Promissory Note



 Exhibit 10.1 
 PROMISSORY NOTE 
 DEFINED TERMS 

 

					
	  

Execution Date: January 12, 2011
	  	  

City and State of Signing: Los Angeles, CA

	  

Loan Amount: $135,000,000.00
	  	  
 Interest Rate: 4.27% per annum

	  

Borrower: KILROY REALTY 303, LLC, a Delaware limited liability company

	  
 Borrower’s Address:
	 	  

 
 Kilroy Realty 303, LLC,
 a Delaware limited liability company
 12200 West Olympic Boulevard, Suite 200

Los Angeles, California 90064
 Attention:
Corporate Finance
  
 With a copy to:

 
 Latham & Watkins LLP

355 South Grand Avenue
 Los Angeles, CA
90071-1560
 Attention: Glen B. Collyer
  

	  

Holder: METROPOLITAN LIFE INSURANCE COMPANY, a New York Corporation

 

	  
 Holder’s Address:
  
  

 
  

and:
	 	  
 Metropolitan Life Insurance Company
 10 Park Avenue

Morristown, New Jersey 07962

Attention:   Senior Vice President

                   Real Estate Investments

 
 Metropolitan Life Insurance Company

425 Market Street, Suite 1050
 San Francisco,
California 94105
 Attention: Vice President
  

	  

Maturity Date: February 1, 2018
  
	  	  
 Advance Date: The date funds are disbursed to Borrower.
  

	  

Interest Only Installment Dates: The first day of each calendar month beginning on the first day of the second calendar month following the Advance
Date and continuing through the first day of the 25th calendar month following the Advance Date.
  
	  	  
 Principal Interest Installment Dates: The first day of each calendar month beginning on the first day of the 26th calendar month following the Advance Date and continuing through the first day of
the calendar month immediately preceding the Maturity Date.
  



  
 303 Second
Street – Promissory Note     








  

	
	
 
 Monthly Installment: an Interest Only Monthly Installment or a Principal and
Interest Monthly Installment.
  
 Interest Only Monthly Installment:
Equal monthly installments of interest only at the Interest Rate, each in the amount of $480,375, payable on each Interest Only Installment Date.
  

Principal and Interest Monthly Installment: Equal monthly installments of principal and interest at the Interest Rate, each in the amount of
$665,700.46, payable on each Principal and Interest Installment Date. The Principal and Interest Monthly Installment is based upon an amortization period of 30 years.
  

Permitted Prepayment Period: During the 90 day period prior to the Maturity Date, Borrower may prepay the Loan, in whole but not in part(except to
the extent that any partial prepayment is required pursuant to the Cash Management Agreement), without a Prepayment Fee on 30 days’ prior written notice. In addition, commencing February 1, 2014, Borrower may prepay the Loan, in whole but
not in part (except to the extent that any partial prepayment is required pursuant to the Cash Management Agreement), with a Prepayment Fee on 30 days’ prior written notice.

 

	 Liable Party: Kilroy
Realty L.P., a Delaware limited partnership
  
 Addresses of Liable
Party:

	  

Kilroy Realty L.P.
 12200 W. Olympic Boulevard, Suite 200
 Los Angeles,
California 90064
  

	  

Late Charge: An amount equal to four cents ($.04) for each dollar that is overdue. 

 
 Default Rate: An annual rate equal to the Interest Rate plus four percent
(4%).
  

	  

Note: This Promissory Note.
  

Deed of Trust: Deed of Trust, Security Agreement, and Fixture Filing dated as of the Execution Date granted by Borrower to the Trustee named in the
Deed of Trust for the benefit of Holder. 
  
 Loan Documents:
This Note, the Deed of Trust and any other documents related to this Note and/or the Deed of Trust and all renewals, amendments, modifications, restatements and extensions of these documents. 

 
 Guaranty: Guaranty dated as of the Execution Date and executed by Liable
Party.
  
 Indemnity Agreement or Unsecured Indemnity Agreement:
Unsecured Indemnity Agreement dated as of the Execution Date and executed by Borrower in favor of Holder.
  
 Bottom Dollar Agreement: Guaranty and Contribution Agreement dated as of the Execution Date by Kilroy Industries, John B. Kilroy, Sr., John B. Kilroy, Jr., Susan Hahn, Dana Pantuso, Anne Kilroy and
Patrice Kilroy.
  
