Document:

Exhibit

Exhibit 10.5
GUARANTY OF RECOURSE OBLIGATIONS

This GUARANTY OF RECOURSE OBLIGATIONS ("Guaranty") is executed as of June 30, 2016, by KBSGI REIT PROPERTIES, LLC, a Delaware limited liability company ("Guarantor"), in favor of METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation ("Lender"), with reference to the following facts:
A.    Lender has agreed to make a loan (the "Loan") in the principal amount of up to $47,400,000.00 to KBSGI 421 SW 6TH AVENUE, LLC, a Delaware limited liability company ("Borrower"), to be evidenced by that certain Promissory Note of even date herewith (together with all extensions, renewals, modifications, restatements and amendments thereof, the "Note") to be executed by Borrower and payable to Lender.  The Note is to be secured by, among other things, a Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing of even date herewith to be executed by Borrower, as trustor, for the benefit of Lender, as beneficiary, which is to be recorded in the Official Records of Multnomah County, Oregon (together with all extensions, renewals, modifications, restatements and amendments thereof, the “Deed of Trust”).  The Deed of Trust will encumber a fee estate in certain real property located in Portland, County of Multnomah, State of Oregon as described therein.
B.    It is a condition to Lender making the Loan to Borrower that Guarantor execute this Guaranty.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, and in order to induce Lender to make the Loan to Borrower, Guarantor hereby agrees, in favor of Lender, as follows:
1.Definitions and Construction.
(a)    Definitions.  The following terms, as used in this Guaranty, shall have the following meanings:
(i)    "Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 U.S.C.), as amended or supplemented from time to time, and any successor statute, and any and all rules issued or promulgated in connection therewith.
(ii)    "Guaranteed Obligations" means (A) indefeasible payment and performance by Borrower of any and all obligations and liabilities of any kind or character owed by Borrower to Lender under Section 2.11 of the Deed of Trust, Section 11 of the Note and Section 9.1 of the Deed of Trust (but subject to the limitations on Guarantor’s obligations set forth in Section 11 of the Note and Article 9 of the Deed of Trust, and expressly excluding (1) Borrower’s liability under clauses (vi) and (vii) appearing in Section 11(a) of the Note and Section 9.1(a) of the Deed of Trust and (2) any liability for representations and warranties made by Borrower in Article 6 of the Deed of Trust pertaining to hazardous materials or in the Unsecured Indemnity 

1
GUARANTY OF RECOURSE OBLIGATIONS

Agreement) (such amounts under this clause (A) of Section 1(a)(ii) being herein called the "Performance Sums"), plus (B) interest at the Default Rate (as defined in the Note) which accrues on the Performance Sums from the date of written demand for payment under this Guaranty from Lender to Guarantor until the Performance Sums are paid in full, plus (C) all costs, including, without limitation, all reasonable attorneys’ fees, including any and all costs expended by Lender in connection with the initiation, prosecution and/or defense of foreclosure on the Property, but only if the Borrower contests such foreclosure in “bad faith”, and expenses incurred by Lender in connection with collection of the Guaranteed Obligations. For purposes of the immediate preceding sentence, if there is any reasonable basis for which Borrower can contest such foreclosure, then it shall be deemed not to be in “bad faith”.
(iii)    "Loan Documents" shall have the same meaning as in the Deed of Trust.
(iv)    "Secured Indebtedness" shall have the same meaning as in the Deed of Trust.
(b)    Construction.  Unless the context of this Guaranty clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and the term "including" is not limiting.  The words "hereof," "herein," "hereby," "hereunder," and other similar terms refer to this Guaranty as a whole and not to any particular provision of this Guaranty.  Any reference herein to any of the Loan Documents includes any and all alterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, as applicable.  Neither this Guaranty nor any uncertainty or ambiguity herein shall be construed or resolved against Lender or Guarantor, whether under any rule of construction or otherwise.  On the contrary, this Guaranty has been reviewed by Guarantor, Lender, and their respective counsel, and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of Lender and Guarantor.
2.    Guaranteed Obligations.  Guarantor hereby irrevocably and unconditionally guarantees to Lender, as and for Guarantor's own debt, until full and final performance and indefeasible payment thereof has been made, payment and performance of the Guaranteed Obligations, in each case when and as the same shall become due and/or payable, it being the intent of Guarantor that the guaranty set forth herein shall be a guaranty of payment and performance and not a guaranty of collection.
3.    Performance Under This Guaranty.  In the event of default by Borrower in payment or performance of the Guaranteed Obligations, or any part thereof, when such Guaranteed Obligations are due to be paid or performed by Borrower, upon written demand by Lender to Guarantor, Guarantor shall promptly pay or perform the Guaranteed Obligations then due in full, and if not paid within ten (10) days after written demand therefor, shall bear interest from the date of such demand until paid at the rate equal to the lesser of (a) the Default Rate (as defined in the Note) and (b) the maximum rate then permitted for the parties to contract for under applicable law.  

2
GUARANTY OF RECOURSE OBLIGATIONS

4.    Primary Obligations.  This Guaranty is a primary and original obligation of Guarantor, is not merely the creation of a surety relationship, and is an absolute, continuing, unconditional, and irrevocable guaranty of payment and performance which shall remain in full force and effect without respect to future changes in conditions, including any change of law or any invalidity or irregularity with respect to the issuance of the Loan Documents.  Each person and entity executing this Guaranty as Guarantor agrees that it is directly, jointly and severally with any and all other guarantors of the Guaranteed Obligations, liable to Lender, that the obligations of Guarantor hereunder are independent of the obligations of Borrower or any other guarantor, and that a separate action may be brought against each person or entity signing as Guarantor whether such action is brought against Borrower or any other guarantor or whether Borrower or any such other guarantor is joined in such action.  Guarantor agrees that its liability hereunder shall be immediate and shall not be contingent upon the exercise or enforcement by Lender of whatever remedies it may have against Borrower or any other guarantor, or the enforcement of any lien or realization upon any security Lender may at any time possess.  Guarantor agrees that any release which may be given by Lender to Borrower or any other guarantor shall not release Guarantor.  Guarantor consents and agrees that Lender shall be under no obligation to marshal any assets of Borrower or any other guarantor in favor of Guarantor, or against or in payment of any or all of the Guaranteed Obligations.
5.    Waivers.
(a)    Guarantor absolutely, unconditionally, knowingly, and expressly waives:
(i)    (A) Notice of acceptance hereof; (B) notice of any loans or other financial accommodations made or extended under the Loan Documents or the creation or existence of any Guaranteed Obligations; (C) notice of the amount of the Guaranteed Obligations, subject, however, to Guarantor's right to make inquiry of Lender to ascertain the amount of the Guaranteed Obligations at any reasonable time; (D) notice of any adverse change in the financial condition of Borrower or of any other fact that might increase Guarantor's risk hereunder; (E) notice of presentment for payment, demand, protest, and notice thereof as to any promissory notes or other instruments among the Loan Documents; (F) notice of any event of default under the Loan Documents; and (G) all other notices (except if such notice is specifically required to be given to Guarantor hereunder or under any Loan Document to which Guarantor is a party) and demands to which Guarantor might otherwise be entitled.
(ii)    To the extent permitted by applicable law, Guarantor absolutely, unconditionally, irrevocably, knowingly, and expressly waives Guarantor’s right by statute or otherwise to require Lender to institute suit against Borrower or to exhaust any rights and remedies which Lender has or may have against Borrower or any collateral for the Guaranteed Obligations provided by Borrower, Guarantor or any third party.  In this regard, Guarantor agrees that it is bound to the payment of all Guaranteed Obligations, whether now existing or hereafter accruing, as fully as if such Guaranteed Obligations were directly owing to Lender by Guarantor.  

