Lender Parties harmless from and against, and be responsible
for paying, all Losses which may be imposed upon, asserted against, or incurred
or paid by any of them:  (a) by reason of, on account of or in connection with
any act or occurrence relating to the Mortgaged Property or any bodily injury,
death, other personal injury or property damage occurring in, upon or in the
vicinity of the Mortgaged Property from any cause whatsoever; (b) as a result of
the failure of Borrower to perform any of its obligations under any of the Loan
Documents; or (c) on account of any transaction otherwise arising out of or in
any way connected with the Mortgaged Property, this Agreement or the
Indebtedness; provided, however, the indemnification in this Section 6.8 shall
not require Borrower to pay any Taxes that are not Indemnified Taxes.

 

Section 6.9             Estoppel Certificates.  Within ten (10) Business Days
following a request by either party hereto (such party, the “Requesting Party”),
the other party shall provide to the Requesting Party a duly acknowledged
written statement confirming:  (a) the original principal amount of the Loan;
(b) the unpaid principal amount of the Loan; (c) the rate of interest of the
Loan; (d) the terms of payment and maturity date of the Loan; (e) the date
installments of interest and/or principal were last paid; (f) only if Lender is
the Requesting Party, that, except as provided in detail in such statement,
there are no offsets or defenses against the Indebtedness or defaults or events
which with the passage of time or the giving of notice, or both, would
constitute an Event of Default under the Note, this Agreement or the other Loan
Documents; and (g) such other information that the Requesting Party shall
reasonably request.  In connection with a Transfer or Participation of the Loan
pursuant to Section 12.13 hereof, Borrower shall also exercise commercially
reasonable efforts to provide to Lender within thirty (30) days following

 

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its request therefor tenant estoppel letters from such tenants of the Premises
as Lender may require.

 

Section 6.10           ERISA.

 

(a)           Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken hereunder (or the exercise by Lender
of any of its rights under the Note, the Loan Agreement or any of the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA and/or Section 4975 of the
Internal Revenue Code of 1986, as amended.

 

(b)           Borrower further covenants and agrees to deliver to Lender such
certifications and other documents from time to time throughout the Loan Term as
are reasonably requested by Lender to provide evidence that (i) Borrower is not
(and is not deemed to include the assets of) an “employee benefit plan” that is
subject to Title I of ERISA and/or a “plan” that is subject to Section 4975 of
the Internal Revenue Code of 1986, as amended; (ii) Borrower is not a
“governmental plan” within the meaning of Section 3(32) of ERISA and is not
subject to state statutes regulating investments and fiduciary obligations with
respect to governmental plans; and (iii) one or more of the following statements
is and remains true:

 

(i)            equity interests in Borrower are “publicly offered securities”
within the meaning of 29 C.F.R. § 2510.3-101 (as modified by Section 3(42) of
ERISA, the “Plan Assets Regulation”);

 

(ii)           less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower are held by “benefit plan investors” (determined in
accordance with the Plan Assets Regulation);

 

(iii)          Borrower qualifies as an “operating company,” a “venture capital
operating company” or a “real estate operating company” within the meaning of
the Plan Assets Regulation, or Borrower qualifies as an investment company
registered under the Investment Company Act of 1940; or

 

(iv)          no “prohibited transaction” rules apply to the Loan or the Loan
meets the requirements of Prohibited Transaction Exemptions 95-60, 90-1, 84-14
or another available exemption from any applicable “prohibited transaction”
rules.

 

(c)           Borrower shall not agree to, enter into or consummate any
transaction which would render Borrower unable to furnish the certification or
other evidence referred to in Subsection 6.10(b) hereof, to the extent
applicable.

 

(d)           [Intentionally Omitted.]

 

(e)           [Intentionally Omitted.]

 

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Section 6.11           Terrorism and Anti-Money Laundering.

 

(a)           As of the date hereof and throughout the term of this Agreement: 
(i) Borrower; (ii) any Principal; or (iii) any Person for whom Borrower is
acting as agent or nominee in connection with this transaction, is not an OFAC
Prohibited Person.

 

(b)           To comply with applicable Anti-Money Laundering Laws, all payments
by Borrower to Lender or from Lender to Borrower will only be made and received
in Borrower’s name and to and from a bank account of a bank based or
incorporated in or formed under the laws of the United States or a bank that is
not a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act
(31 U.S.C. § 5311 et seq.), as amended, and the regulations promulgated
thereunder by the U.S. Department of the Treasury, as such regulations may be
amended from time to time.

 

(c)           Borrower shall provide Lender at any time and from time to time
during the term of the Loan with such information as Lender determines in its
reasonable discretion to be necessary or appropriate to comply with the
Anti-Money Laundering Laws of any applicable jurisdiction, or to respond to
requests for information concerning the identity of Borrower, any Person
controlling or controlled by Borrower or any Person having a beneficial interest
in Borrower, from any governmental authority, self-regulatory organization or
financial institution in connection with its anti-money laundering compliance
procedures, or to update such information.

 

(d)           The representations and warranties set forth in this Section 6.11
shall be deemed repeated and reaffirmed by Borrower as of each date that
Borrower makes a payment to Lender under the Note, this Agreement and the other
Loan Documents or receives any disbursement of Loan proceeds, reserve funds or
other funds from Lender.  Borrower agrees promptly to notify Lender in writing
should Borrower become aware of any change in the information set forth in these
representations.

 

Section 6.12           Limited Purpose Entity Requirements.  All of the
provisions of this Section 6.12 are individually and collectively referred to as
the “LPE Requirements”.

 

(a)           Borrower has not and shall not:

 

(i)            engage in any business unrelated to the acquisition, development,
ownership, holding, sale, leasing, transfer, exchange, management or operation
of the Mortgaged Property;

 

(ii)           have any assets other than those related to the Mortgaged
Property or related to any business not prohibited by Subsection 6.12(a)(i);

 

(iii)          incur any indebtedness, other than (A) the Indebtedness,
(B) unsecured trade payables and other operational debt which are incurred, paid
and processed in the ordinary course of business, (C) tenant improvement
allowances or similar concessions granted to tenants, and (D) such other
indebtedness as shall be permitted by

 

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the Loan Documents (including, without limitation, indebtedness described in
Subsection 6.12(a)(iv) below);

 

(iv)          assume or guarantee or become obligated for the debts of any other
Person or hold out its credit as being available to satisfy the obligations of
any other Person except for its obligations under the Loan Documents, and except
for (A) payment or performance bonds, guarantees, indemnities or other
assurances in connection with the performance of tenant improvements required or
permitted by Leases or Lease modifications approved or deemed approved by Lender
or otherwise permitted by the Loan Documents, (B) obligations under Leases or
Lease modifications approved or deemed approved by Lender or otherwise permitted
by the Loan Documents, (C) lease takeover arrangements in connection with Leases
or Lease modifications approved or deemed approved by Lender or otherwise
permitted by the Loan Documents, and (D) customary types of indemnities or other
assurances with respect to existing seller liabilities the existence or
incurrence of which are not in violation of the Loan Documents and that may be
required by the buyer or the title company in connection with the sale of the
Mortgaged Property;

 

(v)           acquire obligations or securities of its members or shareholders
or any other Affiliate; or

 

(vi)          except for its obligations under the Loan Documents or as
otherwise permitted by the Loan Documents, pledge its assets for the benefit of
any other Person.

 

(b)           Borrower shall not amend or modify any of its formation documents
without the prior consent of Lender, which consent shall not be unreasonably
withheld, delayed or conditioned.  Promptly after Lender’s written request from
time to time, but not more frequently than once in any calendar year, Borrower
shall deliver to Lender evidence satisfactory to Lender in its reasonable
discretion that Borrower is in compliance with the provisions of this
Section 6.12.

 

Section 6.13           Operating Agreements and Permitted Encumbrances.

 

(a)           No Operating Agreement or Permitted Encumbrance shall be amended,
modified, supplemented, restated or otherwise altered by Borrower, nor shall
Borrower consent or otherwise acquiesce in any of the foregoing, in each case in
any manner materially adverse to Lender, without in each instance the prior
consent of Lender (such consent not to be unreasonably withheld, delayed or
conditioned).

 

(b)           No Operating Agreement or Permitted Encumbrance benefiting the
Mortgaged Property shall be terminated by Borrower unless such terminated
Operating Agreement or such terminated Permitted Encumbrance is replaced with a
similar agreement upon

 

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terms and conditions, and with such third parties, as are acceptable to Lender
in its reasonable discretion; provided, however, if a property management
agreement with respect to the Mortgaged Property is so terminated, Borrower
shall not be required to replace such agreement so long as the Mortgaged
Property is managed by Kilroy LP following such termination.

 

(c)           Borrower shall deliver to Lender, at the same time received or
sent by Borrower, copies of all notices, demands or requests sent or otherwise
sent by Borrower or received from any other Person under or pursuant to any
Operating Agreement or Permitted Encumbrance.

 

(d)           The term of any Operating Agreement or Permitted Encumbrance shall
not be extended or otherwise renewed by Borrower (unless pursuant to a right
currently afforded Borrower thereunder) without in each instance Lender’s prior
written approval (such approval not to be unreasonably withheld, delayed or
conditioned).

 

(e)           Borrower shall observe, perform and discharge in all material
respects all obligations, covenants and warranties required to be kept and
performed by Borrower under the Operating Agreements and Permitted Encumbrances.

 

(f)            Borrower shall enforce or secure the performance of each and
every material obligation, term, covenant, condition and agreement to be
performed by any other party to any of the Operating Agreements and Permitted
Encumbrances.

 

The foregoing covenants in this Section 6.13 shall not apply to the TIC
Agreement, which is addressed in Section 6.19 below.

 

Section 6.14           Compliance with Laws.  The Mortgaged Property is in
compliance in all material respects with all provisions of all zoning,
subdivision, land use, environmental, traffic, fire, building, and occupational
safety and health rules, regulations, codes, acts and statutes to which it is
subject.

 

Section 6.15           Business Purpose of Loan.  Borrower stipulates and
warrants that the purpose of the Loan is for the sole purpose of carrying on or
acquiring a business, professional or commercial enterprise.  Borrower further
stipulates and warrants that all proceeds of the Loan will be used for said
business, professional or commercial enterprise.

 

Section 6.16           Maintenance of Mortgaged Property.  Borrower shall
maintain the Mortgaged Property in good and safe condition, working order and
repair, and comply with all existing and future federal, state and local laws,
ordinances, rules and regulations and court orders affecting or which may be
interpreted as affecting the Mortgaged Property, including the Americans with
Disabilities Act and all zoning, subdivision, land use, environmental, traffic,
fire, building, and occupational safety and health rules, regulations, codes,
acts and statutes to which it is subject; provided, however, that Borrower’s
failure to so comply with such laws, ordinances, rules and regulations and court
orders shall not result in an Event of Default unless such failure is in any
material respect and following the expiration of any applicable notice and/or
cure period contemplated herein.  Borrower shall permit Lender and its agents to
enter upon and inspect, in each case, subject to the rights of tenants under any
applicable Leases:  (a) the areas of the Mortgaged Property which are open to
the public at all reasonable hours

 

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during which such areas are open to the public, without prior notice and (b) all
other areas of the Mortgaged Property during normal business hours with
reasonable prior notice (provided that Lender shall in no event be required to
provide Borrower with more than three (3) Business Days prior notice), except
that no notice shall be required in the event of an emergency.  Borrower shall
not, without the prior consent of Lender, which consent may be granted or
withheld in Lender’s sole and absolute discretion:  (i) change the use of the
Premises; (ii) cause or permit the use or occupancy of any part of the Premises
to be discontinued if such discontinuance would violate any zoning or other law,
ordinance or regulation; (iii) apply for or consent to any subdivision,
re-subdivision, zoning reclassification, modification or restriction affecting
the Premises; (iv) threaten, commit or permit any waste, structural or material
addition to or alteration, demolition or removal of the Mortgaged Property or
any portion thereof (provided that the Equipment included within the Collateral
may be removed if replaced with similar items of equal or greater value);
(v) take any action whatsoever to apply for, consent to, or acquiesce in the
conversion of the Mortgaged Property, or any portion thereof, to a condominium
or cooperative form of ownership, or (vi) take any action whatsoever to apply
for, consent to or acquiesce in any subdivision or re-subdivision of the
Mortgaged Property, or any portion thereof.  No provision of this Section 6.16
shall prohibit Borrower from undertaking and completing tenant improvement work
authorized under Leases or Lease modifications previously approved by Lender or
not requiring Lender’s prior approval.

