-----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, F2TI0LyFbnin7Cw3gfWdSvkgnwjeK5ad/MQgigYHXZ04TUBMV8ezcSyZ2y7DL5e1 G483+ritPKg4lwvHjbccrA== 0000898430-97-002913.txt : 19970716 0000898430-97-002913.hdr.sgml : 19970716 ACCESSION NUMBER: 0000898430-97-002913 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970715 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 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12675 FILM NUMBER: 97641060 BUSINESS ADDRESS: STREET 1: 2250 E IMPERIAL HWY STREET 2: C/O KILROY INDUSTRIES CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 2137721193 MAIL ADDRESS: STREET 1: C/O KILROY INDUSTRIES STREET 2: 2250 E IMPERIAL HIGHWAY #1200 CITY: EL SEGUNDO STATE: CA ZIP: 90245 8-K 1 KILROY REALTY CORPORATION FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report: (Date of earliest event reported) June 30, 1997 KILROY REALTY CORPORATION (Exact name of registrant as specified in its charter) MARYLAND COMMISSION FILE: 1-12675 95-4598246 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2250 EAST IMPERIAL HIGHWAY, EL SEGUNDO, CALIFORNIA, 90245 (Address of principal executive offices) Registrant's telephone number, including area code: (213) 772-1193 =============================================================================== ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On June 30, 1997 Kilroy Realty Corporation (collectively with its subsidiaries the "Company") acquired three office buildings in Santa Monica, California which comprise approximately 94,800 aggregate rentable square feet. On such date, the office buildings were 100% leased at an average annual rental rate of $2.02 per square foot. The quoted independent market rental rate is $2.10 per square foot for comparable office properties in the Santa Monica submarket. The properties were purchased from Santa Monica Number Seven Associates L.P., an unaffiliated entity, for approximately $31,000,000 in cash. On July 1, 1997 the Company acquired two office buildings in Santa Ana, California which comprise approximately 124,900 aggregate rentable square feet. On such date, the office buildings were 100% leased at an average annual rental rate of $1.10 per square foot. The quoted independent market rental rate is $0.95 per square foot for comparable office properties in the Santa Ana submarket. The properties were purchased from Pullman Carnegie Associates, an unaffiliated entity, for approximately $15,540,000 in cash. On July 2, 1997 the Company acquired one office building and one industrial building in Irvine, California which comprise approximately 272,000 aggregate rentable square feet. On such date, the office building was 100% leased at an average annual rental rate of $0.85 per square foot. The quoted independent market rental rate is $1.05 per square foot for comparable office properties in the Irvine submarket. On such date, the industrial building was 100% leased at an average annual rental rate of $0.45 per square foot. The quoted independent market rental rate is $0.57 per square foot for comparable industrial properties in the Irvine submarket. The properties were purchased from Mazda Motor of America, Inc., an unaffiliated entity, for approximately $17,025,000 in cash. The purchase prices for the above acquisitions were based on arms length negotiations. The Company used its secured revolving credit facility to finance the acquisitions. The loans currently bear interest at LIBOR plus 1.5%. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. DESCRIPTION ----------- (a) Financial statements of properties acquired. The required financial statements for the acquired property will be filed within 60 days. (b) Pro forma financial information. The required pro forma financial information will be filed within 60 days. (c) Exhibits EXHIBIT NO. ------- 10.54 Purchase and Sale Agreement and Escrow Instructions, dated May 5, 1997, by and between Kilroy Realty, L.P. and Pullman Carnegie Associates. 10.59 Amendment to Purchase and Sale Agreement and Escrow Instructions, dated June 27, 1997, by and between Kilroy Realty, L.P. and Pullman Carnegie Associates. 10.60 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. 10.61 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. 10.62 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. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. KILROY REALTY CORPORATION Date: July 15, 1997 By /s/ Ann Marie Whitney ------------- ------------------------------------ Name: Ann Marie Whitney Title: Vice President and Controller 4 EX-10.54 2 PURCHASE & SALE AGREEMENT EXHIBIT 10.54 PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS BY AND BETWEEN KILROY REALTY, L.P., A DELAWARE LIMITED PARTNERSHIP AS "BUYER" AND PULLMAN CARNEGIE ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP AS "SELLER" TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I. PURCHASE AND SALE..................................... 1 1.1. Agreement of Purchase and Sale......................... 1 1.2. Property Defined....................................... 2 1.3. Purchase Price......................................... 2 1.4. Opening of Escrow; Deposit............................. 2 1.5. Payment of Purchase Price.............................. 3 1.6. Deposit as Liquidated Damages.......................... 3 1.7. Escrow Holder.......................................... 4 ARTICLE II. TITLE AND SURVEY..................................... 5 2.1. Delivery of Title Documents............................ 5 2.2. Title Examination...................................... 5 2.3. Pre-Closing "Gap" Title Defects........................ 6 2.4. Permitted Exceptions................................... 6 2.5. Conveyance of Title.................................... 7 ARTICLE III. REVIEW OF PROPERTY.................................. 7 3.1. Right of Inspection.................................... 7 3.2. Environmental Reports.................................. 8 3.3. Right of Termination................................... 8 3.4. Review of Tenant Estoppel.............................. 8 ARTICLE IV. CLOSING.............................................. 9 4.1. Time and Place......................................... 9 4.2. Seller's Obligations At and Prior to Closing........... 9 4.3. Buyer's Obligations at Closing......................... 11 4.4. Credits and Prorations................................. 12 4.5. Transaction Taxes and Closing Costs.................... 14 4.6. Conditions Precedent to Obligation of Buyer............ 15 4.7. Conditions Precedent to Obligation of Seller........... 15 ARTICLE V. REPRESENTATIONS, WARRANTIES AND COVENANTS............. 16 5.1. Representations and Warranties of Seller............... 16 5.2. Knowledge Defined...................................... 21 5.3. Survival of Seller's Representations and Warranties.... 21 5.4. Covenants of Seller.................................... 21 5.5. Representations and Warranties of Buyer................ 22 5.6. Survival of Buyer's Representations and Warranties..... 22 ARTICLE VI. DEFAULT.............................................. 23 6.1. Default by Buyer....................................... 23
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6.2. Default by Seller...................................... 23 6.3. Recoverable Damages.................................... 23 ARTICLE VII. RISK OF LOSS........................................ 23 7.1. Minor Damage........................................... 23 7.2. Major Damage........................................... 23 7.3. Definition of "Major" Loss or Damage................... 24 ARTICLE VIII. BROKERAGE COMMISSIONS.............................. 24 ARTICLE IX. DISCLAIMERS.......................................... 25 ARTICLE X. MISCELLANEOUS......................................... 25 10.1. Confidentiality...................................... 25 10.2. Public Disclosure.................................... 25 10.3. Assignment........................................... 25 10.4. Notices.............................................. 25 10.5. Modifications........................................ 27 10.6. Entire Agreement..................................... 27 10.7. Further Assurances................................... 27 10.8. Counterparts......................................... 27 10.9. Facsimile Signatures................................. 27 10.10. Severability......................................... 27 10.11. Applicable Law....................................... 27 10.12. No Third Party Beneficiary........................... 27 10.13. Captions............................................. 28 10.14. Construction......................................... 28 10.15. Recordation.......................................... 28