3
GUARANTY OF RECOURSE OBLIGATIONS

Guarantor further waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower in respect thereof.
(iii)    To the extent permitted by applicable law, Guarantor absolutely, unconditionally, irrevocably, knowingly, and expressly waives (A) any rights to assert against Lender any defense (legal or equitable), set-off, counterclaim, or claim which Guarantor may now or at any time hereafter have against Borrower or any other party liable to Lender; (B) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guaranteed Obligations or any security therefor; (C) any defense Guarantor has to performance hereunder, and any right Guarantor has to be exonerated, arising by reason of: the impairment or suspension of Lender’s rights or remedies against Borrower; the alteration by Lender of the Guaranteed Obligations; any discharge of the Guaranteed Obligations by operation of law as a result of Lender’s intervention or omission; or the acceptance by Lender of anything in partial satisfaction of the Guaranteed Obligations; (D) the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Guaranteed Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to Guarantor’s liability hereunder; and (E) any right by statute or otherwise to terminate or revoke this Guaranty.
(b)    Guarantor absolutely, unconditionally, knowingly, and expressly waives any defense arising by reason of or deriving from (i)  any claim or defense based upon an election of remedies by Lender, including any claim or defense based upon (i) an election of remedies by Lender; or (ii) any election by Lender under Bankruptcy Code Section 1111(b) to limit the amount of, or any collateral securing, its claim against Borrower.  If acceleration of the time for payment by Borrower of all or any portion of the indebtedness is stayed upon the insolvency, bankruptcy or reorganization of Borrower, to the extent permitted by applicable law, the Guaranteed Obligations shall nonetheless be payable by Guarantor hereunder.  Guarantor agrees that it shall remain liable for the Guaranteed Obligations in the event that any payment by Borrower to Lender is deemed a preferential payment under bankruptcy or insolvency law.
(c)    If any of the Guaranteed Obligations at any time are secured by a mortgage or deed of trust upon real property, Lender may elect, in its sole discretion, upon the occurrence, and during the continuance of, a default with respect to the Guaranteed Obligations, to foreclose such mortgage or deed of trust judicially or nonjudicially in any manner permitted by law, before or after enforcing the Loan Documents, without diminishing or affecting the liability of Guarantor hereunder except to the extent the Guaranteed Obligations are repaid with the proceeds of such foreclosure.  Understanding the foregoing, and understanding that Guarantor is hereby relinquishing a defense to the enforceability of the Loan Documents, Guarantor hereby waives any right to assert against Lender any defense to the enforcement of the Loan Documents, whether 

4
GUARANTY OF RECOURSE OBLIGATIONS

denominated “estoppel” or otherwise, based on or arising from an election by Lender nonjudicially to foreclose any such mortgage or deed of trust.  Guarantor understands that the effect of the foregoing waiver may be that Guarantor might  have liability hereunder for amounts with respect to which Guarantor may be left without rights of subrogation, reimbursement, contribution, or indemnity against Borrower or other guarantors or sureties.  
(d)    FURTHER, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS GUARANTY, GUARANTOR HEREBY IRREVOCABLY AGREES THAT, UNTIL PAYMENT IN FULL TO LENDER OF THE SECURED INDEBTEDNESS AND THE GUARANTEED OBLIGATIONS, GUARANTOR SHALL HAVE NO RIGHT TO RECOVER FROM BORROWER ANY CLAIMS GUARANTOR HAS OR MIGHT HAVE AGAINST BORROWER (AS SUCH TERM "CLAIM" IS DEFINED IN BANKRUPTCY CODE 11 U.S.C. §101[5] AS AMENDED FROM TIME TO TIME) IN CONNECTION WITH PAYMENTS MADE BY OR ON BEHALF OF GUARANTOR TO LENDER UNDER THIS GUARANTY AGREEMENT INCLUDING, WITHOUT IMPLIED LIMITATION, ALL RIGHTS GUARANTOR MAY NOW OR HEREAFTER HAVE UNDER ANY AGREEMENT OR AT LAW OR IN EQUITY (INCLUDING, WITHOUT LIMITATION, ANY LAW SUBROGATING THE GUARANTOR TO THE RIGHTS OF LENDER) TO ASSERT ANY CLAIM AGAINST OR SEEK CONTRIBUTION, INDEMNIFICATION OR ANY OTHER FORM OF REIMBURSEMENT FROM BORROWER OR ANY OTHER PARTY LIABLE FOR PAYMENT OF ANY OR ALL OF THE SECURED INDEBTEDNESS.
6.    Releases.  Guarantor consents and agrees that, without notice to or by Guarantor and without affecting or impairing the obligations of Guarantor hereunder, Lender may, by action or inaction:
(a)    Compromise, settle, extend the duration or the time for the payment of, or discharge the performance of, or may refuse to or otherwise not enforce this Guaranty, the other Loan Documents, or any part thereof, with respect to Borrower or any other person or entity;
(b)    Release Borrower or any other person or entity or grant other indulgences to Borrower or any other person or entity in respect thereof;
(c)    Amend or modify in any manner and at any time (or from time to time) any of the Loan Documents; or
(d)    Release or substitute any other guarantor, if any, of the Guaranteed Obligations, or enforce, exchange, release, or waive any security for the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations, or any portion thereof.

5
GUARANTY OF RECOURSE OBLIGATIONS

7.    Obligations Unaffected.  Guarantor hereby agrees that its obligations under this Guaranty shall not be released, discharged, diminished, impaired, reduced, or affected for any reason or by the occurrence of any event, including, without limitation, one or more of the following events, whether or not with notice to or the consent of Guarantor:
(a)    The dissolution, insolvency, or bankruptcy of Borrower, Guarantor, or any other party at any time liable for the payment of any or all of the Secured Indebtedness; 
(b)    Any payment by Borrower or any other party to Lender is held to constitute a preference under applicable bankruptcy or insolvency law or if for any other reason Lender is required to refund any payment or pay the amount thereof to someone else;
(c)    The non-perfection of any security interest or lien securing any or all of the Secured Indebtedness;
(d)    Any impairment of any collateral securing any or all of the Secured Indebtedness;
(e)    The failure of Lender to sell any collateral securing any or all of the Secured Indebtedness in a commercially reasonable manner or as otherwise required by law;
(f)    Any change in the corporate, limited liability company, or partnership existence, structure, or ownership of Borrower; or
(g)    Any other circumstance which might otherwise constitute a defense available to, or discharge of, Borrower or Guarantor, or any other party liable for any or all of the Secured Indebtedness or the Guaranteed Obligations.
8.    No Election.  Lender shall have all of the rights to seek recourse against Guarantor to the fullest extent provided for herein, and no election by Lender to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of Lender's right to proceed in any other form of action or proceeding or against other parties unless Lender has expressly waived such right in writing.  Specifically, but without limiting the generality of the foregoing, no action or proceeding by Lender under any document or instrument evidencing the Guaranteed Obligations shall serve to diminish the liability of Guarantor under this Guaranty except to the extent that Lender finally and unconditionally shall have realized indefeasible payment by such action or proceeding.
9.    Indefeasible Payment.  The Guaranteed Obligations and the Secured Indebtedness shall not be considered indefeasibly paid for purposes of this Guaranty unless and until all payments to Lender are no longer subject to any right on the part of any person or entity, including Borrower, Borrower as a debtor in possession, or any trustee (whether appointed under the Bankruptcy Code or otherwise) of any of 

