-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CNWbz68YR/tdbo6O8WHG4n/96f5Gn+Ie20nqJqvb5HXcfi8wmA/e028FHJ/nWhoQ ix1v07n7npd/gmdLkqWgiA== 0000898430-97-004914.txt : 19971117 0000898430-97-004914.hdr.sgml : 19971117 ACCESSION NUMBER: 0000898430-97-004914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KILROY REALTY CORP CENTRAL INDEX KEY: 0001025996 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 954598246 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12675 FILM NUMBER: 97721072 BUSINESS ADDRESS: STREET 1: 2250 E IMPERIAL HWY STREET 2: C/O KILROY INDUSTRIES CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3105635500 MAIL ADDRESS: STREET 1: C/O KILROY INDUSTRIES STREET 2: 2250 E IMPERIAL HIGHWAY #1200 CITY: EL SEGUNDO STATE: CA ZIP: 90245 10-Q 1 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 9/30/97 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 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 1-12675 KILROY REALTY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 95-4598246 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) NUMBER) 2250 EAST IMPERIAL HIGHWAY, SUITE 1200, EL SEGUNDO, CALIFORNIA 90245 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ---------------- (310) 563-5500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) N/A (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) ---------------- 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 [_] As of November 13, 1997, 24,475,000 shares of common stock, par value $.01 per share, were outstanding. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I--FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Consolidated balance sheet of Kilroy Realty Corporation as of September 30, 1997 (Unaudited) and Combined Balance Sheet of the Kilroy Group (predecessor to Kilroy Realty Corporation) as of December 31, 1996........................................... 3 Consolidated Statement of Operations of Kilroy Realty Corporation for the period February 1, 1997 to September 30, 1997 and the Combined Statements of Operations of the Kilroy Group for the period January 1, 1997 to January 31, 1997 and the nine months ended September 30, 1996 (Unaudited)........... 4 Consolidated Statement of Operations of Kilroy Realty Corporation for the three months ended September 30, 1997 and the Combined Statement of Operations of the Kilroy Group for the three months ended September 30, 1996 (Unaudited).......... 5 Consolidated Statement of Cash Flows of Kilroy Realty Corporation for the nine months ended September 30, 1997 and the Combined Statement of Cash Flows of the Kilroy Group for the nine months ended September 30, 1996 (Unaudited)........... 6 Notes to the Kilroy Realty Corporation Consolidated and Kilroy Group Combined financial statements............................ 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................... 14 PART II--OTHER INFORMATION Item 1. LEGAL PROCEEDINGS.............................................. 20 Item 2. CHANGES IN SECURITIES.......................................... 20 Item 3. DEFAULTS UPON SENIOR SECURITIES................................ 20 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 20 Item 5. OTHER INFORMATION.............................................. 20 Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................... 20
2 PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KILROY REALTY CORPORATION (THE "COMPANY") AND KILROY GROUP (PREDECESSOR TO THE COMPANY) CONSOLIDATED BALANCE SHEET OF THE COMPANY AND COMBINED BALANCE SHEET OF THE KILROY GROUP (IN THOUSANDS, EXCEPT SHARE DATA)
KILROY REALTY CORPORATION KILROY GROUP SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (UNAUDITED) ASSETS RENTAL PROPERTIES (Notes 1, 2, 3 and 5): Land.............................................. $ 124,276 $ 12,490 Buildings and improvements........................ 462,902 214,847 --------- --------- Total rental properties......................... 587,178 227,337 Accumulated depreciation and amortization......... (117,552) (109,668) --------- --------- Rental properties, net.......................... 469,626 117,669 CASH AND CASH EQUIVALENTS........................... 74,890 RESTRICTED CASH..................................... 4,634 TENANT RECEIVABLES, NET............................. 3,764 3,042 INVESTMENT IN SUBSIDIARY............................ 267 ESCROW DEPOSITS..................................... 1,179 DEFERRED CHARGES AND OTHER ASSETS, NET (Note 4)..... 18,184 7,628 --------- --------- TOTAL............................................. $ 572,544 $ 128,339 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Mortgage debt (Note 5)............................ $ 104,054 $ 223,297 Accounts payable and accrued expenses............. 9,794 7,614 Accrued dividends (Note 8)........................ 10,576 Accrued cost of option buy-out and tenant improvement (Note 2)............................. 1,390 Rents received in advance and tenant security deposits......................................... 10,902 9,815 --------- --------- Total liabilities............................... 135,326 242,116 COMMITMENTS AND CONTINGENCIES (Note 6).............. MINORITY INTEREST................................... 45,120 STOCKHOLDERS' EQUITY: Preferred Stock, $.01 par value, 30,000,000 shares authorized: none issued and outstanding.......... Common stock, $.01 par value, 150,000,000 shares authorized: 24,475,000 shares issued and outstanding ..................................... 245 Additional paid-in capital........................ 397,445 Distributions in excess of earnings/(deficit)..... (5,592) (113,777) --------- --------- Total stockholders' equity/(accumulated deficit)....................................... 392,098 (113,777) --------- --------- TOTAL............................................. $ 572,544 $ 128,339 ========= =========
See accompanying notes to consolidated and combined financial statements. 3 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
KILROY KILROY KILROY GROUP GROUP REALTY CORPORATION JANUARY 1, NINE MONTHS FEBRUARY 1, 1997 TO ENDED 1997 TO JANUARY 31, SEPTEMBER 30, SEPTEMBER 30, 1997 1997 1996 ------------------ ----------- ------------- REVENUES: Rental income................... $ 35,878 $2,760 $26,473 Tenant reimbursements........... 3,441 275 2,583 Interest income................. 2,875 Development services............ 14 580 Other income.................... 454 4 65 ---------- ------ ------- Total revenues................ 42,648 3,053 29,701 ---------- ------ ------- EXPENSES: Property expenses............... 5,999 579 5,042 Real estate taxes............... 1,925 106 970 General and administrative...... 3,652 78 1,607 Ground lease.................... 670 64 579 Development expense............. 46 584 Option buy-out cost............. 3,150 Interest expense................ 6,714 1,895 16,234 Depreciation and amortization... 8,404 787 6,838 ---------- ------ ------- Total expenses................ 27,364 3,555 35,004 ---------- ------ ------- INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARY, MINORITY INTEREST AND EXTRAORDINARY GAINS............................ 15,284 (502) (5,303) EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY....................... 187 MINORITY INTEREST................. (2,231) ---------- ------ ------- INCOME (LOSS) BEFORE EXTRAORDINARY GAINS............................ 13,240 (502) (5,303) EXTRAORDINARY GAINS............... 3,204 20,095 ---------- ------ ------- NET INCOME........................ $ 13,240 $2,702 $14,792 ========== ====== ======= Net income per common share....... $ .82 ========== Weighted average shares outstanding...................... 16,162,243 ==========
See accompanying notes to consolidated and combined financial statements. 4 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
KILROY REALTY CORPORATION KILROY GROUP THREE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1996 ------------- ------------- REVENUES: Rental income................................... $ 16,418 $ 8,879 Tenant reimbursements........................... 1,631 793 Interest income................................. 900 Development services............................ 122 Other income.................................... 158 54 ---------- ------- Total revenues................................ 19,107 9,848 ---------- ------- EXPENSES: Property expenses............................... 2,724 1,757 Real estate taxes............................... 998 337 General and administrative...................... 1,477 543 Ground lease.................................... 206 189 Development expense............................. 193 Sale of air rights.............................. 3,150 Interest expense................................ 2,637 5,508 Depreciation and amortization................... 3,660 2,279 ---------- ------- Total expenses................................ 11,702 13,956 ---------- ------- INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARY AND MINORITY INTEREST................. 7,405 (4,108) EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY..... 52 MINORITY INTEREST................................. (977) ---------- ------- NET INCOME (LOSS)................................. $ 6,480 $(4,108) ========== ======= Net income per common share....................... $ .34 ========== Weighted average shares outstanding............... 18,931,522 ==========
See accompanying notes to consolidated and combined financial statements. 5 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1997 1996 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.............................................. $ 15,942 $ 14,792 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization......................... 9,191 6,838 Provision for bad debts............................... 172 920 Extraordinary gain.................................... (3,204) (20,095) Minority interest in earnings......................... 2,231 Equity in income of unconsolidated subsidiary......... 187 Changes in assets and liabilities: Tenant receivables.................................. (894) (310) Deferred charges and other assets................... (9,157) 929 Accounts payable and accrued expenses............... 2,180 1,149 Accrued cost of option buy-out and tenant improvements....................................... (1,390) 3,650 Rents received in advance and tenant security deposits........................................... 1,087 272 --------- -------- Net cash provided by operating activities......... 16,345 8,145 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for rental properties...................... (349,212) (2,140) Escrow deposits......................................... (1,179) Net investment in and advances to unconsolidated subsidiary............................................. (454) --------- -------- Net cash used in investing activities............. (350,845) (2,140) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of stock..................... 543,764 Proceeds received from debt............................. 98,000 21,057 Principal payments on debt.............................. (219,406) (18,256) Cash paid for loan costs................................ (3,989) (2,617) Restricted cash......................................... (4,634) Dividends paid.......................................... (11,125) Deemed and actual contributions from (distributions to) partners, net.......................................... 6,780 (6,189) --------- -------- Net cash provided by (used in) financing activities....................................... 409,390 (6,005) --------- -------- Net increase in cash and cash equivalents................. 74,890 Cash and cash equivalents, beginning of period ........... --------- -------- Cash and cash equivalents, end of period ................. $ 74,890 $ 0 ========= ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest.................................. $ 10,980 $ 14,289 ========= ======== NON-CASH TRANSACTIONS: Accrual of dividend payable............................. $ 10,576 ========= Issuance of units of Kilroy Realty, L.P. to acquire properties............................................. $ 3,979 ========= Issuance of note payable to acquire properties.......... $ 6,650 =========
See accompanying notes to consolidated and combined financial statements. 6 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) 1. ORGANIZATION, FORMATION TRANSACTIONS AND OTHER CAPITAL TRANSACTIONS Kilroy Realty Corporation (the "Company") was incorporated in Maryland in September 1996 and is the successor to the operations of the Kilroy Group ("KG"). KG consists of the combination of Kilroy Industries ("KI") and various entities, the properties of which were under common control of KI and/or its stockholders, including John B. Kilroy, Sr. and John B. Kilroy, Jr. The Company's Chairman of the Board of Directors, and President and Chief Executive Officer are John B. Kilroy, Sr. and John B. Kilroy, Jr., respectively. KI has historically provided acquisition, development, financing, construction and leasing services with respect to the properties held by KG. KI has also provided development services to third-party owners of properties for a fee. The accompanying combined financial statements of KG have been presented on a combined basis because of common ownership and management and because the entities were the subject of a business combination in 1997 with the Company. On January 31, 1997, the Company completed an initial public offering of 12,500,000 shares of its $.01 par value per share, common stock. The offering price was $23.00 per share resulting in gross proceeds of $287,500,000. On February 7, 1997, the underwriters exercised their over-allotment option and, accordingly, the Company issued 1,875,000 additional shares of common stock and received gross proceeds of $43,125,000. The aggregate proceeds to the Company, net of underwriters' discount, advisory fee and offering costs were approximately $302,800,000. The initial public offering, including the exercise of the over-allotment option in connection therewith, is hereinafter referred to as the "IPO". The following transactions occurred simultaneously with the completion of the IPO (collectively, the "Formation Transactions"): . The Company consummated various purchase agreements to acquire four properties for approximately $58,000,000 in cash. The four properties had aggregate operating revenues of approximately $9,100,000 and net operating income (before depreciation, amortization and interest) of approximately $6,300,000 during the year ended December 31, 1996. . The Company became the sole general partner of Kilroy Realty, L.P. (the "Operating Partnership"). Upon completion of the IPO, the Company contributed substantially all of the net proceeds of the Offering in exchange for an approximate 84.5% interest in the Operating Partnership. The Company also contributed cash to purchase 100% of Kilroy Realty Finance, Inc. ("Finance Inc."), which was formed to serve as the general partner of Kilroy Realty Finance Partnership, L.P. (the "Finance Partnership"). The Operating Partnership executed various option and purchase agreements whereby it issued 2,652,374 units in the Operating Partnership ("Units"), representing an approximate 15.5% partnership interest, to the continuing investors in exchange for interest in properties. The continuing investors included John B. Kilroy, Sr. and John B. Kilroy, Jr., certain family members and certain entities owned by them. The Operating Partnership contributed certain properties to the Finance Partnership in exchange for a limited partnership interest therein. All properties acquired by the Company are held by or through the Operating Partnership or the Finance Partnership. Unless otherwise indicated, all references to the Company include the Operating Partnership, the Finance Partnership and Finance Inc. . The Finance Partnership and the Operating Partnership borrowed $84,000,000 and $12,000,000, respectively, under two mortgage loans. . The Company used a portion of the IPO proceeds and the proceeds of the new mortgage borrowings of $96,000,000 to repay approximately $219,000,000 of indebtedness. 7 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) . The Operating Partnership contributed certain assets valued at approximately $100,000 to Kilroy Services, Inc. for 100% of its non- voting preferred common stock, representing a 5% ownership interest and a 95% economic interest in Kilroy Services, Inc. The voting common stock is owned entirely by John B. Kilroy, Sr. and John B. Kilroy, Jr. In June 1997, the Operating Partnership issued 165,102 limited partnership units, with an aggregate value of approximately $3,979,000, in connection with certain property acquisitions (See Note 3). On August 20, 1997, the Company completed a follow-on public offering (the "August Offering") of 10,000,000 shares of, $.01 par value per share, common stock. The offering price was $25.50 per share resulting in gross proceeds of $255,000,000. The aggregate proceeds to the Company, net of underwriter's discount, advisory fee and offering costs were approximately $241,000,000. The proceeds were used to pay outstanding indebtedness and to fund acquisitions. As a result of the capital transactions referred to above, as of September 30, 1997, the Company owned an 89.7% general partnership interest in the Operating Partnership. Giving effect to the transaction referenced in Note 8, as of November 13, 1997, the Company owned an 87.8% general partnership interest in the Operating Partnership. The Company is engaged in the acquisition, development, ownership and operation of office and industrial properties located in California, Washington and Arizona. As of September 30, 1997, the Company owned 37 office properties encompassing approximately 3,100,000 rentable square feet and 54 industrial properties encompassing approximately 3,800,000 rentable square feet. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the consolidated financial position of the Company, the Operating Partnership and the Finance Partnership at September 30, 1997 and the results of their operations for the period from February 1, 1997 to September 30, 1997. Subsequent to the IPO, the operating results of the service business currently conducted by Kilroy Services, Inc. are reflected in the accompanying financial statements on the equity method of accounting. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The combined financial statements of KG reflect a combination of real estate properties, which were under common control of KI and/or its stockholders, including John B. Kilroy, Sr. and John B. Kilroy, Jr., and which were contributed to the Operating Partnership for 2,652,374 Units upon consummation of the IPO. KG is considered the predecessor entity to the Company due to common ownership and management; therefore, its combined financial statements are presented for comparative purposes. The accompanying interim financial statements have been prepared by the Company's management in accordance with generally accepted accounting principles and in conjunction with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the interim financial statements presented herein, reflect all adjustments of a normal and recurring nature which are necessary to fairly state the interim financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the eleven months ended December 31, 1997. These financial statements should be read in conjunction with the Company's prospectus dated January 28, 1997 and the Kilroy Group's audited financial statements and the notes thereto included in the Kilroy Group's Annual Report on Form 10-K for the year ended December 31, 1996. 8 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) The Company intends to qualify as a real estate investment trust ("REIT") under Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code") beginning with the taxable year ending December 31, 1997. As a REIT, the Company will not generally be subject to corporate Federal income taxes as long as it satisfies certain technical requirements of the Code relating to composition of its income and assets, and requirements relating to distributions of taxable income to shareholders. SIGNIFICANT ACCOUNTING POLICIES: Restricted cash--Restricted cash consists of cash held as collateral to provide credit enhancement for the mortgage loans payable and cash reserves for capital expenditures and tenant improvements. Accrued cost of option buy-out and tenant improvements--In September 1996, KG amended the terms of certain of their lease agreements. Such amendments included a $500,000 allowance for tenant improvements. In addition, KG agreed to pay $3,150,000 in consideration for the cancellation of an option to purchase a 50% equity interest in Kilroy Airport Center at El Segundo, which was reflected in the statement of operations as of December 31, 1996. In November 1996, $2,260,000 of the total liability of $3,650,000, was paid by KI and its stockholders. In January 1997, $100,000 of the amount was paid by KG and the remaining balance was paid by the Company with the proceeds of the Offering. Recent Pronouncements--In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128 Earnings Per Share. This statement establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly held common stock or potential common stock. This statement simplifies the standards for computing EPS previously found in APB Opinion No. 15, Earnings per Share, and makes them comparable to international EPS standards. This statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The Company has not yet determined the impact of adopting this statement. In June 1997, the FASB issued SFAS No. 130 Reporting for Comprehensive Income and No. 131, Disclosures about Segments of an Enterprise and Related Information. These statements are effective for financial statements issued for periods beginning after December 15, 1997. The Company has not yet determined the impact of adopting these statements. 9 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) 3. PROPERTY ACQUISITIONS For the nine months ended September 30, 1997, the Company completed a series of transactions to acquire 23 office buildings and 42 industrial buildings in California (excluding the properties acquired through the Formation Transactions, See Note 1), as follows:
