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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________________________________
FORM 10-K
______________________________________________________________________________________________________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 000-54687
__________________________________________________________________________________________
KBS REAL ESTATE INVESTMENT TRUST III, INC.
(Exact Name of Registrant as Specified in Its Charter)
__________________________________________________________________________________________
Maryland
 
27-1627696
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
800 Newport Center Drive, Suite 700
Newport Beach, California
 
92660
(Address of Principal Executive Offices)
 
(Zip Code)
(949) 417-6500
(Registrant’s Telephone Number, Including Area Code)
__________________________________________________________________________________________  
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
None
 
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
__________________________________________________________________________________________  
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨   No   x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ¨   No   x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes   x   No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   x   No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment of this Form 10-K.   x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
 
¨
  
Accelerated Filer
  
¨
Non-Accelerated Filer
 
x  (Do not check if a smaller reporting company)
  
Smaller reporting company
  
¨
 
 
 
 
Emerging growth company
 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes   ¨   No   x
There is no established market for the Registrant’s shares of common stock. On December 9, 2016, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $10.63 based on the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2016. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation of the estimated value per share as of December 9, 2016, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016. On December 6, 2017, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $11.73 based on the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to the Registrant’s net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation of the estimated value per share as of December 6, 2017, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in this Annual Report on Form 10-K.
There were approximately 180,831,059 shares of common stock held by non-affiliates as of June 30, 2017, the last business day of the Registrant’s most recently completed second fiscal quarter.
As of March 5, 2018 , there were 178,303,537  outstanding shares of common stock of the Registrant.
Documents Incorporated by Reference: Registrant incorporates by reference in Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K portions of its Definitive Proxy Statement for its 2018 Annual Meeting of Stockholders.
 
 
 
 
 

Table of Contents

TABLE OF CONTENTS

 
 
ITEM 1.
 
ITEM 1A.
 
ITEM 1B.
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
 
ITEM 5.
 
ITEM 6.
 
ITEM 7.
 
ITEM 7A.
 
ITEM 8.
 
ITEM 9.
 
ITEM 9A.
 
ITEM 9B.
 
 
 
ITEM 10.
 
ITEM 11.
 
ITEM 12.
 
ITEM 13.
 
ITEM14.
 
 
 
ITEM 15.
 
 
 
 


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FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Real Estate Investment Trust III, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•
We are dependent on KBS Capital Advisors LLC (“KBS Capital Advisors”), our advisor, to identify suitable investments, to manage our investments and for the disposition of our investments.
•
All of our executive officers, our affiliated directors and other key real estate and debt finance professionals are also officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other KBS-affiliated entities. As a result, our executive officers, our affiliated directors, some of our key real estate and debt finance professionals, our advisor and its affiliates face conflicts of interest, including significant conflicts created by our advisor’s and its affiliates’ compensation arrangements with us and other KBS-sponsored programs and KBS-advised investors and conflicts in allocating time among us and these other programs and investors. Furthermore, these individuals may become employees of another KBS-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other KBS-sponsored programs. These conflicts could result in action or inaction that is not in the best interests of our stockholders.
•
Because investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs or KBS-advised investors, our advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.
•
Our advisor and its affiliates receive fees in connection with transactions involving the purchase or origination, management and disposition of our investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us and increases our stockholders’ risk of loss. In addition, we have paid substantial fees to and expenses of our advisor, its affiliates and participating broker-dealers in connection with our now-terminated primary initial public offering, which payments increase the risk that our stockholders will not earn a profit on their investment. We may also pay significant fees during our listing/liquidation stage. Although most of the fees payable during our listing/liquidation stage are contingent on our stockholders first enjoying agreed-upon investment returns, the investment return thresholds may be reduced subject to approval by our conflicts committee and to other limitations in our charter.
•
Our charter permits us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. As of December 31, 2017 , we had used a combination of cash flow from operations and proceeds from debt financings to fund distributions. From time to time during our operational stage, we may use proceeds from third party financings to fund at least a portion of distributions in anticipation of cash flow to be received in later periods. We may also fund such distributions from the sale of assets or from the maturity, payoff or settlement of any real estate-related investments, to the extent we make any such additional investments. If we pay distributions from sources other than our cash flow from operations, the overall return to our stockholders may be reduced.
•
We may incur debt until our total liabilities would exceed 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of an investment in us.


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•
We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our debt service obligations and limiting our ability to pay distributions to our stockholders.
•
We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes including, but not limited to: the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our real estate properties; reserves required by any financings of our real estate investments; the acquisition or origination of real estate investments, which include payment of acquisition or origination fees to our advisor; and the repayment of debt. If such funds are not available from our dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
•
Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to implement our business strategy and generate returns to stockholders. In addition, our real estate investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders.
•
Our charter does not require us to liquidate our assets and dissolve by a specified date, nor does our charter require our directors to list our shares for trading by a specified date. No public market currently exists for our shares of common stock, and we have no plans at this time to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. Any sale must comply with applicable state and federal securities laws. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our shares. Our shares cannot be readily sold and, if our stockholders are able to sell their shares, they would likely have to sell them at a substantial discount from the price our stockholders paid to acquire the shares and from our estimated value per share.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of this Annual Report on Form 10-K.

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PART I
ITEM 1.
BUSINESS
Overview
KBS Real Estate Investment Trust III, Inc. (the “Company”) was formed on December 22, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011 and it intends to continue to operate in such a manner. As used herein, the terms “we,” “our” and “us” refer to the Company and as required by context, KBS Limited Partnership III, a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner.
We own a diverse portfolio of real estate investments. As of December 31, 2017 , we owned 28 office properties (one of which was held for sale) and one mixed-use office/retail property and had made an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property, which is currently under construction. Additionally, as of December 31, 2017 , we had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction.
On February 4, 2010, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a minimum of 250,000 shares and a maximum of up to 280,000,000 shares, or up to $2,760,000,000 of shares, of common stock for sale to the public, of which up to 200,000,000 shares, or up to $2,000,000,000 of shares, were registered in our primary offering and up to 80,000,000 shares, or up to $760,000,000 of shares, were registered under our dividend reinvestment plan. The SEC declared our registration statement effective on October 26, 2010 and we retained KBS Capital Markets Group LLC (“KBS Capital Markets Group”), an affiliate of our advisor, to serve as the dealer manager of our initial public offering pursuant to a dealer manager agreement. The dealer manager was responsible for marketing our shares in our initial public offering. We ceased offering shares of common stock in our primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015.
We sold 169,006,162 shares of common stock in our now-terminated primary initial public offering for gross offering proceeds of $1.7 billion . As of December 31, 2017 , we had also sold 22,892,452 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $224.7 million . Also as of December 31, 2017 , we had redeemed 11,312,369 shares sold in our initial public offering for $114.4 million .
Additionally, on October 3, 2014, we issued 258,462 shares of common stock, for $2.4 million, in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.
We continue to offer shares under our dividend reinvestment plan. In some states, we will need to renew the registration statement annually or file a new registration statement to continue the dividend reinvestment plan offering. We may terminate our dividend reinvestment plan offering at any time.
As our advisor, KBS Capital Advisors manages our day-to-day operations and our portfolio of real estate investments. KBS Capital Advisors makes recommendations on all investments to our board of directors. All proposed investments must be approved by at least a majority of our board of directors, including a majority of the conflicts committee. Unless otherwise provided by our charter, the conflicts committee may approve a proposed investment without action by the full board of directors if the approving members of the conflicts committee constitute at least a majority of the board of directors. KBS Capital Advisors also provides asset-management, disposition, marketing, investor-relations and other administrative services on our behalf. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
Objectives and Strategies
Our primary investment objectives are to preserve and return our stockholders’ capital contributions and to provide our stockholders with attractive and stable cash distributions. We will also seek to realize growth in the value of our investments by timing asset sales to maximize asset value.
2017 Investment Highlights
During 2017, we acquired a 75% equity interest in an existing company and created a joint venture with an unaffiliated developer to develop and subsequently operate a 12-story office building and an adjacent two-story office/retail building in the Denver submarket of Greenwood Village, Colorado (together, “Village Center Station II”). The total projected cost of the Village Center Station II development is approximately $113.1 million and our initial capital contribution to the Village Center Station II joint venture was $32.3 million .

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Real Estate Portfolio
Other than our investments in a joint venture to develop and subsequently operate a two-building apartment complex located on the developable land at Gateway Tech Center (“Hardware Village”) and Village Center Station II, we have made investments in core real estate properties, which are generally lower risk, existing properties with at least 80% occupancy and minimal near-term lease rollover. Our primary investment focus has been core office properties located throughout the United States, though we may also invest in other types of properties. Our core property focus in the U.S. office sector has reflected a more value-creating core strategy. In many cases, these properties have slightly higher (10% to 15%) vacancy rates and/or higher near-term lease rollover at acquisition than more conservative value-maintaining core properties. These characteristics may provide us with opportunities to lease space at higher rates, especially in markets with increasing absorption, or to re-lease space at higher rates, bringing below-market rates of in-place expiring leases up to market rates. Many of these properties have required or will require a moderate level of additional investment for capital expenditures and tenant improvement costs in order to improve or rebrand the properties and increase rental rates. Thus, we believe these properties provide an opportunity for us to achieve more significant capital appreciation by increasing occupancy, negotiating new leases with higher rental rates and/or executing enhancement projects.
The core office properties in which we have invested include low-rise, mid-rise and high-rise office buildings and office parks in urban and suburban locations in or near central business districts with access to transportation.
We generally hold fee title to the real estate properties in our portfolio. We may also enter into other joint ventures, partnerships and other co-ownership arrangements (including preferred equity investments) or participations for the purpose of obtaining interests in real estate properties and other real estate investments.
We generally intend to hold our core properties for three to seven years, which we believe is a reasonable period to enable us to capitalize on the potential for increased income and capital appreciation of properties. However, economic and market conditions may influence us to hold our real estate properties for different periods of time.
We have invested all of the proceeds from our now-terminated initial public offering in a diverse portfolio of real estate investments. From time to time, and based upon asset sales, availability under our debt facilities or market conditions, we may seek to make additional real estate investments.
We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. We believe that we are most likely to meet our investment objectives through the careful selection and underwriting of assets. When making an acquisition, we will emphasize the performance and risk characteristics of that investment, how that investment will fit with our portfolio-level performance objectives, the other assets in our portfolio and how the returns and risks of that investment compare to the returns and risks of available investment alternatives. Thus, to the extent that our advisor presents us with what we believe to be good investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), our portfolio composition may vary from what we currently expect. In fact, we may invest in whatever types of real estate or real estate-related assets we believe are in our best interests. However, we will attempt to construct a portfolio that produces stable and attractive returns by spreading risk across different real estate investments.
We acquired our first real estate property on September 29, 2011. As of December 31, 2017 , our real estate portfolio was composed of 28 office properties (one of which was held for sale) and one mixed-use office/retail property encompassing an aggregate of 11.1 million rentable square feet and was collectively 93% occupied. In addition, we have made an investment in an unconsolidated joint venture to develop and subsequently operate Village Center Station II, which is currently under construction, and have entered into a consolidated joint venture to develop and subsequently operate Hardware Village, which is currently under construction.
For more information on our real estate investments, including tenant information, see Item 1, Part 2, “Properties.”

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The following charts illustrate the geographic diversification of our real estate properties, excluding properties under development or held for sale, based on total leased square feet and total annualized base rent as of December 31, 2017 :
KBSRIIIQ4201710KLEASEDSQFT03.JPG

KBSRIIIQ4201710KANNUALIZED04.JPG
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

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We have a stable tenant base and we have tried to diversify our tenant base in order to limit exposure to any one tenant or industry. Our top ten tenants leasing space in our real estate portfolio represented approximately 18.6% of our total annualized base rent as of December 31, 2017 . The chart below illustrates the diversity of tenant industries in our real estate portfolio, excluding properties under development or held for sale, based on total annualized base rent as of December 31, 2017 :
KBSRIIIQ4201710KINDUSTRY04.JPG
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
* “Other” includes any industry less than 4% of total.
Financing Objectives
We financed our real estate acquisitions to date with a combination of the proceeds received from our now-terminated initial public offering and debt. We may use proceeds from borrowings to finance acquisitions of new properties or assets or for originations of new loans; to pay for capital improvements, repairs or tenant build-outs to properties; to refinance existing indebtedness; to pay distributions; or to provide working capital. Our investment strategy is to utilize primarily secured and possibly unsecured debt to finance our investment portfolio.
We expect to continue to borrow funds at fixed and variable rates. As of December 31, 2017 , we had debt obligations in the aggregate principal amount of $2.0 billion , with a weighted-average remaining term of 2.4 years. We plan to exercise our extension options available under our loan agreements or pay down or refinance the related notes payable prior to their maturity dates. We had a total of $192.5 million of fixed rate notes payable and $1.8 billion of variable rate notes payable. The interest rates on $1.3 billion of our variable rate notes payable were effectively fixed through interest rate swap agreements. The weighted-average interest rates of our fixed rate debt and variable rate debt as of December 31, 2017 were 4.1 % and 3.5 %, respectively. The weighted-average interest rate represents the actual interest rate in effect as of December 31, 2017 (consisting of the contractual interest rate and the effect of interest rate swaps), using interest rate indices as of December 31, 2017 , where applicable. In addition, we have entered into one interest rate swap with an aggregate notional amount of $24.0 million , which became effective in January 2018. As of December 31, 2017 , we had $278.1 million of revolving debt available for immediate future disbursement under two portfolio loans, subject to certain conditions set forth in the loan agreements.

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We have tried to spread the maturity dates of our debt to minimize maturity and refinance risk in our portfolio. In addition, a majority of our debt allows us to extend the maturity dates, subject to certain conditions contained in the applicable loan documents. Although we believe we will satisfy the conditions to extend the maturity of our debt obligations, we can give no assurance in this regard. The following table shows the current maturities, including principal amortization payments, of our debt obligations as of December 31, 2017 (in thousands):
2018
 
$
224,158

2019
 
348,925

2020
 
1,109,290

2021
 
93,956

2022
 
180,590

 
 
$
1,956,919

We expect that our debt financing and other liabilities will be between 35% and 65% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves). We expect our debt financing related to the acquisition of core real estate properties to be between 45% and 65% of the aggregate cost of all such assets. We expect our debt financing related to the acquisition or origination of real estate-related investments to be between 0% and 65% of the aggregate cost of all such assets, to the extent we make real-estate related investments and depending upon the availability of such financings in the marketplace. There is no limitation on the amount we may borrow for the purchase of any single asset. We limit our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves) meaning that our borrowings and other liabilities may exceed our maximum target leverage of 65% of the cost of our tangible assets without violating these borrowing restrictions. We may exceed the 75% limit only if a majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. To the extent financing in excess of this limit is available on attractive terms, the conflicts committee may approve debt in excess of this limit. From time to time, our total liabilities could also be below 35% of the cost of our tangible assets due to the lack of availability of debt financing. As of December 31, 2017 , our borrowings and other liabilities were approximately 59% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.
Economic Dependency
We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, acquisition or origination and disposition of investments; management of the daily operations and leasing of our portfolio; and other general and administrative responsibilities. In the event that our advisor is unable to provide these services, we will be required to obtain such services from other sources.
Competitive Market Factors
The U.S. commercial real estate investment and leasing markets remain competitive. We face competition from various entities for investment opportunities, for prospective tenants and to retain our current tenants, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of their investments. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Further, as a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to pay distributions to our stockholders may be adversely affected.

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To the extent we acquire or originate additional real estate-related investments, the success of our portfolio of real estate-related investments will depend, in part, on our ability to acquire and originate investments with spreads over our borrowing cost. In acquiring and originating these investments, we will compete with other REITs that acquire or originate real estate loans, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities, many of which have greater financial resources and lower costs of capital available to them than we do. In addition, there are numerous REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for investments suitable for us. Competitive variables include market presence and visibility, size of loans offered and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential loans than we are, our acquisition and origination volume and profit margins for our real estate-related investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. To the extent we are selling assets, we may also face competition from other entities that are selling assets. Competition from these entities may increase the supply of real estate investment opportunities or increase the bargaining power of real estate investors seeking to buy.
Although we believe that we are well-positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.
Compliance with Federal, State and Local Environmental Law
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce our cash available for distribution to our stockholders. All of our real estate properties are subject to Phase I environmental assessments prior to the time they are acquired.
Industry Segments
As of December 31, 2017 , we aggregated our real estate investments into one reportable business segment. Prior to the reporting period commencing on January 1, 2014, we had identified two reportable business segments based on our investment types: real estate and real estate-related.
Employees
We have no paid employees. The employees of our advisor or its affiliates provide management, acquisition, disposition, advisory and certain administrative services for us.
Principal Executive Office
Our principal executive offices are located at 800 Newport Center Drive, Suite 700, Newport Beach, California 92660.  Our telephone number, general facsimile number and website address are (949) 417-6500, (949) 417-6501 and www.kbsreitiii.com , respectively .
Available Information
Access to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from the following website, www.kbsreitiii.com, or through the SEC’s website, www.sec.gov . These filings are available promptly after we file them with, or furnish them to, the SEC.

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ITEM 1A.
RISK FACTORS
The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.
Risks Related to an Investment in Our Common Stock
Because no public trading market for our shares currently exists, it will be difficult for our stockholders to sell their shares and, if they are able to sell their shares, they will likely sell them at a substantial discount to the public offering price and the estimated value per share.
Our charter does not require our directors to seek stockholder approval to liquidate our assets and dissolve by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. There is no public market for our shares and we have no plans at this time to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. Any sale must comply with applicable state and federal securities laws. Our charter prohibits the ownership of more than 9.8% of our stock by any person, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase our stockholders’ shares. Moreover, our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares to us, and our board of directors could amend, suspend or terminate our share redemption program upon 30 days’ notice to our stockholders, provided that we may increase or decrease funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. We describe the restrictions of our share redemption program in detail under Part II, Item 5, “Share Redemption Program.” As a result of the limitations on the dollar value of shares that may be redeemed under our share redemption program during the calendar year, on November 30, 2017, we exhausted all funds available for redemptions for the year ended December 31, 2017 . Thus, we had no funds available for redemptions for the December 2017 redemption date. Effective January 1, 2018, this limitation was reset, and based on the amount of net proceeds raised from the sale of shares under our dividend reinvestment plan during 2017, we have  $59.8 million  available for redemptions of shares eligible for redemption in 2018.
Therefore, it will be difficult for our stockholders to sell their shares promptly or at all. If our stockholders are able to sell their shares, they will likely have to sell them at a substantial discount to their public offering price or the estimated value per share. It is also likely that our stockholders’ shares will not be accepted as the primary collateral for a loan. Investors should purchase shares in our dividend reinvestment plan only as a long-term investment and be prepared to hold them for an indefinite period of time because of the illiquid nature of our shares.
We face significant competition for tenants and, to the extent we acquire additional assets, real estate investment opportunities, which may limit our ability to achieve our investment objectives or pay distributions.
The U.S. commercial real estate investment and leasing markets remain competitive. We face competition from various entities for investment opportunities, for prospective tenants and to retain our current tenants, including other REITs, pension funds, banks and insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of their investments.
We depend upon the performance of our property managers in the selection of tenants and negotiation of leasing arrangements. The U.S. commercial real estate industry has created increased pressure on real estate investors and their property managers to find new tenants and keep existing tenants. In order to do so, we have offered and may have to offer inducements, such as free rent and tenant improvements, to compete for attractive tenants. Further, as a result of their greater resources, the entities referenced above may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants, which could put additional pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. Our investors must rely entirely on the management abilities of our advisor, the property managers our advisor selects and the oversight of our board of directors. In the event we are unable to find new tenants and keep existing tenants, or if we are forced to offer significant inducements to such tenants, we may not be able to meet our investment objectives and our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to pay distributions to our stockholders may be adversely affected.

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In addition, to the extent we acquire additional assets, we face competition from these same entities for real estate investment opportunities. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Disruptions and dislocations in the credit markets could impact the cost and availability of debt to finance real estate investments, which is a key component of our acquisition strategy. A downturn in the credit market and a potential lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. In addition, the number of entities and the amount of funds competing for suitable investments may increase. We can give no assurance that our advisor will be successful in obtaining additional suitable investments on financially attractive terms or that, if our advisor makes investments on our behalf, our objectives will be achieved. If we acquire investments at higher prices and/or by using less-than-ideal capital structures, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets. If such events occur, our stockholders may experience a lower return on their investment.
Although we believe that we are well-positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.
Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates and commercial real estate values and our ability to refinance or secure debt financing, service future debt obligations, or pay distributions to our stockholders.
We have relied on debt financing to finance our real estate properties and we may have difficulty refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness. We also may be unable to obtain additional debt financing on attractive terms or at all. If we are not able to refinance our existing indebtedness on attractive terms at the various maturity dates, we may be forced to dispose of some of our assets. Market conditions can change quickly, which could negatively impact the value of our assets and may interfere with the implementation of our business strategy and/or force us to modify it.
Disruptions in the financial markets and uncertain economic conditions could adversely affect the values of our investments. Any disruption to the debt and capital markets could result in fewer buyers seeking to acquire commercial properties and possible increases in capitalization rates and lower property values. Furthermore, any decline in economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio, which could have the following negative effects on us:
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the values of our real estate properties could decrease below the amounts paid for such properties; and/or
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revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to pay distributions or meet our debt service obligations on debt financing.
All of these factors could reduce our stockholders’ return and decrease the value of an investment in us.
Because of the concentration of a significant portion of our assets in three geographic areas and in core office properties, any adverse economic, real estate or business conditions in these geographic areas or in the office market could affect our operating results and our ability to pay distributions to our stockholders
As of March 5, 2018 , a significant portion of our real estate properties was located in California, Texas and Illinois. As such, the geographic concentration of our portfolio makes us particularly susceptible to adverse economic developments in the California, Texas and Illinois real estate markets. In addition, the majority of our real estate properties consists of core office properties. Any adverse economic or real estate developments in these geographic markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space could adversely affect our operating results and our ability to pay distributions to our stockholders.
A significant percentage of our assets is invested in 500 West Madison and the value of our stockholders’ investment in us will fluctuate with the performance of this investment.
As of December 31, 2017 , 500 West Madison represented approximately 12% of our total assets and represented approximately 12% of our total annualized base rent. Further, as a result of this acquisition, the geographic concentration of our portfolio makes us particularly susceptible to adverse economic developments in the Chicago real estate market. Any adverse economic or real estate developments in this market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our operating results and our ability to pay distributions to our stockholders.

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We may not be able to operate our business successfully or generate sufficient revenue to make or sustain distributions to our stockholders.
As of March 5, 2018 , we owned 29 real estate properties, had entered into the Hardware Village joint venture to develop and subsequently operate Hardware Village, which is currently under construction, and had entered into the Village Center Station II joint venture to develop and subsequently operate Village Center Station II, which is currently under construction. We cannot assure our stockholders that we will be able to operate our business successfully or implement our operating policies and strategies. We can provide no assurance that our performance will replicate the past performance of other KBS-sponsored programs. Our investment returns could be substantially lower than the returns achieved by other KBS-sponsored programs. The results of our operations depend on several factors, including the availability of opportunities for the acquisition of additional assets, the level and volatility of interest rates, the availability of short and long-term financing, and conditions in the financial markets and economic conditions.
Because we depend upon our advisor and its affiliates to select and acquire our real estate investments and to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could cause our operations to suffer.
We depend on our advisor to select and acquire our real estate investments and to manage our operations and our portfolio of assets. Our advisor depends upon the fees and other compensation that it receives from us, KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”), KBS Strategic Opportunity REIT II, Inc. (“KBS Strategic Opportunity REIT II”), KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”), and any future KBS-sponsored programs that it advises in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes to our relationship with, or the financial condition of, our advisor and its affiliates, could hinder their ability to successfully manage our operations and our portfolio of investments.
We have paid distributions in part from debt financings and in the future we may not pay distributions solely from our cash flow from operating activities. To the extent that we pay distributions from sources other than our cash flow from operating activities, the overall return to our stockholders may be reduced.
Our organizational documents permit us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. We have paid distributions in part from debt financings, and from time to time during our operational stage, we may not pay distributions solely from our cash flow from operating activities, in which case distributions may be paid in whole or in part from debt financing. We may also fund such distributions with proceeds from the sale of assets or from the maturity, payoff or settlement of any real estate-related investments we make. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operating activities available for distribution in future periods. If we fund distributions from the sale of assets or the maturity, payoff or settlement of any real estate-related investments, to the extent we make any such additional investments, this will affect our ability to generate cash flow from operating activities in future periods. To the extent that we pay distributions from sources other than our cash flow from operating activities, the overall return to our stockholders may be reduced. In addition, to the extent distributions exceed cash flow from operating activities, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount of distributions we may fund from sources other than from cash flow from operating activities.
For the year ended December 31, 2017 , we paid aggregate distributions of $117.8 million , including $58.0 million of distributions paid in cash and $59.8 million of distributions reinvested through our dividend reinvestment plan. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $107.8 million (92%) of cash flow from operating activities and $10.0 million (8%) of cash flow from operating activities in excess of distributions paid during 2016 . For the year ended December 31, 2017 , our cash flow from operating activities to distributions paid coverage ratio was 106% and our funds from operations to distributions paid coverage ratio was 141%. For more information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Distributions” in this Annual Report.

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The loss of or the inability to retain or obtain key real estate and debt finance professionals at our advisor could delay or hinder implementation of our investment strategies, which could limit our ability to pay distributions and decrease the value of an investment in our shares.
Our success depends to a significant degree upon the contributions of Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., each of whom would be difficult to replace. Neither we nor our advisor or its affiliates have employment agreements with these individuals and they may not remain associated with us, our advisor or its affiliates. If any of these persons were to cease their association with us, our advisor or its affiliates, we may be unable to find suitable replacements and our operating results could suffer as a result. We do not maintain key person life insurance on any person. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to attract and retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our advisor and its affiliates may be unsuccessful in attracting and retaining such skilled professionals. Further, we have established strategic relationships with firms that have special expertise in certain services or detailed knowledge regarding real properties in certain geographic regions. Maintaining such relationships will be important for us to effectively compete with other investors for properties and tenants in such regions. We may be unsuccessful in maintaining such relationships. If we lose or are unable to obtain the services of highly skilled professionals or do not establish or maintain appropriate strategic relationships, our ability to implement our investment strategies could be delayed or hindered and the value of our stockholders’ investment in us could decline.
Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our stockholders ’ and our recovery against our independent directors if they negligently cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that none of our independent directors shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, our stockholders and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce our stockholders’ and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to our stockholders.
Because the current offering price in our dividend reinvestment plan offering exceeds our net tangible book value per share, investors in our dividend reinvestment plan offering will experience immediate dilution in the net tangible book value of their shares.
We are currently offering shares in our dividend reinvestment plan offering at $11.15 per share. This offering price is equal to 95% of the most recent estimated value per share of our common stock. On December 6, 2017 , our board of directors approved an estimated value per share of our common stock of $11.73 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. The valuation methodologies used to establish the estimated value per share were based upon a number of estimates and assumptions that may not be accurate or complete. Moreover, the current offering price under our dividend reinvestment plan is likely to differ from the price at which a stockholder could resell his or her shares because of the reasons discussed below under “ - Risks Related to Our Corporate Structure - The estimated value per share of our common stock may not reflect the value that stockholders will receive for their investment and does not take into account how developments subsequent to the valuation date related to individual assets, the financial or real estate markets or other events may have increased or decreased the value of our portfolio.” For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share as of December 6, 2017 , see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.”

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Because we are conducting an ongoing offering under our dividend reinvestment plan, we are providing information about our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated as total book value of assets minus total book value of liabilities, divided by the total number of shares of common stock outstanding. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. However, net tangible book value does reflect certain dilution in value of our common stock from the issue price as a result of (i) the substantial fees paid in connection with our now-terminated primary initial public offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker-dealers, (ii) the fees and expenses paid to our advisor and its affiliates in connection with the selection, acquisition, management and sale of our investments, (iii) general and administrative expenses and (iv) accumulated depreciation and amortization of real estate investments. As of December 31, 2017 , our net tangible book value per share was $6.19.
We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A security breach or other significant disruption involving our IT networks and related systems could:
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disrupt the proper functioning of our networks and systems and therefore our operations;
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result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;
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result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
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result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;
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require significant management attention and resources to remedy any damages that result;
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subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or
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damage our reputation among our stockholders.
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

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Risks Related to Conflicts of Interest
Our advisor and its affiliates, including all of our executive officers and our affiliated directors and other key real estate and debt finance professionals, face conflicts of interest caused by their compensation arrangements with us and with other KBS-sponsored programs, which could result in actions that are not in the long-term best interests of our stockholders.
All of our executive officers and our affiliated directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other KBS-affiliated entities. Our advisor and its affiliates receive substantial fees from us. These fees could influence our advisor’s advice to us as well as the judgment of its affiliates. Among other matters, these compensation arrangements could affect their judgment with respect to:
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the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement;
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public offerings of equity by us, which could entitle our dealer manager to additional dealer manager fees and would likely entitle our advisor to additional acquisition and origination fees and asset management fees;
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sales of real estate investments, which entitle our advisor to disposition fees and possible subordinated incentive fees;
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acquisitions of real estate investments, which entitle our advisor to acquisition or origination fees based on the cost of the investment and asset management fees based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us, which may influence our advisor to recommend riskier transactions to us and/or transactions that are not in our best interest and, in the case of acquisitions of investments from other KBS-sponsored programs, which might entitle affiliates of our advisor to disposition fees and possible subordinated incentive fees in connection with its services for the seller;
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borrowings to acquire real estate investments, which borrowings will increase the acquisition and origination fees and asset-management fees payable to our advisor;
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whether and when we seek to list our shares of common stock on a national securities exchange, which listing (i) may make it more likely for us to become self-managed or internalize our management or (ii) could entitle our advisor to a subordinated incentive listing fee, and which could also adversely affect the sales efforts for other KBS-sponsored programs, depending on the price at which our shares trade; and
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whether and when we seek to sell the company or its assets, which sale could entitle our advisor to a subordinated incentive fee and terminate the asset management fee.
Our advisor and its affiliates face conflicts of interest relating to the acquisition and origination of assets and leasing of properties due to their relationship with other KBS-sponsored programs and/or KBS-advised investors, which could result in decisions that are not in our best interest or the best interests of our stockholders.
We rely on our sponsor, KBS Holdings LLC, and other key real estate and debt finance professionals at our advisor, including Messrs. Bren, Hall, McMillan and Schreiber, to identify suitable investment opportunities for us. KBS REIT II, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT, KBS Strategic Opportunity REIT II and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on our sponsor and many of the same real estate and debt finance professionals as will future KBS-sponsored programs advised by our advisor. Messrs. Bren and Schreiber and several of the other key real estate professionals at KBS Capital Advisors are also the key real estate professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to KBS-advised investors. As such, KBS-sponsored programs that have funds available for investment and KBS-advised investors that have funds available for investment rely on many of the same real estate and debt finance professionals, as will future KBS-sponsored programs and KBS-advised investors. Many investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs and KBS-advised investors. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or KBS-advised investor, they, in their sole discretion, will offer the opportunity to the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the company for us to make any significant investment unless our advisor has recommended the investment to us. Thus, the real estate and debt finance professionals of our advisor could direct attractive investment opportunities to other KBS-sponsored programs or KBS-advised investors. Such events could result in us investing in properties that provide less attractive returns, which would reduce the level of distributions we may be able to pay our stockholders.

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We and other KBS-sponsored programs and KBS-advised investors also rely on these real estate professionals to supervise the property management and leasing of properties. If the KBS team of real estate professionals directs creditworthy prospective tenants to properties owned by another KBS-sponsored program or KBS-advised investor when it could direct such tenants to our properties, our tenant base may have more inherent risk and our properties’ occupancy may be lower than might otherwise be the case.
Further, existing and future KBS-sponsored programs and KBS-advised investors and Messrs. Bren, Hall, McMillan and Schreiber generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, origination, development, ownership, leasing or sale of real estate-related investments.
Our sponsor, our officers, our advisor and the real estate, debt finance, management and accounting professionals assembled by our advisor face competing demands on their time and this may cause our operations and our stockholders ’ investment in us to suffer.
We rely on our sponsor, our officers, our advisor and the real estate, debt finance, management and accounting professionals that our advisor retains, including Messrs. Bren, Hall, McMillan and Schreiber and Jeffrey K. Waldvogel and Stacie K. Yamane, to provide services to us for the day-to-day operation of our business. KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on our sponsor and many of the same real estate, debt finance, management and accounting professionals, as will future KBS-sponsored programs and KBS-advised investors. Further, our officers and affiliated directors are also officers and/or affiliated directors of some or all of the other public KBS-sponsored programs. Messrs. Bren, Schreiber and Waldvogel and Ms. Yamane are also executive officers of KBS REIT I, KBS REIT II and KBS Growth & Income REIT and Messrs. Hall and McMillan are executive officers of KBS REIT I and KBS REIT II. Messrs. Hall, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Strategic Opportunity REIT and KBS Strategic Opportunity REIT II, and Messrs. Bren, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Legacy Partners Apartment REIT. Messrs. Bren and Schreiber and Ms. Yamane are executive officers of KBS Realty Advisors and its affiliates, the advisors of the private KBS-sponsored programs and the KBS-advised investors. In addition, KBS Legacy Partners Apartment REIT had announced the passage by its stockholders of a plan of complete liquidation and dissolution of KBS Legacy Partners Apartment REIT and is implementing the plan. KBS REIT II and KBS Strategic Opportunity REIT had announced that they are exploring strategic alternatives. KBS Strategic Opportunity REIT announced that its board of directors and management believe that pursuing a perpetual life daily NAV REIT strategy provides the best opportunity for it to achieve its objectives of maximizing the return to its stockholders and providing additional liquidity for its stockholders and had filed a definitive proxy statement containing certain measures to be voted on at its annual meeting of stockholders in furtherance of those objectives. KBS Capital Advisors acts as the advisor for KBS Legacy Partners Apartment REIT, KBS REIT II and KBS Strategic Opportunity REIT and thus, the key real estate professionals at our advisor, including Messrs. Bren, Schreiber, Hall and McMillan, will be required to perform the potentially time-demanding duties with respect to the implementation of strategic alternatives for KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT and, potentially, KBS REIT II.
As a result of their interests in other KBS-sponsored programs, their obligations to KBS-advised investors and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Messrs. Bren, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane face conflicts of interest in allocating their time among us, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II and/or KBS Growth & Income REIT and KBS Capital Advisors, other KBS-sponsored programs and/or other KBS-advised investors, as well as other business activities in which they are involved. In addition, KBS Capital Advisors and KBS Realty Advisors and their affiliates share many of the same key real estate, management and accounting professionals. During times of intense activity in other programs and ventures, these individuals may devote less time and fewer resources to our business than are necessary or appropriate to manage our business. Furthermore, some or all of these individuals may become employees of another KBS-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other KBS-sponsored programs. If these events occur, the returns on our investments, and the value of our stockholders’ investment in us, may decline.

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All of our executive officers, our affiliated directors and the key real estate and debt finance professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in our advisor and its affiliates, including our dealer manager, which could hinder our ability to implement our business strategy and to generate returns to our stockholders.
All of our executive officers, our affiliated directors and the key real estate and debt finance professionals assembled by our advisor are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other KBS-affiliated entities. Through KBS-affiliated entities, some of these persons also serve as the investment advisors to KBS-advised investors and, through KBS Capital Advisors and KBS Realty Advisors, these persons serve as the advisor to KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II, KBS Growth & Income REIT and other KBS-sponsored programs. As a result, they owe fiduciary duties to each of these entities, their stockholders, members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Further, Messrs. Bren, Hall, McMillan and Schreiber and existing and future KBS-sponsored programs and KBS-advised investors generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to pay distributions to our stockholders and to maintain or increase the value of our assets.
Our board of directors ’ loyalties to KBS REIT II, KBS Strategic Opportunity REIT, KBS Strategic Opportunity REIT II, KBS Growth & Income REIT and possibly to future KBS-sponsored programs could influence its judgment, resulting in actions that may not be in our stockholders ’ best interest or that result in a disproportionate benefit to another KBS-sponsored program at our expense.
All of our directors are also directors of KBS REIT II. One of our affiliated directors is also an affiliated director of KBS Growth & Income REIT and one of our affiliated directors is also an affiliated director of KBS Strategic Opportunity REIT and KBS Strategic Opportunity REIT II. The loyalties of our directors serving on the boards of directors of KBS REIT II, KBS Strategic Opportunity REIT, KBS Strategic Opportunity REIT II and KBS Growth & Income REIT, or possibly on the boards of directors of future KBS-sponsored programs, may influence the judgment of our board of directors when considering issues for us that also may affect other KBS-sponsored programs, such as the following:
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The conflicts committee of our board of directors must evaluate the performance of our advisor with respect to whether our advisor is presenting to us our fair share of investment opportunities. If our advisor is not presenting a sufficient number of investment opportunities to us because it is presenting many opportunities to other KBS-sponsored programs or if our advisor is giving preferential treatment to other KBS-sponsored programs in this regard, our conflicts committee may not be well-suited to enforce our rights under the terms of the advisory agreement or to seek a new advisor.
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We could enter into transactions with other KBS-sponsored programs, such as property sales, acquisitions or financing arrangements. Such transactions might entitle our advisor or its affiliates to fees and other compensation from both parties to the transaction. For example, acquisitions from other KBS-sponsored programs might entitle our advisor or its affiliates to disposition fees and possible subordinated incentive fees in connection with its services for the seller in addition to acquisition or origination fees and other fees that we might pay to our advisor in connection with such transaction. Similarly, property sales to other KBS-sponsored programs might entitle our advisor or its affiliates to acquisition or origination fees in connection with its services to the purchaser in addition to disposition and other fees that we might pay to our advisor in connection with such transaction. Decisions of our board or the conflicts committee regarding the terms of those transactions may be influenced by our board’s or the conflicts committee’s loyalties to such other KBS-sponsored programs.
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A decision of our board or the conflicts committee regarding the timing of a debt or equity offering could be influenced by concerns that the offering would compete with offerings of other KBS-sponsored programs.
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A decision of our board or the conflicts committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs.
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A decision of our board or the conflicts committee regarding whether and when we seek to list our common stock on a national securities exchange could be influenced by concerns that such listing could adversely affect the sales efforts of other KBS-sponsored programs, depending on the price at which our shares trade.

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Because our independent directors are also independent directors of KBS REIT II, they receive compensation for service on the board of directors of KBS REIT II. Through October 30, 2017, like us, KBS REIT II compensated each independent director with an annual retainer of $40,000 as well as compensation for attending meetings as follows: (i) $2,500 for each board of directors meeting attended, (ii) $2,500 for each audit or conflicts committee meeting attended (except that the committee chairman was paid $3,000 for each audit or conflicts committee meeting attended), (iii) $2,000 for each teleconference board of directors meeting attended, and (iv) $2,000 for each teleconference audit or conflicts committee meeting attended (except that the committee chairman was paid $3,000 for each teleconference audit or conflicts committee meeting attended). In addition, KBS REIT II paid its independent directors for attending special committee meetings as follows: $2,000 for each in-person and teleconference special committee meeting attended (except that the committee chairman was paid $3,000 for each in-person and teleconference special committee meeting attended).
Like us, KBS REIT II reimbursed directors for reasonable out-of-pocket expenses incurred in connection with attendance at board of directors meetings and committee meetings.
On October 31, 2017, our conflicts committee and KBS REIT II’s conflicts committee each approved a revised compensation structure for the respective independent directors of each REIT. Commencing on October 31, 2017, like us, KBS REIT II compensates each independent director with an annual retainer of $135,000, as well as compensation for attending meetings as follows:
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each member of the audit committee and conflicts committee is paid $10,000 annually for service on such committees (except that the chair of each of the audit committee and conflicts committee is paid $20,000 annually for service as the chair of such committees);
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after the tenth board of directors meeting of each calendar year, each independent director is paid (i) $2,500 in cash for each in-person board of directors meeting attended for the remainder of the calendar year and (ii) $2,000 in cash for each teleconference board of directors meeting attended for the remainder of the calendar year;
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after the tenth audit committee meeting of each calendar year, each member of the audit committee is paid (i) $2,500 in cash for each in-person audit committee meeting attended for the remainder of the calendar year and (ii) $2,000 in cash for each teleconference audit committee meeting attended for the remainder of the calendar year (except that the audit committee chair is paid $3,000 for each in-person and teleconference audit committee meeting attended after the tenth audit committee meeting of each calendar year, for the remainder of each calendar year); and
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after the tenth conflicts committee meeting of each calendar year, each member of the conflicts committee is paid (i) $2,500 in cash for each in-person conflicts committee meeting attended for the remainder of the calendar year and (ii) $2,000 in cash for each teleconference conflicts committee meeting attended for the remainder of the calendar year (except that the conflicts committee chair is paid $3,000 for each in-person and teleconference conflicts committee meeting attended after the tenth conflicts committee meeting of each calendar year, for the remainder of each calendar year).
In addition, KBS REIT II pays its independent directors for attending special committee meetings as follows: each member of the special committee will be paid $2,000 in cash for each in-person and teleconference special committee meeting attended (except that the special committee chair will be paid $3,000 for each in-person and teleconference special committee meeting attended).
All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at board of directors meetings and committee meetings.
Risks Related to Our Corporate Structure
Our charter limits the number of shares a person may own and permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. In addition, our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. These charter provisions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

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Our stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.
Our board of directors determines our major policies, including our policies regarding targeted investment allocation, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.
Our stockholders may not be able to sell their shares under our share redemption program and, if our stockholders are able to sell their shares under the program, they may not be able to recover an amount equal to the estimated value per share of our common stock.
Our share redemption program includes numerous restrictions that severely limit our stockholders’ ability to sell their shares should they require liquidity and will limit our stockholders’ ability to recover an amount equal to the estimated value per share of our common stock. Our stockholders must hold their shares for at least one year in order to participate in our share redemption program, except in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program, and together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”). We limit the number of shares redeemed pursuant to our share redemption program as follows: (i) during any calendar year, we may redeem no more than 5% of the weighted‑average number of shares outstanding during the prior calendar year and (ii) during each calendar year, redemptions will be limited to the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year; however, we may increase or decrease the funding available for the redemption of shares upon ten business days’ notice to our stockholders. Further, we have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all redemption requests made in any year.
As a result of the limitations on the dollar value of shares that may be redeemed under our share redemption program during the calendar year, on November 30, 2017, we exhausted all funds available for redemptions for the year ended December 31, 2017 . Thus, we had no funds available for redemptions for the December 2017 redemption date. Effective January 1, 2018, this limitation was reset, and based on the amount of net proceeds raised from the sale of shares under our dividend reinvestment plan during 2017, we have  $59.8 million  available for redemptions of shares eligible for redemption in 2018.
Pursuant to our share redemption program, unless our shares are being redeemed in connection with a Special Redemption, the redemption price for shares eligible for redemption will be calculated based upon the updated estimated value per share. On December 6, 2017 , our board of directors approved an estimated value per share of our common stock of $11.73 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. In accordance with our share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. The price at which we will redeem all other shares eligible for redemption is as follows:
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For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated value per share as of the applicable redemption date;
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For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated value per share as of the applicable redemption date;
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For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated value per share as of the applicable redemption date; and
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For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated value per share as of the applicable redemption date.
We currently expect to announce an updated estimated value per share in December 2018.
During their operating stages, other KBS-sponsored REITs have amended their share redemption programs to limit redemptions to Special Redemptions or place restrictive limitations on the amount of funds available for redemptions. As a result, these programs have not been able to honor all redemption requests and stockholders in these programs have been unable to have their shares redeemed when requested. In two instances, Ordinary Redemptions have been suspended for several years. When implementing these amendments, stockholders did not always have a final opportunity to submit redemptions prior to the effectiveness of the amendment to the program.


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Our board may amend, suspend or terminate our share redemption program upon 30 days’ notice to stockholders, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholder. See Part II, Item 5, “Share Redemption Program” for more information about the program.
The estimated value per share of our common stock may not reflect the value that stockholders will receive for their investment and does not take into account how developments subsequent to the valuation date related to individual assets, the financial or real estate markets or other events may have increased or decreased the value of our portfolio.
On December 6, 2017 , our board of directors approved an estimated value per share of our common stock of $11.73  based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. We did not make any other adjustments to the estimated value per share subsequent to September 30, 2017, including any adjustments relating to the following, among others: (i) the issuance of common stock and the payment of related offering costs related to our dividend reinvestment plan offering; (ii) net operating income earned and distributions declared; and (iii) the redemption of shares. We provided this estimated value per share to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of and also to comply with Practice Guideline 2013—01,  Valuations of Publicly Registered, Non-Listed REITs,  issued by the Investment Program Association (“IPA”) in April 2013 (the “IPA Valuation Guidelines”).
We engaged Duff & Phelps, LLC (“Duff & Phelps”), an independent third-party real estate valuation firm, to provide appraisals for 28 of our real estate properties owned as of September 30, 2017 (the “Appraised Properties”) and to provide a calculation of the range in estimated value per share of our common stock as of December 6, 2017 . Duff & Phelps based this range in estimated value per share upon (i) its appraisals of the Appraised Properties, (ii) the contractual sales price less estimated disposition costs and fees with respect to one real estate property under contract to sell as of December 6, 2017, (iii) valuations performed by KBS Capital Advisors of our investment in the Hardware Village joint venture and the Village Center Station II joint venture, cash, other assets, mortgage debt and other liabilities, and (iv) a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. 
As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the price at which our shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that were not under contract to sell as of December 6, 2017 , debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, the impact of restrictions on the assumption of debt or swap breakage fees that may be incurred upon the termination of certain of our swaps prior to expiration. The estimated value per share does not take into consideration acquisition-related costs and financing costs related to future acquisitions. Accordingly, with respect to the estimated value per share, we can give no assurance that:
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a stockholder would be able to resell his or her shares at our estimated value per share;
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a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of our company;
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our shares of common stock would trade at the estimated value per share on a national securities exchange;
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another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share; or
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the methodology used to determine our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

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The value of our shares will fluctuate over time in response to developments related to future investments, the performance of individual assets in our portfolio and the management of those assets, the real estate and finance markets and due to other factors. As such, the estimated value per share does not take into account developments in our portfolio since December 6, 2017 . For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.”
We currently expect to utilize an independent valuation firm to update the estimated value per share in December 2018.
The actual value of shares that we repurchase under our share redemption program may be less than what we pay.
Under our share redemption program, shares currently may be repurchased at varying prices depending on (i) the number of years the shares have been held, and (ii) whether the redemptions are in connection with a Special Redemption. The current maximum price that may be paid under the program is $11.73 per share, which is the current estimated value per share. Although this is our current estimated value per share, this reported value is likely to differ from the price at which a stockholder could resell his or her shares for the reasons discussed in the risk factor above. Thus, when we repurchase shares of our common stock at $11.73 per share, the actual value of the shares that we repurchase is likely to be less, and the repurchase is likely to be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be less than what we pay and the repurchase may be dilutive to our remaining stockholders.
If funds are not available from our dividend reinvestment plan offering for general corporate purposes, then we may have to use a greater proportion of our cash flow from operations to meet our general cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
We depend on the proceeds from our dividend reinvestment plan offering for general corporate purposes including, but not limited to: the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our real estate properties; reserves required by any financings of our real estate investments; the acquisition or origination of real estate investments, which would include payment of acquisition or origination fees to our advisor; and the repayment of debt. We cannot predict with any certainty how much, if any, dividend reinvestment plan proceeds will be available for general corporate purposes. If such funds are not available from our dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet our general cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
As a result of the limitations on the dollar value of shares that may be redeemed under our share redemption program during the calendar year, on November 30, 2017, we exhausted all funds available for redemptions for the year ended December 31, 2017 . Thus, we had no funds available for redemptions for the December 2017 redemption date. Effective January 1, 2018, this limitation was reset, and based on the amount of net proceeds raised from the sale of shares under our dividend reinvestment plan during 2017, we have  $59.8 million  available for redemptions of shares eligible for redemption in 2018
Our stockholders’ interest in us will be diluted if we issue additional shares, which could reduce the overall value of their investment.
Our common stockholders do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. Our board may elect to (i) sell additional shares in our dividend reinvestment plan or in future primary offerings; (ii) issue equity interests in private offerings; (iii) issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation; (iv) issue shares of our common stock to sellers of properties or assets we acquire in connection with an exchange of limited partnership interests of the Operating Partnership; or (v) otherwise issue additional shares of our capital stock. To the extent we issue additional equity interests, whether in future primary offerings, pursuant to our dividend reinvestment plan or otherwise, our stockholders’ percentage ownership interest in us would be diluted. In addition, depending upon the terms and pricing of any additional issuance of shares, the use of the proceeds and the value of our real estate investments, our stockholders may also experience dilution in the book value and fair value of their shares and in the earnings and distributions per share.

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Payment of fees to our advisor and its affiliates reduces cash available for investment and distribution to our stockholders and increases the risk that our stockholders will not be able to recover the amount of their investment in our shares or an amount equal to the estimated value per share of our common stock.
Our advisor and its affiliates perform services for us in connection with the selection and acquisition or origination of our real estate investments, the management and leasing of our real estate properties and the disposition of our investments. We pay them substantial fees for these services, which results in immediate dilution of the value of our stockholders’ investment in us and reduces the amount of cash available for investments or distribution to stockholders. Compensation to be paid to our advisor may be increased with the approval of our conflicts committee and subject to the limitations in our charter, which would further dilute our stockholders’ investment in us and reduce the amount of cash available for investment or distribution to stockholders.
We may also pay significant fees during our listing/liquidation stage. Although most of the fees expected to be paid during our listing/liquidation stage are contingent on our stockholders first receiving agreed-upon investment returns, the investment-return thresholds may be reduced with the approval of our conflicts committee and subject to the limitations in our charter.
Therefore, these fees increase the risk that the amount of cash available for distribution to our stockholders upon a liquidation of our portfolio would be less than the amount stockholders paid to acquire our shares. These substantial fees and other payments also increase the risk that our stockholders will not be able to resell their shares at a profit, even if our shares are listed on a national securities exchange.
If we are unable to obtain funding for future capital needs, cash distributions to our stockholders and the value of an investment in us could decline.
When tenants do not renew their leases or otherwise vacate their space, we will often need to expend substantial funds for improvements to the vacated space in order to attract replacement tenants. Even when tenants do renew their leases we may agree to make improvements to their space as part of our negotiations. If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain funding from sources other than our cash flow from operations or proceeds from our dividend reinvestment plan, such as borrowings or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to pay distributions to our stockholders and could reduce the value of our stockholders’ investment.
Although we are not currently afforded the protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board of directors opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection.
Our charter includes an anti-takeover provision that may discourage a stockholder from launching a tender offer for our shares.
Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with most provisions of Regulation 14D of the Securities Exchange Act of 1934, as amended. The offering stockholder must provide our company notice of such tender offer at least 10 business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, our company will have the right to redeem that stockholder’s shares and any shares acquired in such tender offer. In addition, the noncomplying stockholder shall be responsible for all of our company’s expenses in connection with that stockholder’s noncompliance. This provision of our charter may discourage a stockholder from initiating a tender offer for our shares and prevent our stockholders from receiving a premium price for their shares in such a transaction.

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General Risks Related to Investments in Real Estate
Economic, market and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.
Our operating results and the performance of our real estate properties are subject to the risks typically associated with real estate, any of which could decrease the value of our investments and could weaken our operating results, including:
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downturns in national, regional and local economic conditions;
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competition from other office and industrial buildings;
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adverse local conditions, such as oversupply or reduction in demand for office and industrial buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area;
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vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
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changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;
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changes in tax (including real and personal property tax), real estate, environmental and zoning laws;
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natural disasters such as hurricanes, earthquakes and floods;
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acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;
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the potential for uninsured or underinsured property losses; and
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periods of high interest rates and tight money supply.
Any of the above factors, or a combination thereof, could result in a decrease in our cash flow from operations and a decrease in the value of our investments, which would have an adverse effect on our operations, on our ability to pay distributions to our stockholders and on the value of our stockholders’ investment.
If our acquisitions fail to perform as expected, cash distributions to our stockholders may decline.
As of March 5, 2018 , we had acquired 30 real estate properties (one of which was sold on February 19, 2014 and one of which was held for sale), originated one real estate loan receivable (which was fully repaid on July 1, 2016), entered into the Hardware Village joint venture to develop and subsequently operate Hardware Village, which is currently under construction, and entered into the Village Center Station II joint venture to develop and subsequently operate Village Center Station II, which is currently under construction, based on an underwriting analysis with respect to each asset and how the asset fits into our portfolio. If these assets do not perform as expected we may have less cash flow from operating activities available to fund distributions and stockholder returns may be reduced.
Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties and adversely affect our cash flow and ability to pay distributions to our stockholders.
A property may incur vacancies either by the expiration and non-renewal of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available for distribution to our stockholders. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction in the resale value of a property could also reduce the value of our stockholders’ investment.
Further, some of our assets may be outfitted to suit the particular needs of the tenants. We may have difficulty replacing the tenants of these properties if the outfitted space limits the types of businesses that could lease that space without major renovation. If a tenant does not renew a lease or, terminates or defaults on a lease, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. Because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with such property, we may incur a loss upon the sale of a property with significant vacant space. These events could cause us to reduce distributions to stockholders.

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To the extent that we buy core real estate properties with occupancy of less than 95% or that have significant rollover during the expected hold period, we may incur significant costs for capital expenditures and tenant improvement costs to lease up the properties, which increases the risk of loss associated with these properties compared to other properties. 
We have invested in, and may make additional investments in, core properties that have an occupancy rate of less than 95%, significant rollover during the expected hold period, or other characteristics that could provide an opportunity for us to achieve appreciation by increasing occupancy, negotiating new leases with higher rental rates and/or executing enhancement projects. We likely will need to fund reserves or maintain capacity under our credit facilities to fund capital expenditures, tenant improvements and other improvements in order to attract new tenants to these properties. To the extent we do not maintain adequate reserves to fund these costs, we may use our cash flow from operating activities, which will reduce the amount of cash flow available for distribution to our stockholders.  If we are unable to execute our business plan for these investments, the overall return on these investments will decrease.
We may enter into long-term leases with tenants in certain properties, which may not result in fair market rental rates over time.
We may enter into long-term leases with tenants of certain of our properties, or include renewal options that specify a maximum rate increase. These leases would provide for rent to increase over time; however, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that, even after contractual rent increases, the rent under our long-term leases is less than then-current market rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our cash available for distribution could be lower than if we did not enter into long-term leases.
Certain property types, such as industrial properties, that we may acquire may not have efficient alternative uses and, if we acquire such properties, we may have difficulty leasing them to new tenants and/or have to make significant capital expenditures to them to do so.
Certain property types, particularly industrial properties, can be difficult to lease to new tenants, should the current tenant terminate or choose not to renew its lease. These properties generally will have received significant tenant-specific improvements and only very specific tenants may be able to use such improvements, making the properties very difficult to re-lease in their current condition. Additionally, an interested tenant may demand that, as a condition of executing a lease for the property, we finance and construct significant improvements so that the tenant could use the property. This expense may decrease cash available for distribution, as we likely would have to (i) pay for the improvements up front or (ii) finance the improvements at potentially unattractive terms.
To the extent we acquire retail properties with anchor tenants, our revenue will be significantly impacted by the success and economic viability of our retail anchor tenants. Our reliance on a single tenant or significant tenants in certain properties may decrease our ability to lease vacated space and adversely affect the returns on our stockholders ’ investment in us.
In the retail sector, a tenant occupying all or a large portion of the gross leasable area of a retail center, commonly referred to as an anchor tenant, may become insolvent, may suffer a downturn in business and default on or terminate its lease, or may decide not to renew its lease. Any of these events would result in a reduction or cessation in rental payments to us from that tenant and would adversely affect our financial condition. A lease termination by an anchor tenant could result in lease terminations or reductions in rent by other tenants whose leases may permit cancellation or rent reduction if an anchor tenant’s lease is terminated. In such event, we may be unable to re-lease the vacated space. Similarly, the leases of some anchor tenants may permit those anchor tenants to transfer their leases to other retailers. The transfer to a new anchor tenant could cause customer traffic in the retail center to decrease and thereby reduce the income generated by that retail center. A lease transfer to a new anchor tenant could also allow other tenants, under the terms of their respective leases, to make reduced rental payments or to terminate their leases. In the event that we are unable to re-lease the vacated space to a new anchor tenant, we may incur additional expenses in order to renovate and subdivide the space to be able to re-lease the space to more than one tenant.
Our retail tenants will face competition from numerous retail channels and may be disproportionately affected by economic conditions. These events could reduce the profitability of our retail properties and affect our ability to pay distributions.
Retailers will face continued competition from discount or value retailers, factory outlet centers, wholesale clubs, mail order catalogues and operators, television shopping networks and shopping via the Internet. Such conditions could adversely affect our retail tenants and, consequently, our funds available for distribution.

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We depend on tenants for our revenue generated by our real estate investments and, accordingly, our revenue generated by our real estate investments and our ability to pay distributions to our stockholders are partially dependent upon the success and economic viability of our tenants and our ability to retain and attract tenants. Non-renewals, terminations or lease defaults could reduce our net income and limit our ability to pay distributions to our stockholders.
The success of our real estate investments materially depends upon the financial stability of the tenants leasing the properties we own. The inability of a single major tenant or a significant number of smaller tenants to meet their rental obligations would significantly lower our net income. A non-renewal after the expiration of a lease term, termination or default by a tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord of a property and may incur substantial costs in protecting our investment and re-leasing the property. Tenants may have the right to terminate their leases upon the occurrence of certain customary events of default and, in other circumstances, may not renew their leases or, because of market conditions, may only be able to renew their leases on terms that are less favorable to us than the terms of their initial leases.
The bankruptcy or insolvency of our tenants or delays by our tenants in making rental payments could seriously harm our operating results and financial condition.
Any bankruptcy filings by or relating to any of our tenants could bar us from collecting pre-bankruptcy debts from that tenant, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims, which would harm our financial condition.
Our inability to sell a property at the time and on the terms we want could limit our ability to pay distributions to our stockholders and could reduce the value of our stockholders’ investment in us.
Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow, limit our ability to pay distributions to our stockholders and reduce the value of our stockholders’ investment in us.
If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce cash available for distribution to our stockholders.
If we decide to sell additional properties, we intend to use our best efforts to sell them for cash; however, in some instances, we may sell our properties by providing financing to purchasers. When we provide financing to a purchaser, we will bear the risk that the purchaser may default, which could reduce our cash distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of the sale to our stockholders, or the reinvestment of the proceeds in other assets, will be delayed until the promissory note or other property we may accept upon a sale is actually paid, sold, refinanced or otherwise disposed.

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Potential development and construction delays and resultant increased costs and risks may hinder our operating results and decrease our net income.
From time to time we may acquire unimproved real property or properties that are under development or construction. Investments in such properties, such as our investment in Hardware Village and Village Center Station II, will be subject to the uncertainties associated with the development and construction of real property, including those related to re-zoning land for development, environmental concerns of governmental entities and/or community groups and our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completing construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly-constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a purchase price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.
Actions of our joint venture partners could reduce the returns on joint venture investments and decrease our stockholders ’ overall return.
We have entered into the Hardware Village joint venture and the Village Center Station II joint venture, and may enter into additional joint ventures with third parties to acquire properties and other assets. We may also purchase and develop additional properties in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:
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that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt;
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that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;
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that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or
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that disputes between us and our co-venturer, co-tenant or partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our operations.
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and the value of our stockholders’ investment in us.
Costs imposed pursuant to laws and governmental regulations may reduce our net income and our cash available for distribution to our stockholders.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns.
Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Our tenants’ operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages we must pay will reduce our ability to pay distributions to our stockholders and may reduce the value of our stockholders’ investment in us.

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The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce our cash available for distribution to our stockholders.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce our cash available for distribution to our stockholders.
All of our real estate properties are subject to Phase I environmental assessments prior to the time they are acquired; however, such assessments may not provide complete environmental histories due, for example, to limited available information about prior operations at the properties or other gaps in information at the time we acquire the property. A Phase I environmental assessment is an initial environmental investigation to identify potential environmental liabilities associated with the current and past uses of a given property. If any of our properties were found to contain hazardous or toxic substances after our acquisition, the value of our investment could decrease below the amount paid for such investment. In addition, real estate-related investments in which we invest may be secured by properties with recognized environmental conditions. Where we are secured creditors, we will attempt to acquire contractual agreements, including environmental indemnities, that protect us from losses arising out of environmental problems in the event the property is transferred by foreclosure or bankruptcy; however, no assurances can be given that such indemnities would fully protect us from responsibility for costs associated with addressing any environmental problems related to such properties.
Costs associated with complying with the Americans with Disabilities Act may decrease our cash available for distribution.
Our properties may be subject to the Americans with Disabilities Act of 1990, as amended, or the Disabilities Act. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for Disabilities Act compliance will reduce our net income and the amount of cash available for distribution to our stockholders.
Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flow from operations and the return on our stockholders ’ investment in us.
There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. We may not be able to obtain insurance against the risk of terrorism because it may not be available or may not be available on terms that are economically feasible. The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks. The inability to obtain sufficient terrorism insurance or any terrorism insurance at all could limit our financing and refinancing options as some mortgage lenders have begun to insist that specific coverage against terrorism be purchased by commercial owners as a condition for providing loans. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which will reduce the value of our stockholders’ investment in us. In addition other than any working capital reserve or other reserves we may establish, we have limited sources of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to our stockholders.


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Competition from other apartment communities for tenants could reduce our profitability and the return on our stockholders’ investment.
The apartment community industry is highly competitive. This competition could reduce occupancy levels and revenues at our apartment communities, which would adversely affect our operations. We are currently developing, through the Hardware Village joint venture, the Hardware Village apartment community, which we will subsequently operate through the joint venture. We expect to face competition from many sources. We will face competition from other apartment communities both in the immediate vicinity and in the larger geographic market where our apartment communities are located. Overbuilding of apartment communities may occur. If so, this will increase the number of apartment units available and may decrease occupancy and apartment rental rates. In addition, increases in operating costs due to inflation may not be offset by increased apartment rental rates.
Risks Related to Real Estate-Related Investments
Any future real estate-related investments we make will be subject to the risks typically associated with real estate.
Any future investments we make in real estate loans generally will be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our taking ownership of the property. The values of these properties may change after the dates of acquisition or origination of the loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Any investments we make in residential and commercial mortgage-backed securities and other real estate-related investments may be similarly affected by real estate property values. Therefore, any real estate-related investments we make will be subject to the risks typically associated with real estate, which are described above under the heading “- General Risks Related to Investments in Real Estate.”
Any future investments we make in real estate loans will be subject to interest rate fluctuations that will affect our returns as compared to market interest rates; accordingly, the value of our stockholders’ investment in us will be subject to fluctuations in interest rates.
With respect to fixed rate, long-term loans receivable, if interest rates rise, the loans could yield a return that is lower than then-current market rates. If interest rates decrease, we will be adversely affected to the extent that loans are prepaid because we may not be able to reinvest the proceeds at as high of an interest rate. If we invest in variable-rate loans receivable and interest rates decrease, our revenues will also decrease. For these reasons, investments in real estate loans, returns on those loans and the value of our stockholders’ investment in us would be subject to fluctuations in interest rates.
The mortgage loans we may invest in and the mortgage loans underlying any mortgage securities we may invest in are subject to delinquency, foreclosure and loss, which could result in losses to us.
Commercial real estate loans generally are secured by commercial real estate properties and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, occupancy rates, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, fiscal policies and regulations (including environmental legislation), natural disasters, terrorism, social unrest and civil disturbances.
In the event of any default under any mortgage loan we may acquire, we will bear a risk of loss of principal and accrued interest to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations. Foreclosure on a property securing a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the investment. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

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Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.
We have entered into and in the future may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of investments we hold, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:
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interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
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available interest rate hedging products may not correspond directly with the interest rate risk for which protection is sought;
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the duration of the hedge may not match the duration of the related liability or asset;
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the amount of income that a REIT may earn from hedging transactions to offset losses due to fluctuations in interest rates is limited by federal tax provisions governing REITs;
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the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
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the party owing money in the hedging transaction may default on its obligation to pay; and
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we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.
Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the investments being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the interest rate risk sought to be hedged. Any such imperfect correlation may prevent us from achieving the intended accounting treatment and may expose us to risk of loss.
We assume the credit risk of our counterparties with respect to derivative transactions.
We enter into derivative contracts for risk management purposes to hedge our exposure to cash flow variability caused by changing interest rates on our variable rate notes payable and we may enter into such contracts if we acquire any variable rate real estate loans receivable. These derivative contracts generally are entered into with bank counterparties and are not traded on an organized exchange or guaranteed by a central clearing organization. We would therefore assume the credit risk that our counterparties will fail to make periodic payments when due under these contracts or become insolvent. If a counterparty fails to make a required payment, becomes the subject of a bankruptcy case, or otherwise defaults under the applicable contract, we would have the right to terminate all outstanding derivative transactions with that counterparty and settle them based on their net market value or replacement cost. In such an event, we may be required to make a termination payment to the counterparty, or we may have the right to collect a termination payment from such counterparty. We assume the credit risk that the counterparty will not be able to make any termination payment owing to us. We may not receive any collateral from a counterparty, or we may receive collateral that is insufficient to satisfy the counterparty’s obligation to make a termination payment. If a counterparty is the subject of a bankruptcy case, we will be an unsecured creditor in such case unless the counterparty has pledged sufficient collateral to us to satisfy the counterparty’s obligations to us.
We assume the risk that our derivative counterparty may terminate transactions early.
If we fail to make a required payment or otherwise default under the terms of a derivative contract, the counterparty would have the right to terminate all outstanding derivative transactions between us and that counterparty and settle them based on their net market value or replacement cost. In certain circumstances, the counterparty may have the right to terminate derivative transactions early even if we are not defaulting. If our derivative transactions are terminated early, it may not be possible for us to replace those transactions with another counterparty, on as favorable terms or at all.

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We may be required to collateralize our derivative transactions.
We may be required to secure our obligations to our counterparties under our derivative contracts by pledging collateral to our counterparties. That collateral may be in the form of cash, securities or other assets. If we default under a derivative contract with a counterparty, or if a counterparty otherwise terminates one or more derivative contracts early, that counterparty may apply such collateral toward our obligation to make a termination payment to the counterparty. If we have pledged securities or other assets, the counterparty may liquidate those assets in order to satisfy our obligations. If we are required to post cash or securities as collateral, such cash or securities will not be available for use in our business. Cash or securities pledged to counterparties may be repledged by counterparties and may not be held in segregated accounts. Therefore, in the event of a counterparty insolvency, we may not be entitled to recover some or all collateral pledged to that counterparty, which could result in losses and have an adverse effect on our operations.
There can be no assurance that the direct or indirect effects of the Dodd-Frank Act and other applicable non-U.S. regulations will not have an adverse effect on our interest rate hedging activities.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) imposed additional regulations on derivatives markets and transactions. Such regulations and, to the extent we trade with counterparties organized in non-US jurisdictions, any applicable regulations in those jurisdictions, are still being implemented, and will affect our interest rate hedging activities. While the full impact of regulation on our interest rate hedging activities cannot be fully assessed until all final rules and regulations are implemented, such regulation may affect our ability to enter into hedging or other risk management transactions, may increase our costs in entering into such transactions, and/or may result in us entering into such transactions on less favorable terms than prior to implementation of such regulation. For example, but not by way of limitation, the Dodd-Frank Act and the rulemaking thereunder provides for significantly increased regulation of the derivative transactions used to affect our interest rate hedging activities, including: (i) regulatory reporting, (ii) subject to an exemption for end-users of swaps upon which we and our subsidiaries generally rely, mandated clearing of certain derivatives transactions through central counterparties and execution on regulated exchanges or execution facilities, and (iii) to the extent we are required to clear any such transactions, margin and collateral requirements. The imposition, or the failure to comply with, any of the foregoing requirements may have an adverse effect on our business and our stockholders’ return.
Our investments in derivatives are carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these instruments.
Our investments in derivatives are recorded at fair value but have limited liquidity and are not publicly traded. The fair value of our derivatives may not be readily determinable. We will estimate the fair value of any such investments on a quarterly basis. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed. The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal or maturity.
Risks Associated with Debt Financing
We obtain lines of credit, mortgage indebtedness and other borrowings and have given guarantees, which increases our risk of loss due to potential foreclosure.
We obtain lines of credit and long-term financing secured by our properties and other assets. We have acquired our real estate properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties, to fund property improvements and other capital expenditures, to pay distributions and for other purposes. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gain). However, we can give our stockholders no assurance that we will be able to obtain such borrowings on satisfactory terms or at all.

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If we mortgage a property and there is a shortfall between the cash flow generated by that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distribution to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the value of our stockholders’ investment in us. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We have given and may give full or partial guarantees to lenders of mortgage or other debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of all or a part of the debt or other amounts related to the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a mortgage secured by a single property could affect mortgages secured by other properties.
On November 3, 2017, we entered into a three-year loan facility for borrowings an amount of up to $1.01 billion (the “Portfolio Loan Facility”), of which $757.5 million is term debt and $252.5 million is revolving debt. The Portfolio Loan Facility is secured by RBC Plaza, Preston Commons, Sterling Plaza, One Washingtonian Center, Towers at Emeryville, Ten Almaden, Town Center and 500 West Madison. As of March 5, 2018 , $865.5 million has been funded under the Portfolio Loan Facility.
We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and our stockholders could lose all or part of their investment in us.
High mortgage rates or changes in underwriting standards may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash available for distribution to our stockholders.
If mortgage debt is unavailable at reasonable rate, we may not be able to finance the purchase of properties. If we place mortgage debt on a property, we run the risk of being unable to refinance part or all of the debt when it becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance properties subject to mortgage debt, our income could be reduced. We may be unable to refinance or may only be able to partly refinance properties if underwriting standards, including loan to value ratios and yield requirements, among other requirements, are more strict than when we originally financed the properties. If any of these events occurs, our cash flow could be reduced and/or we might have to pay down existing mortgages. This, in turn, would reduce cash available for distribution to our stockholders, could cause us to require additional capital and may hinder our ability to raise capital by issuing more stock or by borrowing more money.
We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.
We may finance our assets over the long-term through a variety of means, including credit facilities and other structured financings. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities may not accommodate long-term financing. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flow, thereby reducing cash available for distribution to our stockholders and funds available for operations as well as for future business opportunities.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to pay distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan agreements into which we enter may contain covenants that limit our ability to further mortgage a property or that prohibit us from discontinuing insurance coverage or replacing our advisor. These or other limitations would decrease our operating flexibility and our ability to achieve our operating objectives and limit our ability to pay distributions to our stockholders.
The loan agreements for our debt obligations contain customary representations and warranties, financial and other affirmative and negative covenants (including maintenance of ongoing debt service coverage ratios), events of default and remedies typical for these types of financings.

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Increases in interest rates would increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.
We have incurred variable rate debt and we expect that we will incur additional debt in the future. Increases in interest rates will increase the cost of that debt, which could reduce our cash flow from operations and the cash we have available for distribution to our stockholders. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.
We have broad authority to incur debt and high debt levels could limit the amount of cash we have available to distribute to our stockholders and decrease the value of our stockholders’ investment in us.
We may incur debt until our total liabilities would exceed 75% of the cost of our tangible assets (before deducting depreciation and other noncash reserves) and we may exceed this limit with the approval of the conflicts committee of our board of directors. As of December 31, 2017 , our borrowings and other liabilities were approximately 59% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute to our stockholders and could result in a decline in the value of our stockholders’ investment in us.
Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates (a maximum rate of 35% applies through 2017 and 21% for subsequent years). In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to pay distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to our stockholders.
We believe that we have operated and will continue to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes, commencing with the taxable year ended December 31, 2011. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. Accordingly, we cannot be certain that we will be successful in operating so we can remain qualified as a REIT. While we intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.
Our stockholders may have current tax liability on distributions they elect to reinvest in our common stock.
If our stockholders participate in our dividend reinvestment plan, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, our stockholders will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value, if any. As a result, unless our stockholders are tax-exempt entities, they may have to use funds from other sources to pay their tax liability on the value of the shares of common stock received.

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Even if we qualify as a REIT for federal income tax purposes, we may be subject to federal, state, local or other tax liabilities that reduce our cash flow and our ability to pay distributions to our stockholders.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:
•
In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.
•
We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
•
If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may avoid the 100% tax on the gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate.
•
If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also will be subject to corporate tax on any undistributed taxable income. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to pay distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To maintain our REIT status, we may be forced to forego otherwise attractive business or investment opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders ’ overall return.
To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to pay distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and reduce the value of our stockholders’ investment.

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If our operating partnership fails to maintain its status as a partnership for federal income tax purposes, its income would be subject to taxation and our REIT status would be terminated.
We intend to maintain the status of our operating partnership as a partnership for federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of our operating partnership as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our operating partnership could make to us. This would also result in our losing REIT status and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the return on your investment. In addition, if any of the entities through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership for federal income tax purposes, the underlying entity would become subject to taxation as a corporation, thereby reducing distributions to our operating partnership and jeopardizing our ability to maintain REIT status.
Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension-held REIT,” (iii) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) the residual Real Estate Mortgage Investment Conduit interests, or REMICs, we buy (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to federal income tax as unrelated business taxable income under the Internal Revenue Code.
The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for federal income tax purposes.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to dispose of loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level, and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.
It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.
Complying with REIT requirements may force us to liquidate otherwise attractive investments.
To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and residential and commercial mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
Liquidation of assets may jeopardize our REIT qualification.
To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

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Complying with REIT requirements may limit our ability to hedge effectively.
The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the purpose of the instrument is to (i) hedge interest rate risk on liabilities incurred to carry or acquire real estate, (ii) hedge risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests, or (iii) manage risk with respect to the termination of certain prior hedging transactions described in (i) and/or (ii) above and, in each case, such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.
Our ownership of and relationship with our taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.
A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries. A domestic taxable REIT subsidiary will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure our stockholders that we will be able to comply with the 20% value limitation on ownership of taxable REIT subsidiary stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.
The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we intend to elect and qualify to be taxed as a REIT, we may not elect to be treated as a REIT or may terminate our REIT election if we determine that qualifying as a REIT is no longer in our best interests. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.
Changes recently made to the U.S. tax laws could have a negative impact on our business.
The President signed a tax reform bill into law on December 22, 2017 (the “Tax Cuts and Jobs Act”). Among other things, the Tax Cuts and Jobs Act: 
•
Reduces the corporate income tax rate from 35% to 21% (including with respect to a taxable REIT subsidiary);
•
Reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. stockholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
•
Allows an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time;
•
Changes the recovery periods for certain real property and building improvements (for example, to 15 years for qualified improvement property under the modified accelerated cost recovery system, and to 30 years (previously 40 years) for residential real property and 20 years (previously 40 years) for qualified improvement property under the alternative depreciation system);
•
Restricts the deductibility of interest expense by businesses (generally, to 30% of the business’ adjusted taxable income) except, among others, real property businesses electing out of such restriction; we have not yet determined whether we and/or our subsidiaries can and/or will make such an election;
•
Requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;
•
Restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;

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•
Permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes;
•
Requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under GAAP, which, with respect to certain leases, could accelerate the inclusion of rental income;
•
Eliminates the federal corporate alternative minimum tax;
•
Reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);
•
Generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income); and
•
Limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).
 Many of the provisions in the Tax Cuts and Jobs Act, in particular those affecting individual taxpayers, expire at the end of 2025.
As a result of the changes to U.S. federal tax laws implemented by the Tax Cuts and Jobs Act, our taxable income and the amount of distributions to our stockholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, could change. As a REIT, we are required to distribute at least 90% of our taxable income to our stockholders annually.
 The Tax Cuts and Jobs Act is a complex revision to the U.S. federal income tax laws with various impacts on different categories of taxpayers and industries, and will require subsequent rulemaking and interpretation in a number of areas. The long-term impact of the Tax Cuts and Jobs Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. Furthermore, the Tax Cuts and Jobs Act may negatively impact certain of our tenants’ operating results, financial condition, and future business plans. The Tax Cuts and Jobs Act may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the Tax Cuts and Jobs Act will not negatively impact our operating results, financial condition, and future business operations.
Dividends payable by REITs do not qualify for the reduced tax rates.
In general, the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for this reduced rate; provided individuals may be able to deduct 20% of income received as ordinary REIT dividends, thus reducing the maximum effective federal income tax rate on such dividend. While this tax treatment does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.
Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

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The taxation of distributions to our stockholders can be complex; however, distributions that we make to our stockholders generally will be taxable as ordinary income, which may reduce your anticipated return from an investment in us.
Distributions that we make to our taxable stockholders to the extent of our current and accumulated earnings and profits (and not designated as capital gain dividends or qualified dividend income) generally will be taxable as ordinary income. However, a portion of our distributions may (i) be designated by us as capital gain dividends generally taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us, (ii) be designated by us as qualified dividend income generally to the extent they are attributable to dividends we receive from non-REIT corporations, such as our taxable REIT subsidiaries, or (iii) constitute a return of capital generally to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital distribution is not taxable, but has the effect of reducing the basis of a stockholder’s investment in our common stock.
We may be required to pay some taxes due to actions of a taxable REIT subsidiary which would reduce our cash available for distribution to you.
Any net taxable income earned directly by a taxable REIT subsidiary, or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT's customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to you.
Investments in other REITs and real estate partnerships could subject us to the tax risks associated with the tax status of such entities.
We may invest in the securities of other REITs and real estate partnerships. Such investments are subject to the risk that any such REIT or partnership may fail to satisfy the requirements to qualify as a REIT or a partnership, as the case may be, in any given taxable year. In the case of a REIT, such failure would subject such entity to taxation as a corporation, may require such REIT to incur indebtedness to pay its tax liabilities, may reduce its ability to make distributions to us, and may render it ineligible to elect REIT status prior to the fifth taxable year following the year in which it fails to so qualify. In the case of a partnership, such failure could subject such partnership to an entity level tax and reduce the entity’s ability to make distributions to us. In addition, such failures could, depending on the circumstances, jeopardize our ability to qualify as a REIT.
Retirement Plan Risks
If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account (“IRA”)) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.
There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares. Fiduciaries and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:
•
the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code;
•
the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;
•
the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;
•
the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA;
•
the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;
•
our stockholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and
•
the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

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With respect to the annual valuation requirements described above, we will provide an estimated value for our common stock annually. We can make no claim whether such estimated value per share will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common stock. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions. For information regarding our estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities - Market Information” of this Annual Report on Form 10-K.
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In addition, the investment transaction must be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common stock.
If our assets are deemed to be plan assets, our advisor and we may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code.
In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets unless an exception applies. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA or Section 4975 of the Internal Revenue Code, may be applicable, and there may be liability under these and other provisions of ERISA and the Internal Revenue Code. We believe that our assets should not be treated as plan assets because the shares should qualify as “publicly-offered securities” that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if we or our advisor are exposed to liability under ERISA or the Internal Revenue Code, our performance and results of operations could be adversely affected. Stockholders should consult with their legal and other advisors concerning the impact of ERISA and the Internal Revenue Code on their investment and our performance.
The Department of Labor has issued a final regulation revising the definition of “fiduciary” under ERISA and the Internal Revenue Code, which may affect the marketing of investments in our shares.
In April 2016, the Department of Labor issued a final regulation relating to the definition of a fiduciary under ERISA and Section 4975 of the Internal Revenue Code. The final regulation broadens the definition of fiduciary and is accompanied by new and revised prohibited transaction exemptions relating to investments by employee benefit plans subject to Title I of ERISA or retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (including IRAs). Certain provisions of final regulation took effect in June 2017, with full implementation scheduled for July 1, 2019. The final regulation and the accompanying exemptions are complex. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
We have no unresolved staff comments.

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ITEM 2.
PROPERTIES
As of December 31, 2017 , our real estate portfolio held for investment was composed of 27 office properties and one mixed-use office/retail property encompassing 10.8 million rentable square feet in the aggregate that were collectively 93%  occupied with a weighted-average remaining lease term of 4.5 years. In addition, we had entered into the Hardware Village joint venture to develop and subsequently operate Hardware Village, which is currently under construction. The following table provides summary information regarding the properties owned by us and held for investment as of December 31, 2017 :
Property Location of Property
 
Date
Acquired
 
Property Type
 
Rentable Square Feet
 
Total Real Estate at Cost (1)
(in thousands)
 
Annualized Base Rent (2)
(in thousands)
 
Average Annualized Base Rent per Square Foot (3)
 
Average Remaining Lease Term in Years
 
% of Total Assets
 
Occupancy
Domain Gateway
Austin, TX
 
09/29/2011
 
Office
 
173,962

 
$
47,374

 
$
3,716

 
$
21.36

 
1.7

 
1.1
%
 
100.0
%
Town Center
Plano, TX
 
03/27/2012
 
Office
 
522,043

 
115,789

 
11,836

 
24.56

 
3.3

 
2.8
%
 
92.3
%
McEwen Building
Franklin, TN
 
04/30/2012
 
Office
 
175,262

 
36,928

 
4,666

 
28.55

 
2.8

 
0.9
%
 
93.2
%
Gateway Tech Center
     Salt Lake City, UT
 
05/09/2012
 
Office
 
210,256

 
24,804

 
4,714

 
25.89

 
2.8

 
0.6
%
 
86.6
%
Tower on Lake Carolyn
     Irving, TX
 
12/21/2012
 
Office
 
364,336

 
53,412

 
8,670

 
24.07

 
4.1

 
1.3
%
 
98.9
%
RBC Plaza
     Minneapolis, MN
 
01/31/2013
 
Office
 
710,332

 
152,315

 
11,885

 
17.66

 
5.6

 
3.8
%
 
94.7
%
One Washingtonian Center
     Gaithersburg, MD
 
06/19/2013
 
Office
 
314,175

 
91,509

 
9,584

 
31.35

 
6.1

 
2.4
%
 
97.3
%
Preston Commons
     Dallas, TX
 
06/19/2013
 
Office
 
427,799

 
118,211

 
10,709

 
27.26

 
2.7

 
3.1
%
 
91.8
%
Sterling Plaza
    Dallas, TX
 
06/19/2013
 
Office
 
313,609

 
79,621

 
7,316

 
26.92

 
3.8

 
2.1
%
 
86.7
%
201 Spear Street
    San Francisco, CA
 
12/03/2013
 
Office
 
252,591

 
142,408

 
14,776

 
67.22

 
6.5

 
4.0
%
 
87.0
%
500 West Madison
    Chicago, IL
 
12/16/2013
 
Office
 
1,457,724

 
432,842

 
36,031

 
27.58

 
4.4

 
11.5
%
 
89.6
%
222 Main
    Salt Lake City, UT
 
02/27/2014
 
Office
 
426,657

 
160,501

 
15,487

 
36.99

 
6.5

 
4.2
%
 
98.1
%
Anchor Centre
    Phoenix, AZ
 
05/22/2014
 
Office
 
333,014

 
94,620

 
8,212

 
26.56

 
3.9

 
2.5
%
 
92.9
%
171 17th Street
    Atlanta, GA
 
08/25/2014
 
Office
 
510,268

 
133,262

 
12,595

 
24.96

 
4.7

 
3.5
%
 
98.9
%
Reston Square
    Reston, VA
 
12/03/2014
 
Office
 
138,995

 
46,819

 
5,282

 
39.47

 
5.7

 
1.2
%
 
96.3
%
Ten Almaden
    San Jose, CA
 
12/05/2014
 
Office
 
309,255

 
123,800

 
11,995

 
41.43

 
3.4

 
3.4
%
 
93.6
%
Towers at Emeryville
    Emeryville, CA
 
12/23/2014
 
Office
 
815,018

 
267,381

 
26,429

 
39.92

 
3.2

 
7.4
%
 
81.2
%
101 South Hanley
    St. Louis, MO
 
12/24/2014
 
Office
 
360,505

 
71,483

 
8,754

 
25.58

 
4.8

 
2.0
%
 
94.9
%
3003 Washington Boulevard
    Arlington, VA
 
12/30/2014
 
Office
 
210,804

 
151,096

 
12,341

 
59.96

 
10.1

 
4.2
%
 
97.6
%
Village Center Station
    Greenwood Village, CO
 
05/20/2015
 
Office
 
234,915

 
78,399

 
5,886

 
25.06

 
2.5

 
2.1
%
 
100.0
%
Park Place Village
    Leawood, KS
 
06/18/2015
 
Office/Retail
 
483,054

 
128,609

 
14,072

 
29.85

 
5.9

 
3.6
%
 
97.6
%
201 17th Street
    Atlanta, GA
 
06/23/2015
 
Office
 
355,870

 
102,578

 
10,118

 
29.49

 
7.9

 
2.9
%
 
96.4
%
Promenade I & II at Eilan
    San Antonio, TX
 
07/14/2015
 
Office
 
205,773

 
62,643

 
5,079

 
24.86

 
4.8

 
1.7
%
 
99.3
%
CrossPoint at Valley Forge
    Wayne, PA
 
08/18/2015
 
Office
 
272,360

 
90,352

 
8,773

 
32.21

 
3.9

 
2.5
%
 
100.0
%
515 Congress
    Austin, TX
 
08/31/2015
 
Office
 
263,058

 
117,522

 
6,473

 
27.84

 
2.6

 
3.3
%
 
88.4
%
The Almaden
    San Jose, CA
 
09/23/2015
 
Office
 
416,126

 
168,354

 
13,239

 
33.57

 
3.4

 
4.8
%
 
94.8
%
3001 Washington Boulevard
    Arlington, VA
 
11/06/2015
 
Office
 
94,837

 
57,093

 
3,017

 
55.75

 
7.2

 
1.7
%
 
57.1
%
Carillon
    Charlotte, NC
 
01/15/2016
 
Office
 
488,243

 
152,374

 
11,600

 
25.78

 
4.1

 
4.4
%
 
92.2
%
Hardware Village  (4)
   Salt Lake City, UT
 
08/26/2016
 
Development/Apartment
 
N/A
 
67,826

 
N/A
 
N/A
 
N/A
 
2.1
%
 
N/A
 
 
 
 
 
 
10,840,841

 
$
3,369,925

 
$
303,255

 
$
30.16

 
4.5

 
 
 
92.7
%

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Table of Contents

_____________________
(1) Total real estate at cost represents the total cost of real estate net of write-offs of fully depreciated/amortized assets.
(2) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(3) Average annualized base rent per square foot is calculated as the annualized base rent divided by the leased square feet.
(4) On August 26, 2016, we entered into the Hardware Village joint venture to participate in the development and subsequent operation of Hardware Village. We own a 99.24% equity interest in the joint venture.
Portfolio Lease Expirations
The following table sets forth a schedule of expiring leases for our real estate portfolio held for investement by square footage and by annualized base rent as of December 31, 2017 :
Year of Expiration
 
Number of Leases
Expiring
 
Annualized Base Rent
Expiring (1)
(in thousands)
 
% of Portfolio
Annualized Base Rent
Expiring
 
Leased
Square Feet
Expiring  
 
% of Portfolio
Leased Square Feet
Expiring
Month to Month
 
37

 
$
7,254

 
2.4
%
 
405,333

 
4.0
%
2018
 
143

 
23,574

 
7.8
%
 
816,265

 
8.1
%
2019
 
145

 
42,569

 
14.0
%
 
1,512,957

 
15.0
%
2020
 
122

 
32,368

 
10.7
%
 
1,113,308

 
11.1
%
2021
 
111

 
30,264

 
10.0
%
 
1,137,261

 
11.3
%
2022
 
126

 
37,113

 
12.2
%
 
1,130,673

 
11.2
%
2023
 
63

 
29,149

 
9.6
%
 
944,762

 
9.4
%
2024
 
49

 
23,750

 
7.8
%
 
752,161

 
7.5
%
2025
 
27

 
22,143

 
7.3
%
 
663,051

 
6.6
%
2026
 
28

 
13,792

 
4.5
%
 
460,893

 
4.6
%
2027
 
30

 
16,607

 
5.5
%
 
535,808

 
5.3
%
Thereafter
 
16

 
24,672

 
8.2
%
 
581,707

 
5.9
%
Total
 
897

 
$
303,255

 
100.0
%
 
10,054,179

 
100.0
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
As of December 31, 2017 , our portfolio’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:
Industry
 
Number of Tenants
 
Annualized Base Rent (1)
(in thousands)
 
Percentage of
Annualized Base Rent
Finance
 
151
 
$
60,840

 
20.1
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
As of December 31, 2017 , no other tenant industries accounted for more than 10% of annualized base rent and no tenant accounted for more than 10% of the annualized base rent.
During 2017 , we also acquired a 75% equity interest in an existing company and created a joint venture with an unaffiliated developer to develop and subsequently operate Village Center Station II.
For more information about our real estate portfolio, see Part I, Item 1, “Business.”

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In addition, as of December 31, 2017 , we had one office property held for sale. The following table provides summary information regarding the property held for sale as of December 31, 2017 :
Property Location of Property
 
Date
Acquired
 
Property Type
 
Rentable Square Feet
 
Total Real Estate at Cost (1)
(in thousands)
 
Annualized Base Rent (2)
(in thousands)
 
Average Annualized Base Rent per Square Foot (3)
 
Average Remaining Lease Term in Years
 
% of Total Assets
 
Occupancy
Rocklin Corporate Center
    Rocklin, CA
 
11/06/2014
 
Office
 
220,020

 
33,575

 
4,651

 
23.36

 
3.5

 
0.9
%
 
90.5
%
_____________________
(1) Total real estate at cost represents the total cost of real estate net of write-offs of fully depreciated/amortized assets.
(2) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(3) Average annualized base rent per square foot is calculated as the annualized base rent divided by the leased square feet.
ITEM 3.
LEGAL PROCEEDINGS
From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government authorities.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.

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Table of Contents

PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Stockholder Information
As of March 5, 2018 , we had 178.3 million shares of common stock outstanding held by a total of approximately 39,600 stockholders. The number of stockholders is based on the records of DST Systems, Inc., which serves as our transfer agent.
Market Information
No public market currently exists for our shares of common stock, and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. Any sale must comply with applicable state and federal securities laws. In addition, our charter prohibits the ownership of more than 9.8% of our stock by a single person, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.
We provide an estimated value per share to assist broker-dealers that participated in our initial public offering in meeting their customer account statement reporting obligations under NASD Conduct Rule 2340, as required by FINRA. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. For this purpose, we estimated the value of the shares of our common stock as $11.73 per share as of December 31, 2017 . This estimated value per share is based on our board of directors’ approval on December 6, 2017 of an estimated value per share of our common stock of $11.73 based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2017 , with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. There were no other material changes between September 30, 2017 and December 6, 2017 that impacted the overall estimated value per share.
The conflicts committee, composed solely of all of our independent directors, is responsible for the oversight of the valuation process used to determine the estimated value per share of our common stock, including the review and approval of the valuation and appraisal processes and methodologies used to determine our estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. With the approval of the conflicts committee, we engaged Duff & Phelps, LLC, an independent third party real estate valuation firm, to provide appraisals for each of our 28 real estate properties owned as of September 30, 2017 (the “Appraised Properties”) and to provide a calculation of the range in estimated value per share of our common stock as of December 6, 2017.  Duff & Phelps based this range in estimated value per share upon (i) its appraisals of the Appraised Properties, (ii) the contractual sales price less estimated disposition costs and fees with respect to one real estate property under contract to sell as of December 6, 2017, (iii) valuations performed by our advisor of our investment in the Hardware Village joint venture and the Village Center Station II joint venture, cash, other assets, mortgage debt and other liabilities, and (iv) a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017.  The appraisal reports Duff & Phelps prepared summarized the key inputs and assumptions involved in the appraisal of each of the Appraised Properties. The methodologies and assumptions used to determine the estimated value of our assets and the estimated value of our liabilities are described further below.
The conflicts committee reviewed Duff & Phelps’ valuation report, which included an appraised value for each of the Appraised Properties and a summary of the estimated value of each of our other assets and our liabilities as determined by our advisor and reviewed by Duff & Phelps. In light of the valuation report and other factors considered by the conflicts committee and the conflicts committee’s own extensive knowledge of our assets and liabilities, the conflicts committee: (i) concluded that the range in estimated value per share of $10.91 to $12.56, with a mid-range value of $11.73 per share, as determined by Duff & Phelps and recommended by our advisor, which mid-range value was based on (a) Duff & Phelps’ appraisals of the Appraised Properties; (b) valuations performed by our advisor of our real estate under contract to sell as of December 6, 2017 , our investment in the Hardware Village joint venture and the Village Center Station II joint venture, cash, other assets, mortgage debt and other liabilities; and (c) a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017, was reasonable and (ii) recommended to our board of directors that it adopt $11.73 as the estimated value per share of our common stock, which estimated value per share is based on those factors discussed in (i) above. Our board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $11.73 as the estimated value per share of our common stock, which determination is ultimately and solely the responsibility of the board of directors.  

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The table below sets forth the calculation of our estimated value per share as of December 6, 2017 as well as the calculation of our prior estimated value per share as of December 9, 2016. Duff & Phelps was not responsible for the determination of the estimated value per share as of December 6, 2017 or December 9, 2016, respectively.
 
 
December 6, 2017
Estimated Value per Share
 
December 9, 2016
Estimated Value per Share (1)
 
Change in Estimated Value per Share
Real estate properties (2)
 
$
21.98

 
$
20.51

 
$
1.47

Hardware Village joint venture
 
0.31

 
0.08

 
0.23

Cash
 
0.25

 
0.28

 
(0.03
)
Village Center Station II joint venture
 
0.18

 
—

 
0.18

Other assets
 
0.12

 
0.08

 
0.04

Mortgage debt (3)
 
(10.49
)
 
(9.72
)
 
(0.77
)
Advisor participation fee potential liability
 
(0.08
)
 
—

 
(0.08
)
Other liabilities
 
(0.49
)
 
(0.60
)
 
0.11

Deferred financing costs subsequent to September 30, 2017
 
(0.05
)
 
—

 
(0.05
)
Estimated value per share
 
$
11.73

 
$
10.63

 
$
1.10

Estimated enterprise value premium
 
None assumed

 
None assumed

 
None assumed

Total estimated value per share
 
$
11.73

 
$
10.63

 
$
1.10

_____________________
(1) The December 9, 2016 estimated value per share was based upon a calculation of the range in estimated value per share of our common stock as of September 30, 2016 by Duff & Phelps and the recommendation of our advisor. Duff & Phelps based this range in estimated value per share upon its appraisals of our real estate properties held as of September 30, 2016 and valuations performed by our advisor with respect to the Hardware Village joint venture, cash, other assets, mortgage debt and other liabilities. For more information relating to the December 9, 2016 estimated value per share and the assumptions and methodologies used by Duff & Phelps and our advisor, see Part II, Item 5 of our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC.
(2) The increase in the estimated value of real estate properties per share was primarily due to an increase in the appraised value of real estate properties and capital expenditures subsequent to September 30, 2016.
(3) The increase in the estimated value of mortgage debt per share was primarily due to the increase in mortgage debt outstanding through September 30, 2017.
The increase in our estimated value per share from the previous estimate was primarily due to the items noted in the table below, which reflect the significant contributors to the increase in the estimated value per share from $10.63 to $11.73. The changes are not equal to the change in values of each asset and liability group presented in the table above due to changes in the amount of shares outstanding, new investments and related financings and other factors, which caused the value of certain asset or liability groups to change with no impact to our fair value of equity or the overall estimated value per share.
 
 
Change in Estimated Value per Share
December 9, 2016 estimated value per share
 
$
10.63

Changes to estimated value per share
 
 
Real estate
 
 
Real estate
 
1.47

Capital expenditures on real estate
 
(0.53
)
Total change related to real estate
 
0.94

Operating cash flows in excess of monthly distributions declared (1)
 
0.16

Deferred financing costs (2)
 
(0.06
)
Interest rate swap liability
 
0.14

Advisor participation fee potential liability
 
(0.08
)
Total change in estimated value per share
 
$
1.10

December 6, 2017 estimated value per share
 
$
11.73

_____________________
(1) Operating cash flow reflects modified funds from operations (“MFFO”) adjusted to deduct capitalized interest expense and add back the amortization of deferred financing costs. We compute MFFO in accordance with the definition included in the practice guideline issued by the IPA in November 2010.
(2) Amount includes deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017.

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As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the price at which our shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that were not under contract to sell as of December 6, 2017 , debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, the impact of restrictions on the assumption of debt or swap breakage fees that may be incurred upon the termination of certain of our swaps prior to expiration. The estimated value per share does not take into consideration acquisition-related costs and financing costs related to future acquisitions. As of December 6, 2017, we had no potentially dilutive securities outstanding that would impact the estimated value per share of our common stock.
Our estimated value per share takes into consideration any potential liability related to a subordinated participation in cash flows our advisor is entitled to upon meeting certain stockholder return thresholds in accordance with the advisory agreement. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and our advisor estimated the fair value of this liability to be $14.6 million or $0.08 per share as of the valuation date, and included the impact of this liability in its calculation of our estimated value per share.
Methodology
Our goal for the valuation was to arrive at a reasonable and supportable estimated value per share, using a process that was designed to be in compliance with the IPA Valuation Guidelines and using what we and our advisor deemed to be appropriate valuation methodologies and assumptions. The following is a summary of the valuation and appraisal methodologies, assumptions and estimates used to value our assets and liabilities:
Real Estate
Independent Valuation Firm
Duff & Phelps (1) was engaged by our advisor and approved by our conflicts committee and board of directors to appraise each of the Appraised Properties and to provide a calculation of the range in estimated value per share of our common stock as of December 6, 2017. Duff & Phelps is engaged in the business of appraising commercial real estate properties and is not affiliated with us or our advisor. The compensation we paid to Duff & Phelps was based on the scope of work and not on the appraised values of the Appraised Properties. The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation, as well as the requirements of the state where each real property is located. Each appraisal was reviewed, approved and signed by an individual with the professional designation of MAI (Member of the Appraisal Institute). The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
Duff & Phelps collected all reasonably available material information that it deemed relevant in appraising the Appraised Properties. Duff & Phelps obtained property-level information from our advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements; and (iii) information regarding recent or planned capital expenditures. Duff & Phelps reviewed and relied in part on the property-level information provided by our advisor and considered this information in light of its knowledge of each property’s specific market conditions.





_____________________
(1) Duff & Phelps is actively engaged in the business of appraising commercial real estate properties similar to those we own in connection with public securities offerings, private placements, business combinations and similar transactions. We engaged Duff & Phelps to prepare appraisal reports for each of the Appraised Properties and to provide a calculation of the range in estimated value per share of our common stock and Duff & Phelps received fees upon the delivery of such reports and the calculation of the range in estimated value per share of our common stock. In addition, we have agreed to indemnify Duff & Phelps against certain liabilities arising out of this engagement. In the two years prior to the date of this filing, Duff & Phelps and its affiliates have provided a number of commercial real estate, appraisal, valuation and financial advisory services for our affiliates and have received fees in connection with such services. Duff & Phelps and its affiliates may from time to time in the future perform other commercial real estate, appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable Duff & Phelps appraiser as certified in the applicable appraisal report.