6
GUARANTY OF RECOURSE OBLIGATIONS

Borrower's assets to invalidate or set aside such payments or to seek to recoup the amount of such payments or any portion thereof, or to declare same to be fraudulent or preferential.  Until such full and final performance and indefeasible payment of the Guaranteed Obligations whether by Guarantor or Borrower, Lender shall have no obligation whatsoever to transfer or assign its interest in the Loan Documents to Guarantor.  In the event that, for any reason, any portion of such payments to Lender is set aside or restored, whether voluntarily or involuntarily, after the making thereof, then the obligation intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made, and Guarantor shall be liable for the full amount Lender is required to repay plus any and all costs and expenses (including attorneys' fees and expenses incurred pursuant to proceedings arising under the Bankruptcy Code) paid by Lender in connection therewith.
10.    Financial Condition of Borrower.  Guarantor represents and warrants to Lender that Guarantor is currently informed of the financial condition of Borrower and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.  Guarantor further acknowledges that Guarantor has read and understands the terms and conditions of the Loan Documents.  Guarantor hereby acknowledges that it is Guarantor’s obligation to keep informed of Borrower's financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Guaranteed Obligations.
11.    Representations, Warranties and Covenants.  Guarantor represents and warrants to and agrees with Lender as follows:
(a)    Guarantor has the power and authority and legal right to execute, deliver and perform its obligations under this Guaranty.  This Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors’ rights.
(b)    The execution, delivery, and performance by Guarantor of this Guaranty do not and will not violate or conflict with any law, rule, or regulation or any order, writ, injunction, or decree of any court, governmental authority or agency, or arbitrator and do not and will not conflict with, result in a breach of, or constitute a default under, or result in the imposition of any lien upon any assets of Guarantor pursuant to the provisions of Guarantor’s operating agreement or other organizational documents of Guarantor, or any indenture, mortgage, deed of trust, security agreement, franchise, permit, license, or other instrument or agreement to which Guarantor or its properties are bound.
(c)    No authorization, approval, or consent of, and no filing or registration with, any court, governmental authority, or third party is necessary for the execution, delivery, or performance by Guarantor of this Guaranty or the validity or enforceability hereof.

7
GUARANTY OF RECOURSE OBLIGATIONS

(d)    The value of the consideration received and to be received by Guarantor as a result of Lender making extensions of credit to Borrower and Guarantor executing and delivering this Guaranty is reasonably worth at least as much as the liability and obligations of Guarantor hereunder, and such liability and obligations and such extensions of credit have benefited and may reasonably be expected to benefit Guarantor directly and indirectly.
(e)    Guarantor has, independently and without reliance upon Lender and based upon such documents and information as Guarantor has deemed appropriate, made its own analysis and decision to enter into this Guaranty.
(f)    To Guarantor’s knowledge, except as may have been previously disclosed in writing to Lender, there is no action, proceeding or investigation pending or, to the knowledge of Guarantor, threatened or affecting Guarantor, which may materially adversely affect Guarantor’s ability to fulfill Guarantor’s obligations under this Guaranty.  There are no judgments or orders for payment of money against Guarantor, which may materially adversely affect Guarantor’s ability to fulfill Guarantor’s obligations under this Guaranty.  Guarantor is not in default under any agreement which default may materially adversely affect Guarantor’s ability to fulfill Guarantor’s obligations under this Guaranty.
(g)    Guarantor covenants and agrees that, as long as the Secured Indebtedness or the Guaranteed Obligations or any part thereof is outstanding:
(i)Guarantor will furnish to Lender as soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of Guarantor, beginning with the fiscal year ending December 31, 2016 (i) a copy of the certified financial statements of Guarantor for such fiscal year prepared by an authorized representative approved by Lender and certified by Guarantor to its best knowledge, provided, however, that in the event that audited financial statements for Guarantor are prepared by an independent certified public accountant, Guarantor shall promptly deliver Lender a copy of said audited financial statements of Guarantor and (ii) a certificate of Guarantor to Lender stating, to Guarantor’s best knowledge, that no default under this Guaranty and no event which with notice or lapse of time or both would be a default under this Guaranty has occurred and is continuing, or if in Guarantor’s opinion a default under this Guaranty has occurred and is continuing, a statement as to the nature thereof.
(ii)Guarantor will obtain at any time and from time to time all authorizations, licenses, consents or approvals as shall now or hereafter be necessary or desirable under all applicable laws or regulations or otherwise in connection with the execution, delivery and performance of this Guaranty and will promptly furnish copies thereof to Lender.
(iii)Except for transfers permitted under the Deed of Trust and the other Loan Documents, Guarantor will at all times own directly or indirectly and free and clear of all liens and encumbrances whatsoever at least the same 

8
GUARANTY OF RECOURSE OBLIGATIONS

percentage interest in Borrower, if any, as its owns directly or indirectly on the date hereof.
12.    Subordination.  
(a)    Guarantor hereby agrees that the Subordinated Indebtedness (as hereinafter defined) is deferred, postponed in favor of and subordinated to, and shall be junior in right of payment to, the prior indefeasible payment in full, in cash, of the Guaranteed Obligations, the Secured Indebtedness and satisfaction of all obligations of Borrower to Lender under the Loan Documents.  If any sums shall be paid to Guarantor by Borrower or any other person or entity on account of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor for the benefit of Lender and shall forthwith be paid to Lender without affecting the liability of Guarantor under this Guaranty Agreement and may be applied by Lender against the Indebtedness or the Guaranteed Obligations in such order and manner as Lender may determine in its sole discretion.  Upon the request of Lender, Guarantor shall execute, deliver, and endorse to Lender such documents and instruments as Lender may request to perfect, preserve, and enforce its rights hereunder.  For purposes of this Guaranty, the term "Subordinated Indebtedness" means all indebtedness, liabilities, and obligations of Borrower to Guarantor, whether such indebtedness, liabilities, and obligations now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon are direct, indirect, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such indebtedness, liabilities, or obligations are evidenced by a note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such indebtedness, obligations, or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor; provided, however, that the term "Subordinated Indebtedness" shall not mean or include any distributions by Borrower to its constituent members or partners, direct or indirect (including Guarantor) pursuant to the formation documents of Borrower at any time when no Event of Default (as defined in the Deed of Trust) exists.
(b)    Guarantor agrees that any and all liens, security interests, judgment liens, charges, or other encumbrances upon Borrower’s assets securing payment of any Subordinated Indebtedness shall be and remain inferior and subordinate to (i) any and all liens, security interests, judgment liens, charges, or other encumbrances upon Borrower’s assets securing payment of the Secured Indebtedness or any part thereof, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attached and (ii) satisfaction of all obligations of Borrower to Lender under the Loan Documents.  Without the prior written consent of Lender until the Secured Indebtedness has been paid in full, Guarantor shall not (1) file suit against Borrower or exercise or enforce any other creditor’s right it may have against Borrower, or (2) foreclose, repossess, sequester, or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any 

