Document:

KBS SOR Q2 2013 Exhibit 10.8

Exhibit 10.8
Promissory Note
	
					
	$120,000,000.00
	 
	 
	 
	June 26, 2013

FOR VALUE RECEIVED, each of KBS SOR Northridge, LLC, a Delaware limited liability company (“Northridge”),  KBS SOR Powers Ferry Landing East, LLC, a Delaware limited liability company (“Powers Ferry”), KBS SOR 6565-6575 West Loop South, LLC, a Delaware limited liability company (“West Loop”) and KBS SOR Austin Suburban Portfolio, LLC, a Delaware limited liability company (“Austin Suburban”; Northridge, Powers Ferry, West Loop and Austin Suburban shall be hereinafter referred to, individually, as a “Borrower” and, collectively, as “Borrowers”), hereby promises to pay to the order of Bank of America, N.A., a national banking association (together with any and all of its successors and assigns and/or any other holder of this Note, “Lender”), without offset, in immediately available funds in lawful money of the United States of America, at 5 Park Plaza, Suite 500, Irvine, California 92612, the principal sum of One Hundred Twenty Million and No/100 Dollars ($120,000,000.00) (or the unpaid balance of all principal advanced against this Note, if that amount is less), together with interest on the unpaid principal balance of this Note from day to day outstanding as hereinafter provided.  Initially-capitalized terms not otherwise defined in this Note shall have the respective meanings assigned to such terms in the Loan Agreement (as hereinafter defined).  
Section 1Payment Schedule and Maturity Date.  
(a)    Accrued unpaid interest on any disbursed funds under this Note shall be due and payable on July 1, 2013 and on the first day of each succeeding month thereafter. 
(b)    In Addition, on the first day of each month commencing on July 1, 2016, and each succeeding month thereafter, during the original term of this Note (as may be extended pursuant to Section 1A below), Borrowers shall repay principal outstanding under this Note in equal installments based on an amortization schedule providing for the full amortization of a hypothetical loan in the amount of the outstanding principal amount of the Loan (plus any undisbursed Loan proceeds) as of June 30, 2016 over a period of thirty (30) years at an assumed interest rate equal to six percent (6%) per annum.
(c)    Provided, that on July 1, 2017 (the “Maturity Date”), the final maturity of this Note, the entire principal balance of this Note then unpaid and all accrued interest then unpaid shall be finally due and payable.
Section 1A    Extension Option.  Lender shall grant a request by Borrowers to extend the Maturity Date of this Note to July 1, 2018 (the “Extended Maturity Date”), upon and subject to the following terms and conditions:
(a)    Basic Conditions.  Unless otherwise agreed by Lender in writing:
(i)    Borrowers shall request the extension, if at all, by written notice to Lender not more than one hundred twenty (120) days, and not less than sixty (60) days, prior to the original Maturity Date.
(ii)    At the time of the request, and at the time of the extension, there shall not exist any Event of Default, nor any condition or state of facts which after notice and/or lapse of time would constitute an Event of Default.

1

(iii)    Current financial statements regarding each Borrower and Guarantor (as defined in the Loan Agreement) (dated not earlier than thirty (30) days prior to the request for extension) and all other financial statements and other information as may be required under the Loan Documents regarding each Borrower, Guarantor and each Property (as hereinafter defined), shall have been submitted promptly to Lender, and there shall not have occurred, in the reasonable opinion of Lender, any material adverse change in the business or financial condition of any Borrower, Guarantor, or in any Property or in any other state of facts submitted to Lender in connection with the Loan Documents, from that which existed on the date of this Note.  This condition shall be deemed satisfied to the extent that Borrowers and Guarantor have complied with the reporting requirements set forth in Section 4.8 of the Loan Agreement.
(iv)    Whether or not the extension becomes effective, Borrowers shall pay all out-of-pocket costs and expenses incurred by Lender in connection with the proposed extension (pre- and post-closing), including appraisal fees and reasonable attorneys’ fees actually incurred by Lender; all such costs and expenses incurred up to the time of Lender’s written agreement to the extension shall be due and payable on or prior to Lender’s execution of that agreement (or if the proposed extension does not become effective, then upon demand by Lender), and any future failure to pay such amounts shall constitute a default under the Loan Documents.
(v)    Lender shall have received and approved an MAI appraisal of each Property meeting all applicable regulatory requirements, taking into account then-current market conditions.
(vi)    Not later than the Maturity Date, (A) the extension shall have been consented to and documented to Lender’s satisfaction by each Borrower, Guarantor and Lender; (B) Lender shall have been provided with an updated title report and judgment and lien searches, and appropriate title insurance endorsements shall have been issued as reasonably required by Lender (provided that such endorsements are generally issued by title companies in the applicable jurisdiction); and (C) Borrowers shall have paid to Lender a non-refundable extension fee in an amount equal to 0.10% of the sum of the outstanding principal balance of the Note plus any amounts which remain undisbursed under the TILC/Capital Expenditures Holdback, as may be reduced by any repayments on or prior to the initial Maturity Date.
(vii)    At the time of such extension, the Properties then subject to the lien of a Security Instrument shall have a Loan-to-Value Ratio (as defined in the Loan Agreement) of less than or equal to sixty-five percent (65%).  In the event this Loan-to-Value Ratio is not met, Borrowers may satisfy this Loan-to-Value Ratio prior to the extension date by making a voluntary paydown of the Loan, without prepayment fees or premiums other than the payment of any Consequential Loss (as hereinafter defined) under Section 4 below, together with a mutually agreed-upon reduction in the committed amount of the Loan.
(viii)    As of the most recent Test Date, Borrowers shall satisfy an Extension Debt Service Coverage Ratio of at least 1.35 to 1.00.  In the event this Extension Debt Service Coverage Ratio is not met, Borrowers may satisfy this Extension Debt Service Coverage Ratio prior to the extension date by making a voluntary paydown of the Loan, without prepayment fees or premiums other than the payment of any Consequential Loss under Section 4 below, together with a mutually agreed-upon reduction in the committed amount of the Loan.  For purposes hereof:

2

“Extension Debt Service Coverage Ratio” means, as of any Test Date, for a Calculation Period (as defined in the Loan Agreement) of six (6) months, the ratio of Net Operating Income (Extension) to Debt Service (as defined in the Loan Agreement) based on an operating statement for the Property for the immediately preceding six (6) month period which complies with the terms of the Loan Agreement; 
“Net Operating Income (Extension)” means, with respect to any period of time, the amount obtained by subtracting actual Operating Expenses (Extension) from Actual Operating Revenue (as defined in the Loan Agreement); and
“Operating Expenses (Extension)” means, with respect to any period of time, the total of all expenses actually paid or payable, computed on an annualized basis in accordance with GAAP (as defined in the Loan Agreement), of whatever kind relating to the ownership, operation, maintenance or management of the Property, including utilities, ordinary repairs and maintenance, insurance premiums, ground rents, if any, license fees, Taxes (as defined in the Loan Agreement), advertising expenses, payroll and related taxes, management fees equal to the greater of 3% of Actual Operating Revenue or the management fees actually paid under any management agreement, operational equipment or other lease payments as approved by Lender, and normalized capital expenditures equal to (i) $2.00 per rentable square foot per year for the Northridge Property, Powers Ferry Property, and West Loop Property, and (ii) $1.50 per rentable square foot per year for the Great Hills Property, Park Centre Property and Westech 360 Property, but specifically excluding depreciation and amortization, impairments, income taxes, debt service on the Loan, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any tenant under such tenant’s Lease or other agreement provided such reimbursement by tenant is not included in the calculation of Actual Operating Revenue.  Operating Expenses (Extension) shall be subject to appropriate seasonal and other adjustments which are either (i) recommended by Borrowers and approved by Lender in Lender’s reasonable discretion, or (ii) otherwise made by Lender in Lender’s reasonable discretion.
If all of the foregoing conditions are not satisfied strictly in accordance with their terms, the extension shall not be or become effective.
(b)    Changes in Loan Terms.  All terms and conditions of the Loan Documents shall continue to apply to the extended term except to the extent changed as indicated below (such changes to be effective on and after the original Maturity Date, if the extension becomes effective as provided herein):
(i)    Definition of Maturity Date.  The Maturity Date shall mean the Extended Maturity Date.
Section 2    Security; Loan Documents.  The security for this Note includes (i) a Deed to Secure Debt, Assignment and Security Agreement (Northridge) (as the same may from time to time be amended, restated, modified or supplemented, the “Northridge Deed to Secure Debt”) of even date herewith from Northridge to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “Northridge Property”), (ii) a Deed to Secure Debt, Assignment and Security Agreement (Powers Ferry) (as the same may from time to time be amended, restated, modified or supplemented, the “Powers Ferry Deed to 