NUMBER OF ACREAGE/ LOCATION OF PURCHASE PRICE DESCRIPTION BUILDINGS SQUARE FOOTAGE PROPERTY (MILLIONS) -------------------- --------- --------------- ------------------ -------------- Undeveloped land 15 acres Foothill Ranch, CA $ 3.2 Undeveloped land 10 acres Brea, CA 3.3 ------ Total land 6.5 ------ Office buildings 5 115,000 sq. ft. Anaheim, CA 8.0 Office building 1 91,000 sq. ft. Calabasas, CA 11.6 Office buildings 2 80,000 sq. ft. Torrance, CA 6.6 Office buildings 3 95,000 sq. ft. Santa Monica, CA 31.4 Office buildings 4 276,000 sq. ft. Camarillo, CA 24.2 Office building 1 67,000 sq. ft. Irvine, CA 9.8 Office buildings 2 125,000 sq. ft. Santa Ana, CA 15.6 Office building 1 31,000 sq. ft. Riverside, CA 4.4 Office building 1 22,000 sq. ft. Riverside, CA 1.8 Office building 1 61,000 sq. ft. Brea, CA 6.4 Office building 1 27,000 sq. ft. Irvine, CA 3.0 Office building 1 44,000 sq. ft. Santa Monica, CA 8.2 Industrial building 1 109,000 sq. ft. Anaheim, CA 5.3 Industrial building 1 158,000 sq. ft. Irvine, CA 12.1 Industrial buildings 7 276,000 sq. ft. Brea, CA 15.1 Industrial building 1 154,000 sq. ft. Ontario, CA 5.4 Industrial buildings 6 276,000 sq. ft. Garden Grove, CA 13.8 Industrial buildings 10 159,000 sq. ft. Irvine, CA 15.0 Industrial buildings 3 165,000 sq. ft. Diamond Bar, CA 8.6 Industrial building 1 83,000 sq. ft. Garden Grove, CA 4.5 Industrial building 1 245,000 sq. ft. Irvine, CA 14.2 Industrial building 1 64,000 sq. ft. Garden Grove, CA 3.0 Industrial buildings 7 482,000 sq. ft. Various 43.2 Industrial building 1 51,000 sq. ft. Costa Mesa, CA 4.2 Industrial building 1 144,000 sq. ft. Anaheim, CA 7.1 Industrial building 1 144,000 sq. ft. Anaheim, CA 8.1 ------ Total buildings 290.6 ------ Total $297.1 ======
These acquisitions were funded with existing working capital and proceeds from the IPO and the August Offering. In addition, the Company issued a promissory note in the amount of $6,650,000 in conjunction with the purchase of one property in Santa Monica, California (see Note 5), and the Operating Partnership issued 165,102 limited partnership units valued at approximately $3,979,000 in conjunction with the purchase of one office building and ten industrial buildings located in Irvine, California (See Note 1). 10 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) 4. DEFERRED CHARGES AND OTHER ASSETS Deferred charges and other assets are summarized as follows for the Company at September 30, 1997 and the Kilroy Group at December 31, 1996, respectively:
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (IN THOUSANDS) Deferred assets: Deferred financing costs....................... $ 3,989 $ 2,968 Deferred leasing costs......................... 14,641 11,563 ------- ------- Total deferred assets.......................... 18,630 14,531 Accumulated amortization......................... (6,664) (7,728) ------- ------- Deferred assets, net............................. 11,966 6,803 Prepaid expenses and other....................... 6,218 825 ------- ------- Total deferred charges and other assets, net..... $18,184 $ 7,628 ======= =======
5. DEBT At September 30, 1997, mortgage debt consists of an $83,404,000 mortgage loan (the "Permanent Loan") secured by certain of the properties, a $14,000,000 mortgage loan (the "SeaTac Loan") secured by an office complex in Seattle, Washington and a $6,650,000 promissory note (the "Promissory Note") secured by an office building in Santa Monica. The Permanent Loan requires monthly principal and interest payments based on an interest rate of 8.35%, amortizes over a 25-year period and matures in 2022, but is subject to increases in the effective interest rate beginning in 2005. The SeaTac Loan requires monthly payments of interest based on a variable rate of LIBOR plus 1.5% (7.2% at September 30, 1997). The SeaTac Loan matures in January 1998 with an option to extend for six months. The Promissory Note was repaid on October 31, 1997. As of September 30, 1997 the loans have a weighted average interest rate of 8.2%. Scheduled principal payments for the above mortgage loans at September 30, 1997 are as follows: Year Ending December 31, 1997 (3 months).............................................. $ 6,914 1998......................................................... 15,115 1999......................................................... 1,212 2000......................................................... 1,317 2001......................................................... 1,431 Thereafter................................................. 78,065 -------- Total.................................................... $104,054 ========
As of September 30, 1997 the Company maintained a $200,000,000 secured revolving credit facility (the "Credit Facility") which was increased to $250,000,000 on October 31, 1997. The Credit Facility matures on May 30, 1999, with an option to extend for one year, and bears interest based on a variable rate that ranges from LIBOR plus 1.38% to LIBOR plus 1.5% depending on the Company's leverage ratios. The Credit Facility is used to finance property acquisitions and development and for general corporate purposes. As of September 30, 1997, there are no borrowings outstanding and the Company has $153,000,000 available under the Credit Facility. Availability under the Credit Facility is subject to, among other things, the value of the underlying collateral securing it. 11 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) Subsequent to September 30, 1997, the Company assumed $33,600,000 in mortgage debt in connection with the purchase of certain properties. The debt is comprised of a $11,700,000 note, a $8,000,000 note and a $13,900,000 note. The $11,700,000 note bears interest at 8.43% and matures on November 1, 2018. The $8,000,000 note bears interest at 8.21% and matures on October 1, 2013. The $13,900,000 note bears interest at 8.45% and matures on December 1, 2005. Principal and interest are payable monthly on all three notes. The carrying value of the fixed rate Permanent Loan and the Promissory Note at September 30, 1997 approximate fair value based on terms currently offered to the Company. The carrying values of the variable rate SeaTac Loan also approximates fair value at September 30, 1997. In January 1997, KG recorded an extraordinary gain of $3,204,000 consisting of approximately $1,283,000 of unamortized deferred financing fees written off and a net gain on partial forgiveness of a mortgage obligation of $4,487,000. 6. COMMITMENTS AND CONTINGENCIES Operating Leases--The Company has a noncancelable ground lease obligation on Kilroy Airport Center Long Beach with an initial lease period expiring on July 17, 2035, classified as an operating lease. Further, the Company has noncancelable ground lease obligations on the SeaTac Office Center expiring on December 31, 2032, with an option to extend the leases for an additional 30 years. Rentals are subject to adjustments every five years based on changes in the Consumer Price Index. The minimum commitments under these leases as of September 30, 1997 are as follows (in thousands): Year Ending December 31, 1997 (3 months)............................................... $ 270 1998.......................................................... 1,099 1999.......................................................... 1,260 2000.......................................................... 1,394 2001.......................................................... 1,394 Thereafter.................................................. 46,004 ------- Total..................................................... $51,421 =======
7. STOCK OPTIONS The Company has established a stock option and incentive plan for the purpose of attracting and retaining qualified executives and to reward them for superior performance in achieving the Company's business goals and enhancing stockholder value. As of September 30, 1997, 1,100,000 of the Company's authorized options to purchase shares have been granted to directors, officers and employees and an additional 300,000 have been reserved for issuance under such plan. Subsequent to September 30, 1997, 95,000 options were granted to executives and a newly appointed director of the Company. The term of each option is ten years from the date of grant. Each option vests 33 1/3% per year over three years beginning on the first anniversary date of the grant and is exercisable at a price per share equal to the fair market value on the date of grant. 12 KILROY REALTY CORPORATION CONSOLIDATED AND KILROY GROUP COMBINED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED) 8. SUBSEQUENT EVENTS Subsequent to September 30, 1997, the Company acquired the following properties with proceeds from the August Offering, borrowings on the Credit Facility, the assumption of $33,600,000 of mortgage debt and the issuance of 588,736 Operating Partnership units valued at approximately $15,284,000. Eight of the properties were acquired from The Allen Group, a San Diego-based real estate and investment company.
DESCRIPTION ACREAGE/SQUARE FOOTAGE LOCATION OF PROPERTY PURCHASE PRICE (MILLIONS) ----------- ---------------------- -------------------- ------------------------- Office building 141,000 sq. ft San Diego, CA $ 20.4 Office building 93,000 sq. ft San Diego, CA 11.8 Office building 130,000 sq. ft San Diego, CA 12.9 Office building 90,000 sq. ft San Diego, CA 9.6 Industrial building 165,000 sq. ft Stockton, CA 11.3 Industrial building 103,000 sq. ft Las Vegas, NV 4.4 Industrial building 107,000 sq. ft Las Vegas, NV 4.7 Industrial building 78,000 sq. ft. Temecula, CA 4.5 ------ Subtotal/Properties acquired from The Allen Group 79.6 Office building 124,000 sq. ft. Riverside, CA 22.5 Industrial building 100,000 sq. ft. Santa Ana, CA 6.0 Industrial building 291,000 sq. ft. Anaheim, CA 9.5 ------ Total $117.6 ======
On October 10, 1997 dividends of $10,576,000 were paid to stockholders' and unitholders' of record on September 30, 1997. 9. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The accompanying unaudited pro forma information for the nine months ended September 30, 1997 and 1996 are presented as if the Formation Transactions, August Offering and Acquisitions, as described in Note 1 and Note 3, respectively, to the financial statements had occurred on January 1, 1996. Such pro forma information is based upon the historical consolidated financial statements of the Company and the Kilroy Group and should be read in conjunction with the consolidated and combined financial statements and the notes thereto. This unaudited pro forma condensed consolidated information does not purport to represent what the actual results of operations of the Company would have been assuming such Formation Transactions, August Offering and Acquisitions had been completed as set forth above, nor do they purport to predict the results of operations for future periods. PRO FORMA INCOME STATEMENT (IN THOUSANDS, EXCEPT SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1997 1996 --------------- --------------- Total revenues................................ $ 59,084 $ 58,195 =============== =============== Net income before extraordinary items......... $ 20,811 $ 16,849 =============== =============== Net income.................................... $ 24,015 $ 16,849 =============== =============== Income per share of common stock.............. $ 0.98 $ 0.69 =============== =============== Weighted average number of shares of common stock outstanding............................ 24,475,000 24,475,000 =============== ===============
13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion relates to the consolidated financial statements of Kilroy Realty Corporation (the "Company") and the combined financial statements of the Company's predecessor, the Kilroy Group, that should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K of the Company for the year ended December 31, 1996. OVERVIEW AND BACKGROUND The Company owns, operates and develops commercial and industrial real estate, primarily in Southern California. The Company was formed in January 1997 as a self-administered real estate investment trust (a "REIT") and succeeded to the Kilroy Group's real estate business. The Kilroy Group, the Company's predecessor, had been engaged in the acquisition, management, financing, construction and leasing of commercial and industrial properties. The combined financial statements of the Kilroy Group comprise the operations, assets and liabilities of the properties contributed to the Company in connection with the formation transactions following the initial public offering on January 31, 1997 (the "IPO") (see Note 1 to the Consolidated Financial Statements for a discussion of the organization and formation of the Company). As of September 30, 1997, the Company owned 37 office buildings and 54 industrial buildings that encompassed approximately 3,100,000 and 3,800,000 rentable square feet, respectively, and were 96.0% leased. The Company owns all of the properties through the Operating Partnership and the Finance Partnership. As a result of the formation transactions in the first quarter, acquisitions during the second and third quarters and the August Offering, the Company's total assets increased to $572,544,000, including real estate assets of $469,626,000, net of accumulated depreciation at September 30, 1997. The market capitalization of the Company based on the market value of the 24,475,000 issued and outstanding shares of the Company's common stock, 2,817,476 Operating Partnership units and the $104,054,000 of debt outstanding at September 30, 1997 was $840,951,000. The Company's total debt-to-market capitalization ratio at September 30, 1997 was 12.4%. Income is derived primarily from rental revenue (including tenant reimbursements). As a result of the Company's acquisitions in the current fiscal year, the financial data shows significant increases in total revenues and expenses from quarter to quarter. For the foregoing reasons, management does not believe the year to year and quarter to quarter financial data are comparable. The Company anticipates that the more significant part of its revenue growth in the next one to two years will come from additional acquisitions rather than from occupancy and market rent increases in its current portfolio. However, the Company notes that if the Southern California office and industrial rental market continues to improve, then rental rate increases will become a more substantial part of its revenue growth. RESULTS OF OPERATIONS The Company's management believes that in order to provide meaningful historical analysis of the financial statements, certain adjustments must be made to the historical Kilroy Group financial statements to make accounting periods comparable. Accordingly the results of operations for the period January 1, 1997 to January 31, 1997 have been adjusted to reflect interest income, general and administrative expenses, interest expense and extraordinary gains as if the IPO had been consummated on January 1, 1997. The following sections discuss the results of operations as adjusted. 14 Adjusted Nine Months Ended September 30, 1997 compared to Nine Months Ended September 30, 1996
NINE MONTHS ENDED SEPTEMBER 30, (IN THOUSANDS) --------------------- 1997 1996 ------------- ------- (AS ADJUSTED) REVENUES: Rental income..................................... $ 38,638 $26,473 Tenant reimbursements............................. 3,716 2,583 Interest income................................... 3,361 -- Development services.............................. 14 580 Other income...................................... 458 65 -------- ------- Total revenues.................................. 46,187 29,701 -------- ------- EXPENSES: Property expenses................................. 6,578 5,042 Real estate taxes................................. 2,031 970 General and administrative........................ 4,015 1,607 Ground leases..................................... 734 579 Development expense............................... 46 584 Sale of air rights................................ -- 3,150 Interest expense.................................. 7,480 16,234 Depreciation and amortization..................... 9,191 6,838 -------- ------- Total expenses.................................. 30,075 35,004 -------- ------- ADJUSTED INCOME (LOSS) BEFORE MINORITY INTEREST..... $ 16,112 $(5,303) ======== =======
Total revenues increased $16.5 million, or 55.5%, for the nine months ended September 30, 1997 compared to the same period of 1996. Rental income increased $12.1 million, or 46.0%, to $38.6 million for the nine months ended September 30, 1997 compared to $26.5 million in the same period in 1996. Rental income from office properties increased $8.5 million during the nine months ended September 30, 1997 from the comparable period in 1996. This improvement was due to an increase in office space under lease from 1,288,000 square feet at September 30, 1996 to 2,678,000 square feet at September 30, 1997, an increase of 1,390,000 square feet. Approximately 338,000 square feet reflects four office properties acquired in connection with the IPO and 988,000 rentable square feet represents twenty-three office buildings purchased during the nine months ended September 30, 1997. The remaining increase is primarily the result of leasing activity at Kilroy Airport Center at El Segundo and Kilroy Airport Center, Long Beach. The increase in square footage under lease was offset by a decrease in average rent per rentable square foot at Kilroy Airport Center at El Segundo, from $21.69 per square foot for the nine months ended September 30, 1996 to $19.96 for the same period in 1997 as a result of the re-negotiation and extension of a lease with Hughes Space and Communications in November 1996. Rental income also decreased at the SeaTac Office Center by $0.3 million for the nine months ended September 30, 1997 compared to the same period in 1996 due to the expiration of 48,000 rentable square feet on December 31, 1996. During the nine months ended September 30, 1997, 40,000 square feet of this space was re-leased at a comparable rate per square foot. Rental income from industrial properties increased $3.6 million during the nine months ended September 30, 1997 compared to the same period in 1996. This improvement was due to an increase in industrial space under lease from 832,000 square feet at September 30, 1996 to 3,745,000 square feet at September 30, 1997, an increase of 2,913,000 square feet. The increase was due to the purchase of three industrial buildings in connection with the IPO with approximately 380,000 square feet under lease at September 30, 1997, and the purchase of forty-two industrial buildings during the nine months ended September 30, 1997 with approximately 2,471,000 square feet under lease. The remaining increase was primarily due to the lease up of 62,000 square feet at 3340 E. La Palma Avenue. Tenant reimbursements increased to $3.7 million in 1997 from $2.6 million for the same period in 1996. The $1.1 million increase was primarily due 15 to tenant reimbursements from the office and industrial buildings purchased in connection with the IPO and during the nine months ended September 30, 1997. Interest income increased $3.4 million due to interest earned on the $116.2 million of net IPO proceeds remaining after the purchase of the properties and the repayment of debt in connection with the IPO, and the $146.0 million of net proceeds from the August Offering remaining after the repayment of borrowings on the Credit Facility. Other income for the nine months ended September 30, 1997 includes a $0.1 million gain on the sale of furniture and equipment, $0.1 million in revenues which were previously written off as uncollectible, and $0.1 million in property management fees. Development services are now performed by an unconsolidated subsidiary of the company. Expenses for the nine months ended September 30, 1997 decreased by $4.9 million, or 14.1%, to $30.1 million compared to $35.0 million for the nine months ended September 30, 1996. Property expenses and real estate taxes increased $1.5 million and $1.1 