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In conducting its investigation and analyses, Duff & Phelps took into account customary and accepted financial and commercial procedures and considerations as it deemed relevant. Although Duff & Phelps reviewed information supplied or otherwise made available by us or our advisor for reasonableness, it assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party and did not independently verify any such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Duff & Phelps, Duff & Phelps assumed that such forecasts and other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management and/or our advisor. Duff & Phelps relied on us to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.
In performing its analyses, Duff & Phelps made numerous other assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond its and our control, as well as certain factual matters. For example, unless specifically informed to the contrary, Duff & Phelps assumed that we had clear and marketable title to each of the Appraised Properties, that no title defects existed, that any improvements were made in accordance with law, that no hazardous materials were present or had been present previously, that no deed restrictions existed, and that no changes to zoning ordinances or regulations governing use, density or shape were pending or being considered. Furthermore, Duff & Phelps’ analyses, opinions and conclusions were necessarily based upon market, economic, financial and other circumstances and conditions existing as of or prior to the date of the appraisals, and any material change in such circumstances and conditions may affect Duff & Phelps’ analyses and conclusions. Duff & Phelps’ appraisal reports contain other assumptions, qualifications and limitations that qualify the analyses, opinions and conclusions set forth therein. Furthermore, the prices at which the Appraised Properties may actually be sold could differ from their appraised values.
Although Duff & Phelps considered any comments to its appraisal reports received from us or our advisor, the appraised values of the Appraised Properties were determined by Duff & Phelps. The appraisal reports for the Appraised Properties are addressed solely to us to assist in the calculation of the range in estimated value per share of our common stock. The appraisal reports are not addressed to the public and may not be relied upon by any other person to establish an estimated value per share of our common stock and do not constitute a recommendation to any person to purchase or sell any shares of our common stock. In preparing its appraisal reports, Duff & Phelps did not solicit third-party indications of interest for the Appraised Properties. In preparing its appraisal reports and in calculating the range in estimated value per share of our common stock, Duff & Phelps did not, and was not requested to, solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us.
The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to Duff & Phelps’ appraisal reports. All of the Duff & Phelps appraisal reports, including the analyses, opinions and conclusions set forth in such reports, are qualified by the assumptions, qualifications and limitations set forth in the respective appraisal reports.
Real Estate Valuation
Duff & Phelps appraised each of the Appraised Properties using various methodologies including the direct capitalization approach, discounted cash flow analyses and sales comparison approach and relied primarily on 10-year discounted cash flow analyses for the final appraisal of each of the Appraised Properties. Duff & Phelps calculated the discounted cash flow value of each of the Appraised Properties using property-level cash flow estimates, terminal capitalization rates and discount rates that fall within ranges it believes would be used by similar investors to value the Appraised Properties, based on recent comparable market transactions adjusted for unique properties and market-specific factors.
As of December 6, 2017, our real estate portfolio, excluding our investment in the Hardware Village joint venture and Village Center Station II joint venture, consisted of 28 office properties and one mixed use office/retail property, which were acquired for a total purchase price of $3.2 billion, including $45.9 million of acquisition fees and acquisition expenses, and as of September 30, 2017, we had invested $315.5 million in capital and tenant improvements in these properties. As of September 30, 2017, the total appraised value of the Appraised Properties as provided by Duff & Phelps using the appraisal methods described above was $3.9 billion. The estimated value of our office property under contract to sell as of December 6, 2017, which was valued at the contractual sales price less estimated disposition costs and fees, was $41.1 million. The estimated value of our real estate portfolio, excluding our investment in the Hardware Village joint venture and Village Center Station II joint venture, was $4.0 billion which, when compared to the total acquisition cost plus subsequent capital improvements through September 30, 2017 of $3.5 billion, results in an overall increase in the estimated value of these properties of approximately 14.1%.

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Table of Contents

The following table summarizes the key assumptions that Duff & Phelps used in the discounted cash flow analyses to arrive at the appraised value of the Appraised Properties:
 
 
Range in Values
 
Weighted-Average Basis
Terminal capitalization rate
 
6.00% to 7.75%
 
6.49%
Discount rate
 
6.75% to 8.50%
 
7.42%
Net operating income compounded annual growth rate (1)
 
0.67% to 9.85%
 
4.25%
_____________________
(1) The net operating income compounded annual growth rates (the “CAGRs”) reflect both the contractual and market rents and reimbursements (in cases where the contractual lease period is less than the hold period of the property) net of expenses over the hold period for each of the properties. The range of CAGRs shown is the constant annual rate at which the net operating income is projected to grow to reach the net operating income in the final year of the hold period for each of the properties.
While we believe that Duff & Phelps’ assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the appraised value of the Appraised Properties and thus, our estimated value per share. The table below illustrates the impact on our estimated value per share if the terminal capitalization rates or discount rates Duff & Phelps used to appraise the Appraised Properties were adjusted by 25 basis points, assuming all other factors remain unchanged. Additionally, the table below illustrates the impact on our estimated value per share if these terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:
 
 
Increase (Decrease) on the Estimated Value per Share due to
 
 
Decrease of 25 basis points
 
Increase of 25 basis points
 
Decrease of 5%
 
Increase of 5%
Terminal capitalization rate
 
$
0.46

 
$
(0.43
)
 
$
0.61

 
$
(0.57
)
Discount Rate
 
0.36

 
(0.35
)
 
0.53

 
(0.52
)
Finally, a 1% increase in the appraised value of the Appraised Properties would result in an $0.19 increase in our estimated value per share and a 1% decrease in the appraised value of the Appraised Properties would result in a decrease of $0.19 to our estimated value per share, assuming all other factors remain unchanged.
Construction-in-Progress - Hardware Village
As of September 30, 2017, we had one real estate construction-in-progress project held through the Hardware Village joint venture in which we own a 99.24% equity interest and exercise control. The estimated value of our real estate construction-in-progress project is equal to the GAAP carrying value as disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2017. Under GAAP, all costs incurred related to real estate under construction that are necessary to bring the investment to its intended use are capitalized. The fair value and carrying value of our real estate construction-in-progress project was $56.1 million as of September 30, 2017.
Investment in Unconsolidated Joint Venture - Village Center Station II Joint Venture
As of September 30, 2017, we held an investment in an unconsolidated joint venture, the Village Center Station II joint venture. The investment in the Village Center Station II joint venture represents a 75% equity interest in a joint venture to develop and subsequently operate a 12-story office building and an adjacent two-story office/retail building. The estimated value of the our investment in the unconsolidated joint venture is equal to the GAAP carrying value (excluding $1.3 million of acquisition costs, financing costs and interest capitalized) as disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2017. Under GAAP, all costs incurred related to real estate under construction that is necessary to bring the investment to its intended use are capitalized. The fair value and the carrying value of our investment in this unconsolidated joint venture was $32.3 million and $33.6 million, respectively.
Notes Payable
The estimated values of our notes payable are equal to the GAAP fair values disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2017, but do not equal the book value of the loans in accordance with GAAP. Our advisor estimated the values of our notes payable using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms, including extensions we expect to exercise, and on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements.

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As of September 30, 2017, the GAAP fair value and the carrying value of our notes payable were $1.9 billion and $1.9 billion, respectively. The weighted-average discount rate applied to the future estimated debt payments was approximately 3.7%. Our notes payable have a weighted-average remaining term of 1.6 years.
The table below illustrates the impact on our estimated value per share if the discount rates our advisor used to value our notes payable were adjusted by 25 basis points, assuming all other factors remain unchanged. Additionally, the table below illustrates the impact on our estimated value per share if these discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:
 
 
Increase (Decrease) on the Estimated Value per Share due to
 
 
Decrease of 25 basis points
 
Increase of 25 basis points
 
Decrease of 5%
 
Increase of 5%
Discount rate
 
$
(0.03
)
 
$
0.03

 
$
(0.03
)
 
$
0.03

Other Assets and Liabilities
The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature. The estimated value per share includes deductions for minority interests related to the Hardware Village joint venture. Certain balances, such as straight-line rent receivables, lease intangible assets and liabilities, accrued capital expenditures, deferred financing costs, unamortized lease commissions and unamortized lease incentives, have been eliminated for the purpose of the valuation due to the fact that the value of those balances was already considered in the valuation of the related asset or liability. Our advisor has also excluded redeemable common stock, as temporary equity does not represent a true liability to us and the shares that this amount represents are included in our total outstanding shares of common stock for purposes of calculating the estimated value per share of our common stock.
Participation Fee Potential Liability Calculation
In accordance with the advisory agreement with our advisor, our advisor is entitled to receive a participation fee equal to 15.0% of our net cash flows, whether from continuing operations, net sale proceeds or otherwise, after our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to our share redemption program, and (ii) an 8.0% per year cumulative, noncompounded return on such net invested capital. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred in connection with a sale, including disposition fees paid to our advisor. The 8.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 8.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 8.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 8.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our advisor to participate in our net cash flows. In fact, if our advisor is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than a 8.0% per year cumulative, noncompounded return. This fee is payable only if we are not listed on an exchange. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties. Our advisor estimated the fair value of this liability to be $14.6 million or $0.08 per share as of the valuation date, and included the impact of this liability in its calculation of our estimated value per share.
Limitations of the Estimated Value per Share
As mentioned above, we provided this estimated value per share to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations. The estimated value per share set forth above first appeared on the December 31, 2017 customer account statements mailed in January 2018. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to GAAP.

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Accordingly, with respect to the estimated value per share, we can give no assurance that:
•
a stockholder would be able to resell his or her shares at our estimated value per share;
•
a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of our company;
•
our shares of common stock would trade at the estimated value per share on a national securities exchange;
•
another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share; or
•
the methodology used to determine our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.
Further, the estimated value per share is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. We did not make any other adjustments to the estimated value per share subsequent to September 30, 2017, including any adjustments relating to the following, among others: (i) the issuance of common stock and the payment of related offering costs related to our dividend reinvestment plan offering; (ii) net operating income earned and distributions declared; and (iii) the redemption of shares. The value of our shares will fluctuate over time in response to developments related to future investments, the performance of individual assets in our portfolio and the management of those assets, the real estate and finance markets and due to other factors. Our estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. Our estimated value per share does not take into account estimated disposition costs and fees for real estate properties that were not under contract to sell as of December 6, 2017 , debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, the impact of restrictions on the assumption of debt or swap breakage fees that may be incurred upon the termination of certain of our swaps prior to expiration. The estimated value per share does not take into consideration acquisition-related costs and financing costs related to future acquisitions. We currently expect to utilize an independent valuation firm to update our estimated value per share in December 2018.
Historical Estimated Values per Share
The historical reported estimated values per share of our common stock approved by the board of directors are set forth below:
Estimated Value per Share
 
Effective Date of Valuation
 
Filing with the Securities and Exchange Commission

$10.63

 
 
December 9, 2016
 
 Part II, Item 5 of our Annual Report on Form 10-K for the Year Ended
December 31, 2016, filed March 13, 2017

$10.04

 
 
December 8, 2015
 
 Part II, Item 5 of our Annual Report on Form 10-K for the Year Ended
December 31, 2015, filed March 14, 2016

$9.42

(1)  
 
December 9, 2014
 
 Part II, Item 5 of our Annual Report on Form 10-K for the Year Ended
December 31, 2014, filed March 9, 2015

$9.29

(1)  
 
May 5, 2014
 
Supplement no. 3 to our prospectus dated April 25, 2014
(Registration No. 333-164703), filed May 6, 2014
_____________________
(1) Determined solely to be used as a component in calculating the offering prices in our now-terminated primary initial public offering.
Distribution Information
We have authorized and declared, and expect to continue to authorize and declare, distributions based on daily record dates, and we have paid, and expect to continue to pay, such distributions on a monthly basis. The rate is determined by our board of directors based on our financial condition and other factors our board of directors deems relevant. Our board of directors has not pre-established a percentage range of return for distributions to stockholders. We have not established a minimum distribution level, and our charter does not require that we pay distributions to our stockholders.  

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Generally, our policy is to pay distributions from cash flow from operations. From time to time during our operational stage, we may not pay distributions solely from our cash flow from operations. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that, from time to time, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we have funded our distributions in part with debt financings and we may utilize debt financing in the future, if necessary, to fund at least a portion of our distributions. We may also fund such distributions with proceeds from the sale of assets or from the maturity, payoff or settlement of real estate-related investments, to the extent that we make any such additional investments. Our organizational documents permit us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. Our distribution policy is not to use the proceeds from an offering to pay distributions. If we pay distributions from sources other than our cash flow from operations, the overall return to our stockholders may be reduced.
Over the long-term, we generally expect that our distributions will be paid from cash flow from operating activities from current or prior periods (except with respect to distributions related to sales of our assets and distributions related to the repayment of principal under any real estate-related investments we make). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements”, Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those factors include: the future operating performance of our real estate investments in the existing real estate and financial environment; the success and economic viability of our tenants; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on any variable rate debt obligations we incur; and the level of participation in our dividend reinvestment plan. In the event our FFO and/or cash flow from operating activities decrease in the future, the level of our distributions may also decrease.  In addition, future distributions declared and paid may exceed FFO and/or cash flow from operating activities.
We elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with our taxable year ended December 31, 2011. To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
During 2016 and 2017 , we declared distributions based on daily record dates for each day during the periods commencing January 1,  2016 through February 28, 2016 and March 1, 2016 through December 31, 2017 . We paid distributions for all record dates of a given month on or about the first business day of the following month. Distributions declared during 2017 and 2016 , aggregated by quarter, are as follows (dollars in thousands, except per share amounts):
 
2017
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
Total
Total Distributions Declared
$
29,080

 
$
29,421

 
$
29,650

 
$
29,587

 
$
117,738

Total Per Share Distribution (1)
$
0.160

 
$
0.162

 
$
0.164

 
$
0.164

 
$
0.650

 
2016
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
Total
Total Distributions Declared
$
28,667

 
$
29,160

 
$
29,563

 
$
29,635

 
$
117,025

Total Per Share Distribution (1)
$
0.160

 
$
0.162

 
$
0.164

 
$
0.164

 
$
0.650

_____________________
(1) During the years ended December 31, 2016 and 2017 , we declared distributions based on daily record dates for each day during the periods commencing January 1, 2016 through February 28, 2016 and March 1, 2016 through December 31, 2017 .  Distributions for these periods were calculated based on stockholders of record each day during the periods at a rate of $0.00178082 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 5.54% annualized rate based on the current estimated value per share of $11.73.

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The tax composition of our distributions declared for the years ended December 31, 2017 and 2016 was as follows:
 
2017
 
2016
Ordinary Income
44
%
 
43
%
Capital Gain
—
%
 
—
%
Return of Capital
56
%
 
57
%
Total
100
%
 
100
%
For more information with respect to our distributions paid, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Distributions.”
On November 14, 2017, our board of directors authorized distributions based on daily record dates for the period from January 1, 2018 through January 31, 2018, which we paid on February 1, 2018. On January 30, 2018, our board of directors authorized distributions based on daily record dates for the period from February 1, 2018 through February 28, 2018, which we paid on March 1, 2018, and distributions based on daily record dates for the period from March 1, 2018 through March 31, 2018, which we expect to pay in April 2018. On March 7, 2018, our board of directors authorized distributions based on daily record dates for the period from April 1, 2018 through April 30, 2018, which we expect to pay in May 2018, and distributions based on daily record dates for the period from May 1, 2018 to May 31, 2018, which we expect to pay in June 2018. Stockholders may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periods are calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 5.54% annualized rate based on the current estimated value per share of $11.73 .
Use of Proceeds from Sales of Registered Securities and Unregistered Sales of Equity Securities
During the year ended December 31, 2017 , we did not sell any equity securities that were not registered under the Securities Act of 1933.
Share Redemption Program
We have a share redemption program that may enable stockholders to sell their shares to us in limited circumstances. The restrictions of our share redemption program will severely limit our stockholders’ ability to sell their shares should they require liquidity and will limit our stockholders’ ability to recover an amount equal to our estimated value per share.
There are several limitations on our ability to redeem shares under our share redemption program:
•
Unless the shares are being redeemed in connection with a Special Redemption, we may not redeem shares unless the stockholder has held the shares for one year.
•
During any calendar year, we may redeem only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. As a result of the limitations on the dollar value of shares that may be redeemed under our share redemption program, on November 30, 2017, we exhausted all funds available for redemptions for the year ended December 31, 2017 . Thus, we had no funds available for redemptions for the December 2017 redemption date. Effective January 1, 2018, this limitation was reset, and based on the amount of net proceeds raised from the sale of shares under our dividend reinvestment plan during 2017, we have  $59.8 million  available for redemptions of shares eligible for redemption in 2018.
•
Notwithstanding anything contained in our share redemption program to the contrary, we may increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to our stockholders. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to our stockholders.
•
During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•
We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

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For a stockholder’s shares to be eligible for redemption in a given month, the administrator must receive a written redemption request from the stockholder or from an authorized representative of the stockholder setting forth the number of shares requested to be redeemed at least five business days before the redemption date. If we cannot redeem all shares presented for redemption in any month because of the limitations on redemptions set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or the most recently effective, registration statement, as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.
If we do not completely satisfy a redemption request on a redemption date because the program administrator did not receive the request in time, because of the limitations on redemptions set forth in our share redemption program or because of a suspension of our share redemption program, then we will treat the unsatisfied portion of the redemption request as a request for redemption at the next redemption date funds are available for redemption, unless the redemption request is withdrawn. Any stockholder can withdraw a redemption request by sending written notice to the program administrator, provided such notice is received at least five business days before the redemption date.
Upon a transfer of shares, any pending redemption requests with respect to such transferred shares will be canceled as of the date we accept the transfer. Stockholders wishing us to continue to consider a redemption request related to any transferred shares must resubmit their redemption request.
Pursuant to our share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. The price at which we will redeem all other shares eligible for redemption is as follows:
•
For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated value per share as of the applicable redemption date;
•
For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated value per share as of the applicable redemption date;
•
For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated value per share as of the applicable redemption date; and
•
For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated value per share as of the applicable redemption date.
On December 9, 2016, our board of directors approved an estimated value per share of our common stock of $10.63 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2016. This estimated value per share became effective for the December 2016 redemption date, which was December 30, 2016.
On December 6, 2017 , our board of directors approved an estimated value per share of our common stock of $11.73 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2017 , with the exception of a reduction to our net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017 . This estimated value per share became effective for the December 2017 redemption date, which was December 29, 2017.
For purposes of determining the time period a redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to our dividend reinvestment plan will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.
We currently expect to utilize an independent valuation firm to update our estimated value per share in December 2018. We will report the estimated value per share of our common stock in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC. We will also provide information about our estimated value per share on our website, www.kbsreitiii.com (such information may be provided by means of a link to our public filings on the SEC’s website, www.sec.gov ).
Our board may amend, suspend or terminate our share redemption program upon 30 days’ notice to stockholders, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon 10 business days’ notice. The complete share redemption program document is filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2013 and is available at the SEC’s website, www.sec.gov.

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We funded redemptions under our share redemption program with the net proceeds from our dividend reinvestment plan. During the year ended December 31, 2017 , we redeemed shares pursuant to our share redemption program as follows:
Month
 
Total Number of Shares Redeemed  (1)
 
Average Price Paid Per Share  (2)
 
Approximate Dollar Value of Shares
Available That May Yet Be Redeemed
Under the Program
January 2017
 
536,160

 
$
10.46

 
(3)  
February 2017
 
206,012

 
$
10.51

 
(3)  
March 2017
 
458,763

 
$
10.37

 
(3)  
April 2017
 
579,233

 
$
10.40

 
(3)  
May 2017
 
563,933

 
$
10.46

 
(3)  
June 2017
 
675,243

 
$
10.39

 
(3)  
July 2017
 
899,951

 
$
10.36

 
(3)  
August 2017
 
632,696

 
$
10.43

 
(3)  
September 2017
 
701,088

 
$
10.38

 
(3)  
October 2017
 
659,372

 
$
10.40

 
(3)  
November 2017
 
32,637

 
$
10.45

 
(3)  
December 2017
 
—

 
$
—

 
(3)  
Total
 
5,945,088

 
 
 
 
_____________________
(1) We announced the adoption and commencement of the program on October 14, 2010. We announced amendments to the program on March 8, 2013 (which amendment became effective on April 7, 2013) and on March 7, 2014 (which amendment became effective on April 6, 2014).
(2) The prices at which we redeem shares under the program are as set forth above.
(3) We limit the dollar value of shares that may be redeemed under the program as described above. One of these limitations is that during each calendar year, our share redemption program limits the number of shares we may redeem to those that we could purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. In 2016, our net proceeds from our dividend reinvestment plan were $61.9 million. In November 2017, we exhausted $61.9 million of funds available for all redemptions for the year ended December 31, 2017 . As of December 31, 2017 , we had a total of $18.9 million of outstanding and unfulfilled redemptions requests, representing 1,633,717 shares, all of which were redeemed in January 2018. Based on the amount of net proceeds raised from the sale of shares under our dividend reinvestment plan during 2017, we had $59.8 million available for redemptions of shares eligible for redemption in 2018. As of February 28, 2018, we had $15.2 million available for redemptions of shares eligible for redemption for remainder of 2018.

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ITEM 6.
SELECTED FINANCIAL DATA
The following selected financial data as of and for the years ended December 31, 2017 ,  2016 , 2015 , 2014 and 2013 should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (in thousands, except share and per share amounts):
 
 
December 31,
 
 
2017
 
2016
 
2015
 
2014
 
2013
Balance sheet data
 
 
 
 
 
 
 
 
 
 
Total real estate and real estate-related investments, net
 
$
2,962,134

 
$
2,988,855

 
$
2,933,721

 
$
2,217,090

 
$
1,247,319

Total assets
 
3,220,807

 
3,182,676

 
3,133,874

 
2,375,288

 
1,305,447

Notes payable, net
 
1,941,786

 
1,783,468

 
1,640,654

 
1,311,751

 
724,743

Total liabilities
 
2,100,484

 
1,927,429

 
1,791,675

 
1,412,863

 
790,216

Redeemable common stock
 
40,915

 
61,871

 
55,367

 
29,329

 
12,414

Total equity
 
1,079,408

 
1,193,376

 
1,286,832

 
933,096

 
502,817

 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
2014
 
2013
Operating data
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
414,049

 
$
400,407

 
$
315,709

 
$
188,896

 
$
80,423

Net income (loss) attributable to common stockholders
 
1,374

 
763

 
(29,015
)
 
(12,352
)
 
(21,637
)
Net income (loss) per common share attributable to common stockholders - basic and diluted
 
0.01

 
—

 
(0.18
)
 
(0.14
)
 
(0.50
)
Other data
 
 
 
 
 
 
 
 
 
 
Cash flows provided by operating activities
 
124,439

 
114,157

 
97,521

 
53,954

 
20,164

Cash flows used in investing activities
 
(163,475
)
 
(198,884
)
 
(831,986
)
 
(1,035,952
)
 
(938,610
)
Cash flows provided by financing activities
 
32,454

 
48,553

 
739,964

 
1,051,552

 
928,117

Distributions declared
 
117,738

 
117,025

 
106,189

 
59,481

 
28,309

Distributions declared per common share (1)
 
0.650

 
0.650

 
0.650

 
0.650

 
0.650

Weighted-average number of common shares outstanding, basic and diluted
 
181,138,045

 
180,043,027

 
163,358,289

 
91,374,493

 
43,547,227

Reconciliation of funds from operations   (2)
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
 
$
1,374

 
$
763

 
$
(29,015
)
 
$
(12,352
)
 
$
(21,637
)
Depreciation of real estate assets
 
86,573

 
77,676

 
56,957

 
30,088

 
11,445

Amortization of lease-related costs
 
77,716

 
83,688

 
79,978

 
49,475

 
23,935

Gain on sale of real estate, net
 
—

 
—

 
—

 
(10,894
)
 
—

FFO
 
$
165,663

 
$
162,127

 
$
107,920

 
$
56,317

 
$
13,743

_____________________
(1) Distributions declared per common share assumes each share was issued and outstanding each day for the periods presented. Distributions for the periods from January 1, 2013 through February 28, 2012, March 1, 2012 through February 28, 2016 and March 1, 2016 through December 31, 2017 were based on daily record dates and calculated at a rate of $0.00178082 per share per day.
(2) We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
FFO is a non-GAAP financial measure and does not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO includes adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization. Investors should exercise caution when using non-GAAP performance measures, such as FFO, to make investment decisions. Accordingly, FFO should not be considered as an alternative to net income as an indicator of our operating performance.

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ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto. Also see “Forward-Looking Statements” preceding Part I and Part I, Item 1A, “Risk Factors.”
Overview
We were formed on December 22, 2009 as a Maryland corporation that elected to be taxed as a REIT beginning with the taxable year ended December 31, 2011 and we intend to continue to operate in such a manner. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by our advisor pursuant to an advisory agreement and our advisor conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
We have invested in a diverse portfolio of real estate investments. As of December 31, 2017 , we owned 28 office properties (one of which was held for sale) and one mixed-use office/retail property and had made investments in the Village Center Station II joint venture and the Hardware Village joint venture.
Liquidity and Capital Resources
On February 4, 2010, we filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of up to 280,000,000 shares, or up to $2,760,000,000 of shares, of common stock for sale to the public, of which up to 200,000,000 shares, or up to $2,000,000,000 of shares, were registered in our primary offering and up to 80,000,000 shares, or up to $760,000,000 of shares, were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015 upon the completion of review of subscriptions submitted in accordance with our processing procedures. We sold 169,006,162 shares of common stock in our now-terminated primary initial public offering for gross offering proceeds of $1.7 billion . As of December 31, 2017 , we had also sold 22,892,452 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $224.7 million . Also as of December 31, 2017 , we had redeemed 11,312,369 shares sold in our initial public offering for $114.4 million .
Additionally, on October 3, 2014, we issued 258,462 shares of common stock, for $2.4 million, in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.
We continue to offer shares under our dividend reinvestment plan. In some states, we will need to renew the registration statement annually or file a new registration statement to continue the dividend reinvestment plan offering. We may terminate our dividend reinvestment plan offering at any time.
We have invested all of the proceeds from our now-terminated primary initial public offering, net of selling commissions and dealer manager fees and other organization and offering costs, and proceeds from debt financing in a diverse portfolio of real estate investments. To date, proceeds from our dividend reinvestment plan have been used primarily to fund redemptions of shares under our share redemption program and for capital expenditures on our real estate investments.
Our principal demands for funds during the short and long-term are and will be for operating expenses, capital expenditures and general and administrative expenses; payments under debt obligations; redemptions of common stock; capital commitments and development expenses under our joint venture agreements; and payments of distributions to stockholders. Our primary sources of capital for meeting our cash requirements are as follows:
•
Cash flow generated by our real estate investments;
•
Debt financings (including amounts currently available under existing loan facilities); and
•
Proceeds from common stock issued under our dividend reinvestment plan.
Our real estate properties generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate properties is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectability of rent and operating recoveries from our tenants and how well we manage our expenditures.

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As of December 31, 2017 , we had mortgage debt obligations in the aggregate principal amount of $2.0 billion , with a weighted-average remaining term of 2.4 years. The maturity dates of certain loans may be extended beyond their current maturity date, subject to certain terms and conditions contained in the loan documents. Our debt obligations consisted of $192.5 million of fixed rate notes payable and $1.8 billion of variable rate notes payable. As of December 31, 2017 , the interest rates on $1.3 billion of our variable rate notes payable were effectively fixed through interest rate swap agreements. In addition, we entered into one interest rate swap with a notional amount of $24.0 million, which became effective in January 2018. As of December 31, 2017 , we had $278.1 million of revolving debt available for immediate future disbursement under two portfolio loans, subject to certain conditions set forth in the loan agreements.
We paid distributions to our stockholders during the year ended December 31, 2017 using cash flow from operations from current and prior periods. We believe that our cash flow from operations, cash on hand, proceeds from our dividend reinvestment plan, proceeds from the sale of real estate and current and anticipated financing activities are sufficient to meet our liquidity needs for the foreseeable future.
Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended December 31, 2017 did not exceed the charter-imposed limitation.
Volatility in global financial markets and changing political environments can cause fluctuations in the performance of the U.S. commercial real estate markets.  Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from investment properties. Increases in the cost of financing due to higher interest rates  may cause difficulty in refinancing debt obligations prior to or at maturity or at terms as favorable as the terms of existing indebtedness.  Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Management continuously reviews our investment and debt financing strategies to optimize our portfolio and the cost of our debt exposure.
Cash Flows from Operating Activities
During the year ended December 31, 2017 , net cash provided by operating activities was $124.4 million , compared to net cash provided by operating activities of $114.2 million during the year ended December 31, 2016 . Net cash provided by operating activities increased in 2017 primarily as a result of an increase in lease termination fees, rental rates, operating expense recoveries and property tax recoveries.
Cash Flows from Investing Activities
Net cash used in investing activities was $163.5 million for the year ended December 31, 2017 and primarily consisted of the following:
•
$82.0 million used for improvements to real estate;
•
$45.7 million used for construction in progress related to Hardware Village;
•
$33.7 million to make an investment in the Village Center Station II joint venture; and
•
$2.1 million of escrow deposits for tenant improvements.
Cash Flows from Financing Activities
Our cash flows from financing activities consist primarily of debt financings, redemptions and distributions paid to our stockholders. During the year ended December 31, 2017 , net cash provided by financing activities was $32.5 million and primarily consisted of the following:
•
$152.3 million of net cash provided by debt financing as a result of proceeds from notes payable of $942.2 million, partially offset by principal payments on notes payable of $778.7 million and payments of deferred financing costs of $11.2 million;
•
$61.9 million of cash used for redemptions of common stock; and
•
$58.0 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $59.8 million.

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We expect that our debt financing and other liabilities will be between 35% and 65% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves). We expect our debt financing related to the acquisition of core real estate properties to be between 45% and 65% of the aggregate cost of all such assets. We expect our debt financing related to the acquisition or origination of real estate-related investments to be between 0% and 65% of the aggregate cost of all such assets, to the extent we make real estate-related investments and depending upon the availability of such financings in the marketplace. There is no limitation on the amount we may borrow for the purchase of any single asset. We limit our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), meaning that our borrowings and other liabilities may exceed our maximum target leverage of 65% of the cost of our tangible assets without violating these borrowing restrictions. We may exceed the 75% limit only if a majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt in excess of this limit. From time to time, our total liabilities could also be below 35% of the cost of our tangible assets due to the lack of availability of debt financing. As of December 31, 2017 , our borrowings and other liabilities were approximately 59% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.
In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor and we have made certain payments to our dealer manager. During our operational stage, we expect to make payments to our advisor in connection with the management of our investments and costs incurred by our advisor in providing services to us. We also pay fees to our advisor in connection with the disposition of investments.
Among the fees payable to our advisor is an asset management fee. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto (but excludes acquisition fees paid or payable to our advisor). In the case of investments made through joint ventures, the asset management fee is determined based on our proportionate share of the underlying investment (but excluding acquisition fees paid to our advisor). With respect to investments in loans and any investments other than real property, the asset management fee is a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount actually paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition or origination expenses related thereto but is exclusive of acquisition or origination fees paid or payable to our advisor) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination expenses related to the acquisition or funding of such investment (excluding acquisition or origination fees paid or payable to our advisor), as of the time of calculation.
Pursuant to the advisory agreement, with respect to asset management fees accruing from March 1, 2014, our advisor agreed to defer, without interest, our obligation to pay asset management fees for any month in which our MFFO for such month, as such term is defined in the practice guideline issued by the IPA in November 2010 and interpreted by us, excluding asset management fees, does not exceed the amount of distributions declared by us for record dates of that month. We remain obligated to pay our advisor an asset management fee in any month in which our MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus will also be deferred under the advisory agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will be applied to pay any asset management fee amounts previously deferred in accordance with the advisory agreement.
As of December 31, 2017 , we had accrued and deferred payment of $2.3 million of asset management fees under the advisory agreement, as we believe the payment of this amount to our advisor is probable. These fees will be reimbursed in accordance with the terms noted above.  The amount of asset management fees deferred will vary on a month-to-month basis and the total amount of asset management fees deferred as well as the timing of the deferrals and repayments are difficult to predict as they will depend on the amount of and terms of the debt we use to acquire assets, the level of operating cash flow generated by our real estate investments and other factors. In addition, deferrals and repayments may occur in the same period, and it is possible that there could be additional deferrals in the future.

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However, notwithstanding the foregoing, any and all deferred asset management fees that are unpaid will become immediately due and payable at such time as our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) an 8% per year cumulative, noncompounded return on net invested capital (the “Stockholders’ 8% Return”) and (ii) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to our share redemption program. The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our advisor to receive deferred asset management fees.
On September 27, 2017, we and our advisor renewed the advisory agreement. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and our conflicts committee.
Contractual Commitments and Contingencies
The following is a summary of our contractual obligations as of December 31, 2017 (in thousands):
 
 
 
 
Payments Due During the Years Ended December 31,
Contractual Obligations
 
Total
 
2018
 
2019-2020
 
2021-2022
 
Thereafter
Outstanding debt obligations (1)
 
$
1,956,919

 
$
224,158

 
$
1,458,215

 
$
274,546

 
$
—

Interest payments on outstanding debt obligations (2)
 
169,964

 
66,895

 
93,376

 
9,693

 
—

Development obligations
 
39,515

 
(3)  
 
(3)  
 
—

 
—

_____________________
(1) Amounts include principal payments only.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of December 31, 2017 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable). We incurred interest expense of $62.6 million, excluding amortization of deferred financing costs totaling $5.3 million and unrealized gain on derivatives of $10.5 million and including interest capitalized of $2.4 million during the year ended December 31, 2017 .
(3) We have entered into the Hardware Village joint venture to develop a two-building multifamily apartment complex consisting of 466 units and expect to incur approximately $39.5 million in additional development obligations through 2018. As of December 31, 2017 , $21.0 million had been disbursed under the Hardware Village Loan Facility and $53.0 million remained available for future disbursements, subject to certain conditions contained in the Hardware Village Loan Facility documents.
As of December 31, 2017 , we expect to acquire the developer’s 25% equity interest in the Village Center Station II joint venture upon completion of Village Center Station II in 2018 for approximately $25.0 million. Upon such acquisition, we would own 100% of the equity interests in Village Center Station II.
Results of Operations
Overview
As of December 31, 2016 , we owned 28 office properties, one mixed-use office/retail property and had entered into the Hardware Village joint venture. During the year ended December 31, 2016 , the Aberdeen First Mortgage Origination was paid off. As of December 31, 2017 , we owned 28 office properties (one of which was held for sale) and one mixed-use office/retail property and had made investments in the Village Center Station II joint venture and the Hardware Village joint venture. As a result, the results of operations presented for the years ended December 31, 2017 and 2016 are not directly comparable due to our acquisition and development activity and the payoff of the Aberdeen First Mortgage Origination.

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Comparison of the year ended December 31, 2017 versus the year ended December 31, 2016
The following table provides summary information about our results of operations for the years ended December 31, 2017 and 2016 (dollar amounts in thousands):
 
 
For the Years Ended
December 31,
 
Increase (Decrease)
 
Percentage Change
 
$ Change Due to Acquisitions
and Payoffs (1)
 
$ Change Due to Properties Held
Throughout Both Periods (2)
 
 
2017
 
2016
 
 
 
 
Rental income
 
$
314,597

 
$
307,568

 
$
7,029

 
2
 %
 
$
568

 
$
6,461

Tenant reimbursements
 
76,438

 
70,856

 
5,582

 
8
 %
 
(153
)
 
5,735

Other operating income
 
23,014

 
21,152

 
1,862

 
9
 %
 
149

 
1,713

Interest income from real estate loan receivable
 
—

 
831

 
(831
)
 
(100
)%
 
(831
)
 
—

Operating, maintenance and management costs
 
97,477

 
93,580

 
3,897

 
4
 %
 
(131
)
 
4,028

Real estate taxes and insurance
 
65,325

 
61,090

 
4,235

 
7
 %
 
26

 
4,209

Asset management fees to affiliate
 
25,905

 
24,940

 
965

 
4
 %
 
474

 
491

Real estate acquisition fees to affiliate
 
—

 
1,473

 
(1,473
)
 
(100
)%
 
(1,473
)
 
—

Real estate acquisition fees and expenses
 
—

 
306

 
(306
)
 
(100
)%
 
(306
)
 
—

General and administrative expenses
 
4,723

 
5,398

 
(675
)
 
(13
)%
 
n/a

 
n/a

Depreciation and amortization
 
164,289

 
161,364

 
2,925

 
2
 %
 
136

 
2,789

Interest expense
 
55,008

 
51,554

 
3,454

 
7
 %
 
n/a

 
n/a

Other income
 
649

 
—

 
649

 
100
 %
 
—

 
649

Loss from extinguishment of debt
 
(766
)
 
—

 
(766
)
 
100
 %
 
—

 
(766
)
_____________________
(1) Represents the dollar amount increase (decrease) for the year ended December 31, 2017 compared to the year ended December 31, 2016 related to real estate investments acquired or repaid on or after January 1, 2016.
(2) Represents the dollar amount increase (decrease) for the year ended December 31, 2017 compared to the year ended December 31, 2016 related to real estate investments owned by us throughout both periods presented.
Rental income and tenant reimbursements from our real estate properties increased from $378.4 million for the year ended December 31, 2016 to $391.0 million for the year ended December 31, 2017 . The increase in rental income and tenant reimbursements for properties held throughout both periods was primarily due to an increase in lease termination fees, rental rates, operating expense recoveries and property tax recoveries. We expect rental income and tenant reimbursements to vary in future periods based on occupancy rates and rental rates of our real estate investments and increase based on the development and subsequent operation of Hardware Village and upon our acquisition of the developer's 25% equity interest in and subsequent operation of Village Center Station II.
Other operating income increased from $21.2 million during the year ended December 31, 2016 to $23.0 million for the year ended December 31, 2017 . The increase in other operating income for properties held throughout both periods was primarily due to an increase in parking revenues. We expect other operating income to vary in future periods based on occupancy rates and parking rates at our real estate properties and increase upon our acquisition of the developer's 25% equity interest in and subsequent operation of Village Center Station II.
Interest income from our real estate loan receivable, recognized using the interest method, decreased from $0.8 million for the year ended December 31, 2016 to $0 for the year ended December 31, 2017 as a result of the payoff of the real estate loan receivable on July 1, 2016.
Operating, maintenance and management costs increased from $93.6 million for the year ended December 31, 2016 to $97.5 million for the year ended December 31, 2017 . The increase in operating, maintenance and management costs for properties held throughout both periods was primarily due to an increase in repairs and maintenance, janitorial services and security services. We expect operating, maintenance and management costs to increase in future periods as a result of the development and subsequent operation of Hardware Village, upon our acquisition of the developer's 25% equity interest in and subsequent operation of Village Center Station II and general inflation.
Real estate taxes and insurance increased from $61.1 million for the year ended December 31, 2016 to $65.3 million  for the year ended December 31, 2017 . The increase in real estate taxes and insurance for properties held throughout both periods was primarily due to higher property taxes as a result of property tax reassessments. We expect real estate taxes and insurance to increase in future periods as a result of the development and subsequent operation of Hardware Village, upon our acquisition of the developer's 25% equity interest in and subsequent operation of Village Center Station II and general increases due to future property tax reassessments.

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Asset management fees with respect to our real estate investments increased from $24.9 million for the year ended December 31, 2016 to $25.9 million for the year ended December 31, 2017 . We expect asset management fees to increase in future periods as a result of the development and completion of Hardware Village, including our acquisition of the developer's 25% equity interest in and subsequent completion of Village Center Station II and as a result of any improvements we make to our properties, which increase would be offset to the extent we dispose of any of our assets. As of December 31, 2017 , there were $2.3 million of accrued and deferred asset management fees. For a discussion of accrued and deferred asset management fees, see “— Liquidity and Capital Resources” herein.
Real estate acquisition fees and expenses to affiliate and non-affiliates decreased from $1.8 million for the year ended December 31, 2016 to $0 for the year ended December 31, 2017 due to a decrease in acquisition activity. During the year ended December 31, 2017 , we did not acquire any investments accounted for as a business combination, but we did make an investment in the Village Center Station II joint venture. During the year ended December 31, 2017 , we capitalized an aggregate of $1.1 million in acquisition fees and expenses related to the development of Hardware Village and the investment in the Village Center Station II joint venture. During the year ended December 31, 2016 , we acquired one real estate property accounted for as a business combination for $146.1 million. We do not expect to incur any significant real estate acquisition fees and expenses in future periods.
Depreciation and amortization increased from $161.4 million for the year ended December 31, 2016 to $164.3 million  for the year ended December 31, 2017 , primarily as a result of the acceleration of amortization of intangible assets related to a tenant relocation and a lease termination at a property held throughout both periods. We expect depreciation and amortization to vary in future periods as a result of a decrease in amortization related to fully amortized tenant origination and absorption costs and increase as a result of the development and subsequent operation of Hardware Village and upon our acquisition of the developer's 25% equity interest in and subsequent operation of Village Center Station II.
Interest expense increased from $51.6 million for the year ended December 31, 2016 to $55.0 million  for the year ended December 31, 2017 . Included in interest expense is the amortization of deferred financing costs of $5.1 million and $5.3 million for the years ended December 31, 2016 and 2017 , respectively. Additionally, during the year ended December 31, 2016 and 2017 , we capitalized $0.2 million and $2.4 million of interest to construction-in-progress related to Hardware Village and Village Center Station II, respectively. Interest expense (including gains and losses) incurred as a result of our derivative instruments for the years ended December 31, 2016 and 2017 increased interest expense by $6.4 million and decreased interest expense by $3.1 million , respectively, which includes $1.6 million and $10.5 million of unrealized gains on derivative instruments for the years ended December 31, 2016 and 2017 , respectively. The increase in interest expense is due to the increased level of borrowings. We expect interest expense to increase in future periods as a result of additional borrowings for capital expenditures and development activity. In addition, our interest expense in future periods will vary based on fair value changes with respect to our interest rate swaps that are not accounted for as cash flow hedges and fluctuations in one-month LIBOR (for our variable rate debt). 
During the year ended December 31, 2017 , we received $0.6 million in proceeds from a one-time easement agreement, which is included in other income in the accompanying consolidated statements of operations.
During the year ended December 31, 2017 , we recognized a loss from extinguishment of debt of $0.7 million related to the write-off of unamortized deferred financing costs as a result of the early pay-off of the Town Center Mortgage Loan, RBC Plaza Mortgage Loan, National Office Portfolio Mortgage Loan, 500 West Madison Mortgage Loan, Ten Almaden Mortgage Loan and Towers at Emeryville Mortgage Loan on November 3, 2017 in connection with a portfolio refinance.

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Comparison of the year ended December 31, 2016 versus the year ended December 31, 2015
The following table provides summary information about our results of operations for the years ended December 31, 2016 and 2015 (dollar amounts in thousands):
 
 
For the Years Ended
December 31,
 
Increase (Decrease)
 
Percentage Change
 
$ Change Due to Acquisitions and Payoffs (1)
 
$ Change Due to Properties or Loans Held Throughout Both Periods (2)
 
 
2016
 
2015
 
 
 
 
Rental income
 
$
307,568

 
$
245,772

 
$
61,796

 
25
 %
 
$
50,716

 
$
11,080

Tenant reimbursements
 
70,856

 
53,960

 
16,896

 
31
 %
 
11,492

 
5,404

Interest income from real estate loan receivable
 
831

 
1,603

 
(772
)
 
(48
)%
 
(772
)
 
—

Other operating income
 
21,152

 
14,374

 
6,778

 
47
 %
 
6,051

 
727

Operating, maintenance and management costs
 
93,580

 
75,319

 
18,261

 
24
 %
 
17,213

 
1,048

Real estate taxes and insurance
 
61,090

 
50,320

 
10,770

 
21
 %
 
8,541

 
2,229

Asset management fees to affiliate
 
24,940

 
20,051

 
4,889

 
24
 %
 
4,443

 
446

Real estate acquisition fees to affiliate
 
1,473

 
7,697

 
(6,224
)
 
(81
)%
 
(6,224
)
 
—

Real estate acquisition fees and expenses
 
306

 
4,292

 
(3,986
)
 
(93
)%
 
(3,986
)
 
—

General and administrative expenses
 
5,398

 
4,912

 
486

 
10
 %
 
n/a

 
n/a

Depreciation and amortization
 
161,364

 
136,935

 
24,429

 
18
 %
 
27,211

 
(2,782
)
Interest expense
 
51,554

 
45,370

 
6,184

 
14
 %
 
n/a

 
n/a

_____________________
(1) Represents the dollar amount increase (decrease) for the year ended December 31, 2016 compared to the year ended December 31, 2015 related to real estate investments acquired or repaid on or after January 1, 2015.
(2) Represents the dollar amount increase (decrease) for the year ended December 31, 2016 compared to the year ended December 31, 2015 related to real estate investments owned by us throughout both periods presented.
Rental income and tenant reimbursements from our real estate properties increased from $299.7 million for the year ended December 31, 2015 to $378.4 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio. The increase in rental income and tenant reimbursements for properties held throughout both periods was primarily due to an increase in occupancy from 92% as of December 31, 2015 to 94% as of December 31, 2016, an increase in rental rates and an increase in expense recoveries.
Interest income from our real estate loan receivable, recognized using the interest method, decreased from $1.6 million for the year ended December 31, 2015 to $0.8 million for the year ended December 31, 2016 as a result of the Aberdeen First Mortgage Origination being paid off on July 1, 2016.
Other operating income increased from $14.4 million during the year ended December 31, 2015 to $21.2 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio. Other operating income primarily consisted of parking revenues.
Operating, maintenance and management costs increased from $75.3 million for the year ended December 31, 2015 to $93.6 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio. The increase in operating, maintenance and management costs for properties held throughout both periods was primarily due to an increase in repairs and maintenance, association fees and management fees.
Real estate taxes and insurance increased from $50.3 million for the year ended December 31, 2015 to $61.1 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio. The increase of real estate taxes and insurance for properties held throughout both periods was primarily due to higher taxes as the assessed values have increased on several of our properties.
Asset management fees with respect to our real estate investments increased from $20.1 million for the year ended December 31, 2015 to $24.9 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio. As of December 31, 2016, $2.1 million of asset management fees were payable, which were subsequently paid in January 2017.
Real estate acquisition fees and expenses to affiliate and non-affiliates decreased from $12.0 million for the year ended December 31, 2015 to $1.8 million for the year ended December 31, 2016 due to a decrease in acquisition activity. We acquired one real estate property for $146.1 million during the year ended December 31, 2016. During the year ended December 31, 2015, we acquired eight real estate properties for $754.8 million. Additionally, during the year ended December 31, 2016, we capitalized $0.1 million in acquisition fees and expenses related to the development of Hardware Village.

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Depreciation and amortization increased from $136.9 million for the year ended December 31, 2015 to $161.4 million for the year ended December 31, 2016, primarily as a result of the growth in our real estate portfolio.
Interest expense increased from $45.4 million for the year ended December 31, 2015 to $51.6 million for the year ended December 31, 2016. Included in interest expense is the amortization of deferred financing costs of $5.1 million and $3.6 million for the years ended December 31, 2016 and 2015, respectively. Additionally, during the year ended December 31, 2016, we capitalized $0.2 million of interest to construction-in-progress. Interest expense incurred as a result of our derivative instruments for the years ended December 31, 2016 and 2015 was $6.4 million and $13.4 million, respectively, which includes $1.6 million of unrealized gains and $6.1 million of unrealized losses on derivative instruments for the years ended December 31, 2016 and 2015, respectively. The increase in interest expense is primarily due to increased borrowings as a result of our use of additional debt in acquiring real estate properties in 2015 and 2016 and changes in value on interest rate swaps.
Funds from Operations and Modified Funds from Operations
We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses MFFO as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the IPA in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO.  Management believes that excluding acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses) from MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage.  MFFO also excludes non-cash items such as straight-line rental revenue.  Additionally, we believe that MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.

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FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO and MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.
Although MFFO includes other adjustments, the exclusion of adjustments for straight-line rent, the amortization of above- and below-market leases, unrealized (gains) losses on derivative instruments, acquisition fees and expenses (as applicable) and the exclusion of loss from extinguishment of debt are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:
•
Adjustments for straight-line rent.  These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;
•
Amortization of above- and below-market leases.   Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;
•
Unrealized (gains) losses on derivative instruments.   These adjustments include unrealized (gains) losses from mark-to-market adjustments on interest rate swaps. The change in fair value of interest rate swaps not designated as a hedge are non-cash adjustments recognized directly in earnings and are included in interest expense.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate swap agreements;
•
Acquisition fees and expenses.  Prior to our early adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees and expenses related to the acquisition of real estate were generally expensed.  Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.  Additionally, acquisition fees and expenses have been funded from the proceeds from our now-terminated initial public offering and debt financings and not from our operations.  We believe this exclusion is useful to investors as it allows investors to more accurately evaluate the sustainability of our operating performance; and
•
Loss from extinguishment of debt . A loss from extinguishment of debt, which includes prepayment fees related to the extinguishment of debt, represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement. We have excluded the loss from extinguishment of debt in our calculation of MFFO because these losses do not impact the current operating performance of our investments and do not provide an indication of future operating performance.


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Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO, for the years ended December 31, 2017 , 2016 and 2015 , respectively (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
 
For the Years Ended December 31,
 
2017
 
2016
 
2015
Net income (loss) attributable to common stockholders
$
1,374

 
$
763

 
$
(29,015
)
Depreciation of real estate assets
86,573

 
77,676

 
56,957

Amortization of lease-related costs
77,716

 
83,688

 
79,978

FFO attributable to common stockholders (1)
$
165,663

 
$
162,127

 
$
107,920

Straight-line rent and amortization of above- and below-market leases, net
(18,287
)
 
(26,136
)
 
(24,874
)
Loss from extinguishment of debt
766

 
—

 
—

Amortization of discounts and closing costs
—

 
15

 
27

Unrealized (gains) losses on derivative instruments
(10,509
)
 
(1,597
)
 
6,078

Real estate acquisition fees to affiliate
—

 
1,473

 
7,697

Real estate acquisition fees and expenses
—

 
306

 
4,292

MFFO attributable to common stockholders (1)
$
137,633

 
$
136,188

 
$
101,140

_____________________
(1) FFO and MFFO includes $7.0 million, $1.7 million and $1.4 million of lease termination income for the years ended December 31, 2017 , 2016 and 2015 , respectively.
FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.
Distributions
Distributions declared, distributions paid and cash flow from operating activities were as follows during 2017 (in thousands, except per share amounts):
 
 
Distributions Declared (1)
 
Distributions Declared Per Share (1) (2)
 
Distributions Paid  (3)
 
Cash Flow
from Operating
Activities
Period
 
 
 
Cash
 
Reinvested
 
Total
 
First Quarter 2017
 
$
29,080

 
$
0.160

 
$
14,067

 
$
14,987

 
$
29,054

 
$
19,097

Second Quarter 2017
 
29,421

 
0.162

 
14,640

 
15,110

 
29,750

 
39,521

Third Quarter 2017
 
29,650

 
0.164

 
14,689

 
15,001

 
29,690

 
31,947

Fourth Quarter 2017
 
29,587

 
0.164

 
14,575

 
14,687

 
29,262

 
33,874

 
 
$
117,738

 
$
0.650

 
$
57,971

 
$
59,785

 
$
117,756

 
$
124,439

_____________________
(1) Distributions for the periods from January 1,  2017 through December 31, 2017 were based on daily record dates and were calculated at a rate of $0.00178082 per share per day.
(2) Assumes share was issued and outstanding each day during the periods presented.
(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid on or about the first business day of the following month.
For the year ended December 31, 2017 , we paid aggregate distributions of $117.8 million , including $58.0 million of distributions paid in cash and $59.8 million of distributions reinvested through our dividend reinvestment plan. Our net income attributable to common stockholders for the year ended December 31, 2017 was $1.4 million. FFO for the year ended December 31, 2017 was $165.7 million and cash flow from operating activities was $124.4 million . See the reconciliation of FFO to net income (loss) attributable to common stockholders above. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $107.8 million of cash flow from operating activities and $10.0 million of cash flow from operating activities in excess of distributions paid during 2016. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments.

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Over the long-term, we generally expect our distributions will be paid from cash flow from operating activities from current periods or prior periods (except with respect to distributions related to sales of our assets and distributions related to the repayment of principal under any real estate-related investments we make). From time to time during our operational stage, we may not pay distributions solely from our cash flow from operating activities, in which case distributions may be paid in whole or in part from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities, the overall return to our stockholders may be reduced. Further, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements,” Part I, Item 1A, “Risk Factors” and in this Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those factors include: the future operating performance of our real estate investments in the existing real estate and financial environment; the success and economic viability of our tenants; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on any variable rate debt obligations we incur; and the level of participation in our dividend reinvestment plan. In the event our FFO and/or cash flow from operating activities decrease in the future, the level of our distributions may also decrease.  In addition, future distributions declared and paid may exceed FFO and/or cash flow from operating activities.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. There have been no significant changes to our policies during 2017 except for the addition of an accounting policy with respect to investments in unconsolidated joint ventures under the equity method.
Revenue Recognition
Real Estate
We recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured and record amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or by us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
•
whether the lease stipulates how a tenant improvement allowance may be spent;
•
whether the amount of a tenant improvement allowance is in excess of market rates;
•
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
•
whether the tenant improvements are unique to the tenant or general-purpose in nature; and
•
whether the tenant improvements are expected to have any residual value at the end of the lease.
We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.
We make estimates of the collectability of our tenant receivables related to base rents, including deferred rent receivable, expense reimbursements and other revenue or income. We specifically analyze accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, we make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, we will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.

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Real Estate Loan Receivable
Interest income on real estate loans receivable was recognized on an accrual basis over the life of the investment using the interest method. Direct loan origination fees and origination or acquisition costs, as well as acquisition premiums or discounts, were amortized over the term of the loan as an adjustment to interest income.
Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. We consider the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. We anticipate the estimated useful lives of our assets by class to be generally as follows:
Buildings
25-40 years
Building improvements
10-25 years
Tenant improvements
Shorter of lease term or expected useful life
Tenant origination and absorption costs
Remaining term of related leases, including below-market renewal periods
Real Estate Acquisition Valuation
As a result of our early adoption of ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , acquisitions of real estate beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations). We record the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination or an asset acquisition. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business.  For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases and accordingly, most acquisitions of investment properties would not meet the definition of a business and would be accounted for as an asset acquisition.  To be considered a business, a set must include an input and a substantive process that together significantly contributes to the ability to create an output. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. For asset acquisitions, the cost of the acquisition is allocated to individual assets and liabilities on a relative fair value basis. Acquisition costs associated with business combinations are expensed as incurred. Acquisition costs associated with asset acquisitions are capitalized.
We assess the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.
We record above-market and below-market in-place lease values for acquired properties based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of above-market in-place leases and for the initial term plus any extended term for any leases with below-market renewal options. We amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.
We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease up periods, considering current market conditions. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease up periods.
We amortize the value of tenant origination and absorption costs to depreciation and amortization expense over the remaining non-cancelable term of the leases.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.

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Subsequent to the acquisition of a property, we may incur and capitalize costs necessary to get the property ready for its intended use.  During that time, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized.
Impairment of Real Estate and Related Intangible Assets and Liabilities
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities.
Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangible assets and liabilities as well as market and other trends. Using inappropriate assumptions to estimate cash flows could result in incorrect fair values of the real estate and its related intangible assets and liabilities and could result in the overstatement of the carrying values of our real estate and related intangible assets and liabilities and an overstatement of our net income.
Insurance Proceeds for Property Damage
We maintain an insurance policy that provides coverage for losses due to property damage and business interruption. Losses due to physical damage are recognized during the accounting period in which they occur, while the amount of monetary assets to be received from the insurance policy is recognized when receipt of insurance recoveries is probable. Losses, which are reduced by the related probable insurance recoveries, are recorded as operating, maintenance and management expenses on the accompanying consolidated statements of operations. Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved. Anticipated recoveries for lost rental revenue due to property damage are also considered to be a gain contingency and recognized when the contingency related to the insurance claim has been resolved.
Real Estate Held for Sale and Discontinued Operations
We generally consider real estate to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected.  Real estate that is held for sale and its related assets are classified as “real estate held for sale” and “assets related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements.  Notes payable and other liabilities related to real estate held for sale are classified as “notes payable related to real estate held for sale” and “liabilities related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements.  Real estate classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell.  Operating results of properties and related gains on sale that were disposed of or classified as held for sale in the ordinary course of business during the years ended December 31, 2017 , 2016 and 2015 that had not been classified as held for sale in financial statements prior to January 1, 2014 are included in continuing operations on our consolidated statements of operations.
Construction in Progress
Direct investments in undeveloped land or properties without leases in place at the time of acquisition are accounted for as an asset acquisition and not as a business combination.  Acquisition fees and expenses are capitalized into the cost basis of an asset acquisition. Additionally, during the time that we are incurring costs necessary to bring these investments to their intended use, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized. Once construction in progress is substantially completed, the amounts capitalized to construction in progress are transferred to land and buildings and improvements and are depreciated over their respective useful lives.
Investments in Unconsolidated Joint Ventures
We account for investments in unconsolidated joint ventures over which we may exercise significant influence, but do not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and our proportionate share of equity in the joint venture’s income (loss). We recognize our proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, we evaluate our investment in an unconsolidated joint venture for other-than-temporary impairments.

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Derivative Instruments
We enter into derivative instruments for risk management purposes to hedge our exposure to cash flow variability caused by changing interest rates on our variable rate notes payable. We record these derivative instruments at fair value on the accompanying consolidated balance sheets. Derivative instruments designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges. The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) on the accompanying consolidated statements of comprehensive income (loss) and consolidated statements of equity. The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as gain or loss on derivative instruments and included in interest expense as presented in the accompanying consolidated statements of operations.
We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivative instruments that are part of a hedging relationship to specific forecasted transactions or recognized obligations on the consolidated balance sheets. We also assess and document, both at the hedging instrument’s inception and on a quarterly basis thereafter, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the respective hedged items. When we determine that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, we discontinue hedge accounting prospectively and reclassify amounts recorded to accumulated other comprehensive income (loss) to earnings.
Fair Value Measurements
Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

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We consider the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with our estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
We consider the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code. To continue to qualify as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax on income that we distribute as dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially and adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT.
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On January 2,  2018 , we paid distributions of $10.0 million , which related to distributions declared for daily record dates for each day in the period from December 1,  2017 through December 31,  2017 . On February 1,  2018 , we paid distributions of $10.0 million , which related to distributions declared for daily record dates for each day in the period from January 1,  2018 through January 31,  2018 . On March 1,  2018 , we paid distributions of $8.9 million , which related to distributions declared for daily record dates for each day in the period from February 1,  2018 through February 28,  2018 .
Distributions Authorized
On January 30, 2018 , our board of directors authorized distributions based on daily record dates for the period from March 1, 2018 through March 31, 2018 , which we expect to pay in April 2018 . On March 7, 2018 , our board of directors authorized distributions based on daily record dates for the period from April 1, 2018 through April 30, 2018 , which we expect to pay in May 2018 , and distributions based on daily record dates for the period from May 1, 2018 through May 31, 2018 , which we expect to pay in June 2018 . Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 5.54% annualized rate based on our December 6, 2017 estimated value per share of $11.73 .

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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage and other loans. Our profitability and the value of our real estate investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that variable rate exposure is kept at an acceptable level or utilizing a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders and that the losses may exceed the amount we invested in the instruments.
The table below summarizes the outstanding principal balance, weighted-average interest rates and fair value for our notes payable for each category; and the notional amounts, average pay and receive rates, if applicable, of our derivative instruments, based on maturity dates as of December 31, 2017 (dollars in thousands):
 
 
Maturity Date
 
Total Value or Notional Amount
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
 
Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps, notional amount
 
$
231,940

 
$
—

 
$
91,500

 
$
—

 
$
539,760

 
$
76,440

 
$
939,640

 
$
6,514

Average pay rate (1)
 
1.5
%
 
—

 
1.8
%
 
—

 
2.0
%
 
1.6
%
 
1.8
%
 
 
Average receive rate (2)
 
1.6
%
 
—

 
1.6
%
 
—

 
1.6
%
 
1.6
%
 
1.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable, principal outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate
 
$
—

 
$
—

 
$
—

 
$
99,471

 
$
93,000

 
$
—

 
$
192,471

 
$
192,271

Weighted-average interest rate (3)
 
—

 
—

 
—

 
4.0
%
 
4.2
%
 
—

 
4.1
%
 
 
Variable Rate
 
$
221,409

 
$
346,664

 
$
1,108,075

 
$
—

 
$
88,300

 
$
—

 
$
1,764,448

 
$
1,758,694

Weighted-average interest rate (3)
 
3.1
%
 
3.2
%
 
3.7
%
 
—

 
3.4
%
 
—

 
3.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps, notional amount
 
$
50,000

 
$
—

 
$
338,403

 
$
—

 
$
—

 
$
—

 
$
388,403

 
$
1,695

Average pay rate (1)
 
1.7
%
 
—

 
2.2
%
 
—

 
—

 
—

 
2.1
%
 
 
Average receive rate (2)
 
1.6
%
 
—

 
1.6
%
 
—

 
—

 
—

 
1.6
%
 
 
_____________________
(1) The average pay rate is based on the interest rate swap fixed rate.
(2) The average receive rate is based on the 30‑day LIBOR rate as of December 31, 2017 .
(3) The weighted-average interest rate represents the actual interest rate in effect as of December 31, 2017 (consisting of the contractual interest rate and the effect of interest rate swaps), if applicable, using interest rate indices as of December 31, 2017 , where applicable.
We borrow funds and may make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt, unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of December 31, 2017 , the fair value of our fixed rate debt was $192.3 million and the outstanding principal balance of our fixed rate debt was $192.5 million.  The fair value estimate of our fixed rate debt is calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loan was originated as of December 31, 2017 . As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

69
Table of Contents

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of variable rate instruments. As of December 31, 2017 , we were exposed to market risks related to fluctuations in interest rates on $460.4 million of variable rate debt outstanding after giving consideration to the impact of interest rate swap agreements on approximately $1.3 billion of our variable rate debt. This amount does not take into account the impact of $24.0 million of forward interest rate swap agreements that were not yet effective as of December 31, 2017 . Based on interest rates as of December 31, 2017 , if interest rates were 100 basis points higher or lower during the 12 months ending December 31,  2018 , interest expense on our variable rate debt would increase or decrease by $4.6 million.
For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statements at page F-1 of this report.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 . In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on its assessment, our management believes that, as of December 31, 2017 , our internal control over financial reporting was effective based on those criteria. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.


70
Table of Contents

PART III
We will file a definitive Proxy Statement for our 2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”) with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2018 Proxy Statement that specifically address the items required to be set forth herein are incorporated by reference.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Conduct and Ethics can be found at www.kbsreitiii.com .
The other information required by this Item is incorporated by reference from our 2018 Proxy Statement.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from our 2018 Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from our 2018 Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from our 2018 Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated by reference from our 2018 Proxy Statement.


71
Table of Contents

PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)      Financial Statement Schedules
See the Index to Financial Statements at page F-1 of this report.
The following financial statement schedule is included herein at pages F-41 through F-43 of this report:
Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization
(b)      Exhibits
Ex.
  
Description
 
 
 
3.1
  
 
 
 
3.2
 
 
 
 
4.1
  
 
 
 
4.2
 
 
 
 
10.1
 
 
 
 
10.2
 
 
 
 
10.3
 
 
 
 
10.4
 
 
 
 
10.5
 
 
 
 
10.6
 
 
 
 
10.7
 
 
 
 
10.8
 
 
 
 
10.9
 
 
 
 
10.10
 
 
 
 
10.11
 
 
 
 
10.12
 

72
Table of Contents

Ex.
  
Description
 
 
 
 
 
 
10.13
 
 
 
 
10.14
 
 
 
 
21.1
 
 
 
 
23.1
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
32.2
 
 
 
 
99.1
 
 
 
 
99.2
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase

73
Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
 
 
 
Financial Statement Schedule
 
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

F-1
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
KBS Real Estate Investment Trust III, Inc.
We have audited the accompanying consolidated balance sheets of KBS Real Estate Investment Trust III, Inc. (the Company) as of December 31, 2017 and 2016 , the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2017 , and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and 2016 , and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 , in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Irvine, California
March 8, 2018



F-2
Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
 
December 31,
2017
 
December 31,
2016
Assets
 
 
 
 
Real estate:
 
 
 
 
Land
 
$
390,685

 
$
390,685

Buildings and improvements
 
2,680,838

 
2,626,182

Construction in progress
 
67,826

 
21,853

Tenant origination and absorption costs
 
230,576

 
261,678

Total real estate held for investment, cost
 
3,369,925

 
3,300,398

Less accumulated depreciation and amortization
 
(435,808
)
 
(340,928
)
Total real estate held for investment, net
 
2,934,117

 
2,959,470

Real estate held for sale, net
 
28,017

 
29,385

Total real estate, net
 
2,962,134

 
2,988,855

Cash and cash equivalents
 
65,486

 
72,068

Investment in unconsolidated joint venture
 
33,997

 
—

Rents and other receivables, net
 
79,317

 
63,501

Above-market leases, net
 
5,861

 
8,073

Assets related to real estate held for sale, net
 
1,786

 
1,820

Prepaid expenses and other assets
 
72,226

 
48,359

Total assets
 
$
3,220,807

 
$
3,182,676

Liabilities and equity
 
 
 
 
Notes payable, net
 
 
 
 
Notes payable, net
 
1,920,138

 
1,762,741

Note payable related to real estate held for sale, net
 
21,648

 
20,727

Total notes payable, net
 
1,941,786

 
1,783,468

Accounts payable and accrued liabilities
 
71,012

 
56,210

Due to affiliates
 
3,239

 
2,397

Distributions payable
 
9,982

 
10,000

Below-market leases, net
 
24,610

 
33,590

Liabilities related to real estate held for sale, net
 
50

 
65

Redeemable common stock payable
 
18,870

 
—

Other liabilities
 
30,935

 
41,699

Total liabilities
 
2,100,484

 
1,927,429

Commitments and contingencies (Note 11)
 


 


Redeemable common stock
 
40,915

 
61,871

Equity:
 
 
 
 
KBS Real Estate Investment Trust III, Inc. stockholders’ equity
 
 
 
 
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding
 
—

 
—

Common stock, $.01 par value; 1,000,000,000 shares authorized, 180,864,707 and 180,890,572 shares issued and outstanding as of December 31, 2017 and 2016, respectively
 
1,809

 
1,809

Additional paid-in capital
 
1,591,640

 
1,591,652

Cumulative distributions and net losses
 
(514,451
)
 
(398,087
)
Accumulated other comprehensive income (loss)
 
110

 
(2,298
)
Total KBS Real Estate Investment Trust III, Inc. stockholders’ equity
 
1,079,108

 
1,193,076

Noncontrolling interest
 
300

 
300

Total equity
 
1,079,408

 
1,193,376

Total liabilities and equity
 
$
3,220,807

 
$
3,182,676

See accompanying notes to consolidated financial statements.

F-3
Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
Revenues:
 
 
 
 
 
 
Rental income
 
$
314,597

 
$
307,568

 
$
245,772

Tenant reimbursements
 
76,438

 
70,856

 
53,960

Other operating income
 
23,014

 
21,152

 
14,374

Interest income from real estate loan receivable
 
—

 
831

 
1,603

Total revenues
 
414,049

 
400,407

 
315,709

Expenses:
 
 
 
 
 
 
Operating, maintenance, and management
 
97,477

 
93,580

 
75,319

Real estate taxes and insurance
 
65,325

 
61,090

 
50,320

Asset management fees to affiliate
 
25,905

 
24,940

 
20,051

Real estate acquisition fees to affiliate
 
—

 
1,473

 
7,697

Real estate acquisition fees and expenses
 
—

 
306

 
4,292

General and administrative expenses
 
4,723

 
5,398

 
4,912

Depreciation and amortization
 
164,289

 
161,364

 
136,935

Interest expense
 
55,008

 
51,554

 
45,370

Total expenses
 
412,727

 
399,705

 
344,896

Other income:
 
 
 
 
 
 
Other income
 
649

 
—

 
—

Other interest income
 
170

 
61

 
172

Equity in loss of unconsolidated joint venture
 
(1
)
 
—

 
—

Loss from extinguishment of debt
 
(766
)
 
—

 
—

Total other income
 
52

 
61

 
172

Net income (loss)
 
1,374

 
763

 
(29,015
)
Net (income) loss attributable to noncontrolling interest
 
—

 
—

 
—

Net income (loss) attributable to common stockholders
 
$
1,374

 
$
763

 
$
(29,015
)
Net income (loss) per common share attributable to common stockholders, basic and diluted
 
$
0.01

 
$
—

 
$
(0.18
)
Weighted-average number of common shares outstanding, basic and diluted
 
181,138,045

 
180,043,027

 
163,358,289

See accompanying notes to consolidated financial statements.

F-4
Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
Net income (loss)
 
$
1,374

 
$
763

 
$
(29,015
)
Other comprehensive income (loss):
 
 
 
 
 
 
Unrealized income (losses) on derivative instruments designated as cash flow hedges
 
900

 
(3,582
)
 
(9,073
)
Reclassification adjustment realized in net income (effective portion)
 
1,508

 
5,513

 
7,034

Total other comprehensive income (loss)
 
2,408

 
1,931

 
(2,039
)
Total comprehensive income (loss)
 
3,782

 
2,694

 
(31,054
)
Total comprehensive (income) loss attributable to noncontrolling interest
 
—

 
—

 
—

Total comprehensive income (loss) attributable to common stockholders
 
$
3,782

 
$
2,694

 
$
(31,054
)
See accompanying notes to consolidated financial statements.


F-5
Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(dollars in thousands)
 
 
 
 
 
 
Additional Paid-in Capital
 
Cumulative Distributions and Net Losses
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Noncontrolling Interest
 
Total Equity
 
 
Common Stock
 
 
 
Shares
 
Amounts
 
Balance, December 31, 2014
 
123,426,546

 
$
1,234

 
$
1,080,673

 
$
(146,621
)
 
$
(2,190
)
 
$
933,096

 
$
—

 
$
933,096

Net loss
 
—

 
—

 
—

 
(29,015
)
 
—

 
(29,015
)
 
 
 
(29,015
)
Other comprehensive loss
 
—

 
—

 
—

 
—

 
(2,039
)
 
(2,039
)
 
—

 
(2,039
)
Issuance of common stock
 
55,602,428

 
556

 
579,653

 
—

 
—

 
580,209

 
—

 
580,209

Transfers to redeemable common stock
 
—

 
—

 
(26,038
)
 
—

 
—

 
(26,038
)
 
—

 
(26,038
)
Redemptions of common stock
 
(1,085,736
)
 
(11
)
 
(10,579
)
 
—

 
—

 
(10,590
)
 
—

 
(10,590
)
Distributions declared
 
—

 
—

 
—

 
(106,189
)
 
—

 
(106,189
)
 
—

 
(106,189
)
Commissions on stock sales and related dealer manager fees to affiliate
 
—

 
—

 
(48,947
)
 
—

 
—

 
(48,947
)
 
—

 
(48,947
)
Other offering costs
 
—

 
—

 
(3,655
)
 
—

 
—

 
(3,655
)
 
—

 
(3,655
)
Balance, December 31, 2015
 
177,943,238

 
$
1,779

 
$
1,571,107

 
$
(281,825
)
 
$
(4,229
)
 
$
1,286,832

 
$
—

 
$
1,286,832

Net income
 
—

 
—

 
—

 
763

 
—

 
763

 
—

 
763

Other comprehensive income
 
—

 
—

 
—

 
—

 
1,931

 
1,931

 
—

 
1,931

Issuance of common stock
 
6,485,383

 
65

 
61,806

 
—

 
—

 
61,871

 
—

 
61,871

Transfers to redeemable common stock
 
—

 
—

 
(6,504
)
 
—

 
—

 
(6,504
)
 
—

 
(6,504
)
Redemptions of common stock
 
(3,538,049
)
 
(35
)
 
(34,732
)
 
—

 
—

 
(34,767
)
 
—

 
(34,767
)
Distributions declared
 
—

 
—

 
—

 
(117,025
)
 
—

 
(117,025
)
 
—

 
(117,025
)
Other offering costs
 
—

 
—

 
(25
)
 
—

 
—

 
(25
)
 
—

 
(25
)
Noncontrolling interest contribution
 
—

 
—

 
—

 
—

 
—

 
—

 
300

 
300

Balance, December 31, 2016
 
180,890,572

 
$
1,809

 
$
1,591,652

 
$
(398,087
)
 
$
(2,298
)
 
$
1,193,076

 
$
300

 
$
1,193,376

Net income
 
—

 
—

 
—

 
1,374

 
—

 
1,374

 
—

 
1,374

Other comprehensive income
 
—

 
—

 
—

 
—

 
2,408

 
2,408

 
—

 
2,408

Issuance of common stock
 
5,919,223

 
59

 
59,726

 
—

 
—

 
59,785

 
—

 
59,785

Transfers from redeemable common stock
 
—

 
—

 
2,086

 
—

 
—

 
2,086

 
—

 
2,086

Redemptions of common stock
 
(5,945,088
)
 
(59
)
 
(61,812
)
 
—

 
—

 
(61,871
)
 
—

 
(61,871
)
Distributions declared
 
—

 
—

 
—

 
(117,738
)
 
—

 
(117,738
)
 
—

 
(117,738
)
Other offering costs
 
—

 
—

 
(12
)
 
—

 
—

 
(12
)
 
—

 
(12
)
Balance, December 31, 2017
 
180,864,707

 
$
1,809

 
$
1,591,640

 
$
(514,451
)
 
$
110

 
$
1,079,108

 
$
300

 
$
1,079,408

See accompanying notes to consolidated financial statements.

F-6
Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 Years Ended December 31,
 
 
2017
 
2016
 
2015
Cash Flows from Operating Activities:
 
 
 
 
 
 
Net income (loss)
 
$
1,374

 
$
763

 
$
(29,015
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
164,289

 
161,364

 
136,935

Equity in loss of unconsolidated joint venture
 
1

 
—

 
—

Noncash interest income on real estate-related investment
 
—

 
15

 
27

Deferred rents
 
(12,402
)
 
(17,212
)
 
(17,887
)
Loss due to property damage
 
8,401

 
—

 
62

Allowance for doubtful accounts
 
1,863

 
1,279

 
701

Amortization of above- and below-market leases, net
 
(6,710
)
 
(8,924
)
 
(6,987
)
Amortization of deferred financing costs
 
4,952

 
5,064

 
3,615

Loss from extinguishment of debt
 
766

 
—

 
—

Unrealized (gains) losses on derivative instruments
 
(10,509
)
 
(1,597
)
 
6,078

Changes in operating assets and liabilities:
 
 
 
 
 
 
Rents and other receivables
 
(5,220
)
 
(5,019
)
 
(4,163
)
Prepaid expenses and other assets
 
(25,126
)
 
(17,034
)
 
(16,340
)
Accounts payable and accrued liabilities
 
5,373

 
672

 
9,039

Other liabilities
 
(2,731
)
 
2,740

 
8,738

Due to affiliates
 
118

 
(7,954
)
 
6,718

Net cash provided by operating activities
 
124,439

 
114,157

 
97,521

Cash Flows from Investing Activities:
 
 
 
 
 
 
Acquisitions of real estate
 
—

 
(141,760
)
 
(755,548
)
Improvements to real estate
 
(81,949
)
 
(67,275
)
 
(69,116
)
Payments for construction in progress
 
(45,734
)
 
(11,831
)
 
(783
)
Investment in unconsolidated joint venture
 
(33,708
)
 
—

 
—

Advances on real estate loan receivable
 
—

 
(544
)
 
(2,176
)
Principal repayments on real estate loan receivable
 
—

 
22,526

 
162

Purchase of interest rate cap
 
—

 
—

 
(175
)
Escrow deposits for tenant improvements
 
(2,084
)
 
—

 
—

Escrow deposits for future real estate purchase
 
—

 
—

 
(4,350
)
Net cash used in investing activities
 
(163,475
)
 
(198,884
)
 
(831,986
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
Proceeds from notes payable
 
942,184

 
248,470

 
576,454

Principal payments on notes payable
 
(778,670
)
 
(108,457
)
 
(245,960
)
Payments of deferred financing costs
 
(11,206
)
 
(2,201
)
 
(5,259
)
Proceeds from issuance of common stock
 
—

 
—

 
524,842

Payments to redeem common stock
 
(61,871
)
 
(34,767
)
 
(10,590
)
Payments of commissions on stock sales and related dealer manager fees
 
—

 
—

 
(48,947
)
Payments of other offering costs
 
(12
)
 
(34
)
 
(3,918
)
Noncontrolling interest contribution
 
—

 
300

 
—

Reimbursement of other offering costs from affiliate
 
—

 
—

 
1,173

Return (payment) of contingent consideration related to acquisition of real estate
 
—

 
228

 
(228
)
Distributions paid to common stockholders
 
(57,971
)
 
(54,986
)
 
(47,603
)
Net cash provided by financing activities
 
32,454

 
48,553

 
739,964

Net (decrease) increase in cash and cash equivalents
 
(6,582
)
 
(36,174
)
 
5,499

Cash and cash equivalents, beginning of period
 
72,068

 
108,242

 
102,743

Cash and cash equivalents, end of period
 
$
65,486

 
$
72,068

 
$
108,242

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
 
Interest paid, net of capitalized interest of $2,433, $163 and $0 for the years ended December 31, 2017, 2016 and 2015, respectively
 
$
58,472

 
$
47,238

 
$
34,684

Supplemental Disclosure of Noncash Investing and Financing Activities:
 
 
 
 
 
 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan
 
$
59,785

 
$
61,871

 
$
55,367

Increase in distributions payable
 
$
—

 
$
168

 
$
3,219

Increase in redeemable common stock payable
 
$
18,870

 
$
—

 
$
—

Increase in accrued improvements to real estate
 
$
10,054

 
$
53

 
$
4,134

Application of escrow deposits to acquisition of real estate
 
$
—

 
$
4,350

 
$
—

Increase in construction in progress payable
 
$
—

 
$
4,717

 
$
207

Increase in acquisition fee related to construction in progress due to affiliate
 
$
445

 
$
132

 
$
—

Increase in acquisition fee on unconsolidated joint venture due to affiliate
 
$
290

 
$
—

 
$
—

Transfer of land to construction in progress
 
$
—

 
$
4,183

 
$
—

See accompanying notes to consolidated financial statements.

F-7
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017


1.
ORGANIZATION
KBS Real Estate Investment Trust III, Inc. (the “Company”) was formed on December 22, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011 and it intends to continue to operate in such manner. Substantially all of the Company’s business is conducted through KBS Limited Partnership III (the “Operating Partnership”), a Delaware limited partnership. The Company is the sole general partner of and owns a 0.1% partnership interest in the Operating Partnership. KBS REIT Holdings III LLC (“REIT Holdings III”), the limited partner of the Operating Partnership, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings III.
Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company entered into with the Advisor (the “Advisory Agreement”). On January 26, 2010, the Company issued 20,000  shares of its common stock to the Advisor at a purchase price of $10.00  per share. As of December 31, 2017 , the Advisor owned 20,000  shares of the Company’s common stock.
The Company owns a diverse portfolio of real estate investments. As of December 31, 2017 , the Company owned 28 office properties ( one of which was held for sale) and one mixed-use office/retail property and had made an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property, which is currently under construction. Additionally, as of December 31, 2017 , the Company had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction.
The Company commenced its initial public offering (the “Offering”) on October 26, 2010. Upon commencing the Offering, the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager of the Offering pursuant to a dealer manager agreement, as amended and restated (the “Dealer Manager Agreement”). The Company ceased offering shares of common stock in the primary Offering on May 29, 2015 and terminated the primary Offering on July 28, 2015.
The Company sold 169,006,162 shares of common stock in the primary Offering for gross proceeds of $ 1.7 billion . As of December 31, 2017 , the Company had also sold 22,892,452 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $224.7 million . Also as of December 31, 2017 , the Company had redeemed 11,312,369 shares sold in the Offering for $114.4 million .
Additionally, on October 3, 2014, the Company issued 258,462 shares of common stock for $2.4 million in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.
The Company continues to offer shares of common stock under its dividend reinvestment plan. In some states, the Company will need to renew the registration statement annually or file a new registration statement to continue its dividend reinvestment plan offering. The Company may terminate its dividend reinvestment plan offering at any time.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The consolidated financial statements include the accounts of the Company, REIT Holdings III, the Operating Partnership, their direct and indirect wholly owned subsidiaries and a joint venture in which the Company has a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements and accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

F-8
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Reclassifications
Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of the prior period. During the year ended December 31, 2017, the Company classified one office property as held for sale. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented.
Revenue Recognition
Real Estate
The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured and records amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
• whether the lease stipulates how a tenant improvement allowance may be spent;
• whether the amount of a tenant improvement allowance is in excess of market rates;
• whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
• whether the tenant improvements are unique to the tenant or general-purpose in nature; and
• whether the tenant improvements are expected to have any residual value at the end of the lease.
The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.
The Company makes estimates of the collectability of its tenant receivables related to base rents, including deferred rent receivable, expense reimbursements and other revenue or income. Management specifically analyzes accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, the Company will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.
Real Estate Loan Receivable
Interest income on real estate loans receivable was recognized on an accrual basis over the life of the investment using the interest method. Direct loan origination fees and origination or acquisition costs, as well as acquisition premiums or discounts, were amortized over the term of the loan as an adjustment to interest income.
Cash and Cash Equivalents
The Company recognizes interest income on its cash and cash equivalents as it is earned and classifies such amounts as other interest income.

F-9
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
Buildings
25-40 years
Building improvements
10-25 years
Tenant improvements
Shorter of lease term or expected useful life
Tenant origination and absorption costs
Remaining term of related leases, including below-market renewal periods
Real Estate Acquisition Valuation
As a result of the Company’s early adoption of ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , acquisitions of real estate beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations). The Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination or an asset acquisition. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business.  For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases and accordingly, most acquisitions of investment properties would not meet the definition of a business and would be accounted for as an asset acquisition.  To be considered a business, a set must include an input and a substantive process that together significantly contributes to the ability to create an output. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. For asset acquisitions, the cost of the acquisition is allocated to individual assets and liabilities on a relative fair value basis. Acquisition costs associated with business combinations are expensed as incurred. Acquisition costs associated with asset acquisitions are capitalized.
The Company assesses the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.
The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of above-market in-place leases and for the initial term plus any extended term for any leases with below-market renewal options. The Company amortizes any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.
The Company estimates the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.
The Company amortizes the value of tenant origination and absorption costs to depreciation and amortization expense over the remaining non-cancelable term of the leases.

F-10
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s net income.
Subsequent to the acquisition of a property, the Company may incur and capitalize costs necessary to get the property ready for its intended use.  During that time, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized.
Impairment of Real Estate and Related Intangible Assets and Liabilities
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. The Company did not record any impairment loss on its real estate and related intangible assets during the years ended December 31, 2017 , 2016 and 2015 .
Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangible assets and liabilities as well as market and other trends. Using inappropriate assumptions to estimate cash flows could result in incorrect fair values of the real estate and its related intangible assets and liabilities and could result in the overstatement of the carrying values of our real estate and related intangible assets and liabilities and an overstatement of our net income.
Insurance Proceeds for Property Damage
The Company maintains an insurance policy that provides coverage for losses due to property damage and business interruption. Losses due to physical damage are recognized during the accounting period in which they occur, while the amount of monetary assets to be received from the insurance policy is recognized when receipt of insurance recoveries is probable. Losses, which are reduced by the related probable insurance recoveries, are recorded as operating, maintenance and management expenses on the accompanying consolidated statements of operations. Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved. Anticipated recoveries for lost rental revenue due to property damage are also considered to be a gain contingency and recognized when the contingency related to the insurance claim has been resolved.
Real Estate Held for Sale and Discontinued Operations
The Company generally considers real estate to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected.  Real estate that is held for sale and its related assets are classified as “real estate held for sale” and “assets related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements.  Notes payable and other liabilities related to real estate held for sale are classified as “notes payable related to real estate held for sale” and “liabilities related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements.  Real estate classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell.  Operating results of properties and related gains on sale that were disposed of or classified as held for sale in the ordinary course of business during the years ended December 31, 2017 , 2016 and 2015 that had not been classified as held for sale in financial statements prior to January 1, 2014 are included in continuing operations on the Company’s consolidated statements of operations.

F-11
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Investments in Unconsolidated Joint Ventures
The Company accounts for investments in unconsolidated joint ventures over which the Company may exercise significant influence, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and the Company’s proportionate share of equity in the joint venture’s income (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments. As of December 31, 2017 , the Company did not identify any indicators of impairment related to its unconsolidated real estate joint venture accounted for under the equity method.
Construction in Progress
Direct investments in undeveloped land or properties without leases in place at the time of acquisition are accounted for as an asset acquisition and not as a business combination.  Acquisition fees and expenses are capitalized into the cost basis of an asset acquisition. Additionally, during the time that the Company is incurring costs necessary to bring these investments to their intended use, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized. Once construction in progress is substantially completed, the amounts capitalized to construction in progress are transferred to land and buildings and improvements and are depreciated over their respective useful lives.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short term investments. Cash and cash equivalents are stated at cost, which approximates fair value. There are no restrictions on the use of the Company’s cash and cash equivalents as of December 31, 2017 .
The Company’s cash and cash equivalents balance exceeds federally insurable limits as of December 31, 2017 . The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.
Rents and Other Receivables
The Company periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. In addition, the Company maintains an allowance for deferred rent receivable that arises from the straight-lining of rents. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of its tenants in developing these estimates.
Derivative Instruments
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates on its variable rate notes payable. The Company records these derivative instruments at fair value on the accompanying consolidated balance sheets. Derivative instruments designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges. The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) on the accompanying consolidated statements of comprehensive income (loss) and consolidated statements of equity. The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as gain or loss on derivative instruments and included in interest expense as presented in the accompanying consolidated statements of operations.

F-12
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivative instruments that are part of a hedging relationship to specific forecasted transactions or recognized obligations on the consolidated balance sheets. The Company also assesses and documents, both at the hedging instrument’s inception and on a quarterly basis thereafter, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the respective hedged items. When the Company determines that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues hedge accounting prospectively and reclassifies amounts recorded to accumulated other comprehensive income (loss) to earnings.
Deferred Financing Costs
Deferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing and are presented on the balance sheet as a direct deduction from the carrying value of the associated debt liability. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Deferred financing costs incurred before an associated debt liability is recognized are included in prepaid and other assets on the balance sheet. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.
Fair Value Measurements
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, the Company utilizes quoted market prices from independent third-party sources to determine fair value and classifies such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

F-13
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The Company considers the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
The Company considers the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
Dividend Reinvestment Plan
The Company has adopted a dividend reinvestment plan pursuant to which common stockholders may elect to have all or a portion of their dividends and other distributions, exclusive of dividends and other distributions that a Company’s board of directors designates as ineligible for reinvestment through the dividend reinvestment plan, reinvested in additional shares of the Company’s common stock in lieu of receiving cash distributions.
During the Company’s primary Offering and until the Company established an estimated value per share of its common stock for a purpose other than to set the price to acquire a share of common stock in the Company’s primary public Offering, participants in the dividend reinvestment plan acquired the Company’s common stock at a price per share equal to 95% of the most recent price to acquire a share of the Company’s common stock in the primary public Offering (ignoring any discounts that may be available to certain categories of investors). Once the Company established an estimated value per share of its common stock for a purpose other than to set the price to acquire a share of common stock in the Company’s primary public Offering, participants in the dividend reinvestment plan acquire shares of the Company’s common stock at a price equal to 95% of the estimated value per share of the Company’s common stock, as determined by the Advisor or another firm chosen by the Company’s board of directors for that purpose.
On December 9, 2014, the Company’s board of directors approved an updated offering price for shares of common stock to be sold in the primary Offering of $10.51 (unaudited), which was effective December 12, 2014. The updated offering price of shares of common stock to be sold in the primary Offering was determined by adding certain offering costs to the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2014, with the exception of an adjustment for actual or estimated acquisition fees and closing costs related to six properties that were either acquired subsequent to September 30, 2014 or under contract to purchase and were reasonably probable to close, but had not yet closed as of December 9, 2014, which were included as a reduction to the net asset value. As of December 30, 2014, the Company had closed on each of the six properties. Commencing with the January 2, 2015 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $9.99 .

F-14
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

On December 8, 2015, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.04 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015, with the exception of a reduction to the Company’s net asset value for acquisition fees and closing costs related to a real estate acquisition that closed subsequent to September 30, 2015 and deferred financing costs related to a mortgage loan that closed subsequent to September 30, 2015. The change in the dividend reinvestment plan purchase price was effective for the January 4, 2016 dividend reinvestment plan purchase date and was effective until the estimated value per share was updated. Commencing with the January 4, 2016 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $9.54 .
On December 9, 2016, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.63 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2016. The change in the dividend reinvestment plan purchase price was effective for the January 3, 2017 dividend reinvestment plan purchase date and was effective until the estimated value per share was updated. Commencing with the January 3, 2017 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $10.10 .
On December 6, 2017, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $11.73 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to the Company’s net asset value for deferred financing costs related to a portfolio loan facility that closed subsequent to September 30, 2017. The change in the dividend reinvestment plan purchase price was effective for the January 2, 2018 dividend reinvestment plan purchase date and is effective until the estimated value per share is updated. Thus, commencing with the January 2, 2018 purchase date and until the estimated value per share is updated, the purchase price per share under the dividend reinvestment plan is $11.15 .
No selling commissions or dealer manager fees will be paid on shares sold under the dividend reinvestment plan. The board of directors of the Company may amend or terminate the dividend reinvestment plan for any reason upon 10 days’ notice to participants.
Redeemable Common Stock
The Company’s board of directors has adopted a share redemption program that may enable stockholders to sell their shares to the Company in limited circumstances.
There are several limitations on the Company’s ability to redeem shares under the share redemption program:
•
Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program, and together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”), the Company may not redeem shares unless the stockholder has held the shares for one year.
•
During any calendar year, the share redemption program limits the number of shares the Company may redeem to those that the Company could purchase with the amount of net proceeds from the sale of shares under the dividend reinvestment plan during the prior calendar year. Notwithstanding anything contained in the share redemption program to the contrary, the Company may increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to its stockholders. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to its stockholders.
•
During any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•
The Company has no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Pursuant to the share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of the Company’s common stock as of the applicable redemption date. The price at which the Company will redeem all other shares eligible for redemption is as follows:
•
For those shares held by the redeeming stockholder for at least one year, 92.5% of the Company’s most recent estimated value per share as of the applicable redemption date;
•
For those shares held by the redeeming stockholder for at least two years, 95.0% of the Company’s most recent estimated value per share as of the applicable redemption date;
•
For those shares held by the redeeming stockholder for at least three years, 97.5% of the Company’s most recent estimated value per share as of the applicable redemption date; and
•
For those shares held by the redeeming stockholder for at least four years, 100% of the Company’s most recent estimated value per share as of the applicable redemption date.
On December 9, 2016, the Company’s board of directors approved an estimated value per share of its common stock of $10.63 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the December 2016 redemption date, which was December 30, 2016.
On December 6, 2017, the Company’s board of directors approved an estimated value per share of its common stock of $11.73 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the December 2017 redemption date, which was December 29, 2017. The Company currently expects to utilize an independent valuation firm to update its estimated value per share in December 2018.
For purposes of determining the time period a redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to the dividend reinvestment plan will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares relate. The date of the share’s original issuance by the Company is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.
The Company’s board of directors may amend, suspend or terminate the share redemption program with 30  days’ notice to the Company’s stockholders, provided that the Company may increase or decrease the funding available for the redemption of shares pursuant to the share redemption program upon 10 business days’ notice. The Company may provide this notice by including such information in a Current Report on Form 8-K or in the Company’s annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to its stockholders.
The Company records amounts that are redeemable under the share redemption program as redeemable common stock in the accompanying consolidated balance sheets because the shares are mandatorily redeemable at the option of the holder and therefore their redemption is outside the control of the Company. The maximum amount redeemable under the Company’s share redemption program is limited to the number of shares the Company could purchase with the amount of the net proceeds from the sale of shares under the dividend reinvestment plan during the prior calendar year. However, because the amounts that can be redeemed in future periods are determinable and only contingent on an event that is likely to occur (e.g., the passage of time), the Company presents the net proceeds from the current year dividend reinvestment plan as redeemable common stock in the accompanying consolidated balance sheets.
The Company classifies financial instruments that represent a mandatory obligation of the Company to redeem shares as liabilities. The Company’s redeemable common shares are contingently redeemable at the option of the holder. When the Company determines it has a mandatory obligation to redeem shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The Company limits the dollar value of shares that may be redeemed under the program as described above. For the year ended December 31, 2017, the Company redeemed  $61.9 million  of common stock, which represented all redemption requests received in good order and eligible for redemption through the December 2017 redemption date, except for 1,633,717  shares totaling  $18.9 million  due to the limitations described above. The Company recorded  $18.9 million  of redeemable common stock payable on the Company’s balance sheet as of December 31, 2017 related to these unfulfilled redemption requests. Effective January 1, 2018, this limitation was reset, and based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2017, the Company has $59.8 million available for redemptions of shares eligible for redemption in 2018.
Related Party Transactions
The Company has entered into the Advisory Agreement with the Advisor and the Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company and entitle the Advisor to specified fees upon the provision of certain services with regard to the investment of funds in real estate investments, the management of those investments, among other services, and the disposition of investments, as well as entitle the Advisor and/or Dealer Manager to reimbursement of offering costs related to the dividend reinvestment plan incurred by the Advisor and the Dealer Manager on behalf of the Company and certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement (the “AIP Reimbursement Agreement”) with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”), KBS Strategic Opportunity REIT II, Inc. (“KBS Strategic Opportunity REIT II”) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”).
The Company records all related party fees as incurred, subject to any limitations described in the Advisory Agreement, the Dealer Manager Agreement or the AIP Reimbursement Agreement. See Note 9, “Related Party Transactions.”
Selling Commissions and Dealer Manager Fees
The Company paid the Dealer Manager up to 6.5% and 3.0% of the gross offering proceeds from the primary Offering as selling commissions and dealer manager fees, respectively. A reduced sales commission and dealer manager fee was paid with respect to certain volume discount sales. No sales commission or dealer manager fee is paid with respect to shares issued through the dividend reinvestment plan. The Dealer Manager reallowed 100% of sales commissions earned to participating broker-dealers. The Dealer Manager also reallowed certain participating broker-dealers up to 1% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee and, in special cases, the Dealer Manager increased the reallowance.
Organization and Offering Costs
Organization and offering costs (other than selling commissions and dealer manager fees) related to the Company’s now-terminated primary Offering were sometimes paid and, with respect to the dividend reinvestment plan, may be paid by the Advisor, the Dealer Manager or their affiliates on the Company’s behalf, or the Company may pay these costs directly. Offering costs include all costs incurred in connection with the Company’s now-terminated primary Offering or the Company’s now withdrawn follow-on offering (the “Follow-on Offering”) or incurred or to be incurred with respect to the dividend reinvestment plan. Organization costs include all costs incurred by the Company in connection with its formation, including but not limited to legal fees and other costs to incorporate. Organization costs are expensed as incurred and offering costs in the Offering, which include selling commissions and dealer manager fees, are charged as incurred as a reduction to stockholders’ equity.