3

Secure Debt”) of even date herewith from Powers Ferry to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “Powers Ferry Property”), (iii) a Deed of Trust, Assignment, Security Agreement and Fixture Filing (West Loop) (as the same may from time to time be amended, restated, modified or supplemented, the “West Loop Deed of Trust”) of even date herewith from West Loop to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “West Loop Property”), (iv) a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Great Hills) (as the same may from time to time be amended, restated, modified or supplemented, the “Great Hills Deed of Trust”) of even date herewith from Austin Suburban to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “Great Hills Property”), (v) a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Park Centre) (as the same may from time to time be amended, restated, modified or supplemented, the “Park Centre Deed of Trust”) of even date herewith from Austin Suburban to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “Park Centre Property”), and (vi) a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Westech 360) (as the same may from time to time be amended, restated, modified or supplemented, the “Westech 360 Deed of Trust”) of even date herewith from Austin Suburban to Lender, conveying and encumbering certain real and personal property more particularly described therein (the “Westech 360 Property”).  For purposes hereof, the Northridge Deed to Secure Debt, the Powers Ferry Deed to Secure Debt, the West Loop Deed of Trust, the Great Hills Deed of Trust, the Park Centre Deed of Trust and the Westech 360 Deed of Trust shall be hereinafter referred to, individually, as a “Security Instrument” and, collectively, as the “Security Instruments”); and the Northridge Property, the Powers Ferry Property, the West Loop Property, the Great Hills Property, the Park Centre Property and the Westech 360 Property shall be hereinafter referred to, individually, as a “Property” and, collectively, as the “Properties”).  This Note, the Security Instruments, the Term Loan Agreement between Borrowers and Lender of even date herewith (as the same may from time to time be amended, restated, modified or supplemented, the “Loan Agreement”) and all other documents now or hereafter securing, guaranteeing or executed in connection with the loan evidenced by this Note (the “Loan”), as the same may from time to time be amended, restated, modified or supplemented, are herein sometimes called individually a “Loan Document” and together the “Loan Documents.”
Section 3    Interest Rates.
3.1    Interest Rates.  The Principal Debt from day to day outstanding which is not past due shall bear interest at a rate per annum equal to the lesser of (i) the maximum non-usurious rate of interest allowed by applicable Law, or (ii) the following (computed as provided in Section 3.4 hereof) as applicable:
(a)    On Base Rate Principal, on any day, the Base Rate; and
(b)    On LIBOR Rate Principal, for the applicable Interest Period, the applicable LIBOR Rate.
3.2    Interest Rate Elections.
(a)    Subject to the conditions and limitations in this Note, Borrowers may by written notice to Lender in the form specified by Lender (a “Rate Election Notice”):
(i)    Elect, for a new advance of funds, that such Principal Debt will be Base Rate Principal, LIBOR Rate Principal or a combination thereof;

4

(ii)    Elect to convert, on a LIBOR Business Day, all or part of Base Rate Principal into LIBOR Rate Principal;
(iii)    Elect to convert, on the last day of the Interest Period applicable thereto, all or part of any LIBOR Rate Principal into Base Rate Principal; or
(iv)    Elect to continue, commencing on the last day of the Interest Period applicable thereto, any LIBOR Rate Principal.
If, for any reason, an effective election is not made in accordance with the terms and conditions of this Note for any principal advance or for any LIBOR Rate Principal for which the corresponding Interest Period is expiring, or to convert Base Rate Principal to LIBOR Rate Principal, then the sums in question will be Base Rate Principal until an effective LIBOR Rate Election is thereafter made for such sums.
(b)    Each Rate Election Notice must be received by Lender not later than 10:00 a.m. on the applicable date as follows:
(i)    With respect to an advance of or conversion to Base Rate Principal, one (1) Business Day prior to the proposed date of advance or conversion; and
(ii)    With respect to an advance of, conversion to or continuation of LIBOR Rate Principal, three (3) LIBOR Business Days prior to the proposed date of advance, conversion or continuation.
Unless otherwise specified herein, no conversion from LIBOR Rate Principal may be made other than at the end of the corresponding Interest Period.  Each Rate Election Notice shall stipulate:  (A) the amount of the advance or of the Principal Debt to be converted or continued; (B) the nature of the proposed advance, conversion or continuation, which shall be either Base Rate Principal, LIBOR Rate Principal or a combination thereof, and in the case of a conversion or continuation, the nature of the Principal Debt to be converted or continued; and (C) in the case of LIBOR Rate Principal, the proposed commencement date and duration of the Interest Period.  All such notices shall be irrevocable once given, and shall be deemed to have been given only when actually received by Lender in writing in a form specified by Lender.
3.3    General Conditions Precedent to LIBOR Rate Election.  In addition to any other conditions herein, a LIBOR Rate Election shall not be permitted if:
(a)    An Event of Default has occurred and has not been waived by Lender or a Potential Default has occurred and is continuing; or
(b)    After giving effect to the requested LIBOR Rate Election, the sum of all LIBOR Rate Principal plus all Base Rate Principal would exceed the principal face amount of this Note; or
(c)    The requested LIBOR Rate Election would cause more than two (2) LIBOR Rate Elections by Borrowers to be in effect at any one time; or
(d)    The amount of LIBOR Rate Principal requested in the LIBOR Rate Election is less than $200,000; or

5

(e)    The requested interest period does not conform to the definition of Interest Period herein; or
(f)    Any of the circumstances referred to in Section 3.5 hereof shall apply with respect to the requested LIBOR Rate Election or the requested LIBOR Rate Principal.
3.4    Computations and Determinations.  All interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed.  Lender shall determine each interest rate applicable to the Principal Debt in accordance with this Note and its determination thereof shall be conclusive in the absence of manifest error.  The books and records of Lender shall be conclusive evidence, in the absence of manifest error, of all sums owing to Lender from time to time under this Note, but the failure to record any such information shall not limit or affect the obligations of any Borrower under the Loan Documents.
3.5    Illegality.  If Lender determines that any Law has made it unlawful, or that any Governmental Authority (as defined in Section 7) has asserted that it is unlawful, for Lender to make, maintain or fund loans whose interest is determined by reference to the London Interbank Offered Rate, or to determine or charge interest rates based upon the London Interbank Offered Rate, or any Governmental Authority has imposed material restrictions on the authority of Lender to purchase or sell, or to take deposits of, U.S. Dollars in the London interbank eurodollar market, then, on notice thereof by Lender to Borrowers, (a) any obligation of Lender to honor any LIBOR Rate Election or to maintain or continue any LIBOR Rate Principal or to convert Base Rate Principal to LIBOR Rate Principal shall be suspended, and (b) if such notice asserts the illegality of Lender providing or maintaining Base Rate Principal the interest rate on which is determined by reference to the LIBOR Daily Floating Rate component of the Base Rate, the interest rate on which Base Rate Principal shall, if necessary to avoid such illegality, be determined by Lender without reference to the LIBOR Daily Floating Rate component of the Base Rate, in each case until Lender notifies Borrowers in writing that the circumstances giving rise to such determination no longer exist.  Upon receipt of such written notice, (i) Borrowers shall, upon written demand from Lender, prepay or, if applicable, convert all LIBOR Rate Principal to Base Rate Principal (the interest rate on which Base Rate Principal shall, if necessary to avoid such illegality, be reasonably determined by Lender without reference to the LIBOR Daily Floating Rate component of the Base Rate), either on the last day of the Interest Period therefor, if Lender may lawfully continue to maintain such LIBOR Rate Principal to such day, or immediately, if Lender may not lawfully continue to maintain such LIBOR Rate Principal, and (ii) if such notice asserts the illegality of Lender determining or charging interest rates based upon the London Interbank Offered Rate, Lender shall during the period of such suspension compute the Base Rate without reference to the LIBOR Daily Floating Rate component thereof until it is no longer illegal for Lender to determine or charge interest rates based upon the London Interbank Offered Rate.
3.6    Inability to Determine Rates.  If Lender determines in good faith (and not on an arbitrary or capricious basis) that for any reason in connection with any LIBOR Rate Election or a conversion to or continuation of LIBOR Rate Principal that (a) U.S. Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such LIBOR Rate Election or LIBOR Rate Principal, (b) adequate and reasonable means do not exist for determining the London Interbank Offered Rate for any such LIBOR Rate Election or LIBOR Rate Principal, or the LIBOR Daily Floating Rate in connection with any existing or proposed Base Rate Principal, or (c) the LIBOR Rate for any LIBOR Rate Election will not adequately and fairly reflect the cost to Lender of funding or maintaining the applicable LIBOR Rate Principal, Lender will promptly so notify Borrowers in writing.  Thereafter, (i) the obligation of Lender to honor LIBOR Rate Elections and to maintain LIBOR Rate Principal shall be suspended, and (ii) in the event of a determination described in the preceding sentence with respect to the LIBOR Daily Floating Rate 

6

component of the Base Rate, the utilization of the LIBOR Daily Floating Rate component in determining the Base Rate shall be suspended, in each case until Lender revokes such notice.  Upon receipt of such written notice, Borrowers may revoke any pending LIBOR Rate Election for borrowing of, conversion to or continuation of LIBOR Rate Principal or, failing that, will be deemed to have converted such election into a request for Base Rate Principal in the amount specified therein.
3.7    Additional Defined Terms.  In addition to other terms defined herein, as used herein the following terms shall have the meanings indicated, unless the context otherwise requires:
“Adjusted LIBOR Rate” means the quotient obtained by dividing (a) the applicable London Interbank Offered Rate by (b) 1.00 minus the LIBOR Reserve Percentage.
“Base Rate” means, on any day, except as provided in Section 3.5 or Section 3.6 above, a fluctuating rate of interest per annum equal to the LIBOR Daily Floating Rate plus the Base Rate Margin.  In the event the Base Rate cannot be determined by reference to the LIBOR Daily Floating Rate as provided in Section 3.5 or Section 3.6 above, “Base Rate” shall mean the Base Rate Margin plus the highest of: (a) the rate of interest in effect for such day as publicly announced from time to time by Lender as its “Prime Rate,” or (b) the Federal Funds Rate for that day plus fifty (50) basis points.  The “Prime Rate” is a rate set by Lender based upon various factors including Lender’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such Prime Rate announced by Lender shall take effect at the opening of business on the day specified in the public announcement of such change.
“Base Rate Margin” means two hundred fifty (250) basis points per annum, unless, prior to December 31, 2014, or on any Test Date, the Properties shall have satisfied an Ongoing Debt Service Coverage Ratio of at least 1.25 to 1.00, then Base Rate Margin shall mean two hundred twenty-five (225) basis points per annum.
“Base Rate Principal” means, at any time, the Principal Debt minus the portion, if any, of such Principal Debt which is LIBOR Rate Principal.
“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America, N.A. on such day on such transactions as reasonably determined by Lender.
“Indebtedness” means any and all of the indebtedness to Lender evidenced, governed or secured by or arising under this Note or any other Loan Document.
“Interest Period” means with respect to any LIBOR Rate Principal, the period commencing on the date such LIBOR Rate Principal is disbursed or on the date on which the Principal Debt or any portion thereof is converted into or continued as such LIBOR Rate Principal, and ending on the date one (1) month thereafter, as elected by Borrowers in the applicable Rate Election Notice; provided that:
(i)    Each Interest Period must commence on a LIBOR Business Day;