 The Indemnity Agreement, the Guaranty, and the Bottom
Dollar Agreement are not Loan Documents. The Indemnity Agreement and the Guaranty, as it relates to the obligations under the Indemnity Agreement, shall survive repayment of the Loan, and both shall survive any other termination of the Loan
Documents.
  
 Loan: The loan evidenced by this
Note.
  



  

					
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 FOR VALUE RECEIVED, Borrower promises to pay to the order of Holder at Holder’s Address
or such other place as Holder may from time to time designate, the Loan Amount with interest payable in the manner described below, in money of the United States of America that at the time of payment shall be legal tender for payment of all
obligations. 
 Capitalized terms which are not defined in this Note shall have the meanings set forth in the Deed of Trust.

 1.      Payment of Principal and Interest.  Principal and interest under this
Note shall be payable by Borrower to Holder as follows: 
 (a)      Interest on the Loan Amount
shall accrue from the Advance Date at the Interest Rate. On the Advance Date, Borrower shall pay interest for the period beginning on the Advance Date and ending on the last day of the month in which the Advance Date occurs. Commencing on the first
Interest Only Installment Date and continuing on each Interest Only Installment Date thereafter through and including the 25th calendar month following the Advance Date, Borrower shall pay interest in arrears in an amount each month equal to the
Interest Only Monthly Installment. 
 (b)      Commencing on the first Principal and Interest
Installment Date and continuing on each Principal and Interest Installment Date thereafter through and including the first day of the calendar month immediately preceding the Maturity Date, Borrower shall pay principal and interest in arrears in an
amount each month equal to the Principal and Interest Monthly Installment. 
 (c)      On the
Maturity Date, a final payment in the aggregate amount of the unpaid Secured Indebtedness shall become immediately payable in full. “Secured Indebtedness” means the aggregate amount of the principal sum evidenced by this Note, all
accrued and unpaid interest, and all other sums evidenced by this Note or secured by the Deed of Trust and/or any other Loan Documents as well as any future advances under the Deed of Trust that shall have been to or on behalf of Borrower by Holder
following the Advance Date. 
 Borrower acknowledges and agrees that a substantial portion of the original Loan Amount shall be
outstanding and due on the Maturity Date. 
 Interest shall be calculated on the basis of a thirty (30) day month and a
three hundred sixty (360) day year, except that (i) if the Advance Date occurs on a date other than the first day of a calendar month, interest payable for the period commencing on the Advance Date and ending on the last day of the month
in which the Advance Date occurs shall be calculated on the basis of the actual number of days elapsed over a 365 day or 366 day year, as applicable, and (ii) if the Maturity Date occurs on a date other than the last day of the month, interest
payable for the period commencing on the first day of the month in which the Maturity Date occurs and ending on the Maturity Date shall be calculated on the basis of the actual number of days elapsed over a 365 day or 366 day year, as applicable.


  

					
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 2.      Application of Payments.  At the
election of Holder, and to the extent permitted by law, all payments shall be applied in the order selected by Holder to any expenses, prepayment fees, late charges, escrow deposits and other sums due and payable under the Loan Documents, and to
unpaid interest at the Interest Rate or at the Default Rate, as applicable. The balance of any payments shall be applied to reduce the then unpaid Loan Amount. 
 3.      Security.  The covenants of the Deed of Trust are incorporated by reference into this Note. This Note shall evidence, and the Deed of Trust shall
secure, the Secured Indebtedness. 
 4.      Late Charge.  If any payment of
interest, any payment of a Monthly Installment or any payment of a required escrow deposit is not paid within 7 days of the due date, Holder shall have the option to charge Borrower the Late Charge. The Late Charge is for the purpose of defraying
the expenses incurred in connection with handling and processing delinquent payments and is payable in addition to any other remedy Holder may have. Unpaid Late Charges shall become part of the Secured Indebtedness and shall be added to any
subsequent payments due under the Loan Documents. 
 5.      Acceleration Upon
Default.  At the option of Holder, if Borrower fails to pay any sum specified in this Note within 7 days of the due date, or if an Event of Default occurs and is continuing, the Secured Indebtedness, including without limitation any
applicable prepayment fees (collectively, the “Accelerated Loan Amount”) shall become immediately due and payable. 
 6.      Interest Upon Default.  The Accelerated Loan Amount shall bear interest at the Default Rate which shall never exceed the maximum rate of interest
permitted to be contracted for under the laws of the State. The Default Rate shall commence upon the occurrence of an Event of Default and shall continue thereafter until no Event of Default exists. Section 11.12 of the Deed of Trust sets forth
the limited circumstances in which an Event of Default, once having commenced, may cease to exist. 