million, respectively, primarily due to the properties purchased in connection with the IPO and during the nine months ended September 30, 1997. General and administrative expenses increased $2.4 million, or 150%, for the nine months ended June 30, 1997 compared to the same period in 1996, due to increased management and administrative costs associated with the increased portfolio size and the operations of the Company as a public real estate investment trust. Ground lease expense increased $0.2 million during the nine months ended September 30, 1997 over the same period in 1996 primarily as a result of a ground lease on one of the properties purchased in connection with the IPO. Interest expense decreased $8.8 million, or 53.9%, to $7.4 million for the nine months ended September 30, 1997 from $16.2 million for the nine months ended September 30, 1996, primarily as a result of the repayment of $127.4 million in debt in connection with the IPO. Net income was $16.1 million for the nine months ended September 30, 1997 compared to a $5.3 million loss for the same period in 1996. The net change of $21.4 million is due primarily to an increase in rental income of $12.1 million, an increase in interest income of $3.4 million, a decrease of $3.2 in the sale of air rights and a decrease in interest expense of $8.8 million. These changes were partially offset by an increase in real estate taxes of $1.5 million, an increase in general and administrative expenses of $2.4 million and an increase in depreciation and amortization of $2.4 million. LIQUIDITY AND CAPITAL RESOURCES The Company has a $250.0 million secured revolving credit facility (the "Credit Facility"), which bears interest at a rate that ranges from LIBOR plus 1.38% to 1.50% depending on the Company's leverage ratios, and matures in May 1999, subject to a one year option to extend the term. The Credit Facility is secured by certain properties of the Company and the availability of funds is subject to, among other things, the value of those properties. Availability under the Credit Facility was $153.0 million at September 30, 1997. There were no borrowings outstanding at September 30, 1997. In addition, the Operating Partnership has debt outstanding as of September 30, 1997 of $104.1 million, comprised of an $83.4 million mortgage loan, a $14.0 million mortgage loan and a $6.7 million promissory note. The $83.4 million mortgage loan requires monthly principal and interest payments based on an interest rate of 8.35%, amortizes over 25 years and matures in 2022. In February 2005, the interest rate resets to the greater of 13.35% or the sum of the interest rate for U.S. Treasury Securities maturing 15 years from the reset date plus 5.0%. The $14.0 million mortgage loan requires monthly payments of interest computed at a variable rate based on LIBOR plus 1.50%. The $14 million mortgage matures in January 1998. The promissory was repaid on October 31, 1997. On August 20, 1997, the Company completed a follow-on public offering of 10,000,000 shares of, $.01 par value per share, common stock. The offering price was $25.50 per share resulting in gross proceeds of $255.0 million. The aggregate proceeds to the Company, net of underwriter's discount, advisory fee and offering costs were approximately $241.0 million. The proceeds were used to pay outstanding borrowings on the Credit Facility and to fund acquisitions. Through September 30, 1997, the Company purchased 65 office and industrial buildings for an aggregate acquisition cost of $291.0 million. The purchase price for such properties was funded out of net proceeds from the IPO and the August Offering, from borrowings under the Credit Facility, issuance of a promissory note and, in part for two properties, the issuance of limited partnership units in the Operating Partnership. 16 In June 1997, the Company leased approximately 211,000 square feet of office space at the SeaTac Office Center. In connection with the lease, the Company agreed to make $3.25 million of tenant improvements which the Company expects to fund from working capital or borrowings under the Credit Facility. The Company will pay for the tenant improvements upon completion and anticipates that the work will be completed by December 31, 1997. The Company also expects to spend approximately $2.0 million in connection with non-recurring capital improvements at the SeaTac Office Center and $500,000 of earthquake related improvements at certain other properties. As of September 30, 1997 the Company has spent approximately $240,000 on capital improvements at the SeaTac Office Center and $103,000 on earthquake related improvements. Subsequent to September 30, 1997, the Company purchased eleven office and industrial buildings for an aggregate acquisition cost of $117.7 million. The acquisitions were funded from proceeds from the August Offering and the Credit Facility. In addition, the Operating Partnership issued 588,736 limited partnership units valued at approximately $15.3 million and the Company assumed $33.6 million of mortgage debt in connection with the purchases. The debt is comprised of a $11.7 million note, a $8.0 million note and a $13.9 million note. The $11.7 million note bears interest at 8.43% and matures on November 1, 2018. The $8.0 million note bears interest at 8.21% and matures on October 1, 2013. The $13.9 million note bears interest at 8.45% and matures on December 1, 2005. Principal and interest are payable monthly on all three notes. The Company owns approximately 60 acres of developable property and plans to develop an aggregate of over 2.0 million rentable square feet of office or industrial space, subject to required entitlements and other governmental approvals. Of this amount, the Company has commenced development of approximately 1.0 million rentable square feet of industrial space in 1997 at a total budgeted cost of $65.0 million. The Company has also agreed to purchase a 50% managing interest in 50 acres of land in San Diego County owned by The Allen Group upon completion of necessary entitlements and infrastructure. The Company will finance all development with borrowings under the Credit Facility and working capital. The Company makes quarterly distributions to stockholders from cash available for distribution and, if necessary to satisfy distribution requirements to maintain its status as a REIT, the Company may use borrowings under its Credit Facility. All such distributions are at the discretion of the Board of Directors. Amounts accumulated for distribution will be invested primarily in interest-bearing accounts and short-term interest-bearing securities, which are consistent with the Company's intention to qualify for taxation as a REIT. Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit and interest-bearing bank deposits. The Company believes that it will have sufficient capital resources to satisfy its obligations for the next twelve months. The Company expects to meet certain of its long-term liquidity requirements, including the repayment of long-term debt of $83.4 million (less scheduled principal repayments) in 2005, the repayment of debt of $14.0 million in January 1998 and possible property acquisitions and development, through long-term secured and unsecured borrowings, including the Credit Facility, and the issuance of debt securities or additional equity securities of the Company or, possibly in connection with acquisitions of land or improved properties, the issuance of units of the Operating Partnership. HISTORICAL CASH FLOWS Historically, the Kilroy Group's principal sources of funding for operations and capital expenditures were cash flow from operating activities and secured debt financing. The Company's net cash from operating activities increased $8.2 million, from $8.1 million in 1996 to $16.3 million in 1997. There was an increase in income before extraordinary gain of $18.0 million, from a $5.3 million loss in 1996 to income of $12.7 million in 1997. The additional operating cash flow in 1997 was used to pay for deferred charges and other assets of $9.2 million and accrued option buy out and tenant improvements of $1.4 million. 17 Net cash used in investing activities increased $348.7 million to $350.8 million for the nine months ended September 30, 1997 from $2.1 million for 1996. The increase was due to the purchase of 25 acres of land, 23 office buildings and 42 industrial buildings for an aggregate purchase price of $286.4 million (net of $4.0 million paid in units of the Operating Partnership and $6.7 million of debt issued), seven buildings purchased for $58.0 million in connection with the IPO and additional tenant improvements and capital expenditures of $ 4.8 million. Cash flows provided by financing activities totaled $409.4 million for the nine months ended September 30, 1997 compared to net cash used in financing activities of $6.0 million in the 1996 period. The increase is primarily due to net proceeds from the IPO of $302.8 million, a net repayment of debt of $121.4 million and net proceeds from the August Offering of $241.0 million in the 1997 period, compared to net proceeds from debt of $2.8 million in the 1996 period. In addition, there were dividends of $11.1 million and loan costs and restricted cash of $4.0 million and $4.6 million, respectively, in the 1997 period compared to loan costs of $2.6 million in the 1996 period. In 1997 there was a contribution from partners of $6.8 million, compared to a net distribution of $6.2 million in 1996. FUNDS FROM OPERATIONS Industry analysts generally consider Funds from Operations, as defined by NAREIT, an alternative measure of performance for an equity REIT. Funds from Operations is defined by NAREIT to mean net income (loss) determined in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization (other than amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures. The Company believes that in order to facilitate a clear understanding of the combined historical operating results of the Company, Funds from Operations should be examined in conjunction with net income (loss) as presented in the financial statements included elsewhere in this report. The Company computes Funds from Operations in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper, which may differ from the methodologies used by other equity REITs and, accordingly, may not be comparable to that published by such other REITs. Funds from Operations should not be considered as an alternative to net income (loss), as an indication of the Company's performance or to cash flows as a measure of liquidity or the ability to pay dividends or make distributions. The following table presents the Company's Funds from Operations for the period from February 1, 1997 to September 30, 1997 and the three months ended September 30, 1997:
FEBRUARY 1, THREE MONTHS 1997 TO ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1997 ------------- ------------- Net income................................... $13,240 $ 6,480 Add Minority interest........................ 2,231 977 Depreciation and amortization............ 8,404 3,660 Depreciation and amortization on unconsolidated subsidiary............... 8 3 Other.................................... 307 115 ------- ------- Funds from Operations........................ $24,190 $11,235 ======= =======
18 The following table presents the Company's Funds Available for Distribution for the period from February 1, 1997 to September 30, 1997 and the three months ended September 30, 1997:
FEBRUARY 1, THREE MONTHS 1997 TO ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1997 ------------- ------------- Funds from Operations........................ $24,190 $11,235 Adjustments Amortization of deferred financing costs................................... 625 404 Tenant improvements, leasing commissions and recurring capital expenditures...... (806) (274) Net effect of straight-line rents.......... (289) (214) ------- ------- Funds Available for Distribution............. $23,720 $11,151 ======= =======
INFLATION The majority of the Company's tenant leases require tenants to pay most operating expenses, including real estate taxes and insurance, and increases in common area maintenance expenses, which reduce the Company's exposure to increases in costs and operating expenses resulting from inflation. 19 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the three months ended September 30, 1997, no legal proceedings were initiated against or on behalf of the Company, the adverse determination of which would have a material adverse effect upon the financial condition and results of operations of the Company. ITEM 2. CHANGES IN SECURITIES--NONE ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NONE ITEM 5. OTHER INFORMATION--NONE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ---------------------------------------------------------------------- 3.1 Articles of Amendment and Restatement of the Registrant.(1) 3.2 Amended and Restated Bylaws of the Registrant.(1) 3.3 Form of Certificate for Common Stock of the Registrant.(1) 10.1 Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P.(1) 10.2 Form of Registration Rights Agreement among the Registrant and the persons named therein.(1) 10.3 Omnibus Agreement, dated as of October 30, 1996, by and among Kilroy Realty, L.P. and the parties named therein.(1) 10.4 Supplemental Representations, Warranties and Indemnity Agreement by and among Kilroy Realty, L.P. and the parties named therein.(1) 10.5 Pledge Agreement by and among Kilroy Realty, L.P., John B. Kilroy, Sr., John B. Kilroy, Jr. and Kilroy Industries.(1) 10.6 1997 Stock Option and Incentive Plan of the Registrant and Kilroy Realty, L.P.(1) 10.7 Form of Indemnity Agreement of the Registrant and Kilroy Realty, L.P. with certain officers and directors.(1) 10.8 Lease Agreement, dated January 24, 1989, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase I.(1) 10.9 First Amendment to Lease Agreement, dated December 28, 1990, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase I.(1) 10.10 Lease Agreement, dated July 17, 1985, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase III.(1) 10.11 Lease Agreement, dated April 21, 1988, by and between Kilroy Long Beach Associates and the Board of Water Commissioners of the City of Long Beach, acting for and on behalf of the City of Long Beach, for Long Beach Phase IV.(1) 10.12 Lease Agreement, dated December 30, 1988, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase II.(1)
20
EXHIBIT NUMBER DESCRIPTION ------- ---------------------------------------------------------------------- 10.13 First Amendment to Lease, dated January 24, 1989, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase III.(1) 10.14 Second Amendment to Lease Agreement, dated December 28, 1990, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase III.(1) 10.15 First Amendment to Lease Agreement, dated December 28, 1990, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase II.(1) 10.16 Third Amendment to Lease Agreement, dated October 10, 1994, by and between Kilroy Long Beach Associates and the City of Long Beach for Kilroy Long Beach Phase III.(1) 10.17 Development Agreement by and between Kilroy Long Beach Associates and the City of Long Beach.(1) 10.18 Amendment No. 1 to Development Agreement by and between Kilroy Long Beach Associates and the City of Long Beach.(1) 10.19 Ground Lease by and between Frederick Boysen and Ted Boysen and Kilroy Industries, dated May 15, 1969, for SeaTac Office Center.(1) 10.20 Amendment No. 1 to Ground Lease and Grant of Easement, dated April 27, 1973, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose Boysen and Sea/Tac Properties.(1) 10.21 Amendment No. 2 to Ground Lease and Grant of Easement, dated May 17, 1977, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose Boysen and Sea/Tac Properties.(1) 10.22 Airspace Lease, dated July 10, 1980, by and among the Washington State Department of Transportation, as lessor, and Sea Tac Properties, Ltd. and Kilroy Industries, as lessee.(1) 10.23 Lease, dated April 1, 1980, by and among Bow Lake, Inc., as lessor, and Kilroy Industries and SeaTac Properties, Ltd., as lessees for Sea/Tac Office Center.(1) 10.24 Amendment No. 1 to Ground Lease, dated September 17, 1990, between Bow Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties, Ltd., as lessee.(1) 10.25 Amendment No. 2 to Ground Lease, dated March 21, 1991, between Bow Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties, Ltd., as lessee.(1) 10.26 Property Management Agreement between Kilroy Realty Finance Partnership, L.P. and Kilroy Realty, L.P.(1) 10.27 Form of Environmental Indemnity Agreement.(1) 10.28 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Airport Imperial Co.(1) 10.29 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Calabasas Associates.(1) 10.30 Employment Agreement between the Registrant and John B. Kilroy, Jr.(1) 10.31 Employment Agreement between the Registrant and Richard E. Moran Jr.(1) 10.32 Employment Agreement between the Registrant and Jeffrey C. Hawken.(1) 10.33 Employment Agreement between the Registrant and C. Hugh Greenup.(1) 10.34 Noncompetition Agreement by and between the Registrant and John B. Kilroy, Sr.(1) 10.35 Noncompetition Agreement by and between the Registrant and John B. Kilroy, Jr.(1) 10.36 License Agreement by and among the Registrant and the other persons named therein.(1) 10.37 Form of Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits.(1) 10.38 Form of Mortgage Note.(1)
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EXHIBIT NUMBER DESCRIPTION ------- ---------------------------------------------------------------------- 10.39 Form of Indemnity Agreement.(1) 10.40 Form of Assignment of Leases, Rents and Security Deposits.(1) 10.41 Form of Credit Agreement.(1) 10.42 Form of Variable Interest Rate Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases and Rents.(1) 10.43 Form of Environmental Indemnity Agreement.(1) 10.44 Form of Assignment, Rents and Security Deposits.(1) 10.45 Revolving Credit Agreement, dated as of May 21, 1997, among Kilroy Realty, L.P., Morgan Guaranty Trust Company of New York and the Banks listed herein.(5) 10.46 Form of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases and Rents.(1) 10.47 Assignment of Leases, Rents and Security Deposits.(1) 10.48 Purchase and Sale Agreement and Joint Escrow Instructions, dated April 30, 1997, by and between Mission Land Company, Mission-Vacaville, L.P. and Kilroy Realty, L.P.(2) 10.49 Agreement of Purchase and Sale and Joint Escrow Instructions, dated April 30, 1997, by and between Camarillo Partners and Kilroy Realty, L.P.(2) 10.50 Purchase and Sale Agreement and Escrow Instructions, dated May 5, 1997, by and between Kilroy Realty, L.P. and Pullman Carnegie Associates.(4) 10.51 Amendment to Purchase and Sale Agreement and Escrow Instructions, dated June 27, 1997, by and between Pullman Carnegie Associates and Kilroy Realty, L.P.(4) 10.52 Purchase and Sale Agreement, Contribution Agreement and Joint Escrow Instructions, dated May 12, 1997, by and between Shidler West Acquisition Company, LLC and Kilroy Realty, L.P.(3) 10.53 First Amendment to Purchase and Sale Agreement, Contribution Agreement and Joint Escrow Instructions, dated June 6, 1997, between Kilroy Realty, L.P. and Shidler West Acquisition Company, L.L.C.(3) 10.54 Second Amendment to Purchase and Sale Agreement, Contribution Agreement and Joint Escrow Instructions, dated June 12, 1997, by and between Shidler West Acquisition Company, LLC and Kilroy Realty, L.P.(3) 10.55 Agreement of Purchase and Sale and Joint Escrow Instructions, dated June 12, 1997, by and between Mazda Motor of America, Inc. and Kilroy Realty, L.P.(4) 10.56 Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions, dated June 30, 1997, by and between Mazda Motor of America, Inc. and Kilroy Realty, L.P.(4) 10.57 Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California, dated June 16, 1997, by and between Santa Monica Number Seven Associates L.P. and Kilroy Realty L.P.(4) 10.58 First Amendment to Credit Agreement dated July 1, 1997.(5) 10.59 Second Amendment to Credit Agreement and First Amendment to Variable Interest Rate Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases and Rent dated August 13, 1997.(5) *10.60 Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners. *10.61 First Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated August 22, 1997.
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EXHIBIT NUMBER DESCRIPTION ------- --------------------------------------------------------------------- *10.62 Second Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 5, 1997. *10.63 Third Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 19, 1997. *10.64 Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 22, 1997. *10.65 Fifth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 23, 1997. *10.66 Sixth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 25, 1997 *10.67 Seventh Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated September 29, 1997. *10.68 Eighth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated October 2, 1997. *10.69 Ninth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P. and Mission Square Partners, dated October 24, 1997. *27.1 Financial Data Schedule.