7

(ii)    In the case of the continuation of LIBOR Rate Principal, the Interest Period applicable after the continuation of such LIBOR Rate Principal shall commence on the last day of the preceding Interest Period;
(iii)    The last day for each Interest Period and the actual number of days during the Interest Period shall be determined by Lender using the practices of the London interbank eurodollar market; and
(iv)    No Interest Period shall extend beyond the Maturity Date, and any Interest Period which begins before the Maturity Date and would otherwise end after the Maturity Date shall instead end on the Maturity Date.
“Law” or “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
“LIBOR” means the British Bankers Association LIBOR Rate or the successor thereto if the British Bankers Association is no longer making a LIBOR rate available.
“LIBOR Business Day” means a Business Day which is also a London Banking Day.
“LIBOR Daily Floating Rate” means a fluctuating rate of interest per annum equal to (a) LIBOR, as published by Reuters (or other commercially available source providing quotations of LIBOR as selected by Lender from time to time) at approximately 11:00 a.m., London time determined two (2) London Banking Days prior to the date in question, for U.S. Dollar deposits being delivered in the London interbank eurodollar market for a term of one (1) month commencing that day, or (b) if such published rate is not available at such time for any reason, the rate per annum reasonably determined by Lender to be the rate at which deposits in U.S. Dollars for delivery on the date of determination in same day funds in the approximate outstanding amount of the Loan and with a term equal to one (1) month would be offered by Bank of America, N.A.’s London Branch to major banks in the London interbank eurodollar market at their request at the date and time of determination.
“LIBOR Margin” means two hundred fifty (250) basis points per annum, unless, prior to December 31, 2014, or on any Test Date, the Properties shall have satisfied an Ongoing Debt Service Coverage Ratio of at least 1.25 to 1.00, then LIBOR Margin shall mean two hundred twenty-five (225) basis points per annum.
“LIBOR Rate” means for any applicable Interest Period for any LIBOR Rate Principal, a simple rate per annum equal to the sum of the LIBOR Margin plus the Adjusted LIBOR Rate.
“LIBOR Rate Election” means an election by Borrowers of an applicable LIBOR Rate in accordance with this Note.
“LIBOR Rate Principal” means any portion of the Principal Debt which bears interest at an applicable LIBOR Rate at the time in question.
“LIBOR Reserve Percentage” means, with respect to any applicable Interest Period, for any day that percentage (expressed as a decimal, carried out to five decimal places) which is in effect on such day, under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including marginal, emergency, supplemental, special and other reserves)

8

applicable to member banks of the Federal Reserve System, in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR Rate Principal is determined), whether or not Lender has any Eurocurrency liabilities or such requirement otherwise in fact applies to Lender.  The LIBOR Rate shall be adjusted automatically as of the effective date of each change in the LIBOR Reserve Percentage.
“London Banking Day” means any day on which dealings in U.S. Dollar deposits are conducted by and between banks in the London interbank eurodollar market.
“London Interbank Offered Rate” means, with respect to any applicable Interest Period, the rate per annum equal to (a) LIBOR, as published by Reuters (or other commercially available source providing quotations of LIBOR as selected by Lender from time to time) at approximately 11:00 a.m. London time two (2) London Banking Days prior to the commencement of the Interest Period, for U.S. Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or, (b) if such rate is not available at any time for any reason, the rate per annum reasonably determined by Lender to be the rate at which deposits in U.S. Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Election or the LIBOR Rate Principal being continued or converted and with a term equivalent to such Interest Period would be offered by Bank of America, N.A.’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the commencement of such Interest Period.
“Note” means this promissory note, and any renewals, extensions, amendments or supplements hereof.
“Potential Default” means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“Principal Debt” means the aggregate unpaid principal balance of this Note at the time in question.
Section 4    Prepayment.  
(c)    Borrowers may prepay the principal balance of this Note, in full at any time or in part from time to time, provided that: (i) Lender shall have actually received from Borrowers prior irrevocable written notice (the “Prepayment Notice”) of Borrowers’ intent to prepay, the amount of principal which will be prepaid (the “Prepaid Principal”), and the date on which the prepayment will be made; (ii) each prepayment shall be in an amount not less than $1,000 (unless the prepayment retires the outstanding balance of this Note in full); and (iii) each prepayment shall be in the amount of 100% of the Prepaid Principal, plus any other sums which have become due to Lender under the Loan Documents on or before the date of prepayment but have not been paid; and (iv) no portion of LIBOR Rate Principal may be prepaid except on the last day of the Interest Period applicable thereto, unless (X) the prior written consent of Lender is obtained which consent, if given, shall provide, without limitation, the manner and order in which the prepayment is to be applied to the Indebtedness, and (Y) Borrowers pay to Lender any Consequential Loss as a result thereof, in accordance with Section 4(b) below.  If this Note is prepaid in full, any commitment of Lender for further advances shall automatically terminate.
(b)    Within fifteen (15) days after request by Lender (or at the time of any prepayment), Borrowers shall pay to Lender such amount or amounts as will compensate Lender for any loss, cost, expense, penalty, claim or liability, including any loss incurred in obtaining, prepaying, liquidating or employing deposits or other funds from third parties and any loss of revenue, profit or yield, as determined by Lender in its judgment reasonably exercised (together, “Consequential Loss”) incurred by Lender with respect to any LIBOR Rate, including any LIBOR Rate Election or LIBOR Rate Principal as a result of: (i) the failure of Borrowers to

9

make any payment on the date or in the amount specified in any Prepayment Notice from Borrowers to Lender; (ii) the failure of Borrowers to borrow, continue or convert into LIBOR Rate Principal on the date or in the amount specified in any Rate Election Notice or other notice given by Borrowers to Lender; (iii) the early termination of any Interest Period for any reason; or (iv) the payment or prepayment of any amount on a date other than the date such amount is required or permitted to be paid or prepaid.  Borrowers agree to pay all Consequential Loss upon any prepayment of LIBOR Rate Principal (it being understood and agreed that no Consequential Loss shall be payable in connection with the prepayment of any Base Rate Principal), whether voluntary or involuntary, whether effected by a credit bid at foreclosure, or whether by reason of acceleration upon an Event of Default or upon any transfer or conveyance of any right, title or interest in the Property giving Lender the right to accelerate the maturity of this Note as provided in the Security Instruments.  Notwithstanding the foregoing, the amount of the Consequential Loss shall never be less than zero or greater than is permitted by applicable Law.  Lender shall provide a notice to Borrowers setting forth Lender’s determination of any Consequential Loss, which notice shall be conclusive and binding in the absence of manifest error.  Lender reserves the right to provide interim calculations of such Consequential Loss in any notice of default or notice of sale for informational purposes, but the exact amount of such Consequential Loss shall be calculated only upon the actual prepayment of LIBOR Rate Principal as described herein.  The Consequential Loss shall be included in the total indebtedness secured by the Security Instruments for all purposes, including in connection with a foreclosure sale.  Lender may include the amount of the Consequential Loss in any credit bid Lender may make at a foreclosure sale.  Lender shall have no obligation to purchase, sell and/or match funds in connection with the funding or maintaining of the Loan or any portion thereof.  The obligations of Borrowers under this Section shall survive any termination of the Loan Documents and payment of this Note and shall not be waived by any delay by Lender in seeking such compensation.
Section 5    Late Charges.  If Borrowers shall fail to make any payment under the terms of this Note (other than the payment due at maturity) within fifteen (15) days after the date such payment is due, Borrowers shall pay to Lender on demand a late charge equal to four percent (4%) of the amount of such payment.  Such fifteen (15) day period shall not be construed as in any way extending the due date of any payment.  The late charge is imposed for the purpose of defraying the expenses of Lender incident to handling such delinquent payment.  This charge shall be in addition to, and not in lieu of, any other amount that Lender may be entitled to receive or action that Lender may be authorized to take as a result of such late payment.  
Section 6    Default Rate.  After the occurrence, and during the continuance, of an Event of Default (including the expiration of any applicable cure period), Lender, in Lender’s sole discretion and without notice or demand, may raise the rate of interest accruing on the outstanding principal balance of this Note by the lesser of (i) the maximum non-usurious rate of interest allowed by applicable Law, or (ii) three hundred (300) basis points above the rate of interest otherwise applicable (the “Default Rate”), independent of whether Lender elects to accelerate the outstanding principal balance of this Note.
Section 7    Increased Costs.  If any Change in Law shall:
(a)    impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, Lender (which shall include, for purposes of this Section, any corporation Controlling Lender) (excluding any reserve requirement already reflected in the calculation of the interest rate in this Note);