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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company was obligated to reimburse the Advisor, the Dealer Manager and their affiliates for organization and offering costs they incurred on the Company’s behalf.  However, at the termination of the Company’s now-terminated primary Offering and at the termination of the offering pursuant to the dividend reinvestment plan, the Advisor agreed to reimburse the Company to the extent that selling commissions, dealer manager fees and other organization and offering expenses incurred by the Company exceed 15% of the gross offering proceeds. In addition, at the end of the Company’s now-terminated primary Offering and again at the end of the offering pursuant to the dividend reinvestment plan, the Advisor agreed to reimburse the Company to the extent that organization and offering expenses, excluding underwriting compensation (which includes selling commissions, dealer manager fees and any other items viewed as underwriting compensation by the Financial Industry Regulatory Authority), exceed 2% of gross offering proceeds. The Company directly paid or reimbursed the Dealer Manager for underwriting compensation as discussed in the prospectus for the primary Offering, provided that within 30  days after the end of the month in which the Company’s now-terminated primary Offering terminated, the Dealer Manager was required to reimburse the Company to the extent that the Company’s reimbursements caused total underwriting compensation for the Company’s now-terminated primary Offering to exceed 10% of the gross offering proceeds from such offering. The Company also directly paid or reimbursed the Dealer Manager for bona fide invoiced due diligence expenses of broker-dealers. However, no reimbursements made by the Company to the Advisor or the Dealer Manager could cause total organization and offering expenses incurred by the Company (including selling commissions, dealer manager fees and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from the Company’s now-terminated primary Offering and the dividend reinvestment plan as of the date of reimbursement. As of December 31, 2017 , the Company’s selling commissions, dealer manager fees, and organization and other offering costs did not exceed 15% of the gross offering proceeds from the Offering. Through December 31, 2017 , including shares issued through the dividend reinvestment plan, the Company had sold 191,898,613 shares in the Offering for gross offering proceeds of $1.9 billion  and incurred selling commissions and dealer manager fees of $158.8 million and organization and other offering costs of $23.8 million in the Offering. 
In addition, from inception through August 2015, the Company recorded  $1.2 million  of offering costs related to the now withdrawn Follow-on Offering. Pursuant to the Advisory Agreement, the Advisor was obligated to reimburse the Company to the extent offering costs incurred by the Company in the Follow-on Offering exceeded  15%  of the gross offering proceeds of the offering. On August 24, 2015, the Company withdrew the registration statement for the Follow-on Offering. As such, the Advisor reimbursed the Company for  $1.2 million  of offering costs related to the Follow-on Offering.
Acquisition and Origination Fees
The Company pays the Advisor an acquisition fee equal to 1.0% of the cost of investments acquired, including the sum of the amount actually paid or allocated to the purchase, development, construction or improvement of such investments, acquisition expenses and any debt attributable to such investments. With respect to investments in and originations of loans, the Company pays an origination fee equal to 1.0% of the amount to be funded by the Company to acquire or originate mortgage, mezzanine, bridge or other loans, including any expenses related to such investments and any debt the Company uses to fund the acquisition or origination of these loans. The Company does not pay an acquisition fee with respect to investments in loans.
Operating Expenses
Under the Advisory Agreement, the Advisor has the right to seek reimbursement from the Company for all costs and expenses it incurs in connection with the provision of services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities, accounting software and cybersecurity costs. Commencing January 1, 2011, the Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. In the future, the Advisor may seek reimbursement for additional employee costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Asset Management Fee
With respect to investments in real estate, the Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto (but excludes acquisition fees paid or payable to the Advisor). In the case of investments made through joint ventures, the asset management fee will be determined based on the Company’s proportionate share of the underlying investment.
With respect to investments in loans and any investments other than real estate, the Company pays the Advisor a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition or origination expenses related thereto but is exclusive of acquisition or origination fees paid or payable to the Advisor) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination expenses related to the acquisition or funding of such investment (but excluding acquisition or origination fees paid or payable to the Advisor), as of the time of calculation.
Pursuant to the Advisory Agreement, with respect to asset management fees accruing from March 1, 2014, the Advisor has agreed to defer, without interest, the Company’s obligation to pay asset management fees for any month in which the Company’s modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 and interpreted by the Company, excluding asset management fees, does not exceed the amount of distributions declared by the Company for record dates of that month. The Company remains obligated to pay the Advisor an asset management fee in any month in which the Company’s MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus will also be deferred under the Advisory Agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will be applied to pay any asset management fee amounts previously deferred in accordance with the Advisory Agreement.
However, notwithstanding the foregoing, any and all deferred asset management fees that are unpaid will become immediately due and payable at such time as the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) an 8.0% per year cumulative, noncompounded return on such net invested capital (the “Stockholders’ 8% Return”) and (ii) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program. The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive deferred asset management fees.
Disposition Fee
For substantial assistance in connection with the sale of properties or other investments, the Company pays the Advisor or one of its affiliates 1.0% of the contract sales price of each property or other investment sold; provided, however, that if, in connection with such disposition, commissions are paid to third parties unaffiliated with the Advisor or one of its affiliates, the fee paid to the Advisor or one of its affiliates may not exceed the commissions paid to such unaffiliated third parties, and provided further that the disposition fees paid to the Advisor or one of its affiliates and unaffiliated third parties may not exceed 6.0% of the contract sales price. The Company will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other debt-related investment, provided that if the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To continue to qualify as a REIT, the Company must continue to meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries has been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for all open tax years through December 31, 2017 . As of December 31, 2017 , the returns for calendar years 2013 through 2016 remain subject to examination by major tax jurisdictions.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the years ended December 31, 2017 , 2016 and 2015 , respectively.
Distributions declared per common share were $0.650 during the years ended December 31, 2017 , 2016 and 2015 , respectively. Distributions declared per common share assumes each share was issued and outstanding each day from January 1, 2015 through December 31, 2017 . For each day that was a record date for distributions during the period from January 1, 2015 through December 31, 2017 , distributions were calculated at a rate of $0.00178082 per share per day. Each day during the periods from January 1, 2015 through February 28, 2016 and March 1, 2016 through December 31, 2017 was a record date for distributions.
Segments
The Company has invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments.  The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other.  As of December 31, 2017 , the Company aggregated its investments in real estate properties into one reportable business segment.
Square Footage, Occupancy and Other Measures
Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, used to describe real estate investments included in these notes to consolidated financial statements are presented on an unaudited basis.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Recently Issued Accounting Standards Update
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  In addition, the standard provided guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers upon transfer of control. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which deferred the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The Company elected to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the Company’s adoption, January 1, 2018. Under the modified retrospective approach, an entity may also elect to apply this standard to either (i) all contracts as of January 1, 2018 or (ii) only to contracts that are not completed as of January 1, 2018. A completed contract is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP that was in effect before the date of initial application. The Company elected to apply this standard only to contracts that are not completed as of January 1, 2018.
The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from this standard. Based on the Company’s evaluation of contracts within the scope of ASU No. 2014-09, revenue that may be impacted by the new standard includes other operating income and tenant reimbursements for substantial services earned at its properties.
For the year ended December 31, 2017 , other operating income including parking revenues and tenant reimbursements for substantial services and other ancillary income in the scope of ASC 606 were approximately 7% of consolidated revenue. Under current accounting standards, the Company typically recognizes other operating income when the amounts are fixed or determinable, collectability is reasonably assured, and services have been rendered. Under the new revenue recognition ASU, the recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. These services are normally provided at a point in time or over a specified period of time with respect to monthly parking revenue; therefore, revenue recognition under the new revenue recognition ASU is expected to be substantially similar to the recognition pattern under existing accounting standards.
Based on the Company’s evaluation of its contracts within the scope of ASU No. 2014-09, the adoption of the new revenue recognition standard is not expected to have a material impact on the Company’s financial statements on January 1, 2018.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued.  The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard requires lessors to identify lease and non-lease components under their leasing arrangements and allocate the total consideration in the lease agreement to these lease and non-lease components based on their relative standalone selling prices. Non-lease components will be subject to the new revenue recognition standard upon the Company’s adoption of the new leasing standard on January 1, 2019. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. In January 2018, the FASB issued a proposed amendment to the leases ASU, which would add a transition option to the new leases standard that would allow entities to apply the transition provisions of the new standard at its adoption date instead of the earliest comparative periods presented in its financial statements. The FASB also proposed a practical expedient that would permit lessors to not separate lease and non-lease components if certain conditions are met. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements and if adopted by the FASB, applying the transition option and electing the practical expedient of the proposed amendment.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.   ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (d) Relating to distributions received from equity method investments, ASU No. 2016-15 provides an accounting policy election for classifying distributions received from equity method investments. Such amounts can be classified using a (1) cumulative earnings approach, or (2) nature of distribution approach. Under the cumulative earnings approach, an investor would compare the distributions received to its cumulative equity method earnings since inception.  Any distributions received up to the amount of cumulative equity earnings would be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Alternatively, an investor can choose to classify the distributions based on the nature of activities of the investee that generated the distribution. If the necessary information is subsequently not available for an investee to determine the nature of the activities, the entity should use the cumulative earnings approach for that investee and report a change in accounting principle on a retrospective basis; and (e) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  The Company elected to early adopt ASU No. 2016-18 for the reporting period ended December 31, 2016 and applied it retrospectively. As a result of the adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”), to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  ASU No. 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.  If the screen is not met, ASU No. 2017-01 (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace missing elements.  ASU No. 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs.  Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.  ASU No. 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The amendments can be applied to transactions occurring before the guidance was issued (January 5, 2017) as long as the applicable financial statements have not been issued.  The Company elected to early adopt ASU No. 2017-01 for the reporting period beginning January 1, 2017.  As a result of the adoption of ASU No. 2017-01, the Company’s acquisitions of investment properties beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations). Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

3.
REAL ESTATE
Real Estate Held for Investment
As of December 31, 2017 , the Company’s real estate portfolio held for investment was composed of 27 office properties and one mixed-use office/retail property encompassing in the aggregate approximately 10.8 million rentable square feet. In addition, the Company had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction. As of December 31, 2017 , the Company’s real estate portfolio was collectively 93% occupied. The following table summarizes the Company’s investments in real estate as of December 31, 2017 (in thousands):
Property
 
Date Acquired
 
City
 
State
 
Property Type
 
Total Real Estate,
at Cost
 
Accumulated Depreciation and Amortization
 
Total Real Estate, Net
Domain Gateway
 
09/29/2011
 
Austin
 
TX
 
Office
 
$
47,374

 
$
(13,536
)
 
$
33,838

Town Center
 
03/27/2012
 
Plano
 
TX
 
Office
 
115,789

 
(24,742
)
 
91,047

McEwen Building
 
04/30/2012
 
Franklin
 
TN
 
Office
 
36,928

 
(7,178
)
 
29,750

Gateway Tech Center
 
05/09/2012
 
Salt Lake City
 
UT
 
Office
 
24,804

 
(6,189
)
 
18,615

Tower on Lake Carolyn
 
12/21/2012
 
Irving
 
TX
 
Office
 
53,412

 
(12,444
)
 
40,968

RBC Plaza
 
01/31/2013
 
Minneapolis
 
MN
 
Office
 
152,315

 
(31,227
)
 
121,088

One Washingtonian Center
 
06/19/2013
 
Gaithersburg
 
MD
 
Office
 
91,509

 
(15,357
)
 
76,152

Preston Commons
 
06/19/2013
 
Dallas
 
TX
 
Office
 
118,211

 
(19,846
)
 
98,365

Sterling Plaza
 
06/19/2013
 
Dallas
 
TX
 
Office
 
79,621

 
(11,513
)
 
68,108

201 Spear Street
 
12/03/2013
 
San Francisco
 
CA
 
Office
 
142,408

 
(12,085
)
 
130,323

500 West Madison
 
12/16/2013
 
Chicago
 
IL
 
Office
 
432,842

 
(61,865
)
 
370,977

222 Main
 
02/27/2014
 
Salt Lake City
 
UT
 
Office
 
160,501

 
(25,147
)
 
135,354

Anchor Centre
 
05/22/2014
 
Phoenix
 
AZ
 
Office
 
94,620

 
(13,279
)
 
81,341

171 17th Street
 
08/25/2014
 
Atlanta
 
GA
 
Office
 
133,262

 
(21,341
)
 
111,921

Reston Square
 
12/03/2014
 
Reston
 
VA
 
Office
 
46,819

 
(6,707
)
 
40,112

Ten Almaden
 
12/05/2014
 
San Jose
 
CA
 
Office
 
123,800

 
(14,121
)
 
109,679

Towers at Emeryville
 
12/23/2014
 
Emeryville
 
CA
 
Office
 
267,381

 
(27,503
)
 
239,878

101 South Hanley
 
12/24/2014
 
St. Louis
 
MO
 
Office
 
71,483

 
(8,615
)
 
62,868

3003 Washington Boulevard
 
12/30/2014
 
Arlington
 
VA
 
Office
 
151,096

 
(15,124
)
 
135,972

Village Center Station
 
05/20/2015
 
Greenwood Village
 
CO
 
Office
 
78,399

 
(9,610
)
 
68,789

Park Place Village
 
06/18/2015
 
Leawood
 
KS
 
Office/Retail
 
128,609

 
(13,589
)
 
115,020

201 17th Street
 
06/23/2015
 
Atlanta
 
GA
 
Office
 
102,578

 
(10,239
)
 
92,339

Promenade I & II at Eilan
 
07/14/2015
 
San Antonio
 
TX
 
Office
 
62,643

 
(6,787
)
 
55,856

CrossPoint at Valley Forge
 
08/18/2015
 
Wayne
 
PA
 
Office
 
90,352

 
(8,364
)
 
81,988

515 Congress
 
08/31/2015
 
Austin
 
TX
 
Office
 
117,522

 
(11,008
)
 
106,514

The Almaden
 
09/23/2015
 
San Jose
 
CA
 
Office
 
168,354

 
(13,467
)
 
154,887

3001 Washington Boulevard
 
11/06/2015
 
Arlington
 
VA
 
Office
 
57,093

 
(3,055
)
 
54,038

Carillon
 
01/15/2016
 
Charlotte
 
NC
 
Office
 
152,374

 
(11,870
)
 
140,504

Hardware Village (1)
 
08/26/2016
 
Salt Lake City
 
UT
 
Development/Apartment
 
67,826

 
—

 
67,826

 
 
 
 
 
 
 
 
 
 
$
3,369,925

 
$
(435,808
)
 
$
2,934,117

_____________________
(1) On August 26, 2016, the Company, through an indirect wholly-owned subsidiary, entered into a joint venture (the “Hardware Village Joint Venture”) to develop and subsequently operate a multifamily apartment complex, located on the developable land at Gateway Tech Center. The Company owns a 99.24% equity interest in the joint venture.


F-24
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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

As of December 31, 2017 , the following property represented more than 10% of the Company’s total assets:
Property
 
Location
 
Rentable Square Feet
 
Total Real Estate, Net
(in thousands)
 
Percentage of
Total Assets
 
Annualized Base Rent
(in thousands) (1)
 
Average
Annualized Base Rent per sq. ft.
 
Occupancy
500 West Madison
 
Chicago, IL
 
1,457,724

 
$
370,977

 
11.5
%
 
$
36,031

 
$
27.58

 
89.6
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
Operating Leases
The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2017 , the leases had remaining terms, excluding options to extend, of up to 14.1 years with a weighted-average remaining term of 4.5  years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $11.5 million and $12.7 million as of December 31, 2017 and 2016 , respectively.
During the years ended December 31, 2017 , 2016 and 2015 , the Company recognized deferred rent from tenants of $12.4 million , $17.2 million and $17.9 million , respectively. As of December 31, 2017 and 2016 , the cumulative deferred rent balance was $74.4 million and $57.5 million , respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $9.3 million and $5.2 million of unamortized lease incentives as of December 31, 2017 and 2016 , respectively.
As of December 31, 2017 , the future minimum rental income from the Company’s properties under its non-cancelable operating leases was as follows (in thousands):
2018
$
290,995

2019
272,742

2020
239,864

2021
208,998

2022
174,953

Thereafter
494,026

 
$
1,681,578

As of December 31, 2017 , the Company’s real estate properties were leased to approximately 900 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:
Industry
 
Number of Tenants
 
Annualized Base Rent (1)
(in thousands)
 
Percentage of
Annualized Base Rent
Finance
 
151
 
$
60,840

 
20.1
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
As of December 31, 2017 , no other tenant industries accounted for more than 10% of annualized base rent and no tenant accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time.

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KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Geographic Concentration Risk
As of December 31, 2017 , the Company’s net investments in real estate in California, Texas and Illinois represented 20% , 15% and 12% of the Company’s total assets, respectively.  As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California, Texas and Illinois real estate markets.  Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to pay distributions to stockholders.
Property Damage
During the year ended December 31, 2017 , 222 Main located in Salt Lake City, Utah suffered physical damages due to a broken sprinkler pipe. The Company’s insurance policy provides coverage for property damage and business interruption subject to a deductible of up to $5,000 per incident. Based on management’s estimates, the Company recognized an estimated aggregate loss due to damages of $7.9 million during the year ended December 31, 2017, which was reduced by $7.9 million of estimated insurance recoveries related to such damages, which the Company determined were probable of collection. The aggregate net loss of $5,000 due to damages during the year ended December 31, 2017 was classified as operating, maintenance and management expenses on the accompanying consolidated statements of operations and relates to the Company’s insurance deductible.
During the year ended December 31, 2017 , the Company recorded $0.7 million of business interruption insurance recovery, which is included in rental income on the accompanying consolidated statements of operations and recorded $0.7 million of insurance recoveries, which is included in prepaid expenses and other assets on the accompanying consolidated balance sheet.
Real Estate Held for Sale
In accordance with ASU No. 2014-08,  Presentation of Financial Statements (Topic 205)   and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity  (“ASU No. 2014-08”), results of operations from properties that are classified as held for sale in the ordinary course of business would generally be included in continuing operations on the Company’s consolidated statements of operations.
As of December 31, 2017 , the Company had classified one property as held for sale. The results of operations for this property as of December 31, 2017 are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenues and expenses related to this property, which were included in continuing operations (in thousands):
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
Revenues
 
 
 
 
 
 
Rental income
 
$
4,513

 
$
4,458

 
$
4,086

Tenant reimbursements and other operating income
 
153

 
68

 
76

Total revenues
 
$
4,666

 
$
4,526

 
$
4,162

Expenses
 
 
 
 
 
 
Operating, maintenance, and management
 
$
1,363

 
$
1,272

 
$
1,323

Real estate taxes and insurance
 
456

 
436

 
442

Asset management fees to affiliate
 
264

 
340

 
163

Acquisition related costs
 
—

 
—

 
13

Depreciation and amortization
 
1,880

 
2,200

 
2,985

Interest expense
 
662

 
503

 
287

Total expenses
 
$
4,625

 
$
4,751

 
$
5,213



F-26
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The following summary presents the major components of assets and liabilities related to real estate held for sale as of December 31, 2017 and December 31, 2016 (in thousands):
 
December 31, 2017
 
December 31, 2016
Assets related to real estate held for sale
 
 
 
Total real estate, at cost
$
33,575

 
$
33,252

Accumulated depreciation and amortization
(5,558
)
 
(3,867
)
Real estate held for sale, net
28,017

 
29,385

Other assets
1,786

 
1,820

Total assets related to real estate held for sale
$
29,803

 
$
31,205

Liabilities related to real estate held for sale
 
 
 
Notes payable, net
21,648

 
20,727

Other liabilities
50

 
65

Total liabilities related to real estate held for sale
$
21,698

 
$
20,792

4.
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of December 31, 2017 and 2016 , the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
 
December 31,
2017
 
December 31,
2016
 
December 31,
2017
 
December 31,
2016
 
December 31,
2017
 
December 31,
2016
Cost
 
$
230,576

 
$
261,678

 
$
12,301

 
$
14,111

 
$
(47,459
)
 
$
(55,342
)
Accumulated Amortization
 
(108,078
)
 
(98,573
)
 
(6,440
)
 
(6,038
)
 
22,849

 
21,752

Net Amount
 
$
122,498

 
$
163,105

 
$
5,861

 
$
8,073

 
$
(24,610
)
 
$
(33,590
)
Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the years ended December 31, 2017 , 2016 and 2015 were as follows (in thousands):
 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
 
For the Years Ended December 31,
 
For the Years Ended December 31,
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Amortization
 
$
(41,090
)
 
$
(46,647
)
 
$
(45,022
)
 
$
(2,285
)
 
$
(2,794
)
 
$
(3,696
)
 
$
8,995

 
$
11,718

 
$
10,683


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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The remaining unamortized balance for these outstanding intangible assets and liabilities as of December 31, 2017 is estimated to be amortized for the years ending December 31 as follows (in thousands):
 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
2018
 
$
(29,182
)
 
$
(1,730
)
 
$
6,290

2019
 
(24,067
)
 
(1,361
)
 
4,901

2020
 
(18,604
)
 
(834
)
 
3,993

2021
 
(15,351
)
 
(648
)
 
3,567

2022
 
(11,982
)
 
(492
)
 
2,706

Thereafter
 
(23,312
)
 
(796
)
 
3,153

 
 
$
(122,498
)
 
$
(5,861
)
 
$
24,610

Weighted-Average Remaining Amortization Period
 
5.9
 
5.0
 
5.2
5.
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
Village Center Station II Equity Method Investment
On March 3, 2017, the Company, through an indirect wholly owned subsidiary, acquired a 75% equity interest in an existing company and created a joint venture (the “Village Center Station II Joint Venture”) with an unaffiliated developer, Shea Village Center Station II, LLC (the “Developer”) to develop and subsequently operate a 12-story office building and an adjacent two-story office/retail building in the Denver submarket of Greenwood Village, Colorado (together “Village Center Station II”). The total projected cost of the development is approximately $113.1 million and the Company’s initial capital contribution to the Village Center Station II Joint Venture was $32.3 million . The Village Center Station II Joint Venture intends to fund the construction of Village Center Station II with capital contributions from its members and proceeds from a construction loan for borrowings of up to $78.5 million . As of December 31, 2017 , $38.8 million has been drawn under the construction loan. The Company has concluded that the Village Center Station II Joint Venture qualifies as a Variable Interest Entity (“VIE”) and determined that it is not the primary beneficiary of this VIE and to account for its investment in the project under the equity method of accounting. Under the agreement, the Company may be required to contribute up to 75% of additional requested contributions to the Village Center Station II Joint Venture. The Developer will fund all cost overruns (excluding certain overruns described in the Charter Communications lease) once the Village Center Station II Joint Venture has used all available funds in the development of Village Center Station II. Upon completion of Village Center Station II, the Company expects to purchase the Developer’s 25% equity interest. The Developer has an option, provided the put conditions have been satisfied, the most significant of which is completion of the project, to require the Company to purchase its 25% equity interest. If the Developer does not make such request, the Company has the right to purchase the Developer’s 25% equity interest. The expected purchase price of the Developer’s 25% equity interest is approximately $25.0 million .
As of December 31, 2017 , the book value of the Company’s investment in the Village Center Station II Joint Venture was $34.0 million which includes $1.6 million of acquisition costs and capitalized interest incurred directly by the Company. As of December 31, 2017 , the Company’s maximum loss exposure related to its investment in the Village Center Station II Joint Venture is equal to the carrying value of its $34.0 million investment.

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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Summarized financial information for the Village Center Station II Joint Venture follows (in thousands):
 
 
 
 
 
December 31, 2017
Assets:
 
 
Construction in progress
 
$
87,607

      Cash and cash equivalents
 
1

      Other assets
 
2,441

Total assets
 
$
90,049

Liabilities and equity:
 
 
Accounts payable
 
$
7,704

Notes payable, net
 
38,809

      Other liabilities
 
421

      Members’ capital
 
43,115

Total liabilities and equity
 
$
90,049


F-29
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

6.
NOTES PAYABLE
As of December 31, 2017 and 2016 , the Company’s notes payable consisted of the following (dollars in thousands):
 
 
Book Value as of
December 31, 2017
 
Book Value as of
December 31, 2016
 
Contractual Interest Rate as of
December 31, 2017 (1)
 
Effective Interest Rate as of
December 31, 2017 (1)
 
Payment Type
 
Maturity Date (2)
Town Center Mortgage Loan (3)
 
$
—

 
$
75,000

 
(3)  
 
(3)  
 
(3)  
 
(3)  
Portfolio Loan (5)
 
188,460

 
127,500

 
One-month LIBOR + 1.90%
 
3.26%
 
Interest Only
 
06/01/2019
RBC Plaza Mortgage Loan (3)
 
—

 
75,930

 
(3)  
 
(3)  
 
(3)  
 
(3)  
National Office Portfolio Mortgage Loan (3)
 
—

 
170,602

 
(3)  
 
(3)  
 
(3)  
 
(3)  
500 West Madison Mortgage Loan (3)
 
—

 
215,000

 
(3)  
 
(3)  
 
(3)  
 
(3)  
222 Main Mortgage Loan
 
99,471

 
101,343

 
3.97%
 
3.97%
 
Principal & Interest
 
03/01/2021
Anchor Centre Mortgage Loan
 
50,000

 
50,000

 
One-month LIBOR + 1.50%
 
3.18%
 
Interest Only
 
06/01/2018
171 17th Street Mortgage Loan
 
85,292

 
83,778

 
One-month LIBOR + 1.45%
 
2.85%
 
Principal & Interest
 
09/01/2018
Reston Square Mortgage Loan
 
29,800

 
23,840

 
One-month LIBOR + 1.50%
 
3.65%
 
Interest Only (4)
 
02/01/2019
Ten Almaden Mortgage Loan (3)
 
—

 
65,853

 
(3)  
 
(3)  
 
(3)  
 
(3)  
Towers at Emeryville Mortgage Loan (3)
 
—

 
145,379

 
(3)  
 
(3)  
 
(3)  
 
(3)  
101 South Hanley Mortgage Loan
 
40,557

 
37,502

 
One-month LIBOR + 1.55%
 
3.77%
 
Interest Only (4)
 
01/01/2020
3003 Washington Boulevard Mortgage Loan
 
90,378

 
90,378

 
One-month LIBOR + 1.55%
 
3.54%
 
Interest Only
 
02/01/2020
Rocklin Corporate Center Mortgage Loan
 
21,689

 
20,868

 
One-month LIBOR + 1.50%
 
2.85%
 
Interest Only
 
06/05/2018
201 17th Street Mortgage Loan
 
64,428

 
58,063

 
One-month LIBOR + 1.40%
 
3.35%
 
Interest Only
 
08/01/2018
CrossPoint at Valley Forge Mortgage Loan
 
51,000

 
51,000

 
One-month LIBOR + 1.50%
 
3.33%
 
Interest Only (4)
 
09/01/2022
The Almaden Mortgage Loan
 
93,000

 
93,000

 
4.20%
 
4.20%
 
Interest Only
 
01/01/2022
Promenade I & II at Eilan Mortgage Loan
 
37,300

 
37,300

 
One-month LIBOR + 1.75%
 
3.57%
 
Interest Only
 
10/01/2022
515 Congress Mortgage Loan
 
68,381

 
67,500

 
One-month LIBOR + 1.70%
 
3.62%
 
Interest Only
 
11/01/2020
201 Spear Street Mortgage Loan
 
100,000

 
100,000

 
One-month LIBOR + 1.66%
 
3.03%
 
Interest Only
 
01/01/2019
Carillon Mortgage Loan
 
90,248

 
76,440

 
One-month LIBOR + 1.65%
 
3.27%
 
Interest Only
 
02/01/2020
3001 Washington Boulevard Mortgage Loan
 
28,404

 
27,129

 
One-month LIBOR + 1.60%
 
2.97%
 
Interest Only
 
02/01/2019
Hardware Village Loan Facility (6)
 
21,011

 
—

 
One-month LIBOR + 3.25%
 
4.77%
 
Interest Only
 
02/23/2020
Portfolio Loan Facility (7)
 
797,500

 
—

 
One-month LIBOR + 1.80%
 
3.76%
 
Interest Only
 
11/03/2020
Total notes payable principal outstanding
 
1,956,919

 
1,793,405

 
 
 
 
 
 
 
 
Deferred financing costs, net
 
(15,133
)
 
(9,937
)
 
 
 
 
 
 
 
 
Total Notes Payable, net
 
$
1,941,786

 
$
1,783,468

 
 
 
 
 
 
 
 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2017 . Effective interest rate is calculated as the actual interest rate in effect as of December 31, 2017 (consisting of the contractual interest rate and the effect of interest rate swaps and caps, if applicable), using interest rate indices as of December 31, 2017 , where applicable. For further information regarding the Company’s derivative instruments, see Note 7, “Derivative Instruments.”
(2) Represents the maturity date as of December 31, 2017 ; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.
(3) On November 3, 2017, the Company paid off the outstanding balances under these loans with proceeds from the Portfolio Loan Facility. See below,“—Recent Financing Transactions - Portfolio Loan Facility.”


F-30
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

(4) Represents the payment type required under the loan as of December 31, 2017 . Certain future monthly payments due under these loans also include amortizing principal payments. For more information on the Company’s contractual obligations under its notes payable, see the five-year maturity table below.
(5) As of December 31, 2017 , the Portfolio Loan was secured by Domain Gateway, the McEwen Building, Gateway Tech Center, the Tower on Lake Carolyn, Park Place Village and Village Center Station. The face amount of the Portfolio Loan is $255.0 million , of which $127.5 million is term debt and $127.5 million is revolving debt. As of December 31, 2017 , the outstanding balance under the loan consisted of $127.5 million of term debt and $61.0 million of revolving debt. As of December 31, 2017 , an additional $65.5 million of revolving debt remained available for immediate future disbursements, subject to certain conditions set forth in the loan agreement. The remaining $1.0 million of revolving debt is available for future disbursements upon the Company meeting certain financial coverage ratios and subject to certain conditions set forth in the loan agreement. During the remaining term of the Portfolio Loan, the Company has an option, which may be exercised up to two times, to increase the loan amount to a maximum of $350.0 million , of which 50% would be term debt and 50% would be revolving debt, with the addition of one or more properties to secure the Portfolio Loan, subject to certain conditions contained in the loan documents.
(6) As of December 31, 2017 , $21.0 million had been disbursed and $53.0 million remained available for future disbursements, subject to certain conditions contained in the loan documents.
(7) See below,“—Recent Financing Transactions - Portfolio Loan Facility.”
As of December 31, 2017 , the Company’s deferred financing costs were $15.1 million , net of amortization, and were included in notes payable, net on the accompanying consolidated balance sheets. As of December 31, 2016 , the Company’s deferred financing costs were $10.0 million , net of amortization, of which $9.9 million was included in notes payable, net, and $0.1 million was included in prepaid expenses and other assets on the accompanying consolidated balance sheets.
During the years ended December 31, 2017 , 2016 and 2015 , the Company incurred $55.0 million , $51.6 million and $45.4 million of interest expense, respectively. Included in interest expense was (i) the amortization of deferred financing costs of $5.3 million , $5.1 million and $3.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, (ii) the capitalization of interest to construction in progress of $2.4 million , $0.2 million , $0 for the years ended December 31, 2017 , 2016 and 2015 , respectively, (iii) interest expense (including gains and losses) incurred as a result of the Company’s derivative instruments, which decreased interest expense by $3.1 million , increased interest expense by $6.4 million and increased interest expense by $13.4 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. As of December 31, 2017 and 2016 , $6.1 million and $4.3 million of interest expense were payable, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of December 31, 2017 (in thousands):
2018
 
$
224,158

2019
 
348,925

2020
 
1,109,290

2021
 
93,956

2022
 
180,590

 
 
$
1,956,919

The Company’s notes payable contain financial debt covenants. As of December 31, 2017 , the Company was in compliance with these debt covenants.

F-31
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Recent Financing Transactions
Portfolio Loan Facility
On November 3, 2017, the Company, through indirect wholly owned subsidiaries (each a “Borrower”), entered into a three -year loan facility with Bank of America, N.A., as administrative agent; Merril Lynch Pierce Fenner & Smith Incorporated, Wells Fargo Securities, LLC  and U.S. Bank, N.A., as joint lead arrangers and joint book runners; Wells Fargo Bank, NA, as syndication agent, and each of the financial institutions a signatory thereto (the “Lenders”), for an amount of up to $1.01 billion (the “Portfolio Loan Facility”), of which $757.5 million is term debt and $252.5 million is revolving debt. Proceeds from the term debt were used to pay off the Town Center Mortgage Loan, RBC Plaza Mortgage Loan, National Office Portfolio Mortgage Loan, 500 West Madison Mortgage Loan, Ten Almaden Mortgage Loan and Towers at Emeryville Mortgage Loan. At closing, $787.5 million was funded, of which $776.0 million was used to pay off the existing mortgage loans (listed above). The $787.5 million funded consisted of $757.5 million of term debt and $30.0 million of revolving debt. The Portfolio Loan Facility may be used for the repayment of debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity management of the Company and for other purposes described in the loan agreement. During the term of the Portfolio Loan Facility, the Company has an option to increase the aggregate loan amount by up to an additional $400.0 million in increments of $25.0 million , to a maximum of $1.41 billion , 25% of which would be revolving debt and 75% of which would be term debt, subject to certain conditions contained in the loan agreement.
The Portfolio Loan Facility matures on November 3, 2020, with two 12 -month extension options, subject to certain terms and conditions contained in the loan documents.  The Portfolio Loan Facility bears interest at a floating rate of 180 basis points over one-month LIBOR during the term of the loan and monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity, assuming no prior prepayment. The Company will have the right to prepay all of the Portfolio Loan Facility, subject to certain expenses potentially incurred by the Lenders as a result of the prepayment and subject to certain conditions contained in the loan documents. In addition, the Portfolio Loan Facility contains customary representations and warranties, financial and other affirmative and negative covenants (including maintenance of an ongoing debt service coverage ratio), events of default and remedies typical for this type of facility.
On November 3, 2017, KBS REIT Properties III, LLC (“REIT Properties III”), an indirect wholly owned subsidiary of the Company, entered into three interest rate swap agreements with an aggregate notional amount of $451.5 million . As of November 3, 2017, the Company had three existing interest rate swaps related to the paid off loans with a notional amount in the aggregate of $306.0 million . As the existing interest rate swaps expire at various times from January 1, 2018 through January 1, 2020, the notional amount of the new interest rate swaps in the aggregate will increase to maintain a notional amount of $757.5 million . The new and existing interest rate swaps, in the aggregate, effectively fix the interest rate on the term portion of the Portfolio Loan Facility at a blended rate of 3.861% , effective from November 3, 2017 through November 1, 2022.
The Portfolio Loan Facility is secured by RBC Plaza, Preston Commons, Sterling Plaza, One Washingtonian Center, Towers at Emeryville, Ten Almaden, Town Center and 500 West Madison. The Company has the right to substitute properties securing the Portfolio Loan Facility at any time, subject to approval of the Lenders and compliance with the terms and conditions described in the loan agreement.
Under the guaranty agreement related to the Portfolio Loan Facility (the “Guaranty”), REIT Properties III (i) provides a guaranty of, among other sums described in the Guaranty, all principal and interest outstanding under the Portfolio Loan Facility in the event of certain bankruptcy or insolvency proceedings involving REIT Properties III, any Borrower or any of their affiliates and (ii) guarantees payment of, and agrees to protect, defend, indemnify and hold harmless each Lender for, from and against, any deficiency, loss or damage suffered by any Lender because of (a) certain intentional acts committed by any Borrower or (b) certain bankruptcy or insolvency proceedings involving REIT Properties III, any Borrower or any of their affiliates, as such acts are described in the Guaranty.

F-32
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

7.
DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.
The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.
The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
The following table summarizes the notional amount and other information related to the Company’s interest rate swaps and cap as of December 31, 2017 and 2016 . The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
 
 
December 31, 2017
 
December 31, 2016
 
 
 
Weighted-Average
 Fix Pay Rate
 
Weighted-Average Remaining Term in Years
Derivative Instruments
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
Reference Rate as of December 31, 2016
 
 
Derivative instruments designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Swaps
 
2
 
$
118,400

 
7
 
$
625,130

 
One-month LIBOR/
Fixed at 1.411% - 1.68%
 
1.53%
 
0.6
Derivative instruments not designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Swaps (1)
 
16
 
$
1,209,643

 
12
 
$
658,183

 
One-month LIBOR/
Fixed at 1.39% - 2.37%
 
1.96%
 
3.3
Interest Rate Cap (2)
 
—
 
$
—

 
1
 
$
147,340

 
One-month LIBOR
at 2.46%
 
2.46%
 
—
_____________________
(1) Included in these amounts is one forward interest rate swap with a notional amount of $24.0 million that was not yet in effect as of December 31, 2017 . The one interest rate swap became effective in January 2018.
(2) The interest rate cap matured on January 1, 2017.
The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of December 31, 2017 and 2016 (dollars in thousands):
 
 
 
 
December 31, 2017
 
December 31, 2016
Derivative Instruments
 
Balance Sheet Location
 
Number of
Instruments
 
Fair Value
 
Number of
Instruments
 
Fair Value
Derivative instruments designated as hedging instruments
 
 
 
 
Interest Rate Swaps
 
Prepaid expenses and other assets, at fair value
 
1
 
$
128

 
1
 
$
42

Interest Rate Swaps
 
Other liabilities, at fair value
 
1
 
$
(18
)
 
6
 
$
(2,340
)
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments not designated as hedging instruments
 
 
 
 
Interest Rate Swaps
 
Prepaid expenses and other assets, at fair value
 
10
 
$
6,386

 
4
 
$
1,588

Interest Rate Swaps
 
Other liabilities, at fair value
 
6
 
$
(1,677
)
 
8
 
$
(7,388
)
Interest Rate Cap
 
Prepaid expenses and other assets, at fair value
 
—
 
$
—

 
1
 
$
—


F-33
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) on the accompanying consolidated statements of comprehensive income (loss) and as other comprehensive income on the accompanying consolidated statements of equity. Amounts in other comprehensive income (loss) will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flows.  The change in fair value of the ineffective portion is recognized directly in earnings. With respect to swap agreements that are terminated for which it remains probable that the original hedged forecasted transactions (i.e., LIBOR-based debt service payments) will occur, the loss related to the termination of these swap agreements is included in accumulated other comprehensive income (loss) and is reclassified into earnings over the period of the original forecasted hedged transaction. The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
Income statement related
 
 
 
 
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
Amount of expense recognized on interest rate swaps (effective portion)
 
$
1,508

 
$
5,513

 
$
7,034

 
 
1,508

 
5,513

 
7,034

 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
Realized loss recognized on interest rate swaps
 
5,664

 
2,513

 
280

Unrealized (gain) loss on interest rate swaps
 
(10,288
)
 
(1,600
)
 
5,906

Unrealized loss on interest rate cap
 
—

 
3

 
172

 
 
(4,624
)
 
916

 
6,358

(Decrease) increase in interest expense as a result of derivatives
 
$
(3,116
)
 
$
6,429

 
$
13,392

 
 
 
 
 
 
 
Other comprehensive income related
 
 
 
 
 
 
Unrealized income (losses) on derivative instruments
 
$
900

 
$
(3,582
)
 
$
(9,073
)
During the years ended December 31, 2017 , 2016 and 2015 , there was no ineffective portion related to the change in fair value of the derivative instruments designated as cash flow hedges. During the next 12 months, the Company expects to recognize additional interest income related to derivative instruments designated as cash flow hedges. The present value of the unrealized income expected to be recognized over the next 12 months related to derivative instruments designated as cash flow hedges totaled $0.1 million as of December 31, 2017 and was included in accumulated other comprehensive income (loss).

F-34
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

8.
FAIR VALUE DISCLOSURES
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:
Cash and cash equivalents, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
Derivative instruments: The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk. The fair value of interest rate caps (floors) are determined using the market standard methodology of discounting the future expected cash payments (receipts) which would occur if variable interest rates rise above (below) the strike rate of the caps (floors). The variable interest rates used in the calculation of projected payments (receipts) on the caps (floors) are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.
Notes payable: The fair values of the Company’s notes payable are estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

F-35
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

The following were the face values, carrying amounts and fair values of the Company’s notes payable as of December 31, 2017 and 2016 , which carrying amounts generally do not approximate the fair values (in thousands):
 
 
December 31, 2017
 
December 31, 2016
 
 
Face Value
 
Carrying Amount
 
Fair Value
 
Face Value
 
Carrying Amount
 
Fair Value
Financial liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable
 
$
1,956,919

 
$
1,941,786

 
$
1,950,965

 
$
1,793,405

 
$
1,783,468

 
$
1,775,953

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.
As of December 31, 2017 , the Company measured the following assets and liabilities at fair value (in thousands):
 
 
 
 
Fair Value Measurements Using
 
 
Total
 
Quoted Prices in Active Markets 
for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Recurring Basis:
 
 
 
 
 
 
 
 
Asset derivatives - interest rate swap
 
$
6,514

 
$
—

 
$
6,514

 
$
—

Liability derivatives - interest rate swaps
 
(1,695
)
 
—

 
(1,695
)
 
—

9.
RELATED PARTY TRANSACTIONS
The Company has entered into the Advisory Agreement with the Advisor and the Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company and entitle the Advisor to specified fees upon the provision of certain services with regard to the investment of funds in real estate investments, the management of those investments, among other services, and the disposition of investments, as well as entitle the Advisor and/or the Dealer Manager to reimbursement of offering costs related to the dividend reinvestment plan incurred by the Advisor and the Dealer Manager on behalf of the Company and certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into the AIP Reimbursement Agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II and KBS Growth & Income REIT.

F-36
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

On January 6, 2014, the Company, together with KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II, the Dealer Manager, the Advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2015, KBS Growth & Income REIT. was added to the insurance program at terms similar to those described above. In June 2017, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As KBS REIT I was implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.
During the years ended December 31, 2017 , 2016 and 2015 , no other business transactions occurred between the Company and KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT II, KBS Growth & Income REIT, the Advisor, the Dealer Manager or other KBS-affiliated entities.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the years ended December 31, 2017 , 2016 and 2015 , respectively, and any related amounts payable as of December 31, 2017 and 2016 (in thousands):
 
 
Incurred Years Ended
December 31,
 
Payable as of
December 31,
 
 
2017
 
2016
 
2015
 
2017
 
2016
Expensed
 
 
 
 
 
 
 
 
 
 
Asset management fees  (1)
 
$
25,905

 
$
24,940

 
$
20,051

 
$
2,262

 
$
2,126

Reimbursement of operating expenses (2)
 
327

 
423

 
204

 
121

 
139

Real estate acquisition fees
 
—

 
1,473

 
7,697

 
—

 
—

Additional Paid-in Capital
 
 
 
 
 
 
 
 
 
 
Selling commissions
 
—

 
—

 
33,200

 
—

 
—

Dealer manager fees
 
—

 
—

 
15,747

 
—

 
—

Reimbursable other offering costs (3)
 
—

 
—

 
2,471

 
—

 
—

Capitalized
 
 
 
 
 
 
 
 
 
 
Acquisition fee on development project
 
445

 
121

 
—

 
566

 
121

Acquisition fee on unconsolidated joint venture
 
613

 
—

 
—

 
290

 
—

Asset management fees on development project
 
48

 
38

 
—

 
—

 
11

Asset management fee on unconsolidated joint venture
 
14

 
—

 
—

 
—

 
—

 
 
$
27,352

 
$
26,995

 
$
79,370

 
$
3,239

 
$
2,397

_____________________
(1) See “Deferral of Asset Management Fees” below.
(2) Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $242,000 , $217,000 and $167,000 for the years ended December 31, 2017 , 2016 and 2015 , respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the years ended December 31, 2017 , 2016 and 2015 . The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.
(3) Also see “Other Offering Costs” below.

F-37
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

In connection with the Offering, the Company’s sponsor, KBS Holdings LLC, agreed to provide additional indemnification to one of the participating broker-dealers.  The Company agreed to add supplemental coverage to its directors’ and officers’ insurance coverage to insure the sponsor’s obligations under this indemnification agreement in exchange for reimbursement by the sponsor to the Company for all costs, expenses and premiums related to this supplemental coverage.  During each of the years ended December 31, 2017 , 2016 and 2015 , the Advisor incurred $0.1 million for the costs of the supplemental coverage obtained by the Company.
For the year ended December 31, 2017 , the Advisor paid the Company a $0.2 million property insurance rebate. For the year ended December 31, 2016 , the Advisor paid the Company a $0.2 million property insurance rebate and the Advisor and/or the Dealer Manager reimbursed the Company $0.1 million for legal and professional fees and travel expenses.
Other Offering Costs
Pursuant to the Advisory Agreement, the Advisor was obligated to reimburse the Company to the extent organization and offering costs incurred by the Company in each of the Offering and the Follow-on Offering exceeded  15%  of the gross offering proceeds of the respective offering. The Company ceased offering shares of common stock in the primary Offering on May 29, 2015 and terminated the primary Offering on July 28, 2015. As of December 31, 2017 , organization and offering costs in the Offering did not exceed 15% of the gross offering proceeds. From inception through August 2015, the Company had recorded  $1.2 million  of offering costs related to the Follow-on Offering.
On August 24, 2015, the Company withdrew the registration statement for the Follow-on Offering. As such, during the year ended December 31, 2015, the Advisor reimbursed the Company for the  $1.2 million  of offering costs related to the Follow-on Offering previously incurred by the Company.
Deferral of Asset Management Fees
Pursuant to the Advisory Agreement, with respect to asset management fees accruing from March 1, 2014, the Advisor has agreed to defer, without interest, the Company’s obligation to pay asset management fees for any month in which the Company’s modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 and interpreted by the Company, excluding asset management fees, does not exceed the amount of distributions declared by the Company for record dates of that month. The Company remains obligated to pay the Advisor an asset management fee in any month in which the Company’s MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus will also be deferred under the Advisory Agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will be applied to pay any asset management fee amounts previously deferred in accordance with the Advisory Agreement.
However, notwithstanding the foregoing, any and all deferred asset management fees that are unpaid will become immediately due and payable at such time as the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) an 8.0% per year cumulative, noncompounded return on such net invested capital (the “Stockholders’ 8% Return”) and (ii) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program. The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive deferred asset management fees.
As of December 31, 2017 , the Company had accrued and deferred payment of $2.3 million of asset management fees under the Advisory Agreement, as the Company believes the payment of this amount to the Advisor is probable. These fees will be reimbursed in accordance with the terms noted above.

F-38
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Lease to Affiliate
On May 29, 2015, the indirect wholly owned subsidiary of the Company that owns 3003 Washington Boulevard entered into a lease with an affiliate of the Advisor for 5,046 rentable square feet, or approximately 2.3% of the total rentable square feet, at 3003 Washington Boulevard. The lease commenced on October 1, 2015 and terminates on August 31, 2019. The annualized base rent, which represents annualized contractual base rental income as of December 31, 2017 , adjusted to straight-line any contractual tenant concessions (including free rent) and rent increases from the lease’s inception through the balance of the lease term, for this lease is approximately $0.2 million , and the average annual rental rate (net of rental abatements) over the lease term is $46.38 per square foot. During the years ended December 31, 2017 , 2016 and 2015 , the Company recognized $0.2 million , $0.2 million and $0.1 million of revenue related to this lease, respectively.
Prior to their approval of the lease, the Company’s conflicts committee and board of directors determined the lease to be fair and reasonable to the Company.
10.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2017 and 2016 (in thousands, except per share amounts):
 
 
2017
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
Revenues
 
$
105,400

 
$
103,019

 
$
102,558

 
$
103,072

Net income (loss) attributable to common stockholders
 
$
4,986

 
$
(1,568
)
 
$
(3,151
)
 
$
1,107

Net income (loss) per common share attributable to common stockholders, basic and diluted
 
$
0.03

 
$
(0.01
)
 
$
(0.02
)
 
$
0.01

Distributions declared per common share (1)
 
$
0.160

 
$
0.162

 
$
0.164

 
$
0.164

 
 
2016
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
Revenues
 
$
97,903

 
$
100,255

 
$
101,810

 
$
100,439

Net (loss) income attributable to common stockholders
 
$
(13,580
)
 
$
(5,151
)
 
$
3,859

 
$
15,635

Net (loss) income per common share attributable to common stockholders, basic and diluted
 
$
(0.08
)
 
$
(0.03
)
 
$
0.02

 
$
0.09

Distributions declared per common share (1)
 
$
0.160

 
$
0.162

 
$
0.164

 
$
0.164

__________________
(1) Distributions declared per common share assumes each share was issued and outstanding each day during the respective periods from January 1, 2016 through December 31, 2017 . Each day during the periods from January 1, 2016 through February 28, 2016 and March 1, 2016 through December 31, 2017 was a record date for distributions. Distributions were calculated at the rate of $0.00178082 per share per day.
11.
COMMITMENTS AND CONTINGENCIES
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from other sources.

F-39
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2017

Legal Matters
From time to time, the Company may be party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Company’s financial condition and results of operations as of December 31, 2017 .
12.
SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On January 2,  2018 , the Company paid distributions of $10.0 million , which related to distributions declared for daily record dates for each day in the period from December 1,  2017 through December 31,  2017 . On February 1,  2018 , the Company paid distributions of $10.0 million , which related to distributions declared for daily record dates for each day in the period from January 1,  2018 through January 31,  2018 . On March 1,  2018 , the Company paid distributions of $8.9 million , which related to distributions declared for daily record dates for each day in the period from February 1,  2018 through February 28,  2018 .
Distributions Authorized
On January 30, 2018 , the Company’s board of directors authorized distributions based on daily record dates for the period from March 1, 2018 through March 31, 2018 , which the Company expects to pay in April 2018 . On March 7, 2018 , the Company’s board of directors authorized distributions based on daily record dates for the period from April 1, 2018 through April 30, 2018 , which the Company expects to pay in May 2018 , and distributions based on daily record dates for the period from May 1, 2018 through May 31, 2018 , which the Company expects to pay in June 2018 . Investors may choose to receive cash distributions or purchase additional shares through the Company’s dividend reinvestment plan.
Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082  per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 5.54% annualized rate based on the Company’s December 6, 2017 estimated value per share of $11.73 .

F-40
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 2017
(dollar amounts in thousands)

 
 
 
 
 
 
 
 
 
Initial Cost to Company
 
 
 
Gross Amount at which Carried at Close of Period
 
 
 
 
 
 
Description
 
Location
 
Ownership Percent
 
Encumbrances
 
Land
 
Building and Improvements (1)
 
Total
 
Cost Capitalized
Subsequent to Acquisition (2)
 
Land
 
Building and Improvements (1)
 
Total (3)
 
Accumulated Depreciation
and Amortization
 
Original Date of
Construction
 
Date Acquired
Properties Held for Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domain Gateway
 
Austin, TX
 
100%
 
$
(4)  
 
$
2,850

 
$
44,523

 
$
47,373

 
$
1

 
$
2,850

 
$
44,524

 
$
47,374

 
$
(13,536
)
 
2009
 
09/29/2011
Town Center
 
Plano, TX
 
100%
 
 
(5)  
 
7,428

 
108,547

 
115,975

 
(186
)
 
7,428

 
108,361

 
115,789

 
(24,742
)
 
2001/2002/2006
 
03/27/2012
McEwen Building
 
Franklin, TN
 
100%
 
 
(4)  
 
5,600

 
34,704

 
40,304

 
(3,376
)
 
5,600

 
31,328

 
36,928

 
(7,178
)
 
2009
 
04/30/2012
Gateway Tech Center
 
Salt Lake City, UT
 
100%
 
 
(4)  
 
5,617

 
20,051

 
25,668

 
(864
)
 
5,617

 
19,187

 
24,804

 
(6,189
)
 
1909
 
05/09/2012
Tower on Lake Carolyn
 
Irving, TX
 
100%
 
 
(4)  
 
2,056

 
44,579

 
46,635

 
6,777

 
2,056

 
51,356

 
53,412

 
(12,444
)
 
1988
 
12/21/2012
RBC Plaza
 
Minneapolis, MN
 
100%
 
 
(5)  
 
16,951

 
109,191

 
126,142

 
26,173

 
16,951

 
135,364

 
152,315

 
(31,227
)
 
1991
 
01/31/2013
One Washingtonian Center
 
Gaithersburg, MD
 
100%
 
 
(5)  
 
14,400

 
74,335

 
88,735

 
2,774

 
14,400

 
77,109

 
91,509

 
(15,357
)
 
1990
 
06/19/2013
Preston Commons
 
Dallas, TX
 
100%
 
 
(5)  
 
17,188

 
96,330

 
113,518

 
4,693

 
17,188

 
101,023

 
118,211

 
(19,846
)
 
1958/1986
 
06/19/2013
Sterling Plaza
 
Dallas, TX
 
100%
 
 
(5)  
 
6,800

 
68,292

 
75,092

 
4,529

 
6,800

 
72,821

 
79,621

 
(11,513
)
 
1984
 
06/19/2013
201 Spear Street
 
San Francisco, CA
 
100%
 
 
100,000

 
40,279

 
85,941

 
126,220

 
16,188

 
40,279

 
102,129

 
142,408

 
(12,085
)
 
1984
 
12/03/2013
500 West Madison
 
Chicago, IL
 
100%
 
 
(5)  
 
49,306

 
370,662

 
419,968

 
12,874

 
49,306

 
383,536

 
432,842

 
(61,865
)
 
1987
 
12/16/2013
222 Main
 
Salt Lake City, UT
 
100%
 
 
99,471

 
5,700

 
156,842

 
162,542

 
(2,041
)
 
5,700

 
154,801

 
160,501

 
(25,147
)
 
2009
 
02/27/2014
Anchor Centre
 
Phoenix, AZ
 
100%
 
 
50,000

 
13,900

 
73,480

 
87,380

 
7,240

 
13,900

 
80,720

 
94,620

 
(13,279
)
 
1984
 
05/22/2014
171 17th Street
 
Atlanta, GA
 
100%
 
 
85,292

 
7,639

 
122,593

 
130,232

 
3,030

 
7,639

 
125,623

 
133,262

 
(21,341
)
 
2004
 
08/25/2014
Reston Square
 
Reston, VA
 
100%
 
 
29,800

 
6,800

 
38,838

 
45,638

 
1,181

 
6,800

 
40,019

 
46,819

 
(6,707
)
 
2007
 
12/03/2014
Ten Almaden
 
San Jose, CA
 
100%
 
 
(5)  
 
7,000

 
110,292

 
117,292

 
6,508

 
7,000

 
116,800

 
123,800

 
(14,121
)
 
1988
 
12/05/2014
Towers at Emeryville
 
Emeryville, CA
 
100%
 
 
(5)  
 
49,183

 
200,823

 
250,006

 
17,375

 
49,184

 
218,197

 
267,381

 
(27,503
)
 
1972/1975/1985
 
12/23/2014
101 South Hanley
 
St. Louis, MO
 
100%
 
 
40,557

 
6,100

 
57,363

 
63,463

 
8,020

 
6,100

 
65,383

 
71,483

 
(8,615
)
 
1986
 
12/24/2014
3003 Washington Boulevard
 
Arlington, VA
 
100%
 
 
90,378

 
18,800

 
129,820

 
148,620

 
2,476

 
18,800

 
132,296

 
151,096

 
(15,124
)
 
2014
 
12/30/2014
Village Center Station
 
Greenwood Village, CO
 
100%
 
 
(4)  
 
4,250

 
73,631

 
77,881

 
518

 
4,250

 
74,149

 
78,399

 
(9,610
)
 
2009
 
05/20/2015
Park Place Village
 
Leawood, KS
 
100%
 
 
(4)  
 
11,009

 
117,070

 
128,079

 
530

 
11,008

 
117,601

 
128,609

 
(13,589
)
 
2007
 
06/18/2015
201 17th Street
 
Atlanta, GA
 
100%
 
 
64,428

 
5,277

 
86,859

 
92,136

 
10,442

 
5,277

 
97,301

 
102,578

 
(10,239
)
 
2007
 
06/23/2015
Promenade I & II at Eilan
 
San Antonio, TX
 
100%
 
 
37,300

 
3,250

 
59,314

 
62,564

 
79

 
3,250

 
59,393

 
62,643

 
(6,787
)
 
2011
 
07/14/2015
CrossPoint at Valley Forge
 
Wayne, PA
 
100%
 
 
51,000

 
17,302

 
72,280

 
89,582

 
770

 
17,302

 
73,050

 
90,352

 
(8,364
)
 
1974
 
08/18/2015
515 Congress
 
Austin, TX
 
100%
 
 
68,381

 
8,000

 
106,261

 
114,261

 
3,261

 
8,000

 
109,522

 
117,522

 
(11,008
)
 
1975
 
08/31/2015
The Almaden
 
San Jose, CA
 
100%
 
 
93,000

 
29,000

 
130,145

 
159,145

 
9,209

 
29,000

 
139,354

 
168,354

 
(13,467
)
 
1980/1981
 
09/23/2015
3001 Washington Boulevard
 
Arlington, VA
 
100%
 
 
28,404

 
9,900

 
41,551

 
51,451

 
5,642

 
9,900

 
47,193

 
57,093

 
(3,055
)
 
2015
 
11/06/2015
Carillon
 
Charlotte, NC
 
100%
 
 
90,248

 
19,100

 
126,979

 
146,079

 
6,295

 
19,100

 
133,274

 
152,374

 
(11,870
)
 
1991
 
01/15/2016
Hardware Village (6)
 
Salt Lake City, UT
 
99.24%
 
 
21,011

 
—

 
4,183

 
4,183

 
63,643

 
—

 
67,826

 
67,826

 
—

 
N/A
 
08/26/2016
 
 
Total Properties Held for Investment
 
 

 
$
390,685

 
$
2,765,479

 
$
3,156,164

 
$
213,761

 
$
390,685

 
$
2,979,240

 
$
3,369,925

 
$
(435,808
)
 
 
 
 
Property Held for Sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rocklin Corporate Center
 
Rocklin, CA
 
100%
 
 
21,689

 
4,448

 
28,276

 
32,724

 
851

 
4,448

 
29,127

 
33,575

 
(5,558
)
 
2007
 
11/06/2014
 
 
Total Properties Held for Sale
 
 
21,689

 
$
4,448

 
$
28,276

 
$
32,724

 
$
851

 
$
4,448

 
$
29,127

 
$
33,575

 
$
(5,558
)
 
 
 
 
 
 
 
 
Total
 
 
 
 
$
395,133

 
$
2,793,755

 
$
3,188,888

 
$
214,612

 
$
395,133

 
$
3,008,367

 
$
3,403,500

 
$
(441,366
)
 
 
 
 

F-41
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 2017
(dollar amounts in thousands)

____________________
(1) Building and improvements includes tenant origination and absorption costs and construction in progress.
(2) Costs capitalized subsequent to acquisition is net of write-offs of fully depreciated/amortized assets and property damage.
(3) The aggregate cost of real estate for federal income tax purposes was $3.5 billion (unaudited) as of December 31, 2017 .
(4) As of December 31, 2017 , these properties served as the security for the Portfolio Loan, which had an outstanding principal balance of $188.5 million as of December 31, 2017 .
(5) As of December 31, 2017 , these properties served as the security for the Portfolio Loan Facility, which had an outstanding principal balance of $797.5 million as of December 31, 2017 .
(6) On August 26, 2016, the Company, through an indirect wholly-owned subsidiary, entered into the Hardware Village Joint Venture to develop and subsequently operate a multifamily apartment complex, located on the developable land at Gateway Tech Center. The Company owns a 99.24% equity interest in the joint venture.

F-42
Table of Contents
KBS REAL ESTATE INVESTMENT TRUST III, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)
December 31, 2017
(dollar amounts in thousands)


 
 
2017
 
2016
 
2015
Real Estate:   (1)
 
 
 
 
 
 
Balance at the beginning of the year
 
$
3,333,649

 
$
3,134,155

 
$
2,307,861

Acquisitions
 
—

 
149,745

 
775,099

Improvements
 
92,003

 
67,328

 
73,043

Construction in progress
 
45,973

 
16,680

 
990

Write off of fully depreciated and fully amortized assets
 
(59,724
)
 
(34,259
)
 
(22,776
)
Loss due to property damage
 
(8,401
)
 
—

 
(62
)
Balance at the end of the year
 
$
3,403,500

 
$
3,333,649

 
$
3,134,155

Accumulated depreciation and amortization: (1)
 
 
 
 
 
 
Balance at the beginning of the year
 
(344,794
)
 
$
(222,431
)
 
$
(110,781
)
Depreciation and amortization expense
 
(156,296
)
 
(156,622
)
 
(134,426
)
Write off of fully depreciated and fully amortized assets
 
59,724

 
34,259

 
22,776

Balance at the end of the year
 
$
(441,366
)
 
$
(344,794
)
 
$
(222,431
)
_____________________
(1) Amounts include properties held for sale.

F-43
Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on March 8, 2018.
 
KBS REAL ESTATE INVESTMENT TRUST III, INC.
 
 
 
 
By:  
/s/ Charles J. Schreiber, Jr.
 
 
Charles J. Schreiber, Jr.
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name
 
Title
 
Date
 
 
 
 
 
/s/ CHARLES J. SCHREIBER, JR.
 
Chairman of the Board, Chief Executive Officer and Director
(principal executive officer)
 
March 8, 2018
Charles J. Schreiber, Jr.
 
 
 
 
/s/ JEFFREY K. WALDVOGEL 
 
Chief Financial Officer
(principal financial officer)
 
March 8, 2018
Jeffrey K. Waldvogel
 
 
 
 
/s/ PETER MCMILLAN III
 
Executive Vice President, Treasurer, Secretary and Director
 
March 8, 2018
Peter McMillan III
 
 
 
 
/s/ STACIE K. YAMANE
 
Chief Accounting Officer
(principal accounting officer)
 
March 8, 2018
Stacie K. Yamane
 
 
 
 
/s/ BARBARA R. CAMBON
 
Director
 
March 8, 2018
Barbara R. Cambon
 
 
 
 
/s/ JEFFREY A. DRITLEY
 
Director
 
March 8, 2018
Jeffrey A. Dritley

 
 
 
 
/s/ STUART A. GABRIEL, PH.D.
 
Director
 
March 8, 2018
Stuart A. Gabriel, Ph.D.
 
 
 
 



Exhibit 10.2

LOAN AGREEMENT
by and among
KBSIII 60 SOUTH SIXTH STREET, LLC, KBSIII PRESTON COMMONS, LLC, KBSIII STERLING PLAZA, LLC, KBSIII ONE WASHINGTONIAN, LLC, KBSIII TOWERS AT EMERYVILLE, LLC, KBSIII TEN ALMADEN, LLC, KBSIII LEGACY TOWN CENTER, LLC, and KBSIII 500 WEST MADISON, LLC,
each a Delaware limited liability company,
collectively, as Borrower
and
BANK OF AMERICA, N.A.,
a national banking association, as Administrative Agent
and
The Other Financial Institutions Party Hereto
Dated as of November 3, 2017
MERRILL LYNCH PIERCE FENNER & SMITH INCORPORATED, as Joint Lead Arranger and Joint Bookrunner
WELLS FARGO SECURITIES, LLC, as Joint Lead Arranger and Joint Bookrunner
U.S. BANK, NATIONAL ASSOCIATION, as Joint Lead Arranger, Joint Bookrunner and Documentation Agent
WELLS FARGO BANK, N.A., as Syndication Agent
KBSRIII201710KEX103BOFALOGO.JPG




TABLE OF CONTENTS

Page


 
 
 
Page

ARTICLE 1 - THE LOAN
1

 
1.1
General Information and Exhibits
1

 
1.2
Purpose
2

 
1.3
Commitment to Lend; Revolving Availability; Increase in Commitments
2

 
1.4
Interest Rates
6

 
1.5
Prepayment
8

 
1.6
Payment Schedule and Maturity Date
9

 
1.7
Payments
9

 
1.8
Evidence of Debt
10

 
1.9
Unused Fee
10

ARTICLE 2 - TAXES, YIELD PROTECTION, UNAVAILABILITY AND ILLEGALITY
11

 
2.1
Taxes
11

 
2.2
Illegality
15

 
2.3
Inability to Determine Rates
16

 
2.4
Increased Costs
17

 
2.5
Compensation for Losses
18

 
2.6
Mitigation Obligations; Replacement of Lenders
28

 
2.7
Survival
28

ARTICLE 3 - INTENTIONALLY OMITTED
28

ARTICLE 4 - AFFIRMATIVE COVENANTS
28

 
4.1
Compliance with Laws; Use of Proceeds
28

 
4.2
Inspections; Cooperation
28

 
4.3
Payment and Performance of Contractual Obligations
29

 
4.4
Insurance
29

 
4.5
Adjustment of Condemnation and Insurance Claims
31

 
4.6
Utilization of Net Proceeds
32

 
4.7
Management
33

 
4.8
Books and Records; Financial Statements; Tax Returns
33

 
4.9
Estoppel Certificates
35

 
4.10
Taxes; Tax Receipts
35

 
4.11
Administrative Agent's Rights to Pay and Perform
35

 
4.12
Reimbursement; Interest
35

 
4.13
Notification by Borrowers
35

 
4.14
[Intentionally Omitted]
36

 
4.15
Fees and Expenses
36

 
4.16
Appraisals
36

 
4.17
Leasing and Tenant Matters
36

 
4.18
Preservation of Rights
37

 
4.19
Income from Property
37

 
4.20
[Intentionally Omitted]
37

 
4.21
Swap Contracts
37

 
 
 
 

 
i
 

TABLE OF CONTENTS
(continued)
Page


 
4.22
Debt Service Coverage Ratio
37

 
4.23
Anti-Corruption Laws
38

 
4.24
Controlled Substances
38

ARTICLE 5 - NEGATIVE COVENANTS
38

 
5.1
Conditional Sales
38

 
5.2
Insurance Policies and Bonds
38

 
5.3
Commingling
39

 
5.4
Additional Debt
39

 
5.5
Sanctions
39

 
5.6
Anti-Corruption Laws
39

 
5.7
Ownership; Merger; Consolidation; Purchase or Sale of Assets
39

ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
41

 
6.1
Organization, Power and Authority of Borrowers; Loan Documents
41

 
6.2
Other Documents; Laws
41

 
6.3
Taxes
42

 
6.4
Legal Actions
42

 
6.5
Nature of Loan
42

 
6.6
Trade Names
42

 
6.7
Financial Statements
42

 
6.8
No Material Adverse Change
42

 
6.9
ERISA and Prohibited Transactions
42

 
6.10
Compliance with Laws and Zoning and Other Requirements; Encroachments
43

 
6.11
Certificates of Occupancy
43

 
6.12
Utilities; Roads; Access
43

 
6.13
Other Liens
43

 
6.14
No Defaults
43

 
6.15
No Broker
44

 
6.16
Not a Foreign Person
44

 
6.17
OFAC
44

 
6.18
Anti-Corruption Laws
44

 
6.19
EEA Financial Institution
44

ARTICLE 7 - DEFAULT AND REMEDIES
44

 
7.1
Events of Default
44

 
7.2
Remedies
46

ARTICLE 8 - ADMINSTRATIVE AGENT
47

 
8.1
Appointment and Authorization of Administrative Agent
47

 
8.2
Delegation of Duties; Advice
49

 
8.3
Liability of Administrative Agent
49

 
8.4
Reliance by Administrative Agent; Authorized Signers
50

 
8.5
Notice of Default
51

 
8.6
Credit Decisions; Disclosure of Information by Administrative Agent
51

 
 
 
 
 
 
 
 

 
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TABLE OF CONTENTS
(continued)
Page


 
8.7
Indemnification of Administrative Agent
52

 
8.8
Administrative Agent in Individual Capacity
53

 
8.9
Successor Administrative Agent
53

 
8.10
Releases; Acquisition and Transfers of Collateral
54

 
8.11
Application of Payments
56

 
8.12
Administrative Agent Advances
56

 
8.13
Defaulting Lender
57

 
8.14
Benefit
58

 
8.15
Co-Agents; Lead Managers
58

 
8.16
Lender Participation in Swap Transactions
59

 
8.17
Swap Contracts
59

 
8.18
Borrowers Not a Party
59

ARTICLE 9 - GENERAL TERMS AND CONDITIONS
59

 
9.1
Consents; Borrowers' Indemnity
59

 
9.2
Miscellaneous
61

 
9.3
Notices
62

 
9.4
Payments Set Aside
64

 
9.5
Successors and Assigns
64

 
9.6
Confidentiality
68

 
9.7
Set-off
69

 
9.8
Sharing of Payments
69

 
9.9
Amendments; Survival
70

 
9.10
Several Obligations; No Liability; No release
71

 
9.11
[Intentionally Omitted]
72

 
9.12
Replacement of Lenders
72

 
9.13
Further Assurances
73

 
9.14
Inducement to Lenders
73

 
9.15
Forum
73

 
9.16
Interpretation
74

 
9.17
No Partnership, etc
74

 
9.18
Commercial Purpose
74

 
9.19
Usury
74

 
9.20
WAIVER OF JURY TRIAL
75

 
9.21
Service of Process
76

 
9.22
No Delays; Defaults
76

 
9.23
USA Patriot Act; KYC Notice
76

 
9.24
Entire Agreement
77

 
9.25
Limitation on Liability
77

 
9.26
Third Parties; Benefit
78

 
9.27
Other Transactions
78

 
9.28
Limited Recourse Provision
79

 
9.29
Releases and Reconveyances of Properties
79

 
9.30
Additions/Substitutions of Properties to the Collateral
80


 
iii
 

TABLE OF CONTENTS
(continued)
Page


 
9.31
Additional Representations
83

 
9.32
Co-Borrowers
83

 
9.33
Intentionally Omitted
86

 
9.34
Acknowledgment and Consent to Bail-In of EEA Financial Institutions
86



 
iv
 



LOAN AGREEMENT
THIS LOAN AGREEMENT (this “ Agreement ”) is made as of November 3, 2017 by and among each lender from time to time a party hereto (individually, a “ Lender ” and collectively, the “ Lenders ”), and BANK OF AMERICA, N.A., a national banking association as Administrative Agent, and KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”), KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, as a “ Borrower ” and, collectively, jointly and severally, as “ Borrowers ”), who agree as follows:
ARTICLE 1 - THE LOAN
1.1      General Information and Exhibits . This Agreement includes all of the Exhibits listed below, all of which Exhibits are attached hereto and made a part hereof for all purposes. Borrowers and Lenders agree that if any Exhibit attached to this Agreement contains blanks, the same shall be completed correctly and in accordance with this Agreement prior to or at the time of the execution and delivery thereof.
_ X _
Exhibit “A”    -    Legal Description of the Land
_ X _
Exhibit “B”    -    Definitions
_ X _
Exhibit “C”    -    Conditions Precedent to the Disbursement of Term Loan and the Extension of Credit for the Revolving Loan
_ X _
Exhibit “D”    -    Leasing and Tenant Matters
_ X _
Exhibit “E”    -    Assignment and Assumption
_ X _
Exhibit “F”    -    Promissory Note
_ X _
Exhibit “G”    -    Schedule of Lenders
_ X _
Exhibit “H”    -    Swap Contracts
_ X _
Exhibit “I”    -    Extension Conditions
_ X _
Exhibit “J”    -    Form of Draw Request
_ X _
Exhibit “K-1”    -    Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
_ X _
Exhibit “K-2”    -    Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Page 1


_ X _
Exhibit “K-3”    -    Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
_ X _
Exhibit “K-4”    -    Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
_ X _
Exhibit “L”    -    Form of Secured Party Designation Notice
_ X _
Exhibit “M”    -    Form of Joinder Agreement
_ X _
Exhibit “N”    -    Borrowers’ Remittance Instructions
_ X _
Exhibit “O”    -    Borrower’s Instruction Certificate
_ X _
Exhibit “P”    -    Form of Compliance Certificate

The Exhibits contain other terms, provisions and conditions applicable to the Loan. Capitalized terms used in this Agreement shall have the meanings assigned to them in Exhibit “B” . This Agreement and the other Loan Documents, which must be in form, detail and substance satisfactory to Administrative Agent and the Lenders, evidence the agreements of Borrowers and Lenders with respect to the Loan. Borrowers shall comply with all of the Loan Documents.
1.2      Purpose . The proceeds of the Loan shall be used (i) to pay for or reimburse Borrowers for certain costs and expenses incurred by Borrowers in connection with the repayment of principal and interest of certain indebtedness secured by the Property of each Borrower and payment of closing costs and other expenses related to the Loan, (ii) for the return of equity to certain indirect owners of Borrowers, (iii) to pay or reimburse Borrowers for certain other costs and expenses, including costs of Tenant Improvements, Leasing Commissions, and capital improvements at the Properties, (iv) for working capital or liquidity management of the Guarantor, and (v) for any other lawful purpose; provided, however, Borrowers shall not in any case directly or indirectly use the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any individual or entity, to fund any activities of or business with any individual or entity, or in any Designated Jurisdiction, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any individual or entity (including any individual or entity participating in the transaction, whether as Lender, Administrative Agent or otherwise) of Sanctions.
1.3      Commitment to Lend; Revolving Availability; Increase in Commitments .
1.3.1      Commitment to Lend . Borrowers agree, on a joint and several basis, to borrow from each Lender, and each Lender severally agrees to make advances of its Pro Rata Share of the Loan proceeds to Borrowers in amounts at any one time outstanding not to exceed such Lender’s Pro Rata Share of the Loan and (except for Administrative Agent with respect to Administrative Agent Advances), on the terms and subject to the conditions set forth in this Agreement and Exhibit “C” . Each Lender shall fund its Pro Rata Share of each advance of Loan proceeds under this Agreement, provided , however , that no Lender will be required to make an advance in any amount which, when aggregated with all prior advances made by such Lender, would exceed such Lender’s then current Commitment. Lenders’ Commitments to lend shall expire and terminate automatically (a) if the Loan is prepaid in full, (b) upon the occurrence of a Default, and (c) on the Maturity Date. Except

Page 2


as expressly provided in Section 1.3.3 the Loan is not a revolving loan, and amounts repaid may not be re-borrowed except as expressly provided in Section 1.3.3 .
1.3.2      Term Loan Disbursement . On the Closing Date, Lenders shall advance the term loan portion of the Loan proceeds to Borrowers in the principal amount of Seven Hundred Fifty-Seven Five Hundred Thousand Dollars ($757,500,000) (the “ Term Loan ”). The Term Loan is not a revolving loan, and may not be re-borrowed.
1.3.3      Revolving Availability . From and after the Closing Date and until the Maturity Date, Borrowers may borrow, and subsequently repay and reborrow, amounts constituting Revolving Loan Proceeds under this Agreement, so long as (x) the principal amount of the Loan outstanding as Revolving Loan Proceeds at any time does not exceed the Revolving Availability, and (y) the outstanding principal balance of the Loan (including the principal amount of the Term Loan outstanding) does not exceed the amount of the Aggregate Commitments. Borrowers shall pay to Administrative Agent, for the ratable benefit of the Lenders, within five (5) days of written Notice from Administrative Agent, any amount necessary to comply with the preceding sentence. Revolving Loan Proceeds shall be disbursed to Borrower (but not more frequently than three (3) disbursements per month), subject to the following terms and conditions:
(i)      no Default or Potential Default shall exist;
(ii)      Administrative Agent shall have received Draw Request signed by an Authorized Signer; and
(iii)      Administrative Agent shall not have suspended (or such suspension, if any, shall not then exist) the disbursements of Revolving Loan Proceeds for a failure of the Properties to satisfy the Ongoing Debt Service Coverage Ratio in accordance with Section 4.22 ;
(iv)      Borrowers’ representations and warranties set forth in this Agreement shall be true and correct in all material respects as of the date of the Draw Request and, unless Administrative Agent is notified to the contrary prior to the disbursement of the advance requested, will be so on the date of the disbursement; and
(v)      After giving effect to the requested disbursement, Borrowers shall have satisfied a Disbursement Debt Service Coverage Ratio, based on the results of operations of the Properties as of the most recent Test Date, of not less than the Minimum Required Debt Service Coverage Ratio, as evidenced by a compliance certificate delivered by Borrowers to Administrative Agent in accordance with Section 4.8(f) ; and
(vi)      the amount of the requested disbursement shall not, (A) when added to the principal amount of the Revolving Loan outstanding, exceed the Revolving Availability, or (B) when added to the outstanding principal balance of the Loan (including the principal amount of the Term Loan outstanding) exceed the amount of the Aggregate Commitments.

Page 3


Administrative Agent shall fund any disbursement of Revolving Loan Proceeds within five (5) Business Days of the satisfaction of the foregoing conditions, subject to satisfaction of and in accordance with the provisions of Section 1.3.4 .
1.3.4      Disbursements of Revolving Loan Proceeds .
(a)      Following receipt of a Draw Request, Administrative Agent shall promptly provide each Lender with a copy of such Draw Request. Administrative Agent shall notify each Lender telephonically (with confirmation by electronic mail) or by electronic mail (with confirmation by telephone) not later than 1:00 p.m. Administrative Agent’s Time three (3) Business Days prior to the advance Funding Date for LIBOR Rate Principal advances, and one (1) Business Day prior to the advance Funding Date for all other advances, of its Pro Rata Share of the amount Administrative Agent has determined shall be advanced in connection therewith (the “ Advance Amount ”). In the case of an advance of the Revolving Loan, each Lender shall make the funds for its Pro Rata Share of the Advance Amount available to Administrative Agent not later than 11:00 a.m. Administrative Agent’s Time on the Funding Date thereof. After Administrative Agent’s receipt of the Advance Amount from Lenders, Administrative Agent shall make Revolving Loan Proceeds in an amount equal to the Advance Amount (or, if less, such portion of the Advance Amount that shall have been paid to Administrative Agent by Lenders in accordance with the terms hereof) available to Borrowers on the applicable Funding Date by advancing such funds to Borrowers.
(b)      Unless Administrative Agent shall have received notice from a Lender prior to the proposed advance Funding Date for LIBOR Rate Principal advances (or, in the case of any other advances, prior to 12:00 p.m. (Administrative Agent’s Time) on such advance Funding Date) that such Lender will not make available to Administrative Agent such Lender’s Pro Rata Share of such Advance Amount, Administrative Agent may assume that such Lender has made such Pro Rata Share available on such date in accordance with Subsection (a) of this Section (or, in the case of any advances other than LIBOR Rate Principal advances, that such Lender has made such Pro Rata Share available in accordance with, and at the time required by Subsection (a) of this Section) and may, in reliance upon such assumption, make available to Borrowers a corresponding amount. In such event, if a Lender has not in fact made its Pro Rata Share of the Advance Amount available to Administrative Agent, then the applicable Lender severally agrees to pay to Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to Borrowers to but excluding the date of payment to Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by Administrative Agent in connection with the foregoing. If such Lender shall pay such interest to Administrative Agent for the same or an overlapping period, Administrative Agent shall promptly remit to Borrower the amount of such interest paid by Borrower for such period. If such Lender pays its Pro Rata Share of the applicable Advance Amount to Administrative Agent, then the amount so paid shall constitute such Lender’s Pro Rata Share of such Advance Amount. A notice of Administrative Agent to any Lender with respect to any amount owing under this Subsection shall be conclusive, absent manifest error.

Page 4


(c)      If any Lender makes available to Administrative Agent funds for any Loan advances to be made by such Lender as provided in the foregoing provisions of this Section, and such funds are not made available to Borrower by Administrative Agent because the conditions to the applicable Loan advance set forth in Section 1.3.3 are not satisfied in accordance with the terms hereof, Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(d)      The obligations of Lenders hereunder to make Loan advances and to make payments pursuant to Section 8.7 are several and not joint. The failure of any Lender to make any Loan advance or to make any payment under Section 8.7 on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan advance or to make its payment under Section 8.7 .
(f)    Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan advance in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan advance in any particular place or manner.

1.3.5      Increase in Commitments . Borrowers shall have the right to request, not more frequently than once per calendar quarter, increases in the Aggregate Commitments by providing written notice to Administrative Agent; provided, however, that after giving effect to any such increases, the Aggregate Commitments shall not exceed One Billion Four Hundred Ten Million Dollars ($1,410,000,000). Each such increase in the Aggregate Commitments must be in an integral multiple of Twenty-Five Million Dollars ($25,000,000), and, as to any new or increasing Lender, shall be allocated among the Revolving Loan Commitments and the Term Loan Commitments of such Lender in proportion to the aggregate amount of all Revolving Loan Commitments to the aggregate amount of all Term Loan Commitments existing immediately prior to such increase. Any property to be taken as Collateral in connection with any such increase in the Aggregate Commitments shall be subject to satisfaction of the conditions set forth in Section 9.30 and such property must be approved by the Required Lenders, which approval may be granted or withheld in each Required Lender’s sole and absolute discretion. Administrative Agent, in consultation with Borrowers, shall manage all aspects of the syndication of such increase in the Aggregate Commitments, including decisions as to the selection of the existing Lenders and/or other banks, financial institutions and other institutional lenders to be approached with respect to such increase and the allocations of the increase in the Aggregate Commitments among such existing Lenders and/or other banks, financial institutions and other institutional lenders. No Lender shall be obligated in any way whatsoever to increase its Commitment. Effecting the increase of the Aggregate Commitments under this Section is subject to the following conditions precedent (together with any other conditions precedent imposed by Administrative Agent and the Lenders in their sole and absolute discretion): (i) no Default or Potential Default shall be in existence on the effective date of such increase; (ii) except as disclosed to Administrative Agent in writing, the representations and warranties made by Borrowers and Guarantor in any Loan Document shall be true or correct in all material respects on the effective date of such increase, except to the extent that such representations and warranties specifically refer to an earlier date, in which case such representations and warranties

Page 5


must be true and correct in all material respects on such earlier date; (iii) Administrative Agent shall have received each of the following, in form and substance reasonably satisfactory to Administrative Agent: (A) such agreements, amendments, promissory notes, documents, certificates and instruments as Administrative Agent shall reasonably require to evidence the increase in the Commitments; (B) an acknowledgement and ratification by Guarantor of its obligations under the Guaranty; (C) a customary opinion of counsel to Borrowers and Guarantor, and addressed to Administrative Agent and the Lenders covering such matters as reasonably requested by Administrative Agent; and (D) endorsements to the Title Policies dating down the effective date of such Title Policies and increasing such Title Policies by the amount of such increase in the Commitments. In connection with any increase in the aggregate amount of the Commitments pursuant to this Section 1.3.5 , any Lender becoming a party hereto shall execute such documents and agreements as Administrative Agent may reasonably request.
1.4      Interest Rates . Subject to the other terms and provisions of this Agreement, the Principal Debt from day to day outstanding which is not past due shall bear interest at a fluctuating rate per annum equal to the lesser of (i) the maximum non-usurious rate of interest allowed under applicable law, or (ii) the following (computed as provided in Section 1.4.3 ) 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.
1.4.1      Interest Rate Elections .
(a)      Subject to the conditions and limitations in this Agreement, Borrower may by providing a Rollover/Conversion Notice to Administrative Agent:
(i)      Elect, for a new advance of funds, that such Principal Debt will be Base Rate Principal, LIBOR Rate Principal or a combination thereof;
(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 hereof 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.

Page 6


(b)      Each Rollover/Conversion Notice must be received by Administrative Agent not later than 10:00 a.m., Administrative Agent’s Time on the applicable date as follows:
(i)      With respect to an advance of or a 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) 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 Rollover/Conversion 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 Administrative Agent in writing in form specified by Administrative Agent.
1.4.2      General Conditions Precedent to LIBOR Rate Election . In addition to any other conditions herein, a LIBOR Rate Election shall not be permitted if:
(a)      a Default has occurred and has not been waived by Administrative Agent 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 combined Commitments; or
(c)      the requested LIBOR Rate Election would cause more than three (3) 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 $1,000,000; or
(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 2.2 or 2.3 shall apply with respect to the requested LIBOR Rate Election or the requested LIBOR Rate Principal.
1.4.3      Computations, Determinations and Notification . All computations of interest for Base Rate Advances shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Administrative Agent shall determine each interest rate applicable to the Principal Debt in accordance with this Agreement and its determination thereof shall be conclusive

Page 7


in the absence of manifest error. . The books and records of Administrative Agent shall be prima facie evidence of all sums owing to Lenders from time to time under the Loan, but the failure to record any such information shall not limit or affect the obligations of Borrowers under the Loan Documents. Administrative Agent does not warrant, nor accept responsibility, nor shall Administrative Agent have any liability with respect to the administration, submission or any other matter related to the rates in the definitions of “ Index Rate ” or “ LIBOR Daily Floating Rate ” or with respect to any comparable or successor rate thereto. To the extent that any calculation of interest or any fee required to be paid hereunder shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. Administrative Agent shall promptly notify Borrowers and Lenders of the interest rate applicable to each portion of the Principal Debt other than Base Rate Principal upon determination of same.
1.4.4      Late Charge . If Borrowers shall fail to make any payment due hereunder or under the terms of any Note (other than the Principal Debt due on the Maturity Date) within fifteen (15) days after the date such payment is due, Borrowers shall pay to Administrative Agent on demand a late charge equal to four percent (4%) 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 a Lender incident to handling such defaulting payment. This charge shall be in addition to, and not in lieu of, any other amount that Lenders may be entitled to receive or action that Administrative Agent and Lenders may be authorized to take as a result of such late payment, including any other remedy Lenders may have and any fees and charges of any agents or attorneys which Administrative Agent or, subject to the provisions of Section 4.15 , Lenders may employ upon the occurrence of a Default, whether authorized herein or by Law.
1.4.5      Default Rate . After the occurrence and during the continuance of a Default (including the expiration of any applicable cure period), upon the request of the Required Lenders, Administrative Agent, without notice or demand, may raise the rate of interest accruing on the Principal Debt under any Loan Document to the lesser of (i) the maximum non-usurious rate of interest allowed under applicable law, or (ii) three hundred (300) basis points above the rate of interest otherwise applicable (“ Default Rate ”), independent of whether Administrative Agent accelerates the Principal Debt under any Loan Document.
1.5      Prepayment .
(a)      Borrowers may prepay the Principal Debt, in full at any time or in part at any time and from time to time without fee, premium or penalty except as provided in Section 1.5(c) , provided that: (i) Administrative Agent shall have actually received from Borrowers prior written notice of Borrowers’ intent to prepay, the amount of principal which will be prepaid (the “ Prepaid Principal ”), the date on which the prepayment will be made and the LIBOR Rate Advance to which the prepayment shall be applied; (ii) each prepayment shall be in the minimum amount of $10,000 (unless the prepayment retires the outstanding balance of the Revolving Loan or the Term Loan in full or is made by Borrowers (A) to satisfy the conditions to the extension of the maturity of the Loan pursuant to Exhibit “I ,” (B) pursuant to Sections 1.3.3 or 4.22 , or (C) in connection with the release of any Property pursuant to Section 9.29 ); (iii) each prepayment shall be in the amount of 100% of the Prepaid Principal, plus sums due pursuant to Section 1.5(b) , and all other sums which

Page 8


have become due to Administrative Agent and Lenders under the Loan Documents on or before the date of prepayment but have not been paid; and (iv) concurrently with such prepayment, Borrowers pay any Consequential Loss as a result thereof in accordance with Section 2.5 . Notwithstanding the foregoing, if a Default shall have occurred and be continuing as of the date that any prepayment is made, Administrative Agent may apply such prepayment to all or such portions of the Indebtedness as Administrative Agent determines in its sole discretion.
(b)      No yield maintenance premium or other premium or penalty shall be due in connection with any prepayment made pursuant to this Section 1.5 , provided that Borrowers shall pay to Administrative Agent, concurrently with such prepayment, all Consequential Losses and all other sums due pursuant to the Loan Documents in connection with such prepayment.
(c)      Any principal prepayment made pursuant to this Agreement shall be applied (i) first, to the outstanding principal balance of the Revolving Loan until such outstanding principal balance has been repaid in full, and (ii) second, to the outstanding principal balance of the Term Loan. Upon the prepayment of any principal outstanding under the Term Loan, the Revolving Availability shall be permanently reduced to an amount that, once outstanding, would equal twenty-five percent (25%) of the outstanding principal amount of the Loan (after giving effect to such prepayment), or to a lesser amount if designated by Borrowers to Administrative Agent in writing.
1.6      Payment Schedule and Maturity Date .
(a)      The entire Principal Debt then unpaid and all accrued interest then unpaid shall be due and payable in full on the Maturity Date. Accrued unpaid interest shall be due and payable in arrears on the first day of the first calendar month after the Closing Date and on the same day of each succeeding calendar month thereafter until all principal and accrued interest owing on the Loan shall have been fully paid and satisfied.
(b)      Subject to the conditions set forth in Exhibit “I” , Borrowers shall have two (2) option(s) to extend the then Maturity Date. The first option shall extend the Maturity Date from the Initial Maturity Date to the First Extended Maturity Date (such extension period is referred to herein as the “ First Extension Term ”). The second option shall extend the Maturity Date from the First Extended Maturity Date to the Second Extended Maturity Date (such extension period is referred to herein as the “ Second Extension Term ”, and together with the First Extension Term, each an “ Extension Term ”).
1.7      Payments .
(a)      All payments by Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by Borrowers hereunder shall be made to Administrative Agent, for the account of the respective Lenders to which such payment is owed, at Administrative Agent’s Office in U.S. Dollars and in immediately available funds not later than 12:00 p.m. (Administrative Agent’s Time) on the date specified herein. Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by Administrative Agent

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after 12:00 p.m. (Administrative Agent’s Time) shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(b)      For the avoidance of doubt, Administrative Agent will distribute payments to each Lender, (i) on the date of receipt, if Administrative Agent receives such funds on or before 12:00 p.m. (Administrative Agent’s Time), or (ii) on the Business Day following the date of receipt, if Administrative Agent receives such funds after 12:00 p.m. (Administrative Agent’s Time). If Administrative Agent fails to timely pay any amount to any Lender in accordance with this Section 1.7 , Administrative Agent shall pay to such Lender interest on such amount at the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation, for each day from the day such amount was to be paid until it is paid to such Lender. Unless Administrative Agent shall have received notice from any Borrower prior to the date on which any payment is due to Administrative Agent for the account of Lenders hereunder that Borrowers will not make such payment, Administrative Agent may assume that Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to Lenders the amount due. In such event, if Borrowers have not in fact made such payment, then each of the Lenders severally agrees to repay to Administrative Agent forthwith on demand the amount so distributed to such Lender immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation.
(c)      A notice of Administrative Agent to any Lender or to any Borrower with respect to any amount owing under this Section 1.7 shall be conclusive, absent manifest error.
1.8      Evidence of Debt . Amounts of the Loan funded by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by Administrative Agent in the ordinary course of business. The accounts or records maintained by Administrative Agent and each Lender shall be conclusive, in the absence of manifest error, of the amounts of the Loan funded by Lenders to Borrowers, the interest and payments thereon, and all other sums owing to Administrative Agent and each Lender from time to time under the Loan Documents. Any failure to so record such information or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrowers hereunder to pay any amount owing with respect to the Indebtedness or the obligations of any Property under the Loan Documents. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of Administrative Agent in respect of such matters, the accounts and records of Administrative Agent shall control in the absence of manifest error. Each Lender may attach schedules to its Note(s) and endorse thereon the date, amount and maturity of the applicable Note and payments with respect thereto.
1.9      Unused Fee . In addition to any other fees and expenses payable by Borrowers under this Agreement, the other Loan Documents or that certain letter agreement of substantially even

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date herewith between Administrative Agent and Borrower, Borrower agrees to pay to Administrative Agent, for the ratable benefit of Lenders, an unused fee (the “Unused Fee” ), due and payable as of each December 31, March 31, June 30 and September 30 during the term of the Loan, commencing with December 31, 2017, which accrues daily at a rate of one-fifth of one percent (0.20%) per annum on the difference between the actual daily Revolving Availability and the actual daily outstanding principal balance of Revolving Loan Proceeds. For the avoidance of doubt, for purposes of calculating the Unused Fee, on the day that any Revolving Loan Proceeds are repaid, such Revolving Loan Proceeds shall not be considered undisbursed Revolving Loan Proceeds on such day. In other words, the daily Unused Fee shall be calculated as follows:
Unused Fee (on any day) = ( undisbursed Revolving Loan Proceeds on such day x 0.002)
360
This Unused Fee shall be payable quarterly in arrears within ten (10) Business Days of Borrowers’ receipt of Administrative Agent’s written calculation of the Unused Fee. Without limitation of the foregoing, any Unused Fee accruing through the Maturity Date shall be payable on the Maturity Date (calculated pro rata based on the number of days between the immediately preceding calculation date and the Maturity Date).
ARTICLE 2 - TAXES, YIELD PROTECTION, UNAVAILABILITY AND ILLEGALITY
2.1      Taxes .
(a)      Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes .
(i)      Any and all payments by or on account of any obligation of Borrowers under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws. If any applicable Laws (as determined in the good faith discretion of Administrative Agent) require the deduction or withholding of any Tax from any such payment by Administrative Agent or any Borrower, then Administrative Agent or such Borrower shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to Section 2.1(e) .
(ii)      If any Borrower or Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) Administrative Agent shall withhold or make such deductions as are determined by Administrative Agent to be required based upon the information and documentation it has received pursuant to Section 2.1(e) , (B) Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by such Borrower, as applicable, shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 2.1 ) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

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(iii)      If any Borrower or Administrative Agent shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then (A) such Borrower or Administrative Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to Section 2.1(e) , (B) such Borrower or Administrative Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by such Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 2.1 ) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b)      Payment of Other Taxes by Borrowers . Without limiting the provisions of Section 2.1(a) above, Borrowers shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of Administrative Agent or any Lender reimburse Administrative Agent or such Lender within fifteen (15) days after demand for the payment of, any Other Taxes.
(c)      Tax Indemnifications .
(i)      Each Borrower shall, and does hereby indemnify each Recipient, and shall make payment in respect thereof within ten (10 ) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.1 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Borrower by a Lender (with a copy to Administrative Agent), or by Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. Each Borrower shall, and does hereby indemnify Administrative Agent, and shall make payment in respect thereof within fifteen (15) days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to Administrative Agent as required pursuant to Section 2.1(c)(ii) .
(ii)      Each Lender shall, and does hereby, severally indemnify, and shall make payment in respect thereof within fifteen (15) days after demand therefor, (A) Administrative Agent against any Indemnified Taxes attributable to such Lender (but only to the extent that a Borrower has not already indemnified Administrative Agent for such Indemnified Taxes and without limiting the obligation of any Borrower to do so), (B) Administrative Agent and each Borrower, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.5(d) relating to the maintenance of a Participant Register and (C) Administrative Agent and each Borrower against any Excluded Taxes

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attributable to such Lender, in each case, that are payable or paid by Administrative Agent or any Borrower in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Administrative Agent to set off and apply any and all amounts at any time owing to such Lender as the case may be, under this Agreement or any other Loan Document against any amount due to Administrative Agent under this Section 2.1(c)(ii) .
(d)      Evidence of Payments . Upon written request by any Borrower or Administrative Agent, as the case may be, after any payment of Taxes by any Borrower or by Administrative Agent to a Governmental Authority as provided in this Section 2.1 , such Borrower shall deliver to Administrative Agent or Administrative Agent shall deliver to such Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to such Borrower or Administrative Agent, as the case may be.
(e)      Status of Lenders; Tax Documentation .
(i)      Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrowers and Administrative Agent, at the time or times reasonably requested by any Borrower or Administrative Agent, such properly completed and executed documentation reasonably requested by any Borrower or Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by any Borrower or Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by any Borrower or Administrative Agent as will enable such Borrower or Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in clauses (A) , (B) and (D) of Section 2.1(e)(ii)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii)      Without limiting the generality of the foregoing, in the event that any Borrower is a U.S. Person,
(A)      any Lender that is a U.S. Person shall deliver to Borrowers and Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable written request of any Borrower or Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;

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(B)      any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable written request of any Borrower or Administrative Agent), whichever of the following is applicable:
(I)      in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BENE (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BENE (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(II)      executed copies of IRS Form W-8ECI;
(III)      in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit “K-1” to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed copies of IRS W-8BENE (or W-8BEN, as applicable); or
(IV)      to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BENE (or W-8BEN, as applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit “K-2” or Exhibit “K-3” , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit “K-4” on behalf of each such direct and indirect partner.
(C)      any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable written request of any Borrower or Administrative Agent), executed

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copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit Borrowers or Administrative Agent to determine the withholding or deduction required to be made; and
(D)      if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrowers and Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by any Borrower or Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by any Borrower or Administrative Agent as may be necessary for any Borrower and Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D) , “FATCA” shall include any amendments made to FATCA after the Closing Date.
(iii)      Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 2.1 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrowers and Administrative Agent in writing of its legal inability to do so.
(f)      Treatment of Certain Refunds . Unless required by applicable Laws, at no time shall Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by Borrowers with respect to which any Borrower has paid additional amounts pursuant to this Section 2.1 , it shall pay to Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by any Borrower under this Section 2.1 with respect to the Taxes giving right to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that each Borrower, upon the written request of the Recipient, agrees to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.1(f) , in no event will the applicable Recipient be required to pay any amount to any Borrower pursuant to this Section 2.1(f) the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such

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Tax had never been paid. This Section 2.1(f) shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Borrower or any other Person.
(g)      [ Intentionally Omitted .]
(h)      Survival . Each party’s obligations under this Section 2.1 shall survive the resignation or replacement of Administrative Agent, or the assignment of rights by, or the replacement of, a Lender, the termination of the Commitments, the termination of this Agreement and the repayment, satisfaction or discharge of all other Obligations.
2.2      Illegality . If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to perform any of its obligations hereunder or make, maintain, fund or charge interest with respect to any Loan advance or to determine or charge interest rates based upon the Index Rate or the LIBOR Daily Floating Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, U.S. Dollars in the London interbank eurodollar market, then, on notice thereof by such Lender to Borrowers through Administrative Agent, (a) any obligation of such Lender to make, maintain, fund or charge interest with respect to any such Loan advance or continue LIBOR Rate Advances or to convert Base Rate Principal to LIBOR Rate Principal shall be suspended, and (b) if such notice asserts the illegality of such Lender making or maintaining Base Rate Advances the interest rate on which is determined by reference to the LIBOR Daily Floating Rate, the interest rate on which Base Rate Advances of such Lender shall be the Alternative Rate, in each case until such Lender notifies Administrative Agent and Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) Borrowers shall, upon demand from such Lender (with a copy to Administrative Agent), prepay or, if applicable, convert all LIBOR Rate Principal of such Lender to Base Rate Principal, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Principal to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Principal and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the LIBOR Daily Floating Rate, Administrative Agent shall during the period of such suspension compute the rate of interest applicable to such Lender at the Alternative Rate until Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the LIBOR Daily Floating Rate. Upon any such prepayment or conversion, Borrowers shall also pay accrued interest on the amount so prepaid or converted.
2.3      Inability to Determine Rates . If in connection with any LIBOR Rate Election or a conversion to or continuation of any LIBOR Rate Principal, (a) Administrative Agent determines that (i) 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, or (ii) adequate and reasonable means do not exist for determining the Index Rate for any requested Interest Period with respect to a proposed LIBOR Rate Advance or the LIBOR Daily Floating Rate in connection with any existing or proposed Base Rate Principal (in each case with respect to clause (a)(i) above, “ Impacted Advances ”) or (b) Administrative Agent or Required Lenders reasonably

Page 16


determine that the LIBOR Rate for any LIBOR Rate Election does not adequately and fairly reflect the cost to such Lenders of funding the requested LIBOR Rate Advance, Administrative Agent will promptly so notify Borrowers and each Lender. Thereafter, (x) the obligation of Lenders to make or maintain LIBOR Rate Advances shall be suspended (to the extent of the affected LIBOR Rate Principal or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the LIBOR Daily Floating Rate, the utilization of the Base Rate shall be suspended, in each case until Administrative Agent (upon the instruction of Required Lenders) revokes such notice, and the Loan shall bear interest at the Alternative Rate. Upon receipt of such revocation notice from Administrative Agent, Borrowers may revoke any pending LIBOR Rate Election for a borrowing of, conversion to or continuation of LIBOR Rate Principal (to the extent of the affected LIBOR Rate Principal or Interest Periods) or, failing that, will be deemed to have converted such LIBOR Rate Election into a request for an Advance at the Alternative Rate.
Notwithstanding the foregoing, if Administrative Agent has made the determination described in subsection (a)(i) of this Section, Administrative Agent, in consultation with Borrowers and the affected Lenders, may establish an alternative interest rate for the Impacted Advances, in which case, such alternative rate of interest shall apply with respect to the Impacted Advances until (1) Administrative Agent revokes the notice delivered with respect to the Impacted Advances under subsection (a) of the first sentence of this Section, (2) Administrative Agent or Required Lenders notify Administrative Agent and Borrowers that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Advances, or (3) any Lender reasonably determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loan advances whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides Administrative Agent and Borrowers written notice thereof.
2.4      Increased Costs .
(a)      If any Change in Law shall:
(i)      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 or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate);
(ii)      subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii)      impose on any Lender or the London interbank eurodollar market any other condition, cost or expense affecting this Agreement or any Note or the LIBOR Rate Advances made by such Lender;

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and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan advance (or of maintaining its obligation to maintain any such Loan advance), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(b)      Capital Requirements . If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, any Note, the Commitments of such Lender or the advances made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time Borrowers will pay to such Lender, such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c)      Certificates for Reimbursement . A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in Section 2.4(a) or Section 2.4(b) and delivered to Borrowers shall be conclusive absent manifest error. Borrowers shall pay such Lender, as the case may be, the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.
(d)      Delay in Responses . Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section 2.4 shall not constitute a waiver of such Lender’s right to demand such compensation, provided that Borrowers shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section 2.4 for any increased costs incurred or reductions suffered more than six (6) months prior to the date that such Lender notifies Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six (6) month period referred to above shall be extended to include the period of retroactive effect thereof). Subject to the foregoing, all of Borrowers’ obligations under this Section shall survive payment in full, satisfaction or discharge of the Indebtedness, the resignation or removal of Administrative Agent or replacement of any Lender, and any release, enforcement or termination of this Agreement or of any other Loan Documents.
2.5      Compensation for Losses . Within fifteen (15) days of written demand by any Lender (with a copy to Administrative Agent) from time to time (and at the time of any prepayment), Borrowers shall compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(a)      any continuation, conversion, payment or prepayment of any LIBOR Rate Principal on a day other than the last day of the Interest Period for such LIBOR Rate Principal (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise, including acceleration

Page 18


upon any transfer or conveyance of any right, title or interest in any Property giving Administrative Agent on behalf of Lenders the right to accelerate the maturity of the Loan);
(b)      any failure by Borrowers (for a reason other than the failure of such Lender to make a LIBOR Rate Advance) to prepay, borrow, continue or convert any LIBOR Rate Principal on the date or in the amount notified by any Borrower in any LIBOR Rate Election, Draw Request or otherwise; or
(c)      any assignment of a LIBOR Rate Advance other than on the last day of the Interest Period therefor as a result of a request by a Borrower pursuant to Section 9.12 ,
including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such LIBOR Rate Advance or from fees payable to terminate the deposits from which such funds were obtained (collectively, “ Consequential Loss ”). Borrowers shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
For purposes of calculating amounts payable by Borrowers to Lenders under this Section 2.5 , each Lender shall be deemed to have funded each LIBOR Rate Advance made by it at the Index Rate for such advance by a matching deposit or other borrowing in the London interbank eurodollar market for comparable amount and for a comparable period, whether or not such LIBOR Rate Advance was in fact so funded. The foregoing notwithstanding, the amounts of the Consequential Loss shall never be less than zero or greater than is permitted by applicable Law. All of Borrowers’ obligations under this Section 2.5 shall survive the resignation or replacement of Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments, the termination of this Agreement and the repayment, satisfaction or discharge of all other Obligations, and shall not be waived by any delay by Administrative Agent or Lenders in seeking such compensation.
    


[The balance of this page is intentionally left blank.]

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By its signature below, each Borrower waives any right under California Civil Code Section 2954.10 or otherwise to prepay the Loan, in whole or in part, without payment of any and all Consequential Loss as described above. Each Borrower acknowledges that prepayment of the Loan may result in Lenders’ incurring additional losses, costs, expenses and liabilities, including lost revenues and lost profits. Each Borrower therefore agrees to pay any and all Consequential Loss if any LIBOR Rate Principal is prepaid, whether voluntarily or by reason of acceleration, including acceleration upon any transfer or conveyance of any right, title or interest in such Borrower’s Property giving Administrative Agent on behalf of Lenders the right to accelerate the maturity of the Loan as provided in the applicable Security Instrument. Each Borrower agrees that Lenders’ willingness to offer the LIBOR Rate to Borrower is sufficient and independent consideration, given individual weight by Lenders, for this waiver. Each Borrower understands that Lenders would not offer the LIBOR Rate to Borrower absent this waiver.

Dated: November 3
, 2017    


KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


Page 20



KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


Page 21



KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]




Page 22



KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer



[Signatures continue on following page.]


Page 23



KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


Page 24



KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]



Page 25



KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


Page 26



KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[The balance of this page is intentionally left blank.]

Page 27



2.6      Mitigation Obligations; Replacement of Lenders .
(a)      Designation of a Different Lending Office . If any Lender requests compensation under Section 2.4 , or requires Borrowers to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.1 , or if any Lender gives a notice pursuant to Section 2.2 , then at the written request of Borrowers such Lender shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.1 or 2.4 in the future, or eliminate the need for the notice pursuant to Section 2.2 , and (ii) in each case, would not subject such Lender, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender, as the case may be. Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment within ten (10) days of written demand of such Lender.
(b)      Replacement of Lenders . If any Lender requests compensation under Section 2.4 , or if Borrowers are required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.1 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.6(a) , Borrowers may replace such Lender in accordance with Section 9.12 .
2.7      Survival . All of Borrowers’ obligations under this Article 2 shall survive the resignation or replacement of Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments, the termination of this Agreement and the repayment, satisfaction or discharge of all other Obligations.
ARTICLE 3 - INTENTIONALLY OMITTED
ARTICLE 4 - AFFIRMATIVE COVENANTS
Each Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:
4.1      Compliance with Laws; Use of Proceeds . Each Borrower shall comply with all Laws and all orders, writs, injunctions, decrees and demands of any court or any Governmental Authority affecting such Borrower or the Property of such Borrower. Borrowers shall use all proceeds of the Loan for business purposes which are not in contravention of any Law or any Loan Document.
4.2      Inspections; Cooperation . Each Borrower shall permit representatives of Administrative Agent to enter upon the Land of such Borrower, to inspect the Improvements of such Borrower and any and all materials to be used in connection with any construction at the Property of such Borrower, including any construction of tenant improvements, to examine all detailed plans and shop drawings and similar materials as well as all books and records of such Borrower (regardless of where maintained) and all supporting vouchers and data and to make copies

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and extracts therefrom and to discuss the affairs, finances and accounts pertaining to the Loan and the Improvements of such Borrower with representatives of such Borrower. Each Borrower shall at all times cooperate and use commercially reasonable efforts to cause each and every one of its contractors, subcontractors and material suppliers to cooperate with the representatives of Administrative Agent in connection with or in aid of the performance of Administrative Agent’s functions under this Agreement. Except in the event of an emergency, Administrative Agent shall give a Borrower at least twenty-four hours’ notice by telephone in each instance before entering upon the Land of such Borrower and/or exercising any other rights granted in this Section.
4.3      Payment and Performance of Contractual Obligations . Subject to the terms of Section 5.1 of the Security Instruments, each Borrower shall perform in a timely manner all of its obligations under any and all contracts and agreements (in accordance with the terms thereof) related to any construction activities at the Property of such Borrower or the maintenance or operation of the Improvements of such Borrower, and such Borrower will pay before they become delinquent all bills for services or labor performed and materials supplied in connection with such construction, maintenance and/or operation. Within thirty (30) days after the filing of any mechanic’s lien or other lien or encumbrance against the Property of any Borrower, such Borrower will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Administrative Agent’s and Lenders’ security has been protected by the filing of a bond or otherwise in a manner reasonably satisfactory to Lender in its reasonable discretion, each Borrower shall have the right to contest in good faith any claim, lien or encumbrance, provided that such Borrower does so diligently and without prejudice to Administrative Agent or any Lender or delay in completing construction of any tenant improvements.
4.4      Insurance . Each Borrower shall maintain the following insurance at its sole cost and expense:
(a)      Insurance against Casualty to the Property of such Borrower under a policy or policies covering such risks as are presently included in “special form” (also known as “all risk”) coverage, including such risks as are ordinarily insured against by similar businesses, but in any event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Such insurance shall name Administrative Agent as the mortgagee and loss payee. Unless otherwise agreed in writing by Administrative Agent, such insurance shall be for the full insurable value of such Property on a replacement cost basis, with a deductible amount, if any, reasonably satisfactory to Administrative Agent. No policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise. The term “full insurable value” means one hundred percent (100%) of the actual replacement cost of such Property, including tenant improvements (excluding excavation costs and costs of underground flues, pipes, drains and other uninsurable items). For purposes of the foregoing requirements, the policy coverages and amounts existing at the closing of the Loan shall satisfy the property insurance requirements in effect as of the date hereof.