- -------- *Filed herewith. (1) Previously filed as an exhibit to the Registration Statement on Form S-11 (No. 333-15553) as declared effective on January 28, 1997 and incorporated herein by reference. (2) Previously filed as Exhibit 10.11 and 10.12, respectively, to the Current Report on Form 8-K (No. 1-12675) as filed on June 5, 1997 and incorporated herein by reference. (3) Previously filed as Exhibit 10.57, 10.58 and 10.59, respectively, to the Current Report on Form 8-K (No. 1-12675) as filed on July 3, 1997 and incorporated herein by reference. (4) Previously filed as Exhibit 10.54, 10.59, 10.60, 10.61 and 10.62, respectively, to the Current Report on Form 8-K (No. 1-12675) as filed on July 15, 1997 and incorporated herein by reference. (5) Previously filed as an exhibit to the Registration Statement on Form S-11 (No. 333-32261) as filed on July 28, 1997, as amended, and incorporated by reference. (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K dated July 14, 1997 in connection with the acquisition of six office and one industrial buildings. The Company filed a Current Report on Form 8-K dated November 13, 1997 in connection with the acquisition of four office buildings. 23 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 on November 14, 1997. Kilroy Realty Corporation /s/ John B. Kilroy, Jr. By: _________________________________ JOHN B. KILROY, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ Richard E. Moran, Jr. By: _________________________________ RICHARD E. MORAN JR. EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER /s/ Ann Marie Whitney By: _________________________________ ANN MARIE WHITNEY VICE PRESIDENT AND CONTROLLER 24 EX-10.60 2 PURCHASE & SALE & ESCROW - MISSION SQUARE PARTNERS EXHIBIT 10.60 AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ------------------------------ Table of Contents -----------------
Paragraph Number Page - --------- ---- 1. Purchase and Sale........................................... 2 2. Purchase Price.............................................. 2 3. Payment of Purchase Price................................... 2 4. Escrow...................................................... 2 5. Condition of Title.......................................... 3 6. Title Policy................................................ 3 7. Conditions to Close of Escrow............................... 3 8. Deposits by Seller.......................................... 7 9. Deposits by Buyer........................................... 7 10. Costs and Expenses.......................................... 8 11. Prorations.................................................. 8 12. Disbursements and Other Actions by Escrow Holder............ 9 13. Covenants of Seller......................................... 10 14. Seller's Representations and Warranties..................... 10 15. Buyer's Representations and Warranties...................... 11 16. Remedies.................................................... 12 17. Damage or Condemnation Prior to Closing..................... 13 18. Notices..................................................... 13 19. Brokers..................................................... 14 20. Legal Fees.................................................. 14 21. Assignment.................................................. 15 22. Indemnification............................................. 15 23. Miscellaneous............................................... 15 SIGNATURES........................................................ 17
EXHIBITS - -------- Exhibit "A" - Legal Description of the Land Exhibit "B" - Rent Roll Exhibit "C" - Grant Deed Exhibit "D" - Estoppel Certificate Exhibit "E" - Personal Property Exhibit "F" - Tenant Lease Assignment Exhibit "G" - Intentionally Omitted Exhibit "H" - Bill of Sale Exhibit "I" - Transferor's Certification of Non-Foreign Status Exhibit "J" - General Assignment Agreement Exhibit "K" - Copy of U.S. Marshall's Lease -i- AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ------------------------------ THIS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ("Agreement") is made and entered into as of this 10th day of July, 1997 (the "Effective Date"), by and between KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"), and MISSION SQUARE PARTNERS, a California general partnership ("Seller"), with respect to the following: R E C I T A L S : - - - - - - - - A. Seller desires to sell and convey to Buyer the following: 1. That certain real property located in the City of Riverside, County of Riverside, State of California, commonly known as 3750 University Avenue, consisting of improved land, legally described on Exhibit "A" attached ----------- hereto (the "Land"), together with one (1) office building located thereon, associated parking areas, and all other improvements located thereon (the "Improvements"); 2. All of Seller's interest in all rights, privileges, easements and appurtenances benefiting the Land and/or the Improvements, including, without limitation, all mineral and water rights and all easements, rights-of-way and other appurtenances used or connected with the beneficial use or enjoyment of the Land and/or the Improvements (the Land, the Improvements and all such rights, privileges, easements and appurtenances are sometimes collectively hereinafter referred to as the "Real Property"); 3. All of Seller's interest as lessor in the leases covering the Land and the Improvements (said leases, together with any and all amendments, modifications or supplements thereto, are hereinafter referred to collectively as the "Leases" and are identified in the "Rent Roll" [as defined in Paragraph 7(a)(ii)(G) hereof] attached hereto as Exhibit "B"); ----------- 4. All personal property, equipment, supplies and fixtures (collectively, the "Personal Property") owned by Seller and used or useful in the operation of the Real Property which Personal Property is listed in Exhibit ------- "E " attached hereto; and - ---- 5. All of Seller's interest in any intangible property used in connection with the foregoing, including, without limitation, all trademarks, trade names (including, without limitation, the right to use the name "Mission Square" (subject to Buyer's acknowledgment that no fictitious business name or other filing or registration has been made by Seller in connection with its use of such name)), goodwill, contract rights, warranties, guaranties, licenses, permits, entitlements, governmental approvals and certificates of occupancy which benefit the Real Property and/or the Personal Property (the "Intangible Personal Property"). The Real Property, the Personal Property, Seller's interest as lessor under the Leases and the Intangible Personal Property are sometimes collectively hereinafter referred to as the "Property." B. Seller's title to the Property is encumbered by a lien in favor of Metropolitan Life Insurance Company ("Metropolitan") to secure a loan from Metropolitan to Seller in the principal sum of FOURTEEN MILLION DOLLARS ($14,000,000) (the "Met Loan"). The Met Loan cannot be prepaid but may be assumed upon satisfaction of certain conditions, including, without limitation, payment of an assumption fee of one percent (1%) of the principal balance ("Assumption Fee"). C. Seller desires to sell the Property to Buyer and Buyer desires to purchase the Property from Seller upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree that the terms and conditions of this Agreement and the instructions to First American Title Insurance Company ("Escrow Holder") with regard to the escrow ("Escrow") created pursuant hereto are as follows: 1. Purchase and Sale. Seller hereby agrees to sell the Property to ----------------- Buyer, and Buyer hereby agrees to purchase the Property from Seller, upon the terms and conditions herein set forth. 2. Purchase Price. The purchase price ("Purchase Price") for the -------------- Property shall be Twenty-Two Million Five Hundred Forty-Five Thousand and No/100 Dollars ($22,545,000.00). 3. Payment of Purchase Price. The Purchase Price for the Property ------------------------- shall be payable by Buyer as follows: (a) Deposit. Within one (1) business day following the later of the ------- Effective Date or Buyer's receipt of a fully executed original of this Agreement from Seller, Buyer shall deposit or cause to be deposited with Escrow Holder in cash, by a certified or bank cashier's check made payable to Escrow Holder, or by a confirmed wire transfer of funds (hereinafter referred to as "Immediately Available Funds"), the sum of Two Hundred Thousand and No/100 Dollars ($200,000.00) (the "Deposit"). Upon Escrow Holder's receipt of the Deposit, Escrow Holder shall immediately invest it in a federally insured interest bearing account inuring solely to the benefit of Buyer (subject to Seller's rights in the event of Buyer's default as provided for under this Agreement) maintained at a federally insured bank or savings and loan association acceptable to Buyer. The Deposit and all interest accrued thereon (less Five Hundred Dollars ($500.00) and one-half of any escrow cancellation fees) (hereinafter the "Refundable Deposit") shall be fully refundable to Buyer if any of the contingencies set forth in this Agreement for Buyer's benefit are not satisfied or waived by Buyer on or before the expiration of the "Contingency Period" (as defined in Paragraph 7(a)(ii) below). The Deposit shall be applied to the payment of the Purchase Price upon the "Close of Escrow" (as defined in Paragraph 4(b) below) or refunded to Buyer as above-provided or released to Seller in accordance with the provisions of Paragraph 16(a) hereof. (b) Assumption of Met Loan. Upon the Close of Escrow, Buyer shall ---------------------- receive a credit against the Purchase Price equal to the outstanding principal balance of the Met Loan, (i) plus all accrued but unpaid interest and all other amounts payable in connection with the Met Loan, including, but not limited to, late charges and penalties, as of the Close of Escrow, but excluding the Assumption Fee and any other charges arising out of Buyer's assumption of the Met Loan (the "Met Fees"), and (ii) less the balance of all outstanding impounds and other accounts then held by Metropolitan as additional security for the Met Loan. Seller shall assign its interest in all such impounds and other accounts to Buyer upon the Close of Escrow. Prior to signing this Agreement, Seller has provided to Buyer the documents evidencing and securing the Met Loan (the "Met Loan Documents"). Buyer shall complete, sign and submit all applications and information reasonably requested by Metropolitan to process a request for assumption of the Met Loan by buyer. All such applications and submission shall be prepared and submitted at buyer's sole cost and expense. Seller shall cooperate with buyer in pursuing approval provided seller shall not be responsible for incurring or paying any out-of-pocket expenses in connection with such cooperation. Buyer shall not be obligated to pay the met fees until the close of escrow. At no time will seller be obligated to pay the met fees. (c) Closing Funds. No later than the closing date, buyer shall ------------- deposit or cause to be deposited with escrow holder, in cash, by a certified or bank cashier's check made payable to escrow holder or by a confirmed wire transfer of funds, the balance of the purchase price, plus or minus buyer's share of closing costs, prorations and charges payable pursuant to this agreement. 4. Escrow. ------ (a) Opening of Escrow. For purposes of this Agreement, the Escrow ----------------- shall be deemed opened on the date Escrow Holder shall have received a fully executed original or originally executed counterparts of this Agreement from both Buyer and Seller and the Deposit (such date being referred to hereinafter as the "Opening of Escrow"). Escrow Holder shall notify Buyer and Seller in writing of the date Escrow is opened. Buyer and Seller agree to execute, deliver and be bound by any reasonable or customary supplemental escrow instructions of Escrow Holder or other instruments as may reasonably be required by Escrow Holder in order to consummate the transaction contemplated by this Agreement. Any such supplemental instructions shall not conflict with, amend or supersede any portions of this Agreement. To the extent of any conflict or inconsistency between such supplemental instructions and this Agreement, this Agreement shall control. -2- (b) Close of Escrow. For purposes of this Agreement, the "Close of --------------- Escrow" shall be the date that the grant deed, the form of which is attached hereto as Exhibit "C" (the "Grant Deed"), conveying the Real Property to Buyer, ----------- is recorded in the Official Records of Orange County, California (the "Official Records"). Unless extended in writing by Buyer and Seller or unless extended pursuant to the terms and provisions of Paragraph 7(a)(ii) hereof, the Close of Escrow shall occur on or before fourteen (14) days after the last day of the Contingency Period (the "Closing Date"). Seller shall deliver possession of the Property to Buyer upon the Close of Escrow, subject only to the "Approved Condition of Title" (as defined in Paragraph 5 below). 5. Condition of Title. It shall be a condition to the Close of ------------------ Escrow for Buyer's benefit that title to the Real Property be conveyed to Buyer by Seller by the Grant Deed subject only to the following approved condition of title ("Approved Condition of Title"): (a) liens securing payment of any general or special real estate taxes, and assessments and personal property taxes not delinquent; (b) all liens securing the Met Loan and those additional documents required by Metropolitan to be recorded in connection with the assumption of the Met Loan by Buyer; (c) the lien of supplemental taxes assessed pursuant to Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation Code ("Code"), but only to the extent that such supplemental taxes are attributable to the transaction contemplated by this Agreement. Seller shall be responsible for, and shall indemnify, protect, defend (with counsel chosen by Buyer) and hold harmless Buyer and the Real Property from and against any and all supplemental taxes assessed pursuant to the Code, to the extent that such taxes relate to events (including, without limitation, any changes in ownership and/or new construction) occurring prior to the Close of Escrow and which are payable for periods occurring solely prior to the Close of Escrow; (d) matters affecting the Real Property created, directly or indirectly, by Buyer; and (e) exceptions which are disclosed by the Report and all the Surveys described in Paragraph 7(a)(i) hereof and which are approved or deemed approved by Buyer in accordance with such Paragraph 7(a)(i); and (f) all standard exclusions to the "Title Policy" (as defined in Paragraph 6 below); (g) all Leases disclosed to Buyer in accordance with Paragraph 7(a)(ii) below. Seller covenants and agrees that during the term of the Escrow, it will not cause or expressly permit title to the Real Property to differ from the Approved Condition of Title described in this Paragraph 5 other than for notices of non-delinquent pending tax or assessment filed by any governmental agency. Any liens, encumbrances, encroachments, easements, restrictions, conditions, covenants, rights, rights-of-way or other matters affecting the Approved Condition of Title which may appear of record or be revealed after the date of the Report described in Paragraph 7(a)(i) below ("Additional Title Matters") shall also be subject to Buyer's approval as a condition to the Close of Escrow for Buyer's benefit. Buyer shall notify Seller of its approval or disapproval of each Additional Title Matter within five (5) business days after Buyer receives written notice of the same. Any additional Title Matters which are caused or expressly permitted to be caused by Seller shall be eliminated or ameliorated by Seller to Buyer's satisfaction prior to the Close of Escrow as a condition to the Close of Escrow for Buyer's benefit. 6. Title Policy. It shall be a condition to the Close of Escrow for ------------ Buyer's benefit (which Buyer may waive in its sole and absolute discretion) that the "Title Company" (as defined in Paragraph 7(a)(i) hereof) issue its ALTA Extended Coverage (Form B-1970) Owner's Policy of Title Insurance ("Title Policy") in the amount of the Purchase Price, showing title to the Real Property vested in Buyer, subject only to the Approved Condition of Title and with title endorsements reasonably requested by Buyer. 7. Conditions to Close of Escrow. ----------------------------- (a) Conditions to Buyer's Obligations. The Close of Escrow and --------------------------------- Buyer's obligation to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions (or Buyer's written waiver thereof, it being agreed that Buyer may waive in -3- writing any or all of such conditions) for Buyer's benefit on or prior to the dates designated below for the satisfaction of such conditions. In the event Buyer timely terminates this Agreement and the Escrow due to the nonsatisfaction of any such conditions, in strict accordance with Paragraph 7(c) below, then Buyer shall be entitled to the immediate return of the Refundable Deposit and all interest accrued thereon: (i) Title. Buyer shall have approved the legal description of the ----- Land and any matters of title as disclosed by the following documents (collectively, the "Title Documents") which are to be prepared at Buyer's sole cost and expense: (A) a standard preliminary title report dated on or after the date of this Agreement issued by First American Title Insurance Company (the "Title Company") with respect to the Real Property, as such report may be amended or supplemented from time to time to reflect additional title matters or survey exceptions (the "Report"); (B) legible copies of all documents, whether recorded or unrecorded, referred to in the Report; (C) a color-coded map plotting all easements disclosed by the Report; and (D) an ALTA as-built survey of the Real Property prepared by a licensed engineer or surveyor acceptable to Buyer in Buyer's sole and absolute discretion (the "Survey"). Buyer agrees to cause a copy of the Title Documents to be delivered to Seller at least five (5) days prior to expiration of the Contingency period. Buyer shall have until 5:00 p.m. Pacific Time on the date that is thirty (30) days after the Effective Date (the "Title Approval Date") to give Seller and Escrow Holder written notice ("Buyer's Title Notice") of Buyer's disapproval or conditional approval of the legal description or any matters shown in or disclosed by the Title Documents. The failure of Buyer to give Buyer's Title Notice on or before the Title Approval Date shall be deemed to constitute Buyer's approval of the respective matters relating thereto. If Buyer disapproves or conditionally approves any of the foregoing matters, Seller may, within five (5) days after its receipt of Buyer's Title Notice, elect to eliminate or ameliorate to Buyer's sole and absolute satisfaction such disapproved or conditionally approved matters. Within such five (5) day period ("Seller's Title Notice Period"), Seller shall give Buyer written notice (which shall hereinafter be referred to as "Seller's Title Notice") of those disapproved or conditionally approved matters, if any, which Seller covenants and agrees to either eliminate from the Title Policy as exceptions to title to the Property or to ameliorate to Buyer's sole and absolute satisfaction by the Closing Date as a condition to the Close of Escrow for Buyer's benefit. If Seller does not elect in Seller's Title Notice to eliminate or ameliorate any disapproved or conditionally approved matters as provided above or fails to timely deliver Seller's Title Notice, or if Buyer disapproves, in Buyer's sole and absolute discretion, Seller's Title Notice, then Buyer shall have the right, by a writing delivered to Seller and Escrow Holder within five (5) Business Days after the last day of Seller's Title Notice Period, to (A) waive its prior disapproval, in which event said disapproved matter(s) shall be deemed approved, or (B) terminate this Agreement and the Escrow created pursuant hereto in accordance with Paragraph 7(c) below. If Seller fails to timely deliver Seller's Title Notice, then Seller will be deemed to have elected to not eliminate or ameliorate any disapproved or conditionally approved matters set forth in Buyer's Title Notice. Notwithstanding anything to the contrary contained in this Agreement, Buyer hereby disapproves all liens evidencing monetary encumbrances (other than liens for general and special non-delinquent real property taxes and assessments and liens securing the Met Loan) and Seller agrees to cause all such liens to be eliminated at Seller's sole cost and expense (including all prepayment penalties and charges) prior to or concurrently with the Close of Escrow. (ii) Review and Approval of Documents and Materials. Prior to the ---------------------------------------------- signing of this Agreement, Seller has delivered to Buyer the documents and materials respecting the Property set forth below (the "Documents and Materials"). From the Effective Date until 5 p.m. Pacific Time on that date ("Contingency Date") that is forty-five (45) days after the Effective Date (the "Contingency Period"), Buyer shall have the right to review and approve or disapprove, in its sole and absolute discretion, any or all of the Documents and Materials and any other documents affecting or relating to the Property. Seller shall have no liability for the quality, accuracy or completeness of any Documents and Materials provided to Buyer which were prepared by third parties. The failure of Buyer to disapprove any of the Documents and Materials on or before the expiration of the Contingency Period shall be deemed to constitute Buyer's approval thereof. (A) Agreements. Legible copies of any maintenance contracts, service ---------- contracts, and any other contracts or agreements affecting or relating to the leasing, ownership, operation, maintenance, construction or development of the Property, which are (i) in Seller's possession; and (ii) require more than thirty (30) days to terminate (collectively, the "Contracts"); (B) Personal Property Agreements. A copy of any warranties or ---------------------------- guaranties applicable to the Personal Property listed in Exhibit "E" and copies ----------- of any and all security instruments or leases which affect or limit Seller's interest in the Personal Property; -4- (C) Leases. True, correct and complete copies of any and all Leases ------ and all amendments thereto, and copies of any and all documents, agreements and other writings referenced therein affecting the Leases (including, without limitation, lease guaranties and tenant improvement contracts), as well as copies of any letters of intent or other correspondence, pending lease agreements, or the like, which relate to any potential leases with respect to the Real Property. Seller shall also deliver to Buyer any and all financial information concerning the lessees under the Leases which are in Seller's possession; (D) Rent Roll. The "Rent Roll" prepared as of the second business day --------- before Seller's execution of this Agreement and attached hereto as Exhibit "B". ----------- During the term of this Agreement, Seller shall provide to Buyer an updated Rent Roll and Delinquency Report (as defined below) within three (3) business days following written request, but not more often than weekly: (E) Schedule of Income and Expenses. A schedule reflecting all income ------------------------------- generated by or from the property or from the use of all or any portion of the property and reflecting any and all expenses for the ownership, operation, maintenance and repair of the property for the full calendar years of 1995 and 1996 and for the calendar year 1997 up to and including the last day of May, 1997, which schedule shall include, without limitation, the following: (1) annual insurance premiums for all forms of coverage; (2) real property taxes and assessments; (3) utility charges, management