10

(b)    subject Lender to any taxes (other than taxes imposed on or measured by net income, however denominated, franchise taxes or branch profit taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(c)    impose on Lender or the London interbank eurodollar market any other condition, cost or expense affecting this Note or any outstanding amount of the Loan; 
(d)    and the result of any of the foregoing shall be to increase the cost to Lender, of providing, continuing or maintaining the Loan, or to reduce the amount of any sum received or receivable by Lender hereunder (whether of principal, interest or any other amount) then, upon written request of Lender, Borrower will pay to Lender, within fifteen (15) days of the date of delivery of any such written notice, such additional amount or amounts as will compensate Lender for such additional costs incurred or reduction suffered.  Such additional costs and/or reduction shall be allocated to this Note or any outstanding amount of the Loan as reasonably determined by Lender, using any reasonable method.  No failure by Lender to immediately demand payment of any amounts hereunder shall constitute a waiver of Lender’s right to demand payment of such amounts at any subsequent time.  Nothing herein contained shall be construed or shall operate to require Borrower to pay any interest, fees, costs or charges greater than is permitted by applicable Law.
“Change in Law” means the occurrence, after the date of this Note, of any of the following: (a) the adoption or taking effect of any Law, (b) any change in any Law or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or the making or issuance of any request, rule, guideline, or directive (whether or not having the force of Law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and (y) all requests, rules, guidelines, or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority), or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law,” regardless of the date enacted, adopted, or issued.
“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
Section 8    Capital Requirements.  If Lender (which shall include, for purposes of this Section, any corporation Controlling Lender) determines that any Change in Law affecting Lender, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on Lender’s capital, as allocated to this Note or the Loan, or to Lender’s commitments under this Note or the Loan, to a level below that which Lender could have achieved but for such Change in Law (taking into consideration Lender’s policies with respect to capital adequacy), then from time to time Borrowers will pay to Lender, within fifteen (15) days after written request by Lender, such additional amount or amounts as will compensate Lender for any such reduction suffered.  The allocation shall be made as determined by Lender, using any reasonable method.  No failure by Lender to immediately demand payment of any amounts hereunder shall constitute a waiver of Lender’s right to demand payment of such amounts at any subsequent time.  Nothing herein contained shall be construed or shall operate to require Borrower to pay any interest, fees, costs or charges greater than is permitted by applicable Law.

11

Section 9    Certain Provisions Regarding Payments.  All payments made under this Note shall be applied, to the extent thereof, to late charges, to accrued but unpaid interest (including interest at the Default Rate, if applicable), to unpaid principal, and to any other sums due and unpaid to Lender under the Loan Documents, in such manner and order as Lender may elect in its sole discretion, any instructions from any Borrower or anyone else to the contrary notwithstanding.  Remittances shall be made without offset, demand, counterclaim, deduction, or recoupment (each of which is hereby waived) and shall be accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks.  Acceptance by Lender of any payment in an amount less than the amount then due on any indebtedness shall be deemed an acceptance on account only, notwithstanding any notation on or accompanying such partial payment to the contrary, and shall not in any way (a) waive or excuse the existence of an Event of Default (as hereinafter defined), (b) waive, impair or extinguish any right or remedy available to Lender hereunder or under the other Loan Documents, or (c) waive the requirement of punctual payment and performance or constitute a novation in any respect.  Payments received after 2:00 p.m. (California time) shall be deemed to be received on, and shall be posted as of, the following Business Day.  Whenever any payment under this Note or any other Loan Document falls due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day.
Section 10    Events of Default.  The occurrence of any one or more of the following shall constitute an “Event of Default” under this Note:
(a)    Borrowers fail to pay within five (5) Business Days after any amounts payable by any Borrower to Lender under the terms of this Note become due and payable.
(b)    Any covenant, agreement or condition in this Note is not fully and timely performed, observed or kept, subject to any applicable notice and grace or cure period.
(c)    An Event of Default (as therein defined) occurs under any of the Loan Documents other than this Note (subject to any applicable grace or cure period).
Section 11    Remedies.  Upon the occurrence of an Event of Default, Lender may at any time thereafter exercise any one or more of the following rights, powers and remedies:
(a)    Lender may accelerate the current Maturity Date and declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts payable hereunder and under the other Loan Documents, at once due and payable, and upon such declaration the same shall at once be due and payable.
(b)    Lender may set off the amount owed by Borrowers to Lender, whether or not matured and regardless of the adequacy of any other collateral securing the Note, against any and all accounts, credits, money, securities or other property now or hereafter on deposit with, held by or in the possession of Lender to the credit or for the account of Borrowers, without notice to or the consent of any Borrower.
(c)    Lender may foreclose or otherwise realize upon any liens or security interests securing payment hereof.
(d)    Lender may exercise any of its other rights, powers and remedies under the Loan Documents or at law or in equity.

12

Without limitation of the foregoing, upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code (Title 11 of the United States Code, as in effect from time to time), any obligation of Lender to make advances shall automatically terminate, and the unpaid principal amount of the Loan outstanding and all interest and other amounts payable hereunder and under the other Loan Documents shall automatically become due and payable, in each case without further act of Lender.
Section 12    Remedies Cumulative.  All of the rights and remedies of Lender under this Note and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies.  No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further exercise thereof, and every right and remedy may be exercised at any time and from time to time.  No failure by Lender to exercise, nor delay in exercising, any right or remedy, including but not limited to the right to accelerate the maturity of this Note, shall operate as a waiver of such right or remedy or as a waiver of any Event of Default.  Without limiting the generality of the foregoing provisions, the acceptance by Lender from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment, shall not (i) constitute a waiver of or impair or extinguish the right of Lender to accelerate the maturity of this Note or to exercise any other right or remedy under this Note and/or any other Loan Document at the time or at any subsequent time, or nullify any prior exercise of any such right or remedy, or (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect.
Section 13    Costs and Expenses of Enforcement.  Borrowers agree to pay to Lender on demand all costs and expenses incurred by Lender in seeking to collect this Note or to enforce any of Lender’s rights and remedies under the Loan Documents, including court costs and reasonable attorneys’ fees and expenses, whether or not suit is filed hereon, or whether in connection with bankruptcy, insolvency or appeal.
Section 14    Service of Process.  Each Borrower hereby irrevocably designates and appoints Todd Smith of KBS Capital Advisors LLC as such Borrower’s authorized agent to accept and acknowledge on such Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the State of Texas.  If such agent shall cease so to act, Borrower shall irrevocably designate and appoint without delay another such agent reasonably satisfactory to Lender and shall promptly deliver to Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.
Each Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to such Borrower and (b) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by such Borrower as such Borrower’s agent for service of process.  Each Borrower irrevocably agrees that such service shall be deemed to be service of process upon such Borrower in any such suit, action, or proceeding.  Nothing in this Note shall affect the right of Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of Lender otherwise to bring proceedings against any Borrower in the courts of any jurisdiction or jurisdictions, subject to any provision or agreement for arbitration or dispute resolution set forth in the Loan Agreement.
Section 15    Heirs, Successors and Assigns.  The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of the heirs, devisees, representatives, successors and assigns of the parties.  The

13

foregoing sentence shall not be construed to permit any Borrower to assign the Loan except as otherwise permitted under the Loan Documents.
Section 16    General Provisions.  Time is of the essence with respect to each Borrower’s obligations under this Note.  If more than one person or entity executes this Note as a Borrower, all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby.  Each Borrower and each party executing this Note as a Borrower hereby severally (a) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notices (except any notices which are specifically required by this Note or any other Loan Document), filing of suit and diligence in collecting this Note or enforcing any of the security herefor; (b) agree to any substitution, subordination, exchange or release of any such security or the release of any party primarily or secondarily liable hereon; (c) agree that Lender shall not be required first to institute suit or exhaust its remedies hereon against any Borrower or others liable or to become liable hereon or to perfect or enforce its rights against them or any security herefor; (d) consent to any extensions or postponements of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to any of them; and (e) submit (and waive all rights to object) to non‐exclusive personal jurisdiction of any state or federal court sitting in the state and county in which payment of this Note is to be made for the enforcement of any and all obligations under this Note and the other Loan Documents; (f) waive the benefit of all homestead and similar exemptions as to this Note; (g) agree that their liability under this Note shall not be affected or impaired by any determination that any title, security interest or lien taken by Lender to secure this Note is invalid or unperfected; and (h) hereby subordinate to the Loan and the Loan Documents any and all rights against another Borrower and any security for the payment of this Note, whether by subrogation, agreement or otherwise, until this Note is paid in full.  A determination that any provision of this Note is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Note to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.  This Note may not be amended except in a writing specifically intended for such purpose and executed by the party against whom enforcement of the amendment is sought.  Captions and headings in this Note are for convenience only and shall be disregarded in construing it.  This Note and its validity, enforcement and interpretation shall be governed by the laws of the State of Texas (without regard to any principles of conflicts of laws) and applicable United States federal law.  Whenever a time of day is referred to herein, unless otherwise specified such time shall be the local time of the place where payment of this Note is to be made.  The term “Business Day” shall mean a day on which Lender is open for the conduct of substantially all of its banking business at its office in the city in which this Note is payable (excluding Saturdays and Sundays).  Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement.  The words “include” and “including” shall be interpreted as if followed by the words “without limitation.”
Section 17    Notices; Time.  All notices, requests, consents, approvals or demands (collectively, “Notice”) required or permitted by this Note to be given by any party to any other party hereunder shall, unless specified otherwise, be in writing (including facsimile (fax) transmission) and shall be given to such party at its address or fax number set forth in the notice provisions of the Loan Agreement, or at such other address or fax number as such party may hereafter specify for the purpose by Notice to the other party.  Each such Notice shall be effective when actually received by the addressee or when the attempted initial delivery is refused or when it cannot be made because of a change of address of which the sending party has not been notified; provided, that notices to Lender under Sections 3.1 through 3.7 hereof, inclusive, and notices of changed address or fax number, shall not be effective until received.  