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(b)      Commercial (also known as comprehensive) general liability insurance on an “occurrence” basis against claims for “personal injury” liability and liability for death, bodily injury and damage to property, products and completed operations, in limits satisfactory to Administrative Agent with respect to any one occurrence and the aggregate of all occurrences during any given annual policy period. Such insurance shall name Administrative Agent as an additional insured.
(c)      Workers’ compensation insurance for all employees of such Borrower in such amount as is required by Law and including employer’s liability insurance, if required by Administrative Agent.
(d)      During any period of construction of tenant improvements, each Borrower shall maintain, or cause others to maintain, such insurance as may be required by Administrative Agent of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of materials stored at or upon the Property of such Borrower. During any period of other construction upon such Property, such Borrower shall maintain, or cause others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of work in place and materials stored at or upon such Property.
(e)      If at any time any portion of any structure on the Property of a Borrower is insurable against Casualty by flood and is located in a Special Flood Hazard Area under the Flood Disaster Protection Act of 1973, as amended, a flood insurance policy on the structure and any Borrower owned contents in form and amount acceptable to Administrative Agent but in no amount less than the amount sufficient to meet the requirements of applicable Law as such requirements may from time to time be in effect.
(f)      Loss of rental value insurance or business interruption insurance in an amount equal to twelve (12) months of the projected gross income of the Property of such Borrower and an extended period of indemnity endorsement providing an additional twelve (12) months’ loss of rental value or business interruption insurance after such Property has been restored or until the projected gross income returns to the level that existed prior to the loss, whichever is first to occur.
(g)      The Environmental Insurance Policy.
Such other and further insurance as may be required from time to time by Administrative Agent in order to comply with regular requirements and practices of Administrative Agent in similar transactions including, if required by Administrative Agent, boiler and machinery insurance, pollution liability insurance, wind insurance and earthquake insurance, so long as any such insurance is generally available at commercially reasonable premiums as determined by Administrative Agent from time to time.
Each policy of insurance (i) shall be issued by one or more insurance companies each of which must have an A.M. Best Company financial and performance rating of A-IX or better and are qualified or authorized by the Laws of the State to assume the risks covered by such policy, (ii) with respect to the insurance described under the preceding Subsections (a), (d), (e) and (f) , shall have attached thereto standard non-contributing, non-reporting mortgagee clauses in favor of and

Page 30


entitling Administrative Agent without contribution to collect any and all proceeds payable under such insurance, either as sole payee or as joint payee with the applicable Borrower, (iii) shall provide that such policy shall not be canceled or modified for nonpayment of premiums without at least ten (10) days’ prior written Notice to Administrative Agent, or for any other reason without at least thirty (30) days’ prior written Notice to Administrative Agent, and (iv) shall provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of any Borrower which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Each Borrower shall promptly pay all premiums prior to delinquency on such insurance and, not less than five (5) days prior to the expiration dates of each such policy, such Borrower will deliver to Administrative Agent evidence satisfactory to Administrative Agent of the renewal or replacement of such policy continuing insurance in the form required herein and payment of premiums for any such policies within ten (10) days of the availability of same. Each Borrower will immediately give Notice to Administrative Agent of any cancellation of, or change in, any insurance policy. If any Borrower fails to maintain any insurance and pay the premiums for such insurance as required by this Agreement, Administrative Agent may obtain such insurance or pay such premiums on behalf of such Borrower, provided that Administrative Agent has provided to such Borrower not less than two (2) Business Days’ prior Notice. Each Borrower will promptly pay to Administrative Agent all amounts paid by Administrative Agent for the foregoing. Such amounts shall be secured by the Security Instruments. Administrative Agent shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (A) the existence, nonexistence, form or legal sufficiency thereof, (B) the solvency of any insurer, or (C) the payment of losses. Each Borrower may satisfy any insurance requirement hereunder by providing one or more “blanket” insurance policies, subject to Administrative Agent’s approval in each instance as to limits, coverages, forms, deductibles, inception and expiration dates, and cancellation provisions (which approval shall not be unreasonably withheld). Any material waivers or reductions in the requirements of the insurance required under this Section 4.4 shall require the approval of the Required Lenders (which approval shall not be unreasonably withheld, conditioned or delayed).
4.5      Adjustment of Condemnation and Insurance Claims . Each Borrower shall give prompt Notice to Administrative Agent of any Casualty or any Condemnation or threatened Condemnation with respect to the Property of such Borrower. Administrative Agent is authorized, at its sole and absolute option and upon prior written Notice to a Borrower, to commence, appear in and prosecute, in its own or such Borrower’s name, any action or proceeding relating to any Condemnation or Casualty, and to make proof of loss for and to settle or compromise any Claim in connection therewith. In such case, Administrative Agent shall have the right to receive all Condemnation Awards and Insurance Proceeds, and may deduct therefrom all of its expenses. However, so long as no Default has occurred and the applicable Borrower is diligently pursuing its rights and remedies with respect to a Claim, Administrative Agent will obtain such Borrower’s written consent (which consent shall not be unreasonably withheld or delayed) before making proof of loss for or settling or compromising such Claim. Each Borrower agrees to diligently assert its rights and remedies with respect to each Claim and to promptly pursue the settlement and compromise of each Claim subject to Administrative Agent’s approval, which approval shall not be unreasonably withheld or delayed; provided , however , that the approval of the Required Lenders shall also be required (which approval shall not be unreasonably withheld, conditioned or delayed) if the amount of the Claim is equal to or greater than Ten Million and No/100 Dollars

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($10,000,000.00). If, prior to the receipt by Administrative Agent of any Condemnation Award or Insurance Proceeds, the subject Property shall have been sold pursuant to the provisions of the applicable Security Instrument, Administrative Agent shall have the right to receive such funds (a) to the extent of any deficiency found to be due upon such sale with interest thereon (whether or not a deficiency judgment on such Security Instrument shall have been sought or recovered or denied), and (b) to the extent necessary to reimburse Administrative Agent for its expenses. If any Condemnation Awards or Insurance Proceeds are paid to any Borrower, such Borrower shall receive the same in trust for Administrative Agent. Within ten (10) days after any Borrower’s receipt of any Condemnation Awards or Insurance Proceeds, such Borrower shall deliver such awards or proceeds to Administrative Agent in the form in which they were received, together with any endorsements or documents that may be necessary to effectively negotiate or transfer the same to Administrative Agent; provided, however, so long as no Default or Potential Default has occurred and is continuing, a Condemnation award with respect to any single Condemnation for any Property of less than Two Million Dollars ($2,000,000) and Insurance Proceeds with respect to any single Casualty at any Property of less than Two Million Dollars ($2,000,000) may be retained by the applicable Borrower, which funds shall be used by such Borrower to restore the Property of such Borrower. Each Borrower agrees to execute and deliver from time to time, upon the written request of Administrative Agent, such further instruments or documents as may be reasonably requested by Administrative Agent to confirm the grant and assignment to Administrative Agent of any Condemnation Awards or Insurance Proceeds.
4.6      Utilization of Net Proceeds .
(a)      Net Proceeds must be utilized either for payment of the Obligations or for the restoration of the applicable Property. Net Proceeds shall be utilized for the restoration of the applicable Property, but only if no Default shall exist and only if in the reasonable judgment of Administrative Agent (i) there has been no material adverse change in the financial viability of the applicable Improvements and (ii) the Net Proceeds, together with other funds deposited with Administrative Agent for that purpose, are sufficient to pay the cost of the restoration pursuant to a budget and plans and specifications reasonably approved by Administrative Agent. Otherwise, Net Proceeds shall be utilized for payment of the Obligations.
(b)      If Net Proceeds are to be utilized for the restoration of a Property, the Net Proceeds, together with any other funds deposited with Administrative Agent for that purpose, must be deposited in a Borrowers’ Deposit Account, which shall be an interest-bearing account, with all accrued interest to become part of the applicable Borrower’s deposit. Each Borrower agrees that it shall include all interest and earnings on any such deposit as its income (and, if such Borrower is a partnership or other pass-through entity, the income of its partners, members or beneficiaries, as the case may be), and shall be the owner of all funds on deposit in the Borrowers’ Deposit Account for federal and applicable state and local tax purposes. Administrative Agent shall have the exclusive right to manage and control all funds in the Borrowers’ Deposit Account, but Administrative Agent shall have no fiduciary duty with respect to such funds. Administrative Agent will advance the deposited funds from time to time to the applicable Borrower for the payment of costs of restoration of the Property of such Borrower upon presentation of evidence acceptable to Administrative Agent that such restoration has been completed satisfactorily and lien-free. Any account fees and charges

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may be deducted from the balance, if any, in the Borrowers’ Deposit Account. Each Borrower grants to Administrative Agent a security interest in the Borrowers’ Deposit Account and all funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations. Such security interest shall be governed by the Uniform Commercial Code of the State of California, and Administrative Agent shall have available to it all of the rights and remedies available to a secured party thereunder. The Borrowers’ Deposit Account may be established and held in such name or names as Administrative Agent shall deem appropriate, including in the name of Administrative Agent. Each Borrower hereby constitutes and appoints Administrative Agent and any officer or agent of Administrative Agent its true and lawful attorneys-in-fact with full power of substitution to open the Borrowers’ Deposit Account and to do any and every act that such Borrower might do on its own behalf to fulfill the terms of this Section 4.6 . To the extent permitted by Law, each Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.
4.7      Management . Each Borrower at all times shall provide for the competent and responsible management and operation of the Property of such Borrower. At all times, each Borrower shall cause the Property of such Borrower to be managed by an Approved Manager. All management contracts affecting any Property shall be terminable upon thirty (30) days’ written Notice without penalty or charge (except for unpaid accrued management fees). All management contracts must be approved in writing by Administrative Agent prior to the execution of the same (which approval shall not be unreasonably withheld).
4.8      Books and Records; Financial Statements; Tax Returns . Commencing with the fiscal year and fiscal quarter ending December 31, 2017, each Borrower shall provide or cause to be provided to Administrative Agent all of the following:
(a)      Unaudited Financial Statements of each Borrower, certified in writing as true and correct in all material respects by a representative of such Borrower reasonably satisfactory to Administrative Agent, (i) for each fiscal year, as soon as reasonably practicable and in any event within one hundred-twenty (120) days after the close of such fiscal year, and (ii) for each of the first three (3) calendar quarters, as soon as reasonably practicable and in any event within sixty (60) days after the close of such calendar quarters. Such unaudited Financial Statements of each Borrower shall be limited to only a balance sheet and income statement for each such Borrower.
(b)      Unaudited Financial Statements of Guarantor (including, without limitation, a Guarantor Covenant Compliance Certificate): (i) for each fiscal year, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the close of each fiscal year, and (ii) for each of the first three (3) fiscal quarters in the fiscal year, as soon as reasonably practicable and in any event within sixty (60) days after the close of such fiscal quarters. In the event that KBS Real Estate Investment Trust III, Inc., shall no longer file with the Securities and Exchange Commission fiscal year-end audited consolidated financial statements which include the results of operation of Guarantor, either (i) the financial statements of Guarantor to be delivered to Administrative Agent shall be audited by a third-party certified public accountant reasonably satisfactory to Administrative Agent, or (ii) Guarantor shall deliver to Administrative Agent audited

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consolidated financial statements of KBS Real Estate Investment Trust III, Inc. which include the results of operation of Guarantor.
(c)      (i) Prior to the beginning of each fiscal year of such Borrower, a capital and operating budget for the Property of such Borrower; and (ii) for each fiscal quarter (and for the fiscal year through the end of that fiscal quarter), (A) property operating statements which include all income and expenses in connection with the Property of such Borrower and a comparison to the budget, (B) rent rolls, and (C) a current leasing status report (including tenants’ names, occupied tenant space, lease terms, rents, vacant space and proposed rents), as soon as reasonably practicable but in any event within sixty (60) days after the end of each such fiscal quarter, certified in writing as true and correct by a representative of Borrower reasonably satisfactory to Administrative Agent.  Items provided under this Section shall be in form and detail reasonably satisfactory to Administrative Agent.
(d)      From time to time promptly after Administrative Agent’s or, subject to the provisions of Section 4.8(e) , any Lender’s reasonable request, such additional information, reports and statements respecting the Property of such Borrower and the Improvements of such Borrower, or the business operations and financial condition of each reporting party, as Administrative Agent or any Lender, subject to the provisions of Section 4.8(e) , may reasonably request.
Each Borrower will keep and maintain full and accurate books and records administered in accordance with sound accounting principles, consistently applied, showing in detail the earnings and expenses of the Property of such Borrower and the operation thereof. All Financial Statements shall be in form and detail satisfactory to Administrative Agent and shall contain or be attached to the signed and dated written certification of the reporting party in form specified by Administrative Agent to certify that the Financial Statements are furnished to Administrative Agent in connection with the extension of credit by Administrative Agent and constitute, to the knowledge of such reporting party, a true and correct statement of the reporting party’s financial position. All certifications and signatures on behalf of corporations, partnerships, limited liability companies or other entities shall be by a representative of the reporting party satisfactory to Administrative Agent. All fiscal year‑end Financial Statements of each Borrower and Guarantor may be prepared by the reporting party. All Financial Statements may be prepared by the applicable reporting party and shall include a minimum of a balance sheet, income statement, and statement of cash flow. Each Borrower shall provide, upon Administrative Agent’s request, convenient facilities for the audit and verification of any such statement. Additionally, each Borrower will provide Administrative Agent at such Borrower’s expense with all evidence that Administrative Agent may from time to time reasonably request as to compliance with all provisions of the Loan Documents. Each Borrower shall promptly notify Administrative Agent of any event or condition that could reasonably be expected to have a material adverse change in the financial condition of such Borrower, of Guarantor (if known by such Borrower), or in the construction progress of the Improvements of such Borrower.
(e)      Any request by any Lender to any Borrower or Guarantor pursuant to this Agreement or any other Loan Document must be made by such Lender first notifying Administrative Agent of such Lender’s request, and Administrative Agent then making such request (which Administrative Agent agrees to do promptly after receiving any request from a Lender) to such Borrower or

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Guarantor, as applicable, on behalf of such Lender; it being understood and agreed that no Lender shall directly contact any Borrower or Guarantor to make any request and that all such requests must be made through Administrative Agent.
(f)      In addition, commencing with the period ending on December 31, 2017, within sixty (60) days of March 31, June 30, September 30 and December 31 of each year, and as of the date of any disbursement, Borrowers shall deliver to Administrative Agent a compliance certificate to report the results of the Ongoing Debt Service Coverage Ratio or Disbursement Debt Service Coverage Ratio test, as applicable, in the form of Exhibit “P ” attached hereto, together with any additional evidence Administrative Agent may reasonably require, as to Borrowers’ compliance with the requirements of Section 4.22 .
4.9      Estoppel Certificates . Within ten (10) days after any request by Administrative Agent or a proposed assignee or purchaser of the Loan or any interest therein, each Borrower shall certify in writing to Administrative Agent, or to such proposed assignee or purchaser, the then unpaid balance of the Loan and whether such Borrower, to such Borrower’s knowledge, claims any right of defense or setoff to the payment or performance of any of the Obligations, and if such Borrower claims any such right of defense or setoff, such Borrower shall give a detailed written description of such claimed right.
4.10      Taxes; Tax Receipts . Each Borrower shall timely file (taking into account any effective extensions for filing) all federal, state and local income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and shall pay and discharge all Taxes prior to the date on which penalties are attached thereto unless and to the extent only that such Taxes are contested in accordance with the terms of the Security Instrument delivered by such Borrower. If a Borrower fails, following demand, to provide Administrative Agent the tax receipts required under the Security Instrument delivered by such Borrower, without limiting any other remedies available to Administrative Agent, Administrative Agent may, at Borrowers’ sole expense, obtain and enter into a tax services contract with respect to the applicable Property with a tax reporting agency satisfactory to Administrative Agent.
4.11      Administrative Agent’s Rights to Pay and Perform . If, after written Notice, any Borrower fails to promptly pay or perform any of the Obligations within any applicable grace or cure periods, Administrative Agent, without further Notice to or demand upon any Borrower, and without waiving or releasing any Obligation or Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of such Borrower. Administrative Agent may enter upon any of the Properties for that purpose and take all action thereon as Administrative Agent considers necessary or appropriate.
4.12      Reimbursement; Interest . If Administrative Agent shall incur any Expenses or pay any Claims after delivery of any Notice required by the terms of this Agreement or any other Loan Document by reason of the Loan or the rights and remedies provided under the Loan Documents (regardless of whether or not any of the Loan Documents expressly provide for an indemnification by any Borrower against such Claims), Administrative Agent’s payment of such Expenses and Claims shall constitute advances to Borrowers which shall be paid by Borrowers to Administrative Agent on demand, together with interest thereon from the date incurred until paid in full at the rate

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of interest then applicable to the Loan under the terms of this Agreement. Each advance shall be secured by the Security Instruments and the other Loan Documents as fully as if made to a Borrower, regardless of the disposition thereof by the party or parties to whom such advance is made. Notwithstanding the foregoing, however, in any action or proceeding to foreclose any Security Instrument or to recover or collect the Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances shall prevail unaffected by this Section.
4.13      Notification by Borrowers . Each Borrower will promptly give Notice to Administrative Agent of the occurrence of any Default or Potential Default hereunder or under any of the other Loan Documents. Each Borrower will also promptly give Notice to Administrative Agent of any claim of a default by such Borrower, or any claim by such Borrower of a default by any other party, under any property management contract or any Lease.
4.14      [ Intentionally Omitted .]
4.15      Fees and Expenses . Each Borrower shall pay all fees, charges, costs and expenses required to satisfy the conditions of the Loan Documents. Without limitation of the foregoing, each Borrower will pay, when due, and if paid by Administrative Agent will reimburse Administrative Agent on demand for, all reasonable fees and expenses of any construction consultant (if any), the title insurer, environmental engineers, appraisers, surveyors and Administrative Agent’s counsel in connection with the closing, administration, modification or any “workout” of the Loan, or the enforcement of Administrative Agent’s or any Lender’s rights and remedies under any of the Loan Documents. Notwithstanding any provision to the contrary set forth herein or in any other Loan Document, except in any instance where, due to a legal conflict of interest, a single counsel cannot represent Administrative Agent and Lenders in connection with the enforcement of Administrative Agent’s or Lenders’ rights and remedies under any of the Loan Documents (in which event Lenders may employ, at Borrowers’ expense, a single separate counsel to represent the interests of Lenders in connection with the enforcement of Lenders’ rights and remedies under any of the Loan Documents), Borrowers shall not be required to pay or reimburse any Lender for the costs and expenses of any counsel to any Lender.
4.16      Appraisals . Administrative Agent may obtain from time to time an appraisal of all or any part of any of the Properties, prepared in accordance with written instructions from Administrative Agent, from a third-party appraiser satisfactory to, and engaged directly by, Administrative Agent at Administrative Agent’s cost and expense, except as provided below. The cost of any such appraisal, including any costs for internal review thereof, obtained by Administrative Agent in connection with any extension of the maturity of the Loan, and the cost of each such appraisal obtained by Administrative Agent following the occurrence of a Default, shall by borne by Borrowers and shall be paid by Borrowers on written demand by Administrative Agent. Administrative Agent shall provide a copy of such appraisal to each Lender promptly after receipt. In addition, provided (a) no Default or Potential Default has occurred and is continuing, (b) Borrowers have delivered to Administrative Agent Administrative Agent’s standard disclosure and indemnification agreements regarding appraisals, and (c) Borrowers have reimbursed Administrative Agent for the cost of such appraisal, including any costs for internal review thereof, to the extent required by this Section 4.16 , Administrative Agent shall provide a copy of such

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appraisal to Borrowers. Provided no Default or Potential Default has occurred and is continuing, Borrowers shall have the right to request that Administrative Agent obtain, at Borrowers’ sole cost and expense, including any costs for internal review thereof, new appraisals of all or any of the Properties.
4.17      Leasing and Tenant Matters . Each Borrower shall comply with the terms and conditions of Exhibit “D ” in connection with the leasing of space within the Improvements of such Borrower. In addition, each Borrower shall deposit with Administrative Agent on the date of Borrower’s receipt thereof any and all termination fees or other similar funds in excess of $1,000,000.00 paid by a tenant in connection with such tenant’s election to exercise an early termination option contained in its respective Lease or otherwise (the “ Termination Fee Deposit ”). The Termination Fee Deposit shall be deposited into an interest-bearing account maintained with Administrative Agent for the benefit of Borrowers. Administrative Agent shall make the Termination Fee Deposit available to reimburse the applicable Borrower for Tenant Improvements and Leasing Commissions paid with respect to reletting the vacated space at the Property of such Borrower which shall be disbursed in accordance with Administrative Agent’s reasonable customary terms and conditions relating to the disbursement of tenant improvement costs and leasing commissions under loans made or administered by Administrative Agent. After a vacated space has been re-leased to another tenant, any amounts remaining under the Termination Fee Deposit shall, at the Borrower’s election, be returned to the Borrower or be applied to repay a portion of the outstanding balance of the Loan. If a Default has occurred and is continuing, then Administrative Agent shall have the option to apply the Termination Fee Deposit to repay a portion of the outstanding principal balance of the Loan in accordance with Section 1.5 of this Agreement. Notwithstanding the foregoing, so long as no Default or Potential Default has occurred and is continuing, Administrative Agent shall, after any Property has been released pursuant to Section 9.29 hereof, refund all Termination Fee Deposits applicable to such Property to the Borrower which is the owner of such Property.
4.18      Preservation of Rights . Each Borrower shall obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for the operation of the Property of such Borrower and the conduct of such Borrower’s business thereon or therefrom.
4.19      Income from Property . Each Borrower shall pay all costs and expenses associated with the ownership, maintenance, operation and leasing of the Property of such Borrower, including all amounts then required to be paid under the Loan Documents, in accordance with the terms of this Agreement and the other Loan documents. No income derived from any Property, including any income from the Leases, shall be distributed or paid to any member, partner, shareholder or, if a Borrower is a trust, to any beneficiary or trustee, following the occurrence and during the continuation of any Default with respect to which Administrative Agent has provided Notice to any Borrower.
4.20      [ Intentionally Omitted ]
4.21      Swap Contracts . In the event that any Borrower shall elect to enter into a Swap Contract with Swap Counterparty, such Borrower shall comply with all of the terms and conditions of Exhibit “H ” with respect to all Swap Contracts.

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4.22      Debt Service Coverage Ratio . As of each Test Date, the Properties shall maintain an Ongoing Debt Service Coverage Ratio of not less than the Minimum Required Debt Service Coverage Ratio, provided , however , that if the Properties do not meet such Minimum Required Debt Service Coverage Ratio as of any Test Date, the following provisions shall apply:
(a)      If, as of any Test Date, the Ongoing Debt Service Coverage Ratio is less than the Minimum Required Debt Service Coverage Ratio but equal to or greater than the Remargin Debt Service Coverage Ratio, the Administrative Agent, on behalf of the Lenders, shall temporarily suspend all disbursements of Revolving Loan Proceeds until either (i) the Properties have achieved the Minimum Required Debt Service Coverage Ratio as of any subsequent Test Date, or (ii) Borrowers have repaid (without penalty or fee other than any Consequential Loss that may be payable in connection with such repayment) the Loan in an amount sufficient to cause the Ongoing Debt Service Coverage Ratio (calculated after giving effect to such repayment as if repaid on the applicable Test Date) to at least equal the Minimum Required Debt Service Coverage Ratio;
(b)      If, as of any Test Date, the Ongoing Debt Service Coverage Ratio is less than the Remargin Debt Service Coverage Ratio, Borrowers shall, within thirty (30) days following receipt of written demand from Administrative Agent, repay (without penalty or fee other than any Consequential Loss that may be payable in connection with such repayment) the Loan in an amount sufficient to cause the Ongoing Debt Service Coverage Ratio (calculated after giving effect to such repayment as if repaid on the applicable Test Date) to at least equal the Minimum Required Debt Service Coverage Ratio. For the avoidance of doubt, until such repayment is received by Administrative Agent, the Administrative Agent, on behalf of the Lenders, shall suspend all disbursements of Revolving Loan Proceeds.
4.23      Anti-Corruption Laws . Each Borrower, Guarantor and their respective subsidiaries shall each conduct its businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions, and KBS Capital Advisors LLC, the investment advisor to each Borrower, on behalf of each Borrower, maintains policies and procedures designed to promote and achieve compliance with such Laws.
4.24      Controlled Substances . Without limiting the provisions of Section 10 , Borrowers shall not, and shall not knowingly suffer or knowingly permit any tenant leasing space in the Improvements to violate any Laws affecting the Property, including the Controlled Substances Act, or which could otherwise result in the occurrence of a Default under Section 7.1(o) , including the commencement of any proceedings under the Civil Asset Forfeiture Reform Act. Upon learning of any conduct contrary to this Section, Borrower shall immediately take all actions reasonably expected under the circumstances to terminate any such use of the applicable Property, including: (a) to give timely notice to any appropriate law enforcement agency of information that led Borrowers to know such conduct had occurred, and (b) in a timely fashion to revoke or make a good faith attempt to revoke permission for those engaging in such conduct to use the applicable Property or to take reasonable actions in consultation with a law enforcement agency to discourage or prevent illegal use of the applicable Property.

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ARTICLE 5 - NEGATIVE COVENANTS
Each Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:
5.1      Conditional Sales . No Borrower shall incorporate in the Improvements of such Borrower any property acquired under a conditional sales contract or lease or as to which the vendor retains title or a security interest, without the prior written consent of Administrative Agent.
5.2      Insurance Policies and Bonds . No Borrower shall do or permit to be done anything that would affect the coverage or indemnities provided for pursuant to the provisions of any insurance policy, performance bond, labor and material payment bond or any other bond given in connection with any construction at the Property of such Borrower, including any construction of tenant improvements.
5.3      Commingling . No Borrower shall commingle the funds and other assets of such Borrower with those of any other Borrower, any Affiliate of such Borrower or any other Person.
5.4      Additional Debt . No Borrower shall incur any debt for borrowed money, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (a) the Loan, and (b) advances or trade debt or accrued expenses incurred in the ordinary course of business of operating the Property of such Borrower. No other debt may be secured by a lien on, or security interest in, any Property, whether senior, subordinate or pari passu, other than a lien or security interest which constitutes a Permitted Encumbrance (as defined in the applicable Security Instrument).
5.5      Sanctions . Borrowers and Guarantor shall not, directly or indirectly, use any proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any of their respective subsidiaries or joint venture partners or other individual or entity, to fund any activities of or business with any individual or entity, or in any Designated Jurisdiction, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any individual or entity (including any individual or entity participating in the transaction, whether as Lender, Arranger, Administrative Agent, or otherwise) of Sanctions.
5.6      Anti-Corruption Laws . No Borrower shall directly or indirectly use the proceeds of the Loan for any purpose which would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, or other similar anti-corruption legislation in other jurisdictions.
5.7      Ownership; Merger; Consolidation; Purchase or Sale of Assets .
(a)      No Borrower will Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in the Deed of Trust). The Transfer of more than forty-nine percent (49%) of the direct or indirect membership interests in any Borrower (whether in one or more transactions during the term of the Loan) shall be deemed to be a prohibited Transfer of the Property.

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(b)      Notwithstanding anything stated to the contrary herein (but subject to Section 5.7(d) below), the following Transfers shall not be prohibited (and shall be expressly permitted) (each a “ Permitted Transfer ”):
(i)      any transfers (or the pledge or encumbrance) of equity interests or other interests in KBS REIT Properties III, LLC, or in any of the direct or indirect owners of KBS REIT Properties III, LLC (including, without limitation, KBS Limited Partnership III, KBS REIT Holdings III, LLC, or KBS Real Estate Investment Trust III, Inc. (“ KBS REIT ”)), provided that KBS REIT continues to own, either directly or indirectly, not less than a fifty-one percent (51%) of the ownership interests in, and Controls, each Borrower, and so long as the transferee in each instance is not a Prohibited Person, provided , however , the foregoing restriction on transfers to Prohibited Persons shall not apply to transfers of shares of KBS REIT so long as KBS REIT maintains its status as an entity registered with the Securities Exchange Commissions under the Securities Exchange Act of 1934 (such transfers, “ REIT Registered Shares Transfers ”);
(ii)      KBS REIT Properties III, LLC, KBS Limited Partnership III, KBS REIT, and KBS REIT Holdings III, LLC, shall each be permitted to execute guaranties and/or indemnity agreements for their respective subsidiaries; and
(iii)      KBS Limited Partnership III, KBS REIT, and any of the other parties owning interests in KBS Limited Partnership III, direct or indirect, shall be permitted to obtain loans from, or incur indebtedness to any third-party lender (each a “ Secondary Loan ”) and, in addition, shall have the right to pledge their respective interests (direct or indirect) in KBS Limited Partnership III and KBS REIT Properties III, LLC, as security for any such Secondary Loan so long as (A) none of any Borrower or any Borrower’s sole member’s membership interest are pledged to secure such Secondary Loan, and (B) any default under a Secondary Loan resulting in a foreclosure of the pledged interests and a transfer of such interest to the lender of the Secondary Loan shall be deemed a Default hereunder but only to the extent that (1) after any such transfer, KBS REIT owns less than fifty-one percent (51%) of the ownership interests in any Borrower (direct or indirect) or no longer Controls each Borrower, or (2) any such transfer results in the direct or indirect ownership interests in any Borrower being held by a Prohibited Person, provided , however , that the foregoing clause (2) shall not apply to the foreclosure of any interests in KBS REIT so long as KBS REIT maintains its status as an entity registered with the Securities Exchange Commissions under the Securities Exchange Act of 1934 (such foreclosures, “ REIT Registered Foreclosures ”).
(c)      Borrowers shall provide (i) thirty (30) days prior written notice to Administrative Agent of any proposed Permitted Transfer under clause (i) above (other than any REIT Registered Shares Transfers) which results in any Person previously owning, directly or indirectly, less than a twenty-five percent (25%) (unless such Person is a foreign entity, then 10%) ownership interest in any Borrower now owning, directly or indirectly, a twenty-five percent (25%) (unless such Person is a foreign entity, then 10%) or greater ownership interest in any Borrower (or, in each case, such lesser equity interest as may be required by applicable Law or the KYC Equity Ownership

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Percentage, and of which Administrative Agent has previously notified Borrower in writing), and (ii) notice within five (5) days of Borrower’s receipt of knowledge of any foreclosure of the pledged interests in any Secondary Loan (other than any REIT Registered Foreclosures), which results in any Person previously owning, directly or indirectly, less than a twenty-five percent (25%) (unless such Person is a foreign entity, then 10%) ownership interest in any Borrower now owning, directly or indirectly, a twenty-five percent (25%) (unless such Person is a foreign entity, then 10%) or greater ownership interest in any Borrower (or, in each case, such lesser equity interest as may be required by applicable Law or the KYC Equity Ownership Percentage, and of which Administrative Agent has previously notified Borrower in writing), together with (to the extent available) a description of such transfer, the interest transferred and the identity of the transferor and transferee, including, without limitation, all documentation and other information that Administrative Agent or any Lender reasonably requests in order to comply with its ongoing obligations (as determined by Administrative Agent or such Lender) under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
(d)      Notwithstanding anything to the contrary contained herein, at all times during the term of the Loan, Manager shall be the asset manager for KBS REIT pursuant to the Management Agreement. Subject to the Administrative Agent’s and the Arrangers’ prior written consent, Manager may be replaced by another asset manager; provided, if the replacement asset manager: (i) has current assets under management of not less than 10,000,000 square feet of properties; (ii) is in good standing of each Arranger; and (iii) such replacement manager complies with Administrative Agent’s and each Arranger’s ongoing obligations (as reasonably determined by Administrative Agent or such Arranger) under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), then Administrative Agent’s and Arrangers’ consent to the replacement of Manager with such substitute manager shall not be unreasonably withheld, conditioned or delayed. As used in this paragraph, “ Manager ” means KBS Capital Advisors LLC, and “ Management Agreement ” means the Advisory Agreement, dated September 27, 2011, between Manager and KBS REIT.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
Each Borrower, for and on behalf of such Borrower (and not for or on behalf of any other Borrower), makes the following representations and warranties to Administrative Agent and each Lender as of the date hereof and as of the date of each advance hereunder as to itself and the Property it owns:
6.1      Organization, Power and Authority of Borrowers; Loan Documents . Each Borrower (a) is a limited liability company duly organized, existing and in good standing under the laws of the state in which it is organized and is duly qualified to do business and in good standing in the state in which the Land of such Borrower is located (if different from the state of its formation) and in any other state where the nature of such Borrower’s business or property requires it to be qualified to do business, and (b) has the power, authority and legal right to own its property and carry on the business now being conducted by it and to engage in the transactions contemplated by the Loan

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Documents. The Loan Documents to which each Borrower is a party have been duly executed and delivered by such Borrower, and the execution and delivery of, and the carrying out of the transactions contemplated by, such Loan Documents, and the performance and observance of the terms and conditions thereof, have been duly authorized by all necessary organizational action by and on behalf of such Borrower. The Loan Documents to which each Borrower is a party constitute the valid and legally binding obligations of such Borrower and are fully enforceable against such Borrower in accordance with their respective terms, except to the extent that such enforceability may be limited by laws generally affecting the enforcement of creditors’ rights.
6.2      Other Documents; Laws . The execution and performance of the Loan Documents to which each Borrower is a party and the consummation of the transactions contemplated thereby will not conflict with, result in any breach of, or constitute a default under, the organizational documents of such Borrower, or any contract, agreement, document or other instrument to which such Borrower is a party or by which such Borrower or any of its properties may be bound or affected, and such actions do not and will not violate or contravene any Law to which such Borrower is subject.
6.3      Taxes . For U.S. federal income tax purposes, each Borrower is and has at all times been treated as a disregarded entity within the meaning of Treasury Regulation Section 301.7701-2(c). To each Borrower’s knowledge and belief, such Borrower has filed (or has obtained effective extensions for filing) all federal, state, county and municipal tax returns required to have been filed by such Borrower and has paid all Taxes which have become due whether or not shown on such returns or pursuant to any Tax assessments received by such Borrower, other than Taxes which are not yet delinquent. To each Borrower’s knowledge, such tax returns (if any) reflect (in all material respects) the income and taxes of such Borrower for the periods covered thereby, subject only to reasonable adjustments required by the IRS or other applicable tax authority upon audit.
6.4      Legal Actions . There are no material Claims or investigations by or before any court or Governmental Authority, with respect to which any Borrower has been served, or to the best of such Borrower’s knowledge and belief, threatened in writing against or affecting such Borrower, such Borrower’s business or the Property of such Borrower. No Borrower is in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority affecting such Borrower or the Property of such Borrower.
6.5      Nature of Loan . Each Borrower is a business or commercial organization. The Loan is being obtained solely for business or investment purposes, and will not be used for personal, family, household or agricultural purposes.
6.6      Trade Names . Each Borrower conducts its business solely under the name set forth in the Preamble to this Agreement and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Administrative Agent in writing.
6.7      Financial Statements . The financial statements heretofore delivered by each Borrower and Guarantor to Administrative Agent are true and correct in all respects, have been prepared in accordance with sound accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof.

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6.8      No Material Adverse Change . No material adverse change has occurred in the financial conditions reflected in the financial statements of any Borrower or Guarantor since the respective dates of such statements, and no material additional liabilities have been incurred by any Borrower since the dates of such statements other than the borrowings contemplated herein or as approved in writing by Administrative Agent.
6.9      ERISA and Prohibited Transactions . As of the date hereof and throughout the term of the Loan: (a) no Borrower is and will be (i) an “employee benefit plan,” as defined in Section 3(3) of ERISA, (ii) a “governmental plan” within the meaning of Section 3(32) of ERISA, or (iii) a “plan” within the meaning of Section 4975(e) of the Code; (b) the assets of each Borrower do not and will not constitute “plan assets” within the meaning of the United States Department of Labor Regulations set forth in Section 2510.3-101 of Title 29 of the Code of Federal Regulations; (c) transactions by or with any Borrower are not and will not be subject to state statutes applicable to such Borrower regulating investments of fiduciaries with respect to governmental plans; and (d) no Borrower will engage in any transaction that would cause any Obligation or any action taken or to be taken hereunder (or the exercise by Administrative Agent of any of its rights under any of the Security Instruments or any of the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA or Section 4975 of the Code. Each Borrower agrees to deliver to Administrative Agent and each Lender such certifications or other evidence of compliance with the provisions of this Section as Administrative Agent or, subject to the terms of Section 4.8(e) , any Lender may from time to time request.
6.10      Compliance with Laws and Zoning and Other Requirements; Encroachments . To each Borrower’s knowledge and belief, such Borrower is in compliance with the requirements of all applicable Laws. To each Borrower’s knowledge and belief, the use of the Property of such Borrower complies with applicable zoning ordinances, regulations and restrictive covenants affecting the Land. To each Borrower’s knowledge and belief, all use and other requirements of any Governmental Authority having jurisdiction over the Property of such Borrower have been satisfied. To each Borrower’s knowledge and belief, no violation of any Law exists with respect to the Property of such Borrower. To each Borrower’s knowledge and belief, and except as may be disclosed in the Survey, the Improvements of such Borrower are constructed entirely on the Land of such Borrower and do not encroach upon any easement or right-of-way, or upon the land of others. To each Borrower’s knowledge and belief, (i) the Improvements of such Borrower comply with all applicable building restriction lines and set-backs, however established, and (ii) are in strict compliance with all applicable use or other restrictions and the provisions of all applicable agreements, declarations and covenants and all applicable zoning and subdivision ordinances and regulations.
6.11      Certificates of Occupancy . To each Borrower’s knowledge and belief, all certificates of occupancy and other permits and licenses necessary or required in connection with the use and occupancy of the Improvements of such Borrower have been validly issued.
6.12      Utilities; Roads; Access . To each Borrower’s knowledge and belief, all utility services necessary for the operation of the Improvements of such Borrower for their intended purposes have been fully installed, including telephone service, cable television, water supply, storm and sanitary sewer facilities, natural gas and electric facilities, including cabling for telephonic and

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data communication, and the capacity to send and receive wireless communication. To each Borrower’s knowledge and belief, all roads and other accesses necessary to serve the Land of such Borrower and Improvements of such Borrower have been completed, are serviceable in all weather, and where required by the appropriate Governmental Authority, have been dedicated to and formally accepted by such Governmental Authority.
6.13      Other Liens . Except for contracts for labor, materials and services furnished or to be furnished in connection with any construction at a Property, including any construction of tenant improvements, no Borrower has made any contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on the Property of such Borrower.
6.14      No Defaults . To each Borrower’s knowledge and belief, (i) there is no Default or Potential Default under any of the Loan Documents, and (ii) there is no default or event of default under any material contract, agreement or other document related to the construction or operation of the Improvements of such Borrower.
6.15      No Broker . Except as disclosed to Administrative Agent, no financial advisors, brokers, underwriters, placement agents, agents or finders have been dealt with by any Borrower, Guarantor or any Affiliate thereof in connection with the Loan.
6.16      Not a Foreign Person . No Borrower is a “ foreign person ” within the meaning of Section 1445 or 7701 of the Code. Without limiting the foregoing, no Borrower is a foreign corporation, foreign partnership, foreign trust, foreign estate or nonresident alien or a disregarded entity owned by any of them (as those terms are defined in the Code).
6.17      OFAC . Neither any Borrower, nor any of their respective subsidiaries, nor, to the knowledge of each Borrower, any director, officer, employee, agent, Affiliate or representative of any Borrower or any of their subsidiaries, is a Prohibited Person.
6.18      Anti-Corruption Laws . Each Borrower and its respective Affiliates have conducted their businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions, and KBS Capital Advisors LLC, the investment advisor to each Borrower, has, on behalf of each Borrower, instituted and maintained policies and procedures designed to promote and achieve compliance with such Laws.
6.19      EEA Financial Institution . Neither any Borrower nor Guarantor is an EEA Financial Institution.
ARTICLE 7 - DEFAULT AND REMEDIES
7.1      Events of Default . The occurrence of any one of the following shall be a default under this Agreement (“ Default ”):
(a)      Borrowers (or any of them) fail(s) to pay (i) any Obligation under this Agreement (other than sums payable upon the maturity of the Loan) within five (5) business days after the same

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becomes due, whether on the scheduled due date or upon acceleration or otherwise, or (ii) when due any Obligation under this Agreement payable upon maturity of the Loan.
(b)      A Default or Event of Default (as defined therein) occurs under any Note or any Security Instrument or any other Loan Document, or any Borrower or Guarantor fails to promptly pay, perform, observe or comply with any term, obligation or agreement contained in any of the Loan Documents within any applicable grace or cure period, or, if no cure period is specified, any such failure continues uncured for a period of thirty (30) days after Notice from Administrative Agent or any Lender to such Borrower, unless (i) such failure, by its nature, is not capable of being cured within such period, (ii) within such period, such Borrower commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (iii) such Borrower causes such failure to be cured no later than ninety (90) days after the date of such Notice from Administrative Agent or any Lender.
(c)      Any information contained in any financial statement, schedule, report or any other document delivered by any Borrower or Guarantor to Administrative Agent or any Lender in connection with the Loan proves at any time not to be in all material respects true and accurate, or any Borrower or Guarantor shall have failed to state any material fact or any fact necessary to make such information not misleading, or any representation or warranty contained in this Agreement or in any other Loan Document or other document, certificate or opinion delivered to Administrative Agent or any Lender in connection with the Loan, proves at any time to be incorrect or misleading in any material respect either on the date when made or on the date when reaffirmed pursuant to the terms of this Agreement.
(d)      Any Borrower fails to deposit funds into the Borrowers’ Deposit Account pursuant to and as required by the provisions of Section 4.6 , within ten (10) Business Days from the effective date of a Notice from Administrative Agent requesting such deposit, or any Borrower fails to deliver to Administrative Agent any Condemnation Awards or Insurance Proceeds within ten (10) days after such Borrower’s receipt thereof.
(e)      Any Borrower fails to promptly perform or comply with any of the covenants contained in the Loan Documents with respect to maintaining insurance, including the covenants contained in Section 4.4 .
(f)      Any Borrower fails to promptly perform or comply with any of the Obligations set forth in this Agreement (other than those expressly described in other Sections of this Article VII ), and such failure continues uncured for a period of thirty (30) days after Notice from Administrative Agent to such Borrower, unless (i) such failure, by its nature, is not capable of being cured within such period, and (ii) within such period, such Borrower commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (iii) such Borrower causes such failure to be cured no later than ninety (90) days after the date of such Notice from Administrative Agent.
(g)      Any permit, license, certificate or approval that any Borrower is required to obtain with respect to any construction activities at the Property of such Borrower or the operation, leasing or maintenance of the Improvements of such Borrower or the Property of such Borrower lapses or ceases to be in full force and effect for a period of thirty (30) days, unless (i) the failure to maintain

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any such permit, license, certificate or approval, by its nature, is not capable of being cured within such period, (ii) within such period, such Borrower commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (iii) such Borrower causes such failure to be cured no later than ninety (90) days after the date of such Notice from Administrative Agent.
(h)      A lien for the performance of work or the supply of materials filed against any Property, or any stop notice served on any Borrower, any contractor of any Borrower, Administrative Agent or any Lender, remains unsatisfied or unbonded for a period of thirty (30) days after the date of filing or service in violation of the terms of Section 4.3 above.
(i)      Any Borrower or Guarantor files a bankruptcy petition or makes a general assignment for the benefit of creditors, or a bankruptcy petition is filed against any Borrower or Guarantor and such involuntary bankruptcy petition continues undismissed for a period of ninety (90) days after the filing thereof.
(j)      Any Borrower or Guarantor applies for or consents in writing to the appointment of a receiver, trustee or liquidator of such Borrower, Guarantor, any Property, or all or substantially all of the other assets of any Borrower or Guarantor, or an order, judgment or decree is entered by any court of competent jurisdiction on the application of a creditor appointing a receiver, trustee or liquidator of any Borrower, Guarantor, any Property, or all or substantially all of the other assets of any Borrower or Guarantor, but only if any of the foregoing is not dismissed within ninety (90) days after such appointment, judgment or decree.
(k)      Any Borrower or Guarantor admits in writing its inability or fails generally to pay its debts as they become due (other than principal of the Loan due at maturity).
(l)      A final nonappealable judgment for the payment of money involving more than $1,000,000 is entered against any Borrower, and such Borrower fails to discharge the same, or fails to cause it to be discharged or bonded off to Administrative Agent’s satisfaction, within thirty (30) days from the date of the entry of such judgment.
(m)      Unless the written consent of Administrative Agent is previously obtained, all or substantially all of the business assets of any Borrower or Guarantor are sold, any Borrower or Guarantor is dissolved, or there occurs any change in the form of business entity through which any Borrower or Guarantor presently conducts its business or any merger or consolidation involving any Borrower or Guarantor.
(n)      Without the prior written consent of the Required Lenders (which consent must include the consent of each of the Arrangers and may be conditioned, among other matters, on the issuance of a satisfactory endorsement to the title insurance policy insuring Administrative Agent’s interest under the applicable Security Instrument), the controlling interest in any Borrower ceases to be owned, directly or indirectly, by Guarantor.
(o)      A judicial or nonjudicial forfeiture or seizure proceeding is commenced by a Governmental Authority and remains pending with respect to any Property or any part thereof, on the grounds that such Property or any part thereof had been used to commit or facilitate the commission of a criminal offense by any Person, including any tenant, pursuant to any Law, including

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the Controlled Substances Act or the Civil Asset Forfeiture Reform Act, regardless of whether or not such Property or the Security Instrument shall become subject to forfeiture or seizure in connection therewith; provided , however , that no Default shall occur under this clause (o) unless Borrower fails to have the enforcement action stayed (so long as such stay is not lifted) or dismissed within ninety (90) days after the commencement of such proceedings.
7.2      Remedies . Upon the occurrence and during the continuance of a Default, Administrative Agent at its election may (but shall not be obligated to) without the consent of and shall at the direction of the Required Lenders, without notice, exercise any and all rights and remedies afforded by this Agreement, the other Loan Documents, Law, equity or otherwise, including (a) declaring any and all Indebtedness immediately due and payable (provided that, 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 any Debtor Relief Law, any obligation of Lenders to make advances shall automatically terminate, and the unpaid principal amount of the Loan outstanding and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of Administrative Agent or Lenders); (b) reducing any claim to judgment; (c) obtaining appointment of a receiver (to which each Borrower hereby consents) and/or judicial or nonjudicial foreclosure under any of the Security Instruments; (d) terminating Lenders’ Commitments; (e) in its own name on behalf of the Lenders or in the name of any of the Borrowers, entering into possession of any of the Properties, leasing and operating any of the Properties, performing all work and constructing Improvements; and (f) setting-off and applying, to the extent thereof and to the maximum extent permitted by Law, sums in the Interest Reserve Account, any and all deposits, funds, or assets at any time held and any and all other indebtedness at any time owing by Administrative Agent or any Lender to or for the credit or account of Borrower against any Indebtedness.
Each Borrower hereby appoints Administrative Agent as such Borrower’s attorney-in-fact, which power of attorney is irrevocable and coupled with an interest, with full power of substitution if Administrative Agent so elects, to do any of the following in such Borrower’s name upon the occurrence and during the continuance of a Default: (i) endorse the name of such Borrower on any checks or drafts representing proceeds of any insurance policies, or other checks or instruments payable to such Borrower with respect to the Property of such Borrower; (ii) prosecute or defend any action or proceeding incident to the Property of such Borrower; (iii) pay, settle, or compromise all bills and claims regarding the Property of such Borrower; (iv) perform the obligations and exercise the rights of such Borrower under all Leases, guaranties and other agreements to which it is a party or by which the Property of such Borrower is bound, enter into Leases, guaranties and other agreements regarding the Property of such Borrower and pay all leasing, operating and capital expenses of the Property of such Borrower; and (v) take over and use all or any part of the labor, materials, supplies and equipment contracted for, owned by, or under the control of such Borrower, whether or not previously incorporated into the Improvements of the Property of such Borrower. Neither Administrative Agent nor any Lender shall have any liability to any Borrower for the sufficiency or adequacy of any such actions taken by Administrative Agent.
ARTICLE 8 - ADMINISTRATIVE AGENT
8.1      Appointment and Authorization of Administrative Agent .

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(a)      Each Lender hereby irrevocably (subject to Section 8.9 ) appoints, designates and authorizes Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Borrowers, without further inquiry or investigation, shall, and are hereby authorized by Lenders to, assume that all actions taken by Administrative Agent hereunder and in connection with or under the Loan Documents are duly authorized by Lenders and Borrowers shall be entitled to rely on Administrative Agent’s acknowledgment of consent and approvals when required under the Loan Documents. The term “agent” herein and in the other Loan Documents with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(b)      Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, and its duties and responsibilities shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent and its Related Parties:
(i)      shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, and no implied covenants, functions, responsibilities, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Administrative Agent or its Related Parties;
(ii)      shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Administrative Agent to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may affect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(iii)      shall not, except as expressly set forth herein and in the other Loan Documents, have any duty or responsibility to disclose, and shall not be liable for the failure to disclose, any information relating to any Borrower, Guarantor or any of their Related Parties that is communicated to or obtained by the Person serving as Administrative Agent or any of its Related Parties in any capacity.
(c)      No individual Lender or group of Lenders shall have any right to amend or waive, or consent to the departure of any party from any provision of any Loan Document, or secure or enforce the obligations of any Borrower or any other party pursuant to the Loan Documents, or

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otherwise. All such rights, on behalf of Administrative Agent or any Lender or Lenders, shall be held and exercised solely by and at the option of Administrative Agent for the pro rata benefit of the Lenders. Such rights, however, are subject to the rights of a Lender or Lenders, as expressly set forth in this Agreement, to approve matters or direct Administrative Agent to take or refrain from taking action as set forth in this Agreement. Except as expressly otherwise provided in this Agreement or the other Loan Documents, Administrative Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights, or taking or refraining from taking any actions which Administrative Agent is expressly entitled to exercise or take under this Agreement and the other Loan Documents, including (i) the determination if and to what extent matters or items subject to Administrative Agent’s satisfaction are acceptable or otherwise within its discretion, (ii) the making of Administrative Agent Advances, and (iii) the exercise of remedies pursuant to, but subject to, Article 7 or pursuant to any other Loan Document and any action so taken or not taken shall be deemed consented to by Lenders.
(d)      In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower, Guarantor or any other Person liable for any part of the Indebtedness, no individual Lender or group of Lenders shall have the right, and Administrative Agent (irrespective of whether the principal of the Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on any Borrower or any other Person) shall be exclusively entitled and empowered on behalf of itself and the Lenders, by intervention in such proceeding or otherwise:
(i)      to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loan and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Administrative Agent and their respective agents and counsel and all other amounts due Lenders and Administrative Agent under Section 4.15 allowed in such judicial proceeding; and
(ii)      to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and its agents and counsel, and any other amounts due Administrative Agent under Section 4.15 .
Nothing contained herein shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of Lenders except as approved by the Required Lenders or to authorize Administrative Agent to vote in respect of the claims of Lenders except as approved by the Required Lenders in any such proceeding.

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8.2      Delegation of Duties; Advice .
(a)      Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through one or more sub-agents appointed by Administrative Agent. Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article 8 shall apply to any such sub-agent and to the Related Parties of Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Loan as well as activities as Administrative Agent. Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non appealable judgment that Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
(b)      Administrative Agent shall be entitled to advice of counsel and other consultant experts concerning all matters pertaining to such duties. Administrative Agent shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel or other consultant experts.
8.3      Liability of Administrative Agent . Neither Administrative Agent nor any Related Party of Administrative Agent shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby or thereby (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary), or as Administrative Agent shall believe in good faith shall be necessary or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment, or (b) be responsible in any manner to any Lender for any recital, statement, representation or warranty made by any Borrower, Guarantor, any subsidiary or Affiliate of any Borrower or Guarantor, or any other Person, or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. Neither Administrative Agent nor any Related Party of Administrative Agent shall be under any obligation to any Lender or participant or any other Person to inspect the properties, books or records of any Borrower, Guarantor, any of their Related Parties or any other Person, or to ascertain or inquire into (u) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (v) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (w) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (x) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Loan Documents, (y) the value or the sufficiency

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of any Collateral, or (z) the satisfaction of any condition set forth herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
8.4      Reliance by Administrative Agent; Authorized Signers . Administrative Agent is authorized to rely upon the continuing authority of the Authorized Signers to bind any Borrower with respect to all matters pertaining to the Loan and the Loan Documents, including the submission of Draw Requests and the selection of interest rates. Such authorization may be changed only upon written notice addressed to Administrative Agent accompanied by evidence, reasonably satisfactory to Administrative Agent, of the authority of the Person giving such notice. Such notice shall be effective not sooner than five (5) Business Days following receipt thereof by Administrative Agent. Without limitation of the foregoing, Administrative Agent shall be entitled to rely, and shall be fully protected, and shall be indemnified by Lenders pursuant to Section 8.7 , in relying, upon any writing , resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, telephone message, email or other electronic (including any Internet or intranet website posting or other distribution) communication, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any party to the Loan Documents), independent accountants and other experts selected by Administrative Agent. In determining compliance with any condition hereunder to the making of the Loan that by its terms must be fulfilled to the satisfaction of a Lender, Administrative Agent may presume that such condition is satisfactory to such Lender unless Administrative Agent shall have received notice to the contrary from such Lender prior to the making of the Loan. For purposes of determining compliance with the conditions specified in Exhibit “C” , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objections. Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders or all Lenders if required hereunder as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Administrative Agent shall in all cases be fully protected, and shall be indemnified by Lenders pursuant to Section 8.7 , in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or such greater number of Lenders as may be expressly required hereby in any instance, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders. In the absence of written instructions from the Required Lenders or such greater number of Lenders, as expressly required hereunder, Administrative Agent may take or not take any action, at its discretion, unless this Agreement specifically requires the consent of the Required Lenders or such greater number of Lenders. Notwithstanding anything to the contrary herein, in no event shall Administrative Agent be required to take any action that it determines may expose Administrative Agent to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may affect a forfeiture, modification or termination of property of a

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Defaulting Lender in violation of any Debtor Relief Law, and Administrative Agent shall be indemnified by Lenders pursuant to Section 8.7 with respect to such determination.
8.5      Notice of Default . Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Potential Default unless Administrative Agent shall have received written notice from a Lender or any Borrower referring to this Agreement and describing such Default or Potential Default, and Administrative Agent determines that such Default or such Potential Default (if it were to become a Default) will have a Material Adverse Effect. Administrative Agent will notify Lenders of its receipt of any such notice. Administrative Agent shall take such action with respect to any such Default as may be requested by the Required Lenders in accordance with Article 7 ; provided , however , that unless and until Administrative Agent has received any such request, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable or in the best interest of Lenders.
8.6      Credit Decision; Disclosure of Information by Administrative Agent .
(a)      Each Lender acknowledges that neither Administrative Agent nor any Related Party of Administrative Agent has made any representation or warranty to it, and that no act by Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Borrower and Guarantor, shall be deemed to constitute any representation or warranty by Administrative Agent or any Related Party of Administrative Agent to any Lenders as to any matter, including whether Administrative Agent or any Related Party of Administrative Agent have disclosed material information in their possession. Each Lender represents to Administrative Agent that it has, independently and without reliance upon Administrative Agent or any Related Party of Administrative Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower and Guarantor, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers and Guarantor hereunder. Each Lender also represents that it will, independently and without reliance upon Administrative Agent or any Related Party of Administrative Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of any Borrower and Guarantor.
(b)      Administrative Agent promptly after its receipt shall provide each Lender such notices, reports and other documents expressly required to be furnished to Lenders by Administrative Agent herein. To the extent not already available to a Lender, Administrative Agent shall also provide each Lender and/or make available for such Lender’s inspection during reasonable business hours and at such Lender’s expense, promptly after such Lender’s written request therefor: (i) copies of the Loan Documents; (ii) such information as is then in Administrative Agent’s possession in respect of the current status of principal and interest payments and accruals in respect of the Loan;

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(iii) copies of all current financial statements in respect of any Borrower, Guarantor or other Person liable for payment or performance by Borrowers of any obligations under the Loan Documents, then in Administrative Agent’s possession with respect to the Loan; and (iv) other current factual information then in Administrative Agent’s possession with respect to the Loan and bearing on the continuing creditworthiness of Borrowers or Guarantor, or any of their respective Affiliates; provided that nothing contained in this Section shall impose any liability upon Administrative Agent for its failure to provide a Lender any of such Loan Documents, information, or financial statements, unless such failure constitutes willful misconduct or gross negligence on Administrative Agent’s part; and provided , further , that Administrative Agent shall not be obligated to provide any Lender with any information in violation of Law or any contractual restrictions on the disclosure thereof (provided such contractual restrictions shall not apply to distributing to a Lender factual and financial information expressly required to be provided herein). Except as set forth above, Administrative Agent shall not have any duty or responsibility to provide any Lenders with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrowers or Guarantor or any of their respective Affiliates which may come into the possession of Administrative Agent or any Related Party of Administrative Agent.
8.7      Indemnification of Administrative Agent . WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, LENDERS HEREBY INDEMNIFY ADMINISTRATIVE AGENT AND EACH RELATED PARTY OF ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF ANY BORROWER AND WITHOUT LIMITING THE OBLIGATION OF ANY BORROWER TO DO SO), PRO RATA, AND HOLD HARMLESS ADMINISTRATIVE AGENT AND EACH RELATED PARTY OF ADMINISTRATIVE AGENT FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES INCURRED BY IT, INCLUDING BEFORE, DURING AND AFTER ANY FORECLOSURE OF ANY SECURITY INSTRUMENT, OTHER EXERCISE OF RIGHTS AND REMEDIES OR SALE OF ANY PROPERTY , INCLUDING THOSE IN WHOLE OR PART ARISING FROM ADMINISTRATIVE AGENT’S STRICT LIABILITY, OR COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE ; provided , however , that no Lender shall be liable for the payment to Administrative Agent or any Related Party of Administrative Agent of any portion of such Indemnified Liabilities to the extent determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Person’s own gross negligence or willful misconduct; provided , further , that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 8.7 . All payments on account of the foregoing shall be due and payable ten (10) days after demand by Administrative Agent therefor. Without limitation of the foregoing, to the extent that Administrative Agent is not reimbursed by or on behalf of any Borrower, each Lender shall reimburse Administrative Agent within ten (10) days after demand for its ratable share of any costs or out-of-pocket expenses (including attorneys’ fees) incurred by Administrative Agent as described in Section 4.15 . The undertaking in this Section 8.7 shall survive the resignation or replacement of Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments, the termination of this Agreement and the repayment, satisfaction or discharge of all Obligations.

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8.8      Administrative Agent in Individual Capacity . Administrative Agent, in its individual capacity, and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of banking, trust, financial, advisory, underwriting or other business with any party to the Loan Documents and their respective subsidiaries and other Affiliates as though Administrative Agent was not Administrative Agent hereunder, without notice to or consent of Lenders and without any duty to account therefor to Lenders. Lenders acknowledge that one or more Borrowers and Bank of America or its Affiliate have entered or may enter into Swap Transactions. Lenders shall have no right to share in any portion of any payments made by any Borrower under the terms of such Swap Transactions (except and to the extent Lenders shall have participated with Bank of America or such Affiliate in such Swap Transactions). Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any party to the Loan Documents, or their respective Affiliates (including information that may be subject to confidentiality obligations in favor of such parties or such parties’ Affiliates) and acknowledge that Administrative Agent shall be under no obligation to provide such information to them. With respect to its Pro Rata Share of the Loan, Bank of America shall have the same rights and powers under this Agreement as any other Lenders and may exercise such rights and powers as though it were not Administrative Agent or party to Swap Transactions, and the terms “Lender” and “Lenders” include Bank of America in its individual capacity.
8.9      Successor Administrative Agent . Administrative Agent may resign as Administrative Agent upon thirty (30) days’ notice to Lenders and Borrowers. Additionally, if the Person serving as Administrative Agent is a Defaulting Lender, commits gross negligence or willful misconduct in exercising its rights and obligations hereunder or under any of the other Loan Documents, or is no longer an Arranger hereunder, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to Borrowers and such Person, remove such Person as Administrative Agent. If Administrative Agent resigns or is so removed by the Required Lenders under this Agreement, the Required Lenders shall, (i) within thirty (30) days after receipt of Administrative Agent’s notice of resignation or (ii) within five Business Days of the removal of Administrative Agent, as applicable, appoint from among Lenders a successor administrative agent for Lenders, which successor administrative agent shall be consented to by Borrowers at all times other than during the existence of a Default (which consent of Borrowers shall not be unreasonably withheld or delayed). Upon the acceptance by the successor administrative agent of its appointment as successor administrative agent hereunder, the retiring Administrative Agent’s resignation or removal, as applicable, shall be effective, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent, and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is thirty (30) days following a retiring Administrative Agent’s notice of resignation, or on or before the removal day specified by Required Lenders in their removal notice to Administrative Agent and Borrowers, whichever applies, then the Lender other than the retiring Administrative Agent holding the largest Commitment shall automatically become the successor administrative agent; it being understood and agreed that the retiring Administrative Agent’s resignation or removal, as applicable,

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shall in all instances become effective upon such thirtieth (30 th ) day, or upon the removal day set forth in Required Lenders’ removal notice, whichever applies. After the effective date any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VIII and other applicable Sections of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
8.10      Releases; Acquisition and Transfers of Collateral .
(a)      Lenders hereby irrevocably authorize Administrative Agent to transfer or release any lien on, or after foreclosure or other acquisition of title by Administrative Agent on behalf of Lenders to transfer or sell, any Collateral (i) upon the termination of the Commitments, the termination of all obligations of each Swap Counterparty to advance any funds under any Swap Contract, and payment and satisfaction in full of all Indebtedness; (ii) constituting a release, transfer or sale of a lien or Collateral if Borrowers will certify to Administrative Agent that the release, transfer or sale is permitted under this Agreement or the other Loan Documents (and Administrative Agent may rely conclusively on any such certificate, without further inquiry); or (iii) after foreclosure or other acquisition of title (1) in the discretion of Administrative Agent if a purchase price of at least ninety-five percent (95%)) of the value indicated in the most recent appraisal of the collateral obtained by Administrative Agent and made in accordance with regulations governing Administrative Agent, less any reduction indicated in the appraised value estimated by any experts in the applicable areas engaged by Administrative Agent; or (2) if approved by the Required Lenders.
(b)      If all or any portion of the Collateral is acquired by foreclosure or by deed in lieu of foreclosure, Administrative Agent shall take title to the Collateral in its name or by an Affiliate of Administrative Agent, but for the benefit of all Lenders in their Pro Rata Shares on the date of the foreclosure sale or recordation of the deed in lieu of foreclosure (the “ Acquisition Date ”). Administrative Agent and all Lenders hereby expressly waive and relinquish any right of partition with respect to any collateral so acquired. After any Collateral is acquired, Administrative Agent shall appoint and retain one or more Persons (individually and collectively, the “ OREO Property Manager ”) experienced in the management, leasing, sale and/or disposition of similar properties.
(c)      After consulting with the OREO Property Manager, Administrative Agent shall prepare a written plan for operation, management, improvement, maintenance, repair, sale and disposition of the Collateral and a budget for the aforesaid, which may include a reasonable management fee payable to Administrative Agent (the “ Business Plan ”). Administrative Agent will deliver the Business Plan not later than the sixtieth (60th) day after the Acquisition Date to each Lender with a written request for approval of the Business Plan. If the Business Plan is approved by the Required Lenders, Administrative Agent and the OREO Property Manager shall adhere to the Business Plan until a different Business Plan is approved by the Required Lenders. Administrative Agent may propose an amendment to the Business Plan as it deems appropriate, which shall also be subject to Required Lender approval. If the Business Plan (as may be amended) proposed by Administrative Agent is not approved by the Required Lenders, or if sixty (60) days have elapsed following the Acquisition Date without a Business Plan being proposed by Administrative Agent, any Lender may propose an alternative Business Plan, which Administrative

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Agent shall submit to all Lenders for their approval. If an alternative Business Plan is approved by the Required Lenders, Administrative Agent may appoint one of the approving Lenders to implement the alternative Business Plan. Notwithstanding any other provision of this Agreement, unless in violation of an approved Business Plan or otherwise in an emergency situation, Administrative Agent shall, subject to Section 8.10(a) , have the right but not the obligation to take any action in connection with the Collateral (including those with respect to all Real Property Taxes, Insurance Premiums, operation, management, improvement, maintenance, repair, sale and disposition), or any portion thereof.
(d)      Upon written request by Administrative Agent or any Borrower at any time, Lenders will confirm in writing Administrative Agent’s authority to sell, transfer or release any such liens of particular types or items of Collateral pursuant to this Section 8.10 ; provided , however , that (i) Administrative Agent shall not be required to execute any document necessary to evidence such release, transfer or sale on terms that, in Administrative Agent’s opinion, would expose Administrative Agent to liability or create any obligation or entail any consequence other than the transfer, release or sale without recourse, representation or warranty, and (ii) such transfer, release or sale shall not in any manner discharge, affect or impair the obligations of any Borrower other than those expressly being released.
(e)      If only two (2) Lenders exist at the time Administrative Agent receives a purchase offer for Collateral, the consent of the Required Lenders is required pursuant to Section 8.10(a) , and one of the Lenders does not consent within ten (10) Business Days after notification from Administrative Agent, the consenting Lender may, in writing to the other Lender, offer (“ Purchase Offer ”) to purchase all of the non-consenting Lender’s right, title and interest in such Collateral for a purchase price equal to the non-consenting Lender’s Pro Rata Share of the net proceeds anticipated from such sale of such Collateral (as reasonably determined by Administrative Agent, including the undiscounted face principal amount of any purchase money obligation not payable at closing) (“ Lender Net Sale Proceeds ”). Within ten (10) Business Days thereafter the non-consenting Lender shall be deemed to have accepted such Purchase Offer unless the non-consenting Lender notifies Administrative Agent that it elects to purchase all of the consenting Lender’s right, title and interest in such Collateral for a purchase price payable by the non-consenting Lender in an amount equal to the consenting Lender’s Pro Rata Share of the Lender Net Sale Proceeds. Any amount payable hereunder by a Lender shall be due on the earlier to occur of the closing of the sale of such Collateral or ninety (90) days after receipt by the non-consenting Lender of the Purchase Offer, regardless of whether such Collateral is sold.
8.11      Application of Payments . Except as otherwise provided below with respect to Defaulting Lenders, aggregate principal and interest payments, payments for Indemnified Liabilities and/or foreclosure or sale of the collateral, and net operating income from the collateral during any period it is owned by Administrative Agent on behalf of Lenders (“ Payments ”) shall be apportioned pro rata among Lenders and payments of any fees (other than fees designated for Administrative Agent’s separate account) shall, as applicable, be apportioned pro rata among Lenders. All pro rata Payments shall be remitted to Administrative Agent and all such payments not constituting payment of specific fees, and all proceeds of the Collateral received by Administrative Agent, shall be applied first , to pay any fees, indemnities, costs, expenses (including those in Section 8.7 ) and

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reimbursements then due to Administrative Agent from Borrowers (including any of the foregoing constituting Administrative Agent Advances, together with interest thereon); second , to pay any fees, costs, expenses and reimbursements then due to Lenders from Borrowers (including any of the foregoing constituting Administrative Agent Advances, together with interest thereon, reimbursed by Lenders); third , to pay (on a pari passu basis) pro rata interest and late charges due in respect of the Indebtedness and regularly occurring payments under any Swap Contract; fourth , to pay (on a pari passu basis) or prepay pro rata principal of the Indebtedness and “Settlement Amounts” or “Close-Out Amounts”, and similar payments, as applicable, payable by any Borrower under Swap Transactions; and last , to Borrowers, if required by Law, or Lenders in Pro Rata Share percentages equal to their percentages at the termination of the Aggregate Commitments.
Notwithstanding anything to the contrary in this Agreement, obligations arising under Swap Contracts shall be excluded from the application described above in this Section 8.11 if Administrative Agent has not received a Secured Party Designation Notice, together with such supporting documentation as Administrative Agent may request, from the applicable Hedge Bank. Each Hedge Bank not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of Administrative Agent pursuant to the terms of this Article VIII for itself and its Affiliates as if a “Lender” party hereto.
8.12      Administrative Agent Advances .
(a)      Administrative Agent is authorized, from time to time, in Administrative Agent’s sole discretion to make, authorize or determine other advances, or otherwise expend funds, on behalf of Lenders (“ Administrative Agent Advances ”), (i) to pay any costs, fees and expenses as described in Section 4.15 , (ii) when the applicable conditions precedent set forth in Exhibit “C” have been satisfied to the extent required by Administrative Agent, and (iii) when Administrative Agent deems necessary or desirable to preserve or protect the Collateral or any portion thereof (including those with respect to Real Property Taxes, Insurance Premiums, operation, management, improvements, maintenance, repair, sale and disposition) (A) subject to Section 8.5 , after the occurrence of a Default, and (B) subject to Section 8.10 , after acquisition of all or a portion of the Collateral by foreclosure or otherwise; provided , however , that any Administrative Agent Advance under this clause (iii) in excess of Two Million and No/100 Dollars ($2,000,000.00), other than an Administrative Agent Advance to pay Real Property Taxes or Insurance Premiums, shall require the consent of the Required Lenders.
(b)      Administrative Agent Advances shall constitute obligatory advances of Lenders under this Agreement, shall be repayable on demand and secured by the Collateral, and if unpaid by Lenders as set forth below shall bear interest at the rate applicable to such amount under the Loan or if no longer applicable, at the Base Rate. Administrative Agent shall notify each Lender in writing of each Administrative Agent Advance. Upon receipt of notice from Administrative Agent of its making of an Administrative Agent Advance, each Lender shall make the amount of such Lender’s Pro Rata Share of the outstanding principal amount of the Administrative Agent Advance available to Administrative Agent, in same day funds, to such account of Administrative Agent as Administrative Agent may designate, (i) on or before 3:00 p.m. (Administrative Agent’s

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Time) on the day Administrative Agent provides Lenders with notice of the making of such Administrative Agent Advance if Administrative Agent provides such notice on or before 12:00 p.m. (Administrative Agent’s Time), or (ii) on or before 12:00 p.m. (Administrative Agent’s Time) on the Business Day immediately following the day Administrative Agent provides Lenders with notice of the making of such Administrative Agent Advance if Administrative Agent provides notice after 12:00 p.m. (Administrative Agent’s Time).
8.13      Defaulting Lender .
8.13.1      Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(a)      Waivers and Amendments . Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 9.9 .
(b)      Any payment of principal, interest, fees or other amounts received by Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 7 or otherwise) or received by Administrative Agent from a Defaulting Lender pursuant to Section 9.7 shall be applied at such time or times as may be determined by Administrative Agent as follows: first , to the payment of any amounts owing by such Defaulting Lender to Administrative Agent hereunder; second , as Borrowers may request (so long as no Default or Potential Default exists), to the funding of any advance in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent; third , if so determined by Administrative Agent and Borrowers, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to advances under this Agreement; fourth , to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth , so long as no Default or Potential Default exists, to the payment of any amounts owing to Borrowers as a result of any judgment of a court of competent jurisdiction obtained by any Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; and sixth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any advances in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such advances were made at a time when the conditions for same, if any, were satisfied or waived, such payment shall be applied solely to pay the advances of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any advances of such Defaulting Lender until such time as all advances are held by the Lenders pro rata in accordance with the Commitments hereunder. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
8.13.2      Defaulting Lender Cure . If Borrowers and Administrative Agent agree in writing that a Lender is no longer a Defaulting Lender, Administrative Agent will so notify the parties

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hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion of outstanding advances of the other Lenders or take such other actions as Administrative Agent may determine to be necessary to cause the Commitments (and outstanding principal balance of all advances) to be held on a pro rata basis by the Lenders in accordance with their Pro Rata Shares, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrowers while that Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
8.14      Benefit . The terms and conditions of this Article VIII are inserted for the sole benefit of Administrative Agent and Lenders; the same may be waived in whole or in part, with or without terms or conditions, without prejudicing Administrative Agent’s or Lenders’ rights to later assert them in whole or in part. The provisions of this Article VIII are solely among and for the benefit of Administrative Agent and the Lenders, and in no event shall any of the Borrowers be considered a party thereto or a beneficiary thereof (unless specifically provided otherwise herein) or have any additional obligations arising solely out of the provisions contained in this Article VIII .
8.15      Co-Agents; Lead Managers . None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “joint book runner”, “lead manager,” “arranger,” “joint lead arranger” or “co-arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified as a “syndication agent,” “documentation agent,” “co-agent” or “lead manager” shall have or be deemed to have any fiduciary relationship with any Lenders. Each Lender acknowledges that it has not relied, and will not rely, on any of Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
8.16      Lender Participation in Swap Transactions . If any Borrower enters into any Swap Transaction and Swap Contract with one or more Lenders, such Lender(s) shall notify each other then-existing Lender of the terms of each such Swap Transaction and each then-existing Lender (other than a Defaulting Lender) shall have the right in its sole discretion to participate in each such Swap Transaction pro rata according to such Lender’s Pro Rata Share of the amount of the applicable Swap Transaction. All such participation interests shall be governed pursuant to separate documentation.
8.17      Swap Contracts . Except as otherwise expressly set forth herein, no Hedge Bank that obtains the benefit of the provisions of Section 8.11 or any Collateral by virtue of the provisions hereof or any Loan Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) (or to notice of or to consent to any amendment, waiver or modification of the provisions hereof or any Loan Document) other than

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in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article VIII to the contrary, Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Swap Contracts except to the extent expressly provided herein and unless Administrative Agent has received a Secured Party Designation Notice with respect to the related Swap Obligations, together with such supporting documentation as Administrative Agent may request, from the applicable Hedge Bank. Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Swap Contracts.
8.18      Borrowers Not a Party . Except as expressly otherwise provided herein, the provisions of this Article 8 are solely among and for the benefit of Administrative Agent and the Lenders, and except as expressly otherwise provided herein, in no event shall Borrower be considered a party thereto or a beneficiary thereof or have any additional obligations arising solely out of the provisions contained in this Article 8 .
ARTICLE 9 - GENERAL TERMS AND CONDITIONS
9.1      Consents; Borrowers’ Indemnity . Except where otherwise expressly provided in the Loan Documents, in any instance where the approval, consent or the exercise of Administrative Agent’s or Lenders’ judgment is required under any Loan Document, the granting or denial of such approval or consent and the exercise of such judgment shall be (a) within the sole discretion of Administrative Agent or Lenders; (b) deemed to have been given only by a specific writing intended for the purpose given and executed by Administrative Agent or, to the extent applicable, Lenders; and (c) free from any limitation or requirement of reasonableness. Notwithstanding any approvals or consents by Administrative Agent or Lenders, neither Administrative Agent nor any Lender has any obligation or responsibility whatsoever for the adequacy, form or content of any appraisal, environmental, engineering, property condition or other inspection, audit, report or assessment, any contract, any change order, any lease, or any other matter incident to any Property. Any appraisal, inspection, audit, report or assessment of any Property or the books and records of any Borrower or Guarantor, or the procuring of documents and financial and other information, by or on behalf of Administrative Agent shall be for Administrative Agent’s and Lenders’ protection only, and shall not constitute an assumption of responsibility to any Borrower or anyone else with regard to the condition, value, construction, maintenance or operation of any Property, or relieve any Borrower or Guarantor of any of its obligations. NEITHER ADMINISTRATIVE AGENT NOR ANY LENDER SHALL BE LIABLE OR RESPONSIBLE FOR, AND BORROWERS SHALL INDEMNIFY ADMINISTRATIVE AGENT, EACH LENDER, AND EACH RELATED PARTY OF ADMINISTRATIVE AGENT AND EACH LENDER (COLLECTIVELY, THE “ INDEMNITEES ”) FROM AND AGAINST: (A) ANY CLAIM, ACTION, LOSS OR COST (INCLUDING ATTORNEYS’ FEES AND COSTS OF ADMINISTRATIVE AGENT AND, TO THE EXTENT PROVIDED UNDER SECTION 4.15, LENDERS) ARISING FROM, RELATING TO OR OTHERWISE IN CONNECTION WITH (I) THE LEASES, THE PROPERTIES, THE IMPROVEMENTS AND THE OTHER COLLATERAL, INCLUDING ANY DEFECT THEREIN, (II) THE PROTECTION, PRESERVATION, OPERATION, MANAGEMENT, IMPROVEMENT, MAINTENANCE, REPAIR, SALE AND

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DISPOSITION OF ANY PROPERTY AND OTHER COLLATERAL (INCLUDING THOSE WITH RESPECT TO REAL PROPERTY TAXES, INSURANCE PREMIUMS, AND LEASING COSTS AND BROKER FEES) OR (III) THE PERFORMANCE OF ANY OBLIGATION OF ANY BORROWER WHATSOEVER; (B) ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS OF ADMINISTRATIVE AGENT AND, TO THE EXTENT PROVIDED UNDER SECTION 4.15, LENDERS) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE IN ANY WAY RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH (I) ANY OF THE MATTERS DESCRIBED IN THE FOREGOING CLAUSE (A) , (II) THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF ANY LOAN DOCUMENT OR ANY OTHER AGREEMENT, LETTER OR INSTRUMENT DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, (III) ANY COMMITMENT OR THE LOAN, INCLUDING ALL CLAIMS BY ANY ACTUAL OR ALLEGED BROKER FOR ANY BORROWER OR ANY RELATED PARTY OF ANY BORROWER FOR BROKERAGE FEES IN CONNECTION WITH THE LOAN, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY (INCLUDING ANY INVESTIGATION OF, PREPARATION FOR, OR DEFENSE OF ANY PENDING OR THREATENED CLAIM, INVESTIGATION, LITIGATION OR PROCEEDING) AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, INCLUDING ALL COSTS AND EXPENSES INCURRED BY ANY INDEMNITEE IN CONNECTION WITH ANY SUBPOENA, DEPOSITION OR OTHERWISE ACTING AS A WITNESS; (C) ANY AND ALL CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTION ARISING OUT OF OR RELATING TO THE USE OF INFORMATION (AS DEFINED IN SECTION 9.6 ) OR OTHER MATERIALS OBTAINED THROUGH INTERNET, INTRALINKS OR OTHER SIMILAR INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT; AND (D) ANY AND ALL LIABILITIES, LOSSES, COSTS OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS OF ADMINISTRATIVE AGENT AND, TO THE EXTENT PROVIDED UNDER SECTION 4.15, LENDERS) THAT ANY INDEMNITEE SUFFERS OR INCURS AS A RESULT OF THE ASSERTION OF ANY FOREGOING CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR PROCEEDING, OR AS A RESULT OF THE PREPARATION OF ANY DEFENSE IN CONNECTION WITH ANY FOREGOING CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR PROCEEDING, IN ALL CASES, WHETHER OR NOT AN INDEMNITEE IS A PARTY TO SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR PROCEEDING AND WHETHER IT IS DEFEATED, SUCCESSFUL OR WITHDRAWN, (ALL OF THE FOREGOING, COLLECTIVELY, THE “ INDEMNIFIED LIABILITIES ”), INCLUDING IN WHOLE OR PART ANY LOSS ARISING OUT OF AN INDEMNITEES’ STRICT LIABILITY, OR COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE ; provided , however , that such

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indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. Nothing, including any advance or acceptance of any document or instrument, shall be construed as a representation or warranty, express or implied, to any party by Administrative Agent or Lenders. All payments on account of the Indemnified Liabilities shall be due and payable ten (10) Business Days after demand by Administrative Agent therefor. Subject to the provisions of Section 9.29 , the indemnities in this Section 9.1 shall not terminate upon the release, foreclosure or other termination of the Security Instruments but will survive the release, foreclosure of the Security Instruments or conveyance in lieu of foreclosure, the repayment of the Indebtedness, the discharge and release of the Security Instruments and the other Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever.
9.2      Miscellaneous .
9.2.1      Counterparts . This Agreement may be executed in several counterparts (and by different parties hereto in different counterparts), all of which are identical, and all of which counterparts together shall constitute one and the same instrument.
9.2.2      Effectiveness; Signature Copies . This Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Loan Documents, and all signed certificates and other documents delivered thereunder or in connection therewith, may be transmitted and/or signed by facsimile or e-mail transmission (e.g. “pdf” or “tif”). The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all parties to the Loan Documents. Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided , however , that the failure to request or deliver the same shall not limit the effectiveness of any facsimile or e-mail document or signature.
9.2.3      Electronic Signatures . The words “execute,” “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, or any other state laws based on the Uniform Electronic Transactions Act.
9.2.4      Severability . A determination that any provision of this Agreement or any other Loan Document 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 Agreement to any Person or circumstance is illegal or unenforceable shall not affect the enforceability or validity

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of such provision as it may apply to other Persons or circumstances. The parties shall endeavor in good faith negotiations to replace the unenforceable or invalid provisions with valid provisions the economic effect of which comes as close as possible to that of the unenforceable or invalid provisions. The unenforceability or invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 9.2.4 , if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by Administrative Agent, then such provisions shall be deemed to be in effect only to the extent not so limited.
9.2.5      Time of the Essence . Time shall be of the essence with respect to Borrowers’ obligations under the Loan Documents.
9.2.6      Governing Law . This Agreement and each other Loan Document (except to the extent expressly set forth therein), and their respective validity, enforcement and interpretation, shall be governed by the Laws of the State of California (without regard to any conflict of Laws principles) and applicable United States federal Law.
9.3      Notices .
9.3.1      Modes of Delivery; Changes . Except as otherwise provided herein, all notices, and other communications required or which any party desires to give under this Agreement or any other Loan Document shall be in writing. Unless otherwise specifically provided in such other Loan Document, all such notices and other communications shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service, by registered or certified United States mail, postage prepaid, or by facsimile (with, subject to Section 9.3.2 , a confirmatory duplicate copy sent by first class United States mail), addressed to the party to whom directed or by (subject to Section 9.3.3 ) electronic mail address to Borrowers, at the addresses set forth at the end of this Agreement or to Administrative Agent or Lenders at the addresses specified for notices on the Schedule of Lenders (unless changed by similar notice in writing given by the particular party whose address is to be changed). Any such notice or communication shall be deemed to have been given and received 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 , however , 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 9.3 shall not be construed in any way to affect or impair any waiver of notice or demand provided in any Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.
9.3.2      Limited Use of Electronic Mail . Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto, and for other purposes described herein, and may not be used for any other purpose.
9.3.3      Electronic Delivery . Each Borrower hereby acknowledges that (i) Administrative Agent and/or Arranger may, but shall not be obligated to, make available to the Lenders materials

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and/or information provided by or on behalf of Borrowers hereunder (collectively, “ Borrower Materials ”) by posting the Borrower Materials on Debt Domain, IntraLinks, Syndtrak or another similar electronic system (the “ Platform ”) and (ii) certain of the Lenders (each, a “ Public Lender ”) may have personnel who do not wish to receive material non-public information with respect to a Borrower or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Person’s securities. Each Borrower hereby agrees that so long as any Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (A) by marking Borrower Materials “PUBLIC,” each Borrower shall be deemed to have authorized Administrative Agent, Arranger and Lenders to treat such Borrower Materials as not containing any material non-public information with respect to any Borrower or its securities for purposes of United States Federal and state securities Laws ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 9.6 ); (B) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information,” and (C) Administrative Agent and Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information.” Notwithstanding the foregoing, no Borrower shall be under any obligation to mark any Borrower Materials “PUBLIC.”
9.3.4      Reliance by Administrative Agent and Lenders . Administrative Agent and Lenders shall be entitled to rely and act upon any notices (including telephonic Loan advance notices) purportedly given by or on behalf of Borrowers even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. Borrowers shall indemnify each Indemnitee from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of any Borrower. All telephonic notices to and other communications with Administrative Agent may be recorded by Administrative Agent, and each of the parties hereto hereby consents to such recording. If a Lender does not notify or inform Administrative Agent of whether or not it consents to, or approves of or agrees to any matter of any nature whatsoever with respect to which its consent, approval or agreement is required under the express provisions of this Agreement or with respect to which its consent, approval or agreement is otherwise requested by Administrative Agent, in connection with the Loan or any matter pertaining to the Loan, within ten (10) Business Days (or such longer period as may be specified by Administrative Agent) after such consent, approval or agreement is requested by Administrative Agent, Lender shall be deemed to have given its consent, approval or agreement, as the case may be, with respect to the matter in question.
9.4      Payments Set Aside . To the extent that any payment by or on behalf of any Borrower is made to Administrative Agent or any Lender, or Administrative Agent or any Lender exercises any right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Administrative Agent or such Lender in its discretion)

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to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law, to a depository (including Administrative Agent, any Lender or its or their Affiliates) for returned items or insufficient collected funds, or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.
9.5      Successors and Assigns .
(a)      Successors and Assigns Generally . Subject to Section 8.14 , the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 9.5(b) , (ii) by way of participation in accordance with the provisions of Section 9.5(d) , or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 9.5(e) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent permitted in Section 9.5(d) and, to the extent expressly contemplated hereby, the Related Parties of each of Administrative Agent and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)      Assignments by Lenders . Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and Pro Rata Share of the Loan at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i)      Minimum Amounts .
(A)      in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and Pro Rata Share of the Loan at the time owing to it or contemporaneous assignments to related Approved Funds that equal at least the amount specified in Section 9.5(b)(i)(B) in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B)      in any case not described in Section 9.5(b)(i)(A) , the aggregate amount of the Commitment (which for this purpose includes the Pro Rata Share of the Loan outstanding) or, if the Commitment is not then in effect, the principal outstanding Pro Rata Share of the Loan that is subject to each such assignment, determined as of the date the “Effective Date” specified in the Assignment and

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Assumption, shall not be less than $10,000,000 unless each of Administrative Agent and, so long as no Default has occurred and is continuing, Borrowers otherwise consent (each such consent not to be unreasonably withheld or delayed), and, with respect to the consent of Borrowers, shall be deemed given if Administrative Agent does not receive a written disapproval from Borrowers within five (5) Business Days after delivery of any request for consent.
Borrowers shall not be required to (a) execute any documents in connection with any such assignment that expand any of the obligations of Borrowers hereunder or under any of the other Loan Documents or create any additional covenants, representations or warranties of any Borrower hereunder or thereunder, or (b) provide any representations or warranties confirming the accuracy of any information or otherwise.
(ii)      Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to its Pro Rata Share of the Loan and the Commitment assigned.
(iii)      Required Consents . No consent shall be required for any assignment except to the extent required by Section 9.5(b)(i)(B) and, in addition:
(A)      the consent of Borrowers shall be required (such consent not to be unreasonably withheld or delayed; it being understood and agreed that it shall be reasonable for Borrowers to withhold their consent if, as a result of such assignment (X) Borrowers will be required to make additional payments in respect of Indemnified Taxes as provided in Section 2.1 , (Y) Borrowers demonstrate to Administrative Agent’s reasonable satisfaction that, in the future, Borrowers will likely be required to make additional payments in respect of Indemnified Taxes as provided in Section 2.1 , or (Z) any such assignment would result in a termination of any Swap Contract that Borrower or Guarantor is a party to; provided that Borrowers shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to Administrative Agent within five (5) Business Days after having received notice thereof, and provided , further , that Borrowers’ consent shall not be required during the primary syndication of the Loan to Wells Fargo Bank, National Association, and U.S. Bank, National Association), unless (1) a Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and
(B)      the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender.
(iv)      Assignment and Assumption . The parties to each assignment shall execute and deliver to Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided , however , that Administrative Agent may, in its sole discretion, elect to waive such processing and

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recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to Administrative Agent an Administrative Details Reply Form.
(v)      No Assignment to Certain Persons . No such assignment shall be made (A) to any Borrower, Guarantor or any other Person liable for any part of the Obligations or any of Affiliate or Subsidiary of the foregoing, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B) , or (C) to a natural Person.
(vi)      Certain Additional Payments . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of Borrower and Administrative Agent, the applicable Pro Rata Share of the Loan previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full Pro Rata Share of the Loan. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this Section 9.5(b) , then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by Administrative Agent pursuant to Section 9.5(c) , from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of this Agreement with respect to Borrowers’ obligations surviving termination of this Agreement); provided , that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Upon request by Administrative Agent, each Borrower (at its expense to the extent that the expenses of Borrowers do not exceed $10,000) shall execute and deliver substitute Note(s) to Administrative Agent for the assignee, and, for partial assignments, the assignor in replacement of the assignor’s then-existing Note (each, a “ Replacement Note ”). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.5(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.5(d) . For purposes of clarification and notwithstanding any provision to the contrary,

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if Borrowers’ expenses relating to a Replacement Note exceed $10,000, such expenses exceeding $10,000 shall be borne by the Lender or Lenders receiving replacement notes pro rata in accordance with such Lenders’ Pro Rata Shares.
(c)      Register . Administrative Agent, acting solely for this purpose as an agent of Borrowers (and such agency being solely for tax purposes), shall maintain at Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of Lenders, and the Commitments of, and the principal amount (and stated interest) of each Lender’s Pro Rata Share of the Loan owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and Borrowers, Administrative Agent and Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior written notice.
(d)      Participations . Any Lender may at any time, without the consent of, or notice to, any Borrower or Administrative Agent, sell participations to any Person (other than a natural Person, a Defaulting Lender, any Borrower, Guarantor or any Affiliate or Subsidiary of any Borrower or Guarantor) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or its Pro Rata Share of the Loan owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrowers, Administrative Agent and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 8.7 without regard to the existence of any participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the second proviso of Section 9.9 that affects such Participant. Each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.1 , 2.4 and 2.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.5(b) (it being understood that the documentation required under Section 2.1(e) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.5(b) ; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.6 and 9.12 as if it were an assignee under Section 9.5(b) and (B) shall not be entitled to receive any greater payment under Section 2.1 or 2.4 , with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at Borrowers’ written request, to use reasonable efforts to cooperate with

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Borrowers to effectuate the provisions of Section 2.6 with respect to any Participant. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 9.7 as though it were a Lender; provided that such Participant agrees to be subject to Section 9.8 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amount (and stated interest) of each Participant’s interest in the Loan or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e)      Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
9.6      Confidentiality . Administrative Agent and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section 9.6 , to (i) any assignee of or participant in, pledgee of or assignee of a security interest in, or any prospective assignee of or participant in, or pledgee of or assignee of a security interest in, any of its rights or obligations under this Agreement, or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any Swap Transaction or credit derivative transaction relating to obligations of any Borrower or Guarantor; (g) with the consent of Borrowers; or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.6 or (ii) becomes available to Administrative Agent or any Lender on a nonconfidential basis from a source other than a Borrower. For the purposes of this Section 9.6 , “ Information ” means all information received from any Borrower or Guarantor relating to any Borrower or Guarantor or their business, other than any such information that is available to Administrative Agent or any

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Lender on a nonconfidential basis prior to disclosure by a Borrower or Guarantor; provided that in the case of information received from any Borrower or Guarantor after the Closing Date, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 9.6 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Administrative Agent and Lenders may disclose the existence of this Agreement and the other Loan Documents and information about this Agreement and the other Loan Documents to market data collectors, similar service providers to the lending industry, and service providers to Administrative Agent and Lenders in connection with the administration and management of this Agreement, the Loan and Loan Documents.
9.7      Set-off . In addition to any rights and remedies of Administrative Agent and Lenders provided by Law, upon the occurrence and during the continuance of any Default, Administrative Agent and, with the prior written consent of Administrative Agent, each Lender, is authorized at any time and from time to time, without prior written notice to Borrowers, any such notice being waived by each Borrower, to set-off and apply any and all deposits, general or special, time or demand, provisional or final, any time owing by Administrative Agent or Lenders hereunder or under any other Loan Document to or for the credit or the account of such parties to the Loan Documents against any and all Indebtedness, irrespective of whether or not Administrative Agent or Lenders shall have made demand under this Agreement or any other Loan Document and although such Indebtedness may be contingent or unmatured or denominated in a currency different from that of the applicable depositor indebtedness. Each Lender agrees promptly to notify any applicable Borrower and Administrative Agent after any such set off and application made by such Lender; provided , however , that the failure to give such notice shall not affect the validity of such set off and application.
9.8      Sharing of Payments . If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the portions of the Loan advanced by it, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the portions of the Loan made by them as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such portions of the Loan or such participations, as the case may be, pro rata with each of them; provided , however , that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered without further interest thereon. Each Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by Law, exercise all of its rights of payment (including the right of set-off), but subject to Section 9.7 with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. Administrative Agent will keep

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records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 9.8 and will in each case notify Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 9.8 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
9.9      Amendments; Survival . Administrative Agent and Lenders shall be entitled to amend (whether pursuant to a separate intercreditor agreement or otherwise) any of the terms, conditions or agreements set forth in Article 8 or as to any other matter in the Loan Documents respecting payments to Administrative Agent or Lenders or the required number of Lenders to approve or disapprove any matter or to take or refrain from taking any action, without the consent of any Borrower or any other Person or the execution by any Borrower or any other Person of any such amendment or intercreditor agreement. Subject to the foregoing, Administrative Agent may amend or waive any provision of this Agreement or any other Loan Document, or consent to any departure by any party to the Loan Documents therefrom which amendment, waiver or consent is intended to be within Administrative Agent’s discretion or determination, or does not relate to a monetary or material non-monetary provision or term of the Loan Documents); provided , however , that otherwise no such amendment, waiver or consent shall be effective unless in writing, signed by the Required Lenders and any applicable Borrower or the applicable party to the Loan Documents, as the case may be, and acknowledged by Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; and provided , further , that no such amendment, waiver or consent shall:
(a)      extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 7.2 ), without the written consent of such Lender (it being understood that a waiver of a Default shall not constitute an extension or increase in any Lender’s Commitment);
(b)      postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to Lenders (or any of them) hereunder or under any other Loan Document, without the written consent of each Lender directly affected thereby;
(c)      reduce the principal of, or the rate of interest specified herein on, any portion of the Loan, or any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender directly affected thereby; provided , however , that Administrative Agent may waive any obligation of Borrowers to pay interest at the Default Rate and/or late charges for periods of up to thirty (30) days, and only the consent of the Required Lenders shall be necessary to waive any obligation of Borrowers to pay interest at the Default Rate or late charges thereafter, or to amend the definition of “Default Rate” or “late charges”;
(d)      change the percentage of the combined Commitments or of the aggregate unpaid principal amount of the Loan which is required for the Lenders or any of them to take any action hereunder, without the written consent of each Lender;

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(e)      change the definition of “ Pro Rata Share ” or “ Required Lenders ” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
(f)      amend this Section 9.9 , or Section 9.8 , without the written consent of each Lender;
(g)      permit the sale, transfer, pledge, mortgage or assignment of any Collateral or any direct or indirect interest in any Borrower, except as expressly permitted under the Loan Documents, without the written consent of each Lender;
(h)      transfer or release any lien on, or after foreclosure or other acquisition of title by Administrative Agent on behalf of the Lenders transfer or sell, any Collateral except as permitted in Section 8.10 , without the prior written consent of each Lender; or
(i)      release the liability of any Borrower or any existing Guarantor without the written consent of each Lender, except as expressly provided for herein;
and provided , further , that no amendment, waiver or consent shall, unless in writing and signed by Administrative Agent in addition to the Lenders required above, affect the rights or duties of Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.
This Agreement shall continue in full force and effect until the Indebtedness is paid in full and all of Administrative Agent’s and Lenders’ obligations under this Agreement are terminated; and all representations and warranties and all provisions herein for indemnity of the Indemnitees, Administrative Agent and Lenders (and any other provisions herein specified to survive) shall survive the resignation or removal of Administrative Agent, any assignment of rights by, or the replacement of, any Lender, the termination of the Commitments, the termination of this Agreement and the repayment, satisfaction or discharge of all other Obligations.
9.10      Several Obligations; No Liability; No Release . Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, (a) the obligations of Lenders hereunder to make Loan advances and to make payments pursuant to Sections 8.7 and 8.12 are several and not joint and (b) such obligations are and shall remain the several, and not joint, obligations of Lenders despite that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Administrative Agent in its capacity as such, and not by or in favor of Lenders. The failure of any Lender to make any Loan advance or to make any payment under Section 8.7 or 8.12 on any date required hereunder shall not relieve any other Lender of its

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corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan advance or to make its payment under Section 8.7 or 8.12 . Except as may be specifically provided in this Agreement, no Lender shall have any liability for the acts of any other Lender. No Lender shall be responsible to any Borrower or any other Person to take any action on behalf of another Lender hereunder or in connection with the financing contemplated herein. In furtherance of the foregoing, Lenders shall comply with their obligations under the Loan Documents, including the obligations to make payments pursuant to Sections 8.7 and 8.12 regardless of (i) the occurrence of any Default hereunder or under any Loan Document; (ii) any failure of consideration, absence of consideration, misrepresentation, fraud, or any other event, failure, deficiency, breach or irregularity of any nature whatsoever in the Loan Documents; or (iii) any bankruptcy, insolvency or other like event with regard to any Borrower or Guarantor. Such obligations of Lenders are in all regards independent of any claims between Administrative Agent and any Lender.
9.11      [ Intentionally Omitted .]
9.12      Replacement of Lenders . If Borrowers are entitled to replace a Lender pursuant to the provisions of Section 2.6 , or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then Borrowers may, so long as no Default has occurred and is continuing, at their sole expense and effort, upon notice to such Lender and Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.5 ), all of its interests, rights (other than its existing rights to payments pursuant to Sections 2.1 and 2.4 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a)      Borrowers shall have paid to Administrative Agent the assignment fee (if any) specified in Section 9.5(b) and the other conditions set forth in Section 9.5(b) shall have been satisfied;
(b)      such Lender shall have received payment of an amount equal to the Principal Debt owing to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.5 ) from the assignee (to the extent of such Principal Debt and accrued interest and fees) or Borrowers (in case of all other amounts);
(c)      in the case of any such assignment resulting from a claim for compensation under Section 2.4 or payments required to be made pursuant to Section 2.1 , such assignment will result in a reduction in such compensation or payments thereafter; and
(d)      such assignment does not conflict with applicable Laws; and
(e)      in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

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A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrowers to require such assignment and delegation cease to apply.
9.13      Further Assurances . Each Borrower will, upon Administrative Agent’s request, (a) promptly correct any defect, error or omission in any Loan Document; (b) execute, acknowledge, deliver, procure, record or file such further instruments and do such further acts as Administrative Agent deems reasonably necessary, reasonably desirable or reasonably proper to carry out the purposes of the Loan Documents and to identify and subject to the liens and security interest of the Loan Documents any property intended to be covered thereby, including any renewals, additions, substitutions, replacements, or appurtenances to any Property; (c) execute, acknowledge, deliver, procure, file or record any document or instrument Administrative Agent deems reasonably necessary, desirable, or proper to protect the liens or the security interest under the Loan Documents against the rights or interests of third persons; and (d) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts deemed reasonably necessary, reasonably desirable or reasonably proper by Administrative Agent or any Lender to comply with the requirements of any Governmental Authority having jurisdiction over Administrative Agent or such Lender. In addition, at any time, and from time to time, upon written request by Administrative Agent or, subject to the provisions of Section 4.8(e) , any Lender, each Borrower will, at Borrowers’ expense, provide any and all further instruments, certificates and other documents as may, in the reasonable opinion of Administrative Agent or such Lender, be reasonably necessary or reasonably desirable in order to verify any Borrower’s identity and background in a manner reasonably satisfactory to Administrative Agent or such Lender.
9.14      Inducement to Lenders . The representations, warranties, covenants, and agreements contained in this Agreement and the other Loan Documents (a) are made to induce Lenders to make the Loan and extend any other credit to or for the account of Borrowers pursuant hereto, and Administrative Agent and Lenders are relying thereon, and will continue to rely thereon, and (b) shall survive any foreclosure, any conveyance in lieu of foreclosure, or any proceedings under any Debtor Relief Law involving any Borrower, Guarantor or any Property.
9.15      Forum . Each Borrower hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the non-exclusive jurisdiction of any state court, or any United States federal court, sitting in the State specified in Section 9.2 of this Agreement and to the non-exclusive jurisdiction of any state court or any United States federal court, sitting in the state in which any Property is located, over any suit, action or proceeding arising out of or relating to this Agreement, the other Loan Documents or the Obligations. Each Borrower hereby irrevocably waives, to the fullest extent permitted by Law, any objection that they 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. Each Borrower 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 Section 9.2 may be made by certified or registered mail, return receipt requested, directed to such party at its address for notice stated in the Loan Documents, or at a subsequent address of which Administrative Agent received actual notice from Borrowers in accordance with the Loan Documents, and service so

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made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Administrative Agent to serve process in any manner permitted by Law or limit the right of Administrative Agent to bring proceedings against any party in any other court or jurisdiction.
9.16      Interpretation . References to Articles, Sections, and Exhibits are, unless specified otherwise, references to articles, sections and exhibits of this Agreement. Captions and headings in the Loan Documents are for convenience only and shall not affect the construction of the Loan Documents. All references (a) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, and (b) to any Land, any Improvements or any Property shall mean all or any portion of each of the foregoing, respectively. References to “ Dollars ,” “ $ ,” “ money ,” “ payments ” or other similar financial or monetary terms are references to lawful money of the United States of America. Words of any gender shall include each other gender. Words in the singular shall include the plural and words in the plural shall include the singular. References to any Borrower or Guarantor shall mean, each Person comprising same, jointly and severally. The words “ herein ,” “ hereof ,” “ hereunder ” and other similar compounds of the word “ here ” shall refer to this entire Agreement (including the attached exhibits) and not to any particular Article, Section, paragraph or provision. The terms “ agree ” and “ agreements ” mean and include “ covenant ” and “ covenants ”. The words “ include ” and “ including ” shall be interpreted as if followed by the words “ without limitation ”.
9.17      No Partnership, etc . The relationship between Lenders (including Administrative Agent) and each Borrower is solely that of lender and borrower. Neither Administrative Agent nor any Lender has any fiduciary or other special relationship with or duty to any Borrower and none is created by the Loan Documents. Nothing contained in the Loan Documents, and no action taken or omitted pursuant to the Loan Documents, is intended or shall be construed to create any partnership, joint venture, association, or special relationship between any Borrower and Administrative Agent or any Lender or in any way make Administrative Agent or any Lender a co-principal with any Borrower with reference to any Property or otherwise. In no event shall Administrative Agent’s or Lenders’ rights and interests under the Loan Documents be construed to give Administrative Agent or any Lender the right to control, or be deemed to indicate that Administrative Agent or any Lender is in control of, the business, properties, management or operations of any Borrower.
9.18      Commercial Purpose . Each Borrower warrants that the Loan is being made solely to acquire or carry on a business or commercial enterprise, and/or Borrower is a business or commercial organization. Each Borrower further warrants that all of the proceeds of the Loan shall be used for commercial purposes and stipulates that the Loan shall be construed for all purposes as a commercial loan, and is made for other than personal, family, household or agricultural purposes.
9.19      Usury . It is expressly stipulated and agreed to be the intent of each Borrower, Administrative Agent and Lenders at all times to comply with applicable state Law or applicable United States federal Law (to the extent that it permits a Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under state Law) and that this Section 9.19 shall control every other covenant and agreement in this Agreement, the Notes and the other Loan Documents.