 

Section 6.17           Solvency.  (1) Neither Borrower nor any Upstream Owner
Controlled by Sponsor has entered into the transaction or any Loan Document with
the actual intent to hinder, delay, or defraud any creditor, and (2) Borrower
and each Upstream Owner Controlled by Sponsor has received reasonably equivalent
value in exchange for its obligations under the Loan Documents.  Giving effect
to the Loan, the fair saleable value of Borrower’s assets exceeds and will,
immediately following the making of the Loan, exceed Borrower’s total
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities.  The fair saleable value of Borrower’s assets is and
will, immediately following the making of the Loan, be greater than Borrower’s
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured.  Borrower’s assets do
not and, immediately following the making of the Loan will not, constitute
unreasonably small capital for such entity to carry out its business as
conducted or as proposed to be conducted.  Borrower does not intend to, and does
not believe that it will, incur debt and other liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such debt and
liabilities as they mature (taking into account the timing and amounts of cash
to be received by it and the amounts to be payable on or in respect of
obligations of such party).  No petition in bankruptcy has been filed against
Borrower or any Indemnitor or Principal, and neither Borrower nor any Indemnitor
or Principal has ever made an assignment for the benefit of creditors or taken
advantage of any insolvency act for the benefit of debtors.  Neither Borrower
nor Indemnitor or any Principal has been involved in a foreclosure or in a
default on any debt owing to Lender or to any Affiliate of Lender.  All
financial and other information submitted by or on behalf of Borrower and
Indemnitor to Lender in connection with the Loan is true, complete and correct. 
All of Borrower’s material obligations to creditors, including, but not limited
to, all payments and accounts relating to the Premises, are current.

 

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Section 6.18           Representations Regarding Mortgaged Property.

 

(a)           Borrower has truthfully and fully provided to Lender, in writing,
any and all material information relating to conditions in, on, under or about
the Premises that are known by Borrower and that are contained in Borrower’s
files and records.

 

(b)           Borrower has received no written notice from any governmental or
quasi-governmental authority of any pending or threatened condemnation of the
Premises, or any part thereof.

 

(c)           No part of the Premises has been designated as wetlands under any
federal, state or local law or regulation or by any governmental agency, and no
portion of the Premises is located within a 100-year flood plain.

 

(d)           The Improvements and the intended use thereof as office buildings
are in compliance in all material respects with (i) all applicable restrictions,
covenants, conditions and requirements, as applicable to either Property A or
Property B, including, but not limited to, those set forth in the following
agreements, as applicable: (1) the TIC Agreement; (2) that certain Development
Agreement By and Between the City of Irvine and Z West America Corporation,
Regarding the Development Located at Koll Center Irvine dated as of May 26,
1999, executed by and between the City of Irvine and Z West America Corporation,
and recorded in the Official Records of Orange County, California on June 28,
1999 as Document No. 19990476791; (3) that certain Development Agreement dated
as of December 16, 1987, by and between SoPac Properties, Inc., and the City of
Santa Monica, and recorded in the Official Records of Los Angeles County,
California on December 17, 1987 as Document No. 87-1996737, as amended by that
certain Amendment Number One to Development Agreement dated as of December 28,
1988, by and between SoPac Properties, Inc., and the City of Santa Monica, and
recorded in the Official Records of Los Angeles County, California on January 5,
1989 as Document No. 89-15234, as assigned to and assumed by Santa Monica Lowe
Partners, L.P., pursuant to that certain Assignment and Assumption of
Development Agreement dated as of February 22, 1989, by and between SoPac
Properties, Inc. and Santa Monica Lowe Partners, L.P., and recorded in the
Official Records of Los Angeles, California on February 22, 1989 as Document
No. 89-282004, as further amended by that certain Amendment Number Two to
Development Agreement dated as of March 16, 1995, by and between the City of
Santa Monica and Arboretum Development Partners, L.P. and consented to by Santa
Monica Number Seven Associates, L.P., and recorded in the Official Records of
Los Angeles County, California on April 11, 1995 as Document No. 95-504419, and
as further assigned to and assumed by Kilroy LP, pursuant to that certain
Assignment and Assumption of Development Agreement dated as of June 26, 1997, by
and between Santa Monica Number Seven Associates, L.P. and Kilroy LP, and
recorded in the Official Records of Los Angeles County, California as Document
No. 97-965090; and (4) that certain Second Declaration of Protective Covenants,
Conditions and Restrictions and Reciprocal Easement Agreement for the Arboretum
dated as of November 8, 1994, by and among Santa Monica Number Seven Associates,
L.P., Arboretum Development Partners, L.P., and Arboretum Notepurchasers, L.P.,
recorded in the Official Records of Los Angeles County, California on
November 23, 1994, as Document No. 94-2115484, as amended by that certain First
Amendment to Second Declaration of Protective Covenants, Conditions and
Restrictions and Reciprocal Easement Agreement for the Arboretum dated as of
December 5, 1994, by and among Santa Monica Number Seven Associates, L.P.,
Arboretum Development Partners, L.P., and Arboretum Notepurchasers, L.P.,
recorded in the Official Records of Los Angeles County, California on

 

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May 2, 1995, as Document No. 95-717712, and (ii) with all federal, state and
municipal laws, rules, regulations and ordinances applicable thereto, including,
but not limited to, zoning and The Americans with Disabilities Act of 1990, as
amended from time to time.

 

(e)           Borrower has received no written notice from any governmental or
quasi governmental authority alleging that the Improvements are in violation of
any federal, state or municipal laws, orders, regulations or ordinances
applicable thereto.

 

(f)            The Improvements are in good condition and repair, have not
suffered any material damage which has not been fully repaired, and are free of
structural or other material defects.

 

(g)           All required licenses, permits, approvals, accreditations and
qualifications necessary or appropriate for the use and operation of the
Improvements as office buildings, including, but not limited to, all required
certificates of occupancy, have been issued and are in full force and effect.

 

(h)           City water supply, storm and sanitary sewers and sanitary sewer
capacity, and electrical, gas and telephone facilities are available to the
Premises within the boundary lines thereof, and the Improvements connect to all
storm and sanitary sewer lines serving the Premises, and such lines are
sufficient to meet the reasonable needs of the Premises as currently used.  No
other utility facilities are necessary to meet the reasonable needs of the
Premises as currently used, and the design and as-built conditions of the
Improvements are such that surface and storm water do not accumulate on the
Premises and do not drain from the Premises across land of adjacent property
owners, except as permitted by an easement or other agreement with such adjacent
property owners.

 

(i)            The Premises are managed for Borrower by Kilroy LP.

 

(j)            A true and complete rent roll for the Premises as of May 31, 2012
is attached hereto as Exhibit C and incorporated herein by reference.  There has
been no material adverse change in the rent roll delivered to Lender with
Borrower’s application for the Loan or in the rent roll attached hereto as
Exhibit C, or the financial condition, credit rating, business, operations or
affairs of Borrower, Indemnitor, to Borrower’s knowledge, any tenant at the
Premises, or any other entity or natural person for which a financial statement
has been submitted to Lender in connection with the Loan or which is providing
any indemnification, guaranty, collateral or other credit support in connection
with the Loan since the date of the last financial statement for such persons or
entities submitted to Lender.  Borrower is the owner of the landlord’s interest
in each of the Leases.  Borrower has delivered to Lender true and correct copies
of all Leases, as the same have been amended or modified.  Except as disclosed
to Lender in writing, the Leases are in full force and effect, no event of
default exists thereunder and no event has occurred thereunder which with notice
or the passage of time would constitute an event of default thereunder.  Except
as disclosed to Lender in writing, Borrower has received no notice alleging
default by the landlord under any of the Leases, and the Leases are not subject
to any assignment, other than the Assignment of Leases and Rents.

 

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(k)           For all reports provided with respect to Borrower, Borrower
reports, for accounting purposes, on a fiscal year basis commencing on January 1
of each year and terminating on December 31 thereof.

 

(l)            There are no actions, suits or proceedings, pending or, to the
knowledge of Borrower, threatened, affecting Borrower, any Indemnitor, any
Principal, or the Premises at law or in equity, on, before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or other governmental instrumentality.  There are no outstanding
judgments, arbitration awards, decrees or awards of any kind pending against
Borrower, any Indemnitor, any Principal or the Premises.

 

Section 6.19           TIC Agreement.

 

(a)           The TIC Agreement shall not be amended, modified, supplemented,
restated, terminated or otherwise altered by Borrower, nor shall Borrower
consent or otherwise acquiesce in any of the foregoing, without in each instance
the prior consent of Lender (such consent not to be unreasonably withheld,
delayed or conditioned); provided, however, Borrower’s failure to comply with
this covenant shall not result in an Event of Default unless such failure is in
any material respect and after the expiration of any applicable notice or cure
period contemplated herein.  Notwithstanding the foregoing, Borrower shall be
permitted to execute a third amendment to the TIC Agreement without the prior
consent of Lender, provided such third amendment is in the form of that certain
draft Third Amendment to Tenancy in Common Agreement and Granting Easements for
Koll Center Irvine Southwest provided by Borrower to Lender, and approved by
Lender, prior to the date hereof, and provided further that Borrower provides
Lender with a conformed recorded copy of such third amendment to the TIC
Agreement as soon as reasonably available following the full execution thereof
and recordation thereof in the Official Records of Orange County, California.

 

(b)           Borrower shall deliver to Lender, at the same time received or
sent by Borrower, copies of all notices, demands or requests sent or otherwise
sent by Borrower or received from any other Person under or pursuant to the TIC
Agreement.

 

(c)           Borrower shall observe, perform and discharge in all material
respects all obligations, covenants and warranties required to be kept and
performed by Borrower under the TIC Agreement.

 

(d)           Borrower shall use commercially reasonable efforts to enforce or
secure the performance of each and every material obligation, term, covenant,
condition and agreement to be performed by any other party to the TIC Agreement.

 

(e)           Borrower hereby represents and warrants that all charges assessed
against Property A pursuant to the TIC Agreement have been paid in full, and
that there are no unpaid charges, any interest thereon or any other charges
relating thereto, owing with respect to Property A, except any charges being
contested in good faith in the manner described in Subsection 5.3(b).

 

(f)            Within thirty (30) days following Lender’s written request
therefor, Borrower shall use commercially reasonable efforts to cause the Koll
Center Irvine Southwest

 

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Owners Association (the “Association”) to furnish to Lender, at no cost to
Lender, the written certification described in Section 4.07 of the TIC Agreement
setting forth whether the “Assessments” (as defined in the TIC Agreement) with
respect to Property A have been paid and the amount of delinquency, if any.

 

(g)           Pursuant to Section 17.21 of the TIC Agreement, Borrower shall
cause every Lease for any portion of Property A to provide that the terms of
such Lease shall be subject in all respects to the provisions of the TIC
Agreement and that any failure by the tenant thereunder to comply with the terms
of the TIC Agreement shall be a default under such Lease.

 

(h)           Concurrently with the appointment by Borrower of any member of the
board of directors of the Association, Borrower shall deliver to Lender a
written, undated conditional resignation of such member of the board of
directors of the Association (each, a “Conditional Resignation”), pursuant to
which such member tenders his or her resignation from the board of directors of
the Association and instructs such board of directors that the successor member
to such member shall be designated by Lender effective upon a written notice
from Lender to such board of directors that an Event of Default has occurred. 
Upon the occurrence of an Event of Default and with notice to Borrower, at
Lender’s election, in its sole and absolute discretion, Lender may tender any or
all Conditional Resignations to the board of directors of the Association and
the resignation of any member shall become effective on the date of such
tender.  Upon the effectiveness of such resignation, Lender shall designate all
successor members to such members.

 

ARTICLE 7.

 

FINANCIAL REPORTING

 

Section 7.1             Financial Statements; Records.

 

Borrower shall keep adequate books and records of account in accordance with
GAAP related to real estate, consistently applied, and shall provide to Lender
in electronic format, via e-mail and, upon Lender’s request, in hard copy
format, to addresses specified by Lender, within the time periods set forth, the
following (collectively, the “Financial Information”):

 

(a)           Financial Information.  Borrower shall deliver to Lender the
following:

 

(i)            a current rent roll, signed and dated by Borrower, detailing for
each of the Leases, the names of all tenants of the Premises, the portion of the
Premises occupied by each tenant, the annual rental, including base rent,
additional rent and percentage rent, and the term of each of the Leases,
including the expiration date, and any other information as is reasonably
required by Lender and an executed copy of each New Lease and each New Lease
Modification, within sixty (60) days after the end of the first three (3) fiscal
quarters of each Fiscal Year during the Loan Term, but

 

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only if requested by Lender, and within one hundred five (105) days after the
end of each Fiscal Year;

 

(ii)           unaudited quarterly operating statements of the Premises,
prepared by Borrower in a form approved by Lender, detailing the revenues
received, the expenses incurred and the Reported Net Operating Income and major
capital improvements for that quarter and containing appropriate year to date
information, within sixty (60) days after the end of the first three (3) fiscal
quarters of each Fiscal Year during the Loan Term, but only if requested by
Lender, and within one hundred five (105) days after the end of each Fiscal
Year;

 

(iii)          a calculation of the Aggregate Debt Test, certified by Sponsor,
within sixty (60) days after the end of the first three (3) fiscal quarters of
each Fiscal Year and within one hundred five (105) days after the end of each
Fiscal Year, in each case during the Loan Term;

 

(iv)          an annual balance sheet and income statement of Indemnitor, in a
form approved by Lender, prepared and certified by Indemnitor as to the
applicable statement, and, such statements, if required by Lender, shall be
audited financial statements reviewed by an independent certified public
accountant acceptable to Lender, within one hundred five (105) days after the
close of each fiscal year of Indemnitor; provided, however, so long as both
(x) Sponsor continues to be a public entity and (y) Indemnitor continues to
report its financials on a consolidated basis with Sponsor, Borrower shall
satisfy the requirements of this Subsection 7.1(a)(iv) by delivering to Lender,
within one hundred five (105) days after the close of each fiscal year of
Sponsor, the most recent Form 10-K of Sponsor;

 

(v)           an annual operating and capital budget presented on a monthly
basis consistent with the annual operating statement described above for the
Premises, including cash flow projections for the upcoming Fiscal Year, and all
proposed capital replacements and improvements, within one hundred five (105)
days after the close of each Fiscal Year; provided, however, Borrower shall use
reasonable efforts to deliver said plan and budgets to Lender at least sixty
(60) days after the close of each Fiscal Year; and

 

(vi)          an annual statement from Borrower, certifying that (i) there has
been no change in the ownership and organizational structure of Borrower other
than as may have been permitted pursuant to the provisions of Sections 8.1 or
8.2 hereof or otherwise approved by Lender in writing, and (ii) that Borrower
has not obtained any

 

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financing prohibited by this Agreement and the other Loan Documents, signed and
dated by Borrower, within one hundred five (105) days after the close of each
Fiscal Year and from time to time as Lender may reasonably request.