14

Section 18    No Usury.  It is expressly stipulated and agreed to be the intent of Borrowers and Lender at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Note and the other Loan Documents.  If applicable state or federal law should at any time be judicially interpreted so as to render usurious any amount called for under this Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Loan, or if Lender’s exercise of the option to accelerate the Maturity Date, or if any prepayment by Borrowers results in Borrowers having paid any interest in excess of that permitted by applicable law, then it is Lender’s express intent that all excess amounts theretofore collected by Lender shall be credited on the principal balance of this Note and all other indebtedness secured by any of the Security Instruments, and the provisions of this Note and the other Loan Documents shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder.  All sums paid or agreed to be paid to Lender for the use or forbearance of the Loan shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.
Section 19    WAIVER OF JURY TRIAL.  AS FURTHER PROVIDED IN THE LOAN AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING OR ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE, THE LOAN AGREEMENT, THE MORTGAGE, OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO HEREBY:
(a)    CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER;
(b)    ACKNOWLEDGES THAT THIS WAIVER AND THE PROVISIONS OF THIS SECTION WERE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS;
(c)    CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE;
(d)    AGREES AND UNDERSTANDS THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH PROCEEDING OR ACTION, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE, AND FURTHER AGREES THAT SUCH PARTY SHALL NOT SEEK TO

15

CONSOLIDATE ANY SUCH PROCEEDING OR ACTION WITH ANY OTHER PROCEEDING OR ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED;
(e)    AGREES THAT BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING OR ACTION AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL; AND
(f)    REPRESENTS AND WARRANTS THAT SUCH PARTY HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
Section 20    Joint and Several Liability.
(a)    As used in this Section, the term “Co-Borrower” shall mean any one of the following: West Loop or Iron Point, each as maker of this Note; and the term “Co-Borrowers” shall mean both Co-Borrowers, collectively.
(b)    Each Co-Borrower agrees that it is jointly and severally liable to Lender for the payment of all obligations arising under this Note and the other Loan Documents, and that such liability is independent of the obligations of the other Co-Borrower.  Lender may bring an action against any Co-Borrower, whether or not an action is brought against the other Co-Borrower.
(c)    Each Co-Borrower agrees that any release which may be given by Lender to the other Co-Borrower or Guarantor will not release such Co-Borrower from its obligations under this Note or any of the other Loan Documents.
(d)    Each Co-Borrower waives any right to assert against Lender any defense, setoff, counterclaim or claim that such Co-Borrower may have against the other Co-Borrower or any other party liable to Lender for the obligations of the Co-Borrowers under this Note or any of the other Loan Documents.
(e)    Each Co-Borrower agrees that it is solely responsible for keeping itself informed as to the financial condition of the other Co-Borrower and of all circumstances which bear upon the risk of nonpayment.  Each Co-Borrower waives any right it may have to require Lender to disclose to such Co-Borrower any information that Lender may now or hereafter acquire concerning the financial condition of the other Co-Borrower.
(f)    Each Co-Borrower waives all rights to notices of default or nonperformance by any other Co-Borrower under this Note and the other Loan Documents.  Each Co-Borrower further waives all rights to notices of the existence or the creation of new indebtedness by any other Co-Borrower.
(g)    Co-Borrowers represent and warrant to Lender that each will derive benefit, directly and indirectly, from the collective administration and availability of the Loan under this Note and the other Loan Documents.  Co-Borrowers agree that Lender will not be required to inquire as to the disposition by any Co-Borrower of funds disbursed in accordance with the terms of this Note or any of the other Loan Documents.

16

(h)    Until all obligations of Co-Borrowers to Lender under this Note and the other Loan Documents have been paid in full, each Co-Borrower waives any right of subrogation, reimbursement, indemnification and contribution (contractual, statutory or otherwise), including any claim or right of subrogation under the Bankruptcy Code (Title 11, United States Code) or any successor statute, that such Co-Borrower may now or hereafter have against any other Co-Borrower with respect to the indebtedness incurred under this Note or any of the other Loan Documents.  Each Co-Borrower waives any right to enforce any remedy which Lender now has or may hereafter have against any other Co-Borrower, and waives any benefit of, and any right to participate in, any security now or hereafter held by Lender.
(i)    Each Co-Borrower hereby waives any election of remedies by Lender that impairs any subrogation or other right of such Co-Borrower to proceed against any other Co-Borrower or other Person, including any loss of rights resulting from any applicable anti-deficiency Laws relating to nonjudicial foreclosures of real property or other Laws limiting, qualifying or discharging obligations or remedies.
Section 21    Limited Recourse Provision.  Lender shall have no recourse against, nor shall there be any personal liability to, the members of any Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of any Borrower with respect to the obligations of Borrowers and Guarantor under the Loan.  For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect any Borrower’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Lender’s right to exercise any rights or remedies against any collateral securing the Loan.

[Signature pages follow.]

17

IN WITNESS WHEREOF, Borrowers have duly executed this Note under seal as of the date first above written.

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

	
	
	BORROWERS:

KBS SOR NORTHRIDGE, LLC,
a Delaware limited liability company

By:   KBS SOR ACQUISITION III, LLC,
   a Delaware limited liability company,
   its sole member

   By:   KBS SOR PROPERTIES, LLC,
      a Delaware limited liability company,
      its sole member

      By:   KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP,
         a Delaware limited partnership,
         its sole member

         By:   KBS STRATEGIC OPPORTUNITY REIT, INC.,
            a Maryland corporation,
            its sole general partner

            By:   _/s/ David E. Snyder_________________
David E. Snyder,
Chief Financial Officer

[Signatures continue on following page]

SIGNATURE PAGE TO KBS SOR POOL II NOTE

	
	
	   KBS SOR POWERS FERRY LANDING EAST, LLC,
a Delaware limited liability company

By:   KBS SOR ACQUISITION XV, LLC,
   a Delaware limited liability company,
   its sole member

   By:   KBS SOR PROPERTIES, LLC,
      a Delaware limited liability company,
      its sole member

      By:   KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP,
         a Delaware limited partnership,
         its sole member

         By:   KBS STRATEGIC OPPORTUNITY REIT, INC.,
            a Maryland corporation,
            its sole general partner

            By:   _/s/ David E. Snyder___________________
David E. Snyder,
Chief Financial Officer

[Signatures continue on following page]

SIGNATURE PAGE TO KBS SOR POOL II NOTE

	
	
	KBS SOR 6565-6575 WEST LOOP SOUTH, LLC, 
a Delaware limited liability company

By:   KBS SOR ACQUISITION XVII, LLC,
   a Delaware limited liability company,
   its sole member

   By:   KBS SOR PROPERTIES, LLC,
      a Delaware limited liability company,
      its sole member

      By:   KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP,
         a Delaware limited partnership,
         its sole member

         By:   KBS STRATEGIC OPPORTUNITY REIT, INC.,
            a Maryland corporation,
            its sole general partner

            By:   _/s/ David E. Snyder_______________
David E. Snyder,
Chief Financial Officer

[Signatures continue on following page]

SIGNATURE PAGE TO KBS SOR POOL II NOTE

	
	
	   KBS SOR AUSTIN SUBURBAN PORTFOLIO, LLC, 
   a Delaware limited liability company

   By:   KBS SOR ACQUISITION XVIII, LLC,
      a Delaware limited liability company,
      its sole member

      By:   KBS SOR PROPERTIES, LLC,
         a Delaware limited liability company,
         its sole member

         By:   KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP,
            a Delaware limited partnership,
            its sole member

            By:   KBS STRATEGIC OPPORTUNITY REIT, INC.,
               a Maryland corporation,
               its sole general partner

               By:   _/s/ David E. Snyder_________________
David E. Snyder,
Chief Financial Officer

SIGNATURE PAGE TO KBS SOR POOL II NOTEKBS SOR Q2 2013 Exhibit 10.9

Exhibit 10.9
Guaranty Agreement
This Guaranty Agreement (this “Guaranty”) is made as of the 26th day of June, 2013, by KBS SOR Properties, LLC, a Delaware limited liability company (“Guarantor”), in favor of Bank of America, N.A., a national banking association (together with its successors and assigns, “Lender”).
Recitals
KBS SOR Northridge, LLC, a Delaware limited liability company, KBS SOR Powers Ferry Landing East, LLC, a Delaware limited liability company, KBS SOR 6565-6575 West Loop South, LLC, a Delaware limited liability company, and KBS SOR Austin Suburban Portfolio, LLC, a Delaware limited liability company (each, a “Borrower” and, collectively, “Borrowers”), have requested that Lender make a loan (the “Loan”) to Borrowers evidenced by a Promissory Note of even date herewith in the original principal amount of One Hundred Twenty Million and No/100 Dollars ($120,000,000.00) made by Borrowers to the order of Lender (as the same may from time to time be amended, supplemented, restated or otherwise modified, the “Note”).  Certain terms and conditions of the Loan are set forth in the Term Loan Agreement of even date herewith between Borrowers and Lender (as the same may from time to time be amended, supplemented, restated or otherwise modified, the “Loan Agreement”).  As a condition precedent to making the Loan, Lender has required that Guarantor execute and deliver this Guaranty to Lender.  Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement.
Agreements
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce Lender to make the Loan to Borrowers, Guarantor hereby guarantees to Lender the prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the “Guaranteed Obligations”), this Guaranty being upon the following terms and conditions:
Section 1.Guaranty of Payment.  
(a)    Guarantor hereby unconditionally and irrevocably guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of (i) subject to the provisions of Section 1(b),  Section 1(c) and Section 1(d) below, all principal of the Loan now or hereafter due and owing, or which any Borrower is obligated to pay, pursuant to the terms of the Note, the Loan Agreement, the Security Instruments, any of the other Loan Documents, as the same may from time to time be amended, supplemented, restated or otherwise modified, and (ii) 100% of all amounts owing under the Environmental Agreements by Borrowers if (and only if) the Environmental Insurance Policy (as defined in and substantially and materially in the form approved by Lender pursuant to the Loan Agreement) is not then in place or, if not then in place, does not otherwise cover a Borrower for claims relating to environmental matters when and if demand is made by Lender under the Environmental Agreement delivered by such Borrower (i.e., Guarantor shall have no liability under this Guaranty for, and the Indebtedness (as hereinafter defined) shall not include, amounts owing