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If applicable state or federal Law should at any time be judicially interpreted so as to render usurious any amount called for under any of the Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Loan, or if Administrative Agent’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 Administrative Agent’s and each Lender’s express intent that all excess amounts theretofore collected by Administrative Agent or any Lender shall be credited on the Principal Debt and all other Indebtedness and the provisions of the 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 Lenders for the use, forbearance, or detention 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.
9.20      WAIVER OF JURY TRIAL . 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 AGREEMENT, THE NOTES, THE DEED OF TRUST, 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 OR ANY OTHER AGREEMENT, AND FURTHER AGREES THAT SUCH PARTY SHALL NOT SEEK TO 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, ADMINISTRATIVE AGENT 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

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SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
9.21      Service of Process . Each Borrower hereby irrevocably designates and appoints Todd Smith 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 the Loan in any state or federal court sitting in the State of California. If such agent shall cease so to act, each Borrower shall irrevocably designate and appoint without delay another such agent reasonably satisfactory to Administrative Agent and shall promptly deliver to Administrative Agent 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 the Loan 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 hereinabove designated and appointed by each 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 herein or in any other Loan Document shall (i) affect the right of Administrative Agent to serve process in any manner otherwise permitted by Law or (b) limit the right of Administrative Agent on behalf of the Lenders otherwise to bring proceedings against any Borrower in the courts of any jurisdiction or jurisdictions.
9.22      No Delays; Defaults . No delay or omission of Administrative Agent or Lenders to exercise any right, power or remedy accruing upon the happening of a Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Default or any acquiescence therein. No delay or omission on the part of Administrative Agent or Lenders to exercise any option for acceleration of the maturity of the Indebtedness, or for foreclosure of any Security Instrument following any Default as aforesaid, or any other option granted to Administrative Agent and Lenders hereunder in any one or more instances, or the acceptances by Administrative Agent or Lenders of any partial payment on account of the Obligations, shall constitute a waiver of any such Default, and each such option shall remain continuously in full force and effect. No remedy herein conferred upon or reserved to Administrative Agent and/or Lenders is intended to be exclusive of any other remedies provided for in any Note or any of the other Loan Documents, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder, or under any Note or any of the other Loan Documents, or now or hereafter existing at Law or in equity or by statute. Every right, power and remedy given to Administrative Agent and Lenders by this Agreement, any Note or any of the other Loan Documents shall be concurrent, and may be pursued separately, successively or together against any Borrower, Guarantor, any other Person liable for any part of the Obligations, any Property, or any other Collateral, and every right, power and remedy given by this Agreement, any Note or any of the other Loan Documents may be exercised from time to time as often as may be deemed expedient by the Required Lenders. No application of payments will cure any Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of Administrative Agent and Lenders hereunder or thereunder or at Law or in equity.

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9.23      USA Patriot Act; KYC Notice . Each Lender that is subject to the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”) and the regulations implemented by the U.S. Treasury’s Financial Crimes Enforcement Network (“ FinCen ”) under the Bank Secrecy Act (“ Additional KYC Regulations ”) and Administrative Agent (for itself and not on behalf of any Lender) hereby notify Borrower that pursuant to the requirements of the Patriot Act and the Additional KYC Regulations, they are required to obtain, verify and record information that identifies any Borrower. Such information includes, but is not limited to, the name and address of such Borrower and a list of individuals, if any, who own directly or indirectly at least twenty-five percent (25%) of such Borrower (or such lesser equity interest as may be required by applicable Law or as may be reasonably required by the internal policy of any Lender or Administrative Agent), the identification of one individual who manages and Controls such Borrower, organizational information on the ultimate parent of such Borrower, and such other documentation and information that will allow each Lender and Administrative Agent, as applicable, to identify such Borrower in accordance with the Patriot Act and Additional KYC Regulations. Each Borrower shall, promptly following a request by Administrative Agent or any Lender, provide all documentation and other information that Administrative Agent or such Lender reasonably requests in order to comply with its internal policy and its ongoing obligation under “know your customer” and anti-money laundering rules and regulations, including the Patriot Act and the Additional KYC Regulations.
9.24      Entire Agreement . The Loan Documents constitute the entire understanding and agreement between and among Borrowers, Administrative Agent and Lenders with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between and among Borrowers, Administrative Agent and Lenders with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment letter, letter of intent or quote letter by Administrative Agent or any Lender to make the Loan are merged into the Loan Documents. Neither Administrative Agent nor any Lender has made any commitments to extend the term of the Loan past its stated maturity date or to provide any Borrower with financing except as set forth in the Loan Documents. Except as incorporated in writing into the Loan Documents, there are not, and were not, and no Persons are or were authorized by Administrative Agent or any Lender to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
EACH BORROWER FURTHER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY OR ON BEHALF OF ADMINISTRATIVE AGENT OR LENDERS WITH RESPECT TO THIS AGREEMENT, THE NOTES OR OTHERWISE IN RESPECT OF THE LOAN, ANY AND EVERY RIGHT SUCH BORROWER MAY HAVE TO (X) INJUNCTIVE RELIEF, (Y) INTERPOSE ANY COUNTERCLAIM THEREIN, OTHER THAN A COMPULSORY COUNTERCLAIM, AND (Z) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING CONTAINED IN THE IMMEDIATELY PRECEDING SENTENCE SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST LENDER WITH RESPECT TO ANY ASSERTED CLAIM.

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9.25      Limitation on Liability . To the fullest extent permitted by applicable Law, no Borrower shall assert, and each Borrower hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnitee, on any theory of liability, for special, indirect, incidental, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, the Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
9.26      Third Parties; Benefit . All conditions to the obligation of Lenders or Administrative Agent to make advances hereunder are imposed solely and exclusively for the benefit of Lenders, Administrative Agent and their assigns and no other Persons shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lenders or Administrative Agent will refuse to make advances in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be the beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lenders or Administrative Agent at any time in the sole and absolute exercise of their discretion. Subject to Section 8.14 , the provisions of this Agreement and, except to the extent expressly set forth therein, each other Loan Document, are for the sole benefit of Administrative Agent, Lenders and each Borrower, and no other Person shall have any right or cause of action on account thereof or interest therein.
9.27      Other Transactions . In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Borrower acknowledges and agrees, and acknowledges Guarantor’s and each Borrower’s other Affiliates’ understanding, that: (a) (i) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arranger, and the Lenders are arm’s-length commercial transactions between Borrowers, Guarantor and their respective Affiliates, on the one hand, and Administrative Agent, the Arranger, and the Lenders, on the other hand, (ii) each Borrower and Guarantor has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) each Borrower and Guarantor is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (b) (i) Administrative Agent, the Arranger and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Borrower, Guarantor or any of their respective Affiliates, or any other Person and (ii) neither Administrative Agent, the Arranger, nor any Lender has any obligation to any Borrower, Guarantor or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (c) Administrative Agent, the Arranger, the Lenders and their respective Affiliates may be engaged in

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a broad range of transactions that involve interests that differ from those of Borrowers, Guarantor and their respective Affiliates, and neither Administrative Agent, the Arranger, nor any Lender has any obligation to disclose any of such interests to any Borrower, Guarantor or any of their respective Affiliates. To the fullest extent permitted by law, each Borrower and Guarantor hereby waives and releases any claims that it may have against Administrative Agent, the Arranger or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
9.28      Limited Recourse Provision . Neither Administrative Agent nor any Lender shall have any 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 any Borrower 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 Administrative Agent’s and each Lender’s right to exercise any rights or remedies against any collateral securing the Loan.
9.29      Releases and Reconveyances of Properties .
(a)      At the request of a Borrower, which request shall be delivered to Administrative Agent in writing not less than thirty (30) days prior to the date of any proposed release or reconveyance (or, if such release or reconveyance is requested in connection with a substitution of an Add-On Property for the released Property, such period of time as is reasonably required for Administrative Agent and the Required Lenders to confirm that all of the conditions precedent to the inclusion of such Add-On Property in the Collateral have been satisfied in accordance with Section 9.30 , below) Administrative Agent shall promptly issue a release or reconveyance (as applicable) from the lien of a Security Instrument the entirety of the Property encumbered thereby so long as all of the following conditions are satisfied at the time of, and with respect to, the release or reconveyance:
(i)      No Default or Potential Default shall have occurred and be continuing;
(ii)      Administrative Agent shall have been paid, in immediately available funds, the cost of preparing and delivering the release or reconveyance and of any title insurance endorsements reasonably required by Administrative Agent (to the extent available); and
(iii)      Administrative Agent shall have been paid, in immediately available funds (which funds may be Borrowers’ own funds and not necessarily proceeds from the sale or other transfer of the applicable Property), for the ratable benefit of Lenders, the Release Price for the applicable Property being released, provided , however , that no such Release Price shall be required in connection with the substitution of such released Property with an Add-On Property pursuant to Section 9.30 , below, where (A) the value of such Add-On Property (as determined by the appraisal delivered pursuant to Section 9.30 ) is sufficient to maintain the applicable Loan-to-Value requirement set forth in the definition of Release Price, and (B) the Net Operating Income applicable to such Add-On Property for the Calculation Period ending on the then most recent Test Date is sufficient to achieve the

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applicable Ongoing Debt Service Coverage Requirement set forth in the definition of Release Price; and
(iv)      If such release or reconveyance is requested in connection with a substitution of an Add-On Property for the released Property, all conditions precedent to the inclusion of such Add-On Property in the Collateral in accordance with Section 9.30 below shall have been satisfied; and
(v)      After giving effect to the release of such Property, no fewer than two (2) Properties shall remain encumbered by the lien of the Security Instruments.
(b)      Any Release Price received by Administrative Agent under this Section 9.29 shall be applied to reduce the outstanding principal balance of the Loan in accordance with Section 1.5 . If Administrative Agent accepts any payment or issues any release or reconveyance, that shall not affect Borrowers’ obligation to repay all amounts which are owing under the Loan Documents or secured by a Security Instrument on the remaining Property which is not released or reconveyed. If Administrative Agent does not require satisfaction of all of the conditions described above before releasing any Property from the lien of a Security Instrument, that alone shall not be a waiver of such conditions with respect to the release of any additional Property, and Administrative Agent reserves the right to require their satisfaction in full before releasing any additional Property from the lien of a Security Instrument.
(c)      Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, if after giving effect to the release of any Property the Borrower that was the owner of such released Property does not then own any other Property, then such Borrower shall be unconditionally and automatically released from any and all further liability under this Agreement or the other Loan Documents, and Administrative Agent agrees to provide such Borrower, upon request, written evidence of such release concurrently with the release or reconveyance of the applicable Security Instrument; provided, however, the release of such Borrower’s obligations under the Environmental Agreement executed by such Borrower shall be subject to the provisions of Section 7 of such Environmental Agreement.
(d)      Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, upon repayment, in full, of the outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other amounts then due and payable under the terms of this Agreement or any of the other Loan Documents (the “ Payoff ”), then Borrowers shall be unconditionally and automatically released from any and all further liability under this Agreement or the other Loan Documents (other than the obligation, if any, under Section 9.1 to indemnify Administrative Agent and Lenders with respect to any action, cause of action or other claim for any Indemnified Liability asserted against any Borrower in writing on or prior to the date of the Payoff), and Administrative Agent agrees to provide Borrowers, upon request, written evidence of such release concurrently with the Payoff; provided, however, the release of each Borrower’s obligations under the Environmental Agreement executed by such Borrower shall be subject to the provisions of Section 7 of such Environmental Agreement.

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9.30      Additions/Substitutions of Properties to the Collateral . Borrowers may request, at any time and from time to time, to add any property owned in fee or leased pursuant to a ground lease by an Eligible Entity (each such property, an “ Add-On Property ”) to the Collateral and to join such Eligible Entity as a Borrower hereunder, subject to satisfaction of each of the following conditions precedent (in addition to those in any other applicable provision hereof):
(a)      There shall exist no Default or Potential Default; and
(b)      Administrative Agent shall have received and approved all of the following:
(i)      A Joinder Agreement in the form attached hereto as Exhibit “M” , executed by the Eligible Entity and all Borrowers then a party to this Agreement;
(ii)      A Security Instrument encumbering such Add-On Property in the appropriate form based on the jurisdiction in which the Add-On Property is located, executed by the Eligible Entity in favor of Administrative Agent for its benefit and the benefit of the Lenders, in form and substance substantially similar to the form of the Security Instruments executed and delivered on the Closing Date;
(iii)      An Environmental Agreement covering such Add-On Property executed by the Eligible Entity in favor of Administrative Agent for its benefit and the benefit of the Lenders, in form and substance substantially similar to the form of the Environmental Agreements executed and delivered on the Closing Date;
(iv)      A UCC-1 Financing Statement covering any and all personal property included in the Add-On Property; and
(v)      Such other documents, instruments and agreements relating to the Add-On Property that Administrative Agent may reasonably require; and
(c)      After giving effect to the inclusion of the Add-On Property in the Collateral, the Ongoing Debt Service Coverage Ratio as of the most recent Test Date shall be no less than 1.30:1.00 (calculated to include the Net Operating Income attributable to such Add-On Property and any increase in the Aggregate Commitments permitted by Lenders in accordance with Section 1.3.5 ); and
(d)      After giving effect to the inclusion of the Add-On Property in the Collateral (and any increase in the Aggregate Commitments permitted by Lenders in accordance with Section 1.3.5 ), the Loan-to-Value Ratio of all the Properties shall be not more than sixty-five percent (65%) (based upon the appraisal for the Add-On Property obtained pursuant to clause (f), below, and the most recent appraisals of the existing Properties, which appraisals must be dated no earlier than six (6) months prior to the date of the proposed addition); and
(e)      The Security Instrument encumbering the Add-On Property shall be a valid lien upon such Add-On Property and be prior and superior to all other Liens thereon except the Permitted Liens, and Administrative Agent shall have received Title Insurance insuring the Lien of the Security Instrument that encumbers the Add-On Property that complies with the requirements of Section 8 of Exhibit “C” ; and

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(f)      Administrative Agent shall have received and approved the following, each in Administrative Agent’s reasonable discretion: (i) a written appraisal for the Add-On Property; (ii) evidence of the insurance coverage required under this Agreement with respect to the Add-On Property; (iii) a flood certification with respect to the Add-On Property and completion Administrative Agent’s and each Lender’s internal flood compliance procedures; (iv) a physical condition report with respect to the Add-On Property, (v) a zoning condition report with respect to the Add-On Property, (vi) a phase-1 environmental site assessment (and, if recommended therein, a phase-2 environmental site assessment) with respect to the Add-On Property; and (vii) if reasonably requested by Administrative Agent, any seismic reports relating to the Add-On Property; and
(g)      Administrative Agent shall have received evidence that the Eligible Entity is in good standing in its state of formation and states where it conducts business; and
(h)      Administrative Agent shall have received and approved organizational documents, resolutions, certificates and consents with respect the Eligible Entity and such other related entities as Administrative Agent may reasonably require, including, without limitation, a certification as to the Eligible Entity’s tax identification number; and
(i)      Borrowers have delivered to Administrative Agent, at Borrowers’ expense, an opinion (or opinions) of legal counsel in form and content reasonably satisfactory to Administrative Agent to the effect that: (i) upon due authorization, execution and recordation or filing as may be specified in the opinion, each of the Loan Documents to which it is a party shall be legal, valid and binding instruments, enforceable against the Eligible Entity in accordance with their respective terms, except as may be limited by (1) bankruptcy, insolvency, or other similar laws affecting the rights of creditors generally, and (2) general principles of equity (regardless of whether considered in a proceeding in equity or at law); (ii) the Eligible Entity is duly formed and has all requisite authority to enter into the Loan Documents to which it is a party; and (iii) as to such other matters, incident to the transactions contemplated hereby, as Administrative Agent may reasonably request; and
(j)      Administrative Agent shall have received a current survey of the Add-On Property, certified to Administrative Agent and the Title Company, showing the boundaries of the Add-On Property by courses and distances, together with corresponding metes and bounds description, the actual or proposed location of all improvements, encroachments and restrictions, the location and width of all easements, utility lines, rights-of-way and building set-back lines, and notes referencing book and page numbers for the instruments granting same; and
(k)      Administrative Agent shall have received and approved updated “tie-in” endorsements to all existing Title Insurance which shall include a reference to the Title Insurance to be issued in connection with the Add-On Property, if available; and
(l)      Administrative Agent shall have received and approved any ground lease affecting the Add-On Property and a ground lessor estoppel from the ground lessor under such ground lease; and

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(m)      To the extent required by Administrative Agent, the Eligible Entity shall have delivered to Administrative Agent fully executed and acknowledged subordination, non-disturbance and attornment agreements, in form and content reasonably satisfactory to Administrative Agent, with respect to such Leases of spaces in the Add-On Property as Administrative Agent may require; and
(n)      The Eligible Entity shall have delivered to Administrative Agent tenant estoppel certificates from tenants under Leases covering in the aggregate at least 75% of the square footage for the Add-On Property; and
(o)      Administrative Agent shall have received and approved litigation, judgment, tax lien and bankruptcy searches for the Eligible Entity and such other Affiliates of the Eligible Entity as Administrative Agent shall reasonably determine;
(p)      Administrative Agent shall have received and approved such other due diligence information relating to the Eligible Entity or the Add-On Property as Administrative Agent may reasonably require; and
(q)      Administrative Agent shall have received the consent of the Required Lenders and the Arrangers to the inclusion of the Add-On Property in the Collateral, which consent shall be in each Required Lender’s and each Arranger’s sole and absolute discretion.
9.31      Additional Representations .
(a)      On each date on which a Swap Transaction is entered into, each Borrower will be deemed to represent to Administrative Agent and Lenders that such Borrower is a Qualified ECP Borrower (or if any Affiliate of any Borrower entered into such Swap Transaction, that each such Affiliate is a Qualified ECP Borrower (assuming for this purpose only that such Affiliate was a “Borrower” hereunder).
(b)      On each date on which a Swap Transaction is entered into, each guarantor, if any, of any such Borrower’s (or any such Affiliate’s) Swap Obligations that are included as part of the indebtedness and/or obligations the payment and/or performance of which are guaranteed by such guarantor is an “eligible contract participant,” as such term is defined in the Commodity Exchange Act.
9.32      Co-Borrowers .
(a)      Each Borrower agrees that it is jointly and severally liable to Administrative Agent and Lenders for the payment or performance of all Obligations, and that such liability is independent of the obligations of the other Borrowers and shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code or any comparable provisions of any similar federal or state law. Administrative Agent and Lenders may bring an action against any Borrower, whether an action is brought against the other Borrowers.

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(b)      Each Borrower agrees that any release which may be given by Administrative Agent or any Lender to any other Borrower will not release such Borrower from its obligations under this Agreement or any of the other Loan Documents.
(c)      Each Borrower waives any right to assert against Administrative Agent or any Lender any defense, setoff, counterclaim or claim that such Borrower may have against any other Borrower or any other party liable to Administrative Agent or any Lender for the obligations of the Borrowers under this Agreement or any of the other Loan Documents.
(d)      Each Borrower agrees that it is solely responsible for keeping itself informed as to the financial condition of the other Borrowers and of all circumstances which bear upon the risk of nonpayment. Each Borrower waives any right it may have to require Administrative Agent or any Lender to disclose to such Borrower any information that Administrative Agent or any Lender may now or hereafter acquire concerning the financial condition of the other Borrowers.
(e)      Each Borrower waives all rights to notices of default or nonperformance by any other Borrower under this Agreement and the other Loan Documents. Each Borrower further waives all rights to notices of the existence or the creation of new indebtedness by any other Borrower.
(f)      Regardless of whether Administrative Agent or any Lender may have recovered any amounts owing under any of the Loan Documents against a Borrower, each hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Administrative Agent against such Borrower, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “ Reimbursement Rights ”), (ii) all rights to enforce any remedy that Administrative Agent or any Lender may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Administrative Agent for the Obligations. To the extent a Borrower’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights such Borrower may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Administrative Agent may have against such Borrower and to all right, title and interest Administrative Agent may have in any such collateral or security. If any amount should be paid to a Borrower on account of any Reimbursement Rights at any time when any the Obligations have not been paid in full, such amount shall be held in trust for Administrative Agent and shall immediately be paid over to Administrative Agent to be credited and applied against the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement. The covenants and waivers of each Borrower set forth in this Section 9.32(f) shall be effective until all of the Obligations have been paid and performed in full and are made solely for the benefit of Administrative Agent and Lenders.
(g)      Each Borrower waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to such Borrower, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.

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(h)      Each Borrower waives all rights and defenses that such Borrower may have because any of the Obligations may be secured by real property other than the Property of such Borrower. This means, among other things:
(i)      Administrative Agent or any Lender may collect from such Borrower (including enforcing against such Borrower the Security Instrument delivered by such Borrower) without first foreclosing on any real or personal property collateral pledged by any other Borrower;
(ii)      If Administrative Agent forecloses on any real property collateral pledged by any Borrower:
(A)      The amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Administrative Agent or any Lender may collect from such Borrower (including enforcing against such Borrower the Security Instrument delivered by such Borrower) even if Administrative Agent or any Lender, by foreclosing on the real property collateral pledged by any other Borrower, has destroyed any right a Borrower may have to collect from another Borrower.
This Section 9.32(h) is an unconditional and irrevocable waiver of any rights and defenses each Borrower may have because any of the Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(i)      Without limiting the generality of the foregoing Section 9.32(h) , each Borrower understands and acknowledges that if Administrative Agent or any Lender forecloses judicially or nonjudicially against any real property securing any of the Obligations other than the Property of such Borrower, that foreclosure could impair or destroy any ability that such Borrower may have to seek reimbursement, contribution or indemnification from any other Borrower or others based on any Reimbursement Right such Borrower may have for any recovery by Administrative Agent under the Security Instrument encumbering the Property of such Borrower. Each Borrower further understands and acknowledges that in the absence of this Section 9.32 , such potential impairment or destruction of such Borrower’s rights, if any, may entitle such Borrower to assert a defense to such Borrower’s obligations under the Loan Documents to which such Borrower is a party based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Agreement, each Borrower freely, irrevocably and unconditionally: (i) waives and relinquishes that defense and agrees that such Borrower will be fully liable under this Agreement and the other Loan Documents to which such Borrower is a party even though Administrative Agent or any Lender may foreclose judicially or nonjudicially against any real property security for the Obligations other than the Property of such Borrower; (ii) agrees that such Borrower will not assert that defense in any action or proceeding which Administrative Agent or any Lender may commence to enforce the Security Instrument encumbering the Property

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of such Borrower; (iii) acknowledges and agrees that the rights and defenses waived by such Borrower under this Agreement include any right or defense that such Borrower may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Administrative Agent and each Lender is relying on this waiver in extending credit to Borrowers, and that this waiver is a material part of the consideration which Administrative Agent and each Lender is receiving for extending such credit to Borrowers.
(j)      Each Borrower waives any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property of such Borrower.
(k)      Until all obligations of Borrowers under this Agreement and the other Loan Documents have been paid or otherwise performed in full, each 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 or any successor statute, that such Borrower may now or hereafter have against any other Borrower with respect to the Obligations. Each Borrower waives any right to enforce any remedy which Administrative Agent or any Lender now has or may hereafter have against any other Borrower, and waives any benefit of, and any right to participate in, any security now or hereafter held by Administrative Agent or Lenders.
(l)      Each Borrower hereby waives any election of remedies by Administrative Agent or any Lender that impairs any subrogation or other right of such Borrower to proceed against any other 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.
9.33      Intentionally Omitted .
9.34      Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)      the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and
(b)      the effects of any Bail-in Action on any such liability, including, if applicable;
(i)      a reduction in full or in part or cancellation of any such liability;

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(ii)      a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)      the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
THE WRITTEN 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.

[The balance of this page is intentionally left blank.]

Page 88


IN WITNESS WHEREOF, THIS LOAN AGREEMENT IS DULY EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.
KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5271236

Borrower’s Address for Notices:

KBSIII 60 SOUTH SIXTH STREET, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Gio Cordoves
Telephone: (949) 797-0324
Electronic Mail: gcordoves@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com

[Signatures continue on following page.]



S-1


KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5335558

Borrower’s Address for Notices:

KBSIII PRESTON COMMONS, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Gio Cordoves
Telephone: (949) 797-0324
Electronic Mail: gcordoves@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com



[Signatures continue on following page.]




S-2


KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5335562

Borrower’s Address for Notices:

KBSIII STERLING PLAZA, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Gio Cordoves
Telephone: (949) 797-0324
Electronic Mail: gcordoves@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com


[Signatures continue on following page.]




S-3


KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5335559

Borrower’s Address for Notices:

KBSIII ONE WASHINGTONIAN, LLC
c/o KBS Capital Advisors LLC
3003 Washington Blvd., Suite 950
Arlington, Virginia 22201
Attn: Stephen Close
Telephone: (202) 552-7551
Electronic Mail: sclose@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com


[Signatures continue on following page.]



S-4


KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5641776

Borrower’s Address for Notices:

KBSIII TOWERS AT EMERYVILLE, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Brent Carroll
Telephone: (949) 417-6566
Electronic Mail: bcarroll@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com

[Signatures continue on following page]


S-5



KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5637828

Borrower’s Address for Notices:

KBSIII TEN ALMADEN, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Brent Carroll
Telephone: (949) 417-6566
Electronic Mail: bcarroll@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com


[Signatures continue on following page.]



S-6



KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5092307

Borrower’s Address for Notices:

KBSIII LEGACY TOWN CENTER, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Gio Cordoves
Telephone: (949) 797-0324
Electronic Mail: gcordoves@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com



[Signatures continue on following page.]




S-7


KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer

Organizational Identification Number: DE 5421583

Borrower’s Address for Notices:

KBSIII 500 WEST MADISON, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Brett Merz
Telephone: (949) 417-6545
Electronic Mail: bmerz@kbs.com

and

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith
Telephone: (949) 797-0338
Electronic Mail: tsmith@kbs.com
With a copy to:

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Telephone: (949) 732-6670
Electronic Mail: fischerb@gtlaw.com


[Signatures continue on following page.]






S-8


BANK OF AMERICA, N.A.,
a national banking association, individually as
Administrative Agent, and a Lender
By: /s/ Kevin McLain        
Name: Kevin McLain        
Title:     Senior Vice President        


[Signatures continue on following page.]




S-9



WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association, as a Lender
By:     /s/ Cole P. Zehnder        
Name:     Cole P. Zehnder        
Title: Vice President            


[Signatures continue on following page.]




S-10



U.S. BANK, NATIONAL ASSOCIATION,
a national banking association, as a Lender
By: /s/ Christopher R. Coburn    
Name:     Christopher R. Coburn    
Title:     Vice President            




S-11


EXHIBIT “A-1”
LEGAL DESCRIPTION OF RBC PLAZA LAND

REAL PROPERTY IN THE CITY OF MINNEAPOLIS, COUNTY OF HENNEPIN, STATE OF MINNESOTA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL 1:

TRACTS A, B, C, D, G, H, I AND J, REGISTERED LAND SURVEY NO. 1797, HENNEPIN COUNTY, MINNESOTA.

TORRENS PROPERTY
CERTIFICATE OF TITLE NO. 1362521

PARCEL 2:

EASEMENT TO CONSTRUCT, RECONSTRUCT, REPAIR, MAINTAIN, USE AND OBTAIN ACCESS OVER, ACROSS AND THROUGH THE SKYWAYS (AS DEFINED IN THE AGREEMENT, AS HEREINAFTER DEFINED) AS SET FORTH IN THAT CERTAIN SIXTH SKYWAY AGREEMENT, DATED AS OF FEBRUARY 27, 1992, RECORDED MARCH 31, 1992 AS ABSTRACT DOCUMENT NO. 5893893 AND RECORDED MAY 7, 1992 AS TORRENS DOCUMENT NO. 2248394 (THE “AGREEMENT”); AS AMENDED BY AMENDMENT TO SIXTH STREET SKYWAY AGREEMENT, DATED AS OF JANUARY 31, 2013, RECORDED JANUARY 31, 2013 AS DOCUMENT NOS. A9902192 AND T5038757.

PARCEL 3:

NON-EXCLUSIVE EASEMENT (A) FOR THE SUPPORT, MAINTENANCE, REPAIR, RECONSTRUCTION AND REMOVAL OF THE SKYWAY BRIDGE (AS DEFINED IN THE AGREEMENT, AS HEREINAFTER DEFINED), INCLUDING ALL NECESSARY CONNECTIONS OF THE SKYWAY BRIDGE TO THE SIXTH AND NICOLLET BUILDING (AS DEFINED IN THE AGREEMENT), (B) WITHIN THE SKYWAY BRIDGE FOR THE PURPOSES OF PEDESTRIAN ACCESS AND PASSAGE THROUGH THE SKYWAY BRIDGE AND REASONABLE INCIDENTAL USES, AND (C) OVER THE SIXTH AND NICOLLET INTERIOR CORRIDOR (AS DEFINED IN THE AGREEMENT) CONNECTING THE SKYWAY BRIDGE TO CITY CENTER (AS DEFINED IN THE AGREEMENT) AND OTHER STREETS AND OTHER SKYWAYS IN OR ADJACENT TO THE SIXTH AND NICOLLET BUILDING FOR PEDESTRIAN ACCESS AND PASSAGE, ALL AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED SKYWAY AGREEMENT, DATED AS OF OCTOBER 27, 2000, RECORDED OCTOBER 5, 2001 AS DOCUMENT NOS. 7554047 AND 3442897 (THE “AGREEMENT”).


A-1-1



PARCEL 4:

THE BENEFITS OF THE EASEMENTS AS CONTAINED IN EASEMENT AND CONSTRUCTION AGREEMENT DATED JUNE 6, 1989, RECORDED JUNE 28, 1989 AS ABSTRACT DOCUMENT NO. 5548948 AND RECORDED JULY 5, 1989 AS DOCUMENT NO. 2023731; AS AMENDED BY FIRST AMENDMENT TO EASEMENT AND CONSTRUCTION AGREEMENT, DATED MAY 9, 2014, RECORDED JULY 31, 2014 AS DOCUMENT NO. T5188720.

PARCEL 5:

THE BENEFITS OF THE EASEMENTS AS CONTAINED IN EASEMENT AND CONSTRUCTION AGREEMENT DATED JUNE 6, 1989, RECORDED JUNE 28, 1989 AS ABSTRACT DOCUMENT NO. 5548949 AND RECORDED JULY 5, 1989 AS DOCUMENT NO. 2023732; AS AMENDED BY FIRST AMENDMENT TO EASEMENT AND CONSTRUCTION AGREEMENT DATED APRIL 24, 2007, RECORDED MAY 8, 2007 AS TORRENS DOCUMENT NO. 4384031.

PARCEL 6:

BENEFITS OF THE EASEMENTS SET FORTH IN THAT CERTAIN DECLARATION OF EASEMENTS AND COVENANTS, DATED AS OF JANUARY 31, 2013, RECORDED JANUARY 31, 2013 AS TORRENS DOCUMENT NO. T5038758; AS AMENDED BY FIRST AMENDMENT TO DECLARATION OF EASEMENT AND COVENANTS, DATED FEBRUARY 21, 2014, RECORDED MARCH 7, 2014 AS DOCUMENT NO. T5156506; AS FURTHER AMENDED BY SECOND AMENDMENT TO DECLARATION OF EASEMENT AND COVENANTS, DATED MAY 9, 2014, RECORDED JULY 31, 2014 AS DOCUMENT NO. T5188532.



A-1-2


EXHIBIT “A-2”
LEGAL DESCRIPTION OF PRESTON COMMONS LAND

REAL PROPERTY IN THE CITY OF DALLAS, COUNTY OF DALLAS, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT 1: (Fee Tract)

BEING A 5.261 ACRE (229,165 SQUARE FEET) TRACT OF LAND SITUATED IN THE A.J. MANNING SURVEY, ABSTRACT NO. 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS AND BEING A PORTION OF CITY BLOCK NO. 5627 AND BEING ALL OF PRESTON COMMONS, AN ADDITION TO THE CITY OF DALLAS AS DESCRIBED BY PLAT RECORDED IN VOLUME 85139, PAGE 4526, DEED RECORDS OF DALLAS COUNTY, TEXAS (D.R.D.C.T.), SAID TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A P.K. NAIL FOUND FOR THE NORTHWEST CORNER OF SAID PRESTON COMMONS AND BEING THE SOUTHWEST CORNER OF PRESTON PARKWAY ADDITION, AN ADDITION TO THE CITY OF DALLAS AS DESCRIBED BY PLAT RECORDED IN VOLUME 7, PAGE 48, MAP RECORDS OF DALLAS COUNTY, TEXAS, SAID CORNER BEING IN THE EAST RIGHT-OF-WAY LINE OF WESTCHESTER DRIVE (A 50 FOOT RIGHT-OF-WAY);

THENCE ALONG THE SOUTH LINE SAID PRESTON PARKWAY ADDITION AND THE NORTH LINE OF SAID PRESTON COMMONS, NORTH 89 DEGREES 54 MINUTES 00 SECONDS EAST, A DISTANCE OF 368.85 FEET TO A P.K. NAIL FOUND FOR CORNER;

THENCE THE FOLLOWING COURSES AND DISTANCES ALONG THE LINE COMMON TO A TRACT OF LAND DESCRIBED TO VANTEX ENTERPRISES, INC. AS RECORDED IN VOLUME 94235, PAGE 3941 AND SAID PRESTON COMMONS;

SOUTH 00 DEGREES 15 MINUTES 43 SECONDS EAST, A DISTANCE OF 50.31 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER;

SOUTH 45 DEGREES 12 MINUTES 38 SECONDS EAST, A DISTANCE OF 70.77 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER;

NORTH 89 DEGREES 50 MINUTES 30 SECONDS EAST, A DISTANCE OF 251.00 FEET TO A CHISELED “X” FOUND FOR THE NORTHEAST CORNER OF SAID PRESTON COMMONS AND BEING IN THE WEST RIGHT-OF-WAY LINE OF PRESTON ROAD (A 100-FOOT RIGHT-OF-WAY);

THENCE ALONG THE WEST RIGHT-OF-WAY LINE OF SAID PRESTON ROAD, SOUTH 00 DEGREES 15 MINUTES 45 SECONDS EAST, A DISTANCE OF 287.30 FEET TO A CHISELED

A-2-1


“X” FOUND FOR THE SOUTHEAST CORNER OF SAID PRESTON COMMONS AND THE NORTHEAST CORNER OF A TRACT OF LAND DESCRIBED BY DEED TO JOSEPH P. LYNCH, D. D. BISHOP OF DALLAS, RECORDED IN VOLUME 3240, PAGE 475, D.R.D.C.T.;

THENCE ALONG THE NORTH LINE OF SAID LYNCH TRACT AND THE SOUTH LINE OF SAID PRESTON COMMONS, SOUTH 89 DEGREES 47 MINUTES 04 SECONDS WEST, A DISTANCE OF 667.00 FEET TO A CHISELED “X” FOUND FOR THE SOUTHWEST CORNER OF SAID PRESTON COMMONS AND BEING IN THE EAST LINE OF A TRACT OF LAND DESCRIBED BY DEED TO THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, RECORDED IN VOLUME 79007, PAGE 753, D.R.D.C.T.;

THENCE ALONG THE EAST LINE OF SAID TSCHOEPE TRACT AND THE WEST LINE OF SAID PRESTON COMMONS, NORTH, A DISTANCE OF 228.95 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER IN THE SOUTHEASTERLY LINE OF A STREET EASEMENT DESCRIBED BY DEED RECORDED IN VOLUME 79106, PAGE 2680, D.R.D.C.T., SAID CORNER BEING IN A CURVE TO THE LEFT, THE RADIUS POINT WHICH BEARS NORTH 44 DEGREES 14 MINUTES 02 SECONDS WEST, 207.49 FEET FROM SAID CORNER;

THENCE ALONG THE SOUTHEASTERLY LINE OF SAID STREET EASEMENT AND WITH SAID CURVE, THROUGH A CENTRAL ANGLE OF 05 DEGREES 28 MINUTES 35 SECONDS, AN ARC DISTANCE OF 19.83 FEET, A CHORD BEARING OF NORTH 43 DEGREES 01 MINUTE 42 SECONDS EAST AND A CHORD DISTANCE OF 19.82 FEET TO A CHISELED “X” FOUND FOR CORNER;

THENCE NORTH 11 DEGREES 20 MINUTES 40 SECONDS WEST, A DISTANCE OF 32.12 FEET TO A CHISELED “X” FOUND FOR CORNER IN A CURVE TO THE RIGHT, THE RADIUS POINT OF WHICH BEARS NORTH 78 DEGREES 39 MINUTES 20 SECONDS EAST, 606.79 FEET FROM SAID CORNER;

THENCE WITH SAID CURVE THROUGH A CENTRAL ANGLE OF 10 DEGREES 48 MINUTES 37 SECONDS AN ARC DISTANCE OF 114.49 FEET, A CHORD BEARING OF NORTH 05 DEGREES 56 MINUTES 27 SECONDS WEST AND A CHORD DISTANCE 114.32 FEET TO THE POINT OF BEGINNING;

CONTAINING A COMPUTED AREA OF 229,166 SQUARE FEET OR 5.261 ACRES OF LAND, MORE OR LESS.

TRACT 2: (Non-Exclusive Easement Estate)

BEING AN EASEMENT ESTATE AS CREATED BY THAT CERTAIN EASEMENT FROM THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, TO PRESTON STATE BANK, RECORDED IN VOLUME 79137, PAGE 3167, DEED RECORDS, DALLAS COUNTY, TEXAS, IN AND TO THE FOLLOWING TRACT OF LAND:


A-2-2


BEING A 1,954 SQUARE FOOT TRACT OF LAND SITUATED IN THE A. J. MANNING SURVEY, ABSTRACT NO. 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS AND BEING A PORTION OF CITY BLOCK NO. 5627 THAT SAME TRACT OF LAND DESCRIBED TO PRESTON COMMONS LIMITED, RECORDED IN VOLUME 88194, PAGE 4843, DEED RECORDS OF DALLAS COUNTY, TEXAS (D.R.D.C.T.), SAID 1,954 SQUARE FOOT TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT A CHISELED “X” FOR THE SOUTHEAST CORNER OF PRESTON COMMONS, AN ADDITION TO THE CITY OF DALLAS, AS DESCRIBED BY PLAT RECORDED IN VOLUME 85139, PAGE 4526, DEED RECORDS, DALLAS COUNTY, TEXAS, SAID COMMENCING POINT BEING IN THE EAST LINE OF A TRACT OF LAND DESCRIBED BY DEED TO THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, RECORDED IN VOLUME 79007, PAGE 753, DEED RECORDS, DALLAS COUNTY, TEXAS;

THENCE ALONG THE EAST LINE OF SAID TSCHOEPE TRACT AND THE WEST LINE OF SAID PRESTON COMMONS, NORTH, A DISTANCE OF 176.62 FEET TO THE POINT OF BEGINNING;

THENCE SOUTH 89 DEGREES 48 MINUTES 15 SECONDS WEST, A DISTANCE OF 94.52 FEET TO A POINT ALONG THE SOUTH LINE OF WELDON HOWELL PARKWAY AS RECORDED IN VOLUME 79106, PAGE 2680, DEED RECORDS, DALLAS COUNTY, TEXAS, SAID POINT BEING IN A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 30 DEGREES 13 MINUTES 33 SECONDS AND A RADIUS OF 207.49 FEET, A TANGENT BEARING NORTH 75 DEGREES 59 MINUTES 31 SECONDS EAST;

THENCE ALONG THE SOUTH LINE OF SAID WELDON HOWELL PARKWAY, AND WITH SAID CURVE TO THE LEFT AN ARC DISTANCE OF 109.46 FEET TO A 1/2-INCH IRON ROD SET IN THE WEST LINE OF SAID PRESTON COMMONS;

THENCE ALONG SAID WEST LINE SOUTH, A DISTANCE OF 52.33 FEET TO THE POINT OF BEGINNING;

CONTAINING A COMPUTED AREA OF 1,954 SQUARE FEET OF LAND OR 0.045 ACRES OF LAND.



A-2-3


EXHIBIT “A-3”
LEGAL DESCRIPTION OF STERLING PLAZA LAND

REAL PROPERTY IN THE CITY OF DALLAS, COUNTY OF DALLAS, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT 1: Fee

BEING LOTS 11, 12, 13, 14 AND 15, BLOCK 3/5625 OF PRESTON SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS, DALLAS COUNTY, TEXAS, ACCORDING TO THE MAP THEREOF RECORDED IN VOLUME 9, PAGE 159, MAP RECORDS, DALLAS COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEING A TRACT OF LAND SITUATED IN THE ANDREW J. MANNING SURVEY, ABSTRACT NO, 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS; SAID TRACT BEING ALL OF LOTS 11 THROUGH 15, DALLAS CITY BLOCK NO. 3/5625 OF THE PRESTON SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS AS RECORDED IN VOLUME 9, PAGE 159, MAP RECORDS, DALLAS COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A 1/2-INCH IRON ROD FOUND IN THE NORTH RIGHT-OF-WAY LINE OF SHERRY LANE (A 50-FOOT RIGHT-OF-WAY); SAID IRON ROD BEING NORTH 89 DEGREES 48 MINUTES 00 SECONDS EAST, AND A DISTANCE OF 203.61 FEET FROM THE EAST RIGHT-OF-WAY LINE OF LOMO ALTO DRIVE (A 50-FOOT RIGHT-OF-WAY); SAID POINT ALSO BEING THE SOUTHWEST CORNER OF SAID LOT 11; SAID POINT ALSO BEING THE SOUTHEAST CORNER OF LOT 10, BLOCK 3/5625 OF SAID PRESTON SQUARE ADDITION;

THENCE, NORTH 00 DEGREES 06 MINUTES 00 SECONDS EAST, LEAVING THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE AND ALONG THE COMMON PROPERTY LINE BETWEEN LOTS 10 & 11, A DISTANCE OF 195.10 FEET TO A 5/8 INCH IRON ROD WITH “GSES, INC., RPLS 4804” CAP SET FOR CORNER IN THE SOUTH RIGHT-OF-WAY LINE OF A 15-FOOT ALLEY; SAID POINT BEING THE NORTHEAST CORNER OF SAID LOT 10 AND THE NORTHWEST CORNER OF LOT 11;

THENCE, NORTH 89 DEGREES 48 MINUTES 00 SECONDS EAST, ALONG THE SOUTH RIGHT-OF-WAY LINE OF SAID 15-FOOT ALLEY, A DISTANCE OF 465.00 FEET TO AN “+” CUT IN CONCRETE SET IN THE WEST LINE OF LOT 1-A OF LUTHER SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS AS RECORDED IN VOLUME 79119, PAGE 580, MAP RECORDS, DALLAS COUNTY, TEXAS; SAID POINT BEING THE NORTHEAST CORNER OF SAID LOT 15;

THENCE, SOUTH 00 DEGREES 06 MINUTES 00 SECONDS WEST, ALONG THE COMMON PROPERTY LINE BETWEEN SAID LOTS 15 AND 1-A, A DISTANCE OF 195.10 FEET, TO

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AN “+” CUT IN CONCRETE FOUND FOR CORNER IN THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE;

THENCE, SOUTH 89 DEGREES 48 MINUTES 00 SECONDS WEST, ALONG THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE, A DISTANCE OF 465.00 FEET TO THE POINT OF BEGINNING, CONTAINING 90,720 SQUARE FEET, OR 2.0827 ACRES, MORE OR LESS, OF LAND.

TRACT 2: Non-Exclusive Easement Estate

ACCESS EASEMENT AND SIGN EASEMENT AS CREATED BY THAT CERTAIN EASEMENT AND MAINTENANCE AGREEMENT DATED DECEMBER 21, 1994, EXECUTED BY 5900 LUTHER LANE, LTD., A TEXAS LIMITED PARTNERSHIP, TO ZML-STERLING PLAZA LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, RECORDED IN VOLUME 95005, PAGE 6418, OVER AND ACROSS THE TRACTS OF LAND DESCRIBED ON EXHIBIT “C” AND EXHIBIT “D” OF SAID AGREEMENT.



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EXHIBIT “A-4”
LEGAL DESCRIPTION OF ONE WASHINGTONIAN OFFICE TOWER LAND

REAL PROPERTY IN THE CITY OF GAITHERSBURG, COUNTY OF MONTGOMERY, STATE OF MARYLAND, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL I:

ALL THAT PIECE OR PARCEL OF LAND, TOGETHER WITH THE IMPROVEMENTS THEREON AND APPURTENANCES THEREUNTO BELONGING, LYING, SITUATE AND BEING IN MONTGOMERY COUNTY, MARYLAND, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL LETTERED “C”, IN BLOCK LETTERED “C” IN THE SUBDIVISION KNOWN AS WASHINGTONIAN CENTER; AS PER PLAT THEREOF RECORDED IN PLAT BOOK 156 AT PLAT NO. 17750 AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

NOTE FOR INFORMATIONAL PURPOSES ONLY:
TAX I.D. NO. 9-201-2867430

PARCEL II:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS” RECORDED IN LIBER 7144 AT FOLIO 287 AMONG THE AFORESAID LAND RECORDS, AND THE RESERVATION OF RIGHTS TO GRANT EASEMENTS AS CONTAINED THEREIN; AMENDED BY FIRST SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS FOR WASHINGTONIAN CENTER DATED DECEMBER 29, 1988 AND RECORDED DECEMBER 15, 1989 IN LIBER 9123 AT FOLIO 600; AND FURTHER AMENDED BY SECOND SUPPLEMENTAL TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED APRIL 10, 1990 AND RECORDED APRIL 10, 1990 IN LIBER 9268 AT FOLIO 504 AND FURTHER AMENDED BY THIRD SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 4; FURTHER AMENDED BY FOURTH SUPPLEMENT TO DECLARATION DATED MAY 2, 1997 RECORDED IN BOOK 14856 PAGE 256; FURTHER AMENDED BY FIFTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED MAY 23, 2008 AND RECORDED IN LIBER 35818 AT FOLIO 391; FURTHER AMENDED BY SIXTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED OCTOBER 1, 2008 AND RECORDED IN LIBER 36055 AT FOLIO 006; FURTHER AMENDED BY SEVENTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED JANUARY 12, 2009 AND RECORDED IN LIBER 36421 AT FOLIO 217;

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EIGHTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED OCTOBER 28, 2011 AND RECORDED IN LIBER 42601 AT FOLIO 95; NINTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED AUGUST 13, 2013 AND RECORDED IN LIBER 47544 AT FOLIO 460. AS AFFECTED BY AGREEMENT REGARDING COVENANTS, CONDITIONS AND RESTRICTIONS DATED MAY 2, 1997 AND RECORDED IN LIBER 14856 AT FOLIO 329. AS AFFECTED BY AGREEMENT REGARDING COVENANTS, CONDITIONS AND RESTRICTIONS DATED JUNE 18, 1999 AND RECORDED IN LIBER 17219 AT FOLIO 125.

PARCEL III:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS AND RECIPROCAL EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 135, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL IV:

TOGETHER WITH TEMPORARY PARKING EASEMENT AS ESTABLISHED BY “TEMPORARY PARKING EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 187, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND, AND AS SUCH TEMPORARY PARKING EASEMENT AGREEMENT IS MODIFIED BY “DECLARATION OF PARKING AGREEMENT AND MODIFICATION OF TEMPORARY PARKING EASEMENT AGREEMENT” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 166, AMONG THE AFORESAID LAND RECORDS.

PARCEL V:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS AND UTILITY EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 250, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL VI:

TOGETHER WITH BOARDWALK EASEMENT AS ESTABLISHED BY “BOARDWALK EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 281, AS AFFECTED BY THE AMENDMENT TO EASEMENT AGREEMENTS DATED MARCH 15, 1990 AND RECORDED IN LIBER 9236 AT FOLIO 881, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.


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PARCEL VII:

TOGETHER WITH RIGHT OF INGRESS AND EGRESS OVER “MARRIOTT DRIVE” AS ESTABLISHED BY EASEMENT FOR INGRESS AND EGRESS DATED DECEMBER 12, 1989 AND RECORDED IN LIBER 9123 AT FOLIO 589 AND AS FURTHER SET FORTH IN INGRESS AND EGRESS EASEMENT AGREEMENT FROM WILP AND WCD FOR MARRIOTT DRIVE AND SIDE ROAD ACCESS, DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9236 AT FOLIO 821, AND RE-NUMBERED AS LIBER 9254 AT FOLIO 408, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL VIII:

TOGETHER WITH THE BENEFICIAL RIGHTS SET FORTH IN THE RECIPROCAL EASEMENTS AND COVENANTS AS ESTABLISHED BY “DECLARATION OF RECIPROCAL EASEMENTS AND COVENANTS” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 12, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL IX:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “UTILITY EASEMENT AGREEMENT” DATED DECEMBER 12, 1989 AND RECORDED DECEMBER 15, 1989 IN LIBER 9123 AT FOLIO 643, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL X:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “COVENANT AGREEMENT” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 297, AS MODIFIED BY INSTRUMENTS RECORDED IN LIBER 9535 AT FOLIO 536, LIBER 9725 AT FOLIO 374 AND LIBER 9771 AT FOLIO 16, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL XI:

FURTHER TOGETHER WITH THE BENEFICIAL EASEMENTS CREATED BY THE EASEMENT BY AND BETWEEN WASHINGTON LAKE L.L.C. AND 9800 WASHINGTONIAN OFFICE, INC., DATED APRIL 13, 2010 AND RECORDED APRIL 4, 2011 IN LIBER 41396 AT FOLIO 11.




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EXHIBIT “A-5”
LEGAL DESCRIPTION OF TOWERS AT EMERYVILLE LAND

REAL PROPERTY IN THE CITY OF EMERYVILLE, COUNTY OF ALAMEDA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT A: (Submerged Parcel)

PARCEL 3, PARCEL MAP 1535, FILED JULY 16, 1975, IN MAP BOOK 87, PAGE 88, ALAMEDA COUNTY RECORDS.

EXCEPTING THEREFROM, THAT PORTION THEREOF DESCRIBED IN PARCEL 1A IN THE AMENDED FINAL ORDER OF CONDEMNATION ENTERED AUGUST 19, 1992, IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, IN AND FOR THE COUNTY OF ALAMEDA, CASE NO. 641062-5, A CERTIFIED COPY OF WHICH RECORDED AUGUST 19, 1992, SERIES NO. 92-272591, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY.

TRACT B: (Tower I)

PARCEL ONE:

PARCEL 1, PARCEL MAP 7523, FILED AUGUST 4, 2000, IN MAP BOOK 252, PAGES 63 AND 64, ALAMEDA COUNTY RECORDS.

PARCEL TWO:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT C: (Tower II)

PARCEL ONE:

PARCEL 2, PARCEL MAP 2426, FILED FEBRUARY 21, 1978 IN MAP BOOK 101, PAGE 41, ALAMEDA COUNTY RECORDS.


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PARCEL TWO:

AN EASEMENT, APPURTENANT TO PARCEL 2 OF SAID PARCEL MAP 2426, CONVEYED TO TOWER II, A CALIFORNIA LIMITED PARTNERSHIP, BY GRANT OF EASEMENT DATED MAY 18, 1978, RECORDED MAY 24, 1978, IN REEL 5406, IMAGE 111, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY, FOR INGRESS AND EGRESS BY EMERGENCY VEHICLES OF GOVERNMENTAL ENTITIES OVER A PORTION OF PARCEL 1, PARCEL MAP 1179, FILED MAY 22, 1973, IN BOOK 79 OF MAPS, PAGE 59, ALAMEDA COUNTY RECORDS.

PARCEL THREE:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT D: (Tower III)

PARCEL ONE:

PARCEL 3, PARCEL MAP 2426, FILED FEBRUARY 21, 1978, IN MAP BOOK 101, PAGE 41, ALAMEDA COUNTY RECORDS.

PARCEL TWO:

AN EASEMENT, APPURTENANT TO PARCEL 3 OF SAID PARCEL MAP 2426, CONVEYED TO F. PIERCE LATHROP BY GRANT OF EASEMENT DATED MAY 18, 1978, RECORDED MAY 24, 1978, IN REEL 5406, IMAGE 119, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY, FOR INGRESS AND EGRESS BY EMERGENCY VEHICLES OF GOVERNMENTAL ENTITIES OVER A PORTION OF PARCEL 1, PARCEL MAP 1179, FILED MAY 22, 1973, IN BOOK 79 OF MAPS, PAGE 59, ALAMEDA COUNTY, MORE PARTICULARLY DESCRIBED THEREIN.

PARCEL THREE:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE

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TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT E:

NON-EXCLUSIVE EASEMENT(S), AS AN APPURTENANCE TO TRACTS A, B, C, AND D DESCRIBED ABOVE, FOR VEHICULAR AND PEDESTRIAN TRAFFIC OVER THE LANDS DESCRIBED IN THE “RECIPROCAL EASEMENT AGREEMENT” RECORDED JANUARY 20, 1976, REEL 4232, IMAGE 222, INSTRUMENT NO. 76-8732, OFFICIAL RECORDS.

APN: 049-1495-003-02 (TRACT A), 049-1495-008 (TRACT B), 049-1521-006 (TRACT C) AND 049-1521-007 (TRACT D)





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EXHIBIT “A-6”
LEGAL DESCRIPTION OF TEN ALMADEN LAND

REAL PROPERTY IN THE CITY OF SAN JOSE, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL 1, AS SHOWN ON THAT CERTAIN PARCEL MAP FILED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JUNE 9, 1987, IN BOOK 574 OF MAPS, PAGE(S) 45 AND 46.




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EXHIBIT “A-7”
LEGAL DESCRIPTION OF LEGACY TOWN CENTER LAND

REAL PROPERTY IN THE CITY OF PLANO, COUNTY OF COLLIN, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT I, PARCEL A: (Fee)

BEING LOT 1, BLOCK 1, ONE LINCOLN AT LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME N, PAGE 860, PLAT RECORDS, COLLIN COUNTY, TEXAS.

TRACT I, PARCEL B: (Easement Estate)

NON-EXCLUSIVE EASEMENT FOR THE BENEFIT OF TRACT 1, PARCEL A AS CREATED BY RECIPROCAL PARKING EASEMENT AND MAINTENANCE AGREEMENT (THE “REA”) DATED 06/20/2001, BETWEEN LETCHI, LIMITED, AND LINCOLN-TOWN CENTER, LTD., FILED 06/21/2001, RECORDED IN VOLUME 4944, PAGE 2560, REAL PROPERTY RECORDS, COLLIN COUNTY, TEXAS, FOR ACCESS OVER THE COMMON AREAS (AS DEFINED IN THE REA) OF THE LETCHI PARCEL (AS DEFINED IN THE REA) AND FOR PARKING IN THE LETCHI GARAGE (AS DEFINED IN THE REA).

TRACT II, PARCEL A: (Fee)

BEING LOT 1R, BLOCK A, OF SECOND RE-PLAT OF LOT 1R, BLOCK A, OF TWO LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN CABINET 2006, SLIDE 284, PLAT RECORDS OF COLLIN COUNTY, TEXAS; PREVIOUSLY BEING LOT 1R, BLOCK A, TWO LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME N, PAGE 861, PLAT RECORDS, COLLIN COUNTY, TEXAS.

TRACT II, PARCEL B: (Easement Estate)

NON-EXCLUSIVE EASEMENT AS CREATED BY INGRESS AND EGRESS EASEMENT AGREEMENT (THE “IEA”) DATED 9/30/2004, BETWEEN EDS INFORMATION SERVICES L.L.C., AND LINCOLN-TOWN CENTER, LTD., FILED 10/1/2004, RECORDED IN VOLUME 5765, PAGE 2572, REAL PROPERTY RECORDS, COLLIN COUNTY, TEXAS.




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EXHIBIT “A-8”
LEGAL DESCRIPTION OF 500 WEST MADISON TOWER LAND

REAL PROPERTY IN THE CITY OF CHICAGO, COUNTY OF COOK, STATE OF ILLINOIS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

NOTE: THE PHRASE “VACATED 18 FOOT ALLEY” AS USED IN THESE LEGAL DESCRIPTIONS IS IN REFERENCE TO THE 18 FOOT WIDE NORTH-SOUTH ALLEY LYING IN BLOCK 50 WHICH WAS VACATED BY ORDINANCE RECORDED JANUARY 5, 1907 AS DOCUMENT NO. 3974491.

PARCEL 1:

THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PARCEL 2A:

THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING BELOW A HORIZONTAL PLANE HAVING AN ELEVATION OF +23.00 FEET CHICAGO CITY DATUM AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PARCEL 2B:

EASEMENT FOR THE BENEFIT OF PARCELS 1, 2A AND 2C, AS CREATED BY THE DECLARATION OF EASEMENTS, COVENANTS, CONDITIONS AND RESTRICTIONS MADE BY CHICAGO AND NORTHWESTERN TRANSPORTATION COMPANY, A DELAWARE CORPORATION, AND CHICAGO TITLE AND TRUST COMPANY AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 31, 1982 AND KNOWN AS TRUST NUMBER 1079000, DATED MARCH 31, 1982 AND RECORDED SEPTEMBER 7, 1984 AS DOCUMENT 27245590, OVER THE FOLLOWING DESCRIBED PROPERTY:

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THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING ABOVE A HORIZONTAL PLANE HAVING AN ELEVATION OF +23.00 FEET CHICAGO CITY DATUM, LYING BELOW A HORIZONTAL PLANE HAVING AN ELEVATION OF +59.63 FEET CHICAGO CITY DATUM, AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS;

FOR THE CONSTRUCTION, MAINTENANCE, USE, REPAIR, REPLACEMENT, RENOVATION, RECONSTRUCTION AND IMPROVEMENT WITH CAISSONS, SUPPORT POSTS, ARCHES, COLUMNS OR OTHER SUPPORT DEVICES; AND FOR THE INSTALLATION AND MAINTENANCE OF UTILITY LINES.

PARCEL 2C:

THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING ABOVE A HORIZONTAL PLANE HAVING AN ELEVATION OF +59.63 FEET CHICAGO CITY DATUM AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PIN Nos.:
17-09-342-002-0000
17-09-342-004-0000
17-09-342-005-0000




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EXHIBIT “B”
DEFINITIONS
1. DEFINITIONS : As used in this Agreement and the attached exhibits, the following terms shall have the following meanings:
“ 500 West Madison Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by 500 West Madison Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ 500 West Madison Improvements ” means all on-site and off-site improvements to the 500 West Madison Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the 500 West Madison Land and/or in such improvements.
“ 500 West Madison Land ” means the real property of 500 West Madison Borrower described in Exhibit “A-8” .
“ 500 West Madison Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, 500 West Madison Borrower and the Approved Manager for the 500 West Madison Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ 500 West Madison Property ” means the real and personal property conveyed and encumbered by the 500 West Madison Security Instrument.
“ 500 West Madison Security Instrument ” means the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by 500 West Madison Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Actual Operating Revenue ” means, with respect to any Calculation Period for any Property, all income, computed on an annualized basis in accordance with generally accepted accounting principles, from the ownership and operation of such Property from whatever source (other than any source affiliated with a Borrower or Guarantor), including Rents, utility charges, escalations, service fees or charges, license fees, parking fees, other required pass-throughs, and, with respect to any Lease executed (or that commences) during the applicable Calculation Period, income generated by such Lease calculated as if the Lease was in effect as of the first day of such Calculation Period, but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by the applicable Borrower to any Governmental Authority, refunds from tenants, uncollectible accounts, sales of furniture, fixtures and equipment, interest income, Condemnation Awards, Insurance Proceeds (other than business interruption or other loss of income insurance), unforfeited security deposits, utility and other similar deposits, income from tenants not paying rent, income from tenants in bankruptcy, income from any tenant that is in material default under its Lease, and non-recurring or extraordinary income, including lease termination payments. Except as otherwise

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expressly provided herein, Actual Operating Revenue shall be net of rent concessions and credits. Actual Operating Revenue shall be subject to appropriate seasonal and other adjustments in Administrative Agent’s reasonable discretion, and shall include rents (including imputed rent during any free rent period) payable under executed Leases with a rental commencement date which is scheduled to occur within one hundred eighty (180) days of the applicable Test Date.
“ Add-On Property ” has the meaning set forth in Section 9.30 .
“ Additional KYC Regulations ” has the meaning set forth in Section 9.23 .
“ Adjusted LIBOR Rate ” means the rate equal to the quotient obtained by dividing (a) the applicable Index Rate by (b) 1.00 minus the LIBOR Reserve Percentage.
“ Administrative Agent ” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
“ Administrative Agent Advances ” has the meaning set forth in Section 8.12(a) .
“ Administrative Agent’s Office ” means Administrative Agent’s address and, as appropriate, account as set forth on the Schedule of Lenders, or such other address or account as Administrative Agent hereafter may from time to time notify Borrowers and Lenders.
“ Administrative Agent’s Time ” means the time of day observed in the city where Administrative Agent’s Office is located, provided that so long as Bank of America shall serve as Administrative Agent, “ Administrative Agent’s Time ” shall mean Pacific time.
“ Administrative Details Reply Form ” means an Administrative Details Reply Form in a form approved by Administrative Agent.
“ Advance Amount ” has the meaning set forth in Section 1.3.4(a) .
“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“ Aggregate Commitments ” means the Commitments of all Lenders.
“ Agreement ” has the meaning set forth in the introductory paragraph of this Agreement, and includes all exhibits attached hereto and referenced in Section 1.1 .
“ Alternative Rate ” means, on any day, a fluctuating rate per annum equal to eighty (80) basis points plus the highest of: (a) the Federal Funds Rate plus ½ of 1%, and (b) the rate of interest in effect for such day as publicly announced by Bank of America as its “Prime Rate.”
“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender (it being understood that, for the avoidance of doubt, a servicer engaged by a Lender with respect to the Loan shall not be deemed to administer such Lender).

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“ Approved Manager ” means each Borrower, and with respect to any Property, CBRE, Inc., a Delaware corporation, Sterling Bay, Transwestern, Hines, Cushman & Wakefield, Jones Lang LaSalle, Cassidy Turley, PM Realty, L.P., NorthMarq, or any other reputable and creditworthy property manager, subject to the prior approval of Administrative Agent, not to be unreasonably withheld, with a portfolio of properties comparable to the applicable Property under active management.
“ Arranger ” means, collectively, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, and U.S. Bank, National Association, in their capacity as joint lead arrangers, provided , however , that each of the foregoing entities shall only be deemed an “Arranger” for so long as such entity, together with such entity’s Affiliates, holds a Commitment amount in an aggregate amount equal to or greater than the lesser of (i) One Hundred Million Dollars ($100,000,000), or (ii) ten percent (10%) of the Aggregate Commitments.
“ Assignment and Assumption ” means an Assignment and Assumption substantially in the form of Exhibit “E” .
“ Assumed Interest Rate ” means the annual yield payable on the last day of the applicable Calculation Period on ten (10) year United States Treasury obligations in amounts approximating the outstanding principal balance of the Loan on the last day of the Calculation Period plus two hundred fifty (250) basis points per annum; provided, however, that the Assumed Interest Rate shall be not less than six percent (6.0%) per annum.
“ Authorized Signer ” means any signer of this Agreement on behalf of any Borrower, acting alone, or any other representative of any Borrower duly designated and authorized by such Borrower in accordance with Borrowers’ Instruction Certificate to bind such Borrower with respect to all matters pertaining to the Loan and the Loan Documents, including the selection of interest rates and Draw Requests.
“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“ Bank of America ” means Bank of America, N.A. and its successors.
“ Bankruptcy Code ” means Title 11 of the United States Code, as in effect from time to time.
“ Base Rate ” means, on any day, a fluctuating rate per annum equal to the Base Rate Margin plus the LIBOR Daily Floating Rate.
“ Base Rate Advance ” means an advance of the Loan by a Lender to Borrowers or any portion of the Loan held by a Lender which bears interest at an applicable Base Rate at the time in question.

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“ Base Rate Margin ” means one hundred eighty (180) 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.
“ Borrower ” and “ Borrowers ” have the meaning set forth in the introductory paragraph of this Agreement.
“ Borrowers’ Deposit Account ” means an account established with Administrative Agent pursuant to the terms of Section 4.6 .
“ Borrower Materials ” has the meaning set forth in Section 9.3.4(b) .
“ Borrowers’ Instruction Certificate ” means a certificate provided by or on behalf of Borrowers in the form attached hereto as Exhibit “O” , designating certain Authorized Persons and Authorized Signers as set forth therein.
“ Borrowers’ Remittance Instructions ” means Borrowers’ remittance instructions provided in the form attached hereto as Exhibit “N” .
“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where Administrative Agent’s Office is located and, if such day relates to any LIBOR Rate Advance or LIBOR Rate Principal, means any such day that is also a London Banking Day.
“ Business Plan ” as the meaning set forth in Section 8.10(c) .
“ Calculation Period ” means the six (6) month period ending on any Test Date.
“ Casualty ” means any act or occurrence of any kind or nature that results in damage, loss or destruction to any Property.
“ Change in Law ” means the occurrence, after the Closing Date, 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 (c) 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 all requests, rules, guidelines or directives thereunder or issued in connection therewith 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.
“ Checking Account ” has the meaning set forth in Exhibit “H” .
“ Civil Asset Forfeiture Reform Act ” means the Civil Asset Forfeiture Reform Act of 2000 (18 U.S.C. Sections 983 et seq .), as amended from time to time, and any successor thereto.

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“ Claim ” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“ Closing Checklist ” means that certain Closing Requirements and Checklist setting forth the conditions for closing the Loan and recording the Security Instruments.
“ Closing Date ” means the date of this Agreement.
“ Collateral ” means any property of any Borrower that is subject to a lien or security interest security any of the Obligations pursuant to any Security Instrument or any other Loan Document.
“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.
“ Commitment ” means, as to each Lender, the Term Loan Commitment of such Lender and the Revolving Loan Commitment of such Lender.
“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq. ), as amended from time to time, and any successor statute.
“ Condemnation ” means any taking of title to, use of, or any other interest in any Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“ Condemnation Awards ” means any all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“ Consequential Loss ” has the meaning set forth in Section 2.5 .
“ Contract of Sale ” means any contract for the sale of all or any part of any Property or any interest therein, executed by any Borrower.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Controlled Substances Act ” means the Controlled Substances Act (21 U.S.C. Sections 801 et seq.), as amended from time to time, and any successor statute.

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“ Debtor Relief Law(s) ” means any federal, state or local law, domestic or foreign, as now or hereafter in effect relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement, composition, extension or adjustment of debts, or any similar law affecting the rights of creditors , including Title 11 of the United States Code, as in effect from time to time.
“ Debt Service ” means the annual payments of principal and interest that would have been payable under a hypothetical loan during the Calculation Period, assuming (i) an initial loan balance, calculated as of the last day of the Calculation Period, in an amount equal to (A) with respect to Borrowers’ compliance with the provisions of Section 4.22 of this Agreement, principal outstanding under the Loan, and (B) with respect to a determination of the Ongoing Debt Service Coverage Ratio in connection with Borrowers’ exercise of an extension option pursuant to Exhibit “I ” of this Agreement, the inclusion of an Add-On Property in the Collateral, or a release or reconveyance of a Property pursuant to Section 9.29 of this Agreement and the calculation of the applicable Release Price with respect thereto, the Aggregate Commitments, (ii) an interest rate equal to the Assumed Interest Rate, and (iii) amortization of the aggregate principal indebtedness over a thirty (30) year amortization period.
“ Default ” has the meaning set forth in Section 7.1 .
“ Default Rate ” shall have the meaning set forth in Section 1.4.5 .
“ Defaulting Lender ” means, subject to Section 8.13.2 , any Lender that (a) has failed to (i) fund all or any portion of its advances within two (2) Business Days of the date such advances were required to be funded hereunder unless such Lender notifies Administrative Agent and Borrowers in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to advances (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Administrative Agent or any Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due, (b) has notified Borrowers or Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund an advance hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by Administrative Agent or Borrowers to confirm in writing to Administrative Agent and Borrowers that it will comply with its prospective funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Administrative Agent and Borrowers), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that

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Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow, or disaffirm any contracts or agreements made with such Lender. Any determination by Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 8.13.2 ) as of the date established therefor by Administrative Agent in a written notice of such determination, which shall be delivered by Administrative Agent to Borrowers and each Lender promptly following such determination.
“ Deposit Account Control Agreements ” means, collectively, (i) those certain Deposit Account Control Agreements, dated as of the date hereof, by and among Administrative Agent, Wells Fargo Bank, National Association, as the depository bank, and the applicable Borrower, with respect to the 500 West Madison Property and the One Legacy Town Center Property, as applicable, and (ii) those certain Deposit Account Control Agreements, dated as of the date hereof, by and among Administrative Agent, Bank of America, N.A., as the depository bank, and the applicable Borrower, with respect to the One Washingtonian Property, the Preston Commons Property, the RBC Plaza Property, the Sterling Plaza Property, the Ten Almaden Property, and the Towers at Emeryville Property, as applicable, as the same may be amended, restated, supplemented, replaced or otherwise modified from time to time.
“ Designated Jurisdiction ” means any country or territory to the extent that such country or territory itself is the subject of any Sanction.
“ Disbursement Debt Service ” means the annual payments of principal and interest that would have been payable under a hypothetical loan during the Calculation Period, assuming (i) an initial loan balance, calculated as of the date of disbursement (and after giving effect to the disbursement), in an amount equal to (A) principal outstanding under the Term Loan plus (B) the principal outstanding under the Revolving Loan, (ii) an interest rate equal to the Assumed Interest Rate, and (iii) amortization of the aggregate principal indebtedness over a thirty (30) year amortization period.
“ Disbursement Debt Service Coverage Ratio ” means, as of any date of disbursement, for the applicable Calculation Period ending on the most recently occurring Test Date, the ratio of Net Operating Income to Disbursement Debt Service based on operating statements for the Properties for the immediately preceding six (6) month period which comply with the terms of this Agreement.
“ Draw Request ” means a properly completed and executed written request by Borrowers to Administrative Agent in the form of Exhibit “J” (or in another form reasonably satisfactory to Administrative Agent) setting forth the amount of Revolving Loan Proceeds desired.
“ EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country

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which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“ Eligible Assignee ” means any Person that meets the requirements to be an assignee under Sections 9.5(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 9.5(b)(iii) ).
“ Eligible Entity ” means a single purpose entity approved by Administrative Agent in its reasonable discretion, the ownership interests in which are owned entirely, directly or indirectly, by Guarantor.
“ Environmental Agreements ” means, collectively, the RBC Plaza Environmental Agreement, the One Washingtonian Environmental Agreement, the Preston Commons Environmental Agreement, the Sterling Plaza Environmental Agreement, the Towers at Emeryville Environmental Agreement, the Ten Almaden Environmental Agreement, the Legacy Town Center Environmental Agreement and the 500 West Madison Environmental Agreement.
“ Environmental Insurance Policy " means, individually or collectively, each environmental insurance policy covering a Property substantially and materially in the form existing as of the date of this Agreement, naming Administrative Agent as an additional insured issued by an insurance company which has an A.M. Best Company financial and performance rating of A-IX or better and is qualified or authorized by the Laws of the applicable State to assume the risks covered by such policy.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
“ EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“ Expenses ” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after a Default) by Administrative Agent or any Lender in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in any Security Instrument or any of the other Loan Documents, including attorneys’ fees, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, any Property.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the Laws of, or having

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its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in an advance of the Loan or a Commitment pursuant to a Law in effect on the date on which (i) such Lender acquires such interest in such advance of the Loan or Commitment (other than pursuant to an assignment request by Borrowers under Section 2.6 ) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 2.1(a)(ii) , (a)(iii) or (c) , amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.1(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.
“ Extension Fee ” means a fee equal to one fifth of one percent (0.20%) of the Aggregate Commitments (after giving effect to any reduction(s) in the Aggregate Commitments and/or principal repayments of the Loan (but not giving effect to any repayment of the Revolving Loan) prior to any extension pursuant to the terms of the Loan Documents, including, without limitation, the provisions set forth in Exhibit “I ”) as of (a) with respect to the First Extension Option, the Initial Maturity Date, and (b) with respect to the Second Extension Option, the First Extended Maturity Date.
“ Extension Term ” has the meaning set forth in Section 1.6(b) .
“ FATCA ” means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
“ 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 on such day, as published by the Federal Reserve Bank 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 upwards to the next higher 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by Administrative Agent.
“ FEMA ” means the Federal Emergency Management Agency or any successor agency.
“ Financial Statements ” means for each reporting party, a balance sheet, income statement, statements of cash flow, cash flow projections (cash flow projections to be provided only at fiscal year-end and upon Administrative Agent’s request), real estate schedules providing details on each individual real property in the reporting party’s portfolio, including, but not limited to raw land, land under development, construction in process and stabilized properties and unless Administrative Agent otherwise consents, consolidated and consolidating statements if the reporting party is a

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holding company or a parent of a subsidiary entity. For purposes of this definition and any covenant requiring the delivery of Financial Statements, each party for whom Financial Statements are required is a “ reporting party ” and a specified period to which the required Financial Statements relate is a “ reporting period .”
“ FinCen ” has the meaning set forth in Section 9.23 .
“ First Extended Maturity Date ” means November 3, 2021.
“ First Extension Term ” has the meaning set forth in Section 1.6(b) .
“ Flood Insurance Laws ” means, collectively, (a) the National Flood Insurance Act of 1968, (b) the Flood Disaster Protection Act of 1973, and (c) the National Flood Insurance Reform Act of 1994, each as amended and together with any successor Law of such type.
“ Foreign Lender ” means (a) if a Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if a Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“ Fund ” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.
“ Funding Date ” means the date on which the applicable advance of Revolving Loan Proceeds shall occur.
“ GAAP ” means generally accepted accounting principles in the United States of America.
“ Governmental Authority ” or “ Governmental Authorities ” 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).
“ Guarantor ” means KBS REIT PROPERTIES III, LLC, a Delaware limited liability company.
“ Guarantor Covenant Compliance Certificate ” has the meaning set forth in the Guaranty.
“ Guaranty ” means the Guaranty Agreement of even date herewith executed by Guarantor in favor of Administrative Agent for the ratable benefit of Lenders, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“ Hedge Bank ” means any Person in its capacity as a Swap Counterparty.

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“ Improvements ” means the RBC Plaza Improvements, the Preston Commons Improvements, the Sterling Plaza Improvements, the One Washingtonian Office Tower Improvements, the Towers at Emeryville Improvements, the Ten Almaden Improvements, the Legacy Town Center Improvements, the 500 West Madison Tower Improvements.
“ Indebtedness ” means any and all obligations, indebtedness and liabilities of any Borrower that constitute Obligations.
“ Indemnified Liabilities ” has the meaning set forth in Section 9.1 .
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Borrower or Guarantor under any Loan Document and (b) to the extent not otherwise described in clause (a) , Other Taxes.
“ Index Rate ” means, with respect to any applicable Interest Period with respect to a LIBOR Rate Advance, the rate per annum equal to LIBOR, or a comparable or successor rate which is selected by Administrative Agent in accordance with the terms of this Agreement, which rate is approved by Administrative Agent, as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) LIBOR Business Days prior to the commencement of such 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; provided that (a) to the extent a comparable or successor rate is approved by Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further , that to the extent such market practice is not administratively feasible for Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by Administrative Agent, and (b) if the Index Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.
“ Initial Maturity Date ” means November 3, 2020.
“ Insurance Premiums ” means those premiums due in connection with any insurance policies required to be maintained by any Borrower pursuant to any Loan Document.
“ Insurance Proceeds ” means the insurance claims under and the proceeds of any and all policies of insurance covering any Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.
“ 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 Rollover/Conversion Notice; provided that:
(i)      Each Interest Period must commence on a LIBOR Business Day;

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(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 Administrative Agent 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.
“ Interest Reserve Account ” has the meaning set forth in Section 4.22 of this Agreement.
“ IRS ” means the United States Internal Revenue Service.
“ KYC Equity Ownership Percentage ” means the percentage of direct or indirect ownership interests in the Borrower owned by a Person following a transfer which results in Administrative Agent’s or any Lender’s internal policies reasonably requiring a description of such transfer, the interest transferred and the identity of the transferor and transferee, including, without limitation, all documentation and other information that Administrative Agent or any Lender reasonably requests in order to comply with its ongoing obligations (as determined by Administrative Agent or such Lender) under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), provided , however , that any change in the KYC Equity Ownership Percentage shall not be effective until Administrative Agent or the applicable Lender has notified Borrower in writing of such change.
“ Land ” means the RBC Plaza Land, the Preston Commons Land, the Sterling Plaza Land, the One Washingtonian Office Tower Land, the Towers at Emeryville Land, the Ten Almaden Land, the Legacy Town Center Land, the 500 West Madison Land.
“ 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 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. With respect to any Borrower and any Property, “ Law ” or “ Laws ” includes all Laws pertaining to the construction, sale, leasing or use of the Improvements and to access and facilities for handicapped or disabled persons, including and to the extent applicable, any building codes, the Controlled Substances Act, the Flood Insurance Laws, the Federal Architectural Barriers Act (42 U.S.C. § 4151 et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. § 3601 et seq.), the Americans With Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.), the Rehabilitation Act of 1973 (29 U.S.C. § 794), each as amended to date and further amended from time to time.

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“ Leases ” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to any Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“ Leasing Commissions ” means reasonable and customary commissions paid in connection with a Lease to a real estate broker licensed in the state where the applicable Property is located, under commission agreements containing such terms and provisions as are then prevailing between third party, unaffiliated owners and brokers for comparable leases of space at properties similar to such Property in the market area in which such Property is located.
“ Legacy Town Center Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by Legacy Town Center Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Legacy Town Center Improvements ” means all on-site and off-site improvements to the Legacy Town Center Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the Legacy Town Center Land and/or in such improvements.
“ Legacy Town Center Land ” means the real property of Legacy Town Center Borrower described in Exhibit “A-7” .
“ Legacy Town Center Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, Legacy Town Center Borrower and the Approved Manager for the Legacy Town Center Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Legacy Town Center Property ” means the real and personal property conveyed and encumbered by the Legacy Town Center Security Instrument.
“ Legacy Town Center Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by Legacy Town Center Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Lender ” or “ Lenders ” means, singly or collectively, each lender from time to time party to this Agreement.
“ Lender Net Sale Proceeds ” has the meaning set forth in Section 8.10(e) .
“ Lending Office ” means, as to any Lender, the office or offices of such Lender described as such on the Schedule of Lenders, or such other office or offices as such Lender may from time to time notify Borrowers and Administrative Agent.

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“ LIBOR ” means the London Interbank Offered Rate.
LIBOR Business Day ” means a Business Day which is also a London Banking Day.
“ LIBOR Daily Floating Rate ” means, for any day, a fluctuating rate of interest equal to LIBOR, or a comparable or successor rate which is selected by Administrative Agent in accordance with the terms of this Agreement, which rate is approved by Administrative Agent, as published on the applicable Bloomberg screen page (or such commercially available source providing such quotations as may be designated by Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) LIBOR Business Days prior to such day, for U.S. Dollar deposits with a term of one (1) month commencing that day; provided that (a) to the extent a comparable or successor rate is approved by Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further , that to the extent such market practice is not administratively feasible for Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by Administrative Agent, and (b) if the LIBOR Daily Floating Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.
“ LIBOR Margin ” means one hundred eighty (180) 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 Advance ” means an advance of the Loan by Lenders to Borrowers or any portion of the Loan held by a Lender which bears interest at an applicable LIBOR Rate at the time in question.
“ LIBOR Rate Election ” means an election by Borrowers of an applicable LIBOR Rate in accordance with this Agreement.
“ 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) 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 on LIBOR Rate Principal is determined), whether or not any Lender has any Eurocurrency liabilities or requirement otherwise applies to any Lender. The LIBOR Rate shall be adjusted automatically as of the effective date of each change in the LIBOR Reserve Percentage.
“ Loan ” means the loan by Lenders to Borrowers, in the maximum principal amount of One Billion Ten Million Dollars ($1,010,000,000) (as such amount may be reduced, adjusted or increased in accordance with the terms of this Agreement), comprised of the Term Loan and the Revolving Loan.

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“ Loan Documents ” means this Agreement (including all exhibits), the Security Instruments, any Note, the Environmental Agreements, the Manager Subordination Agreements, any Swap Contract, the Guaranty, the Deposit Account Control Agreements, financing statements, and such other documents evidencing, securing or pertaining to the Loan as shall, from time to time, be executed and/or delivered by any Borrower, Guarantor or any other Person to Administrative Agent or any Lender pursuant to this Agreement, as they may be amended, modified, restated, replaced and supplemented from time to time, provided , however , that any agreements relating to any Swap Transaction which are entered into by Guarantor and are not secured by any Property shall not be considered Loan Documents.
“ Loan-to-Value Ratio ” means, as of any date of determination, (i) the amount of the Aggregate Commitments, divided by (ii) the aggregate appraised “As-Is” value of each of the Properties set forth in then-current appraisals of each of the Properties obtained by Administrative Agent as of any calculation of the Loan-to-Value Ratio.
“ London Banking Day ” means a day on which dealings in U.S. Dollar deposits are conducted by and between banks in the London interbank eurodollar market.
“ Management Agreement ” has the meaning specified in Section 5.7(d) .
“ Manager ” has the meaning specified in Section 5.7(d) .
“ Manager Subordination Agreements ” means, collectively, the RBC Plaza Manager Subordination Agreement, the Preston Commons Manager Subordination Agreement, the Sterling Plaza Manager Subordination Agreement, the One Washingtonian Office Tower Manager Subordination Agreement, the Towers at Emeryville Manager Subordination Agreement, the Ten Almaden Manager Subordination Agreement, the Legacy Town Center Manager Subordination Agreement and the 500 West Madison Tower Manager Subordination Agreement.
“ Master Agreement ” has the meaning set forth in the definition of “Swap Contract” set forth in this Exhibit “B” .
“ Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, each of the Properties, or the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of Borrowers, taken as a whole, or Guarantor; (b) a material impairment of the ability of any party to the Loan Documents to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any party to the Loan Documents of any Loan Document to which it is a party.
“ Maturity Date ” means the Initial Maturity Date, as it may be earlier accelerated or extended in accordance with the terms hereof.
“ Minimum Required Debt Service Coverage Ratio ” means (i) as of any Test Date occurring when at least four (4) Properties remain subject to a Security Instrument, an Ongoing Debt Service Coverage Ratio or a Disbursement Debt Service Coverage Ratio (as applicable) of 1.25:1.00, (ii) as of any Test Date occurring when only three (3) Properties remain subject to a Security Instrument,

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an Ongoing Debt Service Coverage Ratio or Disbursement Debt Service Coverage Ratio (as applicable) of 1.30:1.00, and (iii) as of any Test Date occurring when only two (2) Properties remain subject to a Security Instrument, an Ongoing Debt Service Coverage Ratio or Disbursement Debt Service Coverage Ratio (as applicable) of 1.35:1.00.
“ Net Operating Income ” means, with respect to any period of time for any Property, the amount obtained by subtracting actual Operating Expenses for such Property from Actual Operating Revenue of such Property.
“ Net Proceeds ” when used with respect to any Condemnation Awards or Insurance Proceeds, means the gross proceeds from any Condemnation or Casualty remaining after payment of all expenses, including attorneys’ fees, incurred in the collection of such gross proceeds.
“ Non-Consenting Lender ” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 9.9 and (b) has been approved by the Required Lenders.
“ Non-Defaulting Lender ” means, at any time, each Lender that is not a Defaulting Lender at such time.
“ Notes ” means, collectively, the Promissory Note(s), initially dated as of the Closing Date, executed by Borrowers and payable to the order of each Lender in the amount of each Lender’s Commitment and collectively in the maximum principal amount of the Loan substantially in the form of Exhibit “F” , together with all replacements and substitutes thereof, in each case, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Notice ” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.3 of this Agreement.
“ Obligations ” means all liabilities, obligations, covenants and duties of, any Borrower arising under or otherwise with respect to any Loan Document or any Swap Contract, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower or any other party to a Loan Document of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceedings.
“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“ One Washingtonian Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by One Washingtonian Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ One Washingtonian Improvements ” means all on-site and off-site improvements to the One Washingtonian Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the One Washingtonian Land and/or in such improvements.

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“ One Washingtonian Land ” means the real property of One Washingtonian Borrower described in Exhibit “A-4” .
“ One Washingtonian Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, One Washingtonian Borrower and the Approved Manager for the One Washingtonian Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ One Washingtonian Property ” means the real and personal property conveyed and encumbered by the One Washingtonian Security Instrument.
“ One Washingtonian Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by One Washingtonian Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Ongoing Debt Service Coverage Ratio ” means, as of any Test Date, for the applicable Calculation Period, the ratio of Net Operating Income to Debt Service based on operating statements for the Properties for the immediately preceding six (6) month period which comply with the terms of this Agreement.
“ Operating Expenses ” means, with respect to any period of time for any Property, 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 such Property, including utilities, ordinary repairs and maintenance, insurance premiums, ground rents, if any, license fees, Taxes, 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 Administrative Agent, and a replacement reserve equal to $0.25 per rentable square of each 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 shall be subject to appropriate seasonal and other adjustments which are either (i) recommended by Borrowers and approved by Administrative Agent in Administrative Agent’s reasonable discretion, or (ii) otherwise made by Administrative Agent in Administrative Agent’s reasonable discretion.
“ OREO Property Manager ” has the meaning specified in Section 8.10(b) .
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest

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under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.6 ).
“ Participant ” has the meaning specified in Section 9.5(d) .
“ Patriot Act ” has the meaning specified in Section 9.23 .
“ Payment Amount ” means an advance of the Loan, an unreimbursed Administrative Agent Advance, an unreimbursed Indemnified Liability, or any other amount that a Lender is required to fund under this Agreement.
“ Payments ” has the meaning set forth in Section 8.11 .
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“ Platform ” has the meaning set forth in Section 9.3.3 of this Agreement.
“ 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 a Default.
“ Preston Commons Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by Preston Commons Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Preston Commons Improvements ” means all on-site and off-site improvements to the Preston Commons Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the Preston Commons Land and/or in such improvements.
“ Preston Commons Land ” means the real property of Preston Commons Borrower described in Exhibit “A-2” .
“ Preston Commons Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, Preston Commons Borrower and the Approved Manager for the Preston Commons Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Preston Commons Property ” means the real and personal property conveyed and encumbered by the Preston Commons Security Instrument.

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“ Preston Commons Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by Preston Commons Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Prime Rate ” means a rate set by Bank of America based upon various factors including Bank of America’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 Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.
“ Principal Debt ” means the aggregate unpaid principal balance of the Loan at the time in question.
“ Pro Rata Share ” means, with respect to each Lender at any time, a fraction expressed as a percentage, the numerator of which is the amount of the Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Commitments at such time or, if the Aggregate Commitments have been terminated, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the total outstanding amount of all Indebtedness held by such Lender at such time and the denominator of which is the total outstanding amount of all Indebtedness at such time. The initial Pro Rata Share of each Lender named on the signature pages hereto is set forth opposite the name of that Lender on the Schedule of Lenders.
“ Prohibited Person ” means any individual or entity that is (a) currently the subject or target of any Sanctions, (b) included on OFAC’s List of Specially Designated Nationals, HMT’s Consolidated List of Financial Sanctions Targets and the Investment Ban List, or any similar list enforced by any other relevant sanctions authority, (c) any individual or entity that is owned or Controlled by, acting on behalf of, or an Affiliate of, an individual or entity listed in the previous clause (a) or (b) , or (d) located, organized or resident in a Designated Jurisdiction.  
“ Property ” means the RBC Plaza Property, the Preston Commons Property, the Sterling Plaza Property, the One Washingtonian Property, the Towers at Emeryville Property, the Ten Almaden Property, the Legacy Town Center Property and the 500 West Madison Tower Property.
“ Public Lender ” has the meaning set forth in Section 9.3.3 of this Agreement.
“ Purchase Offer ” has the meaning set forth in Section 8.10(e) .
“ Qualified ECP Borrower ” means, at any time, each Borrower with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“ RBC Plaza Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by RBC Plaza Borrower in favor of Administrative Agent for the

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benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ RBC Plaza Improvements ” means all on-site and off-site improvements to the RBC Plaza Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the RBC Plaza Land and/or in such improvements.
“ RBC Plaza Land ” means the real property of RBC Plaza Borrower described in Exhibit “A-1” .
“ RBC Plaza Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, RBC Plaza Borrower and the Approved Manager for the RBC Plaza Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ RBC Plaza Property ” means the real and personal property conveyed and encumbered by the RBC Plaza Security Instrument.
“ RBC Plaza Security Instrument ” means the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by RBC Plaza Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Real Property Taxes ” mean taxes, assessments and other charges or levies imposed upon or against or with respect to any Property or the ownership, use, occupancy or enjoyment of any portion thereof, or any utility service thereto, as the same become due and payable, including all taxes assessed against any Property or any part thereof.
“ Recipient ” means Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower or Guarantor under the Loan Documents.
“ Reimbursement Rights ” shall have the meaning set forth in Section 9.32 .
“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and such Person’s Affiliates.
“ Release Price ” means, with respect to any Property, a principal pay down of the Loan (without prepayment fees or premiums other than the payment of any Consequential Loss) or a permanent reduction in the Revolving Availability, or both, in the following amount:
(a)    If, after giving effect to the release or reconveyance, at least four (4) Properties remain subject to a Security Instrument, an amount sufficient to cause such remaining Properties after such release or reconveyance to satisfy each of the following requirements: (1) the Loan-to-Value Ratio of such remaining Properties shall be not more than sixty percent (60%) (based upon the most recent appraisal of such remaining Properties, which appraisal must be dated no earlier

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than six (6) months prior to the date of the proposed release), assuming the Release Price has been applied to the outstanding principal balance of the Loan, and (2) such remaining Properties would, during the six (6) month period ending on the then-most recent Test Date, satisfy an Ongoing Debt Service Coverage Ratio of at least 1.35:1.00, assuming the Release Price has been applied to the outstanding principal balance of the Loan;
(b)    If, after giving effect to the release or reconveyance, only three (3) Properties remain subject to a Security Instrument, an amount sufficient to cause such remaining Properties after such release or reconveyance to satisfy each of the following requirements: (1) the Loan-to-Value Ratio of such remaining Properties shall be not more than fifty-seven and one-half percent (57.5%) (based upon the most recent appraisal of such remaining Properties, which appraisal must be dated no earlier than six (6) months prior to the date of the proposed release), assuming the Release Price has been applied to the outstanding principal balance of the Loan, and (2) such remaining Properties would, during the six (6) month period ending on the then-most recent Test Date, satisfy an Ongoing Debt Service Coverage Ratio of at least 1.40:1.00, assuming the Release Price has been applied to the outstanding principal balance of the Loan;
(c)    If, after giving effect to the release or reconveyance, only two (2) Properties remain subject to a Security Instrument, an amount sufficient to cause such remaining Properties after such release or reconveyance to satisfy each of the following requirements: (1) the Loan-to-Value Ratio of such remaining Properties shall be not more than fifty-five percent (55%) (based upon the most recent appraisal of such remaining Properties, which appraisal must be dated no earlier than six (6) months prior to the date of the proposed release), assuming the Release Price has been applied to the outstanding principal balance of the Loan, and (2) such remaining Properties would, during the six (6) month period ending on the then-most recent Test Date, satisfy an Ongoing Debt Service Coverage Ratio of at least 1.45:1.00, assuming the Release Price has been applied to the outstanding principal balance of the Loan;
“ Remargin Debt Service Coverage Ratio ” means an Ongoing Debt Service Coverage Ratio of 1.10:1.00.
“ Rents ” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of any Property or any part thereof, or arising from the use or enjoyment of such Property or any part thereof, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within such Property or any part thereof.
“ Replacement Note ” has the meaning specified in Section 9.5(b) .
“ Required Lenders ” means as of any date of determination at least two (2) Lenders having at least 66-2/3% of the Aggregate Commitments or, if the Aggregate Commitments have been terminated, at least two Lenders holding in the aggregate at least 66-2/3% of the total outstanding amount of all Indebtedness; provided that the Commitment of, and the portion of the total outstanding amount of all Indebtedness held by, any Defaulting Lender shall be excluded for purposes of making a determination of the Required Lenders. At any time that there is only one (1) Lender, then “Required Lenders” shall mean such Lender. At any time that there are only two (2) Lenders, then,

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subject to the following sentence, “Required Lenders” shall mean each such Lender. At any time that all but one (1) of the Lenders are Defaulting Lenders, then “Required Lenders” shall mean the non-Defaulting Lender.
“ Revolving Availability ” means the maximum principal amount of Revolving Loan Proceeds available to Borrowers, which shall be an amount that, once outstanding, would equal twenty-five percent (25%) of the outstanding principal amount of the Loan, as such amount may be reduced, increased or adjusted from time to time in accordance with this Agreement. In accordance with Section 1.5 , upon the prepayment of any principal outstanding under the Term Loan, the Revolving Availability shall be permanently reduced to an amount that, once outstanding, would equal twenty-five percent (25%) of the outstanding principal amount of the Loan (after giving effect to such prepayment), or to a lesser amount if designated by Borrowers to Administrative Agent in writing. Notwithstanding anything to the contrary contained herein, Borrowers shall have the right, at any time, to permanently reduce the Revolving Availability by written notice to Administrative Agent, provided, however, that in no event shall the Revolving Availability be less than the Revolving Loan Proceeds then outstanding. The Revolving Availability as of the Closing Date is equal to Two Hundred Fifty-Two Million Five Hundred Thousand Dollars ($252,500,000).
“ Revolving Loan ” means the revolving credit facility comprising a portion of the Loan in the maximum principal amount of the Revolving Availability and available to Borrowers in accordance with Section 1.3.3 of this Agreement.
“ Revolving Loan Commitment ” means, as to any Lender, its obligation to advance its Pro Rata Share of the Revolving Loan in an aggregate principal amount not exceeding the amount set forth opposite such Lender’s name on the Schedule of Lenders at any one time outstanding, as such amount may be reduced, increased or adjusted from time to time in accordance with this Agreement.
“ Revolving Loan Proceeds ” means proceeds of the Revolving Loan disbursed to Borrowers by the Lenders in accordance with Sections 1.3.3 and 1.3.4 of this Agreement.
“ Rollover/Conversion Notice ” means a notice to Administrative Agent which sets forth Borrowers’ interest rate election in accordance with Section 1.4.1(a) hereof, which notice may be (i) in writing, (ii) by telephone provided that any telephonic notice must be confirmed immediately by delivery to Administrative Agent of a written Rollover/Conversion Notice in a form as may be approved by Administrative Agent, or (iii) in any other form approved by Administrative Agent (not to be unreasonably withheld, conditioned, or delayed) (including any form on an electronic platform or electronic transmission system as shall be approved by Administrative Agent), appropriately completed and signed by an Authorized Signer of Borrowers.
“ Sanction(s) ” means any international economic sanction administered or enforced by the United States Government, including OFAC, the United Nations Security Council, the European Union, Her Majesty’s Treasury (“ HMT ”) or other relevant sanctions authority.
“ Schedule of Lenders ” means the schedule of Lenders party to this Agreement as set forth on Exhibit “G” , as it may be modified from time to time in accordance with this Agreement.

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“ Second Extended Maturity Date ” means November 3, 2022.
“ Second Extension Term ” has the meaning set forth in Section 1.6(b) .
“ Secured Party Designation Notice ” means a notice from any Lender or an Affiliate of a Lender substantially in the form of Exhibit “L” .
“ Security Instruments ” means the RBC Plaza Security Instrument, the Preston Commons Security Instrument, the Sterling Plaza Security Instrument, the One Washingtonian Security Instrument, the Towers at Emeryville Security Instrument, the Ten Almaden Security Instrument, the Legacy Town Center Security Instrument, the 500 West Madison Tower Security Instrument, and any other mortgage, deed of trust, or deed to secure debt executed and delivered by an Eligible Entity in connection with the inclusion of an Add-On Property in the Collateral pursuant to Section 9.30 , as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Special Flood Hazard Area ” means an area identified as such by the Administrator of FEMA using FEMA’s Flood Insurance Rate Map or FEMA’s Flood Hazard Boundary Map.
“ State ” means, (i) with respect to the RBC Plaza Property, the State of Minnesota (ii) with respect to the Preston Commons Property, the Sterling Plaza Property and the Legacy Town Center Property, the State of Texas, (iii) with respect to the One Washingtonian Office Tower Property, the State of Maryland, (iv) with respect to the Towers at Emeryville Property and the Ten Almaden Property, the State of California, and (v) with respect to the 500 West Madison Tower Property, the State of Illinois.
“ Sterling Plaza Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by Sterling Plaza Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Sterling Plaza Improvements ” means all on-site and off-site improvements to the Sterling Plaza Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the Sterling Plaza Land and/or in such improvements.
“ Sterling Plaza Land ” means the real property of Sterling Plaza Borrower described in Exhibit “A-3” .
“ Sterling Plaza Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, Sterling Plaza Borrower and the Approved Manager for the Sterling Plaza Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Sterling Plaza Property ” means the real and personal property conveyed and encumbered by the Sterling Plaza Security Instrument.
“ Sterling Plaza Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by Sterling Plaza

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Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Survey ” means a map or plat of survey of the Land described therein which conforms with Administrative Agent’s survey requirements set forth in the Closing Checklist.
“ Swap Contract ” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any agreement or contract that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act and CFTC Regulation 1.3(xxx), any form of master agreement (the “ Master Agreement ”) published by the International Swaps and Derivatives Association, Inc., and any other master agreement, entered into on or prior to the Closing Date or any time after the Closing Date, between Swap Counterparty and any Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“ Swap Counterparty ” means any Person in its capacity as a party to a Swap Contract that, at the time it enters into a Swap Contract not prohibited under this Agreement, is a Lender or an Affiliate of a Lender, in its capacity as a party to such Swap Contract (even if such Person ceases to be a Lender or such Person’s Affiliate ceased to be a Lender); provided , in the case of a Swap Contract with a Person who is no longer a Lender (or Affiliate of a Lender), such Person shall be considered a Swap Counterparty only through the stated termination date (without extension or renewal) of such Swap Contract and provided further that for any of the foregoing to be included as a “Swap Contract” on any date of determination by Administrative Agent, the applicable Hedge Bank (other than Administrative Agent or an Affiliate of Administrative Agent) must have delivered a Secured Party Designation Notice to Administrative Agent prior to such date of determination.
“ Swap Obligation ” means any obligation to pay or perform under any Swap Contract, or any other agreement, contract or transaction entered into in connection with a Swap Transaction.
“ Swap Transaction ” means any transaction that is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, spot or floor transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, in connection with the Loan.
“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Ten Almaden Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by Ten Almaden Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.