9
GUARANTY OF RECOURSE OBLIGATIONS

liens, security interests, collateral rights, judgments or other encumbrances held by Guarantor on assets of Borrower.
(c)    In the event of any receivership, bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency proceeding involving Borrower as debtor, Lender shall have the right to prove and vote any claim under the Subordinated Indebtedness and to receive directly from the receiver, trustee or other court custodian all dividends, distributions, and payments made in respect of the Subordinated Indebtedness.  Lender may apply any such dividends, distributions, and payments against the Guaranteed Obligations in such order and manner as Lender may determine in its sole discretion.  Guarantor hereby appoints Lender as Guarantor’s attorney‐in‐fact, which appointment is coupled with an interest and is irrevocable, to enable Lender to act in the place of Guarantor with respect to (i) any claim under the Subordinated Indebtedness or (ii) the receipt of any such dividends, distributions and payments.
(d)    Guarantor agrees that all promissory notes, accounts receivable, ledgers, records, or any other evidence of Subordinated Indebtedness shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Guaranty.
13.    Payments; Application.  All payments to be made hereunder by Guarantor shall be made in lawful money of the United States of America at the time of payment, shall be made in immediately available funds, and shall be made without deduction (whether for taxes or otherwise) or offset.  All payments made by Guarantor hereunder shall be applied as follows: first, to all costs and expenses (including attorneys' fees and expenses and attorneys' fees and expenses incurred pursuant to proceedings arising under the Bankruptcy Code) incurred by Lender in enforcing this Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and unpaid interest, premium, if any, and fees owing to Lender; and third, to the balance of the Guaranteed Obligations.
14.    Attorneys' Fees and Costs.  Guarantor agrees to pay, on demand, all attorneys' fees (including attorneys' fees incurred pursuant to proceedings arising under the Bankruptcy Code) and all other costs and expenses which may be incurred by Lender in the enforcement of this Guaranty (including those brought relating to proceedings pursuant to 11 U.S.C.) or in any way arising out of, or consequential to the protection, assertion, or enforcement of the Guaranteed Obligations (or any security therefor), whether or not suit is brought.
15.    Notices.  All notices or demands by Guarantor or Lender to the other relating to this Guaranty shall be in writing and either personally served or sent by registered or certified mail, postage prepaid, return receipt requested, or by recognized courier service which provides return receipts, and shall be deemed delivered on the date of actual delivery or refusal to accept delivery as evidenced by the return receipt.  Unless otherwise specified in a notice sent or delivered in accordance with the provisions of this section, such writing shall be sent as follows:

10
GUARANTY OF RECOURSE OBLIGATIONS

		
	If to Lender:
	Metropolitan Life Insurance Company

10 Park Avenue 
Morristown, New Jersey 07962
Attention:  Senior Vice President, Real Estate Investments

		
	With a copy to:
	Metropolitan Life Insurance Company

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

		
	With a copy to:
	Metropolitan Life Insurance Company

425 Market Street, Suite 1050
San Francisco, California 94105
Attention: Associate General Counsel

		
	If to Guarantor:
	KBSGI REIT PROPERTIES, LLC

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn:  Clint Copulos, Vice President of Asset 
Management
 
		
	With a copy to:
	KBSGI REIT PROPERTIES, LLC

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Todd Smith, VP, Controller REIT Corporate 
Accounting
 
		
	And to:
	KBSGI REIT PROPERTIES, LLC

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Bryce Lin, Director of Finance and Reporting

		
	With a copy to:
	KBSGI REIT Properties, LLC

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attention: James Chiboucas, Esq., Vice Chairman & Chief Legal 
Officer

		
	And to: 
	Greenberg Traurig

3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attention:  Bruce Fischer, Esq.

11
GUARANTY OF RECOURSE OBLIGATIONS

16.    Cumulative Remedies; Other Liability of Guarantor or Borrower.
(a)    No remedy under this Guaranty or under any Loan Document is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given hereunder or under any Loan Document, and those provided by law or in equity.  No delay or omission by Lender to exercise any right, power, or privilege under this Guaranty shall impair any such right nor be construed to be a waiver thereof.  No failure on the part of Lender to exercise, and no delay in exercising, any right, power, or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
(b)    If Guarantor becomes liable for any indebtedness owing by Borrower to Lender by endorsement or otherwise, 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 in addition to any and all other rights that Lender may ever have against Guarantor.
17.    Severability of Provisions.  If any provision of this Guaranty is for any reason held to be invalid, illegal or unenforceable in any respect, that provision shall not affect the validity, legality or enforceability of any other provision of this Guaranty.
18.    Entire Agreement; Amendments.  This Guaranty constitutes the entire agreement between Guarantor and Lender pertaining to the subject matter contained herein.  This Guaranty may not be altered, amended, or modified, nor may any provision hereof be waived or noncompliance therewith consented to, except by means of a writing executed by both Guarantor and Lender.  Any such alteration, amendment, modification, waiver, or consent shall be effective only to the extent specified therein and for the specific purpose for which given.  No course of dealing and no delay or waiver of any right or default under this Guaranty shall be deemed a waiver of any other, similar or dissimilar right or default or otherwise prejudice the rights and remedies hereunder.
19.    Successors and Assigns.  This Guaranty shall be binding upon Guarantor's successors and permitted assigns and shall inure to the benefit of the successors and assigns of Lender; provided, however, Guarantor shall not assign this Guaranty or delegate any of its duties hereunder without Lender's prior written consent.  Any assignment without the consent of Lender shall be absolutely void.  In the event of any assignment or other transfer of rights by Lender, the rights and benefits herein conferred upon Lender shall automatically extend to and be vested in such assignee or other transferee.
20.    No Third-Party Beneficiary.  This Guaranty is intended solely for the benefit of Lender and its successors and assigns, and no third party shall have any rights or interest in this Guaranty. 

12
GUARANTY OF RECOURSE OBLIGATIONS

21.    Choice of Law and Venue.  The validity of this Guaranty, its construction, interpretation, and enforcement, and the rights of Guarantor and Lender, shall be determined under, governed by, and construed in accordance with the internal laws of the State of Oregon, without regard to principles of conflicts of law.  To the maximum extent permitted by law, Guarantor hereby agrees that all actions or proceedings arising in connection with this Guaranty may be tried and determined in the state and federal courts located in the County of Multnomah, State of Oregon, or, at the sole option of Lender, in any other court in which Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy.  To the maximum extent permitted by law, Guarantor hereby expressly waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section.
22.    Waiver of Jury Trial.  To the maximum extent permitted by law, Guarantor hereby absolutely, knowingly, unconditionally, and expressly waives any right to trial by jury of any action, cause of action, claim, demand, or proceeding arising under or with respect to this Guaranty, or in any way connected with, related to, or incidental to the dealings of Guarantor and Lender with respect to this Guaranty, or the transactions related hereto, in each case whether now existing or hereafter arising, and whether sounding in contract, tort, or otherwise.  To the maximum extent permitted by law, Guarantor hereby agrees that any such action, cause of action, claim, demand, or proceeding shall be decided by a court trial without a jury and that Lender may file an original counterpart of this section with any court or other tribunal as written evidence of the consent of Guarantor to the waiver of its right to trial by jury.
23.    Understandings With Respect to Waivers and Consents.  Guarantor warrants and agrees that each of the waivers and consents set forth are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to a defense or right may diminish, destroy, or otherwise adversely affect rights which Guarantor otherwise may have against the Borrower, or against any collateral, and that, under the circumstances the waivers and consents herein given are reasonable and not contrary to public policy or law.  If any of the waivers or consents is determined to be unenforceable under applicable law, such waiver and/or consent shall be effective to the maximum extent permitted by law.
24.    Counterparts.  This Guaranty may be executed in one or more counterparts by some or all of the parties hereto, each of which counterparts shall be an original and all of which together shall constitute a single agreement of Guaranty.  The failure of any party to execute this Guaranty, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.
25.    Statute of Limitations.  Any acknowledgment or new promise, whether by payment of principal or interest or otherwise and whether by Borrower or others (including Guarantor), with respect to any of the Secured Indebtedness or Guaranteed Obligations shall, if the statute of limitations in favor of Guarantor against Lender shall have commenced to run, toll the running of such statute of limitations and, if 