7.      Limitation on Interest.  The agreements made by Borrower with respect to this
Note and the other Loan Documents are expressly limited so that in no event shall the amount of interest received, charged or contracted for by Holder exceed the highest lawful amount of interest permissible under the laws applicable to the Loan. If
at any time performance of any provision of this Note or the other Loan Documents results in the highest lawful rate of interest permissible under applicable laws being exceeded, then the amount of interest received, charged or contracted for by
Holder shall automatically and without further action by any party be deemed to have been reduced to the highest lawful amount of interest then permissible under applicable laws. If Holder shall ever receive, charge or contract for, as interest, an
amount which is unlawful, at Holder’s election, the amount of unlawful interest shall be refunded to Borrower (if actually paid) or applied to reduce the then unpaid Loan Amount. To the fullest extent permitted by applicable laws, any amounts
contracted for, charged or received under the Loan Documents included for the purpose of determining whether the Interest Rate would exceed the 

  

					
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highest lawful rate shall be calculated by allocating and spreading such interest to and over the full stated term of this Note. 

8.      Prepayment.  Borrower shall not have the right to prepay all or any portion of
the Loan Amount at any time during the term of this Note except as expressly set forth in the Defined Terms. If Borrower provides notice of its intention to prepay, the Accelerated Loan Amount shall become due and payable on the date specified in
the prepayment notice. Notwithstanding anything set forth herein to the contrary, not more than three (3) times during the term of the Loan, Borrower shall be entitled to retract a notice of prepayment, which notice of retraction shall be
provided to Holder in writing no later than seven (7) days prior to the prepayment date specified in the prepayment notice, provided that Borrower shall pay to Holder any of its out-of-pocket costs and expenses that may have been incurred in
connection with the anticipated prepayment. 
 9.      Prepayment Fee. 

(a)      Any tender of payment by Borrower or any other person or entity of the Secured Indebtedness,
other than as expressly provided in the Loan Documents, shall constitute a prohibited prepayment. If a prepayment of all or any part of the Secured Indebtedness is made (i) following an Event of Default and an acceleration of the Maturity Date,
or (ii) by the application of money to the principal of the Loan after a casualty or condemnation (except if such application of casualty or condemnation proceeds to the principal of the Loan is made during the 90 day period immediately prior
to the Maturity Date), or (iii) in connection with a purchase of the Property or a repayment of the Secured Indebtedness at any time before, during or after, a judicial or non-judicial foreclosure or sale of the Property, or (iv) as
required under the Cash Management Agreement (as defined in the Deed of Trust), then to compensate Holder for the loss of the investment, Borrower shall pay an amount equal to the Prepayment Fee (as hereinafter defined). Notwithstanding the
foregoing, so long as Borrower makes a good faith effort to recover any Prepayment Fee which would be due as a result of a casualty or condemnation, from the insurer in the case of a casualty or from the condemning authority, then the Prepayment Fee
due as a result of the casualty or condemnation shall be waived except to the extent recovered by Borrower. 

(b)      The “Prepayment Fee” shall be the greater of (A) the Prepayment Ratio (as
hereinafter defined) multiplied by (x-y), where (x) is the present value of all remaining payments of principal and interest including the outstanding principal due on the Maturity Date, discounted at the rate which, when compounded monthly, is
equivalent to the Treasury Rate plus 50 basis points compounded semi-annually, and (y) is the amount of the principal then outstanding immediately prior to the prepayment, or (B) one percent (1%) of the amount of the principal being
prepaid. 
 (c)      The “Treasury Rate” shall be the annualized yield on
securities issued by the United States Treasury having a maturity equal to the remaining stated term of this Note, as quoted in the Federal Reserve Statistical Release [H. 15 (519)] under the heading “U.S. Government Securities -
Treasury Constant Maturities” for the date which is five (5) Business Days prior to the date on which prepayment is being made. If this rate is not available as of the 

  