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EXHIBITS A - DESCRIPTION OF LAND B - LIST OF PERSONAL PROPERTY C - FORM OF ASSIGNMENT OF LEASE D - LIST OF OPERATING AGREEMENTS E - OREDS LETTER AND RELATED CORRESPONDENCE F - FORM OF QUIT CLAIM DEED G - ESCROW HOLDER'S GENERAL PROVISIONS H - LIST OF ENVIRONMENTAL REPORTS I - TENANT ESTOPPEL FORM J - FORM OF DEED K - FORM OF BILL OF SALE L - FORM OF ASSIGNMENT OF CONTRACTS M - FORM OF FIRPTA AND CALFIRPTA CERTIFICATES N - FORM OF TENANT NOTICE O - LIST OF SPECIFIED LITIGATION P - LIST OF BROKERAGE AGREEMENTS Q - LIST OF VIOLATION NOTICES R - RENT ROLL S - LIST OF CERTAIN TENANT COSTS AND COMMISSIONS T - 8-K AND AUDIT REQUIREMENTS
iii PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this "Agreement") is made as of May 5, 1997 (the "Effective Date"), by and between - ---------- -------------- KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"), and ----- PULLMAN CARNEGIE ASSOCIATES, a California limited partnership ("Seller"). ------ ARTICLE I. PURCHASE AND SALE Section 1.1. Agreement of Purchase and Sale. Subject to the terms and ------------------------------ conditions hereinafter set forth, Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, the following: (a) that certain parcel of land situated in Orange County, California more particularly described in Exhibit A attached hereto, together with all --------- rights and appurtenances pertaining to such land, including any right, title and interest of Seller in and to adjacent streets, alleys or rights-of-way (the parcel of land described in this clause (a) of Section 1.1 being herein referred to collectively as the "Land"). The Land is located at 2501 Pullman Avenue, ---- Santa Ana, California, and 1700 Carnegie Avenue, Santa Ana, California; (b) the buildings, structures, fixtures and other improvements affixed to or located on the Land, excluding fixtures owned by tenants (the property described in this clause (b) of Section 1.1 being herein referred to collectively as the "Improvements") (The Land and Improvements are referred to ------------ collectively herein as the "Real Property"); ------------- (c) any and all of Seller's right, title and interest in and to all tangible personal property located upon the Land or within the Improvements, including, without limitation, any and all appliances, furniture, carpeting, draperies and curtains, tools and supplies, and other items of personal property owned by Seller, located on and used exclusively in connection with the operation of the Real Property, which personal property includes without limitation the personal property listed on Exhibit B attached hereto (the --------- property described in this clause (c) of Section 1.1 being herein referred to collectively as the "Personal Property"); ----------------- (d) any and all of Seller's right, title and interest in and to that certain lease dated April 28, 1988, by and between Seller as landlord and State of California as tenant, as amended, covering all or any portion of the Real Property, to the extent it is in effect on the date of the Closing (as such term is defined in Section 4.1 hereof) (the property described in this clause (d) of Section 1.1 being herein referred to as the "Lease" which Lease is identified on ----- the rent roll attached hereto as Schedule 2 to Exhibit C), together with all --------- rents and other sums due thereunder after the Closing (collectively the "Rents"); and ----- (e) any and all of Seller's right, title and interest in and to (i) all assignable contracts and agreements (collectively, the "Operating --------- Agreements") listed and described on Exhibit D attached hereto and made a part - ---------- hereof, relating to the upkeep, repair, maintenance or operation of the Land, Improvements or Personal Property, and (ii) all assignable existing warranties and guaranties (express or implied) issued to Seller in connection with the Improvements or the Personal Property, (iii) all assignable existing permits, licenses, approvals, entitlements, certificates and authorizations issued by any governmental authority in connection with the Property (as defined in Section 1.2 below) and (iv) the tradenames and trademarks used or useful in connection with the Real Property, but only to the extent that the same are not trademarks or tradenames of Seller (the property described in this clause (e) of Section 1.1 being collectively referred to herein as the "Intangibles"). ----------- Section 1.2. Property Defined. The Land, the Improvements, the ---------------- Personal Property, the Lease and the Intangibles are collectively referred to herein as "Property." The Property contains two office buildings with, in the aggregate, approximately 124,921 rentable square feet. Section 1.3. Purchase Price. Seller is to sell and Buyer is to -------------- purchase the Property for the amount of: (a) Fifteen Million Four Hundred and Fifty Thousand Dollars ($15,450,000); plus (b) the amount, which shall not exceed Eight Hundred and Fifty Thousand Dollars ($850,000), that is incurred or expended by Seller between the Effective Date and Closing in completing the unfinished rehabilitation and retrofitting items set forth in that certain letter dated May 13, 1997 from Karen Fredericks, Vice President of Essex Realty Management to Tony Macris, Associate Space Planner of the Office of Real Estate and Design Services ("OREDS") (the "OREDS Letter") in response to the November 13, 1996 letter from Tony Macris to Burrel Magnusson and Karen Fredericks, together with those underlying structural reports evidenced by the letters of October 3, 1996 and December 16, 1996 from Robert Lawson of Robert Lawson, Structural Engineers, letters of December 3, 1996 and December 16, 1996 from Pacific Building Industries and the letter of August 9, 1996 from Dames & Moore; each of which are attached hereto as Exhibit E. --------- The aggregate of the amounts set forth in subparagraphs (a) and (b) of this Section 1.3 are collectively referred to herein as the "Purchase Price". Section 1.4. Opening of Escrow; Deposit. Not later than three (3) days -------------------------- following the parties' mutual execution and delivery of this Agreement, Buyer shall open an escrow (the "Escrow") with Commerce Escrow Company (the "Escrow ------ Holder"), having its office at the address set forth under Section 10.4, by - ------ concurrently delivering to Escrow Holder a full executed original of this Agreement and depositing into Escrow the sum of Three Hundred and Fifty Thousand Dollars ($350,000) (the "Deposit") in good funds either by certified bank or ------- cashier's check or by federal wire transfer. Escrow Holder shall hold the Deposit in an interest-bearing account reasonably acceptable to Seller and Buyer, in accordance with the terms, and 2 conditions of this Agreement with interest accruing thereon to be paid to Buyer upon demand to Escrow Holder or, at Buyer's election, paid to Seller and credited to the Purchase Price upon the Closing. All interest accrued on the Deposit shall be deemed income of Buyer; and Buyer shall be responsible for the payment of all costs and fees imposed on the Deposit account. (b) Upon expiration of the Contingency Period (as defined in Section 2.2(a) below) the Deposit shall be immediately released to Seller by Escrow Holder and concurrently therewith Seller shall deliver to Buyer for immediate recordation a Deed of Trust on the Property in a form reasonably satisfactory to Buyer to secure the repayment of the Deposit to Buyer if Buyer becomes entitled to a refund. Buyer shall concurrently deliver into Escrow a Quit Claim Deed for the Property in substantially the form attached hereto as Exhibit F. In the --------- event of Seller's default under this Agreement after the expiration of the Contingency Period, or in the event a closing condition for the benefit of Buyer fails to occur, Buyer shall be legally entitled to the full refund of the Deposit. In either such event, Weyerhaeuser Venture Co., a limited partner of Seller, shall cause the Deposit to be refunded to Seller. Failure of Seller or Weyerhaeuser Venture Co. to refund the Deposit in either of such events shall be an event of default permitting Buyer to foreclose on the Deed of Trust. If the Deposit is refunded to Buyer or if the Closing fails to occur and Seller becomes entitled to retain the Deposit as liquidated damages in accordance with Section 1.6 hereof, Escrow Holder shall record the Quit Claim Deed. If a dispute arises between Buyer and Seller with respect to the recordation of the Quit Claim Deed and Seller desires to remove the lien of the Deed of Trust from the Property, Seller may post a bond from a reputable lender or bonding institution, or other security satisfactory to Buyer in the amount of the Deposit. Upon delivery of the bond or