fees, maintenance and repair costs; (4) any and all other costs and expenses incurred in connection with the ownership, operation, maintenance and repair of the Property; and (F) Delinquency Reports. Complete copies of all aged delinquency ------------------- reports for the months of August, 1996 through and including May, 1997, which sets forth the names of all Lessees that were delinquent during such time period in the payment of any amounts owing pursuant to any of the Leases, together with the amounts and the period of such delinquencies; (G) Plans and Reports. Building plans, structural engineering reports ----------------- and other materials concerning the physical condition of the Property which are in Seller's possession. (H) Miscellaneous. Buyer shall be provided with access to Seller's ------------- files and documents pertaining to the Property, and its management, which Seller has located in its offices located at 2524 Santiago Boulevard, Orange, California 92667. Such files and documents shall be made available to Buyer during regular business hours, upon no less than one business day's prior notice. (iii) Inspections and Studies. On or before the expiration of the ----------------------- Contingency Period, Buyer shall have the right to approve or disapprove, in Buyer's sole and absolute discretion, any aspect of the Property, including, but not limited to the results of any and all inspections, investigations, tests and studies, including, without limitation, investigations with regard to zoning, building codes and other governmental regulations, architectural inspections, engineering tests, economic feasibility studies and soils, seismic and geologic reports, as well as toxic and environmental reports with respect to the Property, inspections of all or any portion of the Improvements (including, without limitation, structural, mechanical and electrical systems, roofs, pavement, landscaping and public utilities), and any other physical inspections and/or investigations as Buyer may elect to make or obtain. The failure of Buyer to disapprove said results on or prior to the expiration of the Contingency Period shall be deemed to constitute Buyer's approval thereof. As additional consideration to Seller, if Buyer elects to terminate this Agreement, Buyer shall deliver to Seller, within five (5) days of Buyer's election to terminate, correct and complete copies of all reports, studies and investigations prepared by Buyer's consultants which concern the physical condition of the Property. Seller acknowledges that Buyer makes no representation or warranty as to the accuracy of any information contained in such materials. Prior to any entry upon the Property by Buyer's agents, contractors, subcontractors or employees, Buyer shall deliver to Seller evidence reflecting Buyer's commercial general liability insurance policy which evidences that Buyer is carrying a commercial general liability insurance policy with a financially responsible insurance company covering the activities of Buyer, and Buyer's agents, contractors, subcontractors and employees on or upon the Property and naming Seller as additional insured, with an agreement not to cancel such coverage without at least ten (10) days' prior written notice to Seller. Such -5- evidence shall reflect that the insurance policy has a per occurrence limit of at least One Million Dollars ($1,000,000). During the term of this Escrow, upon no less than one (1) day's prior notice to Seller identifying the proposed time of entry and naming the consultants intending to enter, Buyer, its agents, consultants, contractors and subcontractors shall have the right upon compliance with the insurance, prior notice, indemnity and other provisions of this Agreement to enter upon the Property (subject to the Leases) to conduct or make any and all inspections and tests (including, without limitation, environmental assessments of the Real Property) as may be necessary or desirable in Buyer's sole and absolute discretion. Buyer hereby indemnifies and holds Seller and the Property harmless from and against any and all costs, losses, damages, liabilities, claims and expenses arising out of or resulting from such entry by Buyer and its agents, consultants, contractors and subcontractors. In addition, Buyer agrees to review and comply with all requirements arising under the Leases. (iv) Representations, Warranties and Covenants of Seller. Seller --------------------------------------------------- shall have duly performed each and every covenant and agreement to be performed by Seller pursuant to this Agreement and Seller's representations, warranties and covenants set forth in Paragraph 14 hereof shall be true and correct as of the Closing Date. (v) No Material Changes. At the Closing Date, there shall have been ------------------- no material adverse changes in the physical or financial condition of the Property from and after the Opening of Escrow. (vi) Rent Roll. The Rent Roll, as updated to the Closing Date, --------- certified as to its accuracy and executed by Seller, does not materially differ from the Rent Roll delivered by Seller to Buyer pursuant to Paragraph 7(a)(ii) hereof. (vii) Tenant Estoppel Certificates. Buyer shall have received ---------------------------- estoppel certificates (collectively, "Estoppel Certificates" and individually, an "Estoppel Certificate") satisfactory to Buyer, which Seller shall use its best efforts to obtain, duly executed by tenants occupying at least ninety percent (90%) of the rentable area of the Property, and to be dated not earlier than thirty (30) days prior to the Closing Date. The Estoppel Certificates shall be in the form of, and upon the terms contained in, Exhibit "D" attached ----------- hereto, with such modifications as may be required to satisfy the requirements of Metropolitan in connection with the Buyer's assumption of the Met Loan and with modifications for any particular Lessee as may be reasonably requested by Buyer no less than twenty (20) days prior to the Close of Escrow. Seller shall deliver the original executed Estoppel Certificates to Buyer no later than five (5) business days prior to the Closing Date. Buyer's failure to disapprove each executed Estoppel Certificate within three (3) business days of receipt shall be deemed to constitute Buyer's approval thereof. (viii) Seller's Performance. Seller shall have duly and timely -------------------- performed all obligations and made all deposits with Escrow Holder required of Seller pursuant to the provisions of this Agreement. (ix) Leases. As of the Close of Escrow, all of the Leases approved by ------ Buyer pursuant to Paragraph 7(a)(ii) hereof shall be in full force and effect and shall not have been modified or amended without Buyer's prior written consent. (b) Conditions to Seller's Obligations. For the benefit of Seller, ---------------------------------- the Close of Escrow and Seller's obligation to sell the Property to Buyer are subject to the satisfaction of the following conditions: (i) Met Loan. As of the Close of Escrow, Metropolitan shall have -------- approved and the parties shall have executed and delivered all documents and satisfied all conditions to Metropolitan's approval of Buyer's assumption of the Met Loan; (ii) Buyer's Performance. Buyer shall have duly and timely performed ------------------- all of the obligations required by the terms of this Agreement to be performed by Buyer (or Seller's waiver thereof, it being agreed that Seller may waive such condition) and Buyer's representations, warranties and covenants set forth in Paragraph 14(b) hereof shall be true and accurate as of the Closing Date. (c) Termination by Buyer on Failure of Condition. If Buyer elects to -------------------------------------------- terminate this Agreement due to the failure of a condition set forth in this Paragraph 7, Buyer shall have the right to terminate this Agreement and have the Refundable Deposit, returned only if Buyer delivers a Termination Notice and instructions to cancel the Escrow to Seller and Escrow Holder within the time -6- period expressly set forth for such condition in this Paragraph 7. A "Termination Notice" shall mean a written notice from Buyer to Seller and Escrow Holder identifying the condition disapproved, Buyer's election to terminate this Agreement and the Escrow and Buyer's advice on when all Documents and Materials provided by Seller or Seller's broker to Buyer and all third-party inspections and reports received by Buyer during its investigations (collectively, "Returned Materials") will be returned or delivered to Seller. Buyer's right to purchase the Property shall unconditionally terminate upon delivery of a Termination Notice. Buyer and Seller shall each execute such instructions as Escrow Holder may reasonably require to terminate the Escrow. Seller shall direct Escrow Holder to return the Refundable Deposit to Buyer promptly following Seller's receipt of the Termination Notice and instructions to cancel the Escrow from Buyer. Following mutual execution of the cancellation instructions and the return to Buyer of the Refundable Deposit, neither party shall have any further obligation to the other under this Agreement, except for Buyer's indemnity of Seller with respect to Buyer's entry in accordance with Paragraph 7(a)(iii) above, Buyer's obligation to deliver the Returned Materials to Seller, and the parties' obligations under Paragraphs 20 and 22 of this Agreement. 8. Deposits by Seller. At least one (1) business day prior to the ------------------ Close of Escrow, Seller shall deposit or cause to be deposited with Escrow Holder the following documents and instruments: (a) Grant Deed. The Grant Deed conveying the Real Property to Buyer, ---------- duly executed as appropriate by Seller, acknowledged and in recordable form in the form attached hereto as Exhibit "C"; ----------- (b) Leases. The original Leases and lease guaranties and financial ------ information and any letters of intent, pending lease agreements, or the like, which relate or potentially relate to any space leases of the Improvements and which have been approved by Buyer in accordance with Paragraph 7(a) hereof; (c) Tenant Lease Assignment. Tenant Lease Assignment ("Assignment of ----------------------- Leases"), duly executed by Seller, in the form attached hereto as Exhibit "F", ----------- pursuant to which Seller shall assign to Buyer all of Seller's right, title and interest in and to the Leases; (d) Bill of Sale. Bill of Sale ("Bill of Sale"), duly executed by ------------ Seller, in the form attached hereto as Exhibit "H", conveying all of Seller's ----------- right, title and interest in and to the Personal Property; (e) Rent Roll. The Rent Roll, updated as of the Close of Escrow, --------- certified as to its accuracy and executed by Seller, together with a list of Lessees whose rent and/or other charges is/are past due as of such date; (f) Tenant Letter. A letter signed by Seller, addressed to each of ------------- the Lessees under the Leases advising the Lessees of the sale herein to Buyer, the transfer of the security deposits, if any, to Buyer and directing that all future rent payments and other charges are to be forwarded to Buyer at an address to be supplied by Buyer; (g) Transferor's Certification of Non-Foreign Status. The ------------------------------------------------ Transferor's Certification of Non-Foreign Status in the form attached hereto as Exhibit "I", duly executed by Seller ("Firpta Certificate"); - ----------- (h) Withholding Exemption Certificate. A Withholding Exemption --------------------------------- Certificate, California Form 590, certifying that Seller is exempt from withholding under California law due to the fact that Seller resides or has a permanent place of business in California ("Form 590"); (i) Permits, Entitlements and the Like. Any and all building and ---------------------------------- development permits, certificates of occupancy, utility will serve letters, use permits and other governmental approvals and/or entitlements relative to the Property which are in Seller's possession; (j) General Assignment. General Assignment ("General Assignment"), ------------------ duly executed by Seller, in the form attached herein as Exhibit "J", conveying ----------- all of Seller's right, title and interest in and to the Intangible Personal Property; and (k) Other Instruments. Such other instruments and documents as ----------------- are described in Paragraph 22(b) herein. 9. Deposits by Buyer. No later than the Closing Date, Buyer shall ----------------- deposit or cause to be deposited with Escrow Holder the funds which are to be applied towards the payment of the -7- Purchase Price in the amounts and at the times designated in Paragraph 3 above (as reduced by the prorations and credits hereinafter provided). In addition, Buyer shall deposit with Escrow Holder prior to the Close of Escrow the following documents and instruments: (a) Met Loan Assumption Documents. The Assumption Documents duly ----------------------------- executed and notarized by Buyer, and the Met Fees (as defined in Paragraph 3(b) hereof); (b) Assignment of Leases. Counterpart of the Assignment of -------------------- Leases, duly executed by Buyer; (c) General Assignment. Counterpart of the General Assignment, ------------------ duly executed by Buyer; and (d) Other Instruments. Such other instruments and documents as ----------------- are described in Paragraph 23(b) herein. 10. Costs and Expenses. The cost and expense of the CLTA portion of ------------------ the Title Policy shall be paid by Seller, and Buyer shall pay for the ALTA portion thereof. The escrow fee of Escrow Holder shall be shared equally by Seller and Buyer. Seller shall pay all documentary transfer taxes payable in connection with the recordation of the Grant Deed. Buyer shall pay the Met Fees. Buyer and Seller shall pay, respectively, the Escrow Holder's customary charges to buyers and sellers for document drafting, recording and miscellaneous charges. If, as a result of no fault of Buyer or Seller, Escrow fails to close, Buyer and Seller shall share equally all of Escrow Holder's fees and charges. 11. Prorations. The following prorations between Seller and Buyer ---------- shall be made by Escrow Holder computed as of the Close of Escrow: (a) Taxes. Real and personal property taxes and assessments on the ----- Property shall be prorated on the basis that Seller is responsible for (i) all such taxes for the fiscal year of the applicable taxing authorities occurring prior to the "Current Tax Period" (as hereinafter defined) and (ii) that portion of such taxes for the Current Tax Period determined on the basis of the number of days which have elapsed from the first day of the Current Tax Period to the Close of Escrow, inclusive, whether or not the same shall be payable prior to the Close of Escrow. The phrase "Current Tax Period" refers to the fiscal year of the applicable taxing authority in which the Close of Escrow occurs. In the event that as of the Close of Escrow the actual tax bills for the year or years in question are not available and the amount of taxes to be prorated as aforesaid cannot be ascertained, then rates and assessed valuation of the previous year, with known changes, shall be used, and when the actual amount of taxes and assessments for the year or years in question shall be determinable, then such taxes and assessments will be reprorated between the parties to reflect the actual amount of such taxes and assessments. (b) Rentals. Rentals and other payments payable by tenants, ------- licensees, concessionaires and other persons using or occupying the Property or any part thereof, if any, for or in connection with such use or occupancy (including, without limitation, fixed monthly rentals, additional rentals, percentage rentals, escalation rentals, retroactive rentals, operating cost pass-throughs, common area maintenance charges, and other sums and charges payable by the Lessees under the Leases [collectively, "Rentals"]) shall be prorated as of the Close of Escrow. All Rentals owing for the calendar month in which the Close of Escrow occurs shall be prorated between Seller and Buyer as of the Close of Escrow, regardless of whether such Rentals have been collected and regardless of whether the Rentals for such period are in arrears or are payable in arrears pursuant to the lease terms as of the Close of Escrow (Seller shall receive a credit for Rentals payable in arrears). (i) Delinquent Rentals. Rentals are delinquent when payment thereof is due on or prior to the Close of Escrow but has not been made by the Close of Escrow. Delinquent rentals shall be prorated between Buyer and Seller as of the Close of Escrow. Buyer shall have the right to collect any delinquent rentals, but shall not have the obligation to do so. After the Close of Escrow, Seller shall not take any action against a Lessee owing delinquent rentals. Seller shall not be entitled to any rentals received from Lessees after the Close of Escrow unless such Lessees are current in their rental obligations for periods occurring from and after the Close of Escrow. Delinquent rentals collected by the Buyer, net of the costs of collection (including attorneys' fees), shall be applied first against any amount currently due and then to amounts most recently overdue. For purposes hereof, "amounts currently due" shall include amounts which would be due for a month which is to commence within ten (10) days after receipt of such amounts. Buyer agrees that any payments due to Seller as a result of collected delinquent rentals shall be payable upon receipt thereof. (c) Security Deposits. Buyer shall be credited and Seller shall be ----------------- charged with any security deposits and advanced rentals in the nature of security deposits made by the Lessees -8- under the Leases, if any. Buyer shall also be credited and Seller shall be charged for all operating cost pass-throughs paid by such tenants and held by Seller in reserve for the benefit of the tenants for the repair and/or improvement of the Property. Seller hereby agrees that it will not during the term of this Escrow or upon the Close of Escrow apply any security deposits toward any delinquent rental payments, or any other amounts, due under any Leases which do not expire by their terms prior to the Close of Escrow. (d) Operating Expenses. All utility service charges for electricity, ------------------ heat and air conditioning service, other utilities, elevator maintenance, common area maintenance, taxes other than real estate taxes such as rental taxes, other expenses incurred in operating the Property that Seller customarily pays, and any other costs incurred in the ordinary course of business or the management and operation of the Property, shall be prorated on an accrual basis. If such bills are not available as of the Close of Escrow, the parties shall prorate the same after the Closing Date, when such bills are received. Seller shall pay all such expenses that accrue prior to the Close of Escrow, and Buyer shall pay all such expenses accruing on the Close of Escrow and thereafter. Seller and Buyer shall obtain billings and meter readings as of the Close of Escrow to aid in such prorations. The parties' obligations under this Paragraph 11(d) shall survive the Close of Escrow. (e) Commissions. Seller shall pay in full all leasing commissions ----------- with respect to the Leases entered into as of or prior to the Effective Date without contribution or proration from Buyer, and Seller hereby indemnifies and holds Buyer harmless from any claims respecting the same. Buyer shall pay in full all leasing commissions with respect to Leases entered into after the Effective Date without contribution or proration from Seller, and Buyer hereby indemnifies and holds Seller harmless from any claims respecting the same. The obligations of the parties under this Paragraph 11(e) shall survive the recording of the Grant Deed and the Close of Escrow. Buyer hereby acknowledges and agrees that Buyer has consented to that certain proposed lease with the U.S. Marshal's Office (the "U.S. Marshal's Lease") a copy of which is attached hereto as Exhibit "K" and agrees to pay any reasonable brokerage commissions owed by ----------- Seller in connection with that lease. (f) Tenant Improvements. All tenant improvements (including labor and ------------------- materials) which are performed or contracted for by Seller at or prior to the Effective Date will be paid by the Seller, without contribution or proration from Buyer, and Seller hereby indemnifies and holds Buyer and the Property harmless from any claims respecting same. All tenant improvements (including labor and material) which are to be performed by Seller under any Lease executed after the Effective Date will be paid for by Buyer, without contribution or proration from Seller, provided that this Agreement is consummated and Buyer acquires the Property from Seller, and Buyer hereby indemnifies and holds Seller harmless from any Claims respecting the same. The obligations of the parties under this Paragraph 11(f) shall survive the recording of the Grant Deed and the Close of Escrow. Buyer agrees to pay for the cost of any tenant improvements required under the U.S. Marshall's Lease in an amount not to exceed One Thousand Seven Hundred and Fifty Dollars ($1,750.00). At least three (3) business day prior to the Close of Escrow, the parties shall agree upon all of the prorations to be made and submit a statement to Escrow Holder setting forth the same. In the event that any prorations, apportionments or computations made under this Paragraph 11 shall require final adjustment, then the parties shall make the appropriate adjustments promptly when accurate information becomes available and either party hereto shall be entitled to an adjustment to correct the same. Any corrected adjustment or proration shall be paid in cash to the party entitled thereto. 12. Disbursements and Other Actions by Escrow Holder. Upon the Close ------------------------------------------------ of Escrow, Escrow Holder shall promptly undertake all of the following in the following manner: (a) Prorations. Prorate all matters referenced in Paragraph 11(a), ---------- (b), (c) and (d) to the extent such prorations can be made as of the Close of Escrow, based upon the statement delivered into Escrow signed by the parties; (b) Recording. Cause the Grant Deed (with documentary transfer tax --------- information to be affixed after recording) and any other documents which the parties hereto may mutually direct, to be recorded in the Official Records in the order directed by the parties; (c) Funds. Disburse from funds deposited by Buyer with Escrow Holder ----- towards payment of all items (including, without limitation, the Purchase Price and the Met Fees) chargeable to the account of Buyer pursuant hereto in payment of such costs and disburse the balance of such funds, if any, to Buyer; (d) Documents to Seller. Deliver to Seller counterparts of the ------------------- Assignment of Leases and the General Assignment executed by Buyer; -9- (e) Documents to Buyer. Deliver to Buyer originals of the Leases, the ------------------ Bill of Sale, the Firpta Certificate, the Form 590, and counterparts of the Assignment of Leases and the General Assignment appropriately executed by Seller, the approved form of letter described in Paragraph 8(h) above addressed to the Lessees advising them of this transaction and any other documents which are to be delivered to Buyer hereunder, and, when issued, the Title Policy; and (f) Title Policy. Direct the Title Company to issue the Title ------------ Policy to Buyer. 