 

(b)           Financial Information Upon Request:  Upon request from Lender, but
not more frequently than once per calendar year during the Loan Term unless an
Event of Default shall have occurred and be continuing, Borrower shall:

 

(i)                                     deliver an accounting of all security
deposits held in connection with any of the Leases, including the name and
identification number of the accounts in which such security deposits are held,
the name and address of the financial institutions in which such security
deposits are held and the name of the person to contact at such financial
institution, along with any authority or release from Borrower to obtain
information regarding such accounts directly from such financial institutions;

 

(ii)                                  deliver such other financial or management
information from Borrower (including monthly or quarterly rent rolls for the
Premises meeting the requirements of Subsection 7.1(a)(i) above) and Indemnitor
as may, from time to time, be reasonably required by Lender and in form and
substance satisfactory to Lender in its reasonable discretion;

 

(iii)                               make available Borrower’s books and records
regarding the Premises for examination, review, copying and audit by Lender or
its auditors during normal business hours and convenient facilities for such
examination review, copying and audit of Borrower’s books and records of
account;

 

(iv)                              deliver, to the extent Borrower has, or has
the ability to obtain, and is permitted to so deliver, such information,
financial statements (audited if available), including balance sheets and profit
and loss statements, and copies of federal tax returns for any tenants under
Leases either:  (A) leasing more than fifty thousand (50,000) square feet of the
rentable portions of the Improvements located on Property A or more than
twenty-five thousand (25,000) square feet of the rentable portions of the
Improvements located on Property B, and any guarantors of those Leases; and

 

(v)                                 deliver a statement confirming:  (A) whether
there has been any material adverse change in the financial condition of any of
the parties with respect to which Financial Information is required to be
provided to Lender under this Article 7 or in the rent roll for the Premises
from the Financial Information or rent roll most recently submitted to Lender,
except those changes to the rent roll that have

 

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been approved or deemed approved by Lender, or that do not require Lender’s
consent under the terms of the Loan Documents, and if any such material adverse
change has occurred providing detailed information satisfactory to Lender in its
reasonable discretion with respect thereto; (B) that neither Borrower nor
Indemnitor has been the subject of any bankruptcy, reorganization, dissolution
or insolvency proceeding; (C) that there does not exist any subordinate,
mezzanine or other indebtedness prohibited by this Agreement or by any other
Loan Document; (D) that there has not occurred any transfer, sale, pledge or
encumbrance prohibited by this Agreement or by any other Loan Document, except
as previously disclosed to Lender in writing and approved by Lender in writing;
and (E) that there has not been a default in any material respect by Borrower,
Indemnitor, or any Principal on any commercial indebtedness owing to Lender or
to any other party.

 

(c)           Failure to Deliver Financial Information:  If Borrower fails to
deliver to Lender any Financial Information required under clause (a) or (b) of
this Subsection 7.1 (other than an executed copy of each New Lease and each New
Lease Modification as required by Subsection 7.1(a)(i)) within ten (10) days
following written notice from Lender to Borrower that Borrower has failed to
timely deliver said Financial Information, Lender may, in its sole and absolute
discretion, (i) declare such failure to be an Event of Default, and/or
(ii) charge Borrower (and Borrower shall pay to Lender) a fee equal to Two
Thousand Five Hundred Dollars ($2,500) (the “Financial Information Fee”), for
each thirty (30) day period or portion thereof during which Borrower fails to
timely deliver to Lender any such Financial Information.  Borrower hereby
appoints Lender as Borrower’s attorney in fact for the purpose of hiring an
auditing firm at Borrower’s cost to prepare and deliver to Lender any overdue
Financial Information required to be provided under this Article 7 and to
otherwise review Borrower’s books and records following the occurrence and
during the continuance of an Event of Default.  Borrower shall make its books
and records available to such auditors.  During the existence of an Event of
Default or in the case of any overdue Financial Information (regardless of
whether Lender has declared an Event of Default), Borrower shall pay the costs
and expenses of the auditors upon request by Lender and such obligations shall
become part of the Indebtedness and shall be secured by the Loan Documents.

 

ARTICLE 8.

 

CONVEYANCES, ENCUMBRANCES AND BORROWINGS

 

Section 8.1             Prohibition Against Conveyances, Encumbrances and
Borrowing.  Except with the prior written consent of Lender, which consent may
be granted or withheld in Lender’s sole and absolute discretion, and except as
expressly permitted in Sections 8.2 and 8.3 below, (a) Borrower shall not sell,
transfer, convey, assign,  mortgage, encumber, pledge, hypothecate, grant a
security interest in, grant options (other than lease extension options or
expansion options to lease additional space under Acceptable Leases) with
respect to, or otherwise dispose of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record), all or any portion of any legal or

 

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beneficial interest in all or any portion of the Mortgaged Property including
the Leases; provided, however, Leases entered into in accordance with Section
5.1 hereof shall not be prohibited hereby; and (b) no other Person shall sell,
transfer, convey, assign or otherwise dispose of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration or of record) all or any portion of any direct or indirect
legal or beneficial interest in all or any direct ownership interest in
Borrower, or pledge or encumber any direct ownership interest in Borrower,
except for (i) the issuance, exchange, redemption or other transfer of common,
preferred or other beneficial ownership interests in Sponsor through the New
York Stock Exchange, the NASDAQ national market, or other national or
international exchange; (ii) transfers of direct or indirect ownership interest
in Borrower to Affiliates of Sponsor and/or to third parties, provided that at
all times after any such transfer (w) Sponsor shall be the general partner of
Kilroy LP and shall own directly or indirectly not less than fifty-one percent
(51%) of the ownership interests in Kilroy LP, (x) Sponsor shall own directly or
indirectly not less than fifty-one percent (51%) of the ownership interests in
Borrower, (y) Sponsor directly or indirectly shall Control Borrower and (z) the
Mortgaged Property shall be managed by Kilroy LP or by an Affiliate of Kilroy LP
in accordance with Section 5.2 hereof; and (iii) transfers of common, preferred
or other beneficial ownership interests in Sponsor pursuant to subparagraph
E(2)(b) of Article IV of the Charter or any similar ownership and transfer
restriction provision in any current or future articles supplementary filed with
respect to a series of preferred beneficial interest in Sponsor.  In furtherance
of the foregoing, subordinate liens (voluntary or involuntary) secured by any
portion of the Mortgaged Property, or any beneficial interest in the Mortgaged
Property, and any other financing obtained by Borrower or any Upstream Owner
secured by any direct ownership interest in Borrower, shall not be permitted
except with the prior written consent of Lender in each case.  Without limiting
Lender’s right to withhold its consent to any transfer or encumbrance, any
transfer or encumbrance must be to or with a United States citizen or an entity
owned or controlled by United States citizens which is not an OFAC Prohibited
Person.  All requests for Lender’s consent under this Section 8.1 shall be on a
form previously acceptable to Lender in its reasonable discretion and shall be
accompanied by the payment of Lender’s standard processing fee for such
transactions then in effect.  Lender’s consent to any of the foregoing actions,
if given (in Lender’s sole discretion), may be conditioned upon a change in the
interest rate, maturity date, amortization period or other terms under this
Agreement, the payment of a transfer or encumbrance fee and/or any other
requirements of Lender.  In addition to the standard processing fee and the
transfer or encumbrance fee referred to in this Section 8.1, Borrower shall pay
or reimburse Lender on demand for all reasonable expenses (including reasonable
attorneys’ fees, costs and expenses, title search costs, and title insurance
endorsement premiums) incurred by Lender in connection with the review, approval
and documentation of any such transaction.  The foregoing prohibitions are not
intended to prevent the individual Upstream Owners from obtaining loans
unrelated to (and not secured by any interest in) Borrower and the Mortgaged
Property and are also not intended to prevent Borrower from incurring reasonable
and customary trade payables which are not evidenced by a promissory note, not
secured by any of the Mortgaged Property and are satisfied within sixty (60)
days of incurrence.

 

Section 8.2             One-Time Permitted Transfer.  Notwithstanding the
foregoing prohibitions of Section 8.1, during the period commencing on July 1,
2014, through and including July 1, 2025, Lender will permit a one-time transfer
(the “Title Transfer”) of title to both Mortgaged Property A and Mortgaged
Property B in a single transaction without

 

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modification of the terms of the Loan, to a proposed transferee (the “Proposed
Transferee”), which benefit shall be personal to the named Borrower herein and
shall not apply to any successor, assignee or transferee of Borrower, and shall
be null and void upon any transfer of title to the Mortgaged Property, or any
portion thereof, or upon any direct or indirect transfer of any ownership
interest in Borrower or in any Upstream Owner (other than any such transfer
permitted pursuant to Section 8.1), provided that all of the following terms and
conditions have been fully satisfied:

 

(a)           At least thirty (30) days prior to such Title Transfer, Borrower
shall have provided Lender with written notice of the proposed Title Transfer
together with a non-refundable administrative processing fee in the amount of
Ten Thousand Dollars ($10,000) (the “Processing Fee”) along with the name(s),
address(es) and organizational documents of the Proposed Transferee and of the
principals, Affiliates and parent or other majority owners, as applicable, of
the Proposed Transferee.  Upon receipt by Lender, the Processing Fee shall be
deemed earned by Lender, whether or not Borrower completes the proposed Title
Transfer and whether or not any proposed Title Transfer is actually approved by
Lender pursuant to this Section 8.2.  A separate Processing Fee shall be
required for each request for a Title Transfer.  Additionally, Borrower shall
furnish to Lender along with such notice the following:  (i) detailed and
complete financial statements of the Proposed Transferee and of the principals,
Affiliates and parent or other majority owners, as applicable, of the Proposed
Transferee, (ii) information with respect to the business and business
experience of the Proposed Transferee and its principals, Affiliates and parent
or other majority owners, as applicable, and their experience in the ownership
and operation of properties similar to the Mortgaged Property and other
commercial real estate, (iii) evidence that the Mortgaged Property, as of the
proposed date of transfer of title and thereafter, will be managed by a
management company and under a management agreement meeting the requirements of
Subsection 8.2(e) below, (iv) the terms and conditions of the proposed sale and
a copy of the executed purchase and sale agreement (or the most recent draft,
provided that the final executed purchase and sale agreement is provided to
Lender as soon as it is finalized, (v) a description, including a chart, if
appropriate, of the ownership structure of the Proposed Transferee and each of
its principals, Affiliates and parent or other majority owners, as applicable,
(vi) if available, the Proposed Transferee’s management plan for the Mortgaged
Property, (vii) the status of the Proposed Transferee and, if the Proposed
Transferee is a single asset entity, of its principals, parent or other majority
owners, as a Qualified Real Estate Investor and (viii) such other information as
Lender may reasonably request to permit Lender to determine the creditworthiness
and management abilities of the Proposed Transferee and its principals,
Affiliates and parent or other majority owners, as applicable;

 

(b)           The Loan must be current in all respects and no Event of Default
under the Loan Documents shall have occurred and be continuing, nor any event
shall have occurred and be continuing that, with the giving of notice or passage
of time, or both, would result in an Event of Default, either as of the date the
notice is given to Lender under Section 8.2(a) above, or thereafter through the
date of transfer of title to the Mortgaged Property;

 

(c)           The Proposed Transferee, or, if the Proposed Transferee is a
limited purpose entity, each of its principals, parent or other majority owners,
as applicable, shall be a Qualified Real Estate Investor;

 

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(d)           The Proposed Transferee may in no event be a tenant in common and
in no event shall the Loan Documents permit a tenancy in common form of
ownership of the Property, other than in accordance with the TIC Agreement. 
Borrower and each and every subsequent transferee Borrower shall covenant and
agree that in no event will any of the Mortgaged Property be transferred to or
held by any tenant in common while the Loan is still outstanding, other than in
accordance with the TIC Agreement;

 

(e)           The Mortgaged Property must continue to be managed by a management
company approved by Lender in its reasonable discretion under a written
management agreement satisfactory to Lender in its reasonable discretion.  The
terms and provisions of any management agreement affecting the Mortgaged
Property, including without limitation the right to receive any fees and
payments there under, shall be expressly and unconditionally subordinate and
inferior to the lien and the terms and provisions of the Loan Documents;