13
GUARANTY OF RECOURSE OBLIGATIONS

the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations.
26.    Material Inducement; No Conditions to Effectiveness.  Guarantor recognizes that Lender is relying upon this Guaranty and the undertakings of Guarantor hereunder in making extensions of credit to Borrower and further recognizes that the execution and delivery of this Guaranty is a material inducement to Lender in making extensions of credit to Borrower.  Guarantor hereby acknowledges that there are no conditions to the full effectiveness of this Guaranty.
27.    Limitation on Constituent Liability.  Notwithstanding anything stated to the contrary in this Guaranty, under no circumstances shall the constituent partners, members, or shareholders in Guarantor (direct or indirect) have any liability for the payment or performance of any of Guarantor’s obligations hereunder.
28.    ORAL LOAN AGREEMENTS.  UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO BE ENFORCEABLE.

[Remainder of page intentionally left blank]

14
GUARANTY OF RECOURSE OBLIGATIONS

IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty of Recourse Obligations as of the date first set forth above.
KBSGI REIT PROPERTIES, LLC,
a Delaware limited liability company

		
	By:
	KBS GROWTH & INCOME LIMITED PARTNERSHIP,

a Delaware limited partnership,
its sole member

		
	By:
	KBS GROWTH & INCOME REIT, INC.,

a Maryland corporation,
its general partner

		
	By:
	/s/ Charles J. Schreiber, Jr.

Charles J. Schreiber, Jr.,
Chief Executive Officer

S-1
GUARANTY OF RECOURSE OBLIGATIONSExhibit

Exhibit 10.6
PROMISSORY NOTE

DEFINED TERMS
	
		
	Execution Date: June 30, 2016
	City and State of Signing:
Newport Beach, California

	Loan Amount:    Up to $47,400,000.00 of which (x) $41,000,000.00 (“Initial Loan Amount”) shall be disbursed to Borrower on the Initial Loan Amount Funding Date and (y) up to $6,400,000.00 (“Maximum Loan Amount”) shall be disbursed as, when, and to the extent expressly provided in Section 12 of the Note.  [Note: Assumes full disbursement of Initial Loan Amount and will be modified as necessary]
	Initial Interest Rate:  2.60%

Interest Rate: A rate per annum equal to the sum of 215 basis points (2.15%) (the “Spread”) and the LIBOR RATE (as defined in Section 1(b))

	Borrower: KBSGI 421 SW 6TH AVENUE, LLC, a Delaware limited liability company

	Borrower's Address:

KBSGI 421 SW 6th Avenue, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn:  Clint Copulos, Vice President of Asset Management
 
With a copy to:
  
KBSGI 421 SW 6th Avenue, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Todd Smith, VP, Controller REIT Corporate Accounting
 
And to:
 
KBSGI 421 SW 6th Avenue, LLC 
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Bryce Lin, Director of Finance and Reporting

And to:

1
PROMISSORY NOTE

	
		
	Greenberg Traurig 
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attention:  Bruce Fischer, Esq.

	Holder: METROPOLITAN LIFE INSURANCE COMPANY, A NEW YORK CORPORATION

	Holder's Address:     
Metropolitan Life Insurance Company, a New York corporation
10 Park Avenue
Morristown, New Jersey 07962
Attention:  Senior Vice President, Real Estate Investors

With a copy to:
Metropolitan Life Insurance Company
425 Market Street, Suite 1050
San Francisco, California  94105
Attention:  Vice President
And to:
Metropolitan Life Insurance Company
425 Market Street, Suite 1050
San Francisco, California  94105
Attention:  Associate General Counsel

	Maturity Date: July 1, 2021.  The Maturity Date is subject to extension as provided in Section 14 herein.
	Initial Loan Amount Funding Date: The date the Initial Loan Amount is disbursed to Borrower.
Earn Out Funding Date: The date or dates the Maximum Loan Amount or portions thereof is disbursed to Borrower.  

	Interest Only Period: The period from the Initial Loan Amount Funding Date and ending on the Maturity Date.  
	 

2
PROMISSORY NOTE

	
		
	Monthly Installment: As provided in Section 1(c) hereof.
	Permitted Prepayment Period: The Loan may not be prepaid in whole or in part at any time prior to the Maturity Date except as follows.  Commencing on  July 1, 2017 (the “Prepayment Commencement Date”) Borrower may prepay the Loan without a prepayment fee on ten (10) days prior written notice.
Sections 8, 9 and 10 set forth other provisions relating to permitted and prohibited prepayments

	Liable Party: KBSGI REIT PROPERTIES, LLC, a Delaware limited liability company

Addresses of Liable Party:

KBSGI REIT PROPERTIES, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Clint Copulos, Vice President of Asset
Management
 
With a copy to:
  
KBSGI REIT PROPERTIES, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Todd Smith, VP, Controller REIT Corporate Accounting
 
And to:
 
KBSGI REIT PROPERTIES, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, CA  92660
Attn:  Bryce Lin, Director of Finance and Reporting

And to:    
Greenberg Traurig
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attention:  Bruce Fischer, Esq.

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

3
PROMISSORY NOTE

	
		
	

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

	

Note:  This Promissory Note.

Deed of Trust:  Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing dated as of the Execution Date granted by Borrower to the Trustee named in the Deed of Trust for the benefit of Holder, together with all extensions, renewals, modifications, restatements and amendments thereof. 

Loan Documents:  This Note, the Deed of Trust and any other documents related to this Note and/or the Deed of Trust (except the Indemnity Agreement and the Guaranty) and all renewals, amendments, modifications, restatements and extensions of these documents.

Guaranty:  Guaranty of Recourse Obligations dated as of the Execution Date and executed by Liable Party in favor of Holder, together with all extensions, renewals, modifications, restatements and amendments thereof.

Indemnity Agreement:  Unsecured Indemnity Agreement dated as of the Execution Date and executed by Borrower in favor of Holder, together with all extensions, renewals, modifications, restatements and amendments thereof.

The Indemnity Agreement and the Guaranty are not Loan Documents and shall survive repayment of the Loan or other termination of the Loan Documents in accordance with their terms.

Loan:  The loan evidenced by this Note.

 

FOR VALUE RECEIVED, Borrower promises to pay to the order of Holder, at Holder's Address or such other place as Holder may from time to time designate, the Loan Amount with interest payable in the manner described below, in money of the United States of America that at the time of payment shall be legal tender for payment of all obligations.

Capitalized terms which are not defined in this Note shall have the meanings set forth in the Deed of Trust.