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“ Ten Almaden Improvements ” means all on-site and off-site improvements to the Ten Almaden Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the Ten Almaden Land and/or in such improvements.
“ Ten Almaden Land ” means the real property of Ten Almaden Borrower described in Exhibit “A-6” .
“ Ten Almaden Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, Ten Almaden Borrower and the Approved Manager for the Ten Almaden Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Ten Almaden Property ” means the real and personal property conveyed and encumbered by the Ten Almaden Security Instrument.
“ Ten Almaden Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by Ten Almaden Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Tenant Improvements ” means the construction and related work to be undertaken by a Borrower pursuant to any Lease as tenant improvements.
“ Term Loan ” has the meaning set forth in Section 1.3.2 .
“ Term Loan Commitment ” means, as to any Lender, its obligation to advance its Pro Rata Share of the Term Loan in an aggregate principal amount not exceeding the amount set forth opposite such Lender’s name on the Schedule of Lenders at any one time outstanding, as such amount may be reduced, increased or adjusted from time to time in accordance with this Agreement.
“ Termination Fee Deposit ” shall have the meaning set forth in Section 4.17 .
“ Test Date ” means March 31, June 30, September 30, and December 31 of each year, commencing on December 31, 2017.
“ Title Company ” means Commonwealth Land Title Insurance Company.
“ Title Insurance ” means the loan policy or policies of title insurance issued to Administrative Agent for the benefit of Lenders by the Title Company, in an amount equal to the maximum principal amount of the Loan, insuring the validity and priority of each of the Security Instruments, together with any facultative reinsurance agreements entered into in connection therewith and approved by Administrative Agent.
“ Towers at Emeryville Environmental Agreement ” means the Environmental Indemnity Agreement, dated as of the Closing Date, by Towers at Emeryville Borrower in favor of Administrative Agent for the benefit of Lenders and certain other parties, as amended, modified, replaced, restated, extended or renewed from time to time.

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“ Towers at Emeryville Improvements ” means all on-site and off-site improvements to the Towers at Emeryville Land, together with all fixtures, tenant improvements, and appurtenances now or later to be located on or in the Towers at Emeryville Land and/or in such improvements.
“ Towers at Emeryville Land ” means the real property of Towers at Emeryville Borrower described in Exhibit “A-5” .
“ Towers at Emeryville Manager Subordination Agreement ” means the Assignment and Subordination of Property Management Agreement dated as of the Closing Date, by and among Administrative Agent, Towers at Emeryville Borrower and the Approved Manager for the Towers at Emeryville Property, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Towers at Emeryville Property ” means the real and personal property conveyed and encumbered by the Towers at Emeryville Security Instrument.
“ Towers at Emeryville Security Instrument ” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date, by Towers at Emeryville Borrower in favor of Administrative Agent, as amended, modified, replaced, restated, extended or renewed from time to time.
“ Transfer ” means any direct or indirect sale, assignment, conveyance, change of Control or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“ U.S. Person ” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.
“ U.S. Tax Compliance Certificate ” has the meaning specified in Section 2.1(e)(ii)(B)(III) .
“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

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EXHIBIT “C”
CONDITIONS PRECEDENT TO THE DISBURSEMENT OF TERM LOAN AND THE EXTENSION OF CREDIT FOR THE REVOLVING LOAN
As conditions precedent to the disbursement of the Term Loan and the extension of credit for the Revolving Loan, if and to the extent required by Administrative Agent, Administrative Agent shall have received and approved the following:
1.      Fees and Expenses . Any and all required commitment and other fees, and evidence satisfactory to Administrative Agent that Borrowers have paid all other fees, costs and expenses (including the fees and costs of Administrative Agent’s counsel) then required to be paid pursuant to this Agreement and all other Loan Documents, including all fees, costs and expenses that Borrowers are required to pay pursuant to any loan application or commitment.
2.      Financial Statements . The Financial Statements of each Borrower and Guarantor or any other Person required by any loan application or commitment or otherwise required by Administrative Agent, which Financial Statements shall not disclose a material adverse change in any Borrower’s or Guarantor’s business condition (financial or otherwise), operations, properties or prospects.
3.      Appraisal . A market value appraisal of each Property made within one hundred eighty (180) days prior to the Closing Date, which appraises the Properties on an “as-is value” basis at not less than $1,553,846,153.85 (the “ Appraised Value ”). The appraiser, appraisal and Appraised Value of each Properties must be satisfactory to Administrative Agent (including satisfaction of applicable regulatory requirements) and the appraiser must be engaged directly by Administrative Agent.
4.      Authorization . Evidence Administrative Agent requires of the existence, good standing, authority and capacity of each Borrower, Guarantor, and their respective constituent partners, members, managers and owners (however remote) to execute, deliver and perform their respective obligations to Administrative Agent and Lenders under the Loan Documents.
5.      Loan Documents . From Borrowers, Guarantor and each other Person required by Administrative Agent, duly executed, acknowledged and/or sworn to as required, and delivered to Administrative Agent (with a copy for each Lender) all Loan Documents then required by Administrative Agent, dated as of the Closing Date, each in form and content satisfactory to Administrative Agent.
6.      Opinions . Written opinions of counsel satisfactory to Administrative Agent for Borrowers, Guarantor, and any other Persons addressed to Administrative Agent for the benefit of Lenders, dated the Closing Date.
7.      Survey; Special Flood Hazard Area . (a) An original Survey of all Land and improvements thereon dated not more than sixty (60) days prior to the Closing Date satisfactory to Administrative Agent and the Title Company; and (b) a flood insurance policy in an amount equal to the lesser of the maximum Loan amount or the maximum amount of flood insurance available under the Flood Disaster Protection Act of 1973, as amended, and otherwise in compliance with

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the requirements of the Loan Documents, or evidence satisfactory to Administrative Agent that none of the Land is located in a Special Flood Hazard Area.
8.      Title Insurance . An ALTA title insurance policy with respect to each Security Instrument, issued by the Title Company (which shall be approved by Administrative Agent) in the maximum amount of the Loan plus any other amount secured by any Security Instrument, on a coinsurance and/or reinsurance basis if and as required by Administrative Agent, insuring that the each Security Instrument constitutes a valid lien covering the applicable Land and all Improvements thereon, having the priority required by Administrative Agent and subject only to those exceptions and encumbrances (regardless of rank or priority) Administrative Agent approves, in a form acceptable to Administrative Agent.
9.      Insurance Policies . The insurance policies initially required by Administrative Agent, pursuant to the Loan Documents, together with evidence satisfactory to Administrative Agent that all premiums therefor have been paid and that the policies are in full force and effect.
10.      Leases . (a) True and correct copies of all leases and subleases, and guaranties thereof; (b) estoppel certificates and subordination and attornment agreements (including non-disturbance agreements if and to the extent agreed by Administrative Agent in its discretion), dated within thirty (30) days prior to this Agreement and in form and content satisfactory to Administrative Agent, from the tenants and subtenants as Administrative Agent requires (which, for estoppel certificates, shall be from tenants and subtenants covering at least 75% of the square footage of the Properties); (c) evidence satisfactory to Administrative Agent of Borrowers’ compliance with the leases; and (d) evidence satisfactory to Administrative Agent of the tenants’ approval of all matters requiring their approval.
11.      Environmental Compliance/Report . Evidence satisfactory to Administrative Agent that no portion of any Land is “wetlands” under any applicable Law and that no Land contains or is within or near any area designated as a hazardous waste site by any Governmental Authority, that neither any Property nor any adjoining property contains or has ever contained any substance classified as hazardous or toxic (or otherwise regulated, such as, without limitation, asbestos, radon and/or petroleum products) under any Law or governmental requirement pertaining to health or the environment, and that neither any Property nor any use or activity thereon violates or is or could be subject to any response, remediation, clean up or other obligation under any Law or governmental requirement pertaining to health or the environment including a written report of an environmental assessment of each Property, made within twelve (12) months prior to the Closing Date, by an engineering firm, and of a scope and in form and content satisfactory to Administrative Agent, complying with Administrative Agent’s established guidelines, showing that there is no evidence of any such substance which has been generated, treated, stored, released or disposed of in any Property, and such additional evidence as may be required by Administrative Agent. All reports, drafts of reports, and recommendations, whether written or oral, from such engineering firm shall be made available and communicated to Administrative Agent.
12.      Other Documents . Such other instruments, documents, certificates and other information as Administrative Agent may reasonably request from each Borrower, Guarantor, and any other Person, in form and content satisfactory to Administrative Agent.

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13.      Borrower Identification Due Diligence . All due diligence materials deemed necessary by Administrative Agent and each Lender with respect to verifying each Borrower’s identity and background information in a manner satisfactory to Administrative Agent and each Lender.
14.      No Guarantor Default . Evidence reasonably satisfactory to Administrative Agent no default or event of default is then continuing under any indebtedness provided by Administrative Agent to Guarantor.
15.      No Litigation . Evidence reasonably satisfactory to Administrative Agent that no notices of default, material litigation, government or environmental proceedings have been initiated or threatened against any Borrower or Guarantor, including, without limitation, evidence reasonably satisfactory to Administrative Agent that, except as disclosed to and approved by Administrative Agent, no action, suit, investigation or proceeding, pending or threatened, in any court or before any arbitrator or governmental authority that affects any Borrower or Guarantor or any transaction contemplated hereby, or that would have a material adverse effect on any Borrower or Guarantor or any transaction contemplated hereby. Administrative Agent agrees that receipt and approval of customary litigation and judgment searches on each Borrower and Guarantor shall satisfy this condition precedent.
Notwithstanding anything stated to the contrary in this Exhibit “C ” or elsewhere in this Agreement or the other Loan Documents, the disbursement of the Term Loan and/or recordation of the Security Instruments shall be deemed a confirmation by Administrative Agent and the Lenders that all conditions precedent to the funding of the Term Loan and the extension of credit of the Revolving Loan as set forth in this Exhibit “C ” have been satisfied or waived for all purposes.



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EXHIBIT “D”
LEASING AND TENANT MATTERS
Borrowers and Lenders agree as follows:
1.      Representations and Warranties of Borrowers Regarding Leases .
Each Borrower represents and warrants that such Borrower has delivered (or will deliver within thirty (30) days of the date of recording of the Security Instruments) to Administrative Agent such Borrower’s standard form of tenant lease and copies of all Leases and any guaranty(ies) thereof, affecting any part of the Improvements of such Borrower, together with a rent roll for the Property of such Borrower, and no such Lease or guaranty contains any option or right of first refusal to purchase all or any portion of such Property or any present or future interest therein.
2.      Covenants of Borrowers Regarding Leases and Rents.
Each Borrower covenants that such Borrower (a) will observe and perform all of the obligations imposed upon the landlord in the Leases and will not do or permit to be done anything to impair the security thereof; (b) will use commercially reasonable efforts to enforce or secure, or cause to be enforced or secured, the performance of each and every obligation and undertaking of the respective tenants under the Leases and will appear in and defend, at such Borrower’s sole cost and expense, any action or proceeding arising under, or in any manner connected with, the Leases; (c) will not collect any of the Rents more than thirty (30) days in advance of the time when the same become due under the terms of the Leases; (d) will not discount any future accruing Rents; (e) without the prior written consent of Administrative Agent, will not execute any assignment of the Leases or the Rents; (f) except as expressly permitted under this Agreement, will not modify the rent, the term, the demised premises or the common area maintenance charges under any of the Leases, or add or modify any option or right of first refusal to purchase all or any portion of the Property of such Borrower or any present or future interest therein, or surrender, cancel or terminate any Lease, without the prior written consent of Administrative Agent (which consent shall not be unreasonably withheld, conditioned or delayed); and (g) will execute and deliver, at the request of Administrative Agent, all such assignments of the Leases and Rents in favor of Administrative Agent as Administrative Agent may from time to time reasonably require.
3.      Leasing Guidelines.
Except as expressly permitted under this Agreement, no Borrower shall enter into any Lease of space in the Improvements of such Borrower unless approved or deemed approved by Administrative Agent (and, to the extent required below, Required Lenders) prior to execution (which consent shall not be unreasonably withheld, conditioned or delayed). Each Borrower’s standard form of tenant lease, and any revisions thereto, must have the prior written approval of Administrative Agent, not to be unreasonably withheld, conditioned or delayed. Administrative Agent and Required Lenders shall be “deemed” to have approved any Lease that: (a) is on the standard form lease approved by Administrative Agent with no deviations except as approved by Administrative Agent (subject to modifications to address customary lease modifications in the

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marketplace); (b) is entered into in the ordinary course of business with a bona fide unrelated third party tenant, and the applicable Borrower, acting in good faith and exercising due diligence, has determined that the tenant is financially capable of performing its obligations under the Lease; (c) is received by Administrative Agent, together with any guaranty(ies) and financial information received by the applicable Borrower regarding the tenant and any guarantor(s), within fifteen (15) days after execution; (d) reflects an arm’s length transaction; (e) contains no option or right of first refusal to purchase all or any portion of any Property or any present or future interest therein; (f) requires the tenant to execute and deliver to Administrative Agent an estoppel certificate in form and substance reasonably acceptable to Administrative Agent within thirty (30) days after notice from Administrative Agent; and (g) does not cover in excess of ten percent (10%) of the aggregate net rentable area of the applicable Improvements or have a rental rate that is less than as set forth below:
Property
Minimum Rental Rate
RBC Plaza Property
Floors 3-11: $16/SF (NNN)*
Floors 12-22: $17/SF (NNN)
Floors 23-40: $17.50/SF (NNN)
Retail Sky Space: $25/SF (NNN)
Retail Street Space: $30/SF (NNN)
500 West Madison Property
Floors 3-15: $20/SF (NNN)
Floors 16-29: $21.50/SF (NNN)
Floors 30-40: $23/SF (NNN)
Retail Space: $42.50/SF (NNN)
Restaurant Space: $35.00/SF (NNN)
Legacy Town Center Property
Tower 1: $23/SF (NNN)
Tower 2: $22/SF (NNN)
Tower 3: $22/SF (NNN)
One Washingtonian Property
$30/SF (Modified Gross – Base Year)
Preston Commons Property
$22/SF (NNN)
Sterling Plaza Property
Floors 1-10: $21/SF (NNN)
Floors 11-19: $22/SF (NNN)
Ten Almaden Property
$42/SF (Full Service Gross)
Towers at Emeryville Property
Tower I: $22.50/SF (Gross)
 
Tower II: Office Floors
Floors 1-5: $41/SF (Full Service Gross)
 
Floors 6-9: $42SF (Full Service Gross”
 
Floors 10-16: $43/SF (Full Service Gross)
Tower III: $5.50/SF (“Gross”)
*NNN means “Net-Net-Net”

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Any Lease that covers in excess of ten percent (10%) of the aggregate net rentable area of the applicable Improvements shall require the prior written approval of Administrative Agent, and any Lease that covers in excess of twenty percent (20%) of the aggregate net rentable area of the applicable Improvements shall require the prior written approval of the Required Lenders.
Borrowers shall provide to Administrative Agent (who will then provide copies to all Lenders if and when the consent of the Required Lenders is required pursuant to the terms hereof, if at all) a correct and complete copy of each Lease, including any exhibits, and any guaranty(ies) thereof, prior to execution unless the Lease meets the foregoing requirements for “deemed” approval by Administrative Agent (and, if applicable, by the Required Lenders). Borrowers shall pay all reasonable costs incurred by Administrative Agent in reviewing and approving Leases and any guaranties thereof, and also in negotiating subordination agreements and subordination, nondisturbance and attornment agreements with tenants, including reasonable attorneys’ fees and costs.
For Leases that require Administrative Agent’s approval (and, if applicable, the approval of the Required Lenders), Borrowers shall provide Administrative Agent (who will then provide copies to all Lenders if and when the consent of the Required Lenders is required pursuant to the terms hereof, if at all) with a copy of the letter of intent (“ LOI ”) for each proposed Lease and, to the extent available, with financial information on the proposed tenant to aid Administrative Agent (and, if applicable, the Required Lenders) in determining whether it will consent thereto. A proposed LOI shall be deemed approved by Administrative Agent (and, if applicable, by the Required Lenders) unless Administrative Agent (and, if applicable, the Required Lenders) disapproves such LOI in writing within five (5) Business Days after such LOI is submitted to Administrative Agent for approval. Upon approval (or deemed approval) of the LOI, no further approval will be required by Administrative Agent (and, if applicable, by the Required Lenders) and Administrative Agent (and, if applicable, the Required Lenders) will have granted its consent to the Lease that results from the LOI so long as such Lease is on the applicable Borrower’s standard form of tenant lease approved by Administrative Agent (which lease form may be modified to address customary lease modifications in the marketplace), and the business terms in the Lease are not materially different from the terms outlined in the approved (or deemed approved) LOI.
In the event a Borrower satisfies all of the conditions of this Section 3 with respect to any Lease, Administrative Agent’s (and/or the Required Lenders’, if applicable) consent to such Lease shall not be required.
4.      Delivery of Leasing Information and Documents.
From time to time upon Administrative Agent’s request, each Borrower shall promptly deliver to Administrative Agent (a) complete executed copies of each Lease, including any exhibits thereto and any guaranty(ies) thereof, (b) a complete rent roll of the Property of such Borrower, together with such operating statements and leasing schedules and reports as Administrative Agent may reasonably require, (c) any and all financial statements of the tenants, subtenants and any lease guarantors to the extent available to such Borrower, and (d) such other information regarding tenants and prospective tenants and other leasing information as Administrative Agent may reasonably request (to the extent available to such Borrower). Each

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Borrower shall use commercially reasonable efforts to deliver to Administrative Agent such estoppel certificates, subordination agreements and/or subordination, non-disturbance and attornment agreements executed by such tenants as Administrative Agent may reasonably require and subject to the terms of the applicable leases and form estoppels and subordination agreements attached thereto.
Upon a Borrower’s request, Administrative Agent agrees to execute a subordination agreement with respect to any Lease, provided that the subordination agreement must be in form and substance acceptable to Administrative Agent.


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EXHIBIT “E”
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this “Assignment”) is dated as of the Effective Date set forth below and is entered into by and between _________________ (the “ Assignor ”) and ____________________ (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement identified below (the “ Loan Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Loan Agreement, as of the Effective Date inserted by Administrative Agent as contemplated below, (i) all of the Assignor’s rights and obligations as a Lender under the Loan Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including Guaranties), and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Loan Agreement, any other documents or instruments delivered pursuant thereto or in any way based on or related to any of the foregoing, including, but not limited to contract claims, tort claims, malpractice claims, statutory claims and all other claims at Law or in equity, related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor.
1.    Assignor:    ______________________________
[Assignor [is] [is not] a Defaulting Lender]
2.    Assignee:    ______________________________ [, an Affiliate/Approved Fund of _____________]
3.    Borrower(s):    KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company.

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4.    Administrative Agent: Bank of America, N.A., as the administrative agent under the Loan Agreement
5.    Loan Agreement: The Loan Agreement, dated as of November 3, 2017, by and among Borrower(s), the Lenders parties thereto, and Administrative Agent
6.    Assigned Interest:
Aggregate
Amount of
Commitment/Loans
for all Lenders
Amount of
Commitment/Loans
Assigned
Percentage
Assigned of
Commitment/Loans
$________________
$________________
______________%
Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment are hereby agreed to:
ASSIGNOR:
______________________________
By:             
    Name:         
    Title:         

ASSIGNEE:
______________________________
By:             
    Name:         
Title:         
[Consented to and] Accepted:
BANK OF AMERICA, N.A., as Administrative Agent
By: _________________________________
Name:_______________________________
Title:________________________________

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[BORROWERS ARE EXECUTING THEIR RESPECTIVE SIGNATURE BLOCKS BELOW SOLELY FOR THE PURPOSE OF ACKNOWLEDGING RECEIPT OF THE ASSIGNMENT AND ASSUMPTION, TO WHICH THIS CONSENT IS ATTACHED, AND BY SIGNING BELOW, BORROWERS SHALL NOT INCUR ANY ADDITIONAL OBLIGATIONS OR ADDITIONAL LIABILITY, EXCEPT AS CONTEMPLATED BY THE LOAN DOCUMENTS]

[Consented to:]
__________________________________________
By: _________________________________
Name: _______________________________
Title: ________________________________

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1      Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and (iv) it is [not] a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents, or any collateral thereunder, (iii) the financial condition of Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
1.2      Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Loan Agreement, (ii) it meets all requirements of an Eligible Assignee under the Loan Agreement (subject to receipt of such consents as may be required under the Loan Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 4.8 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision independently and without reliance on Administrative Agent or any other Lender to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Loan Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
1.3      Assignee’s Address for Notices, etc . Attached hereto as Schedule 1 is all contact information, address, account and other administrative information relating to the Assignee.
2.      Payments . From and after the Effective Date, Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments

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by Administrative Agent for periods prior to the Effective Date or with respect to the making of this Assignment directly between themselves.
3.      General Provisions . This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment. This Assignment shall be governed by, and construed in accordance with, the law of the State of California.

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SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION
ADMINISTRATIVE DETAILS
(Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic mail addresses and account and payment information)
(a)    LIBOR Lending Office:
Assignee name:     
Address:     
         
    Attention:     
    Telephone: (__)     
    Facsimile: (__)     
    Electronic Mail:     
(b)    Domestic Lending Office:
Assignee name:     
    Address:     
         
    Attention:     
    Telephone: (__)     
    Facsimile: (__)     
    Electronic Mail:     
(c)    Notice Address:
Assignee name:     
    Address:     
         
    Attention:     
    Telephone: (__)     
    Facsimile: (__)     
    Electronic Mail:     
(d)    Payment Instructions:
Account No.:     
    Attention:     
    Reference:     


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EXHIBIT “F”
PROMISSORY NOTE
$______________________                        _______________, _____
FOR VALUE RECEIVED, each of KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”), KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, as a “ Borrower ” and, collectively, jointly and severally, as “ Borrowers ”) hereby promises to pay to the order of _____________________ (“ Lender ”), as one of the lenders under that certain Loan Agreement (defined below) (collectively, the “ Lenders ”) by and among Borrowers, the lenders from time to time a party thereto, and Bank of America, N.A., a national banking association (together with any and all of its successors and assigns, “ Administrative Agent ”) as administrative agent for the benefit of the lenders (the “ Loan Agreement ”) dated [as of November 3, 2017] [of even date herewith] , without offset, in immediately available funds in lawful money of the United States of America, at the Administrative Agent’s Office as defined in the Loan Agreement, the principal sum of _______________________________________ DOLLARS ($_______________________) (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. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.
1.      Note; Interest; Payment Schedule . This Note (as may be amended, modified, supplemented, restated and replaced from time to time, this “ Note ”) is one of the Notes referred to in the Loan Agreement and is entitled to the benefits thereof and subject to prepayment in whole or in part as provided therein. The entire principal balance of this Note then unpaid shall be due and payable at the times as set forth in the Loan Agreement. Accrued unpaid interest shall be due and payable at the times and at the interest rate as set forth in the Loan Agreement until all principal and accrued interest owing on this Note shall have been fully paid and satisfied. Any amount not paid when due and payable hereunder shall, to the extent permitted by applicable Law, bear interest and if applicable a late charge as set forth in the Loan Agreement.
2.      Security; Loan Documents . The security for this Note includes the Security Instruments (as defined in the Loan Agreement). This Note, the Security Instruments, the Loan Agreement and all other documents now or hereafter securing, guaranteeing or executed in

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connection with the loan evidenced, in whole or in part, by this Note (the “ Loan ”), are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a “ Loan Document ” and together the “ Loan Documents .”
3.      Defaults .
(a)      Upon the occurrence and during the continuance of a Default, Administrative Agent on behalf of the Lender and the other Lenders shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts due hereunder and under the other Loan Documents, at once due and payable (and upon such declaration, the same shall be at once due and payable), to foreclose any liens and security interests securing payment hereof and to exercise any of its other rights, powers and remedies under this Note, under any other Loan Document, or at Law or in equity.
(b)      All of the rights, remedies, powers and privileges (together, “ Rights ”) of Administrative Agent on behalf of the Lender and the other Lenders provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other Rights at Law or in equity. The resort to any Right shall not prevent the concurrent or subsequent employment of any other appropriate Right. No single or partial exercise of any Right shall exhaust it or preclude any other or further exercise thereof, and every Right may be exercised at any time and from time to time. No failure by Administrative Agent, Lender and the other Lenders to exercise, and no delay in exercising any Right, including, but not limited to, the right to accelerate the maturity of this Note, shall be construed as a waiver of any Default or as a waiver of any Right. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof 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 Administrative Agent, Lender and the other Lenders to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time, or nullify any prior exercise of any such Right, (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect, or (iii) in any way excuse the existence of a Default.
(c)      If any Borrower sues any holder in connection with this Note or any other Loan Document and does not prevail, then Borrowers agree to pay to each such holder to the extent required under Section 4.15 of the Loan Agreement, in addition to principal, interest and any other sums owing to Administrative Agent, Lender and the other Lenders hereunder and under the other Loan Documents, all costs and expenses incurred by such holder in any such suit or proceeding, including attorneys’ fees and expenses, investigation costs and all court costs.
4.      Heirs, Successors and Assigns . The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of each Borrower and Lender and their respective successors and assigns permitted by the Loan Agreement. The foregoing sentence shall not be construed to permit any Borrower to assign the Loan except as otherwise permitted under the Loan Agreement. As further provided in the Loan Agreement, Lender may, at any time, sell, transfer, or assign all or a portion of its interest in this Note, the Security Instruments and the other Loan Documents, as set forth in the Loan Agreement.

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5.      General Provisions . Time is of the essence with respect to Borrowers’ obligations under this Note. If more than one Person executes this Note as “Borrower” or “Borrowers,” all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Each Borrower and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, 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 neither Administrative Agent, Lender nor any other Lender shall 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; (e) waive the benefit of all homestead and similar exemptions as to this Note; (f) agree that their liability under this Note shall not be affected or impaired by any determination that any security interest or lien taken by Administrative Agent, Lender or any other Lender to secure this Note is invalid or unperfected; and (g) hereby subordinate any and all rights against any other Borrower and any of the 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. The words “ include ” and “ including ” shall be interpreted as if followed by the words “ without limitation .” THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY CALIFORNIA LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
6.      Notices . Any notice, request, or demand to or upon any Borrower or the holder hereof shall be deemed to have been properly given or made when delivered in accordance with the Loan Agreement.
7.      No Usury . It is expressly stipulated and agreed to be the intent of Borrowers, Administrative Agent and all Lenders at all times to comply with applicable state Law or applicable United States federal Law (to the extent that it permits a 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 Administrative Agent’s exercise of the option

F-3


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 Administrative Agent’s and each Lender’s express intent that all excess amounts theretofore collected by Administrative Agent or any Lender shall be credited on the principal balance of this Note and all other indebtedness 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 Lenders for the use, forbearance, or detention 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.
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.
[Signatures begin on following page.]

F-4



IN WITNESS WHEREOF, each Borrower has duly executed and delivered this Note as of the date first above written.
KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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


[Signatures continue on following page.]


F-5



KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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


[Signatures continue on following page.]


F-6



KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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


[Signatures continue on following page.]




F-7



KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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



[Signatures continue on following page.]


F-8



KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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


[Signatures continue on following page.]


F-9



KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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


[Signatures continue on following page.]



F-10



KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

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


[Signatures continue on following page.]


F-11



KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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





F-12


EXHIBIT “G”
SCHEDULE OF LENDERS
BANK OF AMERICA, N.A., as Administrative Agent:
Notices:
Bank of America, N.A.
520 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Kevin McLain
    Telephone: (949) 287-0461
    Electronic Mail: kevin.mclain@baml.com
Payment Instructions:
Bank of America, N.A.
ABA Number: 026009593
Attn: CREB Operations
Wire Transfer Account No: 1367011723000
Ref: KBSIII 500 West Madison LLC 42835
BANK OF AMERICA, N.A., as Lender:
Domestic and LIBOR Lending Office:    Commitment Amount: $500,000,000
Bank of America, N.A.        Pro Rata Share: 49.5049504950495%
520 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Rita Ramos
Telephone: (949) 287-0470
Facsimile: (877) 770-3292
Electronic Mail: rita.ramos@baml.com
Notices:
Bank of America, N.A.
520 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Kevin McLain
Telephone: (949) 287-0461
Electronic Mail: kevin.mclain@baml.com

G-1


Payment Instructions:
Bank of America, N.A.
ABA Number: 026009593
Attn: CREB Operations
Wire Transfer Account No: 1367011723000
Ref: KBSIII 500 West Madison LLC 42835

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender:
Domestic and LIBOR Lending Office:    Commitment Amount: $300,000,000
Wells Fargo Bank, National Association        Pro Rata Share: 29.7029702970297%
600 South 4th Street, 9th Floor
Mail Code: Mac: N9300-091
Minneapolis, MN 55414
Attn: Barbara Volk
Telephone: (612) 316-2620
Electronic Mail: Volkbarj@wellsfargo.com
Notices:
Wells Fargo Bank, National Association
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Cole Zehnder
Telephone: (949) 251-4322
Electronic Mail: Cole.Zehnder@wellsfargo.com
Payment Instructions:
Wells Fargo Bank
ABA No.: 121000248
Account No.: 00001154-4050720
Account Name: Wires in Process - MNLC
Attention: Barbara Volk

G-2



U.S. BANK, NATIONAL ASSOCIATION, as Lender:
Domestic and LIBOR Lending Office:    Commitment Amount: $210,000,000
U.S. Bank, National Association        Pro Rata Share: 20.7920792079208%
800 Nicollet Mall
Minneapolis, MN 55402
Attn: NSLS Deal Administrator
Telephone: (920) 237-7601
Facsimile: (866) 721-7062
Electronic Mail: CLSSyndicatedServicesTeam@USBank.com
Notices:
U.S. Bank, National Association
4100 Newport Place, Suite 900
Newport Beach, CA 92660
Attn: Christopher R. Coburn
Telephone: (949) 863-2475
Electronic Mail: Christopher.coburn@usbank.com
Payment Instructions:
U.S. Bank
ABA No.: 091000022
Account No.: 0068542160600
Account Name: Syndication Team
Attention: KBS REIT III



G-3


EXHIBIT “H”
SWAP CONTRACTS
1.      Swap Documentation . If any Borrower elects to enter into a Swap Contract, within the timeframes required by Administrative Agent and Swap Counterparty, each Borrower shall deliver to Swap Counterparty the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Administrative Agent and Swap Counterparty: (a) Master Agreement in the form published by the International Swaps and Derivatives Association, Inc. and related schedule in the form agreed upon between such Borrower and Swap Counterparty; (b) a confirmation under the foregoing, if applicable; (c) if such Borrower is anything other than a natural Person, evidence of due authorization to enter into transactions under the foregoing Swap Contract with Swap Counterparty, together with evidence of due authorization and execution of any Swap Contract; and (d) such other title endorsements, documents, instruments, opinions and agreements as Administrative Agent and Swap Counterparty may require to evidence satisfaction of the conditions set forth in this Section 1.
2.      Conveyance and Security Interest . To secure the Obligations, each Borrower hereby assigns and transfers to Administrative Agent, and grants to Administrative Agent a security interest in, all of such Borrower’s right, title and interest, but not its obligations, duties or liabilities for any breach, in, under and to the Swap Contract, any and all amounts received by such Borrower in connection therewith or to which Borrower is entitled thereunder, and all proceeds of the foregoing. All amounts payable to any Borrower under the Swap Contract in which Administrative Agent is the Swap Counterparty shall be credited to Borrower’s Checking Account (or other account designated by Borrower) in accordance with clause (e) of Paragraph 6, below (except upon the occurrence and during the continuance of a Default, in which event Administrative Agent shall not be obligated to credit the same).
3.      Cross-Default . It shall be a Default under this Agreement if any Event of Default occurs as defined under any Swap Contract as to which any Borrower is the Defaulting Party, and the same is not cured, or any amounts payable with respect to such Event of Default are not paid, within thirty (30) days after notice of such Event of Default has been delivered to Borrower. As used in this Section, the term “ Defaulting Party ” has the meanings ascribed to it in the Swap Contract.
4.      Remedies; Cure Rights . In addition to any and all other remedies to which Administrative Agent, Lenders and Swap Counterparty are entitled at law or in equity, Swap Counterparty shall have the right, to the extent so provided in any Swap Contract or any Master Agreement relating thereto, (a) to declare an event of default, termination event or other similar event thereunder and to designate an Early Termination Date as defined under the Master Agreement, and (b) to determine net termination amounts in accordance with the Swap Contract and to setoff amounts between Swap Contracts. Administrative Agent shall have the right at any time (but shall have no obligation) to take in its name or in the name of any Borrower such action as Administrative Agent may at any time determine to be necessary or advisable to cure any default under any Swap Contract or to protect the rights of any Borrower or Swap Counterparty thereunder; provided , however , that Administrative Agent shall give prior written notice to the applicable Borrower before taking any such action. For this purpose, each Borrower hereby constitutes Administrative Agent

H-1


its true and lawful attorney-in-fact with full power of substitution, which power of attorney is coupled with an interest and irrevocable, to exercise, at the election of Administrative Agent, any and all rights and remedies of Borrower under the Swap Contract, including making any payments thereunder and consummating any transactions contemplated thereby, and to take any action that Administrative Agent may deem proper in order to collect, assert or enforce any claim, right or title, in and to the Swap Contract hereby assigned and conveyed, and generally to take any and all such action in relation thereto as Administrative Agent shall deem advisable. Administrative Agent shall not incur any liability if any action so taken by Administrative Agent or on its behalf shall prove to be inadequate or invalid. Each Borrower expressly understands and agrees that Administrative Agent is not hereby assuming any duties or obligations of any Borrower to make payments to Swap Counterparty under any Swap Contract or under any other Loan Document. Such payment duties and obligations remain the responsibility of the applicable Borrower notwithstanding any language in this Agreement.
5.     Miscellaneous Covenants .
(a)      Any Borrower shall, upon entering into any Swap Contract, pay all sums required to be paid by such Borrower thereunder.
(b)      No Swap Contract shall alter, impair, restrict, limit or modify in any respect the obligation of any Borrower to pay interest or other sums due under the Loan Documents, as and when the same become due and payable.
6.     Automatic Deduction and Credit .
(a)      At all times when any Swap Contract is in effect, the Borrower which is a party to such Swap Contract shall maintain in good standing with Administrative Agent, or another financial institution reasonably satisfactory to Administrative Agent an account (the “ Checking Account ”) designated by such Borrower.
(b)      At all times when any Swap Contract is in effect, all monthly payments owed by Borrowers under the Agreement will be automatically deducted on their due dates from the Checking Account. Administrative Agent is hereby authorized to apply the amounts so debited to Borrowers’ obligations under the Loan. Each Borrower hereby agrees to direct any financial institution where the Checking Account is maintained to allow Administrative Agent to debit the Checking Account as provided herein. Notwithstanding the foregoing, Administrative Agent will not automatically deduct the principal payment at maturity from the Checking Account (or any other account designated by a Borrower).
(c)      At all times when any Swap Contract is in effect in which Administrative Agent is the Swap Counterparty, all payments owed by any Borrower under any Swap Contract will be automatically deducted on their due dates from the Checking Account (or any other account designated by a Borrower). The preceding sentence includes each Borrower’s authorization for Administrative Agent to debit from the Checking Account (or any other account designated by a Borrower) any monetary obligation owed by such Borrower to Swap Counterparty following any Early Termination Date, as defined under the Master Agreement. Swap Counterparty is hereby

H-2


authorized to apply the amounts so debited to the obligations of any Borrower under the applicable Swap Contract.
(d)      Each Borrower shall maintain sufficient funds on the dates when Administrative Agent enters debits authorized by this Agreement. If there are insufficient funds in the Checking Account on any date when Administrative Agent enters any debit authorized by this Agreement, without limiting Administrative Agent’s and Lenders’ other rights and remedies in such an event, the debit will be reversed in whole or in part, in Administrative Agent’s sole and absolute discretion, and such amount not debited shall be deemed to be unpaid and shall be immediately due and payable in accordance with the terms of this Agreement and/or the Swap Contract, as applicable.
(e)      So long as there is no Default existing under this Agreement or any Swap Contract, and provided Administrative Agent is the Swap Counterparty under the Swap Contract, Administrative Agent will automatically credit the Checking Account (or any other account designated by Borrower) for payments owed by Swap Counterparty under the Swap Contract on the dates the foregoing payments become due; provided , however , that if a due date does not fall on a Business Day, Administrative Agent will credit the Checking Account (or other account designated by Borrower) on the first Business Day following such due date.





H-3


EXHIBIT “I”
EXTENSION CONDITIONS
A.    Borrowers’ option to extend the Maturity Date from the Initial Maturity Date to the First Extended Maturity Date, and from the First Extended Maturity Date to the Second Extended Maturity Date, shall each be subject to the following conditions being satisfied by Borrowers at Borrowers’ sole expense:
1.      Borrower shall have delivered to Administrative Agent a written notice of Borrower’s election to extend the Maturity Date no later than sixty (60) days, but no earlier than one hundred twenty (120) days, prior to the Initial Maturity Date.
2.      No Default or Potential Default shall have occurred and then be continuing as of (i) the date of Borrower’s notice of election to extend the Maturity Date or (ii) the Initial Maturity Date or the First Extended Maturity Date, as applicable;
3.      Current financial statements regarding each Borrower and Guarantor as and when required under Section 4.8 shall have been submitted to Administrative Agent, and there shall not have occurred, in the reasonable opinion of Administrative Agent, 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 Administrative Agent in connection with the Loan Documents, from that which existed on the date of this Agreement.
4.      Whether or not the extension becomes effective, Borrowers shall pay all out-of-pocket costs and expenses incurred by Administrative Agent in connection with the proposed extension (pre- and post-closing), including appraisal fees and reasonable attorneys’ fees actually incurred by Administrative Agent; all such costs and expenses incurred up to the time of Administrative Agent’s written agreement to the extension shall be due and payable on or prior to Administrative Agent’s execution of that agreement (or if the proposed extension does not become effective, then upon demand by Administrative Agent), and any future failure to pay such amounts shall constitute a Default.
5.      If required by Administrative Agent, Administrative Agent shall have received and approved the most recent MAI appraisal of each Property (which MAI appraisals must be dated no more than six (6) months prior to the Initial Maturity Date or the First Extended Maturity Date, as applicable) meeting all applicable regulatory requirements, taking into account then-current market conditions.
6.      Not later than the Initial Maturity Date, (i) the extension shall have been consented to and documented to Administrative Agent’s satisfaction by each Borrower, Guarantor and Administrative Agent; and (ii) Administrative Agent 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 Administrative Agent (provided that such endorsements are generally issued by title companies in the applicable jurisdiction).

I-1


7.      At the time of such extension and based on the most recent appraisals (as more particularly described in clause 5, above) obtained by Administrative Agent, the Properties then subject to the lien of a Security Instrument shall have a Loan-to-Value Ratio of less than or equal to sixty percent (60%). In the event this Loan-to-Value Ratio is not met, Borrowers may satisfy this Loan-to-Value Ratio on or prior to the extension date by making a voluntary pay down of the Loan or a permanent reduction in the Revolving Availability, or both, without prepayment fees or premiums other than the payment of any Consequential Loss.
8.      As of the most recent Test Date, Borrowers shall have satisfied an Ongoing Debt Service Coverage Ratio of at least 1.35:1.00. In the event this Ongoing Debt Service Coverage Ratio is not met, Borrowers may satisfy this Ongoing Debt Service Coverage Ratio on or prior to the extension date by making a voluntary pay down of the Loan or a permanent reduction in the Revolving Availability, or both, without prepayment fees or premiums other than the payment of any Consequential Loss, in an amount sufficient to cause such Ongoing Debt Service Coverage Ratio to equal or exceed 1.35:1.00, assuming for purposes of calculating the Ongoing Debt Service Coverage Ratio that the pay down has been applied to the outstanding principal balance of the Loan, and/or such reduction in Revolving Availability has been applied to reduce the Aggregate Commitments, as applicable, as of the most recent Test Date.
9.      Borrowers shall have paid the Extension Fee to Administrative Agent for the benefit of Lenders on or prior to the Initial Maturity Date or the First Extended Maturity Date, as applicable.


I-2


EXHIBIT “J”
FORM OF DRAW REQUEST
[BORROWERS’ LETTERHEAD]
DRAW REQUEST NO. _________
TO: BANK OF AMERICA, N.A. ( “Administrative Agent” )
LOAN NO.         
PROJECT     [RBC Plaza][Preston Commons][Sterling Plaza][One Washingtonian Office Tower][Towers at Emeryville][Ten Almaden][Legacy Town Center][500 West Madison Tower]
LOCATION
[Minneapolis, MN][Dallas, TX][Gaithersburg, MD][Emeryville, CA][San Jose, CA][Plano, TX][Chicago, IL]
BORROWER(S)

KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company
KBSIII Towers at Emeryville, LLC, a Delaware limited liability company
KBSIII Ten Almaden, LLC, a Delaware limited liability company
KBSIII Legacy Town Center, LLC, a Delaware limited liability company
KBSIII 500 West Madison, LLC, a Delaware limited liability company
KBSIII Preston Commons, LLC, a Delaware limited liability company
KBSIII Sterling Plaza, LLC, a Delaware limited liability company
KBSIII One Washingtonian, LLC, a Delaware limited liability company
FOR PERIOD ENDING     
In accordance with the Loan Agreement in the maximum principal amount of $1,010,000,000, dated as of November 3, 2017, by and among Borrowers, Administrative Agent, and the Lenders party thereto, Borrowers request that $______________________ be disbursed from the Revolving Availability as Revolving Loan Proceeds. The proceeds should be deposited into Account No. [_____________] maintained with Administrative Agent.
TOTAL DRAW REQUEST    $_____________________
[Optional language to appoint a new Authorized Signer for draw requests:]
__________________________ is hereby designated and authorized to sign future draw requests on behalf of Borrowers in connection with the Loan. Administrative Agent shall be entitled to rely on draw requests given by such Person(s) until this authorization is revoked by Borrowers in writing.
[Optional language to appoint an authorized person to give rate election notices under the Note:]

J-1


________________________________ is hereby designated as being authorized to give Rollover/Conversion Election Notices (as defined in the Loan Agreement) on behalf of Borrowers under the Loan Agreement. Administrative Agent shall be entitled to rely on Rollover/Conversion Notices given by such Person(s) until this authorization is revoked by Borrowers in writing.
AUTHORIZED SIGNER:
 
                                                                    
Dated:                                                             


J-2


EXHIBIT “K-1”
FORM OF
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of November 3, 2017, by and among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, Bank of America, N.A., as Administrative Agent, and each lender from time to time party thereto (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Loan Agreement ”).
Pursuant to the provisions of Section 2.1(e) of the Loan Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of its interest in the Loan (as well as any Note(s) evidencing such Loan interest) in respect of which it is providing this certificate, (b) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (c) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (d it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished Administrative Agent and Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BENE (or W-8BEN, as applicable). By executing this certificate, the undersigned agrees that (a) if the information provided on this certificate changes, the undersigned shall promptly so inform Borrowers and Administrative Agent, and (b) the undersigned shall have at all times furnished Borrowers and Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF FOREIGN LENDER]
By:    __________________________________
Name:    ____________________________
Title:    ____________________________
Date:    _________________, 20[__]

K-1-1


EXHIBIT “K-2”
FORM OF
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of November 3, 2017, by and among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, Bank of America, N.A., as Administrative Agent, and each lender from time to time party thereto (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Loan Agreement ”).
Pursuant to the provisions of Section 2.1(e) of the Loan Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (b) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (c) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (d) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BENE (or W-8BEN, as applicable). By executing this certificate, the undersigned agrees that (a) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (b) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF FOREIGN PARTICIPANT]
By:    __________________________________
Name:    ____________________________
Title:    ____________________________
Date:    _________________, 20[__]


K-2-1


EXHIBIT “K-3”
FORM OF
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of November 3, 2017, by and among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, Bank of America, N.A., as Administrative Agent, and each lender from time to time party thereto (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Loan Agreement ”).
Pursuant to the provisions of Section 2.1(e) of the Loan Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (b) its direct or indirect partners/members are the sole beneficial owners of such participation, (c) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (d) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (a) an IRS Form W-8BENE (or W-8BEN, as applicable) or (b) an IRS Form W-8IMY accompanied by an IRS Form W-8BENE (or W-8BEN, as applicable) from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (i) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (ii) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF FOREIGN PARTICIPANT]
By:    __________________________________

K-3-1


Name:    ____________________________
Title:    ____________________________
Date:    _________________, 20[__]

K-3-2


EXHIBIT “K-4”
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of November 3, 2017, by and among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, Bank of America, N.A., as Administrative Agent, and each lender from time to time party thereto (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Loan Agreement ”).
Pursuant to the provisions of Section 2.1(e) of the Loan Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of its interest in the Loan (as well as any Note(s) evidencing such Loan interest) in respect of which it is providing this certificate, (b) its direct or indirect partners/members are the sole beneficial owners of such Loan interest (as well as any Note(s) evidencing such Loan interest), (c) with respect to the extension of credit pursuant to the Loan Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (d) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (e) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished Administrative Agent and Borrowers with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (a) an IRS Form W-8BENE (or W-8BEN, as applicable) or (b) an IRS Form W-8IMY accompanied by an IRS Form W-8BENE (or W-8BEN, as applicable) from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (i) if the information provided on this certificate changes, the undersigned shall promptly so inform Borrowers and Administrative Agent, and (ii) the undersigned shall have at all times furnished Borrowers and Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF FOREIGN LENDER]

K-4-1


By:    __________________________________
Name:    ____________________________
Title:    ____________________________
Date:    _________________, 20[__]

K-4-2


EXHIBIT “L”

FORM OF SECURED PARTY DESIGNATION NOTICE
Secured Party Designation Notice
TO:    Bank of America, N.A., as Administrative Agent
RE:
Loan Agreement, dated as of November 3, 2017 by and among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, the Lenders and Bank of America, N.A., as Administrative Agent (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Loan Agreement ”; capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Loan Agreement)
DATE:    [Date]

[Name of Hedge Bank] (the “ Secured Party ”) hereby notifies you, pursuant to the terms of the Loan Agreement, that the Secured Party meets the requirements of a Hedge Bank under the terms of the Loan Agreement and is a Hedge Bank under the Loan Agreement and the other Loan Documents.
Delivery of an executed counterpart of a signature page of this notice by fax transmission or other electronic mail transmission (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this notice.
A duly authorized officer of the undersigned has executed this notice as of the day and year set forth above.
,
 as a Hedge Bank

By:      
Name:      
Title:      



L-1


EXHIBIT “M”

FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of [_________] (this “ Joinder ”), is made by [______________] (“ Additional Borrower ”), each of the other Borrowers party to the Loan Agreement referred to below, and Bank of America, N.A., as administrative agent (“ Administrative Agent ”), on behalf of itself and the other Lenders (defined below).
RECITALS
Reference is made to that certain Loan Agreement, dated as of November 3, 2017 (as the same may be amended, restated, extended, supplemented, or otherwise modified in writing from time to time, the “ Loan Agreement ”), among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”) KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, each as an “ Existing Borrower ” and, collectively, jointly and severally, as “ Existing Borrowers ”), each lender party thereto (individually, a “ Lender ” and collectively, the “ Lenders ”), and Administrative Agent. Any capitalized term used and not defined in this Joinder shall have the meaning given to such term in the Loan Agreement. This Joinder is one of the Loan Documents described in the Loan Agreement.
Additional Borrower is an Eligible Entity which is wholly-owned, directly or indirectly, by Guarantor.
Pursuant to Section 9.30 of the Loan Agreement, Existing Borrowers and Additional Borrowers have requested that certain real property owned or leased by Additional Borrower (together with all Improvements and personalty now or hereafter located thereon, the “ Additional Property ”) more particularly described on Exhibit A attached hereto, be included in the Collateral as an Add-On Property.
As a condition to the inclusion of the Additional Property within the Collateral as an Add-On Property, the parties hereto are executing and delivering this Joinder to Administrative Agent.

M-1


NOW, THEREFORE, in consideration of the foregoing Recitals and the terms, covenants, and conditions of this Joinder, the receipt of which and sufficiency of which are hereby acknowledged, Additional Borrower, Existing Borrowers and Administrative Agent hereby agree as follows:
1.1      Joinder as Co-Borrower . Additional Borrower assumes and agrees to be bound by all of the terms, covenants, representations, warranties, indemnities and conditions of the Loan Agreement, the Notes, and each of the other Loan Documents (collectively, the “ Assumed Obligations ”), jointly and severally with the other Persons comprising the Borrowers, and assumes and agrees to be bound thereby as a Borrower as if Additional Borrower had originally executed the Loan Agreement, the Notes, and each of the other Loan Documents; provided, however, that this provision shall not be construed as joining any Additional Borrower as a party to any Security Instrument other than the Security Instruments executed and delivered by Additional Borrower on the date hereof with respect to the Additional Property owned by such Additional Borrower. All references to the term “Borrowers”, “any Borrower”, “a Borrower”, and similar references in the Loan Documents shall be deemed to be a reference to, and shall include, Additional Borrower. All references to the term “Properties”, “any Property”, “a Property”, and references of similar intent in the Loan Documents shall be deemed to be a reference to, and shall include, the Additional Property.
1.2      Consent and Acceptance . Existing Borrowers and Administrative Agent hereby consent to the assumption by Additional Borrower of the Assumed Obligations and agree and acknowledge that from and after the date of this Joinder, Additional Borrower shall be a “ Borrower ” for all purposes of the Loan Agreement, the Notes, and each of the other Loan Documents. Additional Borrower agrees to execute and deliver such additional documents as Administrative Agent may reasonably require, including, without limitation, a Security Instrument in favor of Administrative Agent, for its benefit and the benefit of the other Lenders, encumbering all right, title and interest of Additional Borrower in its Additional Property, and the other deliverables required under Section 9.30 of the Loan Agreement.
1.3      Ownership of the Additional Borrower . Additional Borrower and Existing Borrowers represent and warrant to Administrative Agent and each Lender that Additional Borrower is wholly-owned, directly or indirectly, by Guarantor.
1.4      Organizational Documents . Additional Borrower and Existing Borrowers represent and warrant to Administrative Agent and each Lender that Additional Borrower is a limited liability company duly organized, existing and in good standing under the laws of the state in which it is organized and is duly qualified to do business and in good standing in the state in which the Land of such Additional Borrower is located (if different from the state of its formation) and in any other state where the nature of such Additional Borrower’s business or property requires it to be qualified to do business,.
1.5      Power and Authority of the Additional Borrower . Additional Borrower and Existing Borrowers hereby represent and warrant that Additional Borrower has the requisite limited liability company power and authority to enter into this Joinder and to perform its obligations hereunder and under the Loan Agreement, the Notes and any Loan Document to which it is now a party. The

M-2


execution, delivery and performance of this Joinder by Additional Borrower and the performance of its obligations under this Joinder, the Loan Agreement, the Notes and any Loan Document to which it is now a party have been duly authorized and no other limited liability company proceedings on the part of such Additional Borrower are necessary to authorize the execution, delivery or performance of this Joinder, the transactions contemplated hereby or the performance of its obligations under this Joinder, the Loan Agreement, the Notes and any Loan Document to which it is now a party.
1.6      Representations and Warranties By Existing Borrowers . Additional Borrower and each of the Existing Borrowers represent and warrant to Administrative Agent and each Lender that each of the representations and warranties made by Existing Borrowers are true and correct in all material respects as such representations and warranties apply to the Additional Borrower or the Additional Property with the same force and effect as if made on the date hereof.
1.7      Counterparts . This Joinder may be executed in multiple counterparts, each of which shall constitute an original but all of which when taken together shall constitute one and the same instrument.
1.8      Governing Law . The validity, enforcement, and interpretation of this Joinder, shall for all purposes be governed by and construed in accordance with the laws of the State of California and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws.
[SIGNATURE PAGE FOLLOWS]

M-3


IN WITNESS WHEREOF, this Joinder has been duly executed and delivered as of the date first above written.
ADDITIONAL BORROWER:
[___________________________]

By:         
Name:        
Its:        
EXISTING BORROWERS:
KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner
By:                         
Charles J. Schreiber, Jr.,
Chief Executive Officer

KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

M-4


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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

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

KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

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

KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

M-5



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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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

KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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

KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member


M-6


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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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

KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


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

[Signatures Continue on Following Page]

M-7


ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A.
as Administrative Agent
By:     
Name:
Title:



M-8


EXHIBIT A
TO JOINDER AGREEMENT



M-9


EXHIBIT “N”

BORROWERS REMITTANCE INSTRUCTIONS
[SEE ATTACHED]

N-1


KBSRIII201710KEX102EXN.JPG

N-2


EXHIBIT “O”

BORROWERS’ INSTRUCTION CERTIFICATE
[SEE ATTACHED]






O-1


KBSRIII201710KEX102EXO.JPG

O-2


EXHIBIT “P”

FORM OF COMPLIANCE CERTIFICATE


KBSRIII201710KEX103EXP.JPG

P-1


Exhibit 10.3
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.
 
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(Legacy Town Center)

by

KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company,
as Grantor,

to

PRLAP, INC., a Texas corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below



(This document serves as a Fixture Filing under Section 9.502 of the Texas Business and Commerce Code)
    
Grantor’s Organizational Identification Number is: DE 5092307
Property Commonly Known As: 6900 and 7160 N. Dallas Parkway, and 5801 Tennyson Parkway
City/County: Plano, County of Collin
State: Texas




DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Legacy Town Center)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Gio Cordoves and Todd Smith, to PRLAP, Inc., a Texas corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

-1-


“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or

-2-


other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

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“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as

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any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Deed of Trust and not met by Grantor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Deed of Trust or for the protection of the lien of this Deed of Trust, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of

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credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments, charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.

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“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.
“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) hereby irrevocably and unconditionally grants, bargains, sells and conveys the Real Property unto Trustee, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property, to have and to hold the Real Property unto Trustee in fee simple forever; provided that Grantor may retain possession of the Real Property until the occurrence of an Event of Default; (b) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (c) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Assignment of Leases and Rents .
As additional security for the making of the Loan by Lenders to Borrower and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. Upon the occurrence, and during the continuance, of a Default hereunder, Beneficiary shall have the right, power and privilege (but shall be under no duty) to demand possession of the Rents, which demand shall to the fullest extent permitted by applicable Law be sufficient action by Beneficiary to entitle Beneficiary to immediate and direct payment of the Rents (including delivery to Beneficiary of Rents collected for the period in which the demand occurs and for any subsequent period), for application as provided in this Deed of Trust. Provided no Event of Default has occurred and is continuing, Grantor agrees to collect all Rents and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose. The powers, rights and remedies granted in this paragraph shall be in addition to (i) the other remedies herein provided for upon the occurrence, and during the continuance, of an Event of Default and may be exercised independently of or concurrently with any of said remedies, and (ii) the powers, rights and remedies afforded an “Assignee” under and as defined in Chapter 64 of the Texas Property Code.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect

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from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Release of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Beneficiary, without the joinder of Trustee, will promptly provide a release of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.

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Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

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Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation; Vendor's/Purchase Money Lien .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor's or purchase money lien is waived; and Beneficiary for the ratable benefit of Lenders shall have, and is hereby granted, a vendor's or purchase money lien on the Property as cumulative additional security for the secured indebtedness. Beneficiary may foreclose under this Deed of Trust or under the vendor's or purchase money lien without waiving the other or may foreclose under both.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).

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(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.

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Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure

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thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report

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and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Upon the occurrence, and during the continuance, of an Event of Default, Trustee is authorized and empowered and it shall be his special duty at the request of Beneficiary to sell the Property or any part thereof situated in the State of Texas, at the courthouse of any county (whether or not the counties in which the Property is located are contiguous, if the Property is located in more than one county) in the State of Texas in which any part of the Property is situated, at public venue to the highest bidder for cash between the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month or at such other place, time and date as provided by the statutes of the State of Texas then in force governing sales of real estate under powers of sale conferred by deed of trust, after having given notice of such sale in accordance with such statutes. Any sale made by Trustee hereunder may be as an entirety or in such parcels as Beneficiary may request. To the extent permitted by applicable Law, any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by Law. The sale by Trustee of less than the whole of the Property shall not exhaust the power of sale herein granted, and Trustee is specifically empowered to make successive sale or sales under such power until the whole of the Property shall be sold; and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the Obligations and the expense of executing this trust as provided herein, this Deed of Trust and the lien hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Grantor shall never have any right to require the sale of less than the whole of the Property but Beneficiary shall have the right, at its sole election, to request Trustee to sell less than the whole of the Property. Trustee may, after any request or direction by Beneficiary, sell not only the real property but also the Personalty and other interests which are a part of the Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the Property. It shall not be necessary for Trustee to have taken possession of any part of the Property or to have present or to exhibit at any sale any of the Personalty. After each sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances in the name of Grantor, conveying the property so sold to the purchaser or purchasers with general warranty of title of Grantor, subject to the Permitted Encumbrances (and to such leases and other matters, if any, as Trustee may elect upon request of Beneficiary), and shall receive the proceeds of said sale or sales and apply the same as herein provided. Payment of the purchase price to the Trustee shall satisfy the obligation of purchaser at such sale therefor, and such purchaser shall not be responsible for the application thereof. The power of sale granted herein shall not be exhausted by any sale held hereunder by Trustee or his substitute or successor, and such power of sale may be exercised from time to time and as many times as Beneficiary may deem necessary until all of the Property has been duly sold and all Obligations has been fully paid. In the event any sale hereunder is not completed or is defective in the opinion of holder, such sale shall not exhaust the power of sale hereunder and Beneficiary shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds or other conveyances given by Trustee or any successor or substitute appointed hereunder as to nonpayment of the Obligations or as to the occurrence of any default, or as to Beneficiary's having declared all of said indebtedness to be due and payable, or as to the request to sell, or as to notice

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of time, place and terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by holder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. The Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. If Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or substitute Trustee thereafter appointed may complete the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting the sale.
Section 7.4      Judicial Action .
Beneficiary shall have the right from time to time to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.5      Collection of Rents .
Beneficiary may, but shall not be obligated to perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay,

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on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to ‎Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in ‎Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall

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be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Beneficiary to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. WITHOUT LIMITATION, THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE . The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part

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thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
The Trustee may resign by an instrument in writing addressed to Beneficiary. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, without any other formality than appointment and designation in writing by Beneficiary. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. The Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as

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Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
This Deed of Trust is a deed of trust and mortgage, and each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies. In the event a foreclosure hereunder shall be commenced by Trustee, Beneficiary may at any time before the sale of the Property direct Trustee to abandon the sale, and may then institute suit for the collection of the Note and/or any other secured indebtedness, and for the foreclosure of this Deed of Trust. It is agreed that if Beneficiary should institute a suit for the collection of the Note or any other secured indebtedness and for the foreclosure of this Deed of Trust, Beneficiary may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee, to sell the Property in accordance with the provisions of this Deed of Trust.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority

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of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:
(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.

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Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise,

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modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
This Deed of Trust constitutes a "construction mortgage" as defined in Section 9.334 of the Uniform Commercial Code of the State - to the extent that it secures an obligation incurred for the construction of the Improvements, including the acquisition cost of the Land.
Section 9.11      Governing Law; Usury .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State. It is the intent of Grantor and Beneficiary and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury Law from time to time in effect. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable, or received under this Deed of Trust, or otherwise, exceed the maximum nonusurious amount permitted by applicable Law (the “Maximum Amount” ). If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, any such construction shall be subject to the provisions of this Section and shall ipso facto be automatically reformed and the interest payable shall be automatically reduced to the Maximum Amount, without the necessity of execution of any amendment or new document. Beneficiary shall ever receive anything of value which is characterized as interest under applicable Law and which would apart from this provision be in excess of the Maximum Amount, an amount equal to the amount which would have been

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excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Obligations in the inverse order of its maturity and not to the payment of interest, or refunded to Grantor or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of the Note or any other Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Amount. As used in this Section, the term “applicable Law” shall mean the Laws of the State where the Property is located or where the Obligations are payable, or the federal Laws of the United States applicable to this transaction, whichever Laws allow the greatest interest, as such Laws now exist or may be changed or amended or come into effect in the future.
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement);
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full; and
(j)      Without limiting the generality of the foregoing, any rights, defenses or remedies Grantor may have under (A) 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 (B) Sections 51.003 through 51.005 of the Texas Property Code, relating to deficiency judgments.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.
(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of

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Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      To the extent applicable, Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:

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(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:
(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may, to the extent applicable, entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.

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(g)      Grantor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.
Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.

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[Signatures appear on following page.]



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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first written above.
GRANTOR:

KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





S-1


ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF PLANO, COUNTY OF COLLIN, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT I, PARCEL A: (Fee)

BEING LOT 1, BLOCK 1, ONE LINCOLN AT LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME N, PAGE 860, PLAT RECORDS, COLLIN COUNTY, TEXAS.

TRACT I, PARCEL B: (Easement Estate)

NON-EXCLUSIVE EASEMENT FOR THE BENEFIT OF TRACT 1, PARCEL A AS CREATED BY RECIPROCAL PARKING EASEMENT AND MAINTENANCE AGREEMENT (THE “REA”) DATED 06/20/2001, BETWEEN LETCHI, LIMITED, AND LINCOLN-TOWN CENTER, LTD., FILED 06/21/2001, RECORDED IN VOLUME 4944, PAGE 2560, REAL PROPERTY RECORDS, COLLIN COUNTY, TEXAS, FOR ACCESS OVER THE COMMON AREAS (AS DEFINED IN THE REA) OF THE LETCHI PARCEL (AS DEFINED IN THE REA) AND FOR PARKING IN THE LETCHI GARAGE (AS DEFINED IN THE REA).

TRACT II, PARCEL A: (Fee)

BEING LOT 1R, BLOCK A, OF SECOND RE-PLAT OF LOT 1R, BLOCK A, OF TWO LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN CABINET 2006, SLIDE 284, PLAT RECORDS OF COLLIN COUNTY, TEXAS; PREVIOUSLY BEING LOT 1R, BLOCK A, TWO LEGACY TOWN CENTER, AN ADDITION TO THE CITY OF PLANO, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME N, PAGE 861, PLAT RECORDS, COLLIN COUNTY, TEXAS.

TRACT II, PARCEL B: (Easement Estate)

NON-EXCLUSIVE EASEMENT AS CREATED BY INGRESS AND EGRESS EASEMENT AGREEMENT (THE “IEA”) DATED 9/30/2004, BETWEEN EDS INFORMATION SERVICES L.L.C., AND LINCOLN-TOWN CENTER, LTD., FILED 10/1/2004, RECORDED IN VOLUME 5765, PAGE 2572, REAL PROPERTY RECORDS, COLLIN COUNTY, TEXAS.


A-1


Exhibit 10.4
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(One Washingtonian)
by
KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company,
as Grantor,
to
PRLAP, INC., a North Carolina corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below


(This document serves as a Fixture Filing under the Maryland Uniform Commercial Code)
    
Grantor’s Organizational Identification Number is: DE 5335559
Property Commonly Known As: 9801 Washingtonian Boulevard
City/County: Gaithersburg, County of Montgomery
State: Maryland
Tax Parcel ID No. 9-201-2867430

THIS DEED OF TRUST IS PARTIALLY EXEMPT FROM RECORDATION TAX PURSUANT TO SECTION 12-108(g) OF THE TAX-PROPERTY ARTICLE OF THE MARYLAND CODE. A REFINANCE AFFIDAVIT AND A RECORDING TAX AFFIDAVIT ARE ATTACHED HERETO AS EXHIBIT B. FOR PURPOSES OF CALCULATING RECORDING TAX ONLY, THE AMOUNT OF THE DEBT SECURED BY THIS DEED OF TRUST AND ALLOCATED TO MARYLAND PROPERTY, PER THE RECORDING TAX AFFIDAVIT ATTACHED HERETO AS EXHIBIT B, IS $59,186,000.00.
 




DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(One Washingtonian)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Todd Smith, and c/o KBS Capital Advisors LLC, 3003 Washington Boulevard, Suite 950, Arlington, VA 22201, Attention: Stephen Close, to PRLAP, INC., a North Carolina corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of BANK OF AMERICA, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) in the original principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.

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“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.
“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers

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or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.

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“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.
“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

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“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Deed of Trust and not met by Grantor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Deed of Trust or for the protection of the lien of this Deed of Trust, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all

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of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments, charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or

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Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.
“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.
“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) grants, bargains, sells and conveys the Real Property unto Trustee, in trust for the benefit of Beneficiary, with power of sale, to have and to hold the Real Property unto Trustee in fee simple forever; provided that Grantor may retain possession of the Real Property until the occurrence of an Event of Default; (b) hereby irrevocably and unconditionally grants, conveys, transfers and assigns to Trustee, in trust, for the benefit of Beneficiary, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property; (c) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (e) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Assignment of Leases and Rents .
In consideration of the making of the Loan by Beneficiary to Borrower, the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor absolutely and unconditionally assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. This assignment is, and is intended to be, an unconditional, absolute and present assignment from Grantor to Beneficiary of all of Grantor’s right, title and interest in and to the Leases and the Rents and not an assignment in the nature of a pledge of the Leases and Rents or the mere grant of a security interest therein. So long as no Event of Default shall exist, however, Grantor shall have a license (which license shall terminate automatically and without notice upon the occurrence, and during the continuance, of an Event of Default) to collect, but not prior to accrual, all Rents. Grantor agrees to collect and hold all Rents in trust for Beneficiary and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect

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from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Release of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Trustee, upon request by Beneficiary (which request shall be promptly made by Beneficiary at Grantor’s request), will promptly provide a release of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge

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and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.
Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

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Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).
(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.

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Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.

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Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure

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thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report

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and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Trustee, if and as directed by Beneficiary, may take possession of and sell the Property, or any part thereof requested by Beneficiary to be sold, and in connection therewith Grantor hereby (a) assents to the passage of a decree for the sale of the Property by the equity court having jurisdiction, and (b) authorizes and empowers Trustee to take possession of and sell (or in case of the default of any purchaser to resell) the Property, or any part thereof, all in accordance with the Laws or rules of court relating to deeds of trust, including any amendments thereof, or additions thereto. In connection with any foreclosure, Beneficiary and/or Trustee may (a) procure such title reports, surveys, tax histories and appraisals as they deem reasonably necessary, and (b) make such repairs and additions to the Property as they deem advisable, all of which shall constitute Expenses. In case of any sale under this Deed of Trust, by virtue of judicial proceedings or otherwise, the Property may be sold as an entirety or in parcels, by one sale or by several sales, as may be deemed by Trustee to be appropriate and without regard to any right of Grantor or any other Person to the marshalling of assets. Any sale hereunder may be made at public auction, at such time or times, at such place or places, and upon such terms and conditions and after such previous public notice as Trustee shall deem appropriate and advantageous and as required by Law. Upon the terms of such sale being complied with, Trustee shall convey to, and at the cost of, the purchaser or purchasers the interest of Grantor in the Property so sold, free and discharged of and from all estate, title or interest of Grantor, at law or in equity, such purchaser or purchasers being hereby discharged from all liability to see to the application of the purchase money. The proceeds of such sale or sales under this Deed of Trust, whether under the assent to a decree, the power of sale, or by equitable foreclosure, shall be held by Trustee and applied as follows: First, to pay (a) all Expenses incurred in connection with such sale or in preparing the Property for such sale including, among other things, a counsel fee of $5,000 to the attorneys representing Beneficiary and Trustee for conducting the proceedings if without contest, but if legal services be rendered to Trustee and Beneficiary in connection with any contested matter in the proceedings, then such other counsel fees shall be allowed and paid out of the proceeds of such sale or sales as the court having jurisdiction may deem proper, and (b) a trustees' commission equal to the commission allowed trustees for making sales of property under decrees of the equity court having jurisdiction; Second, to pay all of the Obligations and all interest then due and accrued thereon, which shall include interest through the date of ratification of the auditor's account; and Lastly, to pay the surplus, if any, to Grantor or any Person entitled thereto upon surrender and delivery to the purchaser or purchasers of the Property, and less the Expenses, if any, of obtaining possession. Immediately upon the first delivery or publication of any advertisement or notice of sale, there shall become due and owing by Grantor all Expenses incident to any foreclosure proceedings under this Deed of Trust and a commission on the total amount of the Obligations then due equal to one-half of the percentage allowed as commission to trustees making sales under orders or decrees of the equity court having jurisdiction, and no Person shall be required to receive only the aggregate amount of the Obligations to the date of payment unless the same is accompanied by a tender of such commission.

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Section 7.4      Judicial Action .
Beneficiary shall have the right from time to time to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.5      Collection of Rents .
Upon the occurrence, and during the continuance, of an Event of Default, the license granted to Grantor to collect the Rents shall be automatically and immediately revoked, without further notice to or demand upon Grantor. Beneficiary may, but shall not be obligated to perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay, on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property

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and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to ‎Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in ‎Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder

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or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. WITHOUT LIMITATION, THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE . The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but

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not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
The Trustee may resign by an instrument in writing addressed to Beneficiary. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, by filing for record in the office where this Deed of Trust is recorded a Deed of Appointment. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. Upon the recordation of such Deed or Deeds of Appointment, the Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
This Deed of Trust is a deed of trust, and each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other

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right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:
(a)      agrees that it will not at any time plead, claim or take advantage of any Laws now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and waives and releases all rights of redemption, valuation, appraisement, stay of execution, extension and notice of election to accelerate the Obligations;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other

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matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.
Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining

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Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise, modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated

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otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
Section 9.11      Governing Law .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State.
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement); and
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.
(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make

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any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      To the extent applicable, Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:
(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:

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(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may, to the extent applicable, entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.
(g)      Grantor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.

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Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.
[Signatures appear on following page.]



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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed under seal as of the day and year first written above.
GRANTOR:

KBSIII ONE WASHINGTONIAN, LLC,                 WITNESS OR ATTEST:
a Delaware limited liability company
    
By:    KBSIII REIT ACQUISITION X, LLC,              /s/ Cydnee Aleson        
a Delaware limited liability company,                Cydnee Aleson
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.         [SEAL]
Charles J. Schreiber, Jr.,
Chief Executive Officer





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ATTORNEY'S CERTIFICATION


THE UNDERSIGNED, a member in good standing of the Bar of the Court of Appeals of Maryland, hereby certifies that the within instrument was prepared by him or her or under his or her supervision.
                    

_______________________________
_______________________________


Tax Account Number: ________________________

Title Insurer: Commonwealth Land Title Insurance Company



        


ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF GAITHERSBURG, COUNTY OF MONTGOMERY, STATE OF MARYLAND, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL I:

ALL THAT PIECE OR PARCEL OF LAND, TOGETHER WITH THE IMPROVEMENTS THEREON AND APPURTENANCES THEREUNTO BELONGING, LYING, SITUATE AND BEING IN MONTGOMERY COUNTY, MARYLAND, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL LETTERED “C”, IN BLOCK LETTERED “C” IN THE SUBDIVISION KNOWN AS WASHINGTONIAN CENTER; AS PER PLAT THEREOF RECORDED IN PLAT BOOK 156 AT PLAT NO. 17750 AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

NOTE FOR INFORMATIONAL PURPOSES ONLY:
TAX I.D. NO. 9-201-2867430

PARCEL II:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS” RECORDED IN LIBER 7144 AT FOLIO 287 AMONG THE AFORESAID LAND RECORDS, AND THE RESERVATION OF RIGHTS TO GRANT EASEMENTS AS CONTAINED THEREIN; AMENDED BY FIRST SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS FOR WASHINGTONIAN CENTER DATED DECEMBER 29, 1988 AND RECORDED DECEMBER 15, 1989 IN LIBER 9123 AT FOLIO 600; AND FURTHER AMENDED BY SECOND SUPPLEMENTAL TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED APRIL 10, 1990 AND RECORDED APRIL 10, 1990 IN LIBER 9268 AT FOLIO 504 AND FURTHER AMENDED BY THIRD SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 4; FURTHER AMENDED BY FOURTH SUPPLEMENT TO DECLARATION DATED MAY 2, 1997 RECORDED IN BOOK 14856 PAGE 256; FURTHER AMENDED BY FIFTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED MAY 23, 2008 AND RECORDED IN LIBER 35818 AT FOLIO 391; FURTHER AMENDED BY SIXTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED OCTOBER 1, 2008 AND RECORDED IN LIBER 36055 AT FOLIO 006; FURTHER AMENDED BY SEVENTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED JANUARY 12, 2009 AND RECORDED IN LIBER 36421 AT FOLIO 217;

A-1    


EIGHTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED OCTOBER 28, 2011 AND RECORDED IN LIBER 42601 AT FOLIO 95; NINTH SUPPLEMENT TO DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS DATED AUGUST 13, 2013 AND RECORDED IN LIBER 47544 AT FOLIO 460. AS AFFECTED BY AGREEMENT REGARDING COVENANTS, CONDITIONS AND RESTRICTIONS DATED MAY 2, 1997 AND RECORDED IN LIBER 14856 AT FOLIO 329. AS AFFECTED BY AGREEMENT REGARDING COVENANTS, CONDITIONS AND RESTRICTIONS DATED JUNE 18, 1999 AND RECORDED IN LIBER 17219 AT FOLIO 125.

PARCEL III:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS AND RECIPROCAL EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 135, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL IV:

TOGETHER WITH TEMPORARY PARKING EASEMENT AS ESTABLISHED BY “TEMPORARY PARKING EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 187, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND, AND AS SUCH TEMPORARY PARKING EASEMENT AGREEMENT IS MODIFIED BY “DECLARATION OF PARKING AGREEMENT AND MODIFICATION OF TEMPORARY PARKING EASEMENT AGREEMENT” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 166, AMONG THE AFORESAID LAND RECORDS.

PARCEL V:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “DECLARATION OF COVENANTS AND UTILITY EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 250, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL VI:

TOGETHER WITH BOARDWALK EASEMENT AS ESTABLISHED BY “BOARDWALK EASEMENT AGREEMENT PHASE I” DATED AUGUST 4, 1988 AND RECORDED AUGUST 22, 1988 IN LIBER 8429 AT FOLIO 281, AS AFFECTED BY THE AMENDMENT TO EASEMENT AGREEMENTS DATED MARCH 15, 1990 AND RECORDED IN LIBER 9236 AT FOLIO 881, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.


A-2    


PARCEL VII:

TOGETHER WITH RIGHT OF INGRESS AND EGRESS OVER “MARRIOTT DRIVE” AS ESTABLISHED BY EASEMENT FOR INGRESS AND EGRESS DATED DECEMBER 12, 1989 AND RECORDED IN LIBER 9123 AT FOLIO 589 AND AS FURTHER SET FORTH IN INGRESS AND EGRESS EASEMENT AGREEMENT FROM WILP AND WCD FOR MARRIOTT DRIVE AND SIDE ROAD ACCESS, DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9236 AT FOLIO 821, AND RE-NUMBERED AS LIBER 9254 AT FOLIO 408, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL VIII:

TOGETHER WITH THE BENEFICIAL RIGHTS SET FORTH IN THE RECIPROCAL EASEMENTS AND COVENANTS AS ESTABLISHED BY “DECLARATION OF RECIPROCAL EASEMENTS AND COVENANTS” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 12, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL IX:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “UTILITY EASEMENT AGREEMENT” DATED DECEMBER 12, 1989 AND RECORDED DECEMBER 15, 1989 IN LIBER 9123 AT FOLIO 643, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL X:

TOGETHER WITH ALL RIGHTS AS ESTABLISHED BY “COVENANT AGREEMENT” DATED MARCH 15, 1990 AND RECORDED MARCH 19, 1990 IN LIBER 9237 AT FOLIO 297, AS MODIFIED BY INSTRUMENTS RECORDED IN LIBER 9535 AT FOLIO 536, LIBER 9725 AT FOLIO 374 AND LIBER 9771 AT FOLIO 16, AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

PARCEL XI:

FURTHER TOGETHER WITH THE BENEFICIAL EASEMENTS CREATED BY THE EASEMENT BY AND BETWEEN WASHINGTON LAKE L.L.C. AND 9800 WASHINGTONIAN OFFICE, INC., DATED APRIL 13, 2010 AND RECORDED APRIL 4, 2011 IN LIBER 41396 AT FOLIO 11.




A-3    


EXHIBIT B
Refinance and Recording Tax Affidavits




B-1    


Exhibit 10.5
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.
 
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(Preston Commons)

by

KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company,
as Grantor,

to

PRLAP, INC., a Texas corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below



(This document serves as a Fixture Filing under Section 9.502 of the Texas Business and Commerce Code)
    
Grantor’s Organizational Identification Number is: DE 5335558
Property Commonly Known As: 8111, 8115 and 8117 Preston Road
City/County: Dallas, County of Dallas
State: Texas




DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Preston Commons)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII Preston Commons, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Gio Cordoves and Todd Smith, to PRLAP, Inc., a Texas corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or

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other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

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“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as

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any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Deed of Trust and not met by Grantor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Deed of Trust or for the protection of the lien of this Deed of Trust, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of

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credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments, charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.

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“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.
“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) hereby irrevocably and unconditionally grants, bargains, sells and conveys the Real Property unto Trustee, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property, to have and to hold the Real Property unto Trustee in fee simple forever; provided that Grantor may retain possession of the Real Property until the occurrence of an Event of Default; (b) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (c) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Assignment of Leases and Rents .
As additional security for the making of the Loan by Lenders to Borrower and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. Upon the occurrence, and during the continuance, of a Default hereunder, Beneficiary shall have the right, power and privilege (but shall be under no duty) to demand possession of the Rents, which demand shall to the fullest extent permitted by applicable Law be sufficient action by Beneficiary to entitle Beneficiary to immediate and direct payment of the Rents (including delivery to Beneficiary of Rents collected for the period in which the demand occurs and for any subsequent period), for application as provided in this Deed of Trust. Provided no Event of Default has occurred and is continuing, Grantor agrees to collect all Rents and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose. The powers, rights and remedies granted in this paragraph shall be in addition to (i) the other remedies herein provided for upon the occurrence, and during the continuance, of an Event of Default and may be exercised independently of or concurrently with any of said remedies, and (ii) the powers, rights and remedies afforded an “Assignee” under and as defined in Chapter 64 of the Texas Property Code.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect

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from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Release of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Beneficiary, without the joinder of Trustee, will promptly provide a release of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.

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Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

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Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation; Vendor's/Purchase Money Lien .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor's or purchase money lien is waived; and Beneficiary for the ratable benefit of Lenders shall have, and is hereby granted, a vendor's or purchase money lien on the Property as cumulative additional security for the secured indebtedness. Beneficiary may foreclose under this Deed of Trust or under the vendor's or purchase money lien without waiving the other or may foreclose under both.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).

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(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.

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Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure

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thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report

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and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Upon the occurrence, and during the continuance, of an Event of Default, Trustee is authorized and empowered and it shall be his special duty at the request of Beneficiary to sell the Property or any part thereof situated in the State of Texas, at the courthouse of any county (whether or not the counties in which the Property is located are contiguous, if the Property is located in more than one county) in the State of Texas in which any part of the Property is situated, at public venue to the highest bidder for cash between the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month or at such other place, time and date as provided by the statutes of the State of Texas then in force governing sales of real estate under powers of sale conferred by deed of trust, after having given notice of such sale in accordance with such statutes. Any sale made by Trustee hereunder may be as an entirety or in such parcels as Beneficiary may request. To the extent permitted by applicable Law, any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by Law. The sale by Trustee of less than the whole of the Property shall not exhaust the power of sale herein granted, and Trustee is specifically empowered to make successive sale or sales under such power until the whole of the Property shall be sold; and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the Obligations and the expense of executing this trust as provided herein, this Deed of Trust and the lien hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Grantor shall never have any right to require the sale of less than the whole of the Property but Beneficiary shall have the right, at its sole election, to request Trustee to sell less than the whole of the Property. Trustee may, after any request or direction by Beneficiary, sell not only the real property but also the Personalty and other interests which are a part of the Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the Property. It shall not be necessary for Trustee to have taken possession of any part of the Property or to have present or to exhibit at any sale any of the Personalty. After each sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances in the name of Grantor, conveying the property so sold to the purchaser or purchasers with general warranty of title of Grantor, subject to the Permitted Encumbrances (and to such leases and other matters, if any, as Trustee may elect upon request of Beneficiary), and shall receive the proceeds of said sale or sales and apply the same as herein provided. Payment of the purchase price to the Trustee shall satisfy the obligation of purchaser at such sale therefor, and such purchaser shall not be responsible for the application thereof. The power of sale granted herein shall not be exhausted by any sale held hereunder by Trustee or his substitute or successor, and such power of sale may be exercised from time to time and as many times as Beneficiary may deem necessary until all of the Property has been duly sold and all Obligations has been fully paid. In the event any sale hereunder is not completed or is defective in the opinion of holder, such sale shall not exhaust the power of sale hereunder and Beneficiary shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds or other conveyances given by Trustee or any successor or substitute appointed hereunder as to nonpayment of the Obligations or as to the occurrence of any default, or as to Beneficiary's having declared all of said indebtedness to be due and payable, or as to the request to sell, or as to notice

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of time, place and terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by holder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. The Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. If Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or substitute Trustee thereafter appointed may complete the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting the sale.
Section 7.4      Judicial Action .
Beneficiary shall have the right from time to time to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.5      Collection of Rents .
Beneficiary may, but shall not be obligated to perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay,

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on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to ‎Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in ‎Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall

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be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Beneficiary to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. WITHOUT LIMITATION, THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE . The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part

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thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
The Trustee may resign by an instrument in writing addressed to Beneficiary. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, without any other formality than appointment and designation in writing by Beneficiary. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. The Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as

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Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
This Deed of Trust is a deed of trust and mortgage, and each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies. In the event a foreclosure hereunder shall be commenced by Trustee, Beneficiary may at any time before the sale of the Property direct Trustee to abandon the sale, and may then institute suit for the collection of the Note and/or any other secured indebtedness, and for the foreclosure of this Deed of Trust. It is agreed that if Beneficiary should institute a suit for the collection of the Note or any other secured indebtedness and for the foreclosure of this Deed of Trust, Beneficiary may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee, to sell the Property in accordance with the provisions of this Deed of Trust.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority

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of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:
(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.

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Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise,

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modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
This Deed of Trust constitutes a "construction mortgage" as defined in Section 9.334 of the Uniform Commercial Code of the State - to the extent that it secures an obligation incurred for the construction of the Improvements, including the acquisition cost of the Land.
Section 9.11      Governing Law; Usury .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State. It is the intent of Grantor and Beneficiary and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury Law from time to time in effect. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable, or received under this Deed of Trust, or otherwise, exceed the maximum nonusurious amount permitted by applicable Law (the “Maximum Amount” ). If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, any such construction shall be subject to the provisions of this Section and shall ipso facto be automatically reformed and the interest payable shall be automatically reduced to the Maximum Amount, without the necessity of execution of any amendment or new document. Beneficiary shall ever receive anything of value which is characterized as interest under applicable Law and which would apart from this provision be in excess of the Maximum Amount, an amount equal to the amount which would have been

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excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Obligations in the inverse order of its maturity and not to the payment of interest, or refunded to Grantor or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of the Note or any other Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Amount. As used in this Section, the term “applicable Law” shall mean the Laws of the State where the Property is located or where the Obligations are payable, or the federal Laws of the United States applicable to this transaction, whichever Laws allow the greatest interest, as such Laws now exist or may be changed or amended or come into effect in the future.
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement);
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full; and
(j)      Without limiting the generality of the foregoing, any rights, defenses or remedies Grantor may have under (A) 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 (B) Sections 51.003 through 51.005 of the Texas Property Code, relating to deficiency judgments.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.

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(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      To the extent applicable, Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:

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(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:
(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may, to the extent applicable, entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.
(g)      Grantor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing

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or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.
Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.
[Signatures appear on following page.]


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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first written above.
GRANTOR:

KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company
    
By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





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ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF DALLAS, COUNTY OF DALLAS, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT 1: (Fee Tract)

BEING A 5.261 ACRE (229,165 SQUARE FEET) TRACT OF LAND SITUATED IN THE A.J. MANNING SURVEY, ABSTRACT NO. 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS AND BEING A PORTION OF CITY BLOCK NO. 5627 AND BEING ALL OF PRESTON COMMONS, AN ADDITION TO THE CITY OF DALLAS AS DESCRIBED BY PLAT RECORDED IN VOLUME 85139, PAGE 4526, DEED RECORDS OF DALLAS COUNTY, TEXAS (D.R.D.C.T.), SAID TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A P.K. NAIL FOUND FOR THE NORTHWEST CORNER OF SAID PRESTON COMMONS AND BEING THE SOUTHWEST CORNER OF PRESTON PARKWAY ADDITION, AN ADDITION TO THE CITY OF DALLAS AS DESCRIBED BY PLAT RECORDED IN VOLUME 7, PAGE 48, MAP RECORDS OF DALLAS COUNTY, TEXAS, SAID CORNER BEING IN THE EAST RIGHT-OF-WAY LINE OF WESTCHESTER DRIVE (A 50 FOOT RIGHT-OF-WAY);

THENCE ALONG THE SOUTH LINE SAID PRESTON PARKWAY ADDITION AND THE NORTH LINE OF SAID PRESTON COMMONS, NORTH 89 DEGREES 54 MINUTES 00 SECONDS EAST, A DISTANCE OF 368.85 FEET TO A P.K. NAIL FOUND FOR CORNER;

THENCE THE FOLLOWING COURSES AND DISTANCES ALONG THE LINE COMMON TO A TRACT OF LAND DESCRIBED TO VANTEX ENTERPRISES, INC. AS RECORDED IN VOLUME 94235, PAGE 3941 AND SAID PRESTON COMMONS;

SOUTH 00 DEGREES 15 MINUTES 43 SECONDS EAST, A DISTANCE OF 50.31 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER;

SOUTH 45 DEGREES 12 MINUTES 38 SECONDS EAST, A DISTANCE OF 70.77 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER;

NORTH 89 DEGREES 50 MINUTES 30 SECONDS EAST, A DISTANCE OF 251.00 FEET TO A CHISELED “X” FOUND FOR THE NORTHEAST CORNER OF SAID PRESTON COMMONS AND BEING IN THE WEST RIGHT-OF-WAY LINE OF PRESTON ROAD (A 100-FOOT RIGHT-OF-WAY);

THENCE ALONG THE WEST RIGHT-OF-WAY LINE OF SAID PRESTON ROAD, SOUTH 00 DEGREES 15 MINUTES 45 SECONDS EAST, A DISTANCE OF 287.30 FEET TO A CHISELED

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“X” FOUND FOR THE SOUTHEAST CORNER OF SAID PRESTON COMMONS AND THE NORTHEAST CORNER OF A TRACT OF LAND DESCRIBED BY DEED TO JOSEPH P. LYNCH, D. D. BISHOP OF DALLAS, RECORDED IN VOLUME 3240, PAGE 475, D.R.D.C.T.;

THENCE ALONG THE NORTH LINE OF SAID LYNCH TRACT AND THE SOUTH LINE OF SAID PRESTON COMMONS, SOUTH 89 DEGREES 47 MINUTES 04 SECONDS WEST, A DISTANCE OF 667.00 FEET TO A CHISELED “X” FOUND FOR THE SOUTHWEST CORNER OF SAID PRESTON COMMONS AND BEING IN THE EAST LINE OF A TRACT OF LAND DESCRIBED BY DEED TO THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, RECORDED IN VOLUME 79007, PAGE 753, D.R.D.C.T.;

THENCE ALONG THE EAST LINE OF SAID TSCHOEPE TRACT AND THE WEST LINE OF SAID PRESTON COMMONS, NORTH, A DISTANCE OF 228.95 FEET TO A 1/2-INCH IRON ROD FOUND FOR CORNER IN THE SOUTHEASTERLY LINE OF A STREET EASEMENT DESCRIBED BY DEED RECORDED IN VOLUME 79106, PAGE 2680, D.R.D.C.T., SAID CORNER BEING IN A CURVE TO THE LEFT, THE RADIUS POINT WHICH BEARS NORTH 44 DEGREES 14 MINUTES 02 SECONDS WEST, 207.49 FEET FROM SAID CORNER;

THENCE ALONG THE SOUTHEASTERLY LINE OF SAID STREET EASEMENT AND WITH SAID CURVE, THROUGH A CENTRAL ANGLE OF 05 DEGREES 28 MINUTES 35 SECONDS, AN ARC DISTANCE OF 19.83 FEET, A CHORD BEARING OF NORTH 43 DEGREES 01 MINUTE 42 SECONDS EAST AND A CHORD DISTANCE OF 19.82 FEET TO A CHISELED “X” FOUND FOR CORNER;

THENCE NORTH 11 DEGREES 20 MINUTES 40 SECONDS WEST, A DISTANCE OF 32.12 FEET TO A CHISELED “X” FOUND FOR CORNER IN A CURVE TO THE RIGHT, THE RADIUS POINT OF WHICH BEARS NORTH 78 DEGREES 39 MINUTES 20 SECONDS EAST, 606.79 FEET FROM SAID CORNER;

THENCE WITH SAID CURVE THROUGH A CENTRAL ANGLE OF 10 DEGREES 48 MINUTES 37 SECONDS AN ARC DISTANCE OF 114.49 FEET, A CHORD BEARING OF NORTH 05 DEGREES 56 MINUTES 27 SECONDS WEST AND A CHORD DISTANCE 114.32 FEET TO THE POINT OF BEGINNING;

CONTAINING A COMPUTED AREA OF 229,166 SQUARE FEET OR 5.261 ACRES OF LAND, MORE OR LESS.

TRACT 2: (Non-Exclusive Easement Estate)

BEING AN EASEMENT ESTATE AS CREATED BY THAT CERTAIN EASEMENT FROM THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, TO PRESTON STATE BANK, RECORDED IN VOLUME 79137, PAGE 3167, DEED RECORDS, DALLAS COUNTY, TEXAS, IN AND TO THE FOLLOWING TRACT OF LAND:


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BEING A 1,954 SQUARE FOOT TRACT OF LAND SITUATED IN THE A. J. MANNING SURVEY, ABSTRACT NO. 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS AND BEING A PORTION OF CITY BLOCK NO. 5627 THAT SAME TRACT OF LAND DESCRIBED TO PRESTON COMMONS LIMITED, RECORDED IN VOLUME 88194, PAGE 4843, DEED RECORDS OF DALLAS COUNTY, TEXAS (D.R.D.C.T.), SAID 1,954 SQUARE FOOT TRACT OF LAND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT A CHISELED “X” FOR THE SOUTHEAST CORNER OF PRESTON COMMONS, AN ADDITION TO THE CITY OF DALLAS, AS DESCRIBED BY PLAT RECORDED IN VOLUME 85139, PAGE 4526, DEED RECORDS, DALLAS COUNTY, TEXAS, SAID COMMENCING POINT BEING IN THE EAST LINE OF A TRACT OF LAND DESCRIBED BY DEED TO THOMAS TSCHOEPE, BISHOP OF THE ROMAN CATHOLIC DIOCESE OF DALLAS, RECORDED IN VOLUME 79007, PAGE 753, DEED RECORDS, DALLAS COUNTY, TEXAS;

THENCE ALONG THE EAST LINE OF SAID TSCHOEPE TRACT AND THE WEST LINE OF SAID PRESTON COMMONS, NORTH, A DISTANCE OF 176.62 FEET TO THE POINT OF BEGINNING;

THENCE SOUTH 89 DEGREES 48 MINUTES 15 SECONDS WEST, A DISTANCE OF 94.52 FEET TO A POINT ALONG THE SOUTH LINE OF WELDON HOWELL PARKWAY AS RECORDED IN VOLUME 79106, PAGE 2680, DEED RECORDS, DALLAS COUNTY, TEXAS, SAID POINT BEING IN A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 30 DEGREES 13 MINUTES 33 SECONDS AND A RADIUS OF 207.49 FEET, A TANGENT BEARING NORTH 75 DEGREES 59 MINUTES 31 SECONDS EAST;

THENCE ALONG THE SOUTH LINE OF SAID WELDON HOWELL PARKWAY, AND WITH SAID CURVE TO THE LEFT AN ARC DISTANCE OF 109.46 FEET TO A 1/2-INCH IRON ROD SET IN THE WEST LINE OF SAID PRESTON COMMONS;

THENCE ALONG SAID WEST LINE SOUTH, A DISTANCE OF 52.33 FEET TO THE POINT OF BEGINNING;

CONTAINING A COMPUTED AREA OF 1,954 SQUARE FEET OF LAND OR 0.045 ACRES OF LAND.


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Exhibit 10.6
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.
 
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(Sterling Plaza)

by

KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company,
as Grantor,

to

PRLAP, INC., a Texas corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below



(This document serves as a Fixture Filing under Section 9.502 of the Texas Business and Commerce Code)
    
Grantor’s Organizational Identification Number is: DE 5335562
Property Commonly Known As: 5949 Sherry Lane
City/County: Dallas, County of Dallas
State: Texas




DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Sterling Plaza)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Gio Cordoves and Todd Smith, to PRLAP, Inc., a Texas corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or

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other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

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“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as

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any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Deed of Trust and not met by Grantor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Deed of Trust or for the protection of the lien of this Deed of Trust, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of

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credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments, charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.

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“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.
“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) hereby irrevocably and unconditionally grants, bargains, sells and conveys the Real Property unto Trustee, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property, to have and to hold the Real Property unto Trustee in fee simple forever; provided that Grantor may retain possession of the Real Property until the occurrence of an Event of Default; (b) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (c) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Assignment of Leases and Rents .
As additional security for the making of the Loan by Lenders to Borrower and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. Upon the occurrence, and during the continuance, of a Default hereunder, Beneficiary shall have the right, power and privilege (but shall be under no duty) to demand possession of the Rents, which demand shall to the fullest extent permitted by applicable Law be sufficient action by Beneficiary to entitle Beneficiary to immediate and direct payment of the Rents (including delivery to Beneficiary of Rents collected for the period in which the demand occurs and for any subsequent period), for application as provided in this Deed of Trust. Provided no Event of Default has occurred and is continuing, Grantor agrees to collect all Rents and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose. The powers, rights and remedies granted in this paragraph shall be in addition to (i) the other remedies herein provided for upon the occurrence, and during the continuance, of an Event of Default and may be exercised independently of or concurrently with any of said remedies, and (ii) the powers, rights and remedies afforded an “Assignee” under and as defined in Chapter 64 of the Texas Property Code.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect

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from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Release of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Beneficiary, without the joinder of Trustee, will promptly provide a release of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.

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Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

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Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation; Vendor's/Purchase Money Lien .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor's or purchase money lien is waived; and Beneficiary for the ratable benefit of Lenders shall have, and is hereby granted, a vendor's or purchase money lien on the Property as cumulative additional security for the secured indebtedness. Beneficiary may foreclose under this Deed of Trust or under the vendor's or purchase money lien without waiving the other or may foreclose under both.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).

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(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.

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Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure

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thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report

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and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Upon the occurrence, and during the continuance, of an Event of Default, Trustee is authorized and empowered and it shall be his special duty at the request of Beneficiary to sell the Property or any part thereof situated in the State of Texas, at the courthouse of any county (whether or not the counties in which the Property is located are contiguous, if the Property is located in more than one county) in the State of Texas in which any part of the Property is situated, at public venue to the highest bidder for cash between the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month or at such other place, time and date as provided by the statutes of the State of Texas then in force governing sales of real estate under powers of sale conferred by deed of trust, after having given notice of such sale in accordance with such statutes. Any sale made by Trustee hereunder may be as an entirety or in such parcels as Beneficiary may request. To the extent permitted by applicable Law, any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by Law. The sale by Trustee of less than the whole of the Property shall not exhaust the power of sale herein granted, and Trustee is specifically empowered to make successive sale or sales under such power until the whole of the Property shall be sold; and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the Obligations and the expense of executing this trust as provided herein, this Deed of Trust and the lien hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Grantor shall never have any right to require the sale of less than the whole of the Property but Beneficiary shall have the right, at its sole election, to request Trustee to sell less than the whole of the Property. Trustee may, after any request or direction by Beneficiary, sell not only the real property but also the Personalty and other interests which are a part of the Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the Property. It shall not be necessary for Trustee to have taken possession of any part of the Property or to have present or to exhibit at any sale any of the Personalty. After each sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances in the name of Grantor, conveying the property so sold to the purchaser or purchasers with general warranty of title of Grantor, subject to the Permitted Encumbrances (and to such leases and other matters, if any, as Trustee may elect upon request of Beneficiary), and shall receive the proceeds of said sale or sales and apply the same as herein provided. Payment of the purchase price to the Trustee shall satisfy the obligation of purchaser at such sale therefor, and such purchaser shall not be responsible for the application thereof. The power of sale granted herein shall not be exhausted by any sale held hereunder by Trustee or his substitute or successor, and such power of sale may be exercised from time to time and as many times as Beneficiary may deem necessary until all of the Property has been duly sold and all Obligations has been fully paid. In the event any sale hereunder is not completed or is defective in the opinion of holder, such sale shall not exhaust the power of sale hereunder and Beneficiary shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds or other conveyances given by Trustee or any successor or substitute appointed hereunder as to nonpayment of the Obligations or as to the occurrence of any default, or as to Beneficiary's having declared all of said indebtedness to be due and payable, or as to the request to sell, or as to notice

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of time, place and terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by holder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. The Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. If Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or substitute Trustee thereafter appointed may complete the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting the sale.
Section 7.4      Judicial Action .
Beneficiary shall have the right from time to time to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.5      Collection of Rents .
Beneficiary may, but shall not be obligated to perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay,

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on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to ‎Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in ‎Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall

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be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Beneficiary to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. WITHOUT LIMITATION, THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE . The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part

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thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO TRUSTEE WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF TRUSTEE. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO TRUSTEE TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
The Trustee may resign by an instrument in writing addressed to Beneficiary. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, without any other formality than appointment and designation in writing by Beneficiary. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. The Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as

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Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
This Deed of Trust is a deed of trust and mortgage, and each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies. In the event a foreclosure hereunder shall be commenced by Trustee, Beneficiary may at any time before the sale of the Property direct Trustee to abandon the sale, and may then institute suit for the collection of the Note and/or any other secured indebtedness, and for the foreclosure of this Deed of Trust. It is agreed that if Beneficiary should institute a suit for the collection of the Note or any other secured indebtedness and for the foreclosure of this Deed of Trust, Beneficiary may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee, to sell the Property in accordance with the provisions of this Deed of Trust.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority

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of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:
(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.

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Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise,

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modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
This Deed of Trust constitutes a "construction mortgage" as defined in Section 9.334 of the Uniform Commercial Code of the State - to the extent that it secures an obligation incurred for the construction of the Improvements, including the acquisition cost of the Land.
Section 9.11      Governing Law; Usury .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State. It is the intent of Grantor and Beneficiary and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury Law from time to time in effect. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable, or received under this Deed of Trust, or otherwise, exceed the maximum nonusurious amount permitted by applicable Law (the “Maximum Amount” ). If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, any such construction shall be subject to the provisions of this Section and shall ipso facto be automatically reformed and the interest payable shall be automatically reduced to the Maximum Amount, without the necessity of execution of any amendment or new document. Beneficiary shall ever receive anything of value which is characterized as interest under applicable Law and which would apart from this provision be in excess of the Maximum Amount, an amount equal to the amount which would have been

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excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Obligations in the inverse order of its maturity and not to the payment of interest, or refunded to Grantor or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of the Note or any other Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Amount. As used in this Section, the term “applicable Law” shall mean the Laws of the State where the Property is located or where the Obligations are payable, or the federal Laws of the United States applicable to this transaction, whichever Laws allow the greatest interest, as such Laws now exist or may be changed or amended or come into effect in the future.
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement);
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full; and
(j)      Without limiting the generality of the foregoing, any rights, defenses or remedies Grantor may have under (A) 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 (B) Sections 51.003 through 51.005 of the Texas Property Code, relating to deficiency judgments.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.