 

(f)            The Proposed Transferee shall expressly assume Borrower’s
obligations under the Loan and the Loan Documents pursuant to a written
agreement which is satisfactory to Lender in its reasonable discretion, subject
to the nonrecourse provisions of the Loan Documents existing as of the date of
the closing of the Title Transfer (the “Non-Recourse Carve Outs”). Additionally,
at the time of the assumption of the Loan, the Proposed Transferee shall furnish
to Lender an Environmental Indemnification Agreement satisfactory to Lender in
its reasonable discretion (the “New Indemnity”), and a financially responsible
Person and/or Persons approved by Lender shall deliver a Recourse Guaranty
Agreement satisfactory to Lender in its reasonable discretion guaranteeing the
Non-Recourse Carve Outs (the “New Recourse Guaranty”), and shall sign the New
Indemnity along with the Proposed Transferee as an Indemnitor thereunder.  It is
understood and agreed that the New Recourse Guaranty and the New Indemnity shall
be prepared on Lender’s then current forms, which may be different than the
forms of Recourse Guaranty Agreement and Environmental Indemnification Agreement
executed by Borrower and Indemnitor, as applicable, as a result of Lender’s
updating Lender’s standard form of Environmental Indemnification Agreement
and/or Recourse Guaranty Agreement, or with respect to the Environmental
Indemnification Agreement, as a result of specific environmental conditions at
the Mortgaged Property.  Borrower and the Proposed Transferee and such other
entities or persons as Lender shall require shall also deliver and, if
applicable, execute (i) evidence of authority and entity existence, (ii) Uniform
Commercial Code searches, (iii) Uniform Commercial Code financing statements,
(iv) an endorsement to Lender’s title policy updating the effective date to the
date of the transfer, showing the Proposed Transferee as the owner of the
Mortgaged Property, showing no additional title exceptions, except as shall be
approved by Lender and otherwise acceptable to Lender, (v) opinions of counsel
acceptable to Lender in its reasonable discretion on such matters as Lender
shall require, (vi) evidence of such insurance as shall be required by the Loan
Documents and Lender and (vii) such other documents as Lender shall require in
order to effectuate the transaction as contemplated by this Section 8.2.  At the
closing of any approved Title Transfer, the Proposed Transferee shall deposit
with Lender sufficient funds to pay when due all real estate taxes, assessments
and municipal charges, and to pay any ground rents, with respect to the
Mortgaged Property.  In addition, Lender may require the Proposed Transferee to
establish with Lender at the time of closing of any approved Title Transfer, a
reserve for future tenant improvements, leasing commissions and/or capital
improvements.  To the extent the Loan Documents require any other reserves or
deposits the same shall be established by the Proposed Transferee prior to the
date of closing of the proposed

 

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Title Transfer.  The foregoing requirement for deposits and reserves shall be
required notwithstanding that any of the foregoing may have been waived by
Lender with respect to Borrower either in the Application, the Loan Documents or
in any side letter or agreement executed by Lender;

 

(g)           At the closing of any approved Title Transfer, Borrower shall pay,
or cause to be paid, to Lender a fee in the amount of one half of one percent
(0.5%) of the then outstanding principal balance of the Loan in cash or
certified funds (the “Transfer Fee”).  The Transfer Fee is being paid in order
to induce Lender to allow the Proposed Transferee to assume the obligations of
Borrower under the Loan Documents and to release Borrower from liability there
under for Borrower’s obligations, acts and omissions from and after the date of
transfer in accordance with the provisions of this Section 8.2, provided that,
in no event shall Borrower be released from any liability for acts or omissions
occurring prior to the date of such Title Transfer, including, without
limitation, acts or omissions leading to environmental contamination, whether
known or unknown;

 

(h)           The Debt Yield, calculated as of the last day of the calendar
month ending two (2) calendar months prior to the month in which the Title
Transfer is anticipated to occur, based upon financial statements satisfactory
to Lender in its reasonable discretion, shall be not less than ten percent (10%)
(the “Transfer Debt Yield Requirement”); provided, however, if the Transfer Debt
Yield Requirement will not be satisfied, Borrower may, at its option, repay the
outstanding principal balance of the Loan by an amount necessary to achieve the
Transfer Debt Yield Requirement.  In connection with any request by Borrower for
a Title Transfer pursuant to this Section 8.2, Borrower shall provide Lender
with Borrower’s own proposed calculation of the Debt Yield, certified by an
authorized officer or representative of Borrower, together with all relevant
supporting detail required to calculate the same.  Lender shall then perform
Lender’s own independent calculation of Debt Yield, which shall be conclusive
and binding on Borrower absent manifest error;

 

(i)            On the date of the closing of the Title Transfer, the Loan to
Value Ratio shall not be more than sixty-five percent (65%), based on the
acquisition price of the Mortgaged Property (the “Transfer Loan to Value Ratio
Requirement”); provided, however, if the Transfer Loan to Value Ratio
Requirement will not be satisfied, Borrower may, at its option, repay the
outstanding principal balance of the Loan by an amount necessary to achieve the
Transfer Loan to Value Ratio Requirement.

 

(j)            As of the date of the closing of such proposed Title Transfer,
the Proposed Transferee shall provide evidence acceptable to Lender that its
cash equity investment in the Mortgaged Property is unencumbered;

 

(k)           The proposed Title Transfer shall not cause a violation of any
federal, state or local law, statute, rule, regulation or order governing the
Mortgaged Property, Borrower or the Proposed Transferee or any of its or their
principals, parent, or other owners;

 

(l)            The proposed Title Transfer shall not cause any breach or
violation of any of the provisions contained in Section 6.11; and

 

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(m)          Borrower shall pay all of Lender’s costs and expenses reasonably
incurred in connection with the proposed Title Transfer whether or not such
Title Transfer actually occurs including, without limitation, reasonable
attorneys’ fees, recording and filing charges, title company charges and the
cost of the endorsement to Lender’s title policy.

 

Lender will not review or process Borrower’s request for approval of a proposed
Title Transfer until such time as Lender has received all of the items,
including the Processing Fee, required to be delivered to Lender pursuant to
this Section 8.2.  Notwithstanding the foregoing Subsections 8.2(h) and (i), if
Borrower elects to repay the outstanding principal balance of the Loan pursuant
to both Subsections 8.2(h) and (i), Borrower shall only be obligated to repay
the outstanding principal balance of the Loan by the greater of the two amounts
determined by Lender to be necessary to achieve the Transfer Debt Yield
Requirement and the Transfer Loan to Value Ratio Requirement, respectively.  Any
such repayment of the outstanding principal balance of the Loan by Borrower
shall be accompanied by the applicable Prepayment Premium, if any, due with
respect to the principal amount of the Loan so repaid; provided, however, if the
Title Transfer occurs prior to the Closed Prepayment Date, the Prepayment
Premium shall be calculated as set forth in Subsection 2.5(b).  In the event of
such repayment, the monthly installments of interest or principal and interest,
as applicable, due thereafter pursuant to Subsections 2.3(b) or 2.3(c),
respectively, shall be calculated by Lender based on the Contract Rate and such
reduced principal balance of the Loan.

 

Section 8.3             Release and Substitution of Release Property.  During
the period commencing on July 1, 2014 through and including July 1, 2025, upon
at least thirty (30) days’ prior written notice, Lender agrees to release either
Mortgaged Property A or Mortgaged Property B from the lien of the applicable
Mortgage (such property, the “Release Property”), and to substitute and spread
the lien of such Mortgage to encumber another property as part of the Mortgaged
Property for the Loan in its place (the “Substitute Property”), provided that
all of the following terms and conditions have been satisfied, as determined by
Lender:

 

(a)           The Substitute Property must be of a similar size, type, quality
and character as the Release Property;

 

(b)           The substitution of the Substitute Property for the Release
Property must not adversely affect the overall geographic diversity of Lender’s
portfolio;

 

(c)           Borrower must own one hundred percent (100%) of the Substitute
Property in fee simple (i.e., Borrower’s ownership interest in the Substitute
Property must not be a leasehold interest);

 

(d)           Following the release of either Mortgaged Property A or Mortgaged
Property B from the lien of the applicable Mortgage, no further release and
substitution hereunder shall be permitted;

 

(e)           After giving effect to the proposed release and substitution, the
Substitution Debt Yield, calculated as of the last day of the calendar month
ending two (2) calendar months prior to the month in which such release and
substitution is anticipated to occur, shall be no less than the Current Debt
Yield calculated by Lender for the twelve (12) month

 

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period immediately preceding such release and substitution, and in no event
shall the Substitution Debt Yield, as calculated by Lender pursuant to this
Subsection 8.3(e), be less than ten percent (10%) ( the “Substitution Debt Yield
Requirement”); provided, however, if the Substitution Debt Yield Requirement
will not be satisfied, Borrower may, at its option, repay the outstanding
principal balance of the Loan by an amount necessary to achieve the Substitution
Debt Yield Requirement.  In connection with any request by Borrower for a
substitution and release pursuant to this Section 8.3, Borrower shall provide
Lender with Borrower’s own proposed calculations of the Substitution Debt Yield
and the Current Debt Yield, certified by an authorized officer or representative
of Borrower, together with all relevant supporting detail required to calculate
the same.  Lender shall then perform Lender’s own independent calculation of the
Substitution Debt Yield and the Current Debt Yield, which shall be conclusive
and binding on Borrower absent manifest error;

 

(f)            On the date of closing of the proposed release and substitution,
the Loan to Value Ratio after giving effect to any such substitution, based on
the appraised value of the Mortgaged Property with the Substitute Property,
shall be not more than the lesser of (i) sixty-five percent (65%) and (ii) the
Loan to Value Ratio based on the value of the Mortgaged Property with the
Release Property prior to such substitution (the “Substitution LTV
Requirement”); provided, however, if the Substitution LTV Requirement will not
be satisfied, Borrower may, at its option, repay the outstanding principal
balance of the Loan by an amount necessary to achieve the Substitution LTV
Requirement.  To determine whether the Substitution LTV Requirement is
satisfied, (x) the value of the Mortgaged Property that is not being released
will initially be calculated based on Lender’s own discounted cash flow analysis
and, if Borrower disagrees with such resulting value, then Lender will order and
obtain an appraisal of such Mortgaged Property from an appraiser holding the MAI
designation at Borrower’s sole cost and expense; (y) if the Release Property is
to be sold to a third party unaffiliated with Borrower pursuant to an executed
agreement of sale, the value of the Release Property will be the sale price, or
if the Release Property is not subject to such an agreement of sale then the
value of the Release Property will be initially calculated based on Lender’s own
discounted cash flow analysis and, if Borrower disagrees with such resulting
value, then Lender will order and obtain an appraisal of the Release Property
from an appraiser holding the MAI designation at Borrower’s sole cost and
expense; and (z) Lender will order and obtain an appraisal of the Substitute
Property from an appraiser holding the MAI designation at Borrower’s sole cost
and expense.  Each determination of the Loan to Value Ratio in accordance with
this Subsection 8.3(f) shall be conclusive and binding on Lender and Borrower
absent manifest error;

 

(g)           The net operating income history, occupancy, location,
demographics, rental rates, tenant mix, and credit quality of the Substitute
Property must be reasonably acceptable to Lender, after taking into
consideration market and economic trends;

 

(h)           Lender may reject any Substitute Property that would not be in
compliance in all material respects with the terms and provisions of the Loan
Documents, or would be detrimental to the overall quality and/or value of the
Mortgaged Property or the Loan, or both.  Factors Lender shall consider include,
but are not limited to, occupancy by a single tenant, unsatisfactory credit
quality of tenants, unusual or unique improvements or location and seismic
performance of the Substitute Property;

 

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(i)            The Substitute Property shall be multi-tenanted, with no single
tenant constituting more than twenty percent (20%) of the gross leasable area of
the Substitute Property, unless otherwise approved by Lender in writing;

 

(j)            Borrower shall pay to Lender a fee equal to, as applicable: (i)
Fifty Thousand Dollars ($50,000) for the release and substitution of Mortgaged
Property A, or (ii) Twenty-Five Thousand Dollars ($25,000) for the release and
substitution of Mortgaged Property B.  Borrower shall also pay, within ten (10)
days after receipt of each billing, all reasonably incurred costs arising from
any request for release and property substitution, whether or not such
substitution is actually pursued by Borrower, is ever approved by Lender or is
ever completed, including without limitation, reasonable attorneys’ fees, costs
and expenses, appraisal fees, market studies and expenses, title insurance
premiums, engineering fees and expenses, recording fees and taxes.  Lender shall
have the right to require that Borrower pay a reasonable advance deposit of
funds, which shall be applied toward payment of such costs and expenses.  There
shall be no Event of Default that has occurred and is continuing at the time
each request for release or substitution is made through the completion of the
release and substitution, nor may any event have occurred which, after the
giving of notice or passage of time or both, would constitute an Event of
Default under the Loan Documents.  Notwithstanding the foregoing, if the removal
of a Release Property from the Mortgaged Property through release and
substitution will cure a default or an Event of Default under the Loan
Documents, then release and substitution shall be permitted so long as all other
requirements and conditions of this Section 8.3 have been satisfied and no other
Event of Default shall have occurred and be continuing or any event exist which,
after the giving of notice or passage of time or both, would constitute an Event
of Default;