1

under any of the Environmental Agreements so long as the Environmental Insurance Policy is in place or otherwise covers the liability of a Borrower for environmental matters at the time demand is made by Lender to such Borrower under the Environmental Agreement delivered by such Borrower, whether or not the claim relating to any such environmental matter is a covered claim under such Environmental Insurance Policy) (the amounts described in clauses (i) and (ii) above shall be referred to herein, collectively, as the “Indebtedness”).  The Indebtedness shall also include all costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Guaranty, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees, whether or not suit is filed or other proceedings are initiated thereon.  This Guaranty covers, subject to the other terms and conditions of this Guaranty, the Indebtedness presently outstanding and the Indebtedness arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments.  The guaranty of Guarantor as set forth in this Section 1 is a continuing guaranty of payment and not a guaranty of collection.
(b)    Notwithstanding anything stated to the contrary in Section 1(a) above, and subject to Section 1(c) below, Guarantor’s maximum liability under clause (i) of Section 1(a) of this Guaranty shall in no event exceed twenty-five percent (25%) (the “Repayment Guaranty Obligation”), of the then outstanding principal balance under the Loan (the “Guaranteed Principal Amount”), such amount calculated as of the date the outstanding principal balance of the Loan becomes due and payable in full as a result of maturity or acceleration or otherwise.  The Guaranteed Principal Amount shall only be reduced by payments actually received by Lender from Guarantor, which are applied to the outstanding principal balance of the Loan.  In no event shall any payment received by Lender from any other party with respect to the Loan, or any amount received by Lender as a result of any exercise of remedies by Lender under any other Loan Document, reduce the Guaranteed Principal Amount or any other obligation of Guarantor hereunder.
(c)    Notwithstanding Section 1(b) above, Guarantor shall be liable for one hundred percent (100%) of the repayment obligations under clause (i) of Section 1(a) upon a Triggering Event (as hereinafter defined). 
(d)    Lender shall grant a request by Guarantor to terminate the Guarantor’s obligations under clause (i) of Section 1(a) of this Guaranty (the “Repayment Guaranty Termination Event”), which shall be evidenced, at Guarantor’s request, by a written confirmation in form and substance reasonably acceptable to Guarantor, upon and subject to the following terms and conditions:
(i)    Guarantor  shall request the termination, if at all, by written notice to Lender not more than ninety (90) days, and not less than forty-five (45) days, prior to the effective date of any proposed Repayment Guaranty Termination Event each, a “Termination Request Date”).
(ii)    At the time of the request and as of the effective date of any Repayment Guaranty Termination Event, there shall not exist any Event of Default, nor any condition or state of facts which after notice and/or lapse of time would constitute an Event of Default.

2

(iii)    Lender shall have received and approved an MAI appraisal of each Property then subject to the lien of any Security Instrument meeting all applicable regulatory requirements, taking into account then-current market conditions.
(iv)    Whether or not the termination becomes effective, Guarantor shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the requested termination, including appraisal fees and reasonable attorneys’ fees actually incurred by Lender; all such costs and expenses incurred up to the time of Lender’s written agreement to the termination shall be due and payable on or prior to Lender’s execution of that agreement (or if the proposed termination does not become effective, then upon demand by Lender), and any future failure to pay such amounts within ten (10) Banking Days following written request of such payment, shall constitute a default under the Loan Documents.
(v)    The Properties then subject to the lien of any Security Instrument shall have a Loan-to-Value Ratio of less than or equal to sixty-five percent (65%).  The conditions contained in this clause (v) may be satisfied by, in Borrowers’ sole discretion, (A) repayment of principal of the Loan outstanding under the TILC/Capital Expenditures Holdback, and/or (B) a voluntary paydown of the Loan, without prepayment fees or premiums other than the payment of any Consequential Loss under Section 4 of the Note in an aggregate amount sufficient to cause such Loan-to-Value Ratio to be met.
(vi)    The Properties then subject to the lien of any Security Instrument shall have a Debt Service Coverage Ratio of at least 1.35 to 1.00.  The conditions contained in this clause (vi) may be satisfied by, in Borrowers’ sole discretion, (A) repayment of principal of the Loan outstanding under the TILC/Capital Expenditures Holdback, and/or (B) a voluntary paydown of the Loan, without prepayment fees or premiums other than the payment of any Consequential Loss under Section 4 of the Note in an aggregate amount sufficient to cause such Ongoing Debt Service Coverage Ratio to be met.  For purposes hereof:
“Debt Service Coverage Ratio” means, as of any Test Date, for a Calculation Period (as defined in the Loan Agreement) of six (6) months, the ratio of Net Operating Income (Guaranty) to Debt Service (as defined in the Loan Agreement) based on an operating statement for the Property for the immediately preceding six (6) month period which complies with the terms of the Loan Agreement; 
“Net Operating Income (Guaranty)” means, with respect to any period of time, the amount obtained by subtracting actual Operating Expenses (Guaranty) from Actual Operating Revenue (as defined in the Loan Agreement) and
“Operating Expenses (Guaranty)” means, with respect to any period of time, the total of all expenses actually paid or payable, computed on an annualized basis in accordance with GAAP, of whatever kind relating to the ownership, operation, maintenance or management of the Property, 

3

including utilities, ordinary repairs and maintenance, insurance premiums, ground rents, if any, license fees, Taxes (as defined in the Loan Agreement), advertising expenses, payroll and related taxes, management fees equal to the greater of 3% of Actual Operating Revenue or the management fees actually paid under any management agreement, operational equipment or other lease payments as approved by Lender, and normalized capital expenditures equal to (i) $2.00 per rentable square foot per year for the Northridge Property, Powers Ferry Property, and West Loop Property, and (ii) $1.50 per rentable square foot per year for the Great Hills Property, Park Centre Property and Westech 360 Property, but specifically excluding depreciation and amortization, impairments, income taxes, debt service on the Loan, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any tenant under such tenant’s Lease or other agreement provided such reimbursement by tenant is not included in the calculation of Actual Operating Revenue.  Operating Expenses (Guaranty) shall be subject to appropriate seasonal and other adjustments which are either (i) recommended by Borrowers and approved by Lender in Lender’s reasonable discretion, or (ii) otherwise made by Lender in Lender’s reasonable discretion.
In addition to the foregoing, a Repayment Guaranty Termination Event shall be deemed to occur on July 1, 2017 in the event Lender grants a request by Borrowers to extend the Maturity Date of the Note upon the terms and conditions set forth in Section 1A of the Note.  
Section 2.    Guaranty of Specific Obligations.  
Guarantor also hereby unconditionally and irrevocably guarantees payment of, and agrees to protect, defend, indemnify and hold harmless Lender for, from and against, 100% of any deficiency, loss or damage suffered by Lender because of: 
(a)    The intentional misapplication or misappropriation by any Borrower of any funds derived from the Property of such Borrower, including the misapplication or misappropriation by any Borrower of rent, security deposits, insurance proceeds, condemnation awards, or other income arising with respect to any Property;
(b)    Any Borrower’s intentional commission of physical waste with respect to any Property;
(c)    The fraud or intentional misrepresentation by any Borrower or Guarantor made in or in connection with the Loan Documents or the Loan;
(d)    Any voluntary transfer of the Property in violation of the terms of the Loan Documents; 
(e)    Any Borrower’s voluntary filing of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or any assignment for the benefit of creditors made by such Borrower, or the involuntary filing against any Borrower by any member of such 

4

Borrower, Guarantor or any Affiliate thereof of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws, and such proceeding is not dismissed within ninety (90) days of the filing thereof (a “Triggering Event”).
Section 3.    Primary Liability of Guarantor.  
(a)    This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance, and Guarantor shall be liable for the payment and performance of the Guaranteed Obligations as a primary obligor.  This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any right to which Guarantor may otherwise have been entitled, whether existing under statute, at Law or in equity, to require Lender to take prior recourse or proceedings against any collateral, security or Person.  It shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against any Borrower or other Person liable on such indebtedness or for such performance, or to enforce any rights against any security given to secure such indebtedness or performance, or to join any Borrower or any other Person liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations; provided, however, that nothing herein contained shall prevent Lender from suing on the Note or foreclosing any Security Instrument or exercising any other right under the Loan Documents.
(b)    Suit may be brought or demand may be made against any Borrower or against any or all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Lender against any party hereto. 
Section 4.    Certain Agreements and Waivers by Guarantor.
(a)    Guarantor agrees that neither Lender’s rights or remedies nor Guarantor’s obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, Guarantor waives any rights, claims or defenses arising from any such events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(i)    any limitation on the liability of, or recourse against, any other Person in any Loan Document or arising under any Law;
(ii)    any claim or defense that this Guaranty was made without consideration or is not supported by adequate consideration or that the obligations of Guarantor hereunder exceed or are more burdensome than those of Borrowers under the other Loan Documents;
(iii)    the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations;