other satisfactory security, Escrow Holder shall cause the Quit Claim Deed to be recorded. Section 1.5. Payment of Purchase Price. The Purchase Price, as ------------------------- increased or decreased by prorations and adjustments as herein provided, less the Deposit, shall be payable in full through Escrow at Closing in cash by wire transfer of immediately available funds to a bank account designated by Seller in writing to Escrow Holder prior to the Closing. Section 1.6. Deposit as Liquidated Damages. EXCEPT AS OTHERWISE ----------------------------- SPECIFICALLY SET FORTH HEREIN AND PROVIDED THAT SELLER IS NOT IN MATERIAL BREACH HEREOF AND PROVIDED FURTHER THAT ALL CLOSING CONDITIONS IN FAVOR OF BUYER HEREIN HAVE BEEN SATISFIED, THE DEPOSIT (BUT NOT THE INTEREST EARNED FROM THE INVESTMENT THEREOF) SHALL BE RETAINED BY SELLER AS LIQUIDATED DAMAGES IN THE EVENT THE SALE OF THE PROPERTY AS CONTEMPLATED HEREUNDER IS NOT CONSUMMATED AS A RESULT OF BUYER'S FAILURE, REFUSAL OR INABILITY TO DO SO. THE PARTIES ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN THE EVENT THAT THE SALE IS NOT SO CONSUMMATED WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY SEPARATELY EXECUTING THIS SECTION 1.6 BELOW, THE PARTIES ACKNOWLEDGE THAT THE THREE HUNDRED AND FIFTY THOUSAND DOLLAR ($350,000) NONREFUNDABLE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES, AND AS SELLER'S EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT THE CLOSING DOES NOT OCCUR AND AS 3 SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER ARISING FROM SUCH FAILURE OF THE SALE TO CLOSE. NOTWITHSTANDING THE FORGOING, THIS SECTION 1.6 SHALL NOT LIMIT THE DAMAGES RECOVERABLE BY SELLER RESULTING FROM A BREACH OTHER THAN SUCH FAILURE, REFUSAL OR INABILITY BY BUYER TO PURCHASE THE PROPERTY. BY THEIR SEPARATELY EXECUTING THIS SECTION 1.6 BELOW, BUYER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE ABOVE PROVISION COVERING LIQUIDATED DAMAGES, AND THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS EXECUTED.
PULLMAN CARNEGIE ASSOCIATES, KILROY REALTY, L.P., a Delaware a California limited partnership limited partnership By: Bay-Santa Ana Partners, By: KILROY REALTY CORPORATION, a a California limited partnership, its Maryland corporation, its General General Partner partner By: Bay Development Corporation By: /s/ Jeffrey C. Hawken a California corporation, its --------------------------- General Partner Name: Jeffrey C. Hawken --------------------------- Its: Executive Vice President -------------------------- By: /s/ Burrel D. Magnusson ------------------------- Name: Burrel D. Magnusson Its: President
Section 1.7. Escrow Holder. Escrow Holder shall hold and dispose of ------------- the Deposit in accordance with the terms of this Agreement. Seller and Buyer agree that the duties of the Escrow Holder hereunder are purely ministerial in nature and shall be expressly limited to the administration of the Escrow and the safekeeping and disposition of the Deposit and any closing funds delivered into Escrow in accordance with this Agreement. Escrow Holder shall incur no liability in connection with the safekeeping or disposition of the Deposit for any reason other than Escrow Holder's failure to comply with any written escrow instructions signed by Buyer and Seller, willful misconduct or gross negligence. If Escrow Holder is in doubt as to its duties or obligations with regard to the Deposit, or if Escrow Holder receives conflicting instructions from Buyer and Seller with respect to the Deposit, then Escrow Holder shall not be required to disburse the Deposit and may, at its option, continue to hold the Deposit until both Buyer and Seller agree as to its disposition, or until a final judgment is entered by a court of competent jurisdiction directing its disposition, or Escrow Holder may interplead the Deposit in accordance with the laws of the state in which the Property is located. Escrow Holder shall not be responsible for any interest on the Deposit except as is actually earned, or for the loss of any interest resulting from the withdrawal of the Deposit prior to the date interest is posted thereon. 4 Escrow Holder shall execute this Agreement solely for the purpose of being bound by the provisions of Sections 1.4, 1.5, 1.6, 1.7 and Article IV hereof. The parties agree to be bound by Escrow Holder's General Provisions attached hereto as Exhibit G; provided, however in the event of a discrepancy between this --------- Agreement and Escrow Holder's General Provisions, this Agreement shall prevail. ARTICLE II. TITLE AND SURVEY Section 2.1. Delivery of Title Documents. As soon as reasonably --------------------------- practicable but in no event later than ten (10) days after the Effective Date, Seller shall cause to be delivered to Buyer (a) a current preliminary title report respecting the Property, to be obtained by Seller at Buyer's expense; (b) copies of all documents referred to in the preliminary title reports, (c) copies of the most recent property tax bills for the Property; and (d) a copy of Seller's title insurance policy and/or survey for the Property, if available (the documents referred to in (a) - (d) of this Section 2.1 are collectively referred to as the "Title Documents"). --------------- Section 2.2. Title Examination. ----------------- (a) During the period beginning upon the Effective Date and ending at 5:00 p.m. (local time at the Property) on June 13, 1997 (hereinafter referred to as the "Contingency Period"), Buyer shall have the right to review the Title ------------------ Documents and otherwise examine the status of title to the Property. Seller shall have no obligation to extend the Contingency Period beyond June 13, 1997 under any circumstances, time being of the essence of this provision. If Seller has not actually received the Deposit immediately after the expiration of the Contingency Period for any reason, Seller may terminate this Agreement and neither party shall have any further obligations hereunder. (b) During the Contingency Period, Buyer shall have the right (but not the obligation) to obtain and approve, a new or updated ALTA survey of the Property to be prepared by a licensed surveyor or engineer hired by Buyer at Buyer's expense (collectively, the "Survey"). Buyer may obtain an ALTA "extended coverage" supplemental report for the Property covered by the Survey, provided Buyer pays any additional expense therefor and satisfies any other Title Company requirements for the issuance thereof. (c) Buyer shall notify Seller in writing (the "Title Notice") prior to the expiration of the Contingency Period which exceptions to title (including survey matters), if any, will not be accepted by Buyer. If Buyer fails to notify Seller in writing of any exceptions to title by the expiration of the Contingency Period, then Buyer shall be deemed to have approved the condition of title to the Real Property. If Buyer notifies Seller in writing that Buyer objects to any exceptions to title, then Seller shall have two (2) business days after receipt of the Title Notice to notify Buyer in writing (a) that Seller will remove such objectionable exceptions from title on or before the Closing; or (b) that Seller elects not to cause such exceptions to be removed. If Seller fails to notify Buyer in writing of its election within said two (2) business day period, the Seller shall be deemed to have elected not to cause such exception to be cured. The procurement by 5 Seller of a commitment for the issuance of the Title Policy (as defined in Section 2.5 hereof) or an endorsement thereto insuring Buyer against any title exception which was disapproved pursuant to this Section 2.2 shall be deemed a cure by Seller of such disapproval. If Seller gives Buyer notice under clause (b) above, then Buyer shall have two (2) business days within which to notify Seller in writing that Buyer will nevertheless proceed with the purchase and take title to the Property subject to such exceptions, or that Buyer will terminate this Agreement. If this Agreement is terminated pursuant to the foregoing provisions of this paragraph, then neither party shall have any further rights or obligations hereunder (except for any indemnity obligations of either party pursuant to the other provisions of this Agreement), the Deposit and all interest thereon shall be returned to Buyer and each party shall bear its own costs incurred hereunder. If Buyer fails to notify Seller in writing of its election within said two (2) business day period, then Buyer shall be deemed to have elected to proceed with the purchase and take title to the Property subject to such exceptions. Notwithstanding the foregoing, Buyer need not disapprove any monetary lien representing monies owed, as Seller hereby agrees to cause all such monetary liens (other than