1.    Payment of Principal and Interest.  Principal and interest under this Note shall be payable as follows:

(a)    The Initial Interest Rate is the rate set forth on the front page of this Note.  The Interest Rate will be reset by Holder, effective as of the first calendar day of the second month following the month during which the Initial Loan Amount Funding Date occurs, and effective the first calendar day of the first month of each successive one month period 
thereafter during the term of the Loan (individually “Rate Reset Date” and collectively “Rate 

4
PROMISSORY NOTE

Reset Dates”).  The Interest Rate will be reset as aforesaid to the annual rate equal to the sum of (i) the Spread plus (ii) the “LIBOR Rate” as of approximately 11:00 a.m. London Time on  the second Business Day prior to each of the Rate Reset Dates.  A “Business Day” shall mean a day that both (x) commercial banks in London are open for international business (including dealings in dollar deposits) and (y) Holder is open for business in New York City;

(b)    The term “LIBOR Rate” as used herein shall mean the one month London interbank offered rate for deposits in U.S. dollars rounded upwards, if necessary, to the nearest one one-hundredth (1/100th) of one percent appearing on the display designated as Reuters Screen LIBOR01 Page, or such other page as may replace LIBOR01 on that service (or such other service as may be nominated as the information vendor by the British Bankers' Association (“BBA”), or successor administrator to the BBA, for the purpose of displaying British Bankers' Association, or successor administrator’s,  interest settlement rates for U.S. dollar deposits as the composite offered rate for London interbank deposits).  If the aforementioned sources of the LIBOR Rate are no longer available, then the term “LIBOR Rate” shall mean the one month London interbank offered rate for deposits in U.S. dollars rounded upwards, if necessary, to the nearest one one-hundredth (1/100th) of one percent as shown on the appropriate Bloomberg Financial Markets Services Screen or any successor index on such service under the heading “USD”.  In the event the LIBOR Rate is no longer available, it shall be replaced by the nearest equivalent or replacement benchmark rate as reasonably determined by Holder in its sole discretion;  

(c)    Borrower shall pay interest only in advance on the Initial Loan Amount Funding Date and shall then pay interest only in arrears, on the first day of the second month following the Initial Loan Amount Funding Date and thereafter Borrower shall make payments of interest only on the first day of each month through and including the last month of the Loan term (i.e., July 1, 2021], unless otherwise extended pursuant to Section 14).  The entire outstanding principal balance of the Loan together with all accrued interest and all other sums due under the Loan Documents, shall be paid on the first day of the 61st month following the Initial Loan Amount Funding Date (i.e., July 1, 2021 unless otherwise extended pursuant to Section 14).  Interest shall be calculated on a daily basis of the actual number of days elapsed over a 360-day year; and

(d)    On the Maturity Date, a final payment in the aggregate amount of the unpaid principal sum evidenced by this Note, all accrued and unpaid interest, and all other sums evidenced by this Note (and all renewals, modifications, consolidations and extensions of this Note) or secured by the Deed of Trust and/or required to be paid by Borrower under any of the other Loan Documents as well as any future loans, advances or fundings under the Deed of Trust that may be made to or on behalf of Borrower by Holder following the Initial Loan Amount Funding Date (collectively, the “Secured Indebtedness”), shall become immediately payable in full.
Borrower acknowledges and agrees that a substantial portion of the original Loan Amount shall be outstanding and due on the Maturity Date.

5
PROMISSORY NOTE

2.    Application of Payments.  At the election of Holder, and to the extent permitted by law, all payments shall be applied in the order selected by Holder to any expenses, prepayment fees, late charges, escrow deposits and other sums due and payable under the Loan Documents, and to unpaid interest at the Interest Rate or at the Default Rate, as applicable.  The balance of any payments shall be applied to reduce the then unpaid Loan Amount.

3.    Security.  The covenants of the Deed of Trust are incorporated by reference into this Note.  This Note shall evidence, and the Deed of Trust shall secure, the Secured Indebtedness.

4.    Late Charge.  If any payment of interest, any payment of a Monthly Installment or any payment of a required escrow deposit is not paid within seven (7) days after the due date, Holder shall have the option to charge Borrower the Late Charge.  The Late Charge is for the purpose of defraying the expenses incurred in connection with handling and processing delinquent payments and is payable in addition to any other remedy Holder may have.  Unpaid Late Charges shall become part of the Secured Indebtedness and shall be added to any subsequent payments due under the Loan Documents.

5.    Acceleration Upon Default.  To the fullest extent permitted by law, at the option of Holder, the Secured Indebtedness, and all other sums evidenced and/or secured by the Loan Documents, including without limitation any applicable prepayment fees (collectively, the “Accelerated Loan Amount”) shall become immediately due and payable if  Borrower fails to pay any sum specified in this Note within ten (10) days after the date of written notice of such failure from Holder to Borrower, provided, however, that Holder shall not be required to provide such notice more than one (1) time in any twelve (12) month period or two (2) times in the aggregate during the term of the Loan, and in the event that Holder is no longer required to provide Borrower with such notices of such failure, then the failure of Borrower to pay any sum specified in this Note within ten (10) days of the date when such amount is due shall cause the Accelerated Loan Amount to become immediately due and payable.
6.    Interest Upon Default.  The Accelerated Loan Amount shall bear interest at the Default Rate which shall never exceed the maximum rate of interest permitted to be contracted for under the laws of the State.  The Default Rate shall commence upon the occurrence of an Event of Default and shall continue until all defaults are cured.

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

6
PROMISSORY NOTE

To the fullest extent permitted by applicable laws, any amounts contracted for, charged or received under the Loan Documents included for the purpose of determining whether the Interest Rate would exceed the highest lawful rate shall be calculated by allocating and spreading such interest to and over the full stated term of this Note.

8.    Prepayment.  Borrower shall not have the right to prepay all or any portion of the Loan Amount at any time during the term of this Note except as expressly set forth in the Defined Terms.  If Borrower provides notice of its intention to prepay, the Accelerated Loan Amount shall become due and payable on the date specified in the prepayment notice; provided, however, that, no more than two (2) times in any twelve (12) month period, Borrower shall have the right (at no cost charged by Holder to Borrower) to revoke any notice to Holder of Borrower’s notice to prepay upon not less than five (5) business day’s prior written notice to Holder.

9.    Lockout Prepayment Fee.

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

(b)    The “Lockout Prepayment Fee” shall be equal to the greater of (a) the value of all remaining Partial Monthly Payments of Interest (as defined below), or (b) one percent (1%) of the amount of the principal being prepaid.  A “Partial Monthly Payment of Interest” shall be defined as the outstanding principal balance of the Loan multiplied by the sum of the Spread plus the LIBOR Rate, divided by 360, multiplied by 365 and divided by 12.  The number of “remaining” Partial Monthly Payments of Interest to be used in the calculation of the Lockout Prepayment Fee shall be equal to the number of remaining monthly installments of principal and interest due on the Loan to and including the Prepayment Commencement Date.

10.    Waiver of Right to Prepay Note Without Prepayment Fee.  Borrower acknowledges that Holder has relied upon the anticipated investment return under this Note in entering into transactions with, and in making commitments to, third parties and that except as 
and when prepayment is expressly permitted under the terms of this Note without a prepayment fee, the tender of any prohibited prepayment or any permitted prepayment which pursuant to the 

7
PROMISSORY NOTE

terms of this Note requires a Lockout Prepayment Fee, shall include the Lockout Prepayment Fee.  Borrower agrees that the determination of the Interest Rate was based on the intent, expectation and agreement (and the Interest Rate would have been higher without such agreement) of Borrower and Holder that the amounts advanced under this Note would not be prepaid during the term of this Note, or if any such prepayment would occur, the Lockout Prepayment Fee would apply (except as expressly permitted by the terms of this Note).  Borrower also agrees that the Lockout Prepayment Fee represents the reasonable estimate of Holder and Borrower of a fair average compensation for the loss that may be sustained by Holder as a result of a prepayment of this Note and it shall be paid without prejudice to the right of Holder to collect any other amounts provided to be paid under the Loan Documents.

BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER OREGON LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION WHICH IS PROHIBITED OR RESTRICTED BY THE DEED OF TRUST, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY THE LOCKOUT PREPAYMENT FEE SPECIFIED IN SECTION 9. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT HOLDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.
BORROWER’S INITIALS:/s/CJS
11.    Liability of Borrower.  

(a)    Upon the occurrence of an Event of Default, except as provided in this Section 11, Holder will look solely to the Property and the security under the Loan Documents for the repayment of the Secured Indebtedness and will not enforce a deficiency judgment against Borrower.  However, nothing contained in this provision shall limit the rights of Holder to proceed against Borrower and/or the Liable Party (but not any of their respective constituent members,  partners, or shareholders, direct or indirect, other than Liable Party under the Guaranty), if any, (i) to enforce any leases entered into by Borrower or its affiliates as a tenant under any of the Leases; (ii) to recover damages for fraud, material misrepresentation, material breach of warranty (and in order to recover from Liable Party, material, intentional misrepresentation or material, intentional breach of warranty) or intentional material physical waste; (iii) to recover any condemnation proceeds or insurance proceeds or other similar funds which have been misapplied by Borrower in violation of the Loan Documents or which, under the terms of the Loan Documents, should have been paid to Holder; (iv) to recover (A) any tenant security deposits, tenant letters of credit or other tenant deposits or tenant termination, 
restoration, or signage fees or other similar fees paid to Borrower in connection with the Property and that are not applied as expressly set forth in the Loan Documents, or (B) prepaid 

8
PROMISSORY NOTE

rents for a period of more than thirty (30) days after an Event of Default; (v) to recover Rents and Profits received by Borrower after the first day of the month in which an Event of Default occurs and prior to the date Holder acquires title to the Property which have not been applied to the Loan or in accordance with the Loan Documents to operating and maintenance expenses of the Property; (vi) to recover solely from Borrower (and not Liable Party with respect to this Section 11(a)(vi)) damages, costs and expenses arising from, or in connection with, Article 6 of the Deed of Trust pertaining to hazardous materials or the  Indemnity Agreement; (vii) with respect to Borrower only (and not Liable Party), to recover all amounts due and payable pursuant to Sections 11. 6 and 11.7 of the Deed of Trust and any amount expended by Holder in connection with the foreclosure of the Deed of Trust; (viii) to recover costs and damages arising from Borrower’s failure to pay any insurance premiums or Impositions in the event Borrower is not required to deposit such amounts with Holder pursuant to Section 2.5 of the Deed of Trust; and (ix) to recover damages arising from Borrower’s failure to comply with Section 8.1 of the Deed of Trust pertaining to ERISA.
 
(b)    The limitation of liability in Section 11(a) shall not apply and the Loan will be a recourse loan to the Borrower and to Liable Party (but not any of their respective constituent members or partners, or shareholders, direct or indirect, other than Liable Party under the Guaranty), in the event that Borrower commences a voluntary bankruptcy or insolvency proceeding or is involved in a collusive involuntary bankruptcy or insolvency proceeding, which is not dismissed within one hundred twenty (120) days of filing. In addition, this agreement shall not waive any rights which Holder would have under any provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Secured Indebtedness or to require that the Property shall continue to secure all of the Secured Indebtedness.
(c)    The limitation of liability in Section 11(a) shall not apply and the Loan shall be fully recourse to Borrower and the Liable Party (but not any of their respective constituent members, partners or shareholders, direct or indirect, other than Liable Party under the Guaranty), in the event there is a voluntary Transfer or voluntary Secondary Financing except as permitted in the Loan Documents or as otherwise approved in writing by Holder.  For purposes of this paragraph, “Transfers” shall only refer to transfers of ownership of the Property or of ownership in entities directly or indirectly owning the Property, in each case which is voluntary.
(d)    Notwithstanding the foregoing, in the event that Borrower fails to maintain or replace the Interest Rate Cap Agreement as and when required under the Deed of Trust or the terms of the Interest Rate Cap Agreement, at Holder’s sole option, Borrower and Liable Party (but not any of their respective constituent members, partners, or shareholders, direct or indirect, other than Liable Party under the Guaranty), shall be liable on a recourse basis for all actual damages, costs, expenses, or liabilities (including reasonable attorneys’ fees) that Holder may incur as a result of such failure and the limitation on liability set forth in Section 11(a) of the Note and Section 9.1(a) of the Deed of Trust shall not be applicable thereto; provided however, that in no event shall Borrower be liable for consequential damages arising out of such failure, including, without limitation, incidental damages, punitive damages, lost profits or opportunity costs.
    

9
PROMISSORY NOTE

12.    Earn Out Funding.  Borrower may request that Holder disburse additional loan proceeds in an amount up to but not exceeding the Maximum Loan Amount solely to reimburse Borrower for tenant improvements and leasing commissions, subject to the terms and conditions set forth in this Section 12; provided, however, in no event shall the total Loan Amount exceed $47,400,000.00:
(a)    The “Earn Out Funding” shall be equal to the amount funded to reimburse Borrower for the costs associated with tenant improvements and leasing commissions paid for new leases, lease expansions or lease renewals that meet the requirements of the Leasing Guidelines or as otherwise reasonably approved by Holder.
(b)    Tenant improvements for leases shall not exceed sixty-five and 00/100 dollars ($65.00) per rentable square foot for new leases and renewals.  Leasing commissions in all cases shall not exceed seven and a half percent (7.5%) of gross rentals.
(c)    The Earn Out Funding shall be funded in amounts of not less than five hundred thousand dollars ($500,000.00) per advance, with reasonable out of pocket costs incurred by Holder paid to Holder for each advance, with no more than one advance per quarter or four advances per year (provided that the final advance may be less than five hundred thousand dollars ($500,000.00) if necessary to achieve the Maximum Loan Amount.
(d) On each Earn Out Funding Date, the Debt Yield Ratio (as defined in Section 14(c) below) based on the net operating income, in the opinion of Holder acting reasonably, derived from the Property shall be no less than nine percent (9.0%) during the first (1st) three (3) years of the Loan at the time of the requested future funding, and no less than nine and half percent (9.5%) thereafter at the time of the requested future funding.  
(e)    On each Earn Out Funding Date, the loan to value ratio based on the Property shall not exceed sixty percent (60%) as determined by Holder in its reasonable discretion.  In the event the threshold is not achieved, Borrower shall have the right to request in writing that Holder engage, at Borrower’s sole cost and expense, an appraiser to determine the value of the Property, and Holder shall engage such appraiser.
(f)    On each Earn Out Funding Date, there shall be no material adverse change in the Borrower or the Property and there shall be no Event of Default under this Note, the Assignment of Leases, the Guaranty or the Unsecured Indemnity Agreement or facts existing that with the giving of notice or passage of time would constitute an Event of Default.
(g)    The Annual Interest Rate applicable to the Initial Loan Amount shall be applicable to the Earn Out Funding, and at Holder’s option shall be documented as additional advances to the existing Loan Amount.
(h)    The documentation required to be submitted to Holder for the Earn Out Funding shall include, but not be limited to (but only to the extent applicable): (i) copies of the applicable fully executed leases or lease amendments, (ii) copies of the applicable commencement date agreements or other documentation reasonably acceptable to Holder that confirms each tenant’s acceptance of its premises (if available in connection with said draw 