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(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      To the extent applicable, Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:

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(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:
(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may, to the extent applicable, entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.

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(g)      Grantor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.
Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.

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[Signatures appear on following page.]



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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first written above.
GRANTOR:

KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





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ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF DALLAS, COUNTY OF DALLAS, STATE OF TEXAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT 1: Fee

BEING LOTS 11, 12, 13, 14 AND 15, BLOCK 3/5625 OF PRESTON SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS, DALLAS COUNTY, TEXAS, ACCORDING TO THE MAP THEREOF RECORDED IN VOLUME 9, PAGE 159, MAP RECORDS, DALLAS COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEING A TRACT OF LAND SITUATED IN THE ANDREW J. MANNING SURVEY, ABSTRACT NO, 948, CITY OF DALLAS, DALLAS COUNTY, TEXAS; SAID TRACT BEING ALL OF LOTS 11 THROUGH 15, DALLAS CITY BLOCK NO. 3/5625 OF THE PRESTON SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS AS RECORDED IN VOLUME 9, PAGE 159, MAP RECORDS, DALLAS COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A 1/2-INCH IRON ROD FOUND IN THE NORTH RIGHT-OF-WAY LINE OF SHERRY LANE (A 50-FOOT RIGHT-OF-WAY); SAID IRON ROD BEING NORTH 89 DEGREES 48 MINUTES 00 SECONDS EAST, AND A DISTANCE OF 203.61 FEET FROM THE EAST RIGHT-OF-WAY LINE OF LOMO ALTO DRIVE (A 50-FOOT RIGHT-OF-WAY); SAID POINT ALSO BEING THE SOUTHWEST CORNER OF SAID LOT 11; SAID POINT ALSO BEING THE SOUTHEAST CORNER OF LOT 10, BLOCK 3/5625 OF SAID PRESTON SQUARE ADDITION;

THENCE, NORTH 00 DEGREES 06 MINUTES 00 SECONDS EAST, LEAVING THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE AND ALONG THE COMMON PROPERTY LINE BETWEEN LOTS 10 & 11, A DISTANCE OF 195.10 FEET TO A 5/8 INCH IRON ROD WITH “GSES, INC., RPLS 4804” CAP SET FOR CORNER IN THE SOUTH RIGHT-OF-WAY LINE OF A 15-FOOT ALLEY; SAID POINT BEING THE NORTHEAST CORNER OF SAID LOT 10 AND THE NORTHWEST CORNER OF LOT 11;

THENCE, NORTH 89 DEGREES 48 MINUTES 00 SECONDS EAST, ALONG THE SOUTH RIGHT-OF-WAY LINE OF SAID 15-FOOT ALLEY, A DISTANCE OF 465.00 FEET TO AN “+” CUT IN CONCRETE SET IN THE WEST LINE OF LOT 1-A OF LUTHER SQUARE ADDITION, AN ADDITION TO THE CITY OF DALLAS AS RECORDED IN VOLUME 79119, PAGE 580, MAP RECORDS, DALLAS COUNTY, TEXAS; SAID POINT BEING THE NORTHEAST CORNER OF SAID LOT 15;

THENCE, SOUTH 00 DEGREES 06 MINUTES 00 SECONDS WEST, ALONG THE COMMON PROPERTY LINE BETWEEN SAID LOTS 15 AND 1-A, A DISTANCE OF 195.10 FEET, TO

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AN “+” CUT IN CONCRETE FOUND FOR CORNER IN THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE;

THENCE, SOUTH 89 DEGREES 48 MINUTES 00 SECONDS WEST, ALONG THE NORTH RIGHT-OF-WAY LINE OF SAID SHERRY LANE, A DISTANCE OF 465.00 FEET TO THE POINT OF BEGINNING, CONTAINING 90,720 SQUARE FEET, OR 2.0827 ACRES, MORE OR LESS, OF LAND.

TRACT 2: Non-Exclusive Easement Estate

ACCESS EASEMENT AND SIGN EASEMENT AS CREATED BY THAT CERTAIN EASEMENT AND MAINTENANCE AGREEMENT DATED DECEMBER 21, 1994, EXECUTED BY 5900 LUTHER LANE, LTD., A TEXAS LIMITED PARTNERSHIP, TO ZML-STERLING PLAZA LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, RECORDED IN VOLUME 95005, PAGE 6418, OVER AND ACROSS THE TRACTS OF LAND DESCRIBED ON EXHIBIT “C” AND EXHIBIT “D” OF SAID AGREEMENT.


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Exhibit 10.7
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(Ten Almaden)

by

KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company,
as Grantor,

to

PRLAP, INC., a North Carolina corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below



This document serves as a Fixture Filing under the California Uniform Commercial Code.
    
Grantor’s Organizational Identification Number is: DE 5637828
Property Commonly Known As: 10 Almaden Boulevard
City/County: San Jose, County of Santa Clara
State: California






DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Ten Almaden)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Brent Carroll and Todd Smith, to PRLAP, Inc., a North Carolina corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or

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other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

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“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as

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any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust; excluding, however, the debts, obligations and liabilities of Grantor under the Environmental Agreement. This Deed of Trust does not secure the Environmental Agreement, the Guaranty or any other Loan Document that is expressly stated to be unsecured.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments,

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charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.
“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.

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“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) hereby irrevocably and unconditionally grants, conveys, transfers and assigns the Real Property unto Trustee, in trust, for the benefit of Beneficiary, for the ratable benefit of Lenders, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property; (b) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (c) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Absolute Assignment of Leases and Rents .
In consideration of the making of the Loan by Lenders to Borrower and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. This assignment is, and is intended to be, an unconditional, absolute and present assignment from Grantor to Beneficiary of all of Grantor’s right, title and interest in and to the Leases and the Rents and not an assignment in the nature of a pledge of the Leases and Rents or the mere grant of a security interest therein. So long as no Event of Default shall exist, however, Grantor shall have a license (which license shall terminate automatically and without notice upon the occurrence of an Event of Default) to collect, but not prior to accrual, all Rents. Grantor agrees to collect and hold all Rents in trust for Beneficiary and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with

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respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Reconveyance of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Trustee, upon request by Beneficiary, will promptly provide a reconveyance of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such reconveyance and the payment of any recording and filing costs. Upon the recording of such reconveyance and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.
Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s

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knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.
Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and

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all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).
(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or

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otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such replacement Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.
Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.

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Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.

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Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Trustee, if and as directed by Beneficiary, shall have all of the rights and may exercise all of the powers set forth in applicable Law of the State, including those powers set forth in Sections 2924 et seq. and Section 2938 of the California Civil Code or any successor provision of Law. Trustee may sell the Property in its entirety or in parcels, and by one or by several sales, as deemed appropriate by Trustee in its sole and absolute discretion. If Trustee chooses to have more than one foreclosure sale, Trustee may cause the foreclosure sales to be held simultaneously or successively, on the same day, or on such different days and at such different times as Trustee may elect. Trustee shall receive and apply the proceeds from the sale of the Property, or any portion thereof, in accordance with Section 2924k of the California Civil Code or any successor provision of Law. Before any foreclosure sale, Beneficiary or Trustee shall give such notice of default and election

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to sell as may be required by Law. After the lapse of such time as may then be required by Law following the recordation of such notice of default, and notice of sale having been given as then required by Law, Trustee shall sell the property being sold at a public auction to be held at the time and place specified in the notice of sale. Neither Trustee nor Beneficiary shall have any obligation to make demand on Grantor before any foreclosure sale. From time to time in accordance with then-applicable Law, Trustee may, and in any event at Beneficiary’s request shall, postpone any foreclosure sale by public announcement at the time and place noticed for that sale. At any foreclosure sale, Trustee shall sell to the highest bidder at public auction for cash in lawful money of the United States (or cash equivalents acceptable to Trustee to the extent permitted by applicable Law), payable at the time of sale. Trustee shall execute and deliver to the purchaser(s) a deed or deeds conveying the property being sold without any covenant or warranty whatsoever, expressed or implied. The recitals in any such deed of any matters of fact, including any facts bearing upon the regularity or validity of any foreclosure sale, shall be conclusive proof of their truthfulness. Any such deed shall be conclusive against all Persons as to the facts recited therein. Any Person, including Trustee or Beneficiary, may purchase at such sale, and any bid by Beneficiary may be, in whole or in part, in the form of cancellation of all or any part of the Obligations.
Section 7.4      Judicial Action .
Beneficiary and Trustee, if and as directed by Beneficiary, shall have the right to bring an action in any court of competent jurisdiction for foreclosure of this Deed of Trust and a deficiency judgment as provided by Law, or for specific enforcement of any of the covenants or agreements of this Deed of Trust.
Section 7.5      Collection of Rents .
Upon the occurrence, and during the continuance of an Event of Default, the license granted to Grantor to collect the Rents shall be automatically and immediately revoked, without further notice to or demand upon Grantor. Beneficiary may, but shall not be obligated to, exercise any or all of the rights and remedies provided in Section 2938 of the California Civil Code and perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute

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and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay, on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a

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secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Beneficiary to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties. Alternatively, Beneficiary may choose to dispose of some or all of the Property, in any combination consisting of both Personalty and Real Property, in one sale to be held in accordance with the Law and procedures applicable to real property, as permitted by Article 9 of the Uniform Commercial Code. Grantor agrees that such a sale of Personalty together with Real Property constitutes a commercially reasonable sale of the Personalty.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted

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by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee, Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, by filing for record in the office where this Deed of Trust is recorded a Substitution of Trustee. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. Upon the recordation of such Substitution of Trustee, the Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.

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Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
Each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:

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(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.
Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.

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Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise, modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es)

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listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
Section 9.11      Governing Law; Usury .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State (without regard to its conflicts of law principles).
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement); and
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.
(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make

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any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:
(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:

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(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.
(g)      Grantor waives any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.

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Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.
[Signatures appear on following page.]



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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first written above.
GRANTOR:

KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





S-1


ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF SAN JOSE, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL 1, AS SHOWN ON THAT CERTAIN PARCEL MAP FILED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JUNE 9, 1987, IN BOOK 574 OF MAPS, PAGE(S) 45 AND 46.



A-1


Exhibit 10.8
Prepared By/Return To:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(Towers at Emeryville)

by

KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company,
as Grantor,

to

PRLAP, INC., a North Carolina corporation,
as Trustee,

for the benefit of

BANK OF AMERICA, N.A.,
a national banking association,
as Beneficiary, in its capacity as administrative agent for the Lenders identified below



This document serves as a Fixture Filing under the California Uniform Commercial Code.
    
Grantor’s Organizational Identification Number is: DE 5641776
Property Commonly Known As: 1900, 2000 and 2200 Powell Street
City/County: Emeryville, County of Alameda
State: California






DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Towers at Emeryville)
This Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (herein referred to as “Grantor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Brent Carroll and Todd Smith, to PRLAP, Inc., a North Carolina corporation ( “Trustee” ), whose address is P.O. Box 2240, Brea, California 92822, for the benefit of Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as beneficiary, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Grantor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Grantor execute and deliver this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Trustee and Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Grantor agrees as follows:
Article I
Definitions .
As used in this Deed of Trust, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Grantor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Beneficiary” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Borrower” means individually and collectively, Grantor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Grantor.
“Deed of Trust” means this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Deed of Trust.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or

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other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.
“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Grantor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Deed of Trust does not secure the obligations of Grantor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or Trustee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

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“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.
“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Beneficiary for the account of Grantor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Deed of Trust, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as

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any or all of such promissory notes may from time to time be renewed, extended, supplemented, increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Deed of Trust.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Beneficiary and/or Lenders and/or Trustee arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Deed of Trust or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Grantor is required to perform, observe or comply with pursuant to this Deed of Trust or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Grantor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust; excluding, however, the debts, obligations and liabilities of Grantor under the Environmental Agreement. This Deed of Trust does not secure the Environmental Agreement, the Guaranty or any other Loan Document that is expressly stated to be unsecured.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Beneficiary and insuring Beneficiary’s interest in the Property which are acceptable to Beneficiary as of the date hereof, (b) the Liens and interests of this Deed of Trust, and (c) any other Encumbrance disclosed to Beneficiary in any commitment for title insurance delivered to Beneficiary or otherwise disclosed in writing to Beneficiary that Beneficiary shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Grantor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Deed of Trust, and neither Beneficiary nor Lenders shall have any responsibility for the performance of Grantor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments,

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charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Grantor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Beneficiary under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Grantor with respect to the Property or Grantor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Grantor with Beneficiary related to the Property, including any such deposit account from which Grantor may from time to time authorize Beneficiary to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Grantor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Grantor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Grantor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.
“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.

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“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Deed of Trust in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
“Trustee” means the Trustee identified in the introductory paragraph of this Deed of Trust or its successor in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, Grantor (a) hereby irrevocably and unconditionally grants, conveys, transfers and assigns the Real Property unto Trustee, in trust, for the benefit of Beneficiary, for the ratable benefit of Lenders, with power of sale and right of entry and possession, all estate, right, title and interest that Grantor now has or may later acquire in and to the Real Property; (b) grants to Beneficiary, for the ratable benefit of Lenders, a security interest in the Personalty; (c) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all Condemnation Awards and all Insurance Proceeds; and (d) assigns to Beneficiary, and grants to Beneficiary, for the ratable benefit of Lenders, a security interest in, all of Grantor’s right, title and interest in, but not any of Grantor’s obligations or liabilities under, all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Absolute Assignment of Leases and Rents .
In consideration of the making of the Loan by Lenders to Borrower and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor assigns the Leases and Rents to Beneficiary, for the ratable benefit of Lenders. This assignment is, and is intended to be, an unconditional, absolute and present assignment from Grantor to Beneficiary of all of Grantor’s right, title and interest in and to the Leases and the Rents and not an assignment in the nature of a pledge of the Leases and Rents or the mere grant of a security interest therein. So long as no Event of Default shall exist, however, Grantor shall have a license (which license shall terminate automatically and without notice upon the occurrence of an Event of Default) to collect, but not prior to accrual, all Rents. Grantor agrees to collect and hold all Rents in trust for Beneficiary and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from Grantor to Beneficiary, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Deed of Trust and otherwise, Beneficiary shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including such fixtures) is situated. This Deed of Trust shall also be effective as a financing statement with

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respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Grantor and Beneficiary are set forth in the opening paragraph of this Deed of Trust. A carbon, photographic or other reproduction of this Deed of Trust or any other financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. Grantor hereby irrevocably authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Beneficiary to establish or maintain the validity, perfection and priority of the security interests granted in this Deed of Trust. The foregoing authorization includes Grantor’s irrevocable authorization for Beneficiary at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Reconveyance of Deed of Trust and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Trustee, upon request by Beneficiary, will promptly provide a reconveyance of the Property from the lien of this Deed of Trust and termination statements for filed financing statements, if any, to Grantor. Grantor shall be responsible for the recordation of such reconveyance and the payment of any recording and filing costs. Upon the recording of such reconveyance and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Grantor makes the following representations and warranties to Beneficiary and each of the Lenders:
Section 3.1      Title to Real Property .
To Grantor’s knowledge and belief, Grantor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Grantor’s knowledge and belief, Grantor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Deed of Trust with general warranty. To Grantor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.
Section 3.2      Title to Other Property .
To Grantor’s knowledge and belief, Grantor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Grantor’s

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knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Grantor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. To Grantor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Grantor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Grantor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Grantor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Grantor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Grantor has title to and the right to assign the Leases and Rents to Beneficiary, and no other assignment of the Leases or Rents has been granted. To the best of Grantor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.

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Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Grantor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Grantor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Beneficiary, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Grantor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Deed of Trust or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary, any Lenders nor Trustee is subjected to any Claim as a result of such contest, and (d) Grantor provides assurances satisfactory to Beneficiary (including the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary, each Lender and Trustee harmless against all Claims in connection therewith. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.
Section 4.4      Compliance with Laws .
Grantor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Grantor, at Grantor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and

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all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to Trustee and/or Beneficiary such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation .
To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary or any Lender to pay or discharge any Lien.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Grantor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Beneficiary as provided under the terms of the Loan Agreement.
(b)      Neither Trustee, Beneficiary nor any Lender shall be obligated to perform or discharge any obligation of Grantor under any Lease. The assignment of Leases provided for in this Deed of Trust in no manner places on Beneficiary, any Lender or Trustee any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).
(c)      No approval of any Lease by Beneficiary shall be for any purpose other than to protect Beneficiary’s security and to preserve Beneficiary’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Deed of Trust, Grantor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Grantor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Beneficiary’s security has been protected by the filing of a bond or

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otherwise in a manner satisfactory to Beneficiary in its sole and absolute discretion, Grantor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Grantor does so diligently and without prejudice to Beneficiary or delay in completing construction of the Improvements. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.
Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Deed of Trust).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Grantor shall be deemed to have subjected such replacement Accessories to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary or otherwise existing as of the date of this Deed of Trust), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.
Section 5.4      Additional Improvements .
Grantor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor will complete and pay for, prior to delinquency, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Grantor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Beneficiary), or any capital improvements to the Property.

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Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Beneficiary and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Deed of Trust, Grantor (a) will promptly perform and observe, and use commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Deed of Trust:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Grantor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Grantor fails to promptly perform or comply with any of the Obligations set forth in this Deed of Trust (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Grantor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Grantor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Beneficiary.

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Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, deed of trust or security agreement covering the Property, including any Permitted Encumbrances.
Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Beneficiary, or Trustee at the direction of Beneficiary, shall have the right, in addition to any other rights or remedies available to Beneficiary under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Beneficiary may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Grantor).
Section 7.2      Appraisal; Inspection .
Following the occurrence, and during the continuance, of an Event of Default, Beneficiary may pay such sums as may be necessary to obtain a current appraisal of the Real Property and/or other Property, to inspect and test the Real Property and/or other Property, to pay any tax, assessment, insurance premium, lien, encumbrance or other charge against the Property, to obtain a title report and/or Trustee’s sale guaranty, all such expenditures to be paid by Grantor on demand and added to the Obligations.
Section 7.3      Foreclosure; Power of Sale .
Trustee, if and as directed by Beneficiary, shall have all of the rights and may exercise all of the powers set forth in applicable Law of the State, including those powers set forth in Sections 2924 et seq. and Section 2938 of the California Civil Code or any successor provision of Law. Trustee may sell the Property in its entirety or in parcels, and by one or by several sales, as deemed appropriate by Trustee in its sole and absolute discretion. If Trustee chooses to have more than one foreclosure sale, Trustee may cause the foreclosure sales to be held simultaneously or successively, on the same day, or on such different days and at such different times as Trustee may elect. Trustee shall receive and apply the proceeds from the sale of the Property, or any portion thereof, in accordance with Section 2924k of the California Civil Code or any successor provision of Law. Before any foreclosure sale, Beneficiary or Trustee shall give such notice of default and election

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to sell as may be required by Law. After the lapse of such time as may then be required by Law following the recordation of such notice of default, and notice of sale having been given as then required by Law, Trustee shall sell the property being sold at a public auction to be held at the time and place specified in the notice of sale. Neither Trustee nor Beneficiary shall have any obligation to make demand on Grantor before any foreclosure sale. From time to time in accordance with then-applicable Law, Trustee may, and in any event at Beneficiary’s request shall, postpone any foreclosure sale by public announcement at the time and place noticed for that sale. At any foreclosure sale, Trustee shall sell to the highest bidder at public auction for cash in lawful money of the United States (or cash equivalents acceptable to Trustee to the extent permitted by applicable Law), payable at the time of sale. Trustee shall execute and deliver to the purchaser(s) a deed or deeds conveying the property being sold without any covenant or warranty whatsoever, expressed or implied. The recitals in any such deed of any matters of fact, including any facts bearing upon the regularity or validity of any foreclosure sale, shall be conclusive proof of their truthfulness. Any such deed shall be conclusive against all Persons as to the facts recited therein. Any Person, including Trustee or Beneficiary, may purchase at such sale, and any bid by Beneficiary may be, in whole or in part, in the form of cancellation of all or any part of the Obligations.
Section 7.4      Judicial Action .
Beneficiary and Trustee, if and as directed by Beneficiary, shall have the right to bring an action in any court of competent jurisdiction for foreclosure of this Deed of Trust and a deficiency judgment as provided by Law, or for specific enforcement of any of the covenants or agreements of this Deed of Trust.
Section 7.5      Collection of Rents .
Upon the occurrence, and during the continuance of an Event of Default, the license granted to Grantor to collect the Rents shall be automatically and immediately revoked, without further notice to or demand upon Grantor. Beneficiary may, but shall not be obligated to, exercise any or all of the rights and remedies provided in Section 2938 of the California Civil Code and perform any or all obligations of the landlord under any or all of the Leases, and Beneficiary may, but shall not be obligated to, exercise and enforce any or all of Grantor’s rights under the Leases. Without limitation to the generality of the foregoing, Beneficiary may, upon the occurrence, and during the continuance, of an Event of Default, notify the tenants under the Leases that all Rents are to be paid to Beneficiary, and following such notice all Rents shall be paid directly to Beneficiary and not to Grantor or any other Person other than as directed by Beneficiary, it being understood that a demand by Beneficiary on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Beneficiary without the necessity of further consent by Grantor. Grantor hereby irrevocably authorizes and directs the tenants under the Leases to pay all Rents to Beneficiary instead of to Grantor, upon receipt of written notice from Beneficiary, without the necessity of any inquiry of Grantor and without the necessity of determining the existence or non-existence of an Event of Default. Grantor hereby appoints Beneficiary as Grantor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Grantor’s name or in Beneficiary’s name: (a) to endorse all checks and other instruments received in payment of Rents and to deposit the same in any account selected by Beneficiary; (b) to give receipts and releases in relation thereto; (c) to institute, prosecute

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and/or settle actions for the recovery of Rents; (d) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (e) to cancel any Leases; (f) to enter into new Leases; and (g) to do all other acts and things with respect to the Leases and Rents which Beneficiary may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Grantor shall pay, on demand, to Beneficiary, the amount of any deficiency between (i) the Rents received by Beneficiary, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.6      Taking Possession or Control of the Property .
Upon the occurrence, and during the continuance, of an Event of Default, as a matter of right without bond and without regard to the adequacy of the security, and to the extent permitted by Law without notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership may be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver and agrees that such receiver shall have all of the rights and powers granted to Beneficiary pursuant to Section 7.5 . In addition, upon the occurrence, and during the continuance, of an Event of Default to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.
Section 7.7      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.6 , Beneficiary, Trustee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Grantor (the costs of completing such Improvements shall be Expenses secured by this Deed of Trust and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Beneficiary, Trustee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.8      Uniform Commercial Code .
Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a

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secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Deed of Trust at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Trustee and/or Beneficiary to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties. Alternatively, Beneficiary may choose to dispose of some or all of the Property, in any combination consisting of both Personalty and Real Property, in one sale to be held in accordance with the Law and procedures applicable to real property, as permitted by Article 9 of the Uniform Commercial Code. Grantor agrees that such a sale of Personalty together with Real Property constitutes a commercially reasonable sale of the Personalty.
Section 7.9      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Beneficiary from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Beneficiary may elect.
Section 7.10      Other Remedies .
Beneficiary shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Grantor provided under the Loan Documents or by applicable Laws.
Article VIII
Trustee .
Section 8.1      Liability of Trustee .
Trustee shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Loan Documents or the description, value or status of title to the Property. Trustee shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by Trustee to be genuine and to have been signed by the party or parties purporting to sign the same. Trustee shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of Law or fact, nor for anything which Trustee may do or refrain from doing in good faith, nor generally shall Trustee have any accountability hereunder except for willful misconduct or gross negligence. The powers and duties of Trustee hereunder may be exercised through such attorneys, agents or servants as Trustee may in good faith and reasonably appoint, and Trustee shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as the selection was made with reasonable care. In addition, Trustee may consult with legal counsel selected by Trustee, and Trustee shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. To the extent permitted

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by applicable Laws, Trustee may act hereunder and may sell or otherwise dispose of the Property or any part thereof as herein provided, although Trustee has been, may now be or may hereafter be, an attorney, officer, agent or employee of Beneficiary, in respect of any matter or business whatsoever. Trustee, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by Trustee hereunder except upon the demand of Beneficiary.
Section 8.2      Indemnification of Trustee .
Grantor agrees to indemnify Trustee and to hold Trustee harmless from and against any and all Claims and Expenses directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including but not limited to any Claim arising out of or resulting from any assertion or allegation that Trustee is liable for any act or omission of Grantor or any other Person in connection with the ownership, development, financing, operation or sale of the Property; provided , however , that Grantor shall not be obligated to indemnify Trustee with respect to any Claim arising solely from the gross negligence or willful misconduct of Trustee or Beneficiary. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, conveyance or assignment in lieu thereof and any other action by Trustee to enforce the rights and remedies of Beneficiary or Trustee hereunder or under the other Loan Documents.
Section 8.3      Substitution of Trustee; Multiple Trustees .
In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Beneficiary shall deem it desirable to appoint a substitute or successor trustee, Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, by filing for record in the office where this Deed of Trust is recorded a Substitution of Trustee. The power of appointment of a successor Trustee may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. Upon the recordation of such Substitution of Trustee, the Trustee so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of its predecessor in the trust hereunder with like effect as if originally named as Trustee hereunder. Whenever in this Deed of Trust reference is made to Trustee, it shall be construed to mean each Person appointed as Trustee for the time being, whether original or successor in trust. All title, estate, rights, powers, trusts and duties granted to Trustee shall be in each Person appointed as Trustee so that any action hereunder by any Person appointed as Trustee shall for all purposes be deemed to be, and as effective as, the action of all Trustees.

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Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
Each right, power and remedy of Beneficiary or Trustee as provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or Trustee of any or all such other rights, powers or remedies.
Section 9.2      No Waiver by Beneficiary or Trustee .
No course of dealing or conduct by or among Beneficiary, Trustee and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Loan Documents. No failure or delay by Beneficiary or Trustee to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, neither Beneficiary nor Trustee shall be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary’s extending the time of payment or modifying the terms of this Deed of Trust or any of the other Loan Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Loan Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Loan Documents in such order and manner as Beneficiary may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Grantor may do so, Grantor hereby:

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(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Grantor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of Trustee.
Section 9.5      No Warranty by Beneficiary or Trustee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or Trustee pursuant to this Deed of Trust or any of the other Loan Documents, Beneficiary and Trustee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or Trustee.
Section 9.6      Amendments .
This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.

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Section 9.7      Severability .
In the event any one or more of the provisions of this Deed of Trust or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Deed of Trust or any of the other Loan Documents, then and in either of those events, at the option of Beneficiary, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Deed of Trust 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 9.9      Joint and Several Liability .
If Grantor consists of two (2) or more Persons, the term “ Grantor ” shall also refer to all Persons signing this Deed of Trust as Grantor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Trustee or Beneficiary may release, compromise, modify or settle with any of Grantor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Grantor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Grantor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Deed of Trust are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es)

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listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
Section 9.11      Governing Law; Usury .
This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State (without regard to its conflicts of law principles).
Section 9.12      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Grantor and Beneficiary with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Grantor and Beneficiary with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Beneficiary to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.13      Limited Recourse Provision .
Beneficiary shall have no recourse against, nor shall there be any personal liability to, the members of Grantor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Grantor with respect to the obligations of Grantor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Grantor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Beneficiary’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Grantor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Deed of Trust which is required to be performed by any Borrower under the Loan Agreement other than Grantor.
Section 10.2      Rights of Beneficiary . Grantor authorizes Beneficiary to perform any or all of the following acts at any time in its sole discretion, all without notice to Grantor and without affecting Beneficiary’s rights or Grantor’s obligations under this Deed of Trust:
(a)      Beneficiary may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Beneficiary may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Beneficiary may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Beneficiary may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Beneficiary may apply any payments or recoveries from Borrower (or any of them), Grantor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Beneficiary may elect, whether that obligation is secured by this Deed of Trust or not at the time of the application.
(f)      Beneficiary may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Beneficiary’s rights or Grantor’s liability under this Deed of Trust.
Section 10.3      Deed of Trust to be Absolute .
Grantor expressly agrees that until the earlier of (i) the release and reconveyance of this Deed of Trust in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Deed of Trust is fully performed, Grantor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Grantor’s obligations under this Deed of Trust;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Beneficiary, or the failure by Beneficiary to proceed promptly or otherwise against any Borrower, Grantor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Grantor may be called upon to perform under this Deed of Trust or which might affect the rights or remedies of Grantor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Deed of Trust shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Grantor hereby acknowledges that absent this Section 10.3 , Grantor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Grantor hereby expressly waives and surrenders any defense to any liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Grantor that Grantor’s obligations under this Deed of Trust are and shall be absolute, unconditional and irrevocable.
Section 10.4      Grantor’s Waivers .
Grantor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Grantor by Beneficiary, to the fullest extent permitted by law;
(b)      Any right it may have to require Beneficiary to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Beneficiary’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Grantor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Beneficiary to any Borrower in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Deed of Trust or under the Loan Agreement); and
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full.
Section 10.5      Grantor’s Additional Waivers.
Grantor waives:
(a)      The obligations of Grantor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Grantor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Beneficiary, Grantor may be joined in any action or proceeding commenced by Beneficiary against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Grantor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against any other Borrower.
(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Beneficiary in its sole discretion, without prior notice to or consent of Grantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Beneficiary may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make

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any other accommodation with any other Borrower or Grantor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary shall release or limit the liability of Grantor, who shall remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Grantor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Grantor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party.
(c)      Regardless of whether Beneficiary may have recovered against Grantor, Grantor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Beneficiary against Grantor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Beneficiary may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third Party Secured Obligations. To the extent Grantor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Grantor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against such Borrower and to all right, title and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Grantor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Grantor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Beneficiary.
(d)      Grantor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Grantor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      Grantor waives all rights and defenses that Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:
(i)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Beneficiary forecloses on any real property collateral pledged by any Borrower:

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(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Beneficiary or any Lender may collect from Grantor (including enforcing this Deed of Trust against Grantor) even if Beneficiary or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Grantor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver of any rights and defenses Grantor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Grantor understands and acknowledges that if Beneficiary or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Grantor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Grantor may have for any recovery by Beneficiary under this Deed of Trust. Grantor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Grantor’s rights, if any, may entitle Grantor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Deed of Trust, Grantor freely, irrevocably and unconditionally: (i) waives and relinquishes that defense and agrees that Grantor will be fully liable under this Deed of Trust even though Beneficiary or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Grantor will not assert that defense in any action or proceeding which Beneficiary or any Lender may commence to enforce this Deed of Trust; (iii) acknowledges and agrees that the rights and defenses waived by Grantor under this Deed of Trust include any right or defense that Grantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Beneficiary and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Beneficiary and each Lender is receiving for extending such credit to Borrowers.
(g)      Grantor waives any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust.

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Section 10.6      Revival and Reinstatement .
If Beneficiary is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Grantor shall be reinstated and revived and the rights of Beneficiary shall continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Grantor represents that: (a) Beneficiary has not made any representation to Grantor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Grantor to execute and deliver this Deed of Trust. Grantor has received and approved copies of all other requested Loan Documents. Before signing this Deed of Trust, Grantor investigated the financial condition and business operations of each other Borrower and such other matters as Grantor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Grantor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Beneficiary. Beneficiary has no any duty to disclose to Grantor any information which Beneficiary may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Grantor acknowledges that Grantor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Grantor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Grantor’s execution of and obligations under this Deed of Trust, and Grantor acknowledges its execution and delivery of this Deed of Trust is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Deed of Trust is intended by the parties to be a fully integrated and final expression of their agreement. This Deed of Trust and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Grantor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Beneficiary, or any employee, attorney or agent of Beneficiary, except for the agreements of Beneficiary set forth herein and in the Loan Documents.
[Signatures appear on following page.]



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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first written above.
GRANTOR:

KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





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ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF EMERYVILLE, COUNTY OF ALAMEDA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

TRACT A: (Submerged Parcel)

PARCEL 3, PARCEL MAP 1535, FILED JULY 16, 1975, IN MAP BOOK 87, PAGE 88, ALAMEDA COUNTY RECORDS.

EXCEPTING THEREFROM, THAT PORTION THEREOF DESCRIBED IN PARCEL 1A IN THE AMENDED FINAL ORDER OF CONDEMNATION ENTERED AUGUST 19, 1992, IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, IN AND FOR THE COUNTY OF ALAMEDA, CASE NO. 641062-5, A CERTIFIED COPY OF WHICH RECORDED AUGUST 19, 1992, SERIES NO. 92-272591, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY.

TRACT B: (Tower I)

PARCEL ONE:

PARCEL 1, PARCEL MAP 7523, FILED AUGUST 4, 2000, IN MAP BOOK 252, PAGES 63 AND 64, ALAMEDA COUNTY RECORDS.

PARCEL TWO:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT C: (Tower II)

PARCEL ONE:

PARCEL 2, PARCEL MAP 2426, FILED FEBRUARY 21, 1978 IN MAP BOOK 101, PAGE 41, ALAMEDA COUNTY RECORDS.


A-1


PARCEL TWO:

AN EASEMENT, APPURTENANT TO PARCEL 2 OF SAID PARCEL MAP 2426, CONVEYED TO TOWER II, A CALIFORNIA LIMITED PARTNERSHIP, BY GRANT OF EASEMENT DATED MAY 18, 1978, RECORDED MAY 24, 1978, IN REEL 5406, IMAGE 111, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY, FOR INGRESS AND EGRESS BY EMERGENCY VEHICLES OF GOVERNMENTAL ENTITIES OVER A PORTION OF PARCEL 1, PARCEL MAP 1179, FILED MAY 22, 1973, IN BOOK 79 OF MAPS, PAGE 59, ALAMEDA COUNTY RECORDS.

PARCEL THREE:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT D: (Tower III)

PARCEL ONE:

PARCEL 3, PARCEL MAP 2426, FILED FEBRUARY 21, 1978, IN MAP BOOK 101, PAGE 41, ALAMEDA COUNTY RECORDS.

PARCEL TWO:

AN EASEMENT, APPURTENANT TO PARCEL 3 OF SAID PARCEL MAP 2426, CONVEYED TO F. PIERCE LATHROP BY GRANT OF EASEMENT DATED MAY 18, 1978, RECORDED MAY 24, 1978, IN REEL 5406, IMAGE 119, OFFICIAL RECORDS OF SAID ALAMEDA COUNTY, FOR INGRESS AND EGRESS BY EMERGENCY VEHICLES OF GOVERNMENTAL ENTITIES OVER A PORTION OF PARCEL 1, PARCEL MAP 1179, FILED MAY 22, 1973, IN BOOK 79 OF MAPS, PAGE 59, ALAMEDA COUNTY, MORE PARTICULARLY DESCRIBED THEREIN.

PARCEL THREE:

NONEXCLUSIVE EASEMENTS FOR PARKING AND VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE TOWERS” RECORDED AUGUST 4, 2000 AS INSTRUMENT NO. 2000-232335, AND AS AMENDED BY THAT CERTAIN “FIRST AMENDMENT TO DECLARATION OF RECIPROCAL EASEMENTS WATERGATE OFFICE

A-2


TOWERS” RECORDED JANUARY 16, 2007 AS INSTRUMENT NO. 2007026642, OF OFFICIAL RECORDS.

TRACT E:

NON-EXCLUSIVE EASEMENT(S), AS AN APPURTENANCE TO TRACTS A, B, C, AND D DESCRIBED ABOVE, FOR VEHICULAR AND PEDESTRIAN TRAFFIC OVER THE LANDS DESCRIBED IN THE “RECIPROCAL EASEMENT AGREEMENT” RECORDED JANUARY 20, 1976, REEL 4232, IMAGE 222, INSTRUMENT NO. 76-8732, OFFICIAL RECORDS.

APN: 049-1495-003-02 (TRACT A), 049-1495-008 (TRACT B), 049-1521-006 (TRACT C) AND 049-1521-007 (TRACT D)

A-3

Exhibit 10.9
Guaranty Agreement
This Guaranty Agreement (this “Guaranty” ) is made as of the 3rd day of November, 2017, by KBS REIT Properties III, LLC, a Delaware limited liability company ( “Guarantor” ), in favor of Bank of America, N.A., a national banking association, as administrative agent for Lenders as that term is defined below (in such capacity, “Administrative Agent” ) and each of the Lenders.
Recitals
Administrative Agent and certain other lenders from time to time (each a “Lender” and collectively, “Lenders” ), and KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company (each, a “Borrower” and, collectively, “Borrowers” ), are entering into concurrently herewith that certain Loan Agreement dated as of the date hereof (herein called, as it may hereafter be modified, supplemented, restated, extended, or renewed and in effect from time to time, the “Loan Agreement” ), which Loan Agreement sets forth the terms and conditions of a loan (the “Loan” ) to Borrowers.
A condition precedent to Lenders’ obligation to make the Loan to Borrowers is Guarantor’s execution and delivery to Administrative Agent of this Guaranty.
The Loan will be evidenced by those certain Promissory Notes of even date herewith, executed by Borrowers and payable to the order of Lenders in the aggregate original face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00) (such notes, as they may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, are herein called the “Note” ).
Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement. This Guaranty is one of the Loan Documents described in the Loan Agreement.
Agreements
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce Lenders to make the Loan to Borrowers, Guarantor hereby guarantees to Administrative Agent and each 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:

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Section 1. Guaranty of Payment .
Guarantor hereby unconditionally and irrevocably guarantees to Administrative Agent and Lenders the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of (i) upon the occurrence of a Triggering Event (as hereinafter defined), all principal and interest (including interest accruing after maturity and after the commencement of any bankruptcy or insolvency proceeding by or against any Borrower, whether or not allowed in such proceeding) now or hereafter due and owing, or which Borrower is obligated to pay, pursuant to the terms of any Note, the Loan Agreement, the Security Instruments, or any of the other Loan Documents, as the same may from time to time be amended, supplemented, restated or otherwise modified, and (ii) regardless of whether a Triggering Event shall have occurred, 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 Administrative Agent 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 Administrative Agent or any 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 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 Administrative Agent or a 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 Administrative Agent in seeking to enforce Administrative Agent’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 Administrative Agent or Lenders 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.
Section 2.      Guaranty of Specific Obligations .
Guarantor also hereby unconditionally and irrevocably guarantees payment of, and agrees to protect, defend, indemnify and hold harmless Administrative Agent and each Lender for, from and against, 100% of any deficiency, loss or damage suffered by Administrative Agent or any 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;

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(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)      (i) 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 collusion by Borrower, Guarantor or any Affiliate thereof in (A) an involuntary filing of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or (B) any assignment for the benefit of creditors made against any Borrower, or (ii) the involuntary filing against any Borrower by any member of such Borrower, Guarantor or any Affiliate thereof of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws, and such proceeding described in this clause (ii) 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 Administrative Agent or any Lender to take prior recourse or proceedings against any collateral, security or Person. It shall not be necessary for Administrative Agent or any 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 Administrative Agent or any Lender from suing on any 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 Administrative Agent or any Lender against any party hereto.
Section 4.      Certain Agreements and Waivers by Guarantor .
(a)      Guarantor agrees that neither the rights or remedies of Administrative Agent and Lenders nor Guarantor’s obligations under the terms of this Guaranty shall be released, diminished,

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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;
(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 Administrative Agent or any 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 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

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Administrative Agent or Lenders 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 Administrative Agent or any 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;
(xi)      any failure of Administrative Agent or any 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 Potential Default, or of any other action taken or refrained from being taken by Administrative Agent or any Lender against any Borrower or any security or other recourse, or of any new agreement between or among Administrative Agent, any Lender and any Borrower, it being understood that Administrative Agent 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 neither Administrative Agent nor any Lender shall have any duty to notify Guarantor of any information which Administrative Agent or such 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, Administrative Agent, any Lender, or any other Person, whether or not arising in connection with this Guaranty, any 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);

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(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 Administrative Agent or any Lender, or any action taken or omitted by Administrative Agent or any Lender in any such proceedings, including any election to have Administrative Agent’s or such Lender’s claim allowed as being secured, partially secured or unsecured, any extension of credit by Administrative Agent or such Lender in any such proceedings or the taking and holding by Administrative Agent or such 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 Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement;
(xvi)      any early termination of any of the Guaranteed Obligations; or
(xvii)      Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such 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 Administrative Agent 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 Administrative Agent or any Lender or paid by Administrative Agent or any Lender to another Person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Administrative Agent or any Lender and any attorneys’ fees, costs and expenses paid or incurred by Administrative Agent or any Lender in connection with any such event.
(c)      It is the intent of Guarantor, Administrative Agent and each 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.

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(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 Administrative Agent or any Lender to any Borrower in excess of the Guaranteed Obligations. All payments, repayments and prepayments of the Loan, whether voluntary or involuntary, received by Administrative Agent or any Lender from any Borrower, any other Person or any other source (other than from Guarantor pursuant to a demand by Administrative Agent 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 Administrative Agent or any Lender. Administrative Agent shall have the right to apply any sums paid by Guarantor to any portion of the Loan in Administrative Agent’s sole and absolute discretion.
(e)      If acceleration of the time for payment of any amount payable by any Borrower under any 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 Administrative Agent.
(f)      Guarantor further waives: (i) any defense to the recovery by Administrative Agent or Lenders against Guarantor of any deficiency or otherwise to the enforcement of this Guaranty or any security for this Guaranty based upon the election by Administrative Agent or Lenders of any remedy against Guarantor or Borrower, including the defense to enforcement of this Guaranty (the so-called “Gradsky” defense) which, absent this waiver, Guarantor would have by virtue of an election by Administrative Agent or Lenders to conduct a non-judicial foreclosure sale (also known as a “trustee’s sale”) of any real property security for the Indebtedness, it being understood by Guarantor that any such non-judicial foreclosure sale will destroy, by operation of California Code of Civil Procedure ( “CCP” ) Section 580d, all rights of any party to a deficiency judgment against Borrower and, as a consequence, will destroy all rights that Guarantor would otherwise have (including the right of subrogation, the right of reimbursement, and the right of contribution) to proceed against Borrower; (ii) any defense or benefits that may be derived from CCP Sections 580a, 580b, 580d or 726, or comparable provisions of the laws of any other jurisdiction and all other anti-deficiency and one form of action defenses under the laws of California and any other jurisdiction; and (iii) any right to a fair value hearing under CCP Section 580a, or any other similar law, to determine the size of any deficiency owing (for which Guarantor would be liable hereunder) following a non-judicial foreclosure sale.
(g)      Without limiting the foregoing or anything else contained in this Guaranty, Guarantor waives all rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. This means, among other things:
(i)      That Administrative Agent or Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; and
(ii)      If Administrative Agent, for the benefit of Lenders, forecloses on any real property collateral pledged by Borrower: (A) the amount of the Guaranteed Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) Administrative Agent and/or Lenders may collect from

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Guarantor even if Administrative Agent, by foreclosing on the real property collateral for Lenders’ benefit, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Sections 580a, 580b, 580d, or 726 of the CCP.

(h)      Guarantor waives all rights and defenses arising out of an election of remedies by Administrative Agent or Lenders, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower by operation of Section 580d of the CCP or otherwise.
(i)      Guarantor waives Guarantor’s rights of subrogation and reimbursement, including (i) any defenses Guarantor may have by reason of an election of remedies by Administrative Agent or Lenders, and (ii) any rights or defenses Guarantor may have by reason of protection afforded to Borrower with respect to the Guaranteed Obligations pursuant to the anti-deficiency or other laws of California limiting or discharging Borrower’s obligations, including Sections 580a, 580b, 580d or 726 of the CCP.
(j)      Guarantor waives any rights, defenses and benefits that may be derived from Sections 2787 to 2855, inclusive, of the California Civil Code or comparable provisions of the laws of any other jurisdiction and further waives all other suretyship defenses Guarantor would otherwise have under the laws of California or any other jurisdiction.
(k)      No provision or waiver in this Guaranty shall be construed as limiting the generality of any other provision or waiver contained in this Guaranty. All of the waivers contained herein are irrevocable and unconditional and are intentionally and freely made by Guarantor.
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 Administrative Agent may find acceptable from time to time in its sole and absolute discretion, and (ii) distributions from such

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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 Administrative Agent 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, Administrative Agent 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 a Default or 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 5 , Guarantor shall pay the same to Administrative Agent immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Administrative Agent and shall have absolutely no dominion over the same except to pay it immediately to Administrative Agent; and
(d)      Guarantor shall promptly upon written request of Administrative Agent from time to time execute such documents and perform such acts as Administrative Agent may reasonably require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this Section 5 , including execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Administrative Agent 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.
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 Administrative Agent or any Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Administrative Agent and Lenders hereunder shall be cumulative of any and all other rights that Administrative Agent or any Lender may have against Guarantor. If any Borrower is or becomes indebted to Administrative Agent or any 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 Administrative Agent or such 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.

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Section 7.      Assigns; Disclosure of Information .
This Guaranty is for the benefit of Administrative Agent and Lenders and the permitted successors and assigns of each of them. Administrative Agent and any Lender may, at any time, sell, transfer or assign all or a portion of its interest in the Guaranteed Obligations and the Loan Documents, on and subject to the terms and conditions of the Loan Agreement. In the event of any such permitted sale, transfer or assignment of the Guaranteed Obligations or any part thereof, the rights and benefits under this Guaranty, to the extent applicable to the Guaranteed Obligations so sold, transferred or assigned, may be transferred with such obligations. Subject to the provisions of Section 9.5 of the Loan Agreement, Guarantor waives notice of any sale, transfer or assignment of the Guaranteed Obligations and/or this Guaranty or any part thereof, and agrees that failure to give notice of any such sale, transfer or assignment will not affect the liability of Guarantor hereunder. Subject to the terms and conditions of the Loan Agreement, including, without limitation, Section 9.6 thereof, Administrative Agent and each Lender are hereby authorized to disseminate any information they now have or hereafter obtain pertaining to the Guaranteed Obligations or this Guaranty, including credit or other information on Borrower, Guarantor and/or any party liable, directly or indirectly, for any part of the Guaranteed Obligations, to any actual or prospective assignee or participant with respect to the Guaranteed Obligations, to any of the affiliates of Administrative Agent or such Lender, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to any regulatory body having jurisdiction over Administrative Agent or such Lender, and to any other parties as necessary or appropriate in the reasonable judgment of Administrative Agent or such Lender.
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.
Section 9.      Governing Law .
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 California 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.

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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 Administrative Agent on demand all costs and expenses incurred by Administrative Agent or any Lender in seeking to enforce Administrative Agent’s or such 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 Administrative Agent or any 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 Administrative Agent, any 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, Administrative Agent and Lenders.
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 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 Administrative Agent by Guarantor do, and all financial statements and information hereafter furnished to Administrative Agent by Guarantor will, fully and accurately

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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 Administrative Agent, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Administrative Agent, 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 any 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 at the end of 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 Administrative Agent and Lenders 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 Administrative Agent or any Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Administrative Agent or any 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 Administrative Agent or Lenders 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 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 Administrative Agent or any 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

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by a writing intended for that purpose (and which refers specifically to this Guaranty) executed and delivered by Administrative Agent 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 Administrative Agent and Lenders 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 Administrative Agent or its nominee or any third party takes record title to a Property of a Borrower (a “Released Borrower” ) following the exercise of Administrative Agent’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 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 Administrative Agent:
(a)      Guarantor or the Released Borrower shall have delivered to Administrative Agent a new environmental insurance policy which insures Administrative Agent ( “New Environmental Insurance Policy” ) and which:
(i)      is comparable to the existing Environmental Insurance Policy approved by Administrative Agent 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 one (1) year from the date of issuance and shall be in “full force and effect” (i.e. shall have coverage under an extended reporting period of no less than three (3) years following the date title to the applicable Property is so taken); and
(b)      Administrative Agent shall have received evidence that all premiums for the coverage described in clause (a)(iii) above under such New Environmental Insurance Policy have been prepaid in full.
Such termination of Guarantor’s liability under clause (ii) of Section 1 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 Administrative Agent to Guarantor of a specific written acknowledgment of the satisfaction of all of the foregoing conditions and the termination of such obligations, which acknowledgment Administrative Agent 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

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Section 1 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 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 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 Covenants .
Guarantor shall maintain, at all times during the term of the Loan, and tested as of the end of each calendar quarter commencing with December 31, 2017, a Net Worth of not less than Two Hundred Fifty Million Dollars ($250,000,000); provided , however , that such amount may hereafter be reduced by written agreement of Administrative Agent, the Required Lenders and the Arrangers, following Guarantor’s written request for such reduction in connection with sales of assets of the Guarantor.
For purposes of this Section 17 :
“ Net Worth ” means the Total Assets of Guarantor minus the Total Liabilities of Guarantor.
“ Total Assets ” means the sum of (i) the asset value of all real properties owned by Guarantor and its subsidiaries, using an asset value for each asset equal to the greater of (A) the undepreciated cost, determined for the applicable measuring period in accordance with GAAP, or (B) the most recent appraised value, plus (ii) the asset value of any other tangible assets (including but not limited to notes payable and CMBS securities) owned by Guarantor and its subsidiaries, determined for the applicable measuring period in accordance with GAAP, plus (iii) all unencumbered cash and cash equivalent investments in which the use is unrestricted; provided , however , from and after the date that two (2) or fewer Properties remain as Collateral for the Loan, Guarantor’s interests in such remaining Properties shall be excluded from the calculation of “Total Assets” as set forth herein.
“ Total Liabilities ” means the sum of all liabilities of Guarantor and its subsidiaries (excluding those liabilities classified as intercompany liabilities) as reported on the balance sheet of Guarantor, determined on a consolidated basis for the applicable measuring period in accordance with GAAP; provided , however , from and after the date that two (2) or fewer Properties remain as Collateral for the Loan, liabilities or other indebtedness secured by such remaining Properties shall be excluded from the calculation of “Total Liabilities” as set forth herein. For purposes of clarification, guarantees provided by Guarantor for indebtedness of Guarantor’s subsidiaries shall only be counted once for the purpose of calculating Total Liabilities.

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Section 18.      Financial Statements .
Guarantor agrees to provide to Administrative Agent, as and when required, the Financial Statements and other financial information required to be delivered to Administrative Agent 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, including, without limitation, the Guarantor’s Covenant Compliance Certificate in the form of Schedule 1 attached hereto (“ Guarantor’s Covenant Compliance Certificate ”). Guarantor also agrees to provide to Administrative Agent such other and further financial information with respect to Guarantor as Administrative Agent shall from time to time reasonably request. Acceptance of any Financial Statement by Administrative Agent, whether or not in the form prescribed herein, shall be relied upon by Administrative Agent in the administration, enforcement, and extension of the Guaranteed Obligations.
Section 19.      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 16 above, and Guarantor hereby waives all of such rights.
Section 20.      Time of Essence .
Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.
Section 21.      Entire Agreement; Counterparts; Construction .
This Guaranty embodies the entire agreement between Administrative Agent and Lenders 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 Administrative Agent. This Guaranty may not be modified, amended or superseded except in a writing signed by Administrative Agent and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof that are to be modified, amended or superseded. This Guaranty 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 22.      [Intentionally Omitted.]
Section 23.      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

15

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 Administrative Agent 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 Administrative Agent or any Lender to serve process in any manner permitted by Law or limit the right of Administrative Agent or any Lender to bring proceedings against Guarantor in any other court or jurisdiction.
Section 24.      WAIVER OF JURY TRIAL .
TO THE EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR AND ADMINISTRATIVE AGENT AND EACH 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, ADMINISTRATIVE AGENT AND EACH LENDER, AND GUARANTOR, ADMINISTRATIVE AGENT AND EACH 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\ , ADMINISTRATIVE AGENT AND EACH 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 25.      Credit Verification .
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 Administrative Agent and each Lender to check any credit references, verify his/her employment and obtain credit reports from credit reporting agencies of Administrative Agent’s or such 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

16

transaction, Administrative Agent and each 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 26.      Limited Recourse Provision .
Administrative Agent and Lenders 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 Administrative Agent’s or any Lender’s right to exercise any rights or remedies against any collateral securing the Loan.
Section 27.      Unsecured Obligations .
Notwithstanding anything to the contrary herein or in any of the Loan Documents, the Guaranteed Obligations of Guarantor are unsecured and are not secured by any Security Instrument.



[Signatures begin on following page.]




17

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 as of the date first written above.

    
Address of Guarantor:

KBS REIT Properties III, LLC
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Todd Smith, Vice President
Controller, Corporate
Fax Number: (949) 417-6501

With copies to:

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: James Chiboucas
Fax Number: (949) 417-6523

c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Bryce Lin
Fax Number: (949) 417-6501

Greenberg Traurig LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Attn: Bruce Fischer
Fax Number: (949) 732-6501

GUARANTOR:

KBS REIT PROPERTIES III, LLC,
a Delaware limited liability company
   
By: KBS LIMITED PARTNERSHIP III,
           a Delaware limited partnership,
           its sole member

        By: KBS REAL ESTATE INVESTMENT TRUST III, INC.,
                 a Maryland corporation,
                 its general partner


      By:    /s/ Charles J. Schreiber, Jr.    
         Charles J. Schreiber, Jr.,
         Chief Executive Officer

Address of Administrative Agent:

Bank of America, N.A.
520 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Kevin McLain
Fax No.: (949) 287-0717
 


SIGNATURE PAGE TO KBS REIT PROPERTIES III GUARANTY

SCHEDULE 1

Guarantor Covenant Compliance Certificate


________, 20__


Bank of America, N.A.
520 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Kevin McLain

RE:
Quarterly Covenant Compliance Certificate; Period Ending [September 30][December 31][March 31][June 30], 20__ (the “ Calculation Date ”)

This compliance certificate is being delivered pursuant to (i) Section 4.8(b) of the Loan Agreement, dated November 3, 2017, among KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company, KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company, KBSIII STERLING PLAZA, LLC, a Delaware limited liability company, KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company, KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company, KBSIII TEN ALMADEN, LLC, a Delaware limited liability company, KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company, and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company, collectively, as borrowers, BANK OF AMERICA, N.A., a national banking association (“ Agent ”), and the other financial institutions party thereto (the “ Lenders ”) and (ii) Section 18 of the Guaranty Agreement, dated November 3, 2017 (the “ Guaranty ”), executed by KBS REIT Properties III, LLC, a Delaware limited liability company (“ Guarantor ”), for the benefit of Agent and the Lenders, for purposes of confirming Guarantor’s compliance with the financial covenants in Section 17 of the Guaranty.
Guarantor hereby represents, warrants and certifies, for the benefit of Agent and the Lenders, that as of the Calculation Date:
1.    The Net Worth of Guarantor was approximately $__________;
2.    Guarantor ___ was ___ was not in compliance with the financial covenants in Section 17 of the Guaranty.

Schedule 1 to Guaranty Agreement


Attached as Exhibit A hereto is an unaudited breakdown of the Net Worth of Guarantor as of the Calculation Date.
GUARANTOR:

KBS REIT PROPERTIES III, LLC,
a Delaware limited liability company
   
By: KBS Capital Advisors LLC,
   a Delaware limited liability company,
   its authorized agent


   By:                                      
   Name:                                
   Title:                                  







Schedule 1 to Guaranty Agreement

EXHIBIT A


Net Worth

Total Assets
 
$_______________
Total Liabilities
-
$
Net Worth
=
$_______________


Schedule 1 to Guaranty Agreement


Exhibit 10.10
This Document Prepared By
and After Recording Return to:
Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
Address of Property:
500 West Madison Street
Chicago, IL 60661

PIN Nos.:
17-09-342-002-0000
17-09-342-004-0000
17-09-342-005-0000
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(500 West Madison)

by

KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company,
as Mortgagor,

to and in favor of

BANK OF AMERICA, N.A.,
a national banking association,
as Mortgagee, in its capacity as administrative agent for the Lenders identified below



This document serves as a Fixture Filing under the Illinois Uniform Commercial Code, Chapter 810 ILCS 5/9-502(b), et seq .
    
Mortgagor’s Organizational Identification Number is: DE 5421583
Property Commonly Known As: 500 West Madison Street
City/County: Chicago, County of Cook
State: Illinois




MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(500 West Madison)
This Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII 500 West Madison, LLC, a Delaware limited liability company (herein referred to as “Mortgagor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Brett Merz and Todd Smith, to Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as Mortgagee, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Mortgagor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Mortgagor execute and deliver this Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Mortgagor agrees as follows:
Article I
Definitions .
As used in this Mortgage, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Mortgagor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Mortgagor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Borrower” means individually and collectively, Mortgagor, KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, and KBSIII Legacy Town Center, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Mortgagor.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Mortgage.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.

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“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Mortgagor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Mortgage does not secure the obligations of Mortgagor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Mortgagee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Mortgage or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.
“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

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“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Mortgagee for the account of Mortgagor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, Mortgage, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Mortgage, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Mortgage” means this Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Mortgagee” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as any or all of such promissory notes may from time to time be renewed, extended, supplemented,

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increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Mortgage.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Mortgagee and/or Lenders arising pursuant to, and/or on account of, the provisions of this Mortgage, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Mortgage or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Mortgagor is required to perform, observe or comply with pursuant to this Mortgage or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Mortgagor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Mortgage. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Mortgage and not met by Mortgagor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Mortgage or for the protection of the lien of this Mortgage, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Mortgagee and insuring Mortgagee’s interest in the Property which are acceptable to Mortgagee as of the date hereof, (b) the Liens and interests of this Mortgage, and (c) any other Encumbrance disclosed to Mortgagee in any commitment for title insurance delivered to Mortgagee or otherwise disclosed in writing to Mortgagee that Mortgagee shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Mortgagor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Mortgage, and neither Mortgagee nor Lenders shall have any responsibility for the performance of Mortgagor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments,

-5-


charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Mortgagor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Mortgagee under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Mortgagor with respect to the Property or Mortgagor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Mortgagor with Mortgagee related to the Property, including any such deposit account from which Mortgagor may from time to time authorize Mortgagee to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Mortgagor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Mortgagor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Mortgagor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Mortgagor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Mortgagor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.
“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.

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“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Mortgage in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Mortgagor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, including any and all renewals, or extensions of the whole or any part thereof (and any such renewals or extensions shall not impair in any manner the validity of or priority of this Mortgage), Mortgagor (a) MORTGAGES AND WARRANTS to Mortgagee the Property TO HAVE AND TO HOLD the Real Property, with all rights, appurtenances, and privileges thereunto belonging, unto the Mortgagee,

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Mortgagee’s successors and assigns forever; (b) grants to Mortgagee a security interest in the Personalty; (c) assigns to Mortgagee, and grants to Mortgagee a security interest in, all Condemnation Awards and all Insurance Proceeds; (d) assigns to Mortgagee, and grants to Mortgagee a security interest in, all of Mortgagor’s right, title and interest in, but not any of Mortgagor’s obligations or liabilities under, all Swap Contracts, Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments, and all Letters of Credit (if any); and (e) assigns to Mortgagee, and grants to Mortgagee a security interest in, all Accounts arising from or related to any transactions related to the Premises (including but not limited to Mortgagor’s rights in tenants’ security deposits, deposits with respect to utility services to the Premises, and any deposits, deposit accounts or reserves hereunder or under any other Loan Documents), and any account or deposit account from which Mortgagor may from time to time authorize Holder to debit and/or credit payments due with respect to the Loan or any Swap Contract, all rights to the payment of money from Mortgagee under any Swap Contract, and all accounts, deposit accounts and general intangibles including payment intangibles, described in any Swap Contract. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Absolute Assignment of Leases and Rents .
In consideration of the making of the Loan by Lenders to Mortgagor and the other Borrowers, the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor absolutely and unconditionally assigns the Leases and Rents to Mortgagee, for the ratable benefit of Lenders. This assignment is, and is intended to be, an unconditional, absolute and present assignment from Mortgagor to Mortgagee of all of Mortgagor’s right, title and interest in and to the Leases and the Rents and not an assignment in the nature of a pledge of the Leases and Rents or the mere grant of a security interest therein. So long as no Event of Default shall exist, however, Mortgagor shall have a license (which license shall terminate automatically and without notice upon the occurrence of an Event of Default) to collect, but not prior to accrual, all Rents. Mortgagor agrees to collect and hold all Rents in trust for Mortgagee and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Mortgage creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Mortgage and otherwise, Mortgagee shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Mortgage shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a financing statement and may be filed as such in any appropriate filing or recording office. The

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respective mailing addresses of Mortgagor and Mortgagee are set forth in the opening paragraph of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or any other financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section. Mortgagor hereby irrevocably authorizes Mortgagee at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Mortgagee to establish or maintain the validity, perfection and priority of the security interests granted in this Mortgage. The foregoing authorization includes Mortgagor’s irrevocable authorization for Mortgagee at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Mortgagor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Fixture Financing Statement.
From the date of its recording, this Mortgage shall be effective as a fixture financing statement within the purview of Section 9-502(c) of the Uniform Commercial Code of the State with respect to all sums on deposit with the Mortgagee pursuant to this Mortgage ( “Deposits” ), and with respect to the Personalty and the goods described herein, which Personalty and goods are or are to become fixtures related to the Property and all replacements of such property, all substitutions for such property, additions to such property, and the proceeds thereof (all of which shall be included in the meaning of the term “Collateral” ). The addresses of Mortgagor (Debtor) and Mortgagee (Secured Party) are set forth below. This Mortgage is to be filed for recording with the Registrar of Titles of the county or the counties where the Property is located. For this purpose, the following information is set forth:
(a)      Name and Address of Debtor:
KBSIII 500 West Madison, LLC
        c/o KBS Capital Advisors LLC
        800 Newport Center Drive, Suite 700
        Newport Beach, California 92660
(b)      Name and Address of Secured Party:
Bank of America, N.A.
        520 Newport Center Drive, Suite 1100
        Newport Beach, California 92660
(c)      This document covers goods which are or are to become fixtures.
(d)      Debtor is the record owner of the Property.
(e)      Debtor’s chief executive office is located in the state of California.
(f)      Debtor’s state of formation is Delaware.

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(g)      Debtor’s exact legal name is as set forth in the first paragraph of this Mortgage.
(h)      Debtor’s organizational identification number is DE 5421583.
(i)      Debtor agrees that:
(i)      Where Collateral is in possession of a third party, Mortgagor will join with Mortgagee in notifying the third party of Mortgagee’s interest and will use commercially reasonable efforts to obtain an acknowledgment from the third party that it is holding such Collateral for the benefit of Mortgagee;
(ii)      Mortgagor will cooperate with Mortgagee in obtaining control with respect to Collateral consisting of: deposit accounts, investment property, letter of credit rights and electronic chattel paper; and
(iii)      Until the Obligations are paid in full, Mortgagor will not change the state its company name without giving Mortgagee at least thirty (30) days prior written notice.
Mortgagor hereby appoints Mortgagee as its attorney-in-fact to execute and file on its behalf any financing statements, continuation statements or other statements in connection therewith which Mortgagee deems reasonably necessary or reasonably advisable to preserve and maintain the priority of the lien hereof, or to extend the effectiveness thereof, under the Uniform Commercial Code of the State or any other laws which may hereafter become applicable. This power, being coupled with an interest, shall be irrevocable so long as any part of the Obligations remains unpaid. Mortgagor shall pay to Mortgagee, from time to time, upon demand, any and all costs and expenses incurred by Mortgagee in connection with the filing of any such statements including, without limitation, reasonable attorneys’ fees and all disbursements and such amounts shall be part of the Obligations secured by this Mortgage.
Section 2.5      Release of Mortgage and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Mortgagee will promptly provide a release of the Property from the lien of this Mortgage and termination statements for filed financing statements, if any, to Mortgagor. Mortgagor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Mortgagor makes the following representations and warranties to Mortgagee and each of the Lenders:

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Section 3.1      Title to Real Property .
To Mortgagor’s knowledge and belief, Mortgagor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. To Mortgagor’s knowledge and belief, Mortgagor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Mortgage with general warranty. To Mortgagor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.
Section 3.2      Title to Other Property .
To Mortgagor’s knowledge and belief, Mortgagor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Mortgagor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Mortgage rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Mortgagor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Mortgage or any interest therein to fulfill any requirement of any Governmental Authority. To Mortgagor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Mortgagor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Mortgagor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Mortgagor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Mortgagor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has

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not forgiven, compromised or discounted any of the Rents. Mortgagor has title to and the right to assign the Leases and Rents to Mortgagee, and no other assignment of the Leases or Rents has been granted. To the best of Mortgagor’s knowledge and belief and except as disclosed to Administrative Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.
Section 3.7      Usury .
Mortgagor represents and agrees that the proceeds of the Loan Documents will be used for the purposes specified in 815 ILCS 205/4 and that the Obligations constitute a business loan which comes within the purview of said 815 ILCS 205/4.
Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Mortgagor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Mortgagor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Mortgagee, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Mortgagor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Mortgage or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Mortgagor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Mortgagor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Mortgagee nor any Lenders is subjected to any Claim as a result of such contest, and (d) Mortgagor provides assurances satisfactory to Mortgagee (including the establishment of an appropriate reserve account with Mortgagee) of its ability to pay such Property Assessments or comply with such Law in the event Mortgagor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Mortgagor shall indemnify and save Mortgagee and each Lender harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN

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PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Mortgagor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.
Section 4.4      Compliance with Laws .
Mortgagor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Mortgagor, at Mortgagor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Mortgagor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further mortgage, conveyance, assignment or other act by Mortgagor, become subject to the Lien of this Mortgage as fully and completely, and with the same effect, as though now owned by Mortgagor and specifically described in the granting clauses hereof. Mortgagor agrees, however, to execute and deliver to Mortgagee such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.
Section 4.7      Subrogation .
To the extent permitted by Law, Mortgagee shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Mortgagee or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Mortgagee or any Lender to pay or discharge any Lien.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Mortgagor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Mortgagee as provided under the terms of the Loan Agreement.

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(b)      Neither Mortgagee nor any Lender shall be obligated to perform or discharge any obligation of Mortgagor under any Lease. The assignment of Leases provided for in this Mortgage in no manner places on Mortgagee or any Lender any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).
(c)      No approval of any Lease by Mortgagee shall be for any purpose other than to protect Mortgagee’s security and to preserve Mortgagee’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Section 4.9      Illinois Responsible Property Transfer Law .
Mortgagor represents and warrants, to Mortgagor’s knowledge, that the Property: (i) contains no facilities that are subject to reporting (by either Mortgagor or any tenant or lessee thereof or other Person in possession or occupancy of any portion thereof) under Sections 311 and 312 of the federal Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. §11001 et seq.); (ii) is not the site of any underground storage tanks for which notification is required under 42 U.S.C. §6991a and other applicable Law; and (iii) is not listed on the Comprehensive Environmental Response, Compensation and Liability Information System (CERCLIS) (42 U.S.C. §9616). Mortgagor represents that the transactions contemplated by this Instrument are not subject to the Illinois Responsible Property Transfer Act. Any part of the Property may be released by Mortgagee from the Lien created by this Mortgage. Any such partial release is at the sole option of Mortgagee; Mortgagee is not obligated to grant partial releases. Any such partial release will not affect the Lien created by this Mortgage as to the remainder of the Property.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Mortgage, Mortgagor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Mortgagor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Mortgagee’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Mortgagee in its sole and absolute discretion, Mortgagor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Mortgagor does so diligently and without prejudice to Mortgagee or delay in completing construction of the Improvements. Mortgagor shall give Mortgagee Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property. Mortgagor agrees that it shall indemnify and hold Mortgagee harmless against any loss or liability, cost or expense, including any judgments, reasonable attorneys’ fees and costs, costs of appeal bonds and printing costs, arising out of or relating to any proceeding instituted by any claimant alleging priority over the lien of this Mortgage.

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Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Mortgagor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Mortgage).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Mortgagor may remove and dispose of, free from the Lien of this Mortgage, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Mortgagor shall be deemed to have subjected such Accessories to the Lien of this Mortgage), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Mortgagee to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Mortgagor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Mortgagee or otherwise existing as of the date of this Mortgage), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.
Section 5.4      Additional Improvements .
Mortgagor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Mortgagor will complete and pay for, prior to delinquency, any Improvements which Mortgagor is permitted to construct on the Land. Mortgagor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Mortgagor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Mortgagee), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Mortgagor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Mortgage, Mortgagor (a) will promptly perform and observe, and use

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commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Mortgage:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Mortgagor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Mortgagor fails to promptly perform or comply with any of the Obligations set forth in this Mortgage (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Mortgagee to Mortgagor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Mortgagor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Mortgagor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Mortgagee.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Mortgagee to Mortgagor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Mortgagor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Mortgagor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Mortgagee.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, Mortgage or security agreement covering the Property, including any Permitted Encumbrances.

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Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Mortgagee shall have the right, in addition to any other rights or remedies available to Mortgagee under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Mortgagee may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Mortgagor).
Section 7.2      Foreclosure; Judicial Foreclosure .
In the event that any provision in this Mortgage shall be inconsistent with any provision of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq. herein called the “ Act ”), the provisions of the Act shall take precedence over the provisions of this Mortgage, but shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Act. If any provision of this Mortgage shall grant to Mortgagee any rights or remedies upon the occurrence, and during the continuance, of an Event of Default which are more limited than the rights that would otherwise be vested in Mortgagee under the Act in the absence of said provision, Mortgagee shall be vested with the rights granted in the Act to the full extent permitted by law. Without limiting the generality of the foregoing, all expenses incurred by Mortgagee to the extent reimbursable under 735 ILCS 5/15-1510 and 735 ILCS 5/15-1512 of the Act, whether incurred before or after any decree or judgment of foreclosure, and whether or not enumerated in this Mortgage, shall be added to the Obligations.
Mortgagee may institute one or more actions of foreclosure on this Mortgage or to institute other proceedings according to Law for foreclosure, and prosecute the same to judgment, execution and sale, for the collection of the Obligations and all costs and expenses of such proceedings, including reasonable attorneys’ fees and actual attorneys’ expenses.
To the extent permitted by law, Mortgagee has the option of proceeding as to both the Real Property and the Personalty in accordance with its rights and remedies in respect of the Property, in which event the default provisions of the UCC will not apply. Mortgagee also has the option of exercising, in respect of the Property consisting of Personalty, all of the rights and remedies available to a secured party upon default under the applicable provisions of the UCC in effect in the jurisdiction where the Real Property is located. In the event Mortgagee elects to proceed with respect to the

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Personalty separately from the Real Property, whenever applicable provisions of the UCC require that notice be reasonable, ten (10) days’ notice will be deemed reasonable.
Section 7.3      Remedies under the Loan Agreement .
Without limiting the other rights and remedies of Mortgagee set forth in this Mortgage, Mortgagee may exercise any and all rights and remedies of Mortgagee specified in the Loan Agreement, or at law or equity.
Section 7.4      Possession of Property Not Required .
Upon any sale of any item of the Property made pursuant to judicial proceedings for foreclosure (“ Judicial Sale ”), it will not be necessary for any public officer acting under execution or order of the court (a “ Selling Official ”) to have any of the Property present or constructively in his possession.
Section 7.5      Mortgages of Conveyance and Transfer .
Upon the completion of every Judicial Sale, the Selling Official will execute and deliver to each purchaser a bill of sale or deed of conveyance, as appropriate, for the items of the Property that are sold. Mortgagor hereby grants every such Selling Official the power as the attorney-in-fact of Mortgagor to execute and deliver in Mortgagor’s name all deeds, bills of sale and conveyances necessary to convey and transfer to the purchaser all of Mortgagor’s rights, title and interest in the items of Property which are sold. Mortgagor hereby ratifies and confirms all that such attorneys-in-fact lawfully do pursuant to such power. Nevertheless, Mortgagor, if so requested by the Selling Official, will ratify any such sale by executing and delivering to such Selling Official or to such purchaser, as applicable, such deeds, bills of sale or other Mortgages of conveyance and transfer as may be reasonably specified in any such request.
Section 7.6      Recitals
The recitals contained in any Mortgage of conveyance or transfer made by a Selling Official to any purchaser at any Judicial Sale will, to the extent permitted by law, conclusively establish the truth and accuracy of the matters stated therein, including the amount of the Obligations, the occurrence of an Event of Default, and the advertisement and conduct of such Judicial Sale in the manner provided herein or under applicable Law, and the qualification of the Selling Official. All prerequisites to such Judicial Sale will be presumed from such recitals to have been satisfied and performed.
Section 7.7      Divestiture of Title; Bar .
To the extent permitted by applicable Law, every Judicial Sale, and every sale made as contemplated by this Mortgage, will operate to divest all rights, title, and interest of Mortgagor in and to the items of the Property that are sold, and will be a perpetual bar, both at law and in equity, against Mortgagor and Mortgagor’s heirs, executors, administrators, personal representatives, successors and assigns, and against everyone else, claiming the item sold either from, through or under Mortgagor or Mortgagor’s heirs, executors, administrators, personal representatives, successors or assigns.

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Section 7.8      Receipt of Purchase Money Sufficient Discharge .
A receipt from any Person authorized to receive the purchase money paid at any Judicial Sale, or other sale contemplated by this Mortgage, will be sufficient discharge therefor to the purchaser. After paying such purchase money and receiving such receipt, neither such purchaser nor such purchaser’s heirs, executors, administrators, personal representatives, successors or assigns will have any responsibility or liability respecting the application of such purchase money or any loss, misapplication or non-application of any of such purchase money, or to inquire as to the authorization, necessity, expediency or regularity of any such sale.
Section 7.9      Purchase by Mortgagee .
In any Judicial Sale, or other public sale made as contemplated by this Mortgage, Mortgagee may bid for and purchase any of the Property being sold, and will be entitled, upon presentment of the relevant Loan Documents and documents evidencing the same, to apply the amount of the Obligations held by it against the purchase price for the items of the Property so purchased. The amount so applied will be credited against the Obligations in accordance with the terms of the Loan Agreement.
Section 7.10      Sale of Portion of Mortgaged Property .
This Mortgage and the Lien created by this Mortgage, as it pertains to any Property that remains unsold, will not be affected by a Judicial Sale of less than all of the Property.
Section 7.11      Judicial Action .
Mortgagee shall have the right from time to time to sue Mortgagor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Mortgage, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against Mortgagor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.12      Collection of Rents .
Upon the occurrence, and during the continuance, of an Event of Default, the license granted to Mortgagor to collect the Rents shall be automatically and immediately revoked, without further notice to or demand upon Mortgagor. Mortgagee may, but shall not be obligated to, perform any or all obligations of the landlord under any or all of the Leases, and Mortgagee may, but shall not be obligated to, exercise and enforce any or all of Mortgagor’s rights under the Leases. Without limitation to the generality of the foregoing, Mortgagee may notify the tenants under the Leases that all Rents are to be paid to Mortgagee, and following such notice all Rents shall be paid directly to Mortgagee and not to Mortgagor or any other Person other than as directed by Mortgagee, it being understood that a demand by Mortgagee on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Mortgagee without the necessity of further consent by Mortgagor. Mortgagor hereby irrevocably authorizes and directs the tenants under the Lease to pay all Rents to Mortgagee instead of to Mortgagor, upon receipt of written

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notice from Mortgagee, without the necessity of any inquiry of Mortgagor and without the necessity of determining the existence or non-existence of an Event of Default. Mortgagor hereby appoints Mortgagee as Mortgagor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Mortgagor’s name or in Mortgagee’s name: (i) to endorse all checks and other Mortgages received in payment of Rents and to deposit the same in any account selected by Mortgagee; (ii) to give receipts and releases in relation thereto; (iii) to institute, prosecute and/or settle actions for the recovery of Rents; (iv) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (v) to cancel any Leases; (vi) to enter into new Leases; and (vii) to do all other acts and things with respect to the Leases and Rents which Mortgagee may deem necessary or desirable to protect the security for the Obligations. Any Rents received shall be applied first to pay all Expenses and next in reduction of the other Obligations. Mortgagor shall pay, on demand, to Mortgagee, the amount of any deficiency between (i) the Rents received by Mortgagee, and (ii) all Expenses incurred together with interest thereon as provided in the Loan Agreement and the other Loan Documents.
Section 7.13      Receiver .
Upon, or at any time prior or after, the filing of any complaint to foreclose the lien of this Mortgage or instituting any other foreclosure of the liens and security interests provided for in this Mortgage or any other legal proceedings under this Mortgage, Mortgagee may, at Mortgagee’s sole option, make application to a court of competent jurisdiction for appointment of a receiver pursuant to Section 15-1702 of the Act for all or any part of the Property, as a matter of strict right and without notice to Mortgagor, and Mortgagor does hereby irrevocably consent to such appointment, waives any and all notices of and defenses to such appointment and agrees not to oppose any application therefor by Mortgagee, but nothing herein is construed to deprive Mortgagee of any other right, remedy or privilege Mortgagee may now have under the Law to have a receiver appointed; provided that the appointment of such receiver, trustee or other appointee by virtue of any court order, statute or regulation shall not impair or in any manner prejudice the rights of Mortgagee to receive payment of all of the rents, issues, deposits and profits pursuant to other terms and provisions set forth in this Mortgage. Such appointment may be made either before or after sale, without notice; without regard to the solvency or insolvency, at the time of application for such receiver, of the Person or Persons, if any, liable for the payment of the Obligations; without regard to the value of the Property at such time and whether or not the same is then occupied as a homestead; without bond being required of the applicant; and Mortgagee hereunder or any employee or agent thereof may be appointed as such receiver. Such receiver shall have all powers and duties prescribed by Section 15-1704 of the Act, including the power to take possession, control and care of the Property and to collect all rents, issues, deposits, profits and avails thereof during the pendency of such foreclosure suit and apply all funds received toward the Obligations, and in the event of a sale and a deficiency where Mortgagor has not waived its statutory rights of redemption, during the full statutory period of redemption, as well as during any further times when Mortgagor or its administrators, legal representatives, successors or assigns, except for the intervention of such receiver, would be entitled to collect such rents, issues, deposits, profits and avails, and shall have all other powers that may be necessary or useful in such cases for the protection, possession, control, management and operation of the Property during the whole of any such period. To the extent permitted by law, such receiver may extend or modify any then existing Leases and make new leases of the Property or any part thereof, which extensions, modifications and new leases may provide for terms to expire,

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or for options to lessees to extend or renew terms to expire, beyond the maturity date of the Loan, it being understood and agreed that any such leases, and the options or other such provisions to be contained therein, shall be binding upon Mortgagor and all Persons whose interests in the Property are subject to the lien hereof, and upon the purchaser or purchasers at any such foreclosure sale, notwithstanding any redemption from sale, discharge of indebtedness, satisfaction of foreclosure decree or issuance of certificate of sale or deed to any purchaser.
Section 7.14      Taking Possession or Control of the Property .
To the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Mortgagee may (a) enter upon, and take possession of (and Mortgagor shall surrender actual possession of), the Property or any part thereof, without notice to Mortgagor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Mortgagor and its agents and employees therefrom.
Section 7.15      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.13 , Mortgagee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Mortgagor (the costs of completing such Improvements shall be Expenses secured by this Mortgage and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Mortgagee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Mortgagee shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.16      Uniform Commercial Code .
Mortgagee may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Mortgagor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Mortgage at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Mortgagee to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.

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Section 7.17      Application of Proceeds .
Unless otherwise provided by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article and any other proceeds received by Mortgagee from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Mortgagee may elect.
Section 7.18      Other Remedies .
Mortgagee shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Mortgagor provided under the Loan Documents or by applicable Laws.
Article VIII
[Reserved].
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
Each right, power and remedy of Mortgagee as provided for in this Mortgage, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Mortgage, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Mortgagee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Mortgagee of any or all such other rights, powers or remedies.
Section 9.2      No Waiver by Mortgagee .
No course of dealing or conduct by or among Mortgagee and Mortgagor shall be effective to amend, modify or change any provisions of this Mortgage or the other Loan Documents. No failure or delay by Mortgagee to insist upon the strict performance of any term, covenant or agreement of this Mortgage or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Mortgagee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, Mortgagee shall not be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Mortgagor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor or of any other Person to take action to foreclose this Mortgage or otherwise enforce any of the provisions of this Mortgage, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Mortgagee, or (c) Mortgagee’s extending the time of payment or modifying the terms of this Mortgage or any of the other Loan Documents without first having obtained the consent of Mortgagor or such other Person. Regardless of consideration, and without the necessity for any

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notice to or consent by the holder of any subordinate Lien on the Property, Mortgagee may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations and may extend the time of payment or otherwise modify the terms of this Mortgage or any of the other Loan Documents without in any way impairing or affecting the Lien of this Mortgage or the priority of this Mortgage over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Mortgage. Mortgagee may resort to the security or collateral described in this Mortgage or any of the other Loan Documents in such order and manner as Mortgagee may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Mortgagor may do so, Mortgagor hereby:
(a)      acknowledges that the transaction of which this Mortgage is a part is a transaction which does not include either agricultural real estate as defined in 735 ILCS 5/15-1201 of the Act, or residential real estate (as defined in 735 ILCS 15/1219 of the Act), and to the full extent permitted by law, hereby voluntarily and knowingly waives any rights to reinstatement and redemption as allowed under 735 ILCS 5/15-1601 of the Act, and to the full extent permitted by law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium Laws under any state or federal Law;
(b)      waives all rights to a marshalling of the assets of Mortgagor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Mortgagee under the terms of this Mortgage to a sale of the Property without any prior or different resort for collection, or the right of Mortgagee to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Mortgagor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.

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Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Mortgage shall run with the Land and shall apply to and bind the successors and assigns of Mortgagor (including any permitted subsequent owner of the Property), and inure to the benefit of Mortgagee, its successors and assigns.
Section 9.5      No Warranty by Mortgagee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Mortgagor or to be given to Mortgagee pursuant to this Mortgage or any of the other Loan Documents, Mortgagee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Mortgagee.
Section 9.6      Amendments .
This Mortgage may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Mortgage or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Mortgage or any of the other Loan Documents, then and in either of those events, at the option of Mortgagee, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Mortgage (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Mortgage 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.

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Section 9.9      Joint and Several Liability .
If Mortgagor consists of two (2) or more Persons, the term “ Mortgagor ” shall also refer to all Persons signing this Mortgage as Mortgagor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Mortgagee may release, compromise, modify or settle with any of Mortgagor, in whole or in part, without impairing, lessening or affecting the obligations and liabilities of the others of Mortgagor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Mortgagor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Mortgage in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Mortgage are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Mortgage unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Mortgage shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
Section 9.11      Governing Law .
This Mortgage shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State.
Section 9.12      Use of Proceeds .
Mortgagor represents and warrants to Mortgagee (a) that the proceeds of the Note secured by this Mortgage will be used for the purposes specified in 815 ILCS 205/4(1)(c) (or any substitute, amended or replacement statute), and that the Obligations constitutes a business loan which comes within the purview of said 815 ILCS 205/4(1)(c), and (b) that the Loan evidenced by the Note is an exempted transaction under the Truth In Lending Act, 15 U.S.C. §1601 et seq.

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Section 9.13      Interest Laws .
It being the intention of Mortgagee and Mortgagor to comply with the laws of the State of Illinois, it is agreed that notwithstanding any provision to the contrary in the Loan Agreement, the Notes, this Mortgage or any of the other Loan Documents, no such provision shall require the payment or permit the collection of any amount ( “Excess Interest” ) in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by the Notes. If any Excess Interest is provided for, or is adjudicated to be provided for, in the Loan Agreement, the Notes, this Mortgage or any of the other Loan Documents, then in such event: (a) the provisions of this Section shall govern and control; (b) neither Mortgagor nor any other party obligated under the terms of the Notes or any of the other Loan Documents shall be obligated to pay any Excess Interest; (c) any Excess Interest that Mortgagee or any Lender may have received hereunder shall, at the option of Mortgagee, be (i) applied as a credit against the then unpaid principal balance under the Notes, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to the payor thereof, or (iii) any combination of the foregoing; (d) the rates of interest payable under the terms of the Loan Agreement and the Notes shall be subject to automatic reduction to the maximum lawful contract rate allowed under the applicable usury laws of the aforesaid State, and the Loan Agreement, the Notes, this Mortgage and the other Loan Documents shall be deemed to be automatically reformed and modified to reflect such reduction in such interest rate(s); and (e) neither Mortgagor nor any other party obligated under the terms of the Loan Agreement, the Notes or any of the other Loan Documents shall have any action against Mortgagee for any damages whatsoever arising out of the payment or collection of any Excess Interest.
Section 9.14      Other Amounts Secured; Maximum Indebtedness .
Mortgagor acknowledges and agrees that this Mortgage secures the entire principal amount of the Note and interest accrued thereon, regardless of whether any or all of the Loan proceeds are disbursed on or after the date hereof, and regardless of whether the outstanding principal is repaid in whole or part or are future advances made at a later date, any and all litigation and other expenses and any other amounts as provided herein or in any of the other Loan Documents, including, without limitation, the payment of any and all liquidated damages, expenses and advances due to or paid or incurred by Mortgagee in connection with the Loan, all in accordance with the Loan commitment issued in connection with this transaction and the Loan Documents. Under no circumstances, however, shall the total indebtedness secured hereby exceed $2,020,000,000.00. It is agreed that any future advances made by Mortgagee for the benefit of Mortgagor from time to time under this Mortgage or the other Loan Documents and whether or not such advances are obligatory or are made at the option of Mortgagee, made at any time from and after the date of this Mortgage, and all interest accruing thereon, shall be equally secured by this Mortgage and shall have the same priority as all amounts, if any, advanced as of the date hereof and shall be subject to all of the terms and provisions of this Mortgage. This Mortgage shall be valid and have priority to the extent of the full amount of the indebtedness secured hereby over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Property given priority by law.

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Section 9.15      Adjustable Mortgage Loan Provision .
The Notes which this Mortgage secures are adjustable notes on which the interest rate may be adjusted from time to time in accordance with the terms and provisions set forth in the Notes and the Loan Agreement.
Section 9.16      Deed in Trust .
If title to the Property or any part thereof is now or hereafter becomes vested in a trustee, any prohibition or restriction contained herein against the creation of any lien on the Property shall be construed as a similar prohibition or restriction against the creation of any lien on or security interest in the beneficial interest of such trust.
Section 9.17      Collateral Protection Act .
Unless Mortgagor provides Mortgagee with evidence of the insurance required by this Mortgage or any other Loan Document, Mortgagee may purchase insurance at Mortgagor’s expense to protect Mortgagee’s interest in the Property or any other collateral for the Obligations. This insurance may, but need not, protect Mortgagor’s interests. The coverage Mortgagee purchases may not pay any claim that Mortgagor makes or any claim that is made against Mortgagor in connection with the Property or any other collateral for the Obligations. Mortgagor may later cancel any insurance purchased by Mortgagee, but only after providing Mortgagee with evidence that Mortgagor has obtained insurance as required under this Mortgage or any other Loan Document. If Mortgagee purchases insurance for the Property or any other collateral for the Obligations, Mortgagor shall be responsible for the costs of that insurance, including interest in any other charges that Mortgagee may lawfully impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance may be more than the cost of insurance that Mortgagor may be able to obtain on its own. For purposes of the Illinois Collateral Protection Act, 815 ILCS 180/1 et seq., Mortgagor hereby acknowledges Mortgagee’s right pursuant to this Section to obtain collateral protection insurance.
Section 9.18      Forbidden Entity .
Mortgagor hereby certifies that it is not a “forbidden entity” as that term is defined in Section 1-110.6 of the Illinois Pension Code, 40 ILCS 5/1-110.6.
Section 9.19      Rights of Tenants .
Mortgagee shall have the right and option to commence a civil action to foreclose this Mortgage and to obtain a decree of foreclosure and sale subject to the rights of any tenant or tenants of the Property having an interest in the Property prior to that of Mortgagee. The failure to join any such tenant or tenants of the Property as party defendant or defendants in any such civil action or the failure of any decree of foreclosure and sale to foreclose their rights shall not be asserted by Mortgagor as a defense in any civil action instituted to collect the Obligations, or any part thereof or any deficiency remaining unpaid after foreclosure and sale of the Property, any statue or rule of law at any time existing to the contrary notwithstanding.

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Section 9.20      Revolving Credit .
This Mortgage secures, among other obligations which comprise the indebtedness secured hereby, the Notes which evidence loans and advances made or to be made by Lenders to Mortgagor from time to time, the aggregate principal amount of which shall not exceed at any one time a maximum amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), plus interest thereon as provided in the Loan Agreement and the Notes, and any disbursements made for the payment of taxes, special assessments or insurance on the Property or any other amounts advanced or made by Mortgagee or Lenders, with interest on such disbursements. Such loans or advances constitute “revolving credit” as defined in 205 ILCS 5/5d. All future advances made by Mortgagee or Lenders for the benefit of Mortgagor from time to time under this Mortgage or the other Loan Documents and whether or not such advances are obligatory or are made at the option of Mortgagee or any Lender, made at any time from and after the date of this Mortgage, and all interest accruing thereon, shall be equally secured by this Mortgage and shall have the same priority as all amounts, if any, advanced as of the date hereof and shall be subject to all of the terms and provisions of this Mortgage. This Mortgage shall be valid and have priority to the extent of the full amount of the indebtedness secured hereby over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Property given priority by law.
Section 9.21      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Mortgagor and Mortgagee with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Mortgagor and Mortgagee with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Mortgagee to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.22      Limited Recourse Provision .
Mortgagee shall have no recourse against, nor shall there be any personal liability to, the members of Mortgagor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Mortgagor with respect to the obligations of Mortgagor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Mortgagor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Mortgagee’s right to exercise any rights or remedies against any collateral securing the Loan.

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Article X
Non-Borrower Mortgagor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Mortgage which is required to be performed by any Borrower under the Loan Agreement other than Mortgagor.
Section 10.2      Rights of Mortgagee . Mortgagor authorizes Mortgagee to perform any or all of the following acts at any time in its sole discretion, all without notice to Mortgagor and without affecting Mortgagee’s rights or Mortgagor’s obligations under this Mortgage:
(a)      Mortgagee may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Mortgagee may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Mortgagee may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Mortgagee may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Mortgagee may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Mortgagee may apply any payments or recoveries from Borrower (or any of them), Mortgagor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Mortgagee may elect, whether that obligation is secured by this Mortgage or not at the time of the application.
(f)      Mortgagee may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Mortgagee may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Mortgagee’s rights or Mortgagor’s liability under this Mortgage.
Section 10.3      Mortgage to be Absolute .
Mortgagor expressly agrees that until the earlier of (i) the release and reconveyance of this Mortgage in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Mortgage is fully performed, Mortgagor shall not be released by or because of:

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(a)      Any act or event which might otherwise discharge, reduce, limit or modify Mortgagor’s obligations under this Mortgage;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Mortgagee, or the failure by Mortgagee to proceed promptly or otherwise against any Borrower, Mortgagor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Mortgagor may be called upon to perform under this Mortgage or which might affect the rights or remedies of Mortgagor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Mortgage shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Mortgagor hereby acknowledges that absent this Section 10.3 , Mortgagor might have a defense to the enforcement of this Mortgage as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Mortgagor hereby expressly waives and surrenders any defense to any liability under this Mortgage based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Mortgagor that Mortgagor’s obligations under this Mortgage are and shall be absolute, unconditional and irrevocable.
Section 10.4      Mortgagor’s Waivers .
Mortgagor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Mortgagor by Mortgagee, to the fullest extent permitted by law;
(b)      Any right it may have to require Mortgagee to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Mortgagee’s power to pursue;
(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Mortgagor’s obligations exceed or are more burdensome than those of any other Borrower;

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(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Mortgagee from any cause, whether consented to by Mortgagee or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Mortgagee in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Mortgagee’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Mortgagee to any Borrower in any Insolvency Proceeding, and the taking and holding by Mortgagee of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Mortgage and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Mortgage or under the Loan Agreement); and
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full.
Section 10.5      Mortgagor’s Additional Waivers.
Mortgagor waives:
(a)      The obligations of Mortgagor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Mortgagor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Mortgagee, Mortgagor may be joined in any action or proceeding commenced by Mortgagee against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Mortgagor in such action or proceeding without any requirement that Mortgagee first assert, prosecute or exhaust any remedy or claim against any other Borrower.
(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Mortgagee in its sole discretion, without prior notice to or consent of Mortgagor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Mortgagee may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make any other accommodation with any other Borrower or Mortgagor, or (iv) exercise any other remedy

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against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Mortgagee shall release or limit the liability of Mortgagor, who shall remain liable under this Mortgage after the action, even if the effect of the action is to deprive Mortgagor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Mortgagee against Mortgagor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Mortgagor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Mortgagee or any third party.
(c)      Regardless of whether Mortgagee may have recovered against Mortgagor, Mortgagor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Mortgagee against Mortgagor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Mortgagee may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Mortgagee for the Third Party Secured Obligations. To the extent Mortgagor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Mortgagor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Mortgagee may have against such Borrower and to all right, title and interest Mortgagee may have in any such collateral or security. If any amount should be paid to Mortgagor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Mortgagee and shall immediately be paid over to Mortgagee to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Mortgagor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Mortgagee.
(d)      To the extent applicable, Mortgagor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Mortgagor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Mortgagor waives all rights and defenses that Mortgagor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:
(i)      Mortgagee or any Lender may collect from Mortgagor (including enforcing this Mortgage against Mortgagor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Mortgagee forecloses on any real property collateral pledged by any Borrower:

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(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Mortgagee or any Lender may collect from Mortgagor (including enforcing this Mortgage against Mortgagor) even if Mortgagee or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Mortgagor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Mortgagor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Mortgagor understands and acknowledges that if Mortgagee or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Mortgagor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Mortgagor may have for any recovery by Mortgagee under this Mortgage. Mortgagor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Mortgagor’s rights, if any, may, to the extent applicable, entitle Mortgagor to assert a defense to this Mortgage based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Mortgage, Mortgagor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Mortgagor will be fully liable under this Mortgage even though Mortgagee or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Mortgagor will not assert that defense in any action or proceeding which Mortgagee or any Lender may commence to enforce this Mortgage; (iii) acknowledges and agrees that the rights and defenses waived by Mortgagor under this Mortgage include any right or defense that Mortgagor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Mortgagee and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Mortgagee and each Lender is receiving for extending such credit to Borrowers.
(g)      Mortgagor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Mortgage shall be construed as limiting the generality of any other provision or waiver contained in this Mortgage.

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Section 10.6      Revival and Reinstatement .
If Mortgagee is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Mortgagor shall be reinstated and revived and the rights of Mortgagee shall continue with regard to such amounts, all as though they had never been paid, and this Mortgage shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Mortgagor represents that: (a) Mortgagee has not made any representation to Mortgagor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Mortgagee to induce Mortgagor to execute and deliver this Mortgage. Mortgagor has received and approved copies of all other requested Loan Documents. Before signing this Mortgage, Mortgagor investigated the financial condition and business operations of each other Borrower and such other matters as Mortgagor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Mortgagor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Mortgagee. Mortgagee has no any duty to disclose to Mortgagor any information which Mortgagee may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Mortgagor acknowledges that Mortgagor has had adequate opportunity to carefully read this Mortgage and to consult with an attorney of Mortgagor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Mortgagor’s execution of and obligations under this Mortgage, and Mortgagor acknowledges its execution and delivery of this Mortgage is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Mortgage is intended by the parties to be a fully integrated and final expression of their agreement. This Mortgage and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Mortgagor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Mortgagee, or any employee, attorney or agent of Mortgagee, except for the agreements of Mortgagee set forth herein and in the Loan Documents.
[Signatures appear on following page.]



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IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed under seal as of the day and year first written above.
MORTGAGOR:

KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company
    
By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer





S-1


ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF CHICAGO, COUNTY OF COOK, STATE OF ILLINOIS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

NOTE: THE PHRASE “VACATED 18 FOOT ALLEY” AS USED IN THESE LEGAL DESCRIPTIONS IS IN REFERENCE TO THE 18 FOOT WIDE NORTH-SOUTH ALLEY LYING IN BLOCK 50 WHICH WAS VACATED BY ORDINANCE RECORDED JANUARY 5, 1907 AS DOCUMENT NO. 3974491.

PARCEL 1:

THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PARCEL 2A:

THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING BELOW A HORIZONTAL PLANE HAVING AN ELEVATION OF +23.00 FEET CHICAGO CITY DATUM AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PARCEL 2B:

EASEMENT FOR THE BENEFIT OF PARCELS 1, 2A AND 2C, AS CREATED BY THE DECLARATION OF EASEMENTS, COVENANTS, CONDITIONS AND RESTRICTIONS MADE BY CHICAGO AND NORTHWESTERN TRANSPORTATION COMPANY, A DELAWARE CORPORATION, AND CHICAGO TITLE AND TRUST COMPANY AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 31, 1982 AND KNOWN AS TRUST NUMBER 1079000, DATED MARCH 31, 1982 AND RECORDED SEPTEMBER 7, 1984 AS DOCUMENT 27245590, OVER THE FOLLOWING DESCRIBED PROPERTY:

A-1



THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING ABOVE A HORIZONTAL PLANE HAVING AN ELEVATION OF +23.00 FEET CHICAGO CITY DATUM, LYING BELOW A HORIZONTAL PLANE HAVING AN ELEVATION OF +59.63 FEET CHICAGO CITY DATUM, AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS;

FOR THE CONSTRUCTION, MAINTENANCE, USE, REPAIR, REPLACEMENT, RENOVATION, RECONSTRUCTION AND IMPROVEMENT WITH CAISSONS, SUPPORT POSTS, ARCHES, COLUMNS OR OTHER SUPPORT DEVICES; AND FOR THE INSTALLATION AND MAINTENANCE OF UTILITY LINES.

PARCEL 2C:

THAT PART OF THE FOLLOWING DESCRIBED PROPERTY, ALL TAKEN AS A TRACT, LYING ABOVE A HORIZONTAL PLANE HAVING AN ELEVATION OF +59.63 FEET CHICAGO CITY DATUM AND LYING NORTH OF THE SOUTH 275.06 FEET (MEASURED PERPENDICULARLY) OF SAID TRACT:

BLOCK 50 AND THE VACATED 18 FOOT ALLEY IN SAID BLOCK 50 (EXCEPT THAT PART OF BLOCK 50 AND THE VACATED ALLEY THEREIN, LYING IN MADISON STREET AS WIDENED) IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHWEST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN IN COOK COUNTY, ILLINOIS.

PIN Nos.:
17-09-342-002-0000
17-09-342-004-0000
17-09-342-005-0000

FOR REFERENCE PURPOSES ONLY, THE ABOVE DESCRIBED PROPERTY IS COMMONLY KNOWN AS:
500 West Madison Street
Chicago, Illinois 60661



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Exhibit 10.11
This Document Prepared By
and After Recording Return to:

Jones Day
3161 Michelson Drive, Suite 800
Irvine, CA 92612
Attn: Cori Capizzi
___________________________________________________________________________

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND
FIXTURE FILING
(RBC Plaza)

by

KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company,
as Mortgagor,

to and in favor of

BANK OF AMERICA, N.A.,
a national banking association,
as Mortgagee, in its capacity as administrative agent for the Lenders identified below


THE MAXIMUM PRINCIPAL INDEBTEDNESS SECURED BY THIS MORTGAGE EXCLUDING ADVANCES MADE BY THE LENDER IN PROTECTION OF THE PROPERTY OR THE LIEN OF THIS MORTGAGE IS $136,039,500.00.

This document serves as a Fixture Filing under the Minnesota Uniform Commercial Code, Section 336.9-502(c), et seq.
    
Mortgagor’s Organizational Identification Number is: DE 5271236
Property Commonly Known As: 60 South 6 th Street
City/County: Minneapolis, County of Hennepin
State: Minnesota



 


MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(RBC Plaza)
This Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of the 3 rd day of November, 2017, by KBSIII 60 South Sixth Street, LLC, a Delaware limited liability company (herein referred to as “Mortgagor” ), whose address is c/o KBS Capital Advisors LLC, 800 Newport Center Drive, Suite 700, Newport Beach, California 92660, Attention: Gio Cordoves and Todd Smith, to Bank of America, N.A., a national banking association, whose address is 520 Newport Center Drive, Suite 1100, Newport Beach, California 92660, as Mortgagee, in its capacity as administrative agent ( “Administrative Agent” ) for the lenders (each, a “Lender” and collectively, “Lenders” ) from time to time party to that certain Loan Agreement of even date herewith, as amended (the “Loan Agreement” ) among Borrower (as defined below), Lenders and Administrative Agent.
Recitals
Mortgagor has requested that Lenders make the Loan (as hereinafter defined) to Borrower (as hereinafter defined). As a condition precedent to making the Loan, Lenders have required that Mortgagor execute and deliver this Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing to Administrative Agent.
Grants and Agreements
Now, therefore, in order to induce Lenders to make the Loan to Borrower, Mortgagor agrees as follows:
Article I
Definitions .
As used in this Mortgage, the terms defined in the Preamble hereto shall have the respective meanings specified therein, and the following additional terms shall have the meanings specified:
“Accessories” means all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies and other articles of personal property, of every kind and character, tangible and intangible (including software embedded therein), now owned or hereafter acquired by Mortgagor, which are now or hereafter attached to or situated in, on or about the Land or Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or Improvements, and all Additions to the foregoing, all of which are hereby declared to be permanent accessions to the Land.
“Accounts” means all accounts of Mortgagor, within the meaning of the Uniform Commercial Code of the State, derived from or arising out of the use, occupancy or enjoyment of the Property or for services rendered therein or thereon.