non-delinquent ad valorem real estate taxes and assessments) to be removed prior to Closing. If Seller fails to remove any such monetary lien prior to Closing, then Buyer shall apply such portion of the Purchase Price as is necessary to cause the removal of such items prior to Closing, and the proceeds of escrow to be otherwise distributed to Seller upon Closing shall be reduced by the amount so applied. Section 2.3. Pre-Closing "Gap" Title Defects. Buyer may, at or prior ------------------------------- to Closing, notify Seller in writing (the "Gap Notice") of any objections to ---------- title (a) raised by the Title Company between the expiration of the Contingency Period and the Closing and (b) not disclosed by the Title Company or otherwise known to Buyer prior to the expiration of the Contingency Period. Buyer must notify Seller of such objection to title within two (2) business days, but prior to Closing, of being made aware of the existence of such exception. If Buyer sends a Gap Notice to Seller, then Buyer and Seller shall have the same rights and obligations with respect to such notice as apply to a Title Notice under Section 2.2(c) hereof. Section 2.4. Permitted Exceptions. The Property shall be conveyed -------------------- subject to the following matters, which are hereinafter referred to as the "Permitted Exceptions": -------------------- (a) those matters that either are not objected to in writing within the time periods provided in Sections 2.2(c) or 2.3 hereof, or if objected to in writing by Buyer, are those which Seller has elected not to remove or cure, or has been unable to remove or cure, and subject to which Buyer has elected or is deemed to have elected to accept the conveyance of the Property; (b) the rights of the tenant under the Lease; (c) the lien of all ad valorem real estate taxes and assessments not yet due and payable as of the date of Closing, subject to adjustment as herein provided; (d) local, state and federal laws, ordinances or governmental regulations, including but not limited to building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property; 6 (e) items shown on the Survey which are not objected to by Buyer or are waived or deemed waived by Buyer in accordance with Section 2.2(c) hereof. Section 2.5. Conveyance of Title. At Closing Seller shall convey and ------------------- transfer to Buyer fee simple title to the Real Property, by execution and delivery of a Deed (as defined in Section 4.2(a)(i) hereof) respecting the Property. Evidence of delivery of such title shall be the issuance by Title Company of a CLTA Standard Coverage Owner's Policy of Title Insurance (the "Title Policy") covering the Property, in the aggregate amount of the Purchase ------------ Price, subject only to the Permitted Exceptions; provided, however, that if Buyer has delivered to the Title Company prior to the Closing a Survey in compliance with all applicable ALTA requirements, then the Title Policy required hereunder shall be an ALTA Extended Coverage Owner's Policy of Title Insurance in accordance with Section 2.2(b) hereof. ARTICLE III. REVIEW OF PROPERTY Section 3.1. Right of Inspection. During the Contingency Period, Buyer ------------------- shall have the right to: (a) Perform, or hire consultants to perform a physical inspection of the Property. (b) Inspect, or hire consultants to inspect, the environmental condition of the Property pursuant to the terms and conditions of this Agreement, to obtain and review, at Buyer's sole election and cost, soils, geology, structural and environmental and any other engineering reports and to examine the defects in the Property alleged in the November 13, 1996 letter from Tony Macris to Burrel Magnusson, discuss the resolution of those items with representatives of the tenant under the lease and make and determine cost estimates relating to those defects. (c) To obtain and examine a search report showing liens against the Personal Property which have been perfected by filings under the Uniform Commercial Code. (d) To examine at the Property, Seller's office and/or the property manager's office, as the case may be, all books, records, reports, and files related to the ownership, leasing, maintenance and operation of the Property, which are to be provided by Seller to the extent available. Such documents include, without limitation, (i) Seller's current Lease files for the Property, including copies of the Lease, Operating Agreements, and letters of intent from prospective tenants (ii) Seller's financial records concerning the Property's income and operating expenses showing, among other things, all sources of revenue and expense (including utility rates, ad valorem tax rates, maintenance expenses and any anticipated capital improvements) through March 31, 1997 (iii) existing notes and deeds of trust encumbering the Property, (iv) as-built plans and specifications for the Improvements, (v) prior soils, geology, structural and engineering reports, (vi) recorded and unrecorded parking agreements, (vii) common area maintenance agreements or other agreements affecting the Property, (viii) certificates of occupancy pertaining to the Improvements (ix) pertinent correspondence with governmental agencies and the current 7 tenant concerning the Property (x) evidence that the Property is zoned for the purpose to which Buyer intends to use it and (xi) documents which set forth the capital improvements to be made pursuant to Paragraph II of the OREDS Letter. Notwithstanding the foregoing, Buyer shall not have the right to examine Seller's partnership or corporate records, internal memoranda, financial projections, budgets, appraisals, accounting and tax records and similar proprietary, confidential or privileged information (collectively, the "Confidential Documents"). ---------------------- Any on-site inspections of the Property shall occur as soon as possible after prior oral or written notice to Seller and shall be conducted so as not to interfere unreasonably with the use of the Property by Seller or the tenant. Seller may have a representative present during any such inspections. If Buyer desires to do any invasive testing at the Property, Buyer shall do so only after notifying Seller and obtaining Seller's prior written consent thereto, which consent shall not be unreasonably withheld or delayed. Buyer agrees to protect, indemnify, defend and hold Seller harmless from and against any claim for liabilities, losses, costs, expenses (including reasonable attorneys' fees), damages or injuries arising out of or resulting from the inspection of the Property by Buyer or its agents or consultants, and notwithstanding anything to the contrary in this Agreement, such obligation to indemnify and hold harmless Seller shall survive the Closing or any termination of this Agreement. Buyer shall keep the Property free and clear of any mechanic's liens or materialmen's liens arising out of Buyer's entry onto the Property. Section 3.2. Environmental Reports. Buyer acknowledges that Buyer has --------------------- received copies of the environmental reports listed on Exhibit H attached --------- hereto. Section 3.3. Right of Termination. If for any reason whatsoever Buyer -------------------- determines that any aspect of the documents listed in Section 3.1 hereof or the results of any inspections contemplated by Section 3.1 hereof makes the Property unsuitable for Buyer's acquisition, or Buyer does not approve, or waive, the failure to occur of any commercially reasonable contingencies, Buyer shall have the right, prior to the expiration of the Contingency Period, to give written notice thereof to Seller. If Buyer gives such notice, this Agreement shall terminate and neither party shall have any further obligations hereunder (except for any indemnity obligations of either party pursuant to the other provisions of this Agreement), the Deposit and all interest thereon shall be returned to Buyer and each party shall bear its own costs incurred hereunder. If Buyer fails to give Seller a notice of termination prior to the expiration of the Contingency Period, then Buyer shall be deemed to have approved all aspects of the Property (except (i) title and survey, which shall be governed by Article II hereof and (ii) tenant estoppels, which shall be governed by Section 3.4 hereof) and to have elected to proceed with the purchase of the Property pursuant to the terms hereof. Section 3.4 Review of Tenant Estoppel. Seller shall deliver to the ------------------------- tenant of the Property an estoppel certificate in substantially the form of Exhibit I attached hereto (the "Tenant Estoppel") and shall request that the tenant complete and sign the Tenant Estoppel and return it to Seller. The Tenant Estoppel shall not be dated more than thirty (30) days