 

(k)           In order to substitute one property for another as Mortgaged
Property for the Loan, Borrower acknowledges that Borrower and Lender must go
through many of the same steps required to close the Loan initially. Solely for
purposes of illustration and without limitation, environmental assessments must
be performed and analyzed; leases must be obtained, reviewed and tenant estoppel
letters obtained; the status of title to the Substitute Property must be
evaluated and title insurance obtained, including, but not limited to, any title
policy endorsement required by Lender in its reasonable discretion to insure
that the release will not impair Lender’s coverage under Lender’s then existing
title policy as to the remaining Mortgaged Property; insurance coverages must be
reviewed, approved and confirmed pursuant to the requirements of Section 3.1
hereof; plans and specifications must be obtained and reviewed; evidence
satisfactory to Lender in its reasonable discretion of substantial compliance
obtained, etc.  Borrower hereby acknowledges and agrees that all terms and
provisions of the Loan Documents shall be applicable to any Substitute
Property.  All documents relating to the substitution shall be in satisfactory
to Lender in its reasonable discretion;

 

(l)            Lender and Borrower shall enter into such amendments and
modifications of the Loan Documents, additional loan documents and other
instruments as required by Lender in its good faith discretion to reflect the
Substitute Property as security for the Loan;

 

(m)          The terms of this Section 8.3  are personally available to and for
the sole benefit of the original named Borrower herein, and shall not be
available to or assignable to any other person or party, including, without
limitation, any third party assuming the Loan.  Any right to request any release
and substitution shall terminate and become null and void upon any

 

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transfer of title to the Mortgaged Property, or any portion thereof, or upon any
direct or indirect transfer of any ownership interest in Borrower or in any
Upstream Owner (other than a transfer permitted pursuant to Section 8.1 hereof),
whether or not any such transfers are permitted by the terms of the Loan
Documents, or otherwise approved by Lender; and

 

(n)           The proposed substitution shall not cause any breach or violation
of any of the terms or provisions of Section 6.11.

 

Notwithstanding the foregoing Subsections 8.3(e) and (f), if Borrower elects to
repay the outstanding principal balance of the Loan pursuant to both Subsections
8.3(e) and (f), Borrower shall only be obligated to repay the outstanding
principal balance of the Loan by the greater of the two amounts determined by
Lender to be necessary to achieve the Substitution Debt Yield Requirement and
the Substitution LTV Requirement, respectively.  Any such repayment of the
outstanding principal balance of the Loan by Borrower shall be accompanied by
the applicable Prepayment Premium, if any, due with respect to the principal
amount of the Loan so repaid; provided, however, if the release and substitution
occurs prior to the Closed Prepayment Date, the Prepayment Premium shall be
calculated as set forth in Subsection 2.5(b).  In the event of such repayment,
the monthly installments of interest or principal and interest, as applicable,
due thereafter pursuant to Subsections 2.3(b) or 2.3(c), respectively, shall be
calculated by Lender based on the Contract Rate and such reduced principal
balance of the Loan.

 

ARTICLE 9.

 

EVENTS OF DEFAULT

 

Section 9.1             Events of Default.  Each of the following shall
constitute an Event of Default under this Agreement, the Note, the Mortgage and
the other Loan Documents:

 

(a)           Failure to pay (i) any monthly installment of principal or
interest in accordance with Section 2.3 or any monthly reserve payment required
under Subsection 5.3(c) within three (3) Business Days following the date such
amount is due, or (ii) the entire amount due under the Note, this Agreement and
all of the other Loan Documents by the Maturity Date;

 

(b)           Except for the payments described in Subsections 9.1(a) and
9.1(i), failure to pay any other amount due under this Agreement, the Note, the
Mortgage or any other Loan Document within ten (10) Business Days following
notice from Lender that such amount is due;

 

(c)           Except as provided in Subsection 9.1(a), 9.1(b) and 9.1(d) to
9.1(y), inclusive, failure to perform or comply with any term, obligation,
covenant or condition contained in this Agreement, the Note, the Mortgage or any
other Loan Documents, within thirty (30) days after the delivery of written
notice (“Cure Notice”) from Lender of such failure; provided that if such
default is not reasonably capable of being cured (without taking into account
financial capability) within such thirty (30) day period, such failure shall not
constitute an Event of Default so long as Borrower commences the cure of such
default within such thirty (30) day period, diligently prosecutes such cure to
completion and completes such cure within one hundred twenty (120) days after
delivery of the Cure Notice from Lender;

 

(d)           [Intentionally Omitted];

 

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(e)           [Intentionally Omitted];

 

(f)            If any representation, warranty, certification or other statement
made herein, in any other Loan Document, in any application for the Loan or in
any statement or certificate at any time given to Lender in connection with the
Loan shall prove to be untrue or misleading in any material respect;

 

(g)           If Lender fails to have a legal, valid, binding and enforceable
first priority lien on the Mortgaged Property or any portion thereof;

 

(h)           Failure to permit Lender or its agents to enter to the Mortgaged
Property or to access Borrower’s books and records in accordance with the terms
of this Agreement and the other Loan Documents;

 

(i)            Failure to pay any Imposition as and when due (except as
expressly permitted in accordance with Subsection 5.3(b), or to maintain
insurance or apply insurance proceeds as required by this Agreement;

 

(j)            Except as permitted in this Agreement, adjusting, compromising,
settling or entering into any agreement with respect to insurance settlements
and condemnation proceedings, without the prior consent of Lender;

 

(k)           [Intentionally Omitted];

 

(l)            Except as permitted in this Agreement:  (i) a change in the use
of any of the Premises or causing or permitting the use or occupancy of any part
of the Premises to be discontinued if such change of use or discontinuance would
violate any zoning or other law, ordinance or regulation; (ii) consent to any
zoning reclassification, modification or restriction affecting any of the
Premises; (iii) taking any steps whatsoever to convert any of the Premises, or
any portion thereof, to a condominium or cooperative form of ownership; or
(iv) the actual or threatened alteration, demolition or removal of any of the
Improvements, without the prior consent of Lender;

 

(m)          Failure to deliver copies of any notice from governmental or
regulatory authorities in accordance with the terms of this Agreement and the
other Loan Documents, which such notice requires or recommends any action or
discloses any condition with respect to any portion of the Mortgaged Property or
any occupant thereof, which such action, if not taken, or such condition, if not
remedied, is reasonably likely to materially impair the value of Lender’s
security for the Loan or to have a materially adverse impact on Borrower’s
ability to perform its obligations under the Loan Documents;

 

(n)           Failure to deliver financial statements required by Article 7
following the written notice from Lender to Borrower and the expiration of the
cure period described in Subsection 7.1(c) or the failure to deliver the
estoppel certificates required by Section 6.9 within ten (10) Business Days
after the delivery of written notice from Lender;

 

(o)           Violation of any of the terms, obligations, covenants or
conditions set forth in Subsection 5.1(a) (Leasing), Subsection
5.1(b) (Leasing), Subsection 5.1(g) (Lease

 

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Termination Reserve Account), Section 6.12 (Special Purpose Entity
Requirements), Section 6.13 (Operating Agreements), Section 6.19 (TIC
Agreement), or Section 8.1 (Transfers);

 

(p)           If an event of default (after giving effect to all applicable cure
periods) shall occur under any permitted mortgage, encumbrance, lien or security
agreement encumbering all or any portion of the Mortgaged Property which is
subordinate or superior to the lien of the Mortgage, or if any party under any
such instrument shall commence a foreclosure or other collection or enforcement
action in connection therewith;

 

(q)           Failure to obtain a management company, management agreement
and/or leasing commissions agreement satisfactory to Lender in its reasonable
discretion within the sixty (60) day period set forth in Section 5.2;

 

(r)            Failure of Borrower, any Principal or any Indemnitor to preserve
and keep in full force and effect its existence, franchises, licenses,
authorizations, registrations, permits and approvals required under the laws of
the state of its formation and, solely with respect to Borrower, the State;

 

(s)           [Intentionally Omitted];

 

(t)            If Borrower, any Upstream Owner (other than any Upstream Owner
who is an Upstream Owner solely because of its ownership interest in Sponsor) or
any Indemnitor consents to the filing of, or commences or consents to the
commencement of, any Bankruptcy Proceeding with respect to Borrower or any
Principal or Indemnitor;

 

(u)           If any Bankruptcy Proceeding shall have been filed against
Borrower, any Principal or any Indemnitor and the same is not withdrawn,
dismissed, canceled or terminated within ninety (90) days of such filing;

 

(v)           If Borrower, any Principal or any Indemnitor is adjudicated
bankrupt or insolvent or a petition for reorganization of Borrower or any such
Principal or Indemnitor is granted;

 

(w)          If a receiver, liquidator or trustee of Borrower, any Principal or
any Indemnitor or of any of the properties of Borrower or any such Principal or
Indemnitor shall be appointed;

 

(x)            If Borrower, any Principal or any Indemnitor shall make an
assignment for the benefit of its creditors or shall admit in writing the
inability to pay its debts generally as they become due; or

 

(y)           Except as otherwise permitted herein, if Borrower, or any
Indemnitor shall die or shall institute or cause to be instituted any proceeding
for the termination or dissolution of Borrower, any Principal, or any
Indemnitor; provided, however, that the death of an Indemnitor shall not
constitute an Event of Default if Borrower shall cause a replacement indemnitor
approved by Lender in its sole discretion to execute and deliver to Lender a
replacement Recourse Guaranty Agreement and a replacement Environmental
Indemnification Agreement within sixty (60) days following the death of said
Indemnitor.

 

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Section 9.2             Notice of Event of Default.  Pursuant to
Section 2924b(d) of the California Civil Code, Borrower and Lender request that
a copy of any notice of default be mailed to Borrower and Lender, respectively,
at the address for such party set forth herein.

 

ARTICLE 10.

 

REMEDIES

 

Section 10.1           Remedies.  Upon the occurrence and during the continuance
of any Event of Default, Lender may (1) declare the entire Loan to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or other notice of default of any kind,
all of which are hereby expressly waived by Borrower, (2) terminate the
obligation, if any, of Lender to advance amounts hereunder, and (3) exercise all
rights and remedies therefor under this Agreement, the Mortgage and the other
Loan Documents and at law or in equity; provided nothing in this Section 10.1
shall limit or prejudice Lender’s ability to make protective advances to protect
the collateral securing the Loan.

 

Section 10.2           Lender’s Right to Perform the Obligations.  If Borrower
shall fail, refuse or neglect to make any payment or perform any act required by
the Loan Documents, then while any Event of Default exists, and without notice
to or demand upon Borrower and without waiving or releasing any other right,
remedy or recourse Lender may have because of such Event of Default, Lender may
(but shall not be obligated to) make such payment or perform such act for the
account of and at the expense of Borrower, and shall have the right to enter
upon the Premises for such purpose and to take all such action thereon and with
respect to the Mortgaged Property as it may deem necessary or appropriate.  If
Lender shall elect to pay any sum due with reference to the Mortgaged Property,
Lender may do so in reliance on any bill, statement or assessment procured from
the appropriate governmental authority or other issuer thereof without inquiring
into the accuracy or validity thereof.  Similarly, in making any payments to
protect the security intended to be created by the Loan Documents, Lender shall
not be bound to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same.  Additionally, if any Hazardous
Substances affect or threaten to affect the Premises, Lender may (but shall not
be obligated to) give such notices and take such actions as it deems necessary
or advisable in order to abate the discharge of any Hazardous Substances or
remove the Hazardous Substances.  Borrower shall indemnify, defend and hold
Lender harmless from and against, and be responsible for, any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever,
including reasonable attorneys’ fees, incurred or accruing by reason of any acts
performed by Lender pursuant to the provisions of this Section 10.2, including
those arising from the joint, concurrent, or comparative negligence of Lender,
except as a result of Lender’s gross negligence or willful misconduct.  All sums
paid by Lender pursuant to this Section 10.2 and all other sums expended by
Lender to which it shall be entitled to be indemnified, shall be deemed to be an
Advance by Lender, shall constitute additions to the Loan, shall be secured by
the Loan Documents and shall be paid by Borrower to Lender upon demand.

 

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Section 10.3           Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets.

 

(a)           Borrower acknowledges that Lender has made the Loan to Borrower in
reliance upon the aggregate of Mortgaged Property A and Mortgaged Property B
taken together being of greater value as collateral security than the sum of the
Mortgaged Property taken separately.  The Mortgages are and will be
cross-collateralized and cross-defaulted with each other so that (a) an Event of
Default under one of the Mortgages shall constitute an Event of Default under
the other Mortgage which secures the Note; (b) an Event of Default under the
Note or this Agreement shall constitute an Event of Default under each Mortgage;
and (c) each Mortgage shall constitute security for the Note as if a single
blanket lien were placed on all of the Mortgaged Property as security for the
Note.