13. Covenants of Seller. Seller hereby covenants with Buyer, as ------------------- follows: (a) From and after the date of this Agreement, Seller shall not, without the prior written consent of Buyer, which consent Buyer may withhold in its sole and absolute discretion, enter into any lease, rental agreement, maintenance contract, service contract, listing agreement or any other contract affecting or relating to the Property or any portion thereof which will survive the Close of Escrow or will otherwise affect the use, operation or enjoyment of the Property after the Close of Escrow. Buyer shall respond to any such request for its consent within three (3) business days after receipt of such request from Seller, and if Buyer fails to respond within three (3) business days, Buyer shall be deemed to have given its approval. Subject to the limitation set forth in Paragraph 11(f) hereof, Buyer acknowledges that it has approved the U.S. Marshal's Lease; (b) All insurance policies carried by Seller with respect to the Property and in effect as of the date of this Agreement shall remain continuously in full force and effect from the date of this Agreement through the day upon which the Close of Escrow occurs; (c) From and after the date of this Agreement, Seller shall not amend, modify, alter or supplement any Lease which is approved by Buyer pursuant to Paragraph 7(a) hereof; (d) From the date of this Agreement until the Close of Escrow, Seller shall (i) continue to operate and manage the Property in the same manner as prior to signing the Agreement and shall maintain the Property in good condition, repair and working order, and (ii) perform when due, and otherwise comply with, all of Seller's obligations and duties under the Leases. None of the Personal Property shall be removed from the Real Property, unless replaced by unencumbered personal property of equal or greater utility and value. All Personal Property and Intangible Personal Property shall be conveyed to Buyer by Seller at the Close of Escrow free from any liens, encumbrances or security interests of any kind or nature; (e) After the date of this Agreement, Seller shall not alienate, lien, encumber or otherwise transfer all or any portion of the Property (other than to Buyer at the Close of Escrow) except as provided in Paragraph 13(a) above; (f) Seller shall promptly notify Buyer of any change in any condition with respect to the Property or of any event or circumstance which makes any representation or warranty of Seller to Buyer under this Agreement materially untrue or misleading, and of any covenant of Seller under this Agreement which Seller will be incapable of performing or less likely to perform. 14. Seller's Representations and Warranties. In consideration of --------------------------------------- Buyer entering into this Agreement and as an inducement to Buyer to purchase the Property, Seller makes the following covenants, representations and warranties, each of which is material and is being relied upon by Buyer (and the continued truth and accuracy of which shall constitute a condition precedent to Buyer's obligations hereunder). To the "actual knowledge" of Seller, as used in this Paragraph 14, means the actual, current knowledge of Thomas C. Parker as of the date of this Agreement without investigation or inquiry. (a) Representations Regarding Seller's Authority. -------------------------------------------- (i) Seller has the legal power, right and authority to enter into this Agreement and the instruments referenced herein, and to consummate the transaction contemplated hereby; (ii) All requisite action (corporate, trust, partnership or otherwise) has been taken by Seller in connection with the entering into this Agreement, the instruments referenced herein, and the consummation of the transaction contemplated hereby. No consent of any partner, shareholder, trustee, trustor, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required; and -10- (iii) The individuals executing this Agreement and the instruments referenced herein on behalf of Seller and the partners of Seller, if any, have the legal power, right, and actual authority to bind Seller to the terms and conditions hereof and thereof. (b) Threatened Actions. To seller's actual knowledge, there are no ------------------ pending or threatened actions, suits, arbitrations, claims or proceedings, at law, in equity or otherwise, affecting, all or any portion of the Property or in which Seller is a party by reason of Seller's ownership of the Property; (c) Compliance with Law. Seller has not received notice of any ------------------- alleged violation of any applicable laws, ordinances, rules, requirements, regulations, building codes and environmental rules from any governmental agency, body or subdivision thereof bearing on the Property or the construction of the Improvements; (d) Contracts. To Seller's actual knowledge, there are no maintenance --------- contracts, service contracts or agreements or any other contracts (whether oral or written) affecting or relating to the Real Property which will survive the Close of Escrow. At the Close of Escrow, there will be no outstanding contracts entered into by Seller for the construction or repair of any Improvements which have not been fully paid for, and Seller shall cause to be discharged all mechanics' and materialmen's liens arising from any labor or materials furnished to the Real Property by or at the request of Seller prior to the Close of Escrow; (e) No Other Documents. The documents delivered by Seller to Buyer ------------------ pursuant to Paragraph 7(a)(ii) above and the documents made available to Buyer for inspection at Seller's offices are all of the material documents known by Seller to exist relative to the leasing, use, ownership and maintenance of the Property; (f) Hazardous Wastes. To Seller's actual knowledge, there is no ---------------- asbestos or materials containing asbestos incorporated into any of the Improvements and the Property is not in violation of any federal, state or local law, ordinance or regulation relating to Hazardous Materials including, but not limited to, soil and groundwater conditions. For purposes of this subparagraph, the term Hazardous Materials shall include, but not be limited to, asbestos, petroleum and any petroleum by-products, urea formaldehyde, foam insulation, polychlorinated biphenyls, and any other substance which is a "Hazardous Substance" under California Health and Safety Code Section 25316 and in the regulations adopted and publications promulgated pursuant to said statute and any amendments thereto; (g) Structural, Mechanical and Electrical Defects. To Seller's actual --------------------------------------------- knowledge and except for items expressly disclosed in the Documents and Materials, there are no physical or mechanical defects or deficiencies in the condition of the Real Property, including, but not limited to, the roofs, exterior walls or structural components of the Improvements and the heating, air conditioning, plumbing, ventilating, utility, sprinkler and other mechanical and electrical systems, apparatus and appliances located on the Real Property or in the Improvements and all such items are in good operating condition and repair; (h) FIRPTA; California Withholding. Seller is not a foreign person ------------------------------ within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, and Seller will furnish the Firpta Certificate to Buyer prior to the Close of Escrow in accordance with the terms and provisions of Paragraph 8(i) hereof. Seller is a resident of or has a permanent place of business in California and no withholding of any portion of the Purchase Price is necessary under California law relative to Seller being a non-resident of California; (i) Hart-Scott-Rodino. For purposes of the Hart-Scott-Rodino ----------------- Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, neither Seller, nor any entity which controls Seller (i.e., the "ultimate parent entity" of Seller), has total assets or annual net - ----- sales of $100 million or more; (j) Representations and Warranties at Closing. Seller shall promptly ----------------------------------------- notify Buyer of any change in any condition with respect to the Property or of any event or circumstance which makes any representation or warranty of Seller to Buyer under this Agreement materially untrue or misleading. Subject to the terms of Paragraph 23(a) of this Agreement, the representations and warranties of Seller set forth in this Agreement shall be deemed to be remade and restated by Seller on and as of the Close of Escrow but shall be modified to the extent that Seller has provided written notice to Buyer of any changes. -11- 15. Buyer's Representations and Warranties. In consideration of -------------------------------------- Seller entering into this Agreement and as an inducement to Seller to sell the Property to Buyer, Buyer makes the following covenants, representations and warranties, each of which is material and is being relied upon by Seller. (a) Representation Regarding Buyer's Authority ------------------------------------------ (i) Buyer has the legal power, right and authority to enter into this Agreement and the instruments referenced herein, and to consummate the transaction contemplated hereby; (ii) All requisite action (corporate, trust, partnership or otherwise) has been taken by Buyer in connection with the entering into this Agreement, the instruments referenced herein, and the consummation of the transaction contemplated hereby. No consent of any partner, shareholder, trustee, trustor, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required; and (iii) The individuals executing this Agreement and the instruments referenced herein on behalf of Buyer and the partners of Buyer, if any, have the legal power, right, and actual authority to bind Buyer to the terms and conditions hereof and thereof. (b) Disclaimer. Prior to entering into this Agreement and during ---------- the Due Diligence Period, Buyer shall have had ample opportunity to review all information concerning the Property and to conduct such other independent investigations as Buyer requires to determine that it is prepared to complete purchase of the Property on the terms and conditions herein stated. Buyer acknowledges that the Documents and Materials provided by Seller which are prepared by third party consultants are (a) provided without representation or warranty by Seller as to quality, accuracy or completeness; and (b) are provided by Seller to Buyer as a convenience only, and Buyer shall conduct such independent investigations, studies and reports as Buyer may reasonably require in deciding whether to purchase the Property. Buyer acknowledges that, except as specifically set forth in this Agreement, Seller, its officers, agents, employees and representatives are making no representations or warranties as to the physical condition of the Property or Improvements or in connection with any matter, report or information relating to the Property's condition, value, fitness, use, income or expense projections or zoning upon which Buyer has relied either directly or indirectly. Further, except as specifically set forth in this Agreement, Seller makes no representation or warranty as to any operative or proposed governmental laws and regulations (including, but not limited to, ADA, zoning, environmental and land use laws and regulations) to which the Property may be subject. Buyer acknowledges that the purchase of the Property will be on the basis of Buyer's own investigation of (i) the physical condition of the Property, including subsurface conditions, and the Improvements, and (ii) the operative or proposed governmental laws and regulations affecting or applicable to the Property. Buyer acknowledges that, except as expressly set forth in this Agreement, it is purchasing the Property "AS-IS, WITH ALL FAULTS" and Buyer is not relying upon any statements, representations or warranties by Seller or any of its agents or representatives regarding the Property's suitability for Buyer's intended purpose. 16. Remedies. -------- (a) LIQUIDATED DAMAGES. IF BUYER BREACHES A MATERIAL OBLIGATION UNDER ------------------ THIS AGREEMENT AND THE CLOSE OF ESCROW FAILS TO OCCUR BY REASON OF SUCH BREACH, THE DAMAGES THAT SELLER WILL INCUR BY REASON THEREOF ARE AND WILL BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTABLISH. BUYER AND SELLER, IN A REASONABLE EFFORT TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF SUCH A DEFAULT BY BUYER, HAVE AGREED BY PLACING THEIR INITIALS BELOW, THAT THE DEPOSIT SHALL BE DEEMED TO CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE PROVISIONS OF CALIFORNIA CIVIL CODE (S) 1671. IN THE EVENT OF SUCH BREACH BY BUYER, THE DEPOSIT SHALL BE DELIVERED TO SELLER WITHOUT THE NECESSITY OF AN INSTRUCTION BY BUYER, AND RETAINED BY SELLER AS LIQUIDATED DAMAGES, WHICH DAMAGES SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY AT LAW OR IN EQUITY IN THE EVENT OF AND FOR SUCH DEFAULT BY BUYER. WITHOUT LIMITING THE FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER WAIVES ANY AND ALL RIGHTS WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA CIVIL CODE SECTION 3389 TO SPECIFICALLY ENFORCE THIS AGREEMENT. SUBJECT TO THE TERMS OF PARAGRAPH 7(C) OF THIS AGREEMENT, IF THE CLOSE OF ESCROW FAILS TO OCCUR FOR ANY REASON OTHER -12- THAN BUYER'S DEFAULT UNDER THIS AGREEMENT, THEN ESCROW HOLDER SHALL RETURN TO BUYER THE DEPOSIT, TOGETHER WITH ALL INTEREST ACCRUED THEREON. SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH 16 AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS. Seller's Initials Buyer's Initials T.C.P J.C.H. ----------------- ---------------- (b) Buyer's Remedies. Buyer and Seller hereby agree that, if the sale ---------------- contemplated by this Agreement is not completed as herein provided by reason of any default of Seller hereunder, then in addition to the return of the Deposit and all interest accrued thereon, Buyer shall be entitled to pursue any remedy available under this Agreement or available at law or in equity, including, without limitation, the right to specifically enforce this Agreement. (c) Termination of Escrow. Notwithstanding anything in this Agreement --------------------- to the contrary, if either party hereto wrongfully refuses to cause Escrow Holder to cancel the Escrow, the other party shall be entitled to recover all costs and expenses, including actual attorneys' fees incurred by the party seeking to enforce its rights under this Paragraph 16. Further, Seller shall be entitled to recover all costs and expenses, including actual attorneys' fees and consequential damages, if any, which may be incurred by Seller, after the closing date by reason of the cloud on title to the property which results directly from Buyer's wrongful failure to cancel the Escrow and this Agreement.. In addition, the terms of this Paragraph 16 shall not apply to nor limit the liability of Buyer under Section 7(a)(iii) of this Agreement. 17. Damage or Condemnation Prior to Closing. Seller shall promptly --------------------------------------- notify Buyer of any casualty to the Property or any condemnation proceeding commenced prior to the Close of Escrow. If any such damage or proceeding relates to or may result in the loss of any material portion of the Property, Seller or Buyer may, in their sole and absolute discretion, elect either to: (i) terminate this Agreement, in which event all funds deposited into Escrow by Buyer shall be returned to Buyer and neither party shall have any further rights or obligations hereunder, or (ii) continue the Agreement in effect, in which event upon the Close of Escrow, Buyer shall be entitled to any compensation, awards, or other payments or relief resulting from such casualty or condemnation proceeding relating to the Property and there shall be no adjustment to the Purchase Price. 18. Notices. All notices or other communications required or ------- permitted hereunder shall be in writing, and shall be personally delivered, sent by overnight mail (Federal Express or the like) or sent by registered or certified mail, postage prepaid, return receipt requested, telegraphed, delivered or sent by telex, telecopy, facsimile, fax or cable and shall be deemed received upon the earlier of (i) if personally delivered, the date of delivery to the address of the person to receive such notice, (ii) if sent by overnight mail, the business day following its deposit in such overnight mail facility, (iii) if mailed, four (4) business days after the date of posting by the United States post office, or (iv) if given by telex, telecopy, facsimile or fax, when sent. Any notice, request, demand, direction or other communication sent by cable, telex, telecopy, facsimile or fax must be confirmed within forty- eight (48) hours by letter mailed or delivered in accordance with the foregoing. To Buyer: Kilroy Realty, L.P. c/o Kilroy Realty Corporation 2250 East Imperial Highway, Suite 1200 El Segundo, California 90245 Attention: Jeff C. Hawken Phone No. (213) 772-1193 Fax No. (310) 322-5981 With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP 18400 Von Karman, Suite 400 Irvine, California 92612 Attention: R. Michael Joyce, Esq. Phone No. (714) 553-1313 Fax No. (714) 553-8354 -13- To Seller: The Betty L. Hutton Title Holding Company 101 West Anapamu, Suite C Santa Barbara, California 93101 Attention: Thomas C. Parker Phone No. (805) 957-4740 Fax No. (805) 957-4743 With a copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92628-1950 Attention: Marcia A. Forsyth, Esq. Phone No. (714) 641-5000 Fax No. (714) 546-9035 To Escrow Holder: First American Title Insurance Company 114 East Fifth Street Santa Ana, California 92701 Attention: Judy Moore Phone No. (714) 647-4466 Fax No. (714) 647-2235 Notice of change of address shall be given by written notice in the manner detailed in this Paragraph. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of the notice, demand, request or communication sent. 19. Brokers. Upon the Close of Escrow, Seller shall pay a real ------- estate brokerage commission to Voit Commercial Brokerage with respect to this transaction in accordance with Seller's separate agreement with said broker and Seller hereby agrees to indemnify, protect, defend (with counsel chosen by Buyer) and hold Buyer free and harmless from and against any and all commissions or other claims such broker may assert in connection with the parties entering into, or consummating the transactions contemplated by, this Agreement. If any additional claims for broker's or finders' fees or commissions for the consummation of this Agreement arise, then Buyer hereby agrees to indemnify, protect, save harmless and defend Seller from and against such claims if they are based upon any statement, representation or agreement made by Buyer, and Seller hereby agrees to indemnify, protect, save harmless and defend Buyer from and against such claims if they are based upon any statement, representation or agreement made by Seller. 20. Legal Fees. In the event of the bringing of any action or suit ---------- by a party hereto against another party hereunder by reason of any breach of any of the covenants or agreements or any inaccuracies in any of the representations and warranties on the part of the other party arising out of this Agreement, then in that event, the prevailing party in such action or dispute, whether by final judgment or out of court settlement, shall be entitled to have and recover of and from the other party all costs and expenses of suit, including actual attorneys' fees. Any judgment or order entered in any final judgment shall contain a specific provision providing for the recovery of all costs and expenses of suit, including actual attorneys' fees (collectively "Costs") incurred in enforcing, perfecting and executing such judgment. For the purposes of this paragraph, Costs shall include, without limitation, attorneys' fees, costs and expenses incurred in (i) postjudgment motions, (ii) contempt proceeding, (iii) garnishment, levy, and debtor and third party examination, (iv) discovery, and (v) bankruptcy litigation. -14- 21. Assignment. Seller may not assign, transfer or convey its rights ---------- or obligations under this Agreement without the prior written consent of Buyer, and then only if Seller's assignee assumes in writing all of Seller's obligations hereunder; provided, however, Seller shall in no event be released from its obligations hereunder by reason of such assignment. Buyer, without being relieved of liability hereunder and without obtaining Seller's consent, shall have the right to assign its rights and obligations hereunder or to nominate another person or entity in whom title to the Property shall vest provided that Metropolitan has issued written approval of the assumption of the Met Loan by the proposed assignee, and the proposed assignee has assumed in writing, for the benefit of Seller, all of Buyer's obligations hereunder. 22. Indemnification. Seller hereby agrees to indemnify, protect, --------------- defend (with counsel chosen by Buyer) and hold harmless Buyer, from and against any and all obligations, liabilities, claims, liens, encumbrances, losses, damages, costs and expenses, including without limitation, attorneys' fees, incurred by Buyer relating to the Property and arising or accruing from acts, occurrences or matters that take place on or before the Close of Escrow. 23. Miscellaneous. ------------- (a) Survival of Covenants. The covenants, representations and --------------------- warranties of both Buyer and Seller set forth in this Agreement, except for Seller's representation contained in Subparagraph 14(g) hereof, shall survive the recordation of the Grant Deed and the Close of Escrow for a period of twelve (12) months. Seller's representation contained in Subparagraph 13(g) hereof shall be deemed to have merged into the Grant Deed as of the Close of Escrow. (b) Required Actions of Buyer and Seller. Buyer and Seller agree to ------------------------------------ execute such instruments and documents as may be reasonably required in order to consummate the purchase and sale herein contemplated. (c) Computation of Time Periods. If the date upon which the --------------------------- Contingency Period expires, the Closing Date or any other date or time period provided for in this Agreement is or ends on a Saturday, Sunday or federal, state or legal holiday, then such date shall automatically be extended until 5 p.m. Pacific Time of the next day which is not a Saturday, Sunday or federal, state or legal holiday. (d) Counterparts. This Agreement may be executed in multiple ------------ counterparts, each of which shall be deemed an original, but all of which, together, shall constitute but one and the same instrument. In addition, executed counterparts may be delivered by facsimile transmission with the same force and effect as delivery of an original executed counterpart. (e) Captions. Any captions to, or headings of, the paragraphs or -------- subparagraphs of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. (f) No Obligations to Third Parties. Except as otherwise expressly ------------------------------- provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate any of the parties hereto, to any person or entity other than the parties hereto. (g) Exhibits. The Exhibits attached hereto are hereby -------- incorporated herein by this reference for all purposes. (h) Amendment to this Agreement. The terms of this Agreement may not --------------------------- be modified or amended except by an instrument in writing executed by each of the parties hereto. (i) Waiver. The waiver or failure to enforce any provision of this ------ Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. (j) Applicable Law. This Agreement shall be governed by and construed -------------- in accordance with the laws of the State of California. (k) Fees and Other Expenses. Except as otherwise provided herein, ----------------------- each of the parties hereto shall pay its own fees and expenses in connection with this Agreement. -15- (l) Entire Agreement. This Agreement supersedes any prior agreements, ---------------- negotiations and communications, oral or written, and contains the entire agreement between Buyer and Seller as to the subject matter hereof. No subsequent agreement, representation, or promise made by either party hereto, or by or to an employee, officer, agent or representative of either party hereto shall be of any effect unless it is in writing and executed by the party to be bound thereby. (m) Successors and Assigns. Subject to the restrictions set forth in ---------------------- Paragraph 21 hereof, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. (n) Construction. The parties hereto hereby acknowledge and agree ------------ that (i) each party hereto is of equal bargaining strength, (ii) each such party has actively participated in the drafting, preparation and negotiation of this Agreement, (iii) each such party has consulted with such party's own, independent counsel, and such other professional advisors as such party has deemed appropriate, relative to any and all matters contemplated under this Agreement, (iv) each such party and such party's counsel and advisors have reviewed this Agreement, (v) each such party has agreed to enter into this Agreement following such review and the rendering of such advice, and (vi) any rule of construction to the effect that ambiguities are to be resolved against the drafting parties shall not apply in the interpretation of this Agreement, or any portions hereof, or any amendments hereto. 