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“Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.
“Administrative Agent” means Bank of America, N.A., a national banking association, in its capacity as administrative agent for Lenders or any successor administrative agent.
“Borrower” means individually and collectively, Mortgagor, KBSIII Preston Commons, LLC, a Delaware limited liability company, KBSIII Sterling Plaza, LLC, a Delaware limited liability company, KBSIII One Washingtonian, LLC, a Delaware limited liability company, KBSIII Towers At Emeryville, LLC, a Delaware limited liability company, KBSIII Ten Almaden, LLC, a Delaware limited liability company, KBSIII Legacy Town Center, LLC, a Delaware limited liability company, and KBSIII 500 West Madison, LLC, a Delaware limited liability company.
“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.
“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.
“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.
“Contract of Sale” means any contract for the sale of all or any part of the Property or any interest therein, hereafter executed by Mortgagor.
“Default” means an event or circumstance which, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Mortgage.
“Design and Construction Documents” means, collectively, (a) all contracts for services to be rendered, work to be performed or materials to be supplied in the development of the Land or the construction or repair of Improvements, including all agreements with architects, engineers or contractors for such services, work or materials; (b) all plans, drawings and specifications for the development of the Land or the construction or repair of Improvements; (c) all permits, licenses, variances and other rights or approvals issued by or obtained from any Governmental Authority or other Person in connection with the development of the Land or the construction or repair of Improvements; and (d) all amendments of or supplements to any of the foregoing.
“Encumbrance” means any Lien, easement, right of way, roadway (public or private), condominium regime, cooperative housing regime, condition, covenant or restriction (including any covenants, conditions or restrictions in connection with any condominium development or cooperative housing development), Lease or other matter of any nature that would affect title to the Property.

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“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith executed by Mortgagor in favor of Administrative Agent pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified. The Environmental Agreement is one of the Loan Documents, but this Mortgage does not secure the obligations of Mortgagor under the Environmental Agreement.
“Event of Default” means an event or circumstance specified in ‎Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI .
“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Mortgagee in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in this Mortgage or any of the other Loan Documents, including reasonable attorneys’ fees actually incurred, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.
“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.
“Guarantor” means KBS REIT Properties III, LLC, a Delaware limited liability company, and its successors and assigns.
“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Administrative Agent, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Improvements” means all buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, together with any on-site improvements and off-site improvements in any way used or to be used in connection with the use, enjoyment, occupancy or operation of the Land.
“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.
“Land” means the real property described in Exhibit A attached hereto and made a part hereof.
“Law” or “Laws” mean all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

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“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.
“Lender” means each Lender from time to time party to the Loan Agreement.
“Letter of Credit” means any letter of credit issued by Mortgagee for the account of Mortgagor or its nominee in connection with the development of the Land or the construction of the Improvements, together with any and all extensions, renewals or modifications thereof, substitutions therefor or replacements thereof.
“Lien” means any mortgage, Mortgage, pledge, security interest, assignment, judgment, lien or charge of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
“Loan” means the loan from Lenders to Borrower, the repayment obligations in connection with which are evidenced by the Notes.
“Loan Agreement” means the Loan Agreement of even date herewith among Borrower, Administrative Agent and Lenders which sets forth, among other things, the terms and conditions upon which the proceeds of the Loan will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Loan Documents” means this Mortgage, the Notes, the Guaranty, the Environmental Agreement, the Loan Agreement, any Swap Contract, any application or reimbursement agreement executed in connection with any Letter of Credit, and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Mortgage” means this Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.
“Mortgagee” means Administrative Agent and its successors and assigns, in its capacity as administrative agent for the Lenders.
“Note” or “Notes” mean (i) one or more promissory notes made by Borrower and payable to the order of each of the Lenders in the aggregate face principal amount of One Billion Ten Million and No/100 Dollars ($1,010,000,000.00), and each bearing interest as provided in the Loan Agreement, and (ii) all other promissory notes given in substitution thereof or in modification, supplement, increase, renewal or extension thereof, in whole or in part, whether one or more, as any or all of such promissory notes may from time to time be renewed, extended, supplemented,

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increased or modified. Additionally, the Notes provide that the principal balance evidenced thereby shall bear interest at a floating rate of interest subject to change from time to time.
“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 9.8 of this Mortgage.
“Obligations” means all present and future debts, obligations and liabilities of Borrower to Mortgagee and/or Lenders arising pursuant to, and/or on account of, the provisions of this Mortgage, the Notes or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Notes; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under this Mortgage or any of the other Loan Documents, together with interest thereon as herein or therein provided; (c) to pay and perform all obligations of Borrower under any Swap Contract; (d) to perform, observe and comply with all of the other terms, covenants and conditions, expressed or implied, which Mortgagor is required to perform, observe or comply with pursuant to this Mortgage or any of the other Loan Documents; and (e) to pay and perform all future advances and other obligations that Mortgagor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Mortgage. Additionally, “Obligations” means such additional amounts as Administrative Agent or Lenders may from time to time advance pursuant to the terms and conditions of this Mortgage and not met by Mortgagor, with respect to an obligation secured by a lien or encumbrance prior to the lien of this Mortgage or for the protection of the lien of this Mortgage, together with interest thereon.
“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Mortgagee and insuring Mortgagee’s interest in the Property which are acceptable to Mortgagee as of the date hereof, (b) the Liens and interests of this Mortgage, and (c) any other Encumbrance disclosed to Mortgagee in any commitment for title insurance delivered to Mortgagee or otherwise disclosed in writing to Mortgagee that Mortgagee shall expressly approve in writing in its sole and absolute discretion.
“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.
“Personalty” means all personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, in which Mortgagor now has or hereafter acquires an interest and which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of the Property, including (a) the Accessories; (b) the Accounts; (c) all franchise, license, management or other agreements with respect to the operation of the Real Property or the business conducted therein (provided all of such agreements shall be subordinate to this Mortgage, and neither Mortgagee nor Lenders shall have any responsibility for the performance of Mortgagor’s obligations thereunder) and all general intangibles (including payment intangibles, trademarks, trade names, goodwill, software and symbols) related to the Real Property or the operation thereof; (d) all sewer and water taps, appurtenant water stock or water rights, allocations and agreements for utilities, bonds, letters of credit, permits, certificates, licenses, guaranties, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, and all rebates or refunds of fees, Taxes, assessments,

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charges or deposits paid to any Governmental Authority related to the Real Property or the operation thereof; (e) all of Mortgagor’s rights and interests under all Swap Contracts, including all rights to the payment of money from Mortgagee under any Swap Contract and all accounts, deposit accounts and general intangibles, including payment intangibles, described in any Swap Contract; (f) all insurance policies held by Mortgagor with respect to the Property or Mortgagor’s operation thereof; and (g) all money, instruments and documents (whether tangible or electronic) arising from or by virtue of any transactions related to the Property, and all deposits and deposit accounts of Mortgagor with Mortgagee related to the Property, including any such deposit account from which Mortgagor may from time to time authorize Mortgagee to debit and/or credit payments due with respect to the Loan; together with all Additions to and Proceeds of all of the foregoing.
“Proceeds,” when used with respect to any of the Property, means all proceeds of such Property, including all Insurance Proceeds and all other proceeds within the meaning of that term as defined in the Uniform Commercial Code of the State.
“Property” means the Real Property and the Personalty and all other rights, interests and benefits of every kind and character which Mortgagor now has or hereafter acquires in, to or for the benefit of the Real Property and/or the Personalty and all other property and rights used or useful in connection therewith, including all Leases, all Rents, all Condemnation Awards, all Proceeds, and all of Mortgagor’s right, title and interest in and to all Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments.
“Property Assessments” means all Taxes, payments in lieu of taxes, water rents, sewer rents, assessments, condominium and owner’s association assessments and charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.
“Real Property” means the Land and Improvements, together with (a) all estates, title interests, title reversion rights, remainders, increases, issues, profits, rights-of-way or uses, additions, accretions, servitudes, strips, gaps, gores, liberties, privileges, water rights, water courses, alleys, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements, rights of way, rights of ingress or egress, parking rights, timber, crops, mineral interests and other rights, now or hereafter owned by Mortgagor and belonging or appertaining to the Land or Improvements; (b) all Claims whatsoever of Mortgagor with respect to the Land or Improvements, either in law or in equity, in possession or in expectancy; (c) all estate, right, title and interest of Mortgagor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to the Land or Improvements; and (d) all options to purchase the Land or Improvements, or any portion thereof or interest therein, and any greater estate in the Land or Improvements, and all Additions to and Proceeds of the foregoing.
“Refinancing Commitment” means any commitment from or other agreement with any Person providing for the financing of the Property, some or all of the proceeds of which are intended to be used for the repayment of all or a portion of the Loan.

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“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Real Property.
“State” means the state in which the Land is located.
“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement” ) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into on or any time after the date hereof, between Swap Counterparty and Borrower, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.
“Swap Counterparty” means a Lender or an Affiliate of a Lender, in its capacity as counterparty under any Swap Contract.
“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to, on or anytime after the date hereof between Swap Counterparty and Borrower so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by this Mortgage in connection with the Loan .
“Taxes” means all taxes and assessments, whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any community facilities or other private district on Mortgagor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.
“Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including any Contract of Sale and any other contract or agreement to sell, assign, convey or transfer, whether made voluntarily or by operation of Law or otherwise, and whether made with or without consideration.
Article II
Granting Clauses; Condition of Grant .
Section 2.1      Conveyances and Security Interests .
In order to secure the prompt payment and performance of the Obligations, including any and all renewals, or extensions of the whole or any part thereof (and any such renewals or extensions shall not impair in any manner the validity of or priority of this Mortgage), Mortgagor (a) irrevocably and unconditionally grants, conveys, transfers and assigns to Mortgagee, with power of sale and right of entry and possession, all estate, right, title and interest that Mortgagor now has or may later

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acquire in and to the Real Property; (b) grants to Mortgagee a security interest in the Personalty; (c) assigns to Mortgagee, and grants to Mortgagee a security interest in, all Condemnation Awards and all Insurance Proceeds; (d) assigns to Mortgagee, and grants to Mortgagee a security interest in, all of Mortgagor’s right, title and interest in, but not any of Mortgagor’s obligations or liabilities under, all Swap Contracts, Design and Construction Documents, all Contracts of Sale and all Refinancing Commitments, and all Letters of Credit (if any); and (e) assigns to Mortgagee, and grants to Mortgagee a security interest in, all Accounts arising from or related to any transactions related to the Premises (including but not limited to Mortgagor’s rights in tenants’ security deposits, deposits with respect to utility services to the Premises, and any deposits, deposit accounts or reserves hereunder or under any other Loan Documents), and any account or deposit account from which Mortgagor may from time to time authorize Holder to debit and/or credit payments due with respect to the Loan or any Swap Contract, all rights to the payment of money from Mortgagee under any Swap Contract, and all accounts, deposit accounts and general intangibles including payment intangibles, described in any Swap Contract. All Persons who may have or acquire an interest in all or any part of the Property will be deemed to have notice of, and will be bound by, the terms of the Obligations and each other agreement or instrument made or entered into in connection with each of the Obligations. Such terms include any provisions in the Note, the Loan Agreement or any Swap Contract which provide that the interest rate on one or more of the Obligations may vary from time to time.
Section 2.2      Absolute Assignment of Leases and Rents .
In consideration of the making of the Loan by Lenders to Mortgagor and the other Borrowers, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor absolutely and unconditionally assigns the Leases and Rents to Mortgagee, for the ratable benefit of Lenders, which, whether before or after foreclosure or during the full period of redemption, accrue and are owing for the use and occupancy of all or any part of the Property. This assignment is, and is intended to be, an unconditional, absolute and present assignment from Mortgagor to Mortgagee of all of Mortgagor’s right, title and interest in and to the Leases and the Rents and not an assignment in the nature of a pledge of the Leases and Rents or the mere grant of a security interest therein. So long as no Event of Default shall exist, however, Mortgagor shall have a license (which license shall terminate automatically and without notice upon the occurrence of an Event of Default) to collect, but not prior to accrual, all Rents. Mortgagor agrees to collect and hold all Rents in trust for Mortgagee and to use the Rents for the payment of the cost of operating and maintaining the Property and for the payment of the other Obligations before using the Rents for any other purpose.
Section 2.3      Security Agreement, Fixture Filing and Financing Statement .
This Mortgage creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee, for the ratable benefit of Lenders, under the Uniform Commercial Code of the State. In addition to all of its other rights under this Mortgage and otherwise, Mortgagee shall have all of the rights of a secured party under the Uniform Commercial Code of the State, as in effect from time to time, or under the Uniform Commercial Code in force from time to time in any other state to the extent the same is applicable Law. This Mortgage shall also be effective as a financing statement with respect to any other Property as to which a security interest may be perfected by the filing of a

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financing statement and may be filed as such in any appropriate filing or recording office. The respective mailing addresses of Mortgagor and Mortgagee are set forth in the opening paragraph of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or any other financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section. Mortgagor hereby irrevocably authorizes Mortgagee at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable Law, reasonably required by Mortgagee to establish or maintain the validity, perfection and priority of the security interests granted in this Mortgage. The foregoing authorization includes Mortgagor’s irrevocable authorization for Mortgagee at any time and from time to time to file any initial financing statements and amendments thereto that indicate the Personalty (a) as “all assets” of Mortgagor or words of similar effect, regardless of whether any particular asset comprised in the Personalty falls within the scope of the Uniform Commercial Code of the State or the jurisdiction where the initial financing statement or amendment is filed, or (b) as being of an equal or lesser scope or with greater detail.
Section 2.4      Fixture Financing Statement.
From the date of its recording, this Mortgage shall be effective as a fixture financing statement within the purview of Section 9-502(c) of the Uniform Commercial Code of the State with respect to all sums on deposit with the Mortgagee pursuant to this Mortgage ( “Deposits” ), and with respect to the Personalty and the goods described herein, which Personalty and goods are or are to become fixtures related to the Property and all replacements of such property, all substitutions for such property, additions to such property, and the proceeds thereof (all of which shall be included in the meaning of the term “Collateral” ). The addresses of Mortgagor (Debtor) and Mortgagee (Secured Party) are set forth below. This Mortgage is to be filed for recording with the Registrar of Titles of the county or the counties where the Property is located. For this purpose, the following information is set forth:
(a)      Name and Address of Debtor:
KBSIII 60 South Sixth Street, LLC
        c/o KBS Capital Advisors LLC
        800 Newport Center Drive, Suite 700
        Newport Beach, California 92660
(b)      Name and Address of Secured Party:
Bank of America, N.A.
        520 Newport Center Drive, Suite 1100
        Newport Beach, California 92660
(c)      This document covers goods which are or are to become fixtures.
(d)      Debtor is the record owner of the Property.
(e)      Debtor’s state of formation is Delaware.
(f)      Debtor’s exact legal name is as set forth in the first paragraph of this Mortgage.

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(g)      Debtor’s organizational identification number is DE 5271236.
(h)      Debtor agrees that:
(i)      Where Collateral is in possession of a third party, Mortgagor will join with Mortgagee in notifying the third party of Mortgagee’s interest and will use commercially reasonable efforts to obtain an acknowledgment from the third party that it is holding such Collateral for the benefit of Mortgagee;
(ii)      Mortgagor will cooperate with Mortgagee in obtaining control with respect to Collateral consisting of: deposit accounts, investment property, letter of credit rights and electronic chattel paper; and
(iii)      Until the Obligations are paid in full, Mortgagor will not change the state its company name without giving Mortgagee at least thirty (30) days prior written notice.
Mortgagor hereby appoints Mortgagee as its attorney-in-fact to execute and file on its behalf any financing statements, continuation statements or other statements in connection therewith which Mortgagee deems reasonably necessary or reasonably advisable to preserve and maintain the priority of the lien hereof, or to extend the effectiveness thereof, under the Uniform Commercial Code of the State or any other laws which may hereafter become applicable. This power, being coupled with an interest, shall be irrevocable so long as any part of the Obligations remains unpaid. Mortgagor shall pay to Mortgagee, from time to time, upon demand, any and all costs and expenses incurred by Mortgagee in connection with the filing of any such statements including, without limitation, reasonable attorneys’ fees and all disbursements and such amounts shall be part of the Obligations secured by this Mortgage.
Section 2.5      Release of Mortgage and Termination of Assignments and Financing Statements .
If and when Borrower has paid and performed all of the Obligations, and no further advances are to be made under the Loan Agreement, Mortgagee will promptly provide a release of the Property from the lien of this Mortgage and termination statements for filed financing statements, if any, to Mortgagor. Mortgagor shall be responsible for the recordation of such release and the payment of any recording and filing costs. Upon the recording of such release and the filing of such termination statements, the absolute assignments set forth in Section 2.2 shall automatically terminate and become null and void.
Article III
Representations and Warranties .
Mortgagor makes the following representations and warranties to Mortgagee and each of the Lenders:
Section 3.1      Title to Real Property .
To Mortgagor’s knowledge and belief, Mortgagor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is

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lawfully seized and possessed of the Real Property. To Mortgagor’s knowledge and belief, Mortgagor has the right and authority to convey the Real Property and does hereby convey the Real Property in accordance with the terms of this Mortgage with general warranty. To Mortgagor’s knowledge and belief, the Real Property is subject to no Encumbrances other than the Permitted Encumbrances and Taxes, not yet delinquent.
Section 3.2      Title to Other Property .
To Mortgagor’s knowledge and belief, Mortgagor has good title to the Personalty, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances. To Mortgagor’s knowledge and belief, none of the Leases, Rents, Design and Construction Documents, Contracts of Sale or Refinancing Commitments are subject to any Encumbrance other than the Permitted Encumbrances.
Section 3.3      Property Assessments .
The fee portion of the Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that such fee portion of the Real Property is not subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.
Section 3.4      Independence of the Real Property .
Except as disclosed in the underlying documents referenced in the title commitment relating to the Property delivered to Administrative Agent in connection with the making of the Loan, no buildings or other improvements on property not covered by this Mortgage rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and, to Mortgagor’s knowledge and belief, none of the Real Property relies, or will rely, on any property not covered by this Mortgage or any interest therein to fulfill any requirement of any Governmental Authority. To Mortgagor’s knowledge and belief, the Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.
Section 3.5      Existing Improvements .
To Mortgagor’s knowledge and belief, the existing Improvements, if any, were constructed, and are being used and maintained, in accordance with all applicable Laws, including zoning Laws.
Section 3.6      Leases and Tenants .
To Mortgagor’s knowledge and belief, and except as expressly disclosed to Administrative Agent in writing, the Leases are valid and are in full force and effect, and Mortgagor is not in default under any of the terms thereof. Except as expressly permitted in the Loan Agreement, and except as expressly disclosed to Administrative Agent in writing, Mortgagor has not accepted any Rents more than thirty (30) days in advance of the time the same became due under the Leases and has not forgiven, compromised or discounted any of the Rents. Mortgagor has title to and the right to assign the Leases and Rents to Mortgagee, and no other assignment of the Leases or Rents has been granted. To the best of Mortgagor’s knowledge and belief and except as disclosed to Administrative

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Agent in writing, no tenant or tenants occupying, individually or in the aggregate, more than five percent (5%) of the net rentable area of the Improvements are in default under their Lease(s) or are the subject of any bankruptcy, insolvency or similar proceeding.
Section 3.7      Wells; Wetlands; Sewage Treatment Systems .
To Mortgagor’s knowledge and belief:
(a)      There are no existing, abandoned or sealed wells on the Property, as the term “wells” is defined by Minnesota Statutes Section 103I.005, Subdivision 21, as amended;
(b)      No portion of the Property is located in a wetland (as defined below) or in a flood plain, flood plain district, or area of similar characterization that may give rise to a violation of any requirement of the United States Army Corps of Engineers or any federal, state, county, or other local law or regulation relating to wetlands (as defined below) or that may impair or prevent the present use and occupancy of the Improvements and the Property. “Wetlands” shall mean those areas that are: (1) inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and that, under normal circumstances, do support, a prevalence of vegetation typically adopted for life in saturated soil conditions; or (2) designated as protected wetlands by the applicable state, federal, county, city or other governmental entity; and
(c)      There are no individual sewage treatment systems on or serving the Property, within the meaning of Minnesota Statutes Section 115.55 subd. 6.
Article IV
Affirmative Covenants .
Section 4.1      Obligations .
Mortgagor agrees to promptly pay and perform all of the Obligations in accordance with the terms of the Loan Documents, time being of the essence in each case.
Section 4.2      Property Assessments; Documentary Taxes .
Mortgagor (a) will promptly pay in full and discharge all Property Assessments, and (b) will furnish to Mortgagee, upon written demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalty commences to accrue thereon. Except as may be permitted pursuant to the provisions of Section 4.3 below, Mortgagor will promptly pay all stamp, documentary, recordation, transfer and intangible taxes and all other taxes that may from time to time be required to be paid with respect to the Loan, the Note, this Mortgage or any of the other Loan Documents.
Section 4.3      Permitted Contests .
Mortgagor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Mortgagor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an

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appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Mortgagee nor any Lenders is subjected to any Claim as a result of such contest, and (d) Mortgagor provides assurances satisfactory to Mortgagee (including the establishment of an appropriate reserve account with Mortgagee) of its ability to pay such Property Assessments or comply with such Law in the event Mortgagor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Mortgagor shall indemnify and save Mortgagee and each Lender harmless against all Claims in connection therewith. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Promptly after the settlement or conclusion of such contest or action, Mortgagor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.
Section 4.4      Compliance with Laws .
Mortgagor will comply with and not knowingly violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.
Section 4.5      Maintenance and Repair of the Property .
Mortgagor, at Mortgagor’s sole expense, will (a) keep and maintain Improvements and Accessories in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to Improvements and Accessories, so that each part of the Improvements and all of the Accessories shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.
Section 4.6      Additions to Security .
All right, title and interest of Mortgagor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Accessories hereafter acquired shall, without any further Mortgage, conveyance, assignment or other act by Mortgagor, become subject to the Lien of this Mortgage as fully and completely, and with the same effect, as though now owned by Mortgagor and specifically described in the granting clauses hereof. Mortgagor agrees, however, to execute and deliver to Mortgagee such further documents as may be reasonably required by the terms of the Loan Agreement and the other Loan Documents.

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Section 4.7      Subrogation; Vendor's/Purchase Money Lien .
To the extent permitted by Law, Mortgagee shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Mortgagee or any Lender whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Mortgagee or any Lender to pay or discharge any Lien. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor's or purchase money lien is waived; and Mortgagee for the ratable benefit of Lenders shall have, and is hereby granted, a vendor's or purchase money lien on the Property as cumulative additional security for the secured indebtedness. Mortgagee may foreclose under this Mortgage or under the vendor's or purchase money lien without waiving the other or may foreclose under both.
Section 4.8      Leases .
(a)      Except as expressly permitted in the Loan Agreement, Mortgagor shall not enter into any Lease with respect to all or any portion of the Property without the prior written consent of Mortgagee as provided under the terms of the Loan Agreement.
(b)      Neither Mortgagee nor any Lender shall be obligated to perform or discharge any obligation of Mortgagor under any Lease. The assignment of Leases provided for in this Mortgage in no manner places on Mortgagee or any Lender any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown).
(c)      No approval of any Lease by Mortgagee shall be for any purpose other than to protect Mortgagee’s security and to preserve Mortgagee’s rights under the Loan Documents, and no such approval shall result in a waiver of a Default or Event of Default.
Article V
Negative Covenants .
Section 5.1      Encumbrances .
Except as expressly permitted in this Mortgage, Mortgagor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances. Within thirty (30) days after the filing of any mechanic’s lien or other Lien or Encumbrance against the Property, Mortgagor will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Mortgagee’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Mortgagee in its sole and absolute discretion, Mortgagor shall have the right to contest in good faith any Claim, Lien or Encumbrance (and shall not be deemed in default hereunder), provided that Mortgagor does so diligently and without prejudice to Mortgagee or delay in completing construction of the Improvements. Mortgagor shall give Mortgagee Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure with respect to any of the Property.

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Section 5.2      Transfer of the Property .
With the exception of Permitted Transfers (as defined in the Loan Agreement), Mortgagor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for certain Transfers of the Accessories and other Transfers expressly permitted in this Mortgage).
Section 5.3      Removal, Demolition or Alteration of Accessories and Improvements .
Except to the extent permitted by the following sentence, no Improvements or Accessories shall be removed, demolished or materially altered without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Mortgagor may remove and dispose of, free from the Lien of this Mortgage, such Accessories as from time to time become worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Accessories are replaced with other Accessories which are free from Liens other than Permitted Encumbrances and have a value at least equal to that of the replaced Accessories (and by such removal and replacement Mortgagor shall be deemed to have subjected such Accessories to the Lien of this Mortgage), or (b) so long as a prepayment may be made without the imposition of any premium pursuant to the Note, such Accessories are sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Mortgagee to be applied to the prepayment of the principal of the Loan. Notwithstanding the foregoing, nothing herein shall limit Mortgagor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Mortgagee or otherwise existing as of the date of this Mortgage), tenant improvements ongoing as of the date hereof, or any capital improvements to the Property.
Section 5.4      Additional Improvements .
Mortgagor will not construct any Improvements other than those presently on the Land and those described in the Loan Agreement without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed. Mortgagor will complete and pay for, prior to delinquency, any Improvements which Mortgagor is permitted to construct on the Land. Mortgagor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right-of-way or upon the land of others, and (d) wholly within any building restriction and setback lines applicable to the Land. Notwithstanding the foregoing, nothing herein shall limit Mortgagor’s right to undertake any tenant improvements for tenants under their Leases (approved or deemed approved by Mortgagee), or any capital improvements to the Property.
Section 5.5      Restrictive Covenants, Zoning, etc .
Without the prior written consent of Mortgagee and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, Mortgagor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions limiting or defining the uses which may be made of the Property. Except as expressly permitted in this Mortgage, Mortgagor (a) will promptly perform and observe, and use

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commercially reasonable efforts to cause to be performed and observed, all of the terms and conditions of all agreements affecting the Property, and (b) will do or cause to be done all things reasonably necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.
Article VI
Events of Default .
The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Mortgage:
Section 6.1      Payment Obligations .
Borrower fails to pay any of the Obligations within five (5) business days after same becomes due, whether on the scheduled due date or upon acceleration, maturity or otherwise.
Section 6.2      Transfers .
Mortgagor fails to comply with the provisions of Section 5.2 above.
Section 6.3      Other Obligations .
Mortgagor fails to promptly perform or comply with any of the Obligations set forth in this Mortgage (other than those expressly described in other Sections of this Article VI ), and such failure continues uncured for a period of thirty (30) days after Notice from Mortgagee to Mortgagor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Mortgagor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Mortgagor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Mortgagee.
Section 6.4      Event of Default Under Other Loan Documents .
An Event of Default (as defined therein) occurs under the Notes or the Loan Agreement, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any obligation or agreement contained in any of the other Loan Documents (within any applicable grace or cure period) and in accordance with the terms of the applicable Loan Documents, or if no such grace or cure period is specified, such failure continues uncured for a period of thirty (30) days after Notice from Mortgagee to Mortgagor, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Mortgagor commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Mortgagor causes such failure to be cured no later than ninety (90) days after the date of such Notice from Mortgagee.
Section 6.5      Default Under Other Lien Documents .
A default occurs (and is not cured within any applicable notice and/or cure period) under any other mortgage, Mortgage or security agreement covering the Property, including any Permitted Encumbrances.

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Section 6.6      Execution; Attachment .
Any execution or attachment is levied against any of the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.
Article VII
Rights and Remedies .
Upon the happening, and during the continuance of any Event of Default, Mortgagee shall have the right, in addition to any other rights or remedies available to Mortgagee under any of the Loan Documents or applicable Law, to exercise any one or more of the following rights, powers or remedies:
Section 7.1      Acceleration .
Mortgagee may accelerate all Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, notice of acceleration or intention to accelerate, presentment or demand for payment, protest, notice of protest, notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Mortgagor).
Section 7.2      Foreclosure .
(a)      When all or any part of the Obligations shall become due, whether by acceleration or otherwise, Mortgagee shall have the right to foreclose the lien hereof for such Obligations or part thereof and/or exercise any right, power or remedy provided in this Mortgage or any of the other Loan Documents in accordance with the Act (as defined below), power being expressly granted to sell the Property at public auction. In the event of a foreclosure sale, Mortgagee is hereby authorized, without the consent of the Mortgagor, to assign any and all insurance policies to the purchaser at such sale or to take such other steps as Mortgagee may deem advisable to cause the interest of such purchaser to be protected by any of such insurance policies. Mortgagor does hereby grant and confer upon Mortgagee the fullest rights and remedies available for foreclosure of this Mortgage by action or by advertisement pursuant to Minnesota Statutes Chapters 580, 581 and 582, as said statutes may be amended from time to time, and pursuant to other applicable Minnesota laws and statutes, as amended, governing and authorizing mortgage foreclosures by action and by advertisement including, but not limited to, a grant to Mortgagee of the power of sale; and the power of sale granted Mortgagee in this Mortgage shall include, without limitation, the power of sale required to permit, at Mortgagee’s option, lawful foreclosure of this Mortgage by advertisement in accordance with the statutes then made and provided. If any provision in this Mortgage shall be inconsistent with any provision of Minnesota Statutes Sections 559.17 and 576.25 and Chapters 580, 581 or 582 (collectively, the “Act”), provisions of the Act shall take precedence over the provisions of this Mortgage, but shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Act. If any provision of this Mortgage shall grant to Mortgagee (including Mortgagee acting as a mortgagee-in-possession) or a receiver any powers, rights or remedies prior to, upon or following the occurrence, and during the continuance, of an Event of Default which are more limited than the powers, rights or remedies that would otherwise be vested in Mortgagee or in such receiver under the Act in the absence of

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said provision, Mortgagee and such receiver shall be vested with the powers, rights and remedies granted in the Act to the full extent permitted by law.
(b)      In any suit to foreclose the lien hereof, there shall be allowed and included as additional indebtedness in the decree for sale all expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee for reasonable attorneys’ fees, appraisers’ fees, outlays for documentary and expert evidence, stenographers’ charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies, and similar data and assurances with respect to the title as Mortgagee may deem reasonably necessary either to prosecute such suit or to evidence to bidders at any sale which may be had pursuant to such decree the true condition of the title to or the value of the Property. All expenditures and expenses of the nature mentioned in this section and such other expenses and fees as may be incurred in the enforcement of the Mortgagor’s obligations hereunder, the protection of said Property and the maintenance of the lien of this Mortgage, including the reasonable fees of any attorney employed by Mortgagee in any litigation or proceeding affecting this Mortgage, the Notes, or the Property, including probate and bankruptcy proceedings, or in preparations for the commencement or defense of any proceeding or threatened suit or proceeding shall be immediately due and payable by the Mortgagor, with interest thereon until paid at the Default Rate (as defined in the Loan Agreement) and shall be secured by this Mortgage.
Mortgagee may institute one or more actions of foreclosure on this Mortgage or to institute other proceedings according to law for foreclosure, and prosecute the same to judgment, execution and sale, for the collection of the Obligations and all costs and expenses of such proceedings, including reasonable attorneys’ fees and actual attorneys’ expenses.
To the extent permitted by law, Mortgagee has the option of proceeding as to both the Real Property and the Personalty in accordance with its rights and remedies in respect of the Property, in which event the default provisions of the UCC will not apply. Mortgagee also has the option of exercising, in respect of the Property consisting of Personalty, all of the rights and remedies available to a secured party upon default under the applicable provisions of the UCC in effect in the jurisdiction where the Real Property is located. In the event Mortgagee elects to proceed with respect to the Personalty separately from the Real Property, whenever applicable provisions of the UCC require that notice be reasonable, ten (10) days’ notice will be deemed reasonable.
Section 7.3      Remedies under the Loan Agreement .
Without limiting the other rights and remedies of Mortgagee set forth in this Mortgage, Mortgagee may exercise any and all rights and remedies of Mortgagee specified in the Loan Agreement, or at law or equity.
Section 7.4      Application of Proceeds .
Unless otherwise required by applicable Law, all proceeds from the sale of the Property or any part thereof pursuant to the rights and remedies set forth in this Article VII and any other proceeds received by Mortgagee from the exercise of any of its other rights and remedies hereunder or under the other Loan Documents shall be applied first to pay all Expenses and next in reduction of the other Obligations, in such manner and order as Mortgagee may elect.

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Section 7.5      Divestiture of Title; Bar .
To the extent permitted by applicable law, every sale made as contemplated by this Mortgage will operate to divest all rights, title, and interest of Mortgagor in and to the items of the Property that are sold, and will be a perpetual bar, both at law and in equity, against Mortgagor and Mortgagor’s heirs, executors, administrators, personal representatives, successors and assigns, and against everyone else, claiming the item sold either from, through or under Mortgagor or Mortgagor’s heirs, executors, administrators, personal representatives, successors or assigns.
Section 7.6      Receipt of Purchase Money Sufficient Discharge .
A receipt from any person authorized to receive the purchase money paid at any sale contemplated by this Mortgage will be sufficient discharge therefor to the purchaser. After paying such purchase money and receiving such receipt, neither such purchaser nor such purchaser’s heirs, executors, administrators, personal representatives, successors or assigns will have any responsibility or liability respecting the application of such purchase money or any loss, misapplication or non-application of any of such purchase money, or to inquire as to the authorization, necessity, expediency or regularity of any such sale.
Section 7.7      Purchase by Mortgagee .
In any public sale made as contemplated by this Mortgage, Mortgagee may bid for and purchase any of the Property being sold, and will be entitled, upon presentment of the relevant Loan Documents and documents evidencing the same, to apply the amount of the Obligations held by it against the purchase price for the items of the Property so purchased. The amount so applied will be credited against the Obligations in accordance with the terms of the Loan Agreement.
Section 7.8      Sale of Portion of Mortgaged Property .
The Lien created by this Mortgage, as it pertains to any Property that remains unsold, will not be affected by a sale of less than all of the Property.
Section 7.9      Judicial Action .
Mortgagee shall have the right from time to time to sue Mortgagor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Mortgage, as the same become due), without regard to whether or not any of the other Obligations shall be due, and without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against Mortgagor, including an action of foreclosure or an action for specific performance, for a Default or Event of Default existing at the time such earlier action was commenced.
Section 7.10      Collection of Rents .
(a)      Upon the occurrence, and during the continuance, of an Event of Default, the license granted to Mortgagor to collect the Rents shall be automatically and immediately revoked, without further notice to or demand upon Mortgagor. Mortgagee may, but shall not be obligated to, perform any or all obligations of the landlord under any or all of the Leases, and Mortgagee may, but shall

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not be obligated to, exercise and enforce any or all of Mortgagor’s rights under the Leases. Without limitation to the generality of the foregoing, Mortgagee may notify the tenants under the Leases that all Rents are to be paid to Mortgagee, and following such notice all Rents shall be paid directly to Mortgagee and not to Mortgagor or any other Person other than as directed by Mortgagee, it being understood that a demand by Mortgagee on any tenant under the Leases for the payment of Rent shall be sufficient to warrant payment by such tenant of Rent to Mortgagee without the necessity of further consent by Mortgagor. Mortgagor hereby irrevocably authorizes and directs the tenants under the Lease to pay all Rents to Mortgagee instead of to Mortgagor, upon receipt of written notice from Mortgagee, without the necessity of any inquiry of Mortgagor and without the necessity of determining the existence or non-existence of an Event of Default. Mortgagor hereby appoints Mortgagee as Mortgagor’s attorney-in-fact with full power of substitution, which appointment shall take effect upon the occurrence of an Event of Default and is coupled with an interest and is irrevocable prior to the full and final payment and performance of the Obligations, in Mortgagor’s name or in Mortgagee’s name: (i) to endorse all checks and other Mortgages received in payment of Rents and to deposit the same in any account selected by Mortgagee; (ii) to give receipts and releases in relation thereto; (iii) to institute, prosecute and/or settle actions for the recovery of Rents; (iv) to modify the terms of any Leases including terms relating to the Rents payable thereunder; (v) to cancel any Leases; (vi) to enter into new Leases; and (vii) to do all other acts and things with respect to the Leases and Rents which Mortgagee may deem necessary or desirable to protect the security for the Obligations.
(b)      In furtherance of this Section, following the occurrence, and during the continuance, of an Event of Default, Mortgagee may apply for appointment of a receiver, for which receivership Mortgagor hereby consents to, who shall have all the rights permitted by Minn. Stat. Ch. 576 and Minn. Stat. § 559.17 and as otherwise authorized by such appointment and all rights permitted to the Mortgagee in this Mortgage and who shall manage the Property, collect the Rents, deal with the tenants, renew or extend the Lease(s) within or beyond the period of receivership, cancel, enforce or modify the Lease(s), including the Rents, apply the Rents as hereinafter provided, perform the terms of this Mortgage, perform the terms of and take such actions as are authorized by its appointment, and do any acts which the receiver deems proper to protect the security hereof.
(c)      Any Rents, whether collected by the Mortgagee or by a receiver, shall be applied in the following order:
(i)      to payment of all reasonable fees of any receiver appointed;
(ii)      to the extent possible and in the order determined by the receiver to preserve the value of the Property, as required by Minn. Stat. § 576.25, Subd.5(d);
(iii)      to Mortgagee in payment of the Obligations in such order of application as Mortgagee may elect, and in the event that a foreclosure sale of this Mortgage shall have occurred:
(A)      if Mortgagee is the purchaser at the foreclosure sale, the Rents shall be paid to Mortgagee to be applied to the extent of any deficiency remaining after the sale, the balance to be retained by Mortgagee, and if the Property be redeemed by Mortgagee or any other party entitled to redeem, to be applied as a credit against

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the redemption price, provided, if the Property not be redeemed, any remaining excess Rents to belong to Mortgagee, whether or not a deficiency exists; or
(B)      if Mortgagee is not the purchaser at the foreclosure sale, the Rents shall be paid to Mortgagee to be applied to the extent of any deficiency remaining after the sale, and the balance, if any, to the purchaser, provided if the Property is redeemed by Mortgagor or other party entitled to redeem, the Rents collected after foreclosure sale shall be applied as a credit against the redemption price with the remainder to be paid to Mortgagor. If the Property is not redeemed by Mortgagor, any remaining excess Rents shall be paid to the purchaser.
The exercise of Mortgagee’s rights hereunder, the appointment of a receiver, the collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default or waive, modify or affect notice of default under the Loan Agreement, the Notes or this Mortgage or invalidate any act done pursuant to said notice, nor in any way operate to prevent Mortgagee from pursuing any remedy which now or hereafter it may have under the terms and conditions of this Mortgage, or the Loan Agreement or the Notes secured thereby, or any other instruments securing the same. The rights and powers of Mortgagee hereunder shall remain in full force and effect both prior to and after any foreclosure of this Mortgage and any sale pursuant thereto and until expiration of the period of redemption from said sale, regardless of whether a deficiency remains from said sale. The purchaser at any foreclosure sale, including Mortgagee, shall have the right, at any time and without limitation, to advance money to any receiver appointed of the Property to pay any part or all of the items which the receiver would otherwise be authorized to pay if cash were available from the Property and the sum so advanced, with interest at the rate provided for in the Loan Agreement, shall be a part of the sum required to be paid to redeem from any foreclosure sale.
(d)      It is the intention of the parties that this Mortgage shall confer upon Mortgagee the fullest rights, remedies and benefits available under Minn. Stat. Ch. 576 and Minn. Stat. § 559.17, as from time to time amended or supplemented, or any successor or replacement statutes thereof.
Section 7.11      Appointment of Receiver .
Following the occurrence, and during the continuance, of an Event of Default, Mortgagee shall, as a matter of right, without notice and without giving bond to Mortgagee or anyone claiming by, under or through it, and without regard to the solvency or insolvency of Mortgagor or the then value of the Property, be entitled to have a receiver appointed pursuant to the Act of all or any part of the Property and the rents, issues and profits thereof, with such power as the court making such appointment shall confer (including, but not limited to, the rights of a receiver pursuant to Minn. Stat. Ch. 576), and Mortgagor hereby consents to the appointment of such receiver and shall not oppose any such appointment. Any such receiver may, to the extent permitted under applicable law, without notice, enter upon and take possession of the Property or any part thereof by summary proceedings, ejectment or otherwise, and may remove Mortgagor or other persons and any and all property therefrom, and may hold, operate and manage the same and receive all earnings, income, rents, issues and proceeds accruing with respect thereto or any part thereof, whether during the pendency of any foreclosure or until any right of redemption shall expire or otherwise, and perform the terms of this Mortgage and apply the rents, issues and profits to the payment of the expenses enumerated in Minn. Stat. Ch. 576 in the priority mentioned therein and to all expenses for

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maintenance of the Property and to the costs and expenses of the receivership, including attorney’s fees, to the repayment of the indebtedness secured hereby and as further provided in any assignment of leases and rents executed by the Mortgagor to Mortgagee whether contained in this Mortgage or in a separate instrument. Mortgagor does hereby irrevocably consent to such appointment. The purchaser at any foreclosure sale, including Mortgagee, shall have the right, at any time and without limitation as provided in Minn. Stat. § 582.03, to advance the money to any receiver appointed hereunder to pay any part or all of the items which the receiver would otherwise be authorized to pay if cash were available from the Property and the sum so advanced, with interest at the rate then in effect under the terms of the Loan Agreement, shall be a part of the sum required to be paid to redeem from any foreclosure sale.
Section 7.12      Taking Possession or Control of the Property .
To the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Mortgagee may (a) enter upon, and take possession of (and Mortgagor shall surrender actual possession of), the Property or any part thereof, without notice to Mortgagor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Mortgagor and its agents and employees therefrom.
Section 7.13      Management of the Property .
Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.11 , Mortgagee or the receiver, as the case may be, may, at its sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, and (c) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name or in the name of Mortgagor (the costs of completing such Improvements shall be Expenses secured by this Mortgage and shall accrue interest as provided in the Loan Agreement and the other Loan Documents). Mortgagee or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for gross negligence or willful misconduct. The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Mortgagee shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.
Section 7.14      Uniform Commercial Code .
Mortgagee may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Mortgagor shall assemble all of the Accessories and make the same available within the Improvements. Any notification required by the Uniform Commercial Code shall be deemed reasonably and properly given if sent in accordance with the Notice provisions of this Mortgage at least ten (10) days before any sale or other disposition of the Personalty. Disposition of the Personalty

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shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. It shall be deemed commercially reasonable for the Mortgagee to dispose of the Personalty without giving any warranties as to the Personalty and specifically disclaiming all disposition warranties.
Section 7.15      Acknowledgment of Waiver of Hearing Before Sale .
Mortgagor understands and agrees that if an Event of Default shall occur and be continuing, Mortgagee has the right, inter alia , to foreclose this Mortgage by advertisement pursuant to Minn. Stat. Ch. 580, as hereafter amended, or pursuant to any similar or replacement statute hereafter enacted; that if Mortgagee elects to foreclose by advertisement, it may cause the Property, or any part thereof, to be sold at public auction; that notice of such sale must be published for six (6) successive weeks at least once a week in a newspaper of general circulation and that no personal notice is required to be served upon Mortgagor. Mortgagor further understands that upon occurrence, and during the continuance, of an Event of Default, Mortgagee may also elect to exercise its rights under the Code and take possession of the collateral and dispose of the same by sale or otherwise in one or more parcels provided that at least ten (10) days’ prior notice of such disposition must be given, all as provided for by the Code, as hereafter amended or by any similar or replacement statute hereafter enacted. Mortgagor further understands that under the Constitution of the United States and the Constitution of the State of Minnesota, it may have the right to notice and hearing before the Property may be sold and that the procedures for foreclosure by advertisement described above do not insure that notice will be given to Mortgagor and neither said procedure for foreclosure by advertisement nor the Code requires any hearing or other judicial proceeding. MORTGAGOR HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE REAL PROPERTY MAY BE FORECLOSED UPON BY ADVERTISEMENT AND THAT THE PERSONAL PROPERTY MAY BE DISPOSED OF PURSUANT TO THE CODE, ALL AS DESCRIBED ABOVE. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING THIS MORTGAGE THIS SECTION AND MORTGAGOR’S CONSTITUTIONAL RIGHTS WERE FULLY EXPLAINED BY SUCH COUNSEL AND THAT MORTGAGOR UNDERSTANDS THE NATURE AND EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
Section 7.16      Compliance with Minnesota Mortgage Foreclosure Law .
(a)      If any provision in this Mortgage shall be inconsistent with any provision of the Act, provisions of the Act shall take precedence over the provisions of this Mortgage, but shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Act.
(b)      If any provision of this Mortgage shall grant to Mortgagee (including Mortgagee acting as a mortgagee-in-possession) or a receiver any powers, rights or remedies prior to, upon or following the occurrence of an Event of Default which are more limited than the powers, rights or remedies that would otherwise be vested in Mortgagee or in such receiver under the Act in the absence of said provision, Mortgagee and such receiver shall be vested with the powers, rights and remedies granted in the Act to the full extent permitted by law.

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(c)      Without limiting the generality of the foregoing, all reasonable expenses incurred by Mortgagee which are of the type referred to in Minn. Stat. Ch. 576, whether incurred before or after any decree or judgment of foreclosure, and whether or not enumerated in this Mortgage, shall be added to the Obligations and/or by the judgment of foreclosure.
Section 7.17      Other Remedies .
Mortgagee shall have the right from time to time to protect, exercise and enforce any legal or equitable remedy against Mortgagor provided under the Loan Documents or by applicable Laws.
Article VIII
[Reserved].
Article IX
Miscellaneous .
Section 9.1      Rights, Powers and Remedies Cumulative .
Each right, power and remedy of Mortgagee as provided for in this Mortgage, or in any of the other Loan Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Mortgage, or in any of the other Loan Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Mortgagee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Mortgagee of any or all such other rights, powers or remedies.
Section 9.2      No Waiver by Mortgagee .
No course of dealing or conduct by or among Mortgagee and Mortgagor shall be effective to amend, modify or change any provisions of this Mortgage or the other Loan Documents. No failure or delay by Mortgagee to insist upon the strict performance of any term, covenant or agreement of this Mortgage or of any of the other Loan Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Mortgagee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, Mortgagee shall not be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Mortgagor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor or of any other Person to take action to foreclose this Mortgage or otherwise enforce any of the provisions of this Mortgage, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Mortgagee, or (c) Mortgagee’s extending the time of payment or modifying the terms of this Mortgage or any of the other Loan Documents without first having obtained the consent of Mortgagor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Mortgagee may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations

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and may extend the time of payment or otherwise modify the terms of this Mortgage or any of the other Loan Documents without in any way impairing or affecting the Lien of this Mortgage or the priority of this Mortgage over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Mortgage. Mortgagee may resort to the security or collateral described in this Mortgage or any of the other Loan Documents in such order and manner as Mortgagee may elect in its sole discretion.
Section 9.3      Waivers and Agreements Regarding Remedies .
To the fullest extent Mortgagor may do so, Mortgagor hereby:
(a)      to the full extent permitted by Law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption, and to the full extent permitted by Law, waives the benefits of all present and future valuation, appraisement, homestead, exemption, stay, extension or redemption, right to notice of election to accelerate the Obligations, and moratorium laws under any state or federal law;
(b)      waives all rights to a marshalling of the assets of Mortgagor, including the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Mortgagee under the terms of this Mortgage to a sale of the Property without any prior or different resort for collection, or the right of Mortgagee to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;
(c)      waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action; and
(d)      waives and relinquishes any and all rights and remedies which Mortgagor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties.
Section 9.4      Successors and Assigns .
All of the grants, covenants, terms, provisions and conditions of this Mortgage shall run with the Land and shall apply to and bind the successors and assigns of Mortgagor (including any permitted subsequent owner of the Property), and inure to the benefit of Mortgagee, its successors and assigns.

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Section 9.5      No Warranty by Mortgagee .
By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Mortgagor or to be given to Mortgagee pursuant to this Mortgage or any of the other Loan Documents, Mortgagee shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Mortgagee.
Section 9.6      Amendments .
This Mortgage may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.
Section 9.7      Severability .
In the event any one or more of the provisions of this Mortgage or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of the Loan Documents operates or would prospectively operate to invalidate this Mortgage or any of the other Loan Documents, then and in either of those events, at the option of Mortgagee, such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.
Section 9.8      Notices .
All Notices 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 applicable address specified in the Preamble to this Mortgage (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice 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 Mortgage 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 9.9      Joint and Several Liability .
If Mortgagor consists of two (2) or more Persons, the term “ Mortgagor ” shall also refer to all Persons signing this Mortgage as Mortgagor, and to each of them, and all of them are jointly and severally bound, obligated and liable hereunder. Mortgagee may release, compromise, modify or settle with any of Mortgagor, in whole or in part, without impairing, lessening or affecting the

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obligations and liabilities of the others of Mortgagor hereunder or under the Note. Any of the acts mentioned aforesaid may be done without the approval or consent of, or notice to, any of Mortgagor.
Section 9.10      Rules of Construction .
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Mortgage in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The headings of this Mortgage are for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. Any reference to a Property street address(es) is for administrative and reference purposes only. In the event of any conflict between a Property street address(es) listed herein and Exhibit A attached hereto, the legal description set forth on Exhibit A shall control. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles or Sections are to the respective Articles or Sections contained in this Mortgage unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Mortgage shall have the meaning ascribed to that term in the Uniform Commercial Code of the State. If a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term shall have the meaning specified in Article 9.
Section 9.11      Governing Law .
This Mortgage shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State.
Section 9.12      Use of Proceeds .
Mortgagor represents and warrants to Mortgagee that the proceeds of the Note secured by this Mortgage will be used for business purposes, and that the Obligations constitute a business loan.
Section 9.13      Interest Laws .
It being the intention of Mortgagee and Mortgagor to comply with the laws of the State of Minnesota, it is agreed that notwithstanding any provision to the contrary in the Loan Agreement, the Notes, this Mortgage or any of the other Loan Documents, no such provision shall require the payment or permit the collection of any amount ( “Excess Interest” ) in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by the Notes. If any Excess Interest is provided for, or is adjudicated to be provided for, in the Loan Agreement, the Notes, this Mortgage or any of the other Loan Documents, then in such event: (a) the provisions of this Section shall

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govern and control; (b) neither Mortgagor nor any other party obligated under the terms of the Notes or any of the other Loan Documents shall be obligated to pay any Excess Interest; (c) any Excess Interest that Mortgagee or any Lender may have received hereunder shall, at the option of Mortgagee, be (i) applied as a credit against the then unpaid principal balance under the Notes, accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to the payor thereof, or (iii) any combination of the foregoing; (d) the rates of interest payable under the terms of the Loan Agreement and the Notes shall be subject to automatic reduction to the maximum lawful contract rate allowed under the applicable usury laws of the aforesaid State, and the Loan Agreement, the Notes, this Mortgage and the other Loan Documents shall be deemed to be automatically reformed and modified to reflect such reduction in such interest rate(s); and (e) neither Mortgagor nor any other party obligated under the terms of the Loan Agreement, the Notes or any of the other Loan Documents shall have any action against Mortgagee for any damages whatsoever arising out of the payment or collection of any Excess Interest.
Section 9.14      Other Amounts Secured; Maximum Indebtedness .
(a)      Mortgagor acknowledges and agrees that, subject to Sections 9.14(b) and (d) below, this Mortgage secures the entire principal amount of the Note and interest accrued thereon, regardless of whether any or all of the Loan proceeds are disbursed on or after the date hereof, and regardless of whether the outstanding principal is repaid in whole or part or are future advances made at a later date, any and all litigation and other expenses and any other amounts as provided herein or in any of the other Loan Documents, including, without limitation, the payment of any and all liquidated damages, expenses and advances due to or paid or incurred by Mortgagee in connection with the Loan, all in accordance with the Loan commitment issued in connection with this transaction and the Loan Documents. It is agreed that any future advances made by Mortgagee for the benefit of Mortgagor from time to time under this Mortgage or the other Loan Documents and whether or not such advances are obligatory or are made at the option of Mortgagee, made at any time from and after the date of this Mortgage, and all interest accruing thereon, shall be equally secured by this Mortgage and shall have the same priority as all amounts, if any, advanced as of the date hereof and shall be subject to all of the terms and provisions of this Mortgage. This Mortgage shall be valid and have priority to the extent of the full amount of the indebtedness secured hereby over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Property given priority by law.
(b)      Mortgagor represents and covenants that, notwithstanding any other provision of this Mortgage or any other Loan Document: (i) the maximum principal amount of Obligations secured by this Mortgage at any one time, excluding advances made by Mortgagee in protection of the Property or the lien of this Mortgage which are exempt from or not subject to mortgage registry tax shall be $136,039,500.00; and (ii) the representations contained in this Section are made solely for the benefit of county recording authorities in determining the mortgage registry tax ( “MRT” ) payable as a prerequisite to the recording of this Mortgage. Mortgagor acknowledges that such representations do not constitute or imply an agreement by Mortgagee to make any future advances to Mortgagor.
(c)      To the extent that this Mortgage secures future advances other than the advance evidenced by the Note, the amount of such advances is not currently known. The acceptance of this Mortgage by Mortgagee, however, constitutes an acknowledgement that Mortgagee has been

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informed of the MRT requirements, as set forth in Minn. Stat. §287.05, Subd. 5, and intends to comply with the provisions contained in this Section.
(d)      Notwithstanding any other provision of this Mortgage or any of the other Loan Documents to the contrary, any principal indebtedness as to which MRT is payable shall not be secured by this Mortgage unless and until such MRT is paid on the principal amount set forth in subsection (b) above.
Section 9.15      Adjustable Mortgage Loan Provision .
The Notes which this Mortgage secures are adjustable notes on which the interest rate may be adjusted from time to time in accordance with the terms and provisions set forth in the Notes and the Loan Agreement.
Section 9.16      Collateral Protection .
Unless Mortgagor provides Mortgagee with evidence of the insurance required by this Mortgage or any other Loan Document, Mortgagee may purchase insurance at Mortgagor’s expense to protect Mortgagee’s interest in the Property or any other collateral for the Obligations. This insurance may, but need not, protect Mortgagor’s interests. The coverage Mortgagee purchases may not pay any claim that Mortgagor makes or any claim that is made against Mortgagor in connection with the Property or any other collateral for the Obligations. Mortgagor may later cancel any insurance purchased by Mortgagee, but only after providing Mortgagee with evidence that Mortgagor has obtained insurance as required under this Mortgage or any other Loan Document. If Mortgagee purchases insurance for the Property or any other collateral for the Obligations, Mortgagor shall be responsible for the costs of that insurance, including interest in any other charges that Mortgagee may lawfully impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance may be more than the cost of insurance that Mortgagor may be able to obtain on its own. Mortgagor hereby acknowledges Mortgagee’s right pursuant to this provision to obtain collateral protection insurance.
Section 9.17      Rights of Tenants .
Mortgagee shall have the right and option to commence a civil action to foreclose this Mortgage and to obtain a decree of foreclosure and sale subject to the rights of any tenant or tenants of the Property having an interest in the Property prior to that of Mortgagee. The failure to join any such tenant or tenants of the Property as party defendant or defendants in any such civil action or the failure of any decree of foreclosure and sale to foreclose their rights shall not be asserted by Mortgagor as a defense in any civil action instituted to collect the Obligations, or any part thereof or any deficiency remaining unpaid after foreclosure and sale of the Property, any statue or rule of law at any time existing to the contrary notwithstanding.

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Section 9.18      Non-Agricultural Use .
Mortgagor represents and warrants that as of the date of this Mortgage, the Property is not in agricultural use as defined in Minn. Stat. § 40A.02, Subd. 3, and is not used for agricultural purposes.
Section 9.19      Waiver of Homestead .
Mortgagor waives to the full extent lawfully allowed the benefit of any homestead laws now or hereinafter in force. Mortgagor expressly consents to and authorizes the sale of the Real Property or any part thereof as a single unit or parcel.
Section 9.20      Mortgage Registry Tax .
Mortgagor expressly agrees to pay the Mortgage Registry Tax under Minn. Stat. §287.05 (as the same may be amended or recodified) and any other tax or fee which is based on the amount secured by this Mortgage or of which the payment is a prerequisite for the enforceability, effectiveness or primary priority of this Mortgage, whether such amounts are due at the time of the making or filing for record of this Mortgage or any time thereafter.
Section 9.21      Entire Agreement .
The Loan Documents constitute the entire understanding and agreement between Mortgagor and Mortgagee with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Mortgagor and Mortgagee with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Mortgagee to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents.
THE WRITTEN 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.
Section 9.22      Limited Recourse Provision .
Mortgagee shall have no recourse against, nor shall there be any personal liability to, the members of Mortgagor, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Mortgagor with respect to the obligations of Mortgagor and Guarantor under the Loan. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Mortgagor’s liability or obligations under the Loan Documents, Guarantor’s liability or obligations under the Guaranty, or Mortgagee’s right to exercise any rights or remedies against any collateral securing the Loan.

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Section 9.23      Maturity .
The latest maturity date for any of the indebtedness evidenced by the Note secured by this Mortgage is [____________, 2022.]
Article X
Non-Borrower Mortgagor .
Section 10.1      Definition . As used in this Article X , “Third Party Secured Obligation” means any obligation secured by this Mortgage which is required to be performed by any Borrower under the Loan Agreement other than Mortgagor.
Section 10.2      Rights of Mortgagee . Mortgagor authorizes Mortgagee to perform any or all of the following acts at any time in its sole discretion, all without notice to Mortgagor and without affecting Mortgagee’s rights or Mortgagor’s obligations under this Mortgage:
(a)      Mortgagee may alter any terms of the Third Party Secured Obligations or any part of them, including renewing, compromising, modifying, extending or accelerating, terminating early, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Third Party Secured Obligations or any part of them.
(b)      Mortgagee may enforce or forbear from enforcing the Third Party Secured Obligations on a net or gross basis.
(c)      Mortgagee may take and hold security for the Third Party Secured Obligations, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, reconvey, compromise, fail to perfect and sell or otherwise dispose of any such security.
(d)      Mortgagee may direct the order and manner of any sale of all or any part of any security now or later to be held for the Third Party Secured Obligations, and Mortgagee may also bid at any such sale and may apply all or any part of the Third Party Secured Obligations against the amount so bid.
(e)      Mortgagee may apply any payments or recoveries from Borrower (or any of them), Mortgagor or any other source, and any proceeds of any security, to the Third Party Secured Obligations in such manner, order and priority as Mortgagee may elect, whether that obligation is secured by this Mortgage or not at the time of the application.
(f)      Mortgagee may substitute, add or release any Borrower, guarantors or endorsers.
(g)      In addition to the Third Party Secured Obligation, Mortgagee may extend other credit to any Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligations, all without affecting Mortgagee’s rights or Mortgagor’s liability under this Mortgage.

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Section 10.3      Mortgage to be Absolute .
Mortgagor expressly agrees that until the earlier of (i) the release and reconveyance of this Mortgage in accordance with Section 9.29 of the Loan Agreement, or (ii) the date that the Third Party Secured Obligations are paid and performed in full, and each and every term, covenant and condition of this Mortgage is fully performed, Mortgagor shall not be released by or because of:
(a)      Any act or event which might otherwise discharge, reduce, limit or modify Mortgagor’s obligations under this Mortgage;
(b)      Any waiver, extension, modification, forbearance, delay or other act or omission of Mortgagee, or the failure by Mortgagee to proceed promptly or otherwise against any Borrower, Mortgagor or any security;
(c)      Any action, omission or circumstance which might increase the likelihood that Mortgagor may be called upon to perform under this Mortgage or which might affect the rights or remedies of Mortgagor against any Borrower; or
(d)      Any Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding” ) and as a result thereof some or all of the Third Party Secured Obligations being terminated, rejected, discharged, modified or abrogated.
This Mortgage shall remain in full force and effect without regard to, and shall not be affected or impaired, by any invalidity, irregularity or unenforceability, in whole or in part (including with respect to any netting provision) of any Loan Document or Swap Contract or any limitation on the liability of any Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or in the future be caused or imposed in any manner whatsoever. Mortgagor hereby acknowledges that absent this Section 10.3 , Mortgagor might have a defense to the enforcement of this Mortgage as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Mortgagor hereby expressly waives and surrenders any defense to any liability under this Mortgage based upon any of such acts, omissions, agreements, waivers or matters. It is the express intent of Mortgagor that Mortgagor’s obligations under this Mortgage are and shall be absolute, unconditional and irrevocable.
Section 10.4      Mortgagor’s Waivers .
Mortgagor waives:
(a)      All statutes of limitations as a defense to any action or proceeding brought against Mortgagor by Mortgagee, to the fullest extent permitted by law;
(b)      Any right it may have to require Mortgagee to proceed against any Borrower or any other party, proceed against or exhaust any security held from any Borrower or any other party, or pursue any other remedy in Mortgagee’s power to pursue;

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(c)      To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium;
(d)      All rights of marshaling in the event of foreclosure;
(e)      Any defense based on any claim that Mortgagor’s obligations exceed or are more burdensome than those of any other Borrower;
(f)      Any defense based on: (i) any legal disability of any Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of any Borrower to Mortgagee from any cause, whether consented to by Mortgagee or arising by operation of law or from any Insolvency Proceeding, and (iii) any rejection, disallowance or disaffirmance of any of the Third Party Secured Obligations, or any part of them, or any security held for any of them, in any such Insolvency Proceeding;
(g)      Any defense based on any action taken or omitted by Mortgagee in any Insolvency Proceeding involving any Borrower, including. without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Mortgagee’s claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 1111(b), seeking relief from the automatic stay or adequate protection, including submitting an appraisal of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by Mortgagee to any Borrower in any Insolvency Proceeding, and the taking and holding by Mortgagee of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligations;
(h)      All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Mortgage and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind (other than notices expressly provided for under this Mortgage or under the Loan Agreement); and
(i)      Any defense based on or arising out of any defense that any Borrower may have to the payment or performance of the Third Party Secured Obligations or any part of them other than payment and performance in full.
Section 10.5      Mortgagor’s Additional Waivers.
Mortgagor waives:
(a)      The obligations of Mortgagor hereunder are independent of the obligations of any other Borrower, and a separate action or actions may be brought against Mortgagor whether or not action or suit is brought against any other Borrower or any other Borrower is joined in any such action or actions. At the option of Mortgagee, Mortgagor may be joined in any action or proceeding commenced by Mortgagee against any other Borrower in connection with or based on the Third Party Secured Obligations or any security therefor, and recovery may be had against Mortgagor in such action or proceeding without any requirement that Mortgagee first assert, prosecute or exhaust any remedy or claim against any other Borrower.

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(b)      Upon the occurrence and during the continuance of any Event of Default under any of the Loan Documents, Mortgagee in its sole discretion, without prior notice to or consent of Mortgagor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security that Mortgagee may hold for the Third Party Secured Obligations other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust any of the Third Party Secured Obligations or any part of them or make any other accommodation with any other Borrower or Mortgagor, or (iv) exercise any other remedy against any Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Mortgagee shall release or limit the liability of Mortgagor, who shall remain liable under this Mortgage after the action, even if the effect of the action is to deprive Mortgagor of any subrogation rights, rights of indemnity, rights of contribution, or other rights to collect reimbursement from any Borrower for any recovery by Mortgagee against Mortgagor, whether contractual or arising by operation of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure any of the Third Party Secured Obligations, Mortgagor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Mortgagee or any third party.
(c)      Regardless of whether Mortgagee may have recovered against Mortgagor, Mortgagor hereby waives, to the extent permitted by applicable law: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from any other Borrower or any other party for any recovery by Mortgagee against Mortgagor, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, “Reimbursement Rights” ), (ii) all rights to enforce any remedy that Mortgagee may have against any other Borrower, and (iii) all rights to participate in any security now or later to be held by Mortgagee for the Third Party Secured Obligations. To the extent Mortgagor’s waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Mortgagor may have against any other Borrower or any collateral or security shall be junior and subordinate to any rights Mortgagee may have against such Borrower and to all right, title and interest Mortgagee may have in any such collateral or security. If any amount should be paid to Mortgagor on account of any Reimbursement Rights at any time when any the Third Party Secured Obligations have not been paid in full, such amount shall be held in trust for Mortgagee and shall immediately be paid over to Mortgagee to be credited and applied against the Third Party Secured Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Mortgagor set forth in this Section 10.5(c) shall be effective until all of the Third Party Secured Obligations have been paid and performed in full and are made solely for the benefit of Mortgagee.
(d)      To the extent applicable, Mortgagor waives any rights and defenses described in Section 2856(a) of the California Civil Code that are or may become available to Mortgagor, including, without limitation, any rights and defenses by reason of Sections 2787 to 2855, inclusive, of the California Civil Code.
(e)      To the extent applicable Mortgagor waives all rights and defenses that Mortgagor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. This means, among other things:

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(i)      Mortgagee or any Lender may collect from Mortgagor (including enforcing this Mortgage against Mortgagor) without first foreclosing on any real or personal property collateral pledged by any Borrower;
(ii)      If Mortgagee forecloses on any real property collateral pledged by any Borrower:
(A)      The amount of the Third Party Secured Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(B)      Mortgagee or any Lender may collect from Mortgagor (including enforcing this Mortgage against Mortgagor) even if Mortgagee or any Lender, by foreclosing on the real property collateral pledged by any Borrower, has destroyed any right Mortgagor may have to collect from such Borrower.
This Section 10.5(e) is an unconditional and irrevocable waiver, to the extent applicable, of any rights and defenses Mortgagor may have because any of the Third Party Secured Obligations may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(f)      Without limiting the generality of the foregoing Section 10.5(e), Mortgagor understands and acknowledges that if Mortgagee or any Lender forecloses judicially or nonjudicially against any real property securing any of the Third Party Secured Obligations other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Mortgagor may have to seek reimbursement, contribution or indemnification from any Borrower or others based on any Reimbursement Right Mortgagor may have for any recovery by Mortgagee under this Mortgage. Mortgagor further understands and acknowledges that in the absence of this Section 10.5, such potential impairment or destruction of Mortgagor’s rights, if any, may, to the extent applicable, entitle Mortgagor to assert a defense to this Mortgage based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky , 265 Cal.App.2d 40 (1968). By executing this Mortgage, Mortgagor freely, irrevocably and unconditionally: (i) waives and relinquishes, to the extent applicable, that defense and agrees that Mortgagor will be fully liable under this Mortgage even though Mortgagee or any Lender may foreclose judicially or nonjudicially against any real property security for the Third Party Secured Obligations other than the Property; (ii) agrees that Mortgagor will not assert that defense in any action or proceeding which Mortgagee or any Lender may commence to enforce this Mortgage; (iii) acknowledges and agrees that the rights and defenses waived by Mortgagor under this Mortgage include any right or defense that Mortgagor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Mortgagee and each Lender is relying on this waiver in extending credit to Borrowers in the form of the Third Party Secured Obligations, and that this waiver is a material part of the consideration which Mortgagee and each Lender is receiving for extending such credit to Borrowers.

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(g)      Mortgagor waives, to the extent applicable, any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure of any property other than the Property hereby encumbered.
(h)      No provision or waiver in this Mortgage shall be construed as limiting the generality of any other provision or waiver contained in this Mortgage.
Section 10.6      Revival and Reinstatement .
If Mortgagee is required to pay, return or restore to any Borrower or any other person any amounts previously paid on any of the Third Party Secured Obligations because of any Insolvency Proceeding of any Borrower, any stop notice or any other reason, the obligations of Mortgagor shall be reinstated and revived and the rights of Mortgagee shall continue with regard to such amounts, all as though they had never been paid, and this Mortgage shall continue to be effective or be reinstated, as the case may be.
Section 10.7      Information Regarding Borrowers .
Mortgagor represents that: (a) Mortgagee has not made any representation to Mortgagor as to the creditworthiness of any Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Mortgagee to induce Mortgagor to execute and deliver this Mortgage. Mortgagor has received and approved copies of all other requested Loan Documents. Before signing this Mortgage, Mortgagor investigated the financial condition and business operations of each other Borrower and such other matters as Mortgagor deemed appropriate to assure itself of each such Borrower’s ability to discharge its obligations in connection with the Third Party Secured Obligations. Mortgagor assumes full responsibility for that due diligence and for keeping informed of all matters which may affect any Borrower’s ability to pay and perform its obligations to Mortgagee. Mortgagee has no any duty to disclose to Mortgagor any information which Mortgagee may have or receive about any Borrower’s financial condition or business operations or any other circumstances bearing on any Borrower’s ability to perform.
Section 10.8      Counsel; Integration; Miscellaneous .
Mortgagor acknowledges that Mortgagor has had adequate opportunity to carefully read this Mortgage and to consult with an attorney of Mortgagor’s choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Mortgagor’s execution of and obligations under this Mortgage, and Mortgagor acknowledges its execution and delivery of this Mortgage is made voluntarily without any duress or undue influence of any kind. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. This Mortgage is intended by the parties to be a fully integrated and final expression of their agreement. This Mortgage and the other Loan Documents incorporate all negotiations of the parties and constitute the parties’ entire agreement. Mortgagor acknowledges that is relying on no written or oral agreement, representation, warranty or understanding of any kind made by Mortgagee, or any employee, attorney or agent of Mortgagee, except for the agreements of Mortgagee set forth herein and in the Loan Documents.

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[Signatures appear on following page.]



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IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed under seal as of the day and year first written above.
MORTGAGOR:

KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company
    
By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer









S-1


ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


State of California

County of Orange    


On September 13, 2017         before me, K.Godin                 , Notary Public,
(here insert name of the officer)
personally appeared         Charles J. Schreiber, Jr.              who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

Signature     /s/ K. Godin             (Seal)





        


EXHIBIT A
Legal Description

REAL PROPERTY IN THE CITY OF MINNEAPOLIS, COUNTY OF HENNEPIN, STATE OF MINNESOTA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL 1:

TRACTS A, B, C, D, G, H, I AND J, REGISTERED LAND SURVEY NO. 1797, HENNEPIN COUNTY, MINNESOTA.

TORRENS PROPERTY
CERTIFICATE OF TITLE NO. 1362521

PARCEL 2:

EASEMENT TO CONSTRUCT, RECONSTRUCT, REPAIR, MAINTAIN, USE AND OBTAIN ACCESS OVER, ACROSS AND THROUGH THE SKYWAYS (AS DEFINED IN THE AGREEMENT, AS HEREINAFTER DEFINED) AS SET FORTH IN THAT CERTAIN SIXTH SKYWAY AGREEMENT, DATED AS OF FEBRUARY 27, 1992, RECORDED MARCH 31, 1992 AS ABSTRACT DOCUMENT NO. 5893893 AND RECORDED MAY 7, 1992 AS TORRENS DOCUMENT NO. 2248394 (THE “AGREEMENT”); AS AMENDED BY AMENDMENT TO SIXTH STREET SKYWAY AGREEMENT, DATED AS OF JANUARY 31, 2013, RECORDED JANUARY 31, 2013 AS DOCUMENT NOS. A9902192 AND T5038757.

PARCEL 3:

NON-EXCLUSIVE EASEMENT (A) FOR THE SUPPORT, MAINTENANCE, REPAIR, RECONSTRUCTION AND REMOVAL OF THE SKYWAY BRIDGE (AS DEFINED IN THE AGREEMENT, AS HEREINAFTER DEFINED), INCLUDING ALL NECESSARY CONNECTIONS OF THE SKYWAY BRIDGE TO THE SIXTH AND NICOLLET BUILDING (AS DEFINED IN THE AGREEMENT), (B) WITHIN THE SKYWAY BRIDGE FOR THE PURPOSES OF PEDESTRIAN ACCESS AND PASSAGE THROUGH THE SKYWAY BRIDGE AND REASONABLE INCIDENTAL USES, AND (C) OVER THE SIXTH AND NICOLLET INTERIOR CORRIDOR (AS DEFINED IN THE AGREEMENT) CONNECTING THE SKYWAY BRIDGE TO CITY CENTER (AS DEFINED IN THE AGREEMENT) AND OTHER STREETS AND OTHER SKYWAYS IN OR ADJACENT TO THE SIXTH AND NICOLLET BUILDING FOR PEDESTRIAN ACCESS AND PASSAGE, ALL AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED SKYWAY AGREEMENT, DATED AS OF OCTOBER 27, 2000, RECORDED OCTOBER 5, 2001 AS DOCUMENT NOS. 7554047 AND 3442897 (THE “AGREEMENT”).


A-1


PARCEL 4:

THE BENEFITS OF THE EASEMENTS AS CONTAINED IN EASEMENT AND CONSTRUCTION AGREEMENT DATED JUNE 6, 1989, RECORDED JUNE 28, 1989 AS ABSTRACT DOCUMENT NO. 5548948 AND RECORDED JULY 5, 1989 AS DOCUMENT NO. 2023731; AS AMENDED BY FIRST AMENDMENT TO EASEMENT AND CONSTRUCTION AGREEMENT, DATED MAY 9, 2014, RECORDED JULY 31, 2014 AS DOCUMENT NO. T5188720.

PARCEL 5:

THE BENEFITS OF THE EASEMENTS AS CONTAINED IN EASEMENT AND CONSTRUCTION AGREEMENT DATED JUNE 6, 1989, RECORDED JUNE 28, 1989 AS ABSTRACT DOCUMENT NO. 5548949 AND RECORDED JULY 5, 1989 AS DOCUMENT NO. 2023732; AS AMENDED BY FIRST AMENDMENT TO EASEMENT AND CONSTRUCTION AGREEMENT DATED APRIL 24, 2007, RECORDED MAY 8, 2007 AS TORRENS DOCUMENT NO. 4384031.

PARCEL 6:

BENEFITS OF THE EASEMENTS SET FORTH IN THAT CERTAIN DECLARATION OF EASEMENTS AND COVENANTS, DATED AS OF JANUARY 31, 2013, RECORDED JANUARY 31, 2013 AS TORRENS DOCUMENT NO. T5038758; AS AMENDED BY FIRST AMENDMENT TO DECLARATION OF EASEMENT AND COVENANTS, DATED FEBRUARY 21, 2014, RECORDED MARCH 7, 2014 AS DOCUMENT NO. T5156506; AS FURTHER AMENDED BY SECOND AMENDMENT TO DECLARATION OF EASEMENT AND COVENANTS, DATED MAY 9, 2014, RECORDED JULY 31, 2014 AS DOCUMENT NO. T5188532.


A-2

Exhibit 10.12
AMENDED AND RESTATED PROMISSORY NOTE
$450,000,000.00                                 November 17 , 2017
FOR VALUE RECEIVED, each of KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”), KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, as a “ Borrower ” and, collectively, jointly and severally, as “ Borrowers ”) hereby promises to pay to the order of BANK OF AMERICA, N.A., a national banking association (“ Lender ”), as one of the lenders under that certain Loan Agreement (defined below) by and among Borrowers, the lenders from time to time a party thereto (collectively, the “ Lenders ”), and Bank of America, N.A., a national banking association (together with any and all of its successors and assigns, “ Administrative Agent ”) as administrative agent for the benefit of the lenders (the “ Loan Agreement ”) dated as of November 3, 2017, without offset, in immediately available funds in lawful money of the United States of America, at the Administrative Agent’s Office as defined in the Loan Agreement, the principal sum of FOUR HUNDRED FIFTY MILLION AND NO/100 DOLLARS ($450,000,000.00) (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. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. This Note amends and restates in its entirety that certain Promissory Note, dated November 3, 2017, executed by Borrowers and payable to the order of Lender (the “ Original Note ”). In no event shall this Note be deemed to be or constitute a novation or release of Borrowers’ obligations under the Original Note.
1.      Note; Interest; Payment Schedule . This Note (as may be amended, modified, supplemented, restated and replaced from time to time, this “ Note ”) is one of the Notes referred to in the Loan Agreement and is entitled to the benefits thereof and subject to prepayment in whole or in part as provided therein. The entire principal balance of this Note then unpaid shall be due and payable at the times as set forth in the Loan Agreement. Accrued unpaid interest shall be due and payable at the times and at the interest rate as set forth in the Loan Agreement until all principal and accrued interest owing on this Note shall have been fully paid and satisfied. Any amount not paid when due and payable hereunder shall, to the extent permitted by applicable Law, bear interest and if applicable a late charge as set forth in the Loan Agreement.
2.      Security; Loan Documents . The security for this Note includes the Security Instruments (as defined in the Loan Agreement). This Note, the Security Instruments, the Loan

1

Agreement and all other documents now or hereafter securing, guaranteeing or executed in connection with the loan evidenced, in whole or in part, by this Note (the “ Loan ”), are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a “ Loan Document ” and together the “ Loan Documents .”
3.      Defaults .
(a)      Upon the occurrence and during the continuance of a Default, Administrative Agent on behalf of the Lender and the other Lenders shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts due hereunder and under the other Loan Documents, at once due and payable (and upon such declaration, the same shall be at once due and payable), to foreclose any liens and security interests securing payment hereof and to exercise any of its other rights, powers and remedies under this Note, under any other Loan Document, or at Law or in equity.
(b)      All of the rights, remedies, powers and privileges (together, “ Rights ”) of Administrative Agent on behalf of the Lender and the other Lenders provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other Rights at Law or in equity. The resort to any Right shall not prevent the concurrent or subsequent employment of any other appropriate Right. No single or partial exercise of any Right shall exhaust it or preclude any other or further exercise thereof, and every Right may be exercised at any time and from time to time. No failure by Administrative Agent, Lender and the other Lenders to exercise, and no delay in exercising any Right, including, but not limited to, the right to accelerate the maturity of this Note, shall be construed as a waiver of any Default or as a waiver of any Right. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof 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 Administrative Agent, Lender and the other Lenders to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time, or nullify any prior exercise of any such Right, (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect, or (iii) in any way excuse the existence of a Default.
(c)      If any Borrower sues any holder in connection with this Note or any other Loan Document and does not prevail, then Borrowers agree to pay to each such holder to the extent required under Section 4.15 of the Loan Agreement, in addition to principal, interest and any other sums owing to Administrative Agent, Lender and the other Lenders hereunder and under the other Loan Documents, all costs and expenses incurred by such holder in any such suit or proceeding, including attorneys’ fees and expenses, investigation costs and all court costs.
4.      Heirs, Successors and Assigns . The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of each Borrower and Lender and their respective successors and assigns permitted by the Loan Agreement. The foregoing sentence shall not be construed to permit any Borrower to assign the Loan except as otherwise permitted under the Loan Agreement. As further provided in the Loan Agreement, Lender may, at any time, sell, transfer, or assign all or a portion of its interest in this Note, the Security Instruments and the other Loan Documents, as set forth in the Loan Agreement.

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5.      General Provisions . Time is of the essence with respect to Borrowers’ obligations under this Note. If more than one Person executes this Note as “Borrower” or “Borrowers,” all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Each Borrower and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, 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 neither Administrative Agent, Lender nor any other Lender shall 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; (e) waive the benefit of all homestead and similar exemptions as to this Note; (f) agree that their liability under this Note shall not be affected or impaired by any determination that any security interest or lien taken by Administrative Agent, Lender or any other Lender to secure this Note is invalid or unperfected; and (g) hereby subordinate any and all rights against any other Borrower and any of the 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. The words “ include ” and “ including ” shall be interpreted as if followed by the words “ without limitation .” THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY CALIFORNIA LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
6.      Notices . Any notice, request, or demand to or upon any Borrower or the holder hereof shall be deemed to have been properly given or made when delivered in accordance with the Loan Agreement.
7.      No Usury . It is expressly stipulated and agreed to be the intent of Borrowers, Administrative Agent and all Lenders at all times to comply with applicable state Law or applicable United States federal Law (to the extent that it permits a 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 Administrative Agent’s exercise of the option

3

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 Administrative Agent’s and each Lender’s express intent that all excess amounts theretofore collected by Administrative Agent or any Lender shall be credited on the principal balance of this Note and all other indebtedness 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 Lenders for the use, forbearance, or detention 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.
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.

[Signatures begin on following page.]


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IN WITNESS WHEREOF, each Borrower has duly executed and delivered this Note as of the date first above written.
KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-1


KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-2


KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]




S-3


KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer



[Signatures continue on following page.]


S-4


KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-5


KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]



S-6


KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-7


KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


S-8

Exhibit 10.13
AMENDED AND RESTATED PROMISSORY NOTE
$100,000,000.00                                 November 17 , 2017
FOR VALUE RECEIVED, each of KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”), KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, as a “ Borrower ” and, collectively, jointly and severally, as “ Borrowers ”) hereby promises to pay to the order of U.S. BANK, NATIONAL ASSOCIATION, a national banking association (“ Lender ”), as one of the lenders under that certain Loan Agreement (defined below) by and among Borrowers, the lenders from time to time a party thereto (collectively, the “ Lenders ”), and Bank of America, N.A., a national banking association (together with any and all of its successors and assigns, “ Administrative Agent ”) as administrative agent for the benefit of the lenders (the “ Loan Agreement ”) dated as of November 3, 2017, without offset, in immediately available funds in lawful money of the United States of America, at the Administrative Agent’s Office as defined in the Loan Agreement, the principal sum of ONE HUNDRED MILLION AND NO/100 DOLLARS ($100,000,000.00) (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. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. This Note amends and restates in its entirety that certain Promissory Note, dated November 3, 2017, executed by Borrowers and payable to the order of Lender (the “ Original Note ”). In no event shall this Note be deemed to be or constitute a novation or release of Borrowers’ obligations under the Original Note.
1.      Note; Interest; Payment Schedule . This Note (as may be amended, modified, supplemented, restated and replaced from time to time, this “ Note ”) is one of the Notes referred to in the Loan Agreement and is entitled to the benefits thereof and subject to prepayment in whole or in part as provided therein. The entire principal balance of this Note then unpaid shall be due and payable at the times as set forth in the Loan Agreement. Accrued unpaid interest shall be due and payable at the times and at the interest rate as set forth in the Loan Agreement until all principal and accrued interest owing on this Note shall have been fully paid and satisfied. Any amount not paid when due and payable hereunder shall, to the extent permitted by applicable Law, bear interest and if applicable a late charge as set forth in the Loan Agreement.
2.      Security; Loan Documents . The security for this Note includes the Security Instruments (as defined in the Loan Agreement). This Note, the Security Instruments, the Loan

1

Agreement and all other documents now or hereafter securing, guaranteeing or executed in connection with the loan evidenced, in whole or in part, by this Note (the “ Loan ”), are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a “ Loan Document ” and together the “ Loan Documents .”
3.      Defaults .
(a)      Upon the occurrence and during the continuance of a Default, Administrative Agent on behalf of the Lender and the other Lenders shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts due hereunder and under the other Loan Documents, at once due and payable (and upon such declaration, the same shall be at once due and payable), to foreclose any liens and security interests securing payment hereof and to exercise any of its other rights, powers and remedies under this Note, under any other Loan Document, or at Law or in equity.
(b)      All of the rights, remedies, powers and privileges (together, “ Rights ”) of Administrative Agent on behalf of the Lender and the other Lenders provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other Rights at Law or in equity. The resort to any Right shall not prevent the concurrent or subsequent employment of any other appropriate Right. No single or partial exercise of any Right shall exhaust it or preclude any other or further exercise thereof, and every Right may be exercised at any time and from time to time. No failure by Administrative Agent, Lender and the other Lenders to exercise, and no delay in exercising any Right, including, but not limited to, the right to accelerate the maturity of this Note, shall be construed as a waiver of any Default or as a waiver of any Right. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof 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 Administrative Agent, Lender and the other Lenders to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time, or nullify any prior exercise of any such Right, (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect, or (iii) in any way excuse the existence of a Default.
(c)      If any Borrower sues any holder in connection with this Note or any other Loan Document and does not prevail, then Borrowers agree to pay to each such holder to the extent required under Section 4.15 of the Loan Agreement, in addition to principal, interest and any other sums owing to Administrative Agent, Lender and the other Lenders hereunder and under the other Loan Documents, all costs and expenses incurred by such holder in any such suit or proceeding, including attorneys’ fees and expenses, investigation costs and all court costs.
4.      Heirs, Successors and Assigns . The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of each Borrower and Lender and their respective successors and assigns permitted by the Loan Agreement. The foregoing sentence shall not be construed to permit any Borrower to assign the Loan except as otherwise permitted under the Loan Agreement. As further provided in the Loan Agreement, Lender may, at any time, sell, transfer, or assign all or a portion of its interest in this Note, the Security Instruments and the other Loan Documents, as set forth in the Loan Agreement.

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5.      General Provisions . Time is of the essence with respect to Borrowers’ obligations under this Note. If more than one Person executes this Note as “Borrower” or “Borrowers,” all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Each Borrower and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, 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 neither Administrative Agent, Lender nor any other Lender shall 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; (e) waive the benefit of all homestead and similar exemptions as to this Note; (f) agree that their liability under this Note shall not be affected or impaired by any determination that any security interest or lien taken by Administrative Agent, Lender or any other Lender to secure this Note is invalid or unperfected; and (g) hereby subordinate any and all rights against any other Borrower and any of the 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. The words “ include ” and “ including ” shall be interpreted as if followed by the words “ without limitation .” THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY CALIFORNIA LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
6.      Notices . Any notice, request, or demand to or upon any Borrower or the holder hereof shall be deemed to have been properly given or made when delivered in accordance with the Loan Agreement.
7.      No Usury . It is expressly stipulated and agreed to be the intent of Borrowers, Administrative Agent and all Lenders at all times to comply with applicable state Law or applicable United States federal Law (to the extent that it permits a 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 Administrative Agent’s exercise of the option

3

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 Administrative Agent’s and each Lender’s express intent that all excess amounts theretofore collected by Administrative Agent or any Lender shall be credited on the principal balance of this Note and all other indebtedness 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 Lenders for the use, forbearance, or detention 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.
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.

[Signatures begin on following page.]


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IN WITNESS WHEREOF, each Borrower has duly executed and delivered this Note as of the date first above written.
KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-1


KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-2


KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]




S-3


KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer



[Signatures continue on following page.]


S-4


KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-5


KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]



S-6


KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-7


KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


S-8

Exhibit 10.14
AMENDED AND RESTATED PROMISSORY NOTE
$200,000,000.00                                 November 17 , 2017
FOR VALUE RECEIVED, each of KBSIII 60 SOUTH SIXTH STREET, LLC, a Delaware limited liability company (“ RBC Plaza Borrower ”), KBSIII PRESTON COMMONS, LLC, a Delaware limited liability company (“ Preston Commons Borrower ”), KBSIII STERLING PLAZA, LLC, a Delaware limited liability company (“ Sterling Plaza Borrower ”), KBSIII ONE WASHINGTONIAN, LLC, a Delaware limited liability company (“ One Washingtonian Office Tower Borrower ”), KBSIII TOWERS AT EMERYVILLE, LLC, a Delaware limited liability company (“ Towers at Emeryville Borrower ”), KBSIII TEN ALMADEN, LLC, a Delaware limited liability company (“ Ten Almaden Borrower ”), KBSIII LEGACY TOWN CENTER, LLC, a Delaware limited liability company (“ Legacy Town Center Borrower ”), and KBSIII 500 WEST MADISON, LLC, a Delaware limited liability company (“ 500 West Madison Tower Borrower ”; RBC Plaza Borrower, Preston Common Borrower, Sterling Plaza Borrower, One Washingtonian Office Tower Borrower, Towers at Emeryville Borrower, Ten Almaden Borrower, Legacy Town Center Borrower and 500 West Madison Tower Borrower shall be hereinafter referred to, individually, as a “ Borrower ” and, collectively, jointly and severally, as “ Borrowers ”) hereby promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“ Lender ”), as one of the lenders under that certain Loan Agreement (defined below) by and among Borrowers, the lenders from time to time a party thereto (collectively, the “ Lenders ”), and Bank of America, N.A., a national banking association (together with any and all of its successors and assigns, “ Administrative Agent ”) as administrative agent for the benefit of the lenders (the “ Loan Agreement ”) dated as of November 3, 2017, without offset, in immediately available funds in lawful money of the United States of America, at the Administrative Agent’s Office as defined in the Loan Agreement, the principal sum of TWO HUNDRED MILLION AND NO/100 DOLLARS ($200,000,000.00) (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. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. This Note amends and restates in its entirety that certain Promissory Note, dated November 3, 2017, executed by Borrowers and payable to the order of Lender (the “ Original Note ”). In no event shall this Note be deemed to be or constitute a novation or release of Borrowers’ obligations under the Original Note.
1.      Note; Interest; Payment Schedule . This Note (as may be amended, modified, supplemented, restated and replaced from time to time, this “ Note ”) is one of the Notes referred to in the Loan Agreement and is entitled to the benefits thereof and subject to prepayment in whole or in part as provided therein. The entire principal balance of this Note then unpaid shall be due and payable at the times as set forth in the Loan Agreement. Accrued unpaid interest shall be due and payable at the times and at the interest rate as set forth in the Loan Agreement until all principal and accrued interest owing on this Note shall have been fully paid and satisfied. Any amount not paid when due and payable hereunder shall, to the extent permitted by applicable Law, bear interest and if applicable a late charge as set forth in the Loan Agreement.

1

2.      Security; Loan Documents . The security for this Note includes the Security Instruments (as defined in the Loan Agreement). This Note, the Security Instruments, the Loan Agreement and all other documents now or hereafter securing, guaranteeing or executed in connection with the loan evidenced, in whole or in part, by this Note (the “ Loan ”), are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a “ Loan Document ” and together the “ Loan Documents .”
3.      Defaults .
(a)      Upon the occurrence and during the continuance of a Default, Administrative Agent on behalf of the Lender and the other Lenders shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts due hereunder and under the other Loan Documents, at once due and payable (and upon such declaration, the same shall be at once due and payable), to foreclose any liens and security interests securing payment hereof and to exercise any of its other rights, powers and remedies under this Note, under any other Loan Document, or at Law or in equity.
(b)      All of the rights, remedies, powers and privileges (together, “ Rights ”) of Administrative Agent on behalf of the Lender and the other Lenders provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other Rights at Law or in equity. The resort to any Right shall not prevent the concurrent or subsequent employment of any other appropriate Right. No single or partial exercise of any Right shall exhaust it or preclude any other or further exercise thereof, and every Right may be exercised at any time and from time to time. No failure by Administrative Agent, Lender and the other Lenders to exercise, and no delay in exercising any Right, including, but not limited to, the right to accelerate the maturity of this Note, shall be construed as a waiver of any Default or as a waiver of any Right. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof 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 Administrative Agent, Lender and the other Lenders to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time, or nullify any prior exercise of any such Right, (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect, or (iii) in any way excuse the existence of a Default.
(c)      If any Borrower sues any holder in connection with this Note or any other Loan Document and does not prevail, then Borrowers agree to pay to each such holder to the extent required under Section 4.15 of the Loan Agreement, in addition to principal, interest and any other sums owing to Administrative Agent, Lender and the other Lenders hereunder and under the other Loan Documents, all costs and expenses incurred by such holder in any such suit or proceeding, including attorneys’ fees and expenses, investigation costs and all court costs.
4.      Heirs, Successors and Assigns . The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of each Borrower and Lender and their respective successors and assigns permitted by the Loan Agreement. The foregoing sentence shall not be construed to permit any Borrower to assign the Loan except as otherwise permitted under the Loan Agreement. As further provided in the Loan Agreement, Lender may, at any time, sell, transfer, or

2

assign all or a portion of its interest in this Note, the Security Instruments and the other Loan Documents, as set forth in the Loan Agreement.
5.      General Provisions . Time is of the essence with respect to Borrowers’ obligations under this Note. If more than one Person executes this Note as “Borrower” or “Borrowers,” all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Each Borrower and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, 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 neither Administrative Agent, Lender nor any other Lender shall 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; (e) waive the benefit of all homestead and similar exemptions as to this Note; (f) agree that their liability under this Note shall not be affected or impaired by any determination that any security interest or lien taken by Administrative Agent, Lender or any other Lender to secure this Note is invalid or unperfected; and (g) hereby subordinate any and all rights against any other Borrower and any of the 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. The words “ include ” and “ including ” shall be interpreted as if followed by the words “ without limitation .” THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY CALIFORNIA LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.
6.      Notices . Any notice, request, or demand to or upon any Borrower or the holder hereof shall be deemed to have been properly given or made when delivered in accordance with the Loan Agreement.
7.      No Usury . It is expressly stipulated and agreed to be the intent of Borrowers, Administrative Agent and all Lenders at all times to comply with applicable state Law or applicable United States federal Law (to the extent that it permits a 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

3

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 Administrative Agent’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 Administrative Agent’s and each Lender’s express intent that all excess amounts theretofore collected by Administrative Agent or any Lender shall be credited on the principal balance of this Note and all other indebtedness 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 Lenders for the use, forbearance, or detention 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.
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.

[Signatures begin on following page.]


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IN WITNESS WHEREOF, each Borrower has duly executed and delivered this Note as of the date first above written.
KBSIII 60 SOUTH SIXTH STREET, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-1


KBSIII PRESTON COMMONS, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION IX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-2


KBSIII STERLING PLAZA, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION VIII, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]




S-3


KBSIII ONE WASHINGTONIAN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION X, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer



[Signatures continue on following page.]


S-4


KBSIII TOWERS AT EMERYVILLE, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XXI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-5


KBSIII TEN ALMADEN, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XIX, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]



S-6


KBSIII LEGACY TOWN CENTER, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION III, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner

By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


[Signatures continue on following page.]


S-7


KBSIII 500 WEST MADISON, LLC,
a Delaware limited liability company

By:    KBSIII REIT ACQUISITION XI, LLC,
a Delaware limited liability company,
its sole member

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

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

By:    KBS REAL ESTATE INVESTMENT TRUST III, INC.,
a Maryland corporation,
its general partner


By:     /s/ Charles J. Schreiber, Jr.        
Charles J. Schreiber, Jr.,
Chief Executive Officer


S-8

Exhibit 21.1
Subsidiaries of KBS REIT III as of January 9, 2018
CA Capital Management Services II, LLC
KBSIII REIT Acquisition I, LLC
Hardware East Village, LLC
KBSIII REIT Acquisition II, LLC
Hardware Village Community, LLC
KBSIII REIT Acquisition III, LLC
Hardware West Village, LLC
KBSIII REIT Acquisition IV, LLC
KBS Debt Holdings III, LLC
KBSIII REIT Acquisition V, LLC
KBS Debt Holdings III X, LLC
KBSIII REIT Acquisition VI, LLC
KBS Limited Partnership III
KBSIII REIT Acquisition VII, LLC
KBS REIT Holdings III LLC
KBSIII REIT Acquisition VIII, LLC
KBS REIT Properties III, LLC
KBSIII REIT Acquisition IX, LLC
KBS REIT III Finance LLC
KBSIII REIT Acquisition X, LLC
KBSIII 101 South Hanley, LLC
KBSIII REIT Acquisition XI, LLC
KBSIII 155 North 400 West, LLC
KBSIII REIT Acquisition XII, LLC
KBSIII 1550 West McEwan Drive, LLC
KBSIII REIT Acquisition XIII, LLC
KBSIII 171 17th Street, LLC
KBSIII REIT Acquisition XIV, LLC
KBSIII 201 17 th  Street, LLC
KBSIII REIT Acquisition XV, LLC
KBSIII 201 Spear Street, LLC
KBSIII REIT Acquisition XVI, LLC
KBSIII 222 Main, LLC
KBSIII REIT Acquisition XVII, LLC
KBSIII 3001 Washington, LLC
KBSIII REIT Acquisition XVIII, LLC
KBSIII 3003 Washington, LLC
KBSIII REIT Acquisition XIX, LLC
KBSIII 3003 Washington Member, LLC
KBSIII REIT Acquisition XX, LLC
KBSIII 3003 Washington Member TRS Member, LLC
KBSIII REIT Acquisition XXI, LLC
KBSIII 500 West Madison, LLC
KBSIII REIT Acquisition XXII, LLC
KBSIII 515 Congress, LLC
KBSIII REIT Acquisition XXIII, LLC
KBSIII 60 South Sixth Street, LLC
KBSIII REIT Acquisition XXIV, LLC
KBSIII Almaden Financial Plaza, LLC
KBSIII REIT Acquisition XXV, LLC
KBSIII Anchor Centre, LLC
KBSIII REIT Acquisition XXVI, LLC
KBSIII Carillon, L.P.
KBSIII REIT Acquisition XXVII, LLC
KBSIII CrossPoint At Valley Forge, LLC
KBSIII REIT Acquisition XXVIII, LLC
KBSIII CrossPoint At Valley Forge Trust
KBSIII REIT Acquisition XXIX, LLC
KBSIII Domain Gateway, LLC
KBSIII REIT Acquisition XXX, LLC
KBSIII Hardware Village, LLC
KBSIII REIT Acquisition XXXI, LLC
KBSIII Las Cimas IV, LLC
KBSIII REIT Acquisition XXXII, LLC
KBSIII Legacy Town Center, LLC
KBSIII Reston Square, LLC
KBSIII One Washingtonian, LLC
KBSIII Rocklin Corporate Center, LLC
KBSIII Park Place Village, LLC
KBSIII Sterling Plaza, LLC
KBSIII Park Place Village Hotel Site, LLC
KBSIII Tower at Lake Carolyn, LLC
KBSIII Preston Commons, LLC
KBSIII Village Center Station, LLC
KBSIII Promenade At Eilan, LLC
KBSIII Towers at Emeryville, LLC
KBSIII Promenade One, LLC
KBSIII Ten Almaden, LLC
KBSIII Promenade One Mezz, LLC
KBSIII Village Center Station II Member, LLC
KBSIII Promenade Two, LLC
KBS III TRS Services LLC
KBSIII Promenade Two Mezz, LLC
Village Center Station II Owner, LLC
 
 
 
 



Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (Post-Effective Amendment No. 26 to Form S-11 on Form S-3 No. 333-164703) of KBS Real Estate Investment Trust III, Inc. and in the related Prospectus of our report dated March 8, 2018, with respect to the consolidated financial statements and schedule of KBS Real Estate Investment Trust III, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2017.

/s/ Ernst & Young LLP
Irvine, California
March 8, 2018




Exhibit 31.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles J. Schreiber, Jr., certify that:
1.
I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust III, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
March 8, 2018
By:
/ S / C HARLES  J. S CHREIBER , J R .    
 
 
 
Charles J. Schreiber, Jr.
 
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
 
(principal executive officer)




Exhibit 31.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Jeffrey K. Waldvogel, certify that:
1.
I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust III, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
March 8, 2018
By:
/S/ J EFFREY  K. W ALDVOGEL
 
 
 
Jeffrey K. Waldvogel
 
 
 
Chief Financial Officer
 
 
 
(principal financial officer)




Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust III, Inc. (the “Registrant”) for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles J. Schreiber, Jr., Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:
March 8, 2018
By:
/ S / C HARLES  J. S CHREIBER , J R .     
 
 
 
Charles J. Schreiber, Jr.
 
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
 
(principal executive officer)




Exhibit 32.2
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust III, Inc. (the “Registrant”) for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey K. Waldvogel, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:
March 8, 2018
By:
/S/ J EFFREY  K. W ALDVOGEL
 
 
 
Jeffrey K. Waldvogel
 
 
 
Chief Financial Officer
 
 
 
(principal financial officer)




Exhibit 99.2
CONSENT OF INDEPENDENT VALUATION EXPERT
We hereby consent to the : (a) reference to our name and description of our role in the (i) valuation process of certain of the real estate properties (the “Appraised Properties”) of KBS Real Estate Investment Trust III, Inc. (the “Company”) and (ii) valuation process of the Company being included or incorporated by reference into the Company’s Registration Statement on Form S-3 (File No. 333-164703), and the related prospectus, included therein, by being filed on this Annual Report on Form 10-K for the fiscal year ended December 31, 2017, to be filed on the date hereof (the “Form 10-K”); and (b) inclusion in the Form 10-K that the total appraised value of the Appraised Properties of $3.9 billion represents the sum of the appraised values of each of the Appraised Properties contained in the individual property appraisal reports provided by us to the Company as of the date of each such report. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.
 
 
March 8, 2018
/s/ Duff & Phelps, LLC
 
Duff & Phelps, LLC