 

(b)           To the fullest extent permitted by law, Borrower, for itself and
its successors and assigns, waives all rights to a marshalling of the assets of
Borrower, and others with interests in Borrower, and of the Mortgaged Property,
or to a sale in inverse order of alienation in the event of foreclosure of all
or any of the Mortgages, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of the Mortgaged Property for the collection
of the Indebtedness without any prior or different resort for collection or of
the right of Lender to the payment of the Indebtedness out of the net proceeds
of the Mortgaged Property in preference to every other claimant whatsoever.  In
addition, Borrower, for itself and its successors and assigns, waives in the
event of foreclosure of one or both of the Mortgages, any equitable right
otherwise available to Borrower which would require the separate sale of the
Mortgaged Property or require Lender to exhaust its remedies against one of
Mortgaged Property A or Mortgaged Property B before proceeding against the
other; and further, in the event of such foreclosure, Borrower hereby expressly
consents to and authorizes, at the option of Lender, the foreclosure and sale
either separately or together of any combination of Mortgaged Property A and
Mortgaged Property B.  Borrower agrees that the actions, sales, proceedings and
foreclosure described herein or in any of the other Loan Documents may be
commenced in any order determined by Lender.

 

ARTICLE 11.

 

LIMITATIONS ON LIABILITY

 

Section 11.1           Limitation on Liability.

 

(a)           Subject to the provisions of this Section 11.1, in any action or
proceedings brought on this Agreement, the Note, the Mortgage or on any of the
other Loan Documents in which a money judgment is sought, Lender will look
solely to the Mortgaged Property and other Collateral described in the Loan
Documents (including the Property Income and any other rents and profits from
such property) for payment of the Indebtedness and, specifically and without
limitation, Lender agrees to waive any right to seek or obtain a deficiency
judgment against Borrower.

 

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(b)           The provisions of Subsection 11.1(a) shall not:

 

(i)            constitute a waiver, release or impairment of any obligation
evidenced or secured by this Agreement, the Note, the Mortgage or any other Loan
Document;

 

(ii)           be deemed to be a waiver of any right which Lender may have under
Sections 506(a), 506(b), 1111(b) or any other provisions of the Federal
Bankruptcy Code to file a claim for the full amount of the Indebtedness
evidenced by this Agreement, the Note and secured by the Mortgages or to require
that all of the Mortgaged Property shall continue to secure all of the
Indebtedness owing to Lender in accordance with this Agreement, the Note, the
Mortgage and the other Loan Documents;

 

(iii)          impair the right of Lender to name Borrower or any Principal or
any Indemnitor as a party or parties’ defendant in any action or suit for
judicial foreclosure and sale under the Mortgage;

 

(iv)          affect the validity or enforceability of, or limit recovery under,
any indemnity (including the environmental indemnity set forth in any separate
environmental indemnity agreement, however designated), guaranty, master or
other lease or similar instrument made in connection with this Agreement, the
Note, the Mortgage or the other Loan Documents;

 

(v)           impair the right of Lender to obtain the appointment of a
receiver; or

 

(vi)          impair Lender’s rights and remedies under this Agreement, the
Mortgage or any separate assignment of leases and rents regarding the assignment
of Leases and Property Income to Lender.

 

(c)           Notwithstanding any provisions of Subsection 11.1(a), Borrower
shall be personally liable to Lender and Lender shall have recourse to Borrower
in connection with the Loan, for each item listed below to the extent, and only
to the extent, provided below with respect to such item:

 

(i)            Fraud or material misrepresentation in connection with the
Application, this Agreement or any of the other Loan Documents or the making of
the Loan — Recourse liability for any Losses incurred by Lender in connection
with such acts;

 

(ii)           Insurance and/or condemnation Proceeds received by or on behalf
of Borrower but not paid over to Lender or applied in accordance with the terms
of Article 3 — Recourse liability for the amount of insurance and/or
condemnation Proceeds either not paid over to Lender or applied in accordance
with the terms of Article 3;

 

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(iii)          The application or appropriation of security deposits, advances
or prepaid rents, cancellation or termination payments and other similar sums
received by Borrower or any other Person in connection with the operation of the
Premises from any tenants or other occupants of the Premises in violation of the
terms of the Loan Documents — Recourse liability for the amount of security
deposits, advances or prepaid rents, cancellation or termination payments and
other similar sums either not paid over to Lender or applied in accordance with
the terms of the Loan Documents;

 

(iv)          Any Equipment material to the operation of the Mortgaged Property
which is removed from the Premises by or on behalf of Borrower and not replaced
with Equipment of the same utility and of the same or greater value — Recourse
liability for the replacement value of any Equipment which is removed and not so
replaced;

 

(v)           Any act of arson, malicious destruction or waste by Borrower, any
Indemnitor, any Principal, or any general partner, manager or managing member of
Borrower which affects all or any portion of the Mortgaged Property — Recourse
liability for any Losses incurred by Lender in connection with such acts;

 

(vi)          Property Income or Proceeds which are not applied to payments due
under the Loan Documents or to real and personal property taxes, Impositions,
capital improvements to the Premises and Operating Expenses of the Mortgaged
Property (including, without limitation, any deposits or reserves required under
this Agreement or any other Loan Document) — Recourse liability to the extent of
any Property Income or Proceeds which are not applied as aforesaid.  Lender,
however, shall not have the right to recover distributions from Property Income
or Proceeds to Borrower or any Principal made in good faith (after determining
the sufficiency of revenues to cover the payments on the Loan and the foregoing
operating and capital expenses) more than one hundred eighty (180) days prior to
an Event of Default occurring under any Loan Document, or the occurrence of any
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default;

 

(vii)         The filing by Borrower, any Principal, any Indemnitor, or any
general partner, manager or managing member of Borrower of a voluntary
bankruptcy or insolvency proceeding, or the filing against Borrower, or any
Principal, any Indemnitor, or any general partner, manager or managing member of
Borrower of an involuntary bankruptcy or insolvency proceeding which is not
dismissed within ninety (90) days of filing, or if Borrower or its

 

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assets are consolidated into a bankruptcy proceeding of any Affiliate of
Borrower — Recourse liability for the entire Indebtedness;

 

(viii)        The failure of Borrower to timely maintain, or pay the premiums
for, any insurance required to be maintained under Article 3 of this Agreement
or any other Loan Document, or to pay any Impositions or to pay to Lender any
reserve deposits required by this Agreement or by any other Loan Document for
any Imposition, real estate tax, assessment, municipal charge or ground rent —
Recourse liability for any Losses incurred by Lender in connection with such
failure to timely maintain insurance, pay any Imposition or pay insurance
premiums or make said reserve deposits;

 

(ix)           A violation of the restrictions on transfers of the Mortgaged
Property or any ownership interest in Borrower set forth in Article 8 — Recourse
liability for the entire Indebtedness;

 

(x)            A violation of the restrictions on subordinate, mezzanine and
other financing set forth in Section 8.1 — Recourse liability for the entire
Indebtedness; and

 

(xi)           A violation of the LPE Requirements set forth in Section 6.12 —
Recourse liability for any Losses incurred by Lender in connection with such
acts.

 

Lender has also required that Indemnitor provide the Recourse Guaranty
Agreement, which provides that Lender shall have recourse to Indemnitor to the
extent of the recourse described in this Subsection 11.1(c).

 

ARTICLE 12.

 

MISCELLANEOUS

 

Section 12.1           Notices.

 

(a)           All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by: 
(i) certified or registered United States mail, postage prepaid, return receipt
requested; or (ii) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery; addressed in
either case as follows:

 

If to Lender, at the following address:

 

Massachusetts Mutual Life Insurance Company

c/o Cornerstone Real Estate Advisers LLC

One Financial Plaza

 

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Hartford, Connecticut 06103

Attention:  Paralegal, Finance Group

 

With a copy to:

 

Massachusetts Mutual Life Insurance Company

c/o Cornerstone Real Estate Advisers Inc.

5000 Birch Street, Suite 7500

Newport Beach, California 92660

Attention:  Managing Director

 

If to Borrower, at the following address:

 

KR MML 12701, LLC

12200 West Olympic Boulevard, Suite 200

Los Angeles, California 90064

Attention:  Corporate Finance

 

With a copy to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, California 90071-1560

Attention:  Glen B. Collyer

 

or to such other address and person as shall be designated from time to time by
Lender or Borrower, as the case may be, in a written notice to the other party
in the manner provided for in this Section 12.1.  A notice shall be deemed to
have been given:  in the case of hand delivery, at the time of actual delivery;
in the case of registered or certified mail, three (3) Business Days after
deposit in the United States mail; in the case of expedited prepaid delivery,
upon the first attempted delivery on a Business Day.  A party receiving a notice
that does not comply with the technical requirements for notice under this
Section 12.1 may elect to waive any deficiencies and treat the notice as having
been properly given.

 

(b)           Each of Borrower and Lender acknowledge that Borrower and Lender
may elect to correspond or transmit information concerning the Loan, Borrower or
Indemnitor via email or the internet.  Such transmissions shall be for the
convenience of the parties hereto and shall not replace or supplement the
required methods of delivering notices provided for above.  In addition, each of
Borrower and Lender acknowledge that that such information may be transmitted
via the internet or by email and with or without any algorithm enhanced security
software and each of Borrower and Lender waives any right to privacy in
connection therewith.

 

(c)           Borrower shall notify Lender promptly of the occurrence of any of
the following:  (i) receipt of notice from any governmental authority relating
to the Mortgaged Property; (ii) any material change in the occupancy of the
Mortgaged Property; (iii) receipt of any notice from the holder of any other
lien or security interest in any of the Mortgaged Property; or (iv) commencement
of any judicial or administrative proceedings by, against or otherwise affecting
Borrower or any Indemnitor, any of the Mortgaged Property, or any Person

 

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Controlled by or under common Control with Borrower or any Indemnitor, or any
other action by any creditor thereof as a result of any default under the terms
of any loan.

 

Section 12.2           Interest on Advances and Expenses.  All Advances made and
any reasonable expenses incurred at any time by Lender pursuant to the
provisions of this Agreement or the other Loan Documents or under applicable law
shall be secured by the Mortgage as part of the Indebtedness, with equal rank
and priority.  All such Advances and expenses shall bear interest at the Default
Rate from the date that each such Advance or expense is made or incurred to the
date of repayment and all such Advances and expenses with interest thereon shall
be paid by Borrower to Lender on demand.

 

Section 12.3           Successors and Assigns.  This Agreement shall be binding
upon Borrower’s successors and assigns and shall inure to the benefit of Lender,
each Lender Successor, and the Lender Parties.  This Agreement shall also be
binding upon Lender’s successors and assigns and shall inure to the benefit of
Borrower and its successors and assigns.

 

Section 12.4           Joint and Several Liability.  If more than one party is
executing this Agreement as a Borrower, then each party that executes this
Agreement shall be jointly and severally responsible for any and all obligations
of any Borrower hereunder.

 

Section 12.5           Captions.  The captions of the sections and subsections
of this Agreement are for convenience only and are not intended to be a part of
this Agreement and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.

 

Section 12.6           Further Assurances.  Borrower shall do, execute,
acknowledge and deliver, at Borrower’s sole cost and expense, such further acts,
instruments or documentation, including additional title insurance policies or
endorsements, and title reinsurance, as Lender may reasonably require from time
to time to better assure, transfer and confirm unto Lender the rights now or
hereafter intended by Lender and Borrower to be granted to Lender under this
Agreement or any other Loan Document.

 

Section 12.7           Severability.  All rights, powers and remedies provided
in this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable law, and are intended to be limited to the
extent (but only to the extent) necessary so that they will not render this
Agreement invalid or unenforceable.  If any term, covenant, condition, or
provision of this Agreement or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remaining
terms, covenants, conditions and provisions of this Agreement, or the
application of such term, covenant, condition or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant, condition and provision
of this Agreement shall be modified and/or limited to the extent necessary to
render the same valid and enforceable to the fullest extent permitted by law.

 

Section 12.8           Borrower’s Obligations Absolute.  All sums payable by
Borrower hereunder shall be paid without notice, demand, counterclaim, setoff,
deduction or defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of Borrower hereunder shall in no
way be released, discharged, or

 

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otherwise affected (except as expressly provided herein) by reason of:  (a) any
damage to or destruction of or any condemnation or similar taking of the
Premises or any portion thereof; (b) any restriction or prevention of or
interference with any use of the Premises or any portion thereof; (c) any title
defect or encumbrance or any eviction from the Premises or any portion thereof
by title paramount or otherwise; (d) any Bankruptcy Proceeding relating to
Borrower, any Principal, any Indemnitor or any general partner, manager or
managing member of Borrower, or any action taken with respect to this Agreement
or any other Loan Document by any trustee or receiver of Borrower, any
Principal, any Indemnitor or any general partner, manager or managing member of
Borrower, or by any court, in any such proceeding; (e) any claim which Borrower
has or might have against Lender; (f) any default or failure on the part of
Lender to perform or comply with any of the terms hereof or of any other
agreement with Borrower; or (g) any other occurrence whatsoever, whether similar
or dissimilar to the foregoing, whether or not Borrower shall have notice or
knowledge of any of the foregoing.  Except as expressly provided herein,
Borrower waives all rights now or hereafter conferred by statute or otherwise to
any abatement, suspension, deferment, diminution or reduction of any sum secured
hereby and payable by Borrower.