5

(iv)    the operation of any statutes of limitation or other Laws regarding the limitation of actions, all of which are hereby waived as a defense to any action or proceeding brought by Lender against Guarantor, to the fullest extent permitted by Law;
(v)    any homestead exemption or any other exemption under applicable Law;
(vi)    any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, or any impairment of Guarantor’s recourse against any Person or collateral;
(vii)    whether express or by operation of Law, any partial release of the liability of Guarantor hereunder (except to the extent expressly so released) or any complete or partial release of any Borrower or any other Person liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations;
(viii)    the death, insolvency, bankruptcy, disability, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of any Borrower or any other Person at any time liable for the payment or performance of any or all of the Guaranteed Obligations;
(ix)    either with or without notice to or consent of Guarantor, any renewal, extension, modification, supplement, subordination or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s)) or performance (including changes with respect to the construction of the Improvements) or any other terms thereof, or any waiver, termination, or release of, or consent to departure from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to any Borrower or any other Person at any time liable for the payment or performance of any or all of the Guaranteed Obligations; 
(x)    any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing any or all of the Guaranteed Obligations;

6

(xi)    any failure of Lender to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, subordination, or assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security, or of the occurrence or existence of any Default or Event of Default, or of any other action taken or refrained from being taken by Lender against any Borrower or any security or other recourse, or of any new agreement between Lender and any Borrower, it being understood that Lender shall not be required to give Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor, and Guarantor shall be responsible for obtaining for itself information regarding each Borrower and any collateral, including any changes in the business or financial condition of each Borrower or any collateral, and Guarantor acknowledges and agrees that Lender shall have no duty to notify Guarantor of any information which Lender may have concerning any Borrower or any collateral;
(xii)    the existence of any claim, counterclaim, set‐off or other right that Guarantor may at any time have against any Borrower, Lender, or any other Person, whether or not arising in connection with this Guaranty, the Note, the Loan Agreement or any other Loan Document;
(xiii)    the unenforceability of all or any part of the Guaranteed Obligations against any Borrower, whether because the Guaranteed Obligations exceed the amount permitted by Law or violate any usury law, or because the Persons creating the Guaranteed Obligations acted in excess of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because any Borrower has any valid defense, claim or offset with respect thereto, or because any Borrower’s obligation ceases to exist by operation of Law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable hereon regardless of whether any Borrower or any other Person be found not liable on the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of any Borrower or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations);
(xiv)    any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with respect to any Borrower or any other Person, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Lender, or any action taken or omitted by Lender in any such proceedings, including any election to have Lender’s claim allowed as being secured, partially secured or unsecured, any extension of credit by Lender in any such proceedings or the taking and holding by Lender of any security for any such extension of credit;
(xv)    any other condition, event, omission, action or inaction that would in the absence of this paragraph result in the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement;

7

(xvi)    any early termination of any of the Guaranteed Obligations; or
(xvii)    Lender’s enforcement or forbearance from enforcement of the Guaranteed Obligations on a net or gross basis.
(b)    In the event any payment by any Borrower or any other Person to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar Law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by any Borrower or any other party to Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to another Person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any attorneys’ fees, costs and expenses paid or incurred by Lender in connection with any such event.  
(c)    It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute, irrevocable and unconditional under any and all circumstances and that until the Guaranteed Obligations are fully and finally paid and performed, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor.
(d)    Guarantor’s obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to any Borrower in excess of the Guaranteed Obligations.  All payments, repayments and prepayments of the Loan, whether voluntary or involuntary, received by Lender from any Borrower, any other Person or any other source (other than from Guarantor pursuant to a demand by Lender hereunder), and any amounts realized from any collateral for the Loan, shall be deemed to be applied first to any portion of the Loan which is not covered by this Guaranty, and last to the Guaranteed Obligations, and this Guaranty shall bind Guarantor to the extent of any Guaranteed Obligations that may remain owing to Lender.  Lender shall have the right to apply any sums paid by Guarantor to any portion of the Loan in Lender’s sole and absolute discretion.
(e)    If acceleration of the time for payment of any amount payable by any Borrower under the Note, the Loan Agreement, or any other Loan Document is stayed or delayed by any Law or tribunal, all such amounts shall nonetheless be payable by Guarantor on demand by Lender.
(f)    Guarantor unconditionally and irrevocably waives any rights, defenses or remedies Guarantor may have under (i) Section 17.001 of the Texas Civil Practice and Remedies Code, Texas Rule of Civil Procedure 31, and Chapter 43 of the Texas Civil Practice and Remedies Code, entitled Principal and Surety, including notice, discharge, levy and subrogation, and (ii) Sections 51.003 through 51.005 of the Texas Property Code, relating to deficiency judgments.

8

Section 5.    Subordination.
If, for any reason whatsoever, any Borrower is now or hereafter becomes indebted to Guarantor:
(a)    such indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of such Borrower securing such indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations;
(b)    Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of such Borrower to Guarantor until the Guaranteed Obligations have been fully and finally paid and performed; provided, however, that so long as no Default shall have occurred and be continuing, Guarantor shall not be prohibited from receiving such (i) reasonable management fees or reasonable salary from such Borrower as Lender may find acceptable from time to time in its sole and absolute discretion, and (ii) distributions from such Borrower in an amount equal to any income taxes imposed on Guarantor which are attributable to such Borrower’s income from the Property of such Borrower;
(c)    Guarantor hereby assigns and grants to Lender a security interest in all such indebtedness and security therefor, if any, of such Borrower to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below.  In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving such Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not an Event of Default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of such Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been fully and finally paid and performed.  If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section 6, Guarantor shall pay the same to Lender immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and
(d)    Guarantor shall promptly upon written request of Lender from time to time execute such documents and perform such acts as Lender may reasonably require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this Section 6, including execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of such Borrower to Guarantor.  All promissory notes, accounts receivable ledgers or other evidences, now or hereafter held by Guarantor, of obligations of such Borrower to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this Guaranty.

9

Section 6.    Other Liability of Guarantor or Borrowers.
If Guarantor is or becomes liable, by endorsement or otherwise, for any indebtedness owing by any Borrower to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor.  If any Borrower is or becomes indebted to Lender for any indebtedness other than or in excess of the Guaranteed Obligations, any payment received or recovery realized upon such other indebtedness of such Borrower to Lender may be applied to such other indebtedness.  This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given.  Further, Guarantor’s liability under this Guaranty is in addition to any and all other liability Guarantor may have in any other capacity, including, if applicable, its capacity as a general partner.
Section 7.    Lender Assigns; Disclosure of Information.
This Guaranty is for the benefit of Lender and Lender’s successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so assigned, may be transferred with such Guaranteed Obligations.  Guarantor waives notice of any transfer or assignment of the Guaranteed Obligations or any part thereof.  Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants.  Guarantor shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith (at no cost, expense, liability or potential liability to Guarantor and provided that such instruments will not modify or affect Guarantor’s rights or obligations under this Guaranty), and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such Person(s) would have if such Person(s) were Lender hereunder.  Lender may disclose to any such assignee or participant or prospective assignee or participant, to Lender’s affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to any regulatory body having jurisdiction over Lender and to any other parties as necessary or appropriate in Lender’s reasonable judgment, any information Lender now has or hereafter obtains pertaining to the Guaranteed Obligations, this Guaranty, or Guarantor, including information regarding any security for the Guaranteed Obligations or for this Guaranty, and/or credit or other information on Guarantor and/or any other Person liable, directly or indirectly, for any part of the Guaranteed Obligations.  
Section 8.    Binding Effect; Joint and Several Liability.
This Guaranty is binding not only on Guarantor, but also on Guarantor’s heirs, personal representatives, successors and assigns.  Upon the death of Guarantor, if Guarantor is a natural person, this Guaranty shall continue against Guarantor’s estate as to all of the Guaranteed Obligations, including that portion incurred or arising after the death of Guarantor and shall be provable in full against Guarantor’s estate, whether or not the Guaranteed Obligations are then due and payable.  If this Guaranty is signed by more than one Person, then all of the obligations of Guarantor arising hereunder shall be jointly and severally binding on each of the undersigned, and their respective heirs, personal representatives, successors and assigns, and the term “Guarantor” shall mean all of such Persons and each of them individually. 