					
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date of prepayment, the Treasury Rate shall be determined by interpolating between the yield on securities of the next longer and next shorter maturity. If the Treasury Rate is no longer
published, Holder shall select a comparable rate. Holder will, upon request, provide an estimate of the amount of the Prepayment Fee two weeks before the date of the scheduled prepayment. A Business Day is a day on which Holder is conducting normal
business operations. 
 (d)      The “Prepayment Ratio” shall be a fraction, the
numerator of which shall be the amount of principal being prepaid, and the denominator of which shall be the principal then outstanding immediately prior to the prepayment. 
 10.       Waiver of Right to Prepay Note Without Prepayment Fee.  Borrower acknowledges that Holder has relied upon the anticipated investment return
under this Note in entering into transactions with, and in making commitments to, third parties and that the tender of any prohibited prepayment or any permitted prepayment which pursuant to the terms of this Note requires a Prepayment Fee, shall
include the Prepayment Fee. Borrower agrees that the determination of the Interest Rate was based on the intent, expectation and agreement (and the Interest Rate would have been higher without such agreement) of Borrower and Holder that the amounts
advanced under this Note would not be prepaid during the term of this Note, or if any such prepayment would occur, the Prepayment Fee would apply (except as expressly permitted by the terms of this Note). Borrower also agrees that the Prepayment Fee
represents the reasonable estimate of Holder and Borrower of a fair average compensation for the loss that may be sustained by Holder as a result of a prepayment of this Note and it shall be paid without prejudice to the right of Holder to collect
any other amounts provided to be paid under the Loan Documents. 
 BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA
CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY
ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION WHICH IS PROHIBITED OR RESTRICTED BY THE DEED OF
TRUST, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY THE PREPAYMENT FEE SPECIFIED IN SECTION 9. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT HOLDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND
FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT. 
 BORROWER’S
INITIALS:    MN, TP     
 11.     Liability of
Borrower.  Upon the occurrence and during the continuance of an Event of Default, except as provided in this Section 11, Holder will look solely to the Property and the security under the Loan Documents for the repayment of the
Loan and will not 

  

					
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enforce a deficiency judgment against Borrower. However, nothing contained in this section shall limit the rights of Holder to proceed against Borrower and/or the Liable Party (i) to enforce
any Leases entered into by Borrower or its affiliates as tenant; (ii) to recover damages for fraud, material misrepresentation, or waste; (iii) to recover any Condemnation Proceeds or Insurance Proceeds or other similar funds which have
been misapplied by Borrower or which, under the terms of the Loan Documents, should have been paid to Holder and were not paid to Holder; (iv) to recover any tenant security deposits, tenant letters of credit or other deposits or fees paid to
Borrower or prepaid rents for a period of more than one month which have not been delivered to Holder; (v) to recover Rents and Profits received by Borrower after the first day of the month in which an Event of Default occurs and prior to the
date Holder acquires title to the Property which have not been applied to the Loan or in accordance with the Loan Documents to operating and maintenance expenses of the Property; (vi) to recover damages, costs and expenses arising from, or in
connection with Article VI of the Deed of Trust pertaining to hazardous materials or the Unsecured Indemnity Agreement; (vii) to recover all amounts due and payable pursuant to Sections 11.06 and 11.07 of the Deed of Trust, and any amount
expended by Holder in connection with the foreclosure of the Deed of Trust; (viii) to recover costs and damages arising from Borrower’s failure to pay Premiums or Impositions in the event that Borrower is not required to deposit such
amounts with Holder pursuant to Section 2.05 of the Deed of Trust; (ix) to recover damages arising from Borrower’s failure to comply with Section 8.01 of the Deed of Trust pertaining to ERISA; (x) to recover any damages,
costs, expenses or liabilities, including attorneys’ fees, incurred by Holder and arising from any breach or enforcement of any “environmental provision” (as defined in California Code of Civil Procedure Section 736, as such
Section may be amended from time to time) relating to the Property or any portion thereof; and/or (xi) in accordance with California Code of Civil Procedure Section 726.5, as such Section may be amended from time to time, to waive the
security of the Deed of Trust as to any parcel of Real Property that is “environmentally impaired” or is an “affected parcel” (as such terms are defined in such Section), and as to any Personal Property attached to such parcel,
and thereafter to exercise against Borrower, to the extent permitted by such Section 726.5, the rights and remedies of an unsecured creditor, including reduction of Holder’s claim against Borrower to judgment, and any other rights and
remedies permitted by law. If Holder exercises the rights and remedies of an unsecured creditor in accordance with clause (xi) above, Borrower promises to pay to Holder, on demand by Holder following such exercise, all amounts owed to
Holder under any Loan Document, and Borrower agrees that it and the Liable Party will be personally liable for the payment of all such sums. 
 The limitation of liability set forth in this Section 11 shall not apply and the Loan shall be fully recourse to Borrower in the event that Borrower commences a voluntary bankruptcy or insolvency
proceeding or an involuntary bankruptcy or insolvency proceeding is commenced against Borrower and is not dismissed within 90 days of filing. In addition, this agreement shall not waive any rights which Holder would have under any provisions of the
U.S. Bankruptcy Code to file a claim for the full amount of the Secured Indebtedness or to require that the Property shall continue to secure all of the Secured Indebtedness. 
 The limitation of liability set forth in this Section 11 shall not apply and the Loan shall be fully recourse to Borrower in the event that there is a Transfer or Secondary Financing except as
permitted in the Loan Documents or otherwise approved in writing by Holder. 