 

Section 12.9           Amendments; Consents.  This Agreement cannot be altered,
amended, modified or discharged orally and no executory agreement shall be
effective to modify or discharge it in whole or in part, unless in writing and
signed by the party against which enforcement is sought. No consent or approval
required hereunder or under any other Loan Document shall be binding unless in
writing and signed by the party sought to be bound.

 

Section 12.10         Other Loan Documents and Exhibits.  All of the agreements,
conditions, covenants, provisions and stipulations contained in the Note and the
other Loan Documents, and each of them, which are to be kept and performed by
Borrower are hereby made a part of this Agreement to the same extent and with
the same force and effect as if they were fully set forth in this Agreement, and
Borrower shall keep and perform the same, or cause them to be kept and
performed, strictly in accordance with their respective terms.  The Cover Sheet
and each exhibit, schedule and rider attached to this Agreement are integral
parts of this Agreement and are incorporated herein by this reference.  In the
event of any conflict between the provisions of any such exhibit, schedule or
rider and the remainder of this Agreement, the provisions of such exhibit,
schedule or rider shall prevail.

 

Section 12.11         Merger.  So long as any Indebtedness shall remain unpaid,
fee title to and any other estate in the Mortgaged Property shall not merge, but
shall be kept separate and distinct, notwithstanding the union of such estates
in any Person.

 

Section 12.12         Time of the Essence.  Time shall be of the essence in the
performance of all obligations of Borrower under this Agreement and every other
Loan Document.

 

Section 12.13         Transfer of Loan.  Lender may, at any time, sell, transfer
or assign this Agreement, the Note, the Mortgage and the other Loan Documents or
any portion thereof, and any or all servicing rights with respect thereto
(collectively, a “Transfer”) or grant participations therein (a
“Participation”).  In the case of a Transfer, the transferee shall have, to the
extent of such Transfer, the rights, benefits and obligations of “Lender”
hereunder and the

 

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other Loan Documents.  Lender may forward to each purchaser, transferee,
assignee, servicer, participant, investor in such Transfer or Participation
(collectively, the “Investor”) and each prospective Investor or any agency
maintaining databases on the underwriting and performance of commercial mortgage
loans, all documents and information which Lender now has or may hereafter
acquire relating to the Loan, the Mortgaged Property, Borrower, any Principal,
and any Indemnitor, whether provided by Borrower, any Indemnitor, or otherwise,
as Lender determines necessary or desirable.  Borrower irrevocably waives any
and all rights it may have under applicable state or federal law to prohibit
disclosure, including any right of privacy.  Further Borrower acknowledges that
such information may be transmitted via the internet or by email.  Lender will
notify Borrower in writing of any Transfer of the Loan that results in Lender or
its affiliates not retaining any ownership or servicing interest in the Loan. 
Any Person with whom Lender shares information pursuant to this Section 12.13
shall be required to keep such information confidential; provided, however,
Lender shall have no liability on account of the failure of any such Person to
maintain such confidentiality despite such requirement.  Notwithstanding the
foregoing provisions of this Section 12.13, Lender shall not include the Loan in
any rated public offering or securitize the Loan, in each case without
Borrower’s prior written consent.  Each Investor that becomes a “Lender”
hereunder and that grants a further Participation of its interest in the Loan
shall, acting solely for this purpose as an agent of the Borrower, cause to be
kept a register on which it enters the name and address of each of its
participants and the principal amounts (and stated interest) of each such
participant’s interest in the Loan or other obligations under the Loan Documents
according to such reasonable regulations as such Investor may prescribe (the
“Sub-Participant Register”); provided that no such Investor shall have any
obligation to disclose all or any portion of the Sub-Participant Register
(including the identity of any participant or any information relating to a
participant’s interest in any commitments, loan, letter of credit or its other
obligations under any Loan Document) to any Person except to the extent that
such disclosure is necessary to establish that such commitment, loan, letter of
credit or other obligation is in registered form under Section 5f.103-1(c) of
the United States Treasury Regulations.  The entries in the Sub-Participant
Register shall be conclusive, absent manifest error, and such Investor shall
treat each Person whose name is recorded in the Sub-Participant Register as the
owner of such further Participation for all purposes of this Agreement
notwithstanding any notice to the contrary.  For the avoidance of doubt, neither
Lender nor the Administrative Agent (in its capacity as Administrative Agent)
shall have any responsibility for maintaining a Sub-Participant Register.

 

 

Section 12.14         Cooperation.  Borrower shall, and shall cause each
Principal and Indemnitor to, cooperate with Lender in connection with servicing
the Loan and any Transfer, Participation or any other financing created or
obtained in connection with the Loan, including:

 

(a)           Estoppel Certificates.  Borrower, within ten (10) days following a
request by Lender, shall provide Lender or any proposed assignee with an
estoppel certificate containing the information set forth in Section 6.9 and
such other information that Lender shall reasonably request, duly acknowledged
and certified;

 

(b)           Bifurcation of Note.  The Note and the Mortgage may, at any time
until the same shall be fully paid and satisfied, at the sole election of
Lender, be split or divided into two or more notes and two or more security
instruments, each of which shall cover all or a portion of the Mortgaged
Property to be more particularly described therein.  To that end,

 

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Borrower, upon written request of Lender, shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered by any Indemnitor
or the then owner of any of the Mortgaged Property, to Lender and/or its
designee or designees substitute notes and security instruments in such
principal amounts, aggregating not more than the then unpaid principal amount of
Indebtedness, and containing terms, provisions and clauses similar to those
contained herein and in the Note, which, in the aggregate, will have economic
terms consistent with the Loan, and such other documents and instruments as may
be required by Lender, which have no material adverse effect on Borrower. 
Borrower shall not be required to reimburse Lender for any of Lender’s costs
incurred in connection with any such Transfer or Participation; and

 

(c)           No Out-of-Pocket Costs.  Borrower may be required to execute
additional documents in connection with any such Transfer, Participation or
financing, including a new note or notes, which have no material adverse effect
on Borrower.  Borrower shall not be required to incur any out of pocket costs,
and Lender shall reimburse Borrower for any such out of pocket costs, in
connection with any such cooperation, and reimbursement of such expenses shall
be a condition to the execution of such additional documents by Borrower.

 

Section 12.15         Register.  Lender or, in the event there is an
Administrative Agent pursuant to Section 13.1 hereof, Administrative Agent,
shall cause to be kept a register (the “Register”) for the registration of
ownership and transfer or assignment of the Note or any substitute note or notes
secured by the Mortgage.  The names and addresses of the registered owners of
such notes, the transfers or assignment of such notes and the names and
addresses of the transferees of such notes will be registered in the Register
under such reasonable regulations as Lender or Administrative Agent, as
applicable, may prescribe.  Borrower and Lender and, if applicable,
Administrative Agent, shall deem and treat the registered owner of any note as
shown in the Register as the absolute owner thereof for all purposes, and
neither Borrower, Lender nor, if applicable, Administrative Agent, shall be
affected by any notice to the contrary and payment of the principal of, interest
on, and Prepayment Premium, if any, due on or with respect to the related note
shall be made only to or upon the order of such registered owner.  All such
payments so made shall be valid and effective to satisfy and discharge the
liability of Borrower upon such notes to the extent of the sums so paid.  Upon
reasonable request from time to time, Lender or Administrative Agent, as
applicable, shall permit Borrower and Lender to examine the Register.

 

Section 12.16         Limitation on Interest.  It is the intention of the
parties hereto to conform strictly to applicable usury laws.  Accordingly, all
agreements between Borrower and Lender with respect to the Loan are hereby
expressly limited so that in no event, whether by reason of acceleration of
maturity or otherwise, shall the amount paid or agreed to be paid to Lender or
charged by Lender for the use, forbearance or detention of the money to be lent
hereunder or otherwise, exceed the maximum amount allowed by law.  If the Loan
would be usurious under applicable law (including the laws of the State and the
laws of the United States of America), then, notwithstanding anything to the
contrary in the Loan Documents:  (a) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received under the Loan Documents shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited, without any Prepayment Premium, to the
outstanding principal of the Loan; and (b) if the Maturity Date is accelerated
by reason of an election by Lender in accordance with the terms hereof, or in
the event of any prepayment, then any consideration

 

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which constitutes interest may never include more than the maximum amount
allowed by applicable law.  In such case, excess interest, if any, provided for
in the Loan Documents or otherwise, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread from the date of advance
until payment in full thereof so that the actual rate of interest is uniform
through the term hereof.  If such amortization, proration, allocation and
spreading is not permitted under applicable law, then such excess interest shall
be cancelled automatically on the Note as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited, without any Prepayment
Premium, to the outstanding principal of the Loan.  The terms and provisions of
this Section 12.16 shall control and supersede every other provision of the Loan
Documents.  The Loan Documents are contracts made under and shall be construed
in accordance with and governed by the laws of the State as set forth in
Section 12.19 hereof, except that if at any time the laws of the United States
of America permit Lender to contract for, take, reserve, charge or receive a
higher rate of interest than is allowed by the laws of the State (whether such
federal laws directly so provide or refer to the law of any state), then such
federal laws shall to such extent govern as to the rate of interest which Lender
may contract for, take, reserve, charge or receive under the Loan Documents.

 

Section 12.17         Survival.  All of the representations, warranties,
covenants, and indemnities of Borrower hereunder (including environmental
matters under Article 4 and under the indemnification provisions herein and in
the other Loan Documents) shall survive (a) the repayment in full of the Loan
and the release of the Liens evidencing or securing the Loan, (b) the transfer
(by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or
all right, title and interest in and to the Mortgaged Property to any party, and
(c) in the event Lender assigns any interest in the Loan hereunder in accordance
with the terms of this Agreement, the making of such assignment, notwithstanding
that such assigning Lender may cease to be a “Lender” hereunder.

 

Section 12.18         WAIVER OF JURY TRIAL.  TO THE EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER AND LENDER EACH HEREBY WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER
OF THIS AGREEMENT.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY
MADE BY BORROWER AND LENDER, AND EACH PARTY ACKNOWLEDGES THAT THE OTHER PARTY
HAS NOT MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.  BORROWER FURTHER ACKNOWLEDGES
THAT BORROWER HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS AGREEMENT BY INDEPENDENT LEGAL COUNSEL
SELECTED BY BORROWER AND THAT BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS
WAIVER WITH COUNSEL.

 

Section 12.19         Governing Law.  In all respects, including, without
limitation, matters of construction and performance of this Agreement and the
obligations arising hereunder, this Agreement shall be governed by, and
construed in accordance with, the laws of the State in which the Premises are
located applicable to contracts and obligations made and performed in such State
and any applicable laws of the United States of America.  Interpretation

 

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and construction of this Agreement shall be according to the contents hereof and
without presumption or standard of construction in favor of or against Borrower
or Lender.

 

Section 12.20         Consent to Jurisdiction and Venue.  Borrower hereby
submits to personal jurisdiction in the State in which the Premises are located
for the enforcement of the provisions of this Agreement and irrevocably waives
any and all rights to object to such jurisdiction for the purposes of litigation
to enforce any provision of this Agreement.  Each of Lender and Borrower hereby
consents to the jurisdiction of and agrees that any action, suit or proceeding
to enforce this Agreement may be brought in any state or federal court in the
state in which the Premises are located.  Each of Lender and Borrower hereby
irrevocably waives any objection that it may have to the laying of the venue of
any such actions, suit, or proceeding in any such court and hereby further
irrevocably waives any claim that any such action, suit or proceeding brought in
such a court has been brought in an inconvenient forum.

 

Section 12.21         Service of Process.  In its filings with the Secretary of
State of the State of California, Borrower has appointed Paracorp Incorporated,
2804 Gateway Oaks Drive, Suite 200, Sacramento, California 95833 as its
authorized agent to accept and acknowledge on its behalf service of any and all
process which may be served in any such suit, action or proceeding in any
federal or state court and agrees that service of process upon said agent at
said address and written notice of said service, and a full copy of all
documents that were served, mailed or delivered to Borrower in the manner
provided herein shall be deemed in every respect effective service of process
upon Borrower, in any such suit, action or proceeding in connection with this
Agreement.  Borrower (a) shall give prompt notice to Lender of any change of
address of its authorized agent hereunder, (b) may at any time and from time to
time designate a substitute authorized agent with an office in the State where
the Premises are located (which substitute agent and office shall be designated
as the person and address for service of process), and (c) shall promptly
designate such a substitute if its authorized agent ceases to have an office the
State where the Premises are located or is dissolved without leaving a
successor.

 

Section 12.22         Entire Agreement.  This Agreement and the other Loan
Documents embody the entire agreement and understanding between Lender and
Borrower and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof.  Accordingly, the
Loan Documents may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties.  There are no unwritten oral
agreements between the parties.

 

Section 12.23         Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.