10

Section 9.    Governing Law.
This Guaranty is an agreement executed under seal.  If any Guarantor is a corporation, the designation “(SEAL)” on this Guaranty shall be effective as the affixing of such Guarantor’s corporate seal physically to this Guaranty.  The validity, enforcement, and interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the State of Texas and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws.  All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed Obligations are payable and performable.
Section 10.    Invalidity of Certain Provisions.
If any provision of this Guaranty or the application thereof to any Person or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other Person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other Persons or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable Law.
Section 11.    Costs and Expenses of Enforcement.
Guarantor agrees to pay to Lender on demand all costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Guaranty, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees, whether or not suit is filed or other proceedings are initiated hereon.  All such costs and expenses incurred by Lender shall constitute a portion of the Guaranteed Obligations hereunder, shall be subject to the provisions hereof with respect to the Guaranteed Obligations and shall be payable by Guarantor on demand by Lender.
Section 12.    No Usury.
It is not the intention of Lender or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable Law.  Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor’s capacity as guarantor, may lawfully be required to pay under applicable Law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable Law.  The provisions of this Section shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender.
Section 13.    Representations, Warranties, and Covenants of Guarantor.
Guarantor hereby represents, warrants, and covenants that: (a) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; (b) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to any law or in default (or at risk of

11

acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (c) unless Guarantor is a natural person, Guarantor is duly organized, validly existing, and in good standing under the laws of the state of its organization and has full power and authority to enter into and perform this Guaranty; (d) there is no material litigation pending with respect to which process has been served or, to the knowledge of Guarantor, threatened by or before any tribunal against or affecting Guarantor which, if adversely determined, would have a material adverse effect on Guarantor’s ability to perform its obligations hereunder; (e) all financial statements and information heretofore furnished to Lender by Guarantor do, and all financial statements and information hereafter furnished to Lender by Guarantor will, fully and accurately present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor’s operations for the periods therein specified, and, since the date of the most recent financial statements of Guarantor heretofore furnished to Lender, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Lender, has Guarantor incurred any material liability, direct or indirect, fixed or contingent; (f) after giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature; and (g) Guarantor has read and fully understands the provisions contained in the Note, the Loan Agreement, the Security Instruments and the other Loan Documents.  
Section 14.    Notices.  
All notices, requests, consents, demands and other communications required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service, or by certified United States mail, postage prepaid, addressed to the party to whom directed at the addresses specified in this Guaranty (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile.  Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of facsimile, upon receipt; provided that service of a notice required by any applicable statute shall be considered complete when the requirements of that statute are met.  Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt.  This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Guaranty or in any other Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.  
Section 15.    Cumulative Rights.
All of the rights and remedies of Lender under this Guaranty and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies.  No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further

12

exercise thereof, and every right and remedy may be exercised at any time and from time to time.  No failure by Lender to exercise, nor delay in exercising, any right or remedy shall operate as a waiver of such right or remedy or as a waiver of any Event of Default.  No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances.  No provision of this Guaranty or any right or remedy of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed and delivered by Lender to Guarantor.
Section 16.    Term of Guaranty.
This Guaranty shall continue in effect until all the Guaranteed Obligations and all of the obligations of Guarantor to Lender under this Guaranty are fully and finally paid, performed and discharged and are not subject to any bankruptcy preference period or any other disgorgement.
Notwithstanding anything stated to the contrary in this Guaranty, in the event that Lender or its nominee or any third party takes record title to a Property of a Borrower (a “Released Borrower”) following the exercise of Lender’s rights and remedies under the Loan Documents, Guarantor shall nonetheless have the right to terminate its continuing liability under clause (ii) of Section 1(a) of this Guaranty with respect to the Released Borrower’s obligations under the Environmental Agreement delivered by the Released Borrower (and only as to such obligations), upon fulfillment of each of the following conditions to the reasonable satisfaction of Lender:
(a)    Guarantor or the Released Borrower shall have delivered to Lender a new environmental insurance policy which insures Lender (“New Environmental Insurance Policy”) and which:
(i)    is comparable to the existing Environmental Insurance Policy approved by Lender except the policy limits shall be at least $5,000,000 for each occurrence and in the aggregate with a retention of no greater than $100,000; and
(ii)    is issued by the same company as the existing Environmental Insurance Policy or a replacement company with an AM Best’s Rating equivalent or better than A‐ (Excellent)/IX; and
(iii)    has a term of three (3) years from the date of issuance; and
(b)    Lender shall have received evidence that all premiums for three (3) years coverage under such New Environmental Insurance Policy have been prepaid in full.
Such termination of Guarantor’s liability under clause (ii) of Section 1(a) of this Guaranty with respect to a Released Borrower’s obligations under the Environmental Agreement delivered by such Released Borrower, shall become effective only upon the delivery by Lender to Guarantor of a specific written acknowledgment of the satisfaction of all of the foregoing conditions and the termination of such obligations, which acknowledgement Lender agrees to provide unless any of the conditions to such termination have not been satisfied.  This Section 16 shall under no circumstance be interpreted to terminate or limit any of Guarantor’s liabilities in

13

Section 1(a) of this Guaranty except to the extent such liabilities relate to a Released Borrower’s obligations under the Environmental Agreement delivered by such Released Borrower, and in no event shall this Section 16 be interpreted to terminate or limit Guarantor’s liabilities in Section 1(a) as to any other Borrower’s obligations under the Environmental Agreement delivered by such other Borrower unless and until the conditions of this Section 16 are satisfied as to such other Borrower.
Notwithstanding anything stated to the contrary in this Guaranty, in the event that a Borrower successfully exercises its right to terminate its continuing liability under the Environmental Agreement delivered by such Borrower pursuant to and in accordance with the terms and conditions of Section 7 thereof, Guarantor’s liability under clause (ii) of Section 1(a) of this Guaranty with respect to its guaranty of such Borrower’s obligations under the Environmental Agreement delivered by such Borrower (and only as to such obligations) shall automatically terminate.
Section 17.    Financial Statements.
Guarantor agrees to provide to Lender, as and when required, the Financial Statements and other financial information required to be delivered to Lender with respect to Guarantor pursuant to the terms of the Loan Agreement and the other Loan Documents, in the form and detail required by the Loan Documents.  Guarantor also agrees to provide to Lender such other and further financial information with respect to Guarantor as Lender shall from time to time reasonably request.  Acceptance of any Financial Statement by Lender, whether or not in the form prescribed herein, shall be relied upon by Lender in the administration, enforcement, and extension of the Guaranteed Obligations.
Section 18.    Subrogation.
Guarantor shall not have any right of subrogation under any of the Loan Documents or any right to participate in any security for the Guaranteed Obligations or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the Guaranteed Obligations have been fully and finally paid, performed and discharged in accordance with Section 17 above, and Guarantor hereby waives all of such rights.  
Section 19.    Time of Essence.
Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.
Section 20.    Entire Agreement; Counterparts; Construction.
This Guaranty embodies the entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations.  This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations.  This Guaranty shall be effective upon execution by Guarantor and delivery to Lender.  This Guaranty may not be modified, amended or superseded except in a writing signed by Lender and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof that are to be modified, amended or superseded.  This Guaranty

14

has been executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement.  As used herein, the words “include” and “including” shall be interpreted as if followed by the words “without limitation.”
Section 21.    [Intentionally Omitted.]
Section 22.    Forum.
Guarantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in the State specified in the governing law section of this Guaranty and to the jurisdiction of any state court or any United States federal court sitting in the state in which any of the Property is located, over any Dispute.  Guarantor hereby irrevocably waives, to the fullest extent permitted by Law, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum.  Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Guaranty may be made by certified or registered mail, return receipt requested, directed to Guarantor at its address for notice set forth in this Guaranty, or at a subsequent address of which Lender received actual notice from Guarantor in accordance with the notice section of this Guaranty, and service so made shall be complete five (5) days after the same shall have been so mailed.  Nothing herein shall affect the right of Lender to serve process in any manner permitted by Law or limit the right of Lender to bring proceedings against Guarantor in any other court or jurisdiction.
Section 23.    WAIVER OF JURY TRIAL.  
TO THE EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR AND LENDER WAIVE TRIAL BY JURY IN RESPECT OF ANY DISPUTE (AS DEFINED IN THE LOAN AGREEMENT) AND ANY ACTION ON SUCH DISPUTE.  THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND LENDER, AND GUARANTOR AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  GUARANTOR AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL.  GUARANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.  
Section 24.    Credit Verification.

15

Each legal entity and individual obligated on this Guaranty, whether as a Guarantor, a general partner of a Guarantor or in any other capacity, hereby authorizes Lender to check any credit references, verify his/her employment and obtain credit reports from credit reporting agencies of Lender’s choice in connection with any monitoring, collection or future transaction concerning the Loan, including any modification, extension or renewal of the Loan.  Also in connection with any such monitoring, collection or future transaction, Lender is hereby authorized to check credit references, verify employment and obtain a third party credit report for the spouse of any married person obligated on this Guaranty, if such person lives in a community property state.
Section 25.    Limited Recourse Provision.
Lender shall have no recourse against, nor shall there be any personal liability to, the members of Guarantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Guarantor with respect to the obligations of Guarantor under this Guaranty.  For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect any Borrower’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Lender’s right to exercise any rights or remedies against any collateral securing the Loan.

[Signatures begin on following page.]

16

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND 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.

IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty under seal as of the date first written above.

    
	
		
	Address of Guarantor:

KBS SOR Properties, LLC
c/o KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
Attn: Jeff Rader, Vice President
Fax Number: (949) 417-6518

With copies to:

c/o KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
Attn: Laurie Selwitz
Fax Number: (949) 417-6518

c/o KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
Attn: Todd Smith
Fax Number: (949) 417-6520

	GUARANTOR:

KBS SOR PROPERTIES, LLC,
a Delaware limited liability company

By:   KBS STRATEGIC OPPORTUNITY 
   LIMITED PARTNERSHIP,
   a Delaware limited partnership,
   its sole member

   By:   KBS STRATEGIC 
      OPPORTUNITY REIT, INC.,
      a Maryland corporation,
      its sole general partner

      By:   __/s/ David E. Snyder_____________
         David E. Snyder,
         Chief Financial Officer

	 
	 

	Address of Lender:

Bank of America, N.A.
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Angela Lowman
Fax No.: (877) 233-5758
	 

SIGNATURE PAGE TO KBS SOR POOL II GUARANTY

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00220-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00220-of-00352.parquet"}]]