prior to the Closing Date. Seller shall deliver a copy of the completed Tenant Estoppel to Buyer upon its receipt thereof. Buyer shall notify Seller within two (2) business days of its receipt the Tenant Estoppel if Buyer determines that the Tenant Estoppel is not acceptable to Buyer, along with the reasons for such determination. If Buyer fails to give such notice within such two (2) business day period, 8 then the Tenant Estoppel shall be deemed to be acceptable to Buyer. If Seller fails to obtain a Tenant Estoppel with respect to the tenant at the Property which is satisfactory to Buyer on or before two (2) business days prior to the expiration of the Contingency Period, Buyer shall have the right to terminate this Agreement by written notice to Seller. If this Agreement is terminated pursuant to the foregoing provisions of this paragraph, then neither party shall have any further rights or obligations hereunder (except for any indemnity obligations of either party pursuant to the other provisions of this Agreement), the Deposit and all interest thereon shall be returned to Buyer, and each party shall bear its own costs incurred hereunder. If Buyer fails to give Seller a notice of termination as set forth above, Buyer shall be deemed to have approved the Tenant Estoppel and to have elected to proceed with the purchase of the Property pursuant to the terms hereof. In that event Buyer may demand and Seller shall deliver an estoppel certificate in substantially the form of Exhibit I --------- with such estoppel certificate to be executed by the landlord/owner of the leased premises. The provisions of this Section 3.4 shall survive the Closing. ARTICLE IV. CLOSING Section 4.1. Time and Place. The consummation of the transaction -------------- contemplated hereby (the "Closing") shall be held at the offices of Escrow ------- Holder, at the address set forth under Section 10.4, on June 24, 1997. At the Closing, Seller and Buyer shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3 hereof, the performance of which obligations shall be concurrent conditions; provided that the Deed shall not be recorded until Escrow Holder has received the full amount of the Purchase Price (which shall include the Deposit and all interest accrued thereon), adjusted by prorations as set forth herein. Section 4.2. Seller's Obligations At and Prior to Closing. Seller -------------------------------------------- shall: (a) no less than one (1) business day prior to Closing, deliver to Escrow Holder: (i) a duly executed and notarized grant deed (the "Deed") ---- in the form attached hereto as Exhibit J, conveying the Real Property, subject --------- only to the Permitted Exceptions; (ii) a duly executed bill of sale (the "Bill of Sale") in ------------ the form attached hereto as Exhibit K, conveying the Personal Property without --------- warranty of title or use and without warranty, express or implied, as to merchantability and fitness for any purpose; (iii) a duly executed assignment of lease (the "Assignment of Lease") in the form attached hereto as Exhibit C, pursuant to which, among other --------- things, (x) Seller shall assign to Buyer, and Buyer shall assume, the landlord/lessor interest in and to the Lease and Rents, (y) Seller shall indemnify Buyer and hold Buyer harmless from and against any and all claims pertaining to the Lease arising prior to the Closing, except for the cost of completing any unfinished rehabilitation and retrof itting items and/or any unfinished HVAC repairs and carpeting 9 described in the OREDS Letter, all of which shall be Buyer's obligation and (z) Buyer shall indemnify Seller and hold Seller harmless from and against any and all claims pertaining to the Lease arising from and after the Closing and from and against any and all claims pertaining to the completion of any unfinished rehabilitation and retrofitting items and/or any such unfinished HVAC repairs and unfinished carpeting required by the OREDS Letter; (iv) a duly executed assignment and assumption agreement (the "Assignment of Contracts") in the form attached hereto as Exhibit L, ----------------------- --------- pursuant to which, among other things, (x) Seller shall, to the extent assignable, assign to Buyer, and Buyer shall assume, Seller's interest in the Intangibles, (y) Seller shall indemnify Buyer and hold Buyer harmless from and against any and all claims pertaining to the Operating Agreements arising prior to Closing, and (z) Buyer shall indemnify Seller and hold Seller harmless from and against any and all claims pertaining to the Operating Agreements from and after the Closing; (v) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Seller; (vi) FIRPTA and CALFIRPTA certificates in the form attached hereto as Exhibits M-1 and M-2 duly executed by Seller; ------------ --- (vii) such affidavits as may be customarily and reasonably required by the Title Company; (viii) an executed closing statement reasonably acceptable to Seller; and (ix) such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement; (b) join with Buyer to execute notices (the "Tenant Notices") in the -------------- form attached hereto as Exhibit N, which Buyer shall send to the tenant under --------- the Lease promptly after the Closing, informing the tenant of the sale of the Property and of the assignment to Buyer of Seller's interest in, and obligations under the Lease and directing that all Rent and other sums payable after the Closing under the Lease be paid as set forth in the notice; and (c) at or prior to Closing, deliver to Buyer: (i) if any representation or warranty of Seller needs to be modified due to changes since the Effective Date, a certificate, dated as of the date of Closing and executed on behalf of Seller by a duly authorized representative thereof, identifying any representation or warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Seller be liable to Buyer for, or be deemed to be in default hereunder by reason of any breach of representation or warranty which results from any change that (x) occurs between the Effective Date and the date of Closing and (y) is expressly permitted under the terms of this Agreement or is beyond the reasonable control of Seller to prevent. The occurrence of a change in a representation and warranty which is not permitted hereunder or is beyond the reasonable control of Seller to prevent shall, if materially adverse to Buyer, constitute the non-fulfillment of the condition set forth in Section 4.6(b) hereof. If, despite changes or other 10 matters described in such certificate, the Closing occurs, Seller's representations and warranties set forth in this Agreement shall be deemed to have been modified by all statements made in such certificate; (ii) the original Lease and the Operating Agreements, together with such leasing and property files and records located at the Property or Seller's and/or the property manager's office, which are material in connection with the continued operation, leasing and maintenance of the Property, but excluding any Confidential Documents. For a period of three (3) years after the Closing, Buyer shall allow Seller and its representatives access without charge to all files, records and documents delivered to Buyer at the Closing, upon reasonable advance notice and at all reasonable times, to make copies of any and all such files, records and documents, which right shall survive the Closing; (iii) keys (if any) to, and possession and occupancy of, the Property, subject only to the Permitted Exceptions. Section 4.3. Buyer's Obligations at Closing. Buyer shall: ------------------------------ (a) Not less than one (1) business day prior to Closing, deliver to Escrow Holder: (i) the full amount of the Purchase Price as increased or decreased by prorations and adjustments, less the Deposit, as provided in Section 1.5 hereof; (ii) a duly executed Assignment of Lease; (iii) a duly executed Assignment of Contracts; (iv) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Buyer; (v) such affidavits, as may be customarily and reasonably required by the Title Company; (vi) an executed closing statement reasonably acceptable to Buyer; and (vii) such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement; (b) if any representation or warranty of Buyer set forth in Section 5.5 hereof needs to be modified due to changes since the Effective Date, deliver to Seller a certificate, dated as of the date of Closing and executed on behalf of Buyer by a duly authorized representative thereof, identifying any such representation or warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Buyer be liable to Seller for, or be deemed to be in default hereunder by reason of any breach of representation or warranty set forth in Section 5.5 hereof which results from any