 

Section 12.24         Pledge and Grant of Security Interest.  Borrower hereby
pledges to Lender, and grants a security interest in, any and all monies now or
hereafter deposited with Lender from time to time as additional security for the
payment of the Loan.  Borrower shall not further pledge, assign or grant any
security interest in any monies on deposit therein from time to time or permit
any lien or encumbrance to attach thereto, or any levy to be made thereon, or
authorize any UCC-1 financing statements (except those naming Lender as the
secured party) to be filed with respect thereto.  Upon the occurrence and during
the continuance of an Event of

 

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Default, Lender may apply any such sums then deposited with Lender to the
payment of the charges for which such funds have been deposited or to the
payment of the Loan or any other charges affecting the security of the Loan, as
Lender may elect, but no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender.  Until expended or
applied as above provided, such funds shall constitute additional security for
the Loan.

 

Section 12.25         Costs.  Except as provided in Section 12.14, Borrower
shall pay all reasonable Costs incurred by Lender in connection with the
documentation, modification, workout, collection or enforcement of the Loan or
any of the Loan Documents (as applicable), including probate, appellate and
bankruptcy proceedings, any post-judgment proceedings to collect or enforce any
judgment or order relating to the Loan or any of the Loan Documents (as
applicable), and all such Costs shall be included as additional Indebtedness
bearing interest at the Default Rate set forth herein until paid.  In any action
to foreclose the lien hereof or otherwise enforce Lender’s rights and remedies
hereunder, there shall be allowed and included as additional Indebtedness all
Costs which may be paid or incurred by or on behalf of Lender.  For the purposes
hereof “Costs” means all expenditures and expenses which may be paid or
reasonably incurred by or on behalf of Lender including repair costs, payments
to remove or protect against liens, reasonable attorneys’ fees (including
reasonable fees of Lender’s inside counsel), receivers’ fees, appraisers’ fees,
engineers’ fees, accountants’ fees, independent consultants’ fees (including
environmental consultants), all costs and expenses reasonably incurred in
connection with any of the foregoing, Lender’s actual out-of-pocket costs and
expenses reasonably incurred with respect to any audit or inspection of the
Mortgaged Property, reasonably incurred outlays for documentary and expert
evidence, stenographers’ charges, stamp taxes, publication costs, and costs
(which may be estimates as to items to be expended after entry of an order or
judgment) for procuring all such abstracts of title, title searches and
examination, title insurance policies, and similar data and assurances with
respect to title as Lender may deem reasonably necessary either to prosecute any
action or to evidence to bidders at any sale of the partnership interests in
Borrower the true condition of the title to, or the value of, the Mortgaged
Property.  Further, all “Costs” shall include such other costs, expenses and
fees as may be reasonably incurred by Lender in the protection of the Mortgaged
Property and the maintenance of the lien of the Mortgage, including, reasonable
attorneys’ fees, expenses and costs in any litigation or proceeding affecting
this Agreement, the Mortgage, the Note, the other Loan Documents, the Mortgaged
Property or the Personal Property, including probate, appellate, and bankruptcy
proceedings, and any post-judgment proceedings to collect or enforce any
judgment or order relating to this Agreement or the other Loan Documents, to
obtain any court order or the appointment of a receiver to enforce Lender’s
rights pursuant to Section 564 of the California Code of Civil Procedure and/or
Section 2929.5 of the California Civil Code or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by the Mortgage.  This provision is separate and several, and shall
survive the merger of this provision into any judgment.

 

Section 12.26         Confidentiality.  Lender shall not disclose any
Confidential Information to any Person without the prior written consent of
Borrower, other than (a) to Lender’s Affiliates, head office, branches and
representative offices, and their officers, directors, employees, agents and
advisors; (b) to actual or prospective transferees of Lender’s interest in

 

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the Loan, provided that the Persons to whom such disclosure is made pursuant to
this clause (b) will agree to be informed of the confidential nature of such
Confidential Information and shall have agreed in writing to keep such
Confidential Information confidential in accordance with the provisions of this
Section 12.26; (c) as required by any law, rule or regulation or judicial
process; (d) as requested or required by any state, Federal or foreign authority
or examiner regulating such Lender; (e) to any service provider of Lender
(excluding Lender’s inside or outside legal counsel), provided that the Persons
to whom such disclosure is made pursuant to this clause (e) will be informed of
the confidential nature of such Confidential Information and shall have agreed
in writing to keep such Confidential Information confidential in accordance with
the provisions of this Section 12.26; and (f) in connection with the exercise of
any remedies under this Agreement or under any other Loan Document or any action
or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder.  Notwithstanding the foregoing,
Lender shall not have any liability hereunder or otherwise to Borrower for any
failure of any Person to whom Lender discloses Confidential Information in
accordance with this Section 12.26 to maintain the confidentiality thereof.

 

Section 12.27         Status of Lenders.

 

(a)           Any Lender that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Loan Document shall
deliver to the Borrower and the Administrative Agent, at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without withholding
or at a reduced rate of withholding.  In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

 

(b)           Without limiting the generality of the foregoing:

 

(i)            any Lender that is a U.S. Person shall deliver to the Borrower
and the Administrative Agent on or prior to the date on which such Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

 

(ii)           any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), whichever of the following is applicable:

 

(A)          in the case of a Foreign Lender claiming the benefits of an income
tax treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption

 

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from, or reduction of, U.S. federal withholding Tax pursuant to the “interest”
article of such tax treaty and (y) with respect to any other applicable payments
under any Loan Document, IRS Form W-8BEN establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “business profits” or
“other income” article of such tax treaty;

 

(B)           executed originals of IRS Form W-8ECI;

 

(C)           in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit G-1 to the effect that such
Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, a “10 percent shareholder” of the Borrower within the meaning of
Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance
Certificate”) and (y) executed originals of IRS Form W-8BEN; or

 

(D)          to the extent a Foreign Lender is not the beneficial owner,
executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS
Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of
Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification documents
from each beneficial owner, as applicable; provided that if the Foreign Lender
is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate substantially in the form of
Exhibit G-4 on behalf of each such direct and indirect partner;

 

(iii)          any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and

 

(iv)          if a payment made to a Lender under any Loan Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Borrower and the Administrative Agent at the time or
times prescribed by law and at such time or times reasonably requested by the
Borrower or the Administrative Agent such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment.  Solely for purposes of
this clause (iv), “FATCA” shall include any amendments made to FATCA after the
date of this Agreement.

 

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Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do

 

ARTICLE 13.

 

THE ADMINISTRATIVE AGENT

 

Section 13.1           Appointment, Powers and Immunities.  At all times when
there is a Lender other than (including in addition to) Massachusetts Mutual
Life Insurance Company under this Agreement, the Lenders shall be deemed to
appoint and authorize the Administrative Agent to act for all purposes as their
agent hereunder and under the other Loan Documents.  The provisions of this
Article 13 shall not apply at any time when the Administrative Agent is the sole
Lender.

 

Section 13.2           Reliance by Borrower on Administrative Agent.  At all
times when there is more than one Lender, (1) Borrower (a) is entitled to rely
on the Administrative Agent for any waiver, amendment, approval or consent given
by “Lender” under the Loan Documents, (b) shall adhere only to waivers,
amendments, approvals or consents given by Administrative Agent, on behalf of
“Lender” under the Loan Documents, and (c) shall make all payments under the
Notes and the other Loan Documents to Administrative Agent, as set forth herein,
and (2) Administrative Agent shall, on behalf of all of the Lenders, be
permitted to take all actions, including exercising all remedies, permitted to
be taken by “Lender” under the Loan Documents (either by law or pursuant to the
terms of the Loan Documents), and (3) all legal action taken respecting the Loan
Documents shall be taken by the Administrative Agent on behalf of the Lenders,
and all default notices under the Loan Documents will be provided by the
Administrative Agent.  Unless and until the Lenders notify Borrower otherwise,
the Administrative Agent is Cornerstone Real Estate Advisers Inc.  Any successor
Administrative Agent shall be a U.S. Person.  The use of the term “agent” in
this Agreement with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law.  Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties. 
Notwithstanding anything to the contrary contained in the Notes, unless
otherwise directed by Administrative Agent in writing, all payments under this
Agreement, the Notes and the other Loan Documents shall be made by Borrower to
the Administrative Agent in accordance with the provisions of Subsection
2.7(a) of this Agreement.

 

Section 13.3           Rights as a Lender.  If the Administrative Agent is also
a Lender hereunder it shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term “Lender” or “Lenders” shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity.

 

[No Further Text on this Page.]

 

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IN WITNESS WHEREOF, Lender and Borrower have executed and delivered this
Agreement as of the date first written above.

 

 

LENDER:

 

 

 

MASSACHUSETTS MUTUAL LIFE

 

INSURANCE COMPANY, a Massachusetts
corporation

 

 

 

 

By:

Cornerstone Real Estate Advisers Inc.

 

 

Its Authorized Agent

 

 

 

 

 

 

 

 

 

By:

/s/Bruce Anderson

 

 

Name:

Bruce Anderson

 

 

Its:

Managing Director

 

[Signatures continue on the following page]

 

S-1

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IN WITNESS WHEREOF, Lender and Borrower have executed and delivered this
Agreement as of the date first written above.

 

 

BORROWER:

 

 

 

KR MML 12701, LLC,

 

a Delaware limited liability company

 

 

 

 

By:

Kilroy Realty, L.P.,
a Delaware limited partnership,
its sole managing member

 

 

 

 

 

By:

Kilroy Realty Corporation,

 

 

 

a Maryland corporation,
its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

/s/Joseph E. Magri

 

 

 

Name:

Joseph E. Magri

 

 

 

Its:

Vice President and General Counsel

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/Michelle Ngo

 

 

 

Name:

Michelle Ngo

 

 

 

Its:

Vice President and Treasurer

 

S-2

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EXHIBIT A-1

 

LEGAL DESCRIPTION OF PROPERTY A

 

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

 

PARCEL A:

 

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

 

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

 

PARCEL B:

 

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

 

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

 

A1-1

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

 

PARCEL C:

 

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

 

PARCEL D:

 

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

 

PARCEL E:

 

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

 

A1-2

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

 

PARCEL F:

 

AN APPURTENANT NON-EXCLUSIVE EASEMENT OVER, UNDER AND ACROSS THE COMMON AREAS
FOR PARKING OF VEHICLES AS MORE FULLY DESCRIBED IN ARTICLE 8.01(D) OF THE
AGREEMENT, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN SUCH
ARTICLE 8.01(D).

 

PARCEL G:

 

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

 

A1-3

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EXHIBIT A-2

 

LEGAL DESCRIPTION OF PROPERTY B

 

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

 

PARCEL 1:

 

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

 

PARCEL 2:

 

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

 

A2-1

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EXHIBIT B

 

INTENTIONALLY OMITTED

 

B-1

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EXHIBIT C

 

RENT ROLL

 

(See attached)

 

C-1

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EXHIBIT D

 

[INTENTIONALLY OMITTED]

 

D-1

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EXHIBIT E

 

ALLOCATED LOAN AMOUNTS

 

Property

 

Amount Allocated

 

Property A

 

$

63,500,000.00

 

Property B

 

$

33,500,000.00

 

 

E-1

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EXHIBIT F

 

FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

 

(See attached)

 

F-1

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EXHIBIT G-1

 

FORM OF

 

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of June [    ], 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among KR MML 12701, LLC, a Delaware limited liability company, as
Borrower, and Massachusetts Mutual Life Insurance Company, a Massachusetts
corporation, as Lender, and each lender from time to time party thereto.

 

Pursuant to the provisions of Section 12.27 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(iv) it is not a controlled foreign corporation related to the Borrower as
described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN.  By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

 

[NAME OF LENDER]

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Date:

 

, 2012

 

G1-1

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EXHIBIT G-2

 

FORM OF

 

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of June [    ], 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among KR MML 12701, LLC, a Delaware limited liability company, as
Borrower, and Massachusetts Mutual Life Insurance Company, a Massachusetts
corporation, as Lender, and each lender from time to time party thereto.

 

Pursuant to the provisions of Section 12.27 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

 

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN.  By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

 

[NAME OF PARTICIPANT]

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Date:

 

, 2012

 

G2-1

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EXHIBIT G-3

 

FORM OF

 

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of June [    ], 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among KR MML 12701, LLC, a Delaware limited liability company, as
Borrower, and Massachusetts Mutual Life Insurance Company, a Massachusetts
corporation, as Lender, and each lender from time to time party thereto.

 

Pursuant to the provisions of Section 12.27 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption.  By executing this certificate, the undersigned agrees that (1) if
the information provided on this certificate changes, the undersigned shall
promptly so inform such Lender and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

 

[NAME OF PARTICIPANT]

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Date:

 

, 2012

 

G3-1

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EXHIBIT G-4

 

FORM OF

 

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of June [    ], 2012
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among KR MML 12701, LLC, a Delaware limited liability company, as
Borrower, and Massachusetts Mutual Life Insurance Company, a Massachusetts
corporation, as Lender, and each lender from time to time party thereto.

 

Pursuant to the provisions of Section 12.27 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it
is providing this certificate, (ii) its direct or indirect partners/members are
the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing
such Loan(s)), (iii) with respect to the extension of credit pursuant to this
Credit Agreement or any other Loan Document, neither the undersigned nor any of
its direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by one of the following forms from each of its
partners/members that is claiming the portfolio interest exemption: (i) an IRS
Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from
each of such partner’s/member’s beneficial owners that is claiming the portfolio
interest exemption.  By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

 

[NAME OF LENDER]

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Date:

 

, 2012

 

G4-1

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