  

					
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 12.     Waiver by Borrower.  Borrower and others
who may become liable for the payment of all or any part of this Note, and each of them, waive diligence, demand, presentment for payment, notice of nonpayment, protest, notice of dishonor and notice of protest, notice of intent to accelerate and
notice of acceleration and specifically consent to and waive notice of any amendments, modifications, renewals or extensions of this Note, including the granting of extension of time for payment, whether made to or in favor of Borrower or any other
person or persons. 
 13.     Exercise of Rights.  No single or partial exercise by
Holder, or delay or omission in the exercise by Holder, of any right or remedy under the Loan Documents shall waive or limit the exercise of any such right or remedy. Holder shall at all times have the right to proceed against any portion of or
interest in the Property in the manner that Holder may deem appropriate, without waiving any other rights or remedies. The release of any party under this Note shall not operate to release any other party which is liable under this Note and/or under
the other Loan Documents or under the Unsecured Indemnity Agreement. 
 14.     Fees and
Expenses.  If Borrower defaults under this Note, Borrower shall be personally liable for and shall pay to Holder, in addition to the sums stated above, the costs and expenses of enforcement and collection, including a reasonable sum as
an attorney’s fee. This obligation is not limited by Section 11. 
 15.     No
Amendments.  This Note may not be modified or amended except in a writing executed by Borrower and Holder. No waivers shall be effective unless they are set forth in a writing signed by the party which is waiving a right. This Note and
the other Loan Documents constitute the complete and final expression of the lending relationship between Borrower and Holder. All prior agreements are of no further force or effect. Borrower acknowledges that there is no unwritten agreement binding
on Holder with respect to the Loan or the Property. 
 16.     Governing Law.  This
Note is to be construed and enforced in accordance with the laws of California. 

17.     Construction.  The words “Borrower” and “Holder” shall be deemed
to include their respective heirs, representatives, successors and assigns, and shall denote the singular and/or plural, and the masculine and/or feminine, and natural and/or artificial persons, as appropriate. The provisions of this Note shall
remain in full force and effect notwithstanding any changes in the shareholders, partners or members of Borrower. If more than one party is Borrower, the obligations of each party shall be joint and several. The captions in this Note are inserted
only for convenience of reference and do not expand, limit or define the scope or intent of any section of this Note. 

18.     Notices.  All notices, demands, requests and consents permitted or required under this
Note shall be given in the manner prescribed in the Deed of Trust. 

  

					
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 19.      Time of the Essence.  Time shall be
of the essence with respect to all of Borrower’s obligations under this Note. 

20.      Severability.  If any provision of this Note should be held unenforceable or
void, then that provision shall be deemed separable from the remaining provisions and shall not affect the validity of this Note, except that if that provision relates to the payment of any monetary sum, then Holder may, at its option, declare the
Secured Indebtedness (together with the Prepayment Fee) immediately due and payable. 
 [SIGNATURE FOLLOWS ON NEXT PAGE]


  

					
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 IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the Execution Date.

  

											
		 		 	 KILROY REALTY 303, LLC,

		 		 	 a Delaware limited liability company

				
		 		 	 By:
	 	Kilroy Realty, L.P.,
		 		 		 	a Delaware limited partnership
		 		 		 	Its Sole Member
					
		 		 		 	By:	 	Kilroy Realty Corporation,
		 		 		 		 	a Maryland Corporation
		 		 		 		 	Its General Partner
					
		 		 		 		 	By:  /s/ Michelle Ngo                  
		 		 		 		 	Name: Michelle Ngo
		 		 		 		 	Title: Vice President and Treasurer
					
		 		 		 		 	By:    /s/ Tamara J. Porter            
		 		 		 		 	Name: Tamara J. Porter
		 		 		 		 	Title: Vice President and Corporate Counsel


[BORROWER ALSO TO INITIAL SECTION 10.] 
 Signature Page 

  
 303 Second
Street – Promissory Note