change that (i) occurs between the Effective Date and the date of Closing and (ii) is expressly permitted under 11 the terms of this Agreement or is beyond the reasonable control of Buyer to prevent. The occurrence of a change in a representation or warranty which is not permitted hereunder or is beyond the reasonable control of Buyer to prevent shall, if materially adverse to Seller, constitute the non-fulfillment of the conditions set forth in Section 4.7(c) hereof. If, despite changes or other matters described in such certificate, the Closing occurs, Buyer's representations and warranties set forth in this Agreement shall be deemed to have been modified by all statements made in such certificate; and (c) join with Seller to execute the Tenant Notices. Section 4.4. Credits and Prorations. ---------------------- (a) All income and expenses of the Property shall be apportioned as of 12:01 a.m., on the day of Closing as if Buyer were vested with title to the Property during the entire day upon which Closing occurs, subject, however, to Buyer's obligation, net of expenses, to pay to Seller Seller's portion of the income of the Property received by Buyer in arrears for the portion of the month of June that precedes the Closing, it being acknowledged that the tenant pays rent in arrears. Such prorated items include without limitation the following: (i) all Rents, if any; (ii) taxes and assessments (including personal property taxes on the Personal Property) levied against the Property; (iii) utility charges respecting the Property for which Seller is liable, if any, such charges to be apportioned at Closing on the basis of the most recent meter reading occurring prior to Closing (dated not more than fifteen (15) days prior to Closing) or, if unmetered, on the basis of a current bill for each such utility; (iv) all amounts payable under brokerage agreements and Operating Agreements, pursuant to the terms of this Agreement; (v) all operating cost reimbursements, percentage rents, additional rents and other retroactive rental escalations, sums or charges payable by the tenant under the Lease which accrue prior to the Closing but are not then due and payable, shall be prorated as of the Closing. Such amounts shall be for the account of Seller for the period before the Closing and for the account of Buyer from and after the Closing; and (vi) any other operating expenses or other items pertaining to the Property which are customarily prorated between a buyer and a seller in the county in which the Property is located. (b) Notwithstanding anything contained in Section 4.4(a) hereof: (i) Any taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid. If taxes and assessments due and payable during the year of Closing have not been paid before Closing, Seller shall be charged at Closing an amount equal to that 12 portion of such taxes and assessments which relates to the period before Closing, and Buyer shall pay the taxes and assessments prior to their becoming delinquent. Any such apportionment made with respect to a tax year for which the tax rate or assessed valuation, or both, have not yet been fixed shall be based upon the tax rate and/or assessed valuation fixed. To the extent that the actual taxes and assessments for the current year differ from the amount apportioned at Closing, the parties shall make all necessary adjustments by appropriate payments between themselves within thirty (30) days after such amounts are determined following Closing, subject to the provisions of Section 4.4(d) hereof. Buyer shall pay all supplemental taxes resulting from the change in ownership and reassessment occurring as of the Closing Date; (ii) Unpaid and delinquent Rent collected by Seller and Buyer after the date of Closing shall be delivered as follows: (a) if Seller collects any unpaid or delinquent Rent for the Property, Seller shall, within fifteen (15) days after the receipt thereof, deliver to Buyer any such Rent which Buyer is entitled to hereunder relating to the date of Closing and any period thereafter, and (b) if Buyer collects any unpaid or delinquent Rent from the Property, Buyer shall, within fifteen (15) days after the receipt thereof, deliver to Seller any such Rent which Seller is entitled to hereunder relating to the period prior to the date of Closing. Seller and Buyer agree that all Rent received by Seller or Buyer after the date of Closing shall be applied first to actual out-of-pocket costs of collection incurred by Seller or Buyer, as applicable, with respect to the tenant; second, to Rents due from such tenant for the month in which such payment is received; third, to Rents and other tenant charges attributable to any period after the Closing which are past due on the date of receipt, and; finally, to Rents and other tenant charges delinquent as of Closing. Buyer shall use commercially reasonable efforts after Closing to collect all Rents in the usual course of Buyer's operation of the Property, but Buyer will not be obligated to institute any legal proceedings, including an action for unlawful detainer, or other collection procedures to collect delinquent Rents. Seller may attempt to collect any delinquent Rents owed to Seller and may institute any lawsuit or collection procedures, but may not evict the tenant; and (iii) with respect to any year-end reconciliations of percentage rent, retroactive rental escalations and reimbursable expenses (including common area expense reimbursements and the like) under the Lease, Seller and Buyer shall cooperate to complete such reconciliations as soon as possible after the Closing, with Seller responsible for amounts owing to the tenant under the Lease and entitled to amounts payable by the tenant under the Lease (as the case may be), with respect to periods prior to the Closing, and with Buyer responsible for amounts owing to the tenant under the Lease and entitled to amounts payable by the tenant under the Lease (as the case may be), with respect to periods from and after the Closing. With respect to any such amounts payable to Seller, Buyer shall use commercially reasonable efforts after Closing to collect all amounts in the usual course of Buyer's operation of the Property, but Buyer will not be obligated to institute legal proceedings, including an action for unlawful detainer, or other collection procedures to collect such amounts. Seller may attempt to collect any such amounts owed to Seller and may institute any lawsuit or collection procedures, but may not evict the tenant. (c) Seller may prosecute an appeal of the real property tax assessment for any tax years to and including the tax year in which the Closing occurs, and may take related action which Seller deems appropriate in connection therewith. Buyer shall cooperate with Seller in 13 connection with such appeal and collection of a refund of real property taxes paid. Seller owns and holds all right, title and interest in and to such appeal and refund relating to the period prior to the Closing, and all amounts payable in connection therewith shall be paid directly to Seller by the applicable authorities. If such refund or any part thereof is received by Buyer, Buyer shall promptly pay to Seller any amounts relating to the period prior to the Closing. Any refund received by Seller shall be distributed as follows: first, to reimburse Seller and Buyer for all costs incurred in connection with the appeal; second, with respect to refunds payable to the tenant pursuant to the Lease, to such tenant in accordance with the terms of such Lease; and third, to Seller to the extent such appeal covers the period prior to the Closing, and to Buyer to the extent such appeal covers the period as of the Closing and thereafter. If and to the extent any such appeal covers the period after the Closing, Buyer shall have the right to participate in such appeal. (d) Except as otherwise provided herein, any revenue or expense amount which cannot be ascertained with certainty as of Closing shall be prorated on the basis of the parties' reasonable estimates of such amount, and shall be the subject of a final proration sixty (60) days after Closing, or as soon thereafter as the precise amounts can be ascertained. Buyer shall promptly notify Seller when it becomes aware that any such estimated amount has been ascertained. Once all revenue and expense amounts have been ascertained, Buyer shall prepare, and certify as correct, a final proration statement which shall be subject to Seller's approval. Upon Seller's acceptance and approval of any final proration statement submitted by Buyer, such statement shall be conclusively deemed to be accurate and final. (e) The provisions of this Section 4.4 shall survive Closing. Section 4.5. Transaction Taxes and Closing Costs. ----------------------------------- (a) Seller and Buyer shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance; (b) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses: (i) one-half (1/2)of the escrow fee, if any, which may be charged by the Escrow Holder or Title Company; (ii) the premium for a CLTA Owner's Policy of Title Insurance to be issued to Buyer by the Title Company at Closing; (iii) one-half (1/2) of the fees for recording the Deed; (iv) any documentary transfer tax or similar tax which becomes payable by reason of the transfer of the Property; (v) the fees for Seller's Broker, if any, identified in Article VIII hereof. 