24. Election to Postpone Closing. If the Close of Escrow would ---------------------------- otherwise occur between the first (1st) and tenth (10th) day of any calendar month, Seller may elect, in its reasonable discretion, to postpone the Close of Escrow to the eleventh (11th) day of such month in order to provide Seller with an opportunity to collect all Rentals that were due within such ten-day period. Seller may make such election by providing written notice thereof to Buyer no later than seven (7) business days prior to the then scheduled Closing Date. -16- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Jeffrey C. Hawken -------------------------------------------- Name: Jeffrey C. Hawken --------------------------------------- Title: Exec. Vice-President and Chief Operating Officer -------------------------------------- "Seller" MISSION SQUARE PARTNERSHIP, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker -------------------------------------------- Name: Thomas C. Parker --------------------------------------- Title: Chief Executive Officer -------------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: /s/ Gregory L. Hardke -------------------------------------------- Name: Gregory L. Hardke --------------------------------------- Title: Managing Partner -------------------------------------- By: /s/ John D. Wahlin -------------------------------------------- Name: John D. Wahlin --------------------------------------- Title: Managing Partner -------------------------------------- Acceptance by Escrow Holder: - --------------------------- First American Title Insurance Company hereby acknowledges that it has received a fully executed original or original executed counterparts of the foregoing Agreement of Purchase and Sale and Joint Escrow Instructions and agrees to act as Escrow Holder thereunder and to be bound by and strictly perform the terms thereof as such terms apply to Escrow Holder. Dated:__________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By:__________________________________________ Its Authorized Agent -17- LEGAL DESCRIPTION OF THE LAND ----------------------------- [To Be Supplied by Seller] EXHIBIT "A" ----------- RENT ROLL --------- [To Be Supplied by Seller] EXHIBIT "B" ----------- WHEN RECORDED MAIL TO AND MAIL TAX STATEMENTS TO: KILROY REALTY, L.P. c/o Kilroy Realty Corporation 2250 East Imperial Highway, Suite 1200 El Segundo, California 90245 ================================================================================ (Above Space for Recorder's Use Only) GRANT DEED ---------- The undersigned grantor declares: Documentary Transfer Tax not shown pursuant to Section 11932 of the Revenue and Taxation Code, as amended County of ___________________ FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, __________________________________________, a ________________________, hereby GRANTS to ____________________________________________, a ___________________, that certain real property in the City of _______________, County of ______________, State of California, which is more particularly described on Exhibit "1" which is attached hereto. - ----------- IN WITNESS WHEREOF, the parties hereto have caused this Grant Deed to be executed as of the _____ day of _____________, 199__. _________________________________________________ _________________________________________________ By:______________________________________________ Print Name:___________________________________ Print Title:__________________________________ By:______________________________________________ Print Name:___________________________________ Print Title:__________________________________ [ATTACH APPROPRIATE ACKNOWLEDGMENTS] EXHIBIT "C" ----------- DESCRIPTION OF REAL PROPERTY CONVEYED ------------------------------------- [To Be Supplied] EXHIBIT "l" ----------- Document No. _______________________ Recorded ____________________, 199___ STATEMENT OF TAX DUE AND REQUEST THAT TAX DECLARATION NOT BE MADE A PART OF THE PERMANENT RECORD IN THE OFFICE OF THE COUNTY RECORDER (PURSUANT TO SECTION 11932 OF THE CALIFORNIA REVENUE AND TAXATION CODE) TO: Recorder County of _________________ Request is hereby made in accordance with the provisions of the Documentary Transfer Tax Act that the amount of the tax due not be shown on the original document which names: Grantor: ______________________________, a __________________________________ Grantee: ______________________________, a __________________________________ The property described in the accompanying document is located in the City of _____________, County of ___________________. The amount of tax due on the accompanying document is $________________. ________ Computed on full value of property conveyed. ________ Or Computed on full value, less liens and encumbrances remaining at the time of sale. _______________________________________________ (Signature of Declarant or Agent) _______________________________________________ (Firm Name) Note: After the permanent record is made, this form will be affixed to the conveying document and returned with it. TENANT:__________________________ DATE OF LEASE:___________________ AMENDED:_________________________ PREMISES:________________________ ESTOPPEL CERTIFICATE -------------------- To: _______________________ _______________________ _______________________ _______________________ Re: Lease dated _________________, 19__ between ________________________________________________ and_____________________________________________ The undersigned hereby certifies to _________________________ ("Buyer") as follows: 1. The undersigned is the "Tenant" under the above-referenced lease ("Lease") covering the above-referenced Premises ("Premises"). A true, correct and complete copy of the Lease (including all addenda, riders, amendments, modifications and supplements thereto) is attached as Exhibit "1". ----------- 2. The Lease constitutes the entire agreement between landlord under the Lease ("Landlord") and Tenant with respect to the Premises and the Lease has not been modified, changed, altered or amended in any respect except as set forth above. 3. The term of the Lease commenced on _______________, 19__, and, including any presently exercised option or renewal term, will expire on ____________________. Tenant has accepted possession of the Premises and is the actual occupant in possession and has not sublet, assigned or hypothecated all or any portion of Tenant's leasehold interest. All improvements to be constructed on the Property by Landlord have been completed and accepted by Tenant and any tenant construction allowances have been paid in full. 4. As of the date of this Estoppel Certificate, there exists no breach or default, nor state of facts which, with notice, the passage of time, or both, would result in a breach or default on the part of either Tenant or Landlord. To the best of Tenant's knowledge, no claim, controversy, dispute, quarrel or disagreement exists between Tenant and Landlord. 5. Tenant is currently obligated to pay annual rental of $____________ in monthly installments of $___________ per month and monthly installments of annual rental have been paid through _________________, 19__. Tenant is obligated to pay monthly installments of common area maintenance charges in the amount of $____________. No other rent has been paid in advance and Tenant has no claim or defense against Landlord under the Lease and is asserting no offsets or credits against either the rent or Landlord. Tenant has no claim against Landlord for any security deposit or other deposits except $___________ which was paid pursuant to the Lease. 6. Tenant has no option or preferential right to purchase all or any part of the Premises (or the real property of which the Premises are a part) nor any right or interest with respect to the Premises other than as Tenant under the Lease. 7. Tenant has no option, right of first offer or right of first refusal to lease or occupy any other space within the property of which the Premises are a part, except ___________________________ [IF NONE, LEAVE BLANK]. Tenant has no right to renew or extend the terms of the Lease except ___________ ________________________________[IF NONE, LEAVE BLANK]. 8. Tenant has no preferential right to parking spaces or storage area except __________________________________________________________________ [IF NONE, LEAVE BLANK]. EXHIBIT "D" ----------- 9. Tenant has made no agreement with Landlord or any agent, representative or employee of Landlord concerning free rent, partial rent, rebate of rental payments or any other type of rental or other concession except as expressly set forth in the Lease. 10. There has not been filed by or against Tenant a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States, or any state thereof, or any other action brought under said bankruptcy laws with respect to Tenant. 11. All insurance required of Tenant by the Lease has been provided by Tenant and all premiums have been paid. 12. The Premises contains approximately __________ square feet of rentable area. This Estoppel Certificate is made to Buyer in connection with the prospective purchase by Buyer, or Buyer's assignee, of the property containing the Premises. This Estoppel Certificate may be relied on by Buyer and any other party who acquires an interest in the Premises in connection with such purchase or any person or entity which may finance such purchase. Dated this _____ day of _________________, 19__. _________________________________________________ By:______________________________________________ Its:__________________________________________ "TENANT" [Attach Lease as Exhibit "1"] ----------- D-2 PERSONAL PROPERTY EXHIBIT "E" ----------- TENANT LEASE ASSIGNMENT ----------------------- THIS TENANT LEASE ASSIGNMENT ("Assignment") is made this ____ day of _______________, 19__ by and between _______________________________________, a __________________ ("Assignor"), and ________________________________________, a __________________ ("Assignee"). W I T N E S S E T H: - - - - - - - - - - A. Assignor and Assignee entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated as of _________________, 19__ ("Agreement"), respecting the sale of the "Property" (as defined in the Agreement). B. Under the Agreement, Assignor is obligated to assign to Assignee any and all of Assignor's right, title and interest in and to all leases, licenses, rental agreements or occupancy agreements relative to the real property ("Real Property") described in Exhibit "1" attached hereto, together ----------- with all rents, issues and profits thereunder (collectively, the "Tenant Leases") and all security deposits, prepaid rentals, cleaning fees and other deposits, plus any interest accrued thereon (which is payable to the tenant), paid by tenants of the Real Property to Assignor or any other person ("Tenant Deposits"), which Tenant Leases and Tenant Deposits are set forth on Exhibit "2" ----------- attached hereto. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Assignor hereby assigns, sells, transfers, sets over and delivers unto Assignee all of Assignor's estate, right, title and interest in and to the Tenant Leases and the Tenant Deposits and Assignee hereby accepts such assignment. 2. Assignor covenants, warrants and represents to Assignee that, (i) except as shown on Exhibit "2", the Tenant Leases have not been modified, ----------- amended or altered in writing or otherwise, and no concessions, abatements or adjustments have been granted to tenants under the Tenant Leases, and (ii) Assignor has not assigned to any other person or entity the Tenant Leases or Tenant Deposits and Assignor shall indemnify, protect, defend (with counsel chosen by Assignee) and hold harmless Assignee from and against any and all such claims of prior assignment. Such covenants, warranties and representations shall survive the execution and delivery of this Assignment. 3. Assignee hereby assumes the performance of all of the terms, covenants and conditions imposed upon Assignor as landlord under the Tenant Leases accruing or arising on or after the "Close of Escrow" (as defined in the Agreement). 4. Assignor hereby agrees to indemnify, protect, defend (with counsel chosen by Assignee) and hold harmless Assignee, Assignee's agents and Assignee's and their successors and assigns from and against any and all claims, losses, liabilities and expenses, including reasonable attorneys' fees, suffered or incurred by Assignee by reason of any breach by Assignor prior to the Close of Escrow, of any of Assignor's obligations under the Tenant Leases or with respect to the Tenant Deposits. 5. Assignee hereby agrees to indemnify, protect, defend (with counsel chosen by Assignor) and hold harmless Assignor, Assignor's agents and Assignor's and their successors and assigns from and against any and all claims, losses, liabilities and expenses, including reasonable attorneys' fees, suffered or incurred by Assignor by reason of any breach by Assignee from and after the Close of Escrow, of any of Assignee's obligations under the Tenant Leases or with respect to the Tenant Deposits. 6. In the event of the bringing of any action or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, conditions, agreements or provisions on the part of the other party arising out of this Assignment, then in that event the prevailing party shall be entitled to have and recover of and from the other party all costs and expenses of the action or suit, including reasonable attorneys' fees. 7. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. EXHIBIT "F" ----------- 8. This Assignment shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of all the respective parties hereto. 9. This Assignment shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the State of California. IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Assignment as of the day and year first written above. "Assignor" ___________________________________________ ___________________________________________ ___________________________________________ "Assignee" ___________________________________________ ___________________________________________ By:________________________________________ Its:____________________________________ [Attach Real Property Description as Exhibit "1" ----------- and Schedule of Leases and Security Deposits as Exhibit "2"] ----------- F-2 ASSIGNMENT OF CONTRACTS AND ASSUMPTION AGREEMENT ---------------------------------- THIS ASSIGNMENT OF CONTRACTS AND ASSUMPTION AGREEMENT ("Assignment"), is made as of the ____ day of _______________, 19__ by and between _______________________________________, a __________________ ("Assignor"), and ________________________________________, a __________________ ("Assignee"). W I T N E S S E T H: - - - - - - - - - - A. Assignor and Assignee entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated ________________, 19__, ("Agreement"), for the purchase and sale of certain real property ("Property") more particularly described in the Agreement. B. This Assignment is being made pursuant to the terms of the Agreement for the purpose of assigning to Assignee all of Assignor's right, title and interest in and to those certain contracts, warranties and guaranties, together with all supplements, amendments and modifications thereto approved by Buyer pursuant to the Agreement (collectively, the "Contracts"). The Contracts are more particularly described in Exhibit "1" attached hereto. ----------- NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Assignor hereby grants, assigns, transfers, conveys and delivers to Assignee the Contracts and all of Assignor's right, title, interest, benefits and privileges thereunder, and Assignee hereby accepts such Assignment. 2. Assignee hereby agrees to indemnify, protect, defend (with counsel chosen by Assignor) and hold harmless Assignor, Assignor's agents and Assignor's and their successors and assigns from and against any and all claims, losses, liabilities and expenses, including reasonable attorneys' fees, suffered or incurred by Assignor by reason of any breach by Assignee from and after the Close of Escrow (as defined in the Agreement) of any of Assignee's obligations under the Contracts. 3. Assignor hereby agrees to indemnify, protect, defend (with counsel chosen by Assignee) and hold harmless Assignee, Assignee's agents and Assignee's and their successors and assigns from and against any and all claims, losses, liabilities and expenses, including reasonable attorneys' fees, suffered or incurred by Assignee by reason of any breach by Assignor prior to the Close of Escrow of any of Assignor's obligations under the Contracts. 4. By acceptance of this Assignment, Assignee hereby assumes and agrees to perform and to be bound by all of the terms, covenants, conditions and obligations imposed upon or assumed by Assignor under the Contracts. Said assumption shall have application only to those obligations under the Contracts first accruing or arising on or after the Close of Escrow and shall have no application to obligations accruing or arising prior to said date. 5. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. 6. This Assignment shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, heirs and legatees of the respective parties hereto. 7. In the event of the bringing of any action or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, conditions, agreements or provisions on the part of the other party arising out of this Assignment, then in that event the prevailing party shall be entitled to have and recover of and from the other party all costs and expenses of the action or suit, including reasonable attorneys' fees. EXHIBIT "G" ----------- 8. This Assignment shall be governed by, interpreted under, and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. "Assignor" _________________________________________________ _________________________________________________ _________________________________________________ "Assignee" _________________________________________________ _________________________________________________ By:______________________________________________ Its:__________________________________________ [Attach Schedule of Contracts as Exhibit "1"] ----------- G-2 BILL OF SALE ------------ THIS BILL OF SALE ("Bill of Sale") is made this _____ day of _____________, 19__ by MISSION SQUARE PARTNERS, a California general partnership ("Seller"), in favor of KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"). W I T N E S S E T H: - - - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated as of ______________________, 19__ ("Agreement") respecting the sale of certain "Property" (as defined in the Agreement). B. Under the Agreement, Seller is obligated to transfer to Buyer any and all of Seller's right, title and interest in and to all equipment, appliances, tools, machinery, supplies, building materials and other personal property of every kind and character owned by Seller and attached to, appurtenant to, located in or used in connection with the operation of the "Improvements" (as defined in the Agreement) (collectively, the "Personal Property"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby absolutely and unconditionally give, grant, bargain, sell, transfer, set over, assign, convey, release, confirm and deliver to Buyer all of the Personal Property, including, without limitation, those certain items of personal property described on Exhibit "1" attached hereto. - ----------- 1. Seller hereby represents and warrants to Buyer that: (i) the Personal Property has been paid for and is not subject to any liens, encumbrances or claims of any kind, such warranty and representation shall survive the execution and delivery of this Bill of Sale and Buyer's subsequent transfer of any of the Personal Property. 2. Seller warrants, and hereby covenants, at Seller's sole cost and expense, to defend Buyer's title to the Personal Property against all lawful claims and demands of all persons or entities whomsoever which may now exist or which may have accrued as of the "Close of Escrow" (as defined in the Agreement). Seller hereby agrees to indemnify, protect, defend (with counsel chosen by Buyer) and hold Buyer free and harmless from and against any and all liabilities, obligations, damages, causes of action, judgments, costs and expenses (including reasonable attorneys' fees) which Buyer may incur or suffer in connection with any breach by Seller of the preceding warranty and covenant. 