10
PROMISSORY NOTE

request), (iii) copies of invoices, (iv) copies of lien releases (for reimbursements of costs incurred by Borrower for the prior tenant improvements or portion thereof), (v) a signed certification by a corporate officer of the Borrower (or the equivalent) confirming that the applicable portion of the subject tenant improvements has been completed and has been (or will be) paid for and (vi) any other documentation reasonably requested by Holder.
(i)    The Borrower shall be responsible for all reasonable third party costs associated with the inspection or verification of construction as described in this Section 12 and for all reasonable attorneys’ fees in connection with the Earn Out Funding.  Holder may retain the services of a third party consultant to perform inspections upon completion of construction, and the reasonable cost of such consultant shall be borne by the Borrower.
(j)    The Earn Out Funding shall be on such other terms and conditions as Holder may reasonably determine to be consistent with funding the Loan, including obtaining title insurance endorsements (to the extent available) insuring a continued first lien of the Loan at the time of each funding in the amount of such funding, which shall be provided by Borrower.
13.    Waiver by Borrower.  Except as expressly otherwise provided in this Note or in the other Loan Documents, Borrower and others who may become liable for the payment of all or any part of this Note, and each of them, waive diligence, demand, presentment for payment, notice of nonpayment, protest, notice of dishonor and notice of protest, notice of intent to accelerate and notice of acceleration and specifically consent to and waive notice of any amendments, modifications, renewals or extensions of this Note, including the granting of extension of time for payment, whether made to or in favor of Borrower or any other person or persons.
14.    Extension of Maturity Date.

(a)    Borrower shall have two (2) one-year options to extend the Maturity Date of the Loan (the “Extension Options”).  
(b)    The Interest Rate during each of the extensions shall be the (a) the sum of (x) the one month LIBOR Rate plus (y) the Spread.
(c)    The Extension Options shall be subject to the following conditions:  (i) there shall be no Event of Default under the Loan Documents, the Indemnity Agreement or the Guaranty at the time of the exercise of any Extension Option; (ii) the Debt Yield Ratio (as defined below) at the time of the exercise of the applicable Extension Option shall be no less than 9.5% (the “Debt Yield Requirement”); (iii) the loan to value ratio of the Property at the time of the exercise of the applicable Extension Option shall be no greater than sixty percent (60%) as determined by Holder in its reasonable discretion (the “Loan to Value Requirement”); provided, however, in the event the Loan to Value Requirement is not satisfied, Borrower shall have the right to request in writing that Holder engage, at Borrower’s sole cost and expense, an appraiser to determine the value of the Property, which appraiser Holder shall engage; (iv) the Borrower shall comply with all of the requirements set forth in the first sentence of Section 2.11(b) of the Deed of Trust pertaining the Interest Rate Cap Agreement (the “Interest Rate Cap Requirements”) (except that with 

11
PROMISSORY NOTE

respect to each of the Extension Options the interest rate referred to in the first sentence of the Interest Rate Cap Requirements shall be such interest rate that is determined by Holder in its sole good faith discretion); (v) the Borrower shall pay all costs and expenses incurred by Holder in connection with such extension including title insurance premiums, documentation costs and reasonable attorneys’ fees; (vi) Borrower shall pay a fee equal to twenty-five one hundredths percent (0.25%) of the outstanding Loan balance for each Extension Option exercised; and (vii) Borrower and Liable Party shall execute applicable extension documents satisfactory to Holder relating to the Loan Documents, the Indemnity Agreement and the Guaranty (provided that Liable Party shall not be required to execute the Indemnity Agreement or any modification thereof).  “Debt Yield Ratio” shall mean the ratio (expressed as a percentage) of the net operating income derived from the Property projected for the succeeding twelve (12) month period, as determined by Holder in its reasonable discretion (“Projected NOI”), to the outstanding principal balance of the Loan.  Projected NOI shall be determined by Holder in its reasonable discretion based on financial statements, rent rolls and budgets to be provided by Borrower and reasonably satisfactory to Holder.  In the event that the Debt Yield Requirement and/or the Loan to Value Requirement is not satisfied, Borrower may prepay the outstanding principal balance of the Loan, without a prepayment fee, in the amount necessary to satisfy such conditions.  
(d)    In the event Borrower wishes to exercise an Extension Option it shall provide Holder with notice that it shall exercise such Extension Option at least forty-five (45) days prior to the applicable Maturity Date of the Loan.  Holder shall determine such initial Interest Rate as of approximately 11:00 a.m. London time on the second Business Day prior to the applicable Maturity Date.  Holder shall notify the Borrower of the initial Interest Rate and acceptable terms for any required interest rate protection instrument (in accordance with the terms of Section 2.11 of the Deed of Trust) with respect to any extension prior to such applicable Maturity Date.  
(e)    With respect to any extension, the Interest Rate will be reset by Holder effective the first calendar day of the second month following the month during which the effective date of the extension occurred and effective the first calendar day of the first month of each successive one month period thereafter during the remaining term of the Loan (the “Extension Rate Reset Dates”) and Borrower shall comply with all of the Interest Rate Cap Requirements. The Interest Rate will be reset as aforesaid to the rate equal to the sum of (x) the Spread  plus (ii) the one month LIBOR Rate as of approximately 11:00 a.m. London time on the second Business Day prior to each of the Extension Rate Reset Dates.
15.    Exercise of Rights.  No single or partial exercise by Holder, or delay or omission in the exercise by Holder, of any right or remedy under the Loan Documents shall waive or limit the exercise of any such right or remedy.  Holder shall at all times have the right to proceed against any portion of or interest in the Property in the manner that Holder may deem appropriate, without waiving any other rights or remedies.  The release of any party under this 
Note shall not operate to release any other party which is liable under this Note and/or under the other Loan Documents or under the Indemnity Agreement.

        

12
PROMISSORY NOTE

16.    Fees and Expenses.  If Borrower defaults under this Note, Borrower shall be personally liable for and shall pay to Holder, in addition to the sums stated above, the reasonable costs and expenses of enforcement and collection, including a reasonable sum as an attorney's fee.  This obligation is not limited by Section 11.

17.    No Amendments.  This Note may not be modified or amended except in a writing executed by Borrower and Holder.  No waivers shall be effective unless they are set forth in a writing signed by the party which is waiving a right.  This Note and the other Loan Documents are the final expression of the lending relationship between Borrower and Holder.

18.    Governing Law.  This Note is to be construed and enforced in accordance with the laws of the State in which the Property is located.

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

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

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

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

21.    ORAL LOAN AGREEMENTS.  UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO BE ENFORCEABLE.

[Signature on following page]

13
PROMISSORY NOTE

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

KBSGI 421 SW 6TH AVENUE, LLC,
a Delaware limited liability company

		
	By:
	KBSGI REIT ACQUISITION II, LLC, 

a Delaware limited liability company, 
its sole member
		
	By:
	KBSGI REIT PROPERTIES, LLC,

a Delaware limited liability company, 
its sole member
		
	By:
	KBS GROWTH & INCOME LIMITED PARTNERSHIP, 

a Delaware limited partnership, 
its sole member
		
	By:
	KBS GROWTH & INCOME REIT, INC., 

a Maryland corporation,
its general partner
		
	By:
	/s/ Charles J. Schreiber, Jr. 

Charles J. Schreiber, Jr., 
Chief Executive Officer

S-1
PROMISSORY NOTE

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00261-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00261-of-00352.parquet"}]]