14 (c) Buyer shall pay the fees of any counsel representing Buyer in connection with this transaction. Buyer shall also pay the following costs and expenses: (i) one-half (1/2) of the escrow fee, if any, which may be charged by the Escrow Holder or Title Company; (ii) the premium for the ALTA Extended Coverage Owner's Policy of Title Insurance to be issued to Buyer by the Title Company at Closing, and the fee for all endorsements thereto, to the extent that those costs exceed the cost of a CLTA Standard Coverage Owner's Policy; (iii) one- half (1/2) of the fees for recording the Deed; (iv) the cost of the Survey. (d) The Personal Property is included in this sale without charge, except that Seller shall be obligated to pay the amount of any and all sales or similar taxes payable in connection with the transfer of the Personal Property; (e) All costs and expenses incident to this transaction and the Closing hereof, and not specifically described above, shall be paid by the party incurring same; and (f) The provisions of this Section 4.5 shall survive the Closing. Section 4.6. Conditions Precedent to Obligation of Buyer. The ------------------------------------------- obligation of Buyer to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Buyer in its sole discretion: (a) Seller shall have delivered to Buyer and Escrow Holder, as required, all of the items required to be delivered pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.2 hereof; (b) All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of Closing (with appropriate modifications permitted under this Agreement); and (c) Seller shall have performed and observed in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing. Section 4.7. Conditions Precedent to Obligation of Seller. The -------------------------------------------- obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Seller in its sole discretion: 15 (a) Seller shall have received the Purchase Price as adjusted as provided herein, and payable in the manner provided for in this Agreement; (b) Buyer shall have delivered to Seller or Escrow Holder, as required, all of the items required to be delivered pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3 hereof; (c) All of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects as of the date of Closing (with appropriate modifications permitted under this Agreement); and (d) Buyer shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Buyer as of the date of Closing. ARTICLE V. REPRESENTATIONS, WARRANTIES AND COVENANTS Section 5.1. Representations and Warranties of Seller. Seller hereby ---------------------------------------- makes the following representations and warranties to Buyer as of the Effective Date, which representations and warranties shall be deemed to have been made again as of the Closing, subject to Section 4.2(c)(i) hereof: (a) Organization and Authority. Seller has been duly organized and is -------------------------- validly existing under the laws of the State of California. Seller has the full right and authority to enter into this Agreement and to transfer each of the Property and to consummate or cause to be consummated the transaction contemplated by this Agreement. The person signing this Agreement on behalf of Seller is authorized to do so. (b) Pending Actions. There is no action, suit, arbitration, --------------- unsatisfied order or judgment, government investigation or proceeding pending, or to Seller's knowledge, threatened against Seller which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement. Except as set forth on Exhibit O attached hereto, there is no litigation which has been filed --------- against Seller that arises out of the ownership of the Property and would materially affect the Property or use thereof, or Seller's ability to perform hereunder. (c) Operating Agreements. The Operating Agreements listed on -------------------- Exhibit D are all of the agreements concerning the operation and maintenance of - --------- the Property entered into by Seller and affecting the Property, except those Operating Agreements that are not assignable or are to be terminated by Seller within thirty (30) days after the Closing, and except any agreement with Seller's property manager, which shall be terminated by Seller. (d) Lease Brokerage. There are no agreements with brokers providing --------------- for the payment from and after the Closing by Seller or Seller's successor-in- interest of leasing 16 commissions or fees for procuring tenants with respect to the Property, except as disclosed in Exhibit P hereto. --------- (e) Condemnation. Seller has received no written notice of any ------------ condemnation proceedings relating to the Property. (f) Notice of Violations. Seller has not received written notice of -------------------- any uncured violation of any federal, state or local law or code relating to the use or operation of the Property which would materially adversely affect the Property or use thereof, except as related to that portion of the work which has been or will be completed by Seller prior to Closing pursuant to the OREDS Letter and underlying structural reports or as set forth on Exhibit Q attached --------- hereto. (g) Leases. The rent roll attached hereto as Exhibit R is accurate ------ --------- in all material respects and lists all of the leases, licenses and occupancy agreements currently affecting all or any portion of the Real Property. (h) Authorization. This Agreement has been, and on the Closing Date, ------------- all documents to be executed by Seller hereunder will have been, duly authorized, executed and delivered by Seller, and constitute and will constitute the valid and binding obligations of Seller enforceable against it in accordance with their respective terms. (i) No Consents Required. No consent, approval or other authorization -------------------- of, or registration, declaration or filing with, any governmental authority is required for the due execution and delivery of this Agreement, and/or any of the documents to be executed by Seller hereunder, or for the performance by or the validity or enforceability thereof against Seller, other than the recording or filing for recordation of the Deed. (j) Zoning. Seller has obtained all consents, permits, licenses, ------ approvals and authorizations from governmental authorities or other third parties which are necessary to permit the conveyance of the Property in accordance with the provisions of this Agreement and the use of the Property for its current use and for all uses contemplated under the Lease, which is in full force and effect, and the Property is in compliance with all applicable zoning ordinances and the Permitted Exceptions. (k) No Violations. The execution and delivery of this Agreement, and ------------- all other documents to be executed by Seller hereunder, compliance with the provisions hereof and thereof and the consummation of the transactions contemplated hereunder and thereunder will not, to Seller's knowledge, result in (a) a breach or violation of (i) any governmental requirement applicable to Seller or the Property now in effect; (ii) the organizational documents of Seller; (iii) any judgment, order or decree of any governmental authority binding upon Seller; or (iv) any agreement or instrument to which Seller is a party or by which it is bound; (b) the acceleration of any obligation of Seller; or (c) the creation of any lien, encumbrance or other matter affecting title (other than the Permitted Exceptions) to the Property. (l) Use Permitted. Current local zoning ordinances, general plans and ------------- other applicable land use regulations and all private covenants, conditions and restrictions, if any, 17 affecting the Property, permit the transfer of the Property and the use of the Property for its current use (and reconstruction and resumption of use in the event of damage, destruction, or cessation of use) as a matter of right for an unlimited time period and not merely as a legal non-conforming use. (m) Environmental Matters. Subject to the tank removal report --------------------- identified on Exhibit I attached hereto, as to hazardous substances: --------- (i) Seller has no knowledge of any underground tanks or hazardous substances currently located on the Property, that such tanks have ever been located on the Property or that hazardous substances have ever been present, used, stored, treated, released from or disposed of on the Property; (ii) no enforcement, cleanup, removal or other governmental or regulatory actions have, at any time, been instituted or, to Seller's knowledge, threatened with respect to the Property; (iii) there is no current or, to Seller's knowledge, prior violation or state of noncompliance with any environmental law relating to hazardous substances with respect to the Property; (iv) no claims have been made or, to Seller's knowledge, threatened by any third party with respect to the Property relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or related to any hazardous substance; and (v) to Seller's knowledge, there are no current or prior businesses engaged in the storage, treatment or disposal of hazardous substances on any property adjacent to the Property. (n) Special Risk Areas. To Seller's knowledge the Property is not ------------------ located within an area of special risk with respect to natural or man-made disasters or hazards, including any flood hazard area. (o) Utilities. To Seller's knowledge all public utilities, including --------- telephone, gas, electric power, sanitary and storm sewer and water, are available for connection at the boundaries of the Property; such utilities are adequate for the current use of the Property; and the means of ingress and egress, parking, access to public streets and drainage facilities are adequate for the current use of the Property. (p) Legal Parcel. To Seller's knowledge the Property is a legal lot ------------ or parcel which for all purposes may be mortgaged, conveyed and otherwise dealt with as separate parcel and is taxed as a separate parcel. (q) Tax Withholding. Buyer is not required to withhold taxes from the --------------- payment of sale proceeds to Seller under the Internal Revenue code or any applicable state, commonwealth or local tax laws. 18 (r) Contiguous Property. Neither Seller nor any affiliate of Seller ------------------- is retaining any contiguous or adjacent property to the Property. (s) Physical Condition. To Seller's knowledge, there is no existing ------------------ patent or latent structural or other physical defect of deficiency in the condition of the Property, or any component or portion thereof, that would or could impair or impose costs upon the use, occupancy or operation of the Property, and that has not been fully corrected, or will not be fully corrected pursuant to that work which is to be completed pursuant to the OREDS Letter and underlying structural reports. Subject to the OREDS Letter, to Seller's knowledge there is no defect or deficiency in the Improvements, the structural elements thereof, the mechanical systems (including, without limitation, all HVAC System, plumbing, electrical, elevator, security, utility and sprinkler systems) therein. (t) Improvements. To Seller's knowledge, the Improvements were ------------ completed and installed in accordance with the plans and specifications therefor being delivered by Seller to Buyer hereunder, which were approved by all governmental authorities having jurisdiction thereover, and do not violate any governmental laws, ordinances, rules or regulations other than as will be corrected by work to be performed by Seller pursuant to the OREDS Letter and underlying structural reports. (u) Rezoning. There is not now pending, and Seller has no knowledge -------- of, any threatened proceeding for the rezoning of the Property or any portion thereof, or the taking of any other action by governmental authorities that would have an adverse or material impact on the value of the Property or use thereof. (v) Easements and Other Agreements. To Seller's knowledge, Seller is ------------------------------ not in default in complying with the terms and provisions of any of the covenants, conditions, restrictions, right-of-way or easements constituting one or more of the Permitted Exceptions. (w) Soil Condition. To Seller's knowledge, the soil condition of the -------------- Land is such that it will support all of the Improvements for the foreseeable life of the Improvements, without the need for unusual or new sub-surface excavations, fill, footings, caissons or other installations. To Seller's knowledge, the Improvements, as built, were constructed in a manner compatible with the soil condition at the time of construction, and all necessary excavations, fill, footings, caissons or other installations were then and have since been provided. There are no adverse geological or soil conditions affecting the Property. (x) Tenant Leases. With respect to the Lease and the tenant ------------- ("Tenant") listed on the Rent Roll provided to Buyer by Seller, and subject to the OREDS Letter: (i) The Lease is in full force and effect strictly according to the terms set forth therein and in the Rent Roll, and have not been modified, amended, or altered, in writing or otherwise. Tenant is legally required to pay all sums and perform all obligations set forth in the Lease, without concessions, abatements, offsets or other bases for relief or adjustment. 19 (ii) All obligations of the lessor under the Lease that accrue to the date of Closing have been performed including, but not limited to, all required tenant improvements, cash or other inducements, rent abatements or moratoria, installations and construction (for which payment in full has been made in all cases), and the Tenant has, to Seller's knowledge, unconditionally accepted lessor's performance of such obligations. To Seller's knowledge, the Tenant has asserted no offsets, defenses or claims available against Rent payable by it or other performance or obligations otherwise due from it under the Lease. No portion of any Rent due and payable by Tenant represents or constitutes a reimbursement of a tenant improvement or of construction costs incurred by Seller. A true, complete and correct summary of the terms and provisions of all concessions granted by Seller to Tenant (including but not limited to any and all free rent, tenant improvement allowances, direct payments, moving allowances and buyouts of other leases) is attached hereto as Exhibit S. Except as set forth on Exhibit S there have been no other - --------- --------- concessions, of any nature, granted to Tenant. (iii) Tenant is not in default under or is in arrears in the payment of any sums or in the performance of any obligations required of it under the Lease. Tenant has not prepaid any rent or other charges. (iv) Except as disclosed in writing to Buyer, during the thirty-six (36) month period immediately preceding the Effective Date and the Closing Date: (1) Tenant has not, at any time, been more than thirty (30) days delinquent in its respective payment of any and all sums due under the terms of the Lease; (2) Tenant has not requested orally or in writing that Seller provide Tenant with any reduction in Tenant's monetary obligations under its Lease; (3) Tenant has not expressed to Seller orally or in writing any weakness or material decline in Tenant's financial condition, nor has Tenant requested that Seller, in its capacity as lessor, permit Tenant to sublease its leased premises except to the California Highway Patrol as described in the addendum to the Lease, or assign the Lease, or terminate the Lease on an accelerated basis; (4) Seller has not "written off" any delinquent sums owed by Tenant to satisfy its obligation to contribute to the payment of real estate taxes, common area maintenance charges, and insurance premiums; and (5) Seller has not had, nor is it currently engaged in, any dispute (whether of a formal or an informal nature) with Tenant concerning Tenant's obligations to make payments under the terms of the Lease toward real estate taxes, insurance premiums and common area maintenance charges. (v) Seller has no reason to believe that Tenant is, or may become, unable or unwilling to perform any or all of its obligations under the Lease, whether for financial or legal reasons or otherwise. (vi) Except as disclosed in writing to Buyer, neither base rent ("Base Rent"), nor regularly payable estimated Tenant contributions for operating expenses, insurance premiums, real estate taxes, common area charges, and similar or other "pass through" or non-Base Rent items including, without limitation, cost-of-living or so-called "C.P.I." or other such adjustments (collectively, "Additional Rent"), nor any other item payable by Tenant under the Lease has been heretofore prepaid for more than one (1) month nor shall it be prepaid between the Effective Date and the Closing