3. This Bill of Sale shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, heirs and legatees of Buyer and Seller. EXHIBIT "H" ----------- 4. This Bill of Sale shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the State of California. IN WITNESS WHEREOF, Seller has executed and delivered this Bill of Sale as of the date first written above. "Seller" MISSION SQUARE PARTNERSHIP, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By:________________________________________ Name:___________________________________ Title:__________________________________ By: BB&K Mission Square Partners, a California general partnership, its general partner By:________________________________________ Name:___________________________________ Title:__________________________________ By:________________________________________ Name:___________________________________ Title:__________________________________ [Attach Description of Personal Property as Exhibit "1"] ----------- H-2 TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS ------------------------------------------------ To inform ___________________________________________, a _____________ (the "Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") will not be required upon the transfer by _________________________________________, a ______________________ ("Transferor") of certain interests in real property to the Transferee, the undersigned hereby certifies the following on behalf of the Transferor: 1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder); and 2. The Transferor's U.S. employer or tax (social security) identification number is ________________________. The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor. "TRANSFEROR" ____________________________________________ ____________________________________________ ____________________________________________ Dated: ___________________, 19__ EXHIBIT "I" ----------- GENERAL ASSIGNMENT AGREEMENT ---------------------------- THIS GENERAL ASSIGNMENT AGREEMENT ("Assignment"), is made as of the _____ day of _______________, 199__, by and among _____________________________, a _____________________ ("Assignor") and ______________________________ ("Assignee"). W I T N E S S E T H : - - - - - - - - - - Assignor is the owner of that certain land (the "Land") located in the City of ______________, County of ______________, State of California more particularly described in Exhibit "A" attached hereto, and all rights, ----------- privileges and easements appurtenant to the Land (the "Appurtenances"), and all buildings and other improvements thereon (the "Improvements"). The Land, the Appurtenances and the Improvements are hereinafter referred to collectively as the "Real Property." The Real Property is being conveyed by Assignor to Assignee pursuant to a grant, bargain and sale deed ("Grant Deed") of on or about even date herewith, pursuant to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated ______________, 1997 (the "Agreement"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Assignor hereby grants, assigns, transfers, conveys and delivers to Assignee all of Assignor's right, title, interest, benefits and privileges in and to the following described property (collectively, the "Rights"): (a) All construction, engineering, consulting, architectural and other similar contracts, and any and all amendments and modifications thereto, concerning the design or construction of any or all of the Real Property and all warranties with respect thereto (including all statutory, express and implied warranties); (b) All architectural drawings, plans, specifications, soils tests, appraisals, engineering reports and similar materials relating to any or all of the Real Property; (c) All payment and performance bonds or guaranties and any and all modifications and extensions thereof relating to the Real Property; (d) All governmental entitlements (including, but not limited to, all environmental impact reports, negative declarations, map approvals, conditional use permits, building permits and certificates of occupancy for the Improvements), permissions, environmental clearances, authority to subdivide the Land, rights, licenses and permits which relate to all or any of the Real Property; (e) All general intangibles relating to the development or use of the Real Property, including, without limitation, all names under which or by which the Real Property or any portion thereof may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all trademarks and goodwill in any way relating to the Real Property; (f) All refunds and payments of any kind relating to the construction, operation, occupancy, use and/or disposition of any or all of the Real Property; (g) All proceeds and claims arising on account of any damage to or taking of the Real Property or any part thereof, and all causes of action and recoveries for any loss or diminution in the value of the Real Property; and (h) All of Assignor's interest in all impounds, accounts [,letters of credit] and other security held by Metropolitan Life Insurance Company in connection with the Met Loan. 2. Assignee hereby accepts the grant, assignment, transfer, conveyance and delivery of the Rights set forth in Paragraph 1 hereof, effective as of the recordation of the Grant Deed. 3. All rights are conveyed without representation or warranty, subject to all proprietary interests that may exist with the parties preparing the Rights, and subject to all conditions imposed upon issuance of the Rights. EXHIBIT "J" ----------- 4. This Assignment shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, heirs and legatees of the respective parties hereto. 5. In the event of the bringing of any action or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, conditions, agreements or provisions on the part of the other party arising out of this Assignment, then in that event the prevailing party shall be entitled to have and recover of and from the other party all costs and expenses of the action or suit, including reasonable attorneys' fees. 6. This Assignment shall be governed by, interpreted under, and enforced and construed in accordance with the laws of the State of California. 7. This Assignment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the date first hereinabove written. "Assignor" ___________________________________________ ___________________________________________ ___________________________________________ "Assignee" ___________________________________________ a _________________________________________ By:________________________________________ Its:____________________________________ J-2 LEGAL DESCRIPTION OF THE PROPERTY --------------------------------- [To Be Provided] EXHIBIT "A" to -------------- EXHIBIT "J" ----------- COPY OF U.S. MARSHALL'S LEASE ----------------------------- [To Be Provided by Seller] EXHIBIT "K" ----------- EX-10.61 3 1ST AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.61 FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This First Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "First Amendment") is made as of August 22, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions (the "Agreement") providing for the sale of 3750 University Avenue, Riverside, California; B. The Agreement provides that if Buyer acquires the Property, it will, if permitted, assume that certain loan (the "Debt") from Metropolitan Life Insurance Company ("Met"). C. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property including obtaining Met's consent to Buyer's assumption of the Debt; D. Seller and Buyer desire to amend the Agreement to provide for such extension. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date provided for in the Agreement is hereby extended to September 5, 1997. However, if Buyer has not received documents, acceptable to Buyer in its sole discretion, providing for Met's consent to Buyer's assumption of the Debt (the "Met Consent") by September 5, 1997, then the Contingency Date only with respect to Buyer's assumption of the Debt shall automatically be extended to September 25, 1997. Accordingly, if Buyer has not obtained the Met Consent on or before September 25, 1997, then Buyer shall have the right to terminate this Agreement by providing Seller with a Termination Notice no later than 5:00 p.m. Pacific Time on September 25, 1997. 2. Notwithstanding anything in the Agreement to the contrary, the Closing Date shall be deemed to be the earlier of (a) September 30, 1997 or (b) three (3) Business Days after Buyer receives the Met Consent. 3. Except as set forth in this First Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this First Amendment conflicts with any provision of the Agreement, the provisions of this First Amendment shall prevail. 4. Any capitalized terms which are not defined in this First Amendment shall have the meaning provided for in the Agreement. -2- 5. This First amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this first amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Jeffrey C. Hawken --------------------------------------------- Name: Jeffrey C. Hawken ---------------------------------------- Title: E.V.P. and C.O.O. --------------------------------------- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as the Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ----------------------------------------- Name: Thomas C. Parker ------------------------------------ Title: C.E.O. ----------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this First Amendment. Dated: 8/26, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: /s/ J.M. Moore, A.V.P. --------------------------------------------- Its Authorized Agent -3- EX-10.62 4 2ND AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.62 SECOND AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Second Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Second Amendment") is made as of September 5, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by that certain First Amendment to the same dated as of August 22, 1997 (collectively, the "Agreement"); B. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property; C. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, (a) the Contingency Date provided for in the Agreement is hereby extended to September 19, 1997 and (b) the Closing Date shall not be prior to September 22, 1997. 2. Except as set forth in this Second Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this Second Amendment conflicts with any provision of the Agreement, the provisions of this Second Amendment shall prevail. 3. Any capitalized terms which are not defined in this Second Amendment shall have the meaning provided for in the Agreement. 4. This Second Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Jeffrey C. Hawken ------------------------------ Name: Jeffrey C. Hawken ------------------------- Title: E.V.P. and C.O.O. ------------------------ -2- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ------------------------------ Name: Thomas C. Parker ------------------------- Title: C.E.O. ------------------------ By: BB&K Mission Square Partners, a California general partnership, its general partner By: ------------------------------ Name: ------------------------- Title: ------------------------ Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Second Amendment. Dated:_______________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: ---------------------------------- Its Authorized Agent -3- EX-10.63 5 3RD AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.63 THIRD AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Third Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Third Amendment") is made as of September 19, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by that certain First Amendment and that certain Second Amendment to the same (collectively, the "Agreement"); B. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property; C. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the agreement to the contrary, the contingency date provided for in the Agreement is hereby extended to September 22, 1997. 2. Seller acknowledges that, as provided for in the First Amendment to the Agreement, Buyer shall have until September 25, 1997 to terminate the Agreement if it has not obtained the Met Consent on or before such date. 3. Except as set forth in this Third Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this Third Amendment conflicts with any provision of the Agreement, the provisions of this Third Amendment shall prevail. 4. Any capitalized terms which are not defined in this Third Amendment shall have the meaning provided for in the Agreement. 5. This Third Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Third Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Nadine K. Kirk ---------------------------------------------- Name: Nadine K. Kirk ----------------------------------------- Title: V.P. - Legal ---------------------------------------- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ---------------------------------------------- Name: Thomas C. Parker ----------------------------------------- Title: C.E.O. ---------------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: /s/ Christopher L. Carpenter ------------------------------------------ Name: Christopher L. Carpenter ------------------------------------- Title: Partner ------------------------------------ Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Third Amendment. Dated:__________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By:_________________________________________ Its Authorized Agent -2- EX-10.64 6 4TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.64 FOURTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Fourth Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Fourth Amendment") is made as of September 22, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by that certain First Amendment, that certain Second Amendment and that certain Third Amendment to the same (collectively, the "Agreement"); B. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property; C. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date provided for in the Agreement is hereby extended to September 23, 1997. 2. Except as set forth in this Fourth Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this Fourth Amendment conflicts with any provision of the Agreement, the provisions of this Fourth Amendment shall prevail. 3. Any capitalized terms which are not defined in this Fourth Amendment shall have the meaning provided for in the Agreement. 4. This Fourth Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Tyler Rose -------------------------------- Name: Tyler Rose --------------------------- Title: S.V.P. and Treasurer -------------------------- -2- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ---------------------------------------- Name: Thomas C. Parker ----------------------------------- Title: C.E.O. ---------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Fourth Amendment. Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: -------------------------------------------- Its Authorized Agent -3- EX-10.65 7 5TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.65 FIFTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Fifth Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Fifth Amendment") is made as of September 23, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by certain amendments to the same (collectively, the "Agreement"); B. Buyer and Seller have discussed reducing the Purchase Price by Six Hundred Thousand Dollars ($600,000.00); C. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property and to agree upon the terms of the Purchase Price reduction; D. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date provided for in the Agreement is hereby extended to September 25, 1997. 2. Except as set forth in this Fifth Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this Fifth Amendment conflicts with any provision of the Agreement, the provisions of this Fifth Amendment shall prevail. 3. Any capitalized terms which are not defined in this Fifth Amendment shall have the meaning provided for in the Agreement. 4. This Fifth Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Tyler Rose -------------------------------------------- Name: Tyler Rose -------------------------------------- Title: S.V.P. and Treasurer ------------------------------------- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ---------------------------------------- Name: Thomas C. Parker ----------------------------------- Title: C.E.O. ---------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Fifth Amendment. Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: -------------------------------------------- Its Authorized Agent -2- EX-10.66 8 6TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.66 SIXTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Sixth Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Sixth Amendment") is made as of September 25, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by certain amendments to the same (collectively, the "Agreement"); B. Buyer and Seller have discussed reducing the Purchase Price by Six Hundred Thousand Dollars ($600,000.00), but the parties have not come to a final agreement regarding the same; C. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property and to agree upon the terms of the Purchase Price reduction; D. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date, including, but not limited to, for the purpose of Buyer obtaining the Met Consent, provided for in the Agreement is hereby extended to October 3, 1997. 2. Notwithstanding anything in the Agreement to the contrary, the Closing Date shall be deemed to be the earlier of (a) October 7, 1997 or (b) three (3) Business Days after Buyer receives the Met Consent. 3. Except as set forth in this Sixth Amendment, the provisions of the Agreement remain unmodified and in full force and effect. if any provision of this Sixth Amendment conflicts with any provision of the Agreement, the provisions of this Sixth Amendment shall prevail. 4. Any capitalized terms which are not defined in this Sixth Amendment shall have the meaning provided for in the Agreement. 5. This Sixth Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Sixth Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., A Delaware limited partnership By: /s/ Tyler Rose ------------------------------------------- Name: Tyler Rose ------------------------------------- Title: S.V.P. and Treasurer ------------------------------------ "Seller" MISSION SQUARE PARTNERS, A California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By:/s/ Thomas C. Parker ---------------------------------------- Name: Thomas C. Parker ---------------------------------- Title: C.E.O. --------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By:/s/ Christopher L. Carpenter ---------------------------------------- Name: Christopher L. Carpenter ---------------------------------- Title: General Partner --------------------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Sixth Amendment. Dated:____________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: -------------------------------------------- Its Authorized Agent -2- EX-10.67 9 7TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.67 SEVENTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Seventh Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Seventh Amendment") is made as of September 29, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by certain amendments to the same (collectively, the "Agreement"); B. Based upon Buyer's due diligence review of the Property, Buyer and Seller have agreed to reduce the Purchase Price by Six Hundred Thousand Dollars ($600,000.00); C. Seller and Buyer desire to amend the Agreement to provide for such reduction in the Purchase Price. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Purchase Price provided for in the Agreement is hereby reduced by Six Hundred Thousand Dollars ($600,00.00) to Twenty-One Million Nine Hundred Forty-Five Thousand Dollars ($21,945,000.00). 2. Except as set forth in this Seventh Amendment, the provisions of the Agreement remain unmodified and in full force and effect. if any provision of this Seventh Amendment conflicts with any provision of the Agreement, the provisions of this Seventh Amendment shall prevail. 3. Any capitalized terms which are not defined in this Seventh Amendment shall have the meaning provided for in the Agreement. 4. This Seventh Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Seventh Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Tyler Rose --------------------------------- Name: Tyler Rose ---------------------------- Title: S.V.P. and Treasurer --------------------------- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Thomas C. Parker ----------------------------- Name: Thomas C. Parker ------------------------ Title: C.E.O. ----------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: /s/ Christopher L. Carpenter ----------------------------- Name: Christopher L. Carpenter ------------------------ Title: General Partner ----------------------- -2- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Seventh Amendment. Dated:________________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: ----------------------------- Its Authorized Agent -3- EX-10.68 10 8TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.68 EIGHTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Eighth Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Eighth Amendment") is made as of October 2, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by certain amendments to the same (collectively, the "Agreement"); B. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property; C. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date, including, but not limited to, for the purpose of Buyer obtaining the Met Consent, provided for in the Agreement is hereby extended to October 24, 1997. 2. Notwithstanding anything in the Agreement to the contrary, the Closing Date is hereby amended such that it is to occur on October 31, 1997. 3. Except as set forth in this Eighth Amendment, the provisions of the Agreement remain unmodified and in full force and effect. if any provision of this Eighth Amendment conflicts with any provision of the Agreement, the provisions of this Eighth Amendment shall prevail. 4. Any capitalized terms which are not defined in this Eighth Amendment shall have the meaning provided for in the Agreement. 5. This Eighth Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Eighth Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Jeffrey C. Hawken ----------------------------- Name: Jeffrey C. Hawken ------------------------ Title: E.V.P. and C.O.O. ----------------------- "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as The Betty L. Hutton Company), its general partner By: /s/ Arlene R. Craig ------------------------- Name: Arlene R. Craig -------------------- Title: President ------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By: ------------------------- Name: -------------------- Title: ------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Eighth Amendment. Dated:______________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: -------------------------- Its Authorized Agent -2- EX-10.69 11 9TH AMENDMENT - MISSION SQUARE PARTNERS EXHIBIT 10.69 NINTH AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This Ninth Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions (this "Ninth Amendment") is made as of October 24, 1997 by and between Kilroy Realty, L.P., a Delaware limited partnership ("Buyer") and Mission Square Partners, a California general partnership ("Seller") with respect to the following: R E C I T A L S : - - - - - - - - A. Seller and Buyer entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions providing for the sale of 3750 University Avenue, Riverside, California as amended by certain amendments to the same (collectively, the "Agreement"); B. Buyer and Seller anticipate that additional time will be required to complete Buyer's review of the Property; C. Seller and Buyer desire to amend the Agreement to provide for such additional time. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: A G R E E M E N T : - - - - - - - - - 1. Notwithstanding anything in the Agreement to the contrary, the Contingency Date, including, but not limited to, for the purpose of Buyer obtaining the Met Consent, provided for in the Agreement is hereby extended to October 28, 1997. 2. Except as set forth in this Ninth Amendment, the provisions of the Agreement remain unmodified and in full force and effect. If any provision of this Ninth Amendment conflicts with any provision of the Agreement, the provisions of this Ninth Amendment shall prevail. 3. Any capitalized terms which are not defined in this Ninth Amendment shall have the meaning provided for in the Agreement. 4. This Ninth Amendment may be signed in counterparts, including facsimile counterparts, which, when signed by both Buyer and Seller, shall constitute a binding agreement. IN WITNESS WHEREOF, the parties have executed this Ninth Amendment as of the date first written above. "Buyer" KILROY REALTY, L.P., a Delaware limited partnership By: /s/ Jeffrey C. Hawken ------------------------------------------ Name: Jeffrey C. Hawken ------------------------------------- Title: E.V.P. and C.O.O. ------------------------------------ "Seller" MISSION SQUARE PARTNERS, a California general partnership By: The Betty L. Hutton Title Holding Company, Inc., (formerly known as the Betty L. Hutton Company), its general partner By:/s/ Thomas C. Parker --------------------------------------- Name: Thomas C. Parker ---------------------------------- Title: C.E.O. --------------------------------- By: BB&K Mission Square Partners, a California general partnership, its general partner By:/s/ Christopher L. Carpenter --------------------------------------- Name: Christopher L. Carpenter ---------------------------------- Title: General Partner --------------------------------- Acknowledgment by Escrow Holder: - ------------------------------- First American Title Insurance Company hereby acknowledges the terms of this Ninth Amendment. Dated:___________, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: ------------------------------------------- Its authorized agent -2- EX-27.1 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS 9-MOS DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 SEP-30-1997 SEP-30-1996 74,890 0 0 0 4,010 4,670 (246) (1,628) 0 0 0 0 587,178 227,337 (117,552) (109,668) 572,544 128,339 0 0 0 0 0 0 0 0 245 0 391,853 128,339 572,544 128,339 0 0 45,701 29,701 0 0 22,310 18,770 0 0 0 0 8,609 16,234 14,782 (5,303) 0 0 14,782 (5,303) 0 0 3,204 20,095 0 0 15,942 14,792 0 0 0 0 NET INCOME IS AFTER EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY OF $187 AND MINORITY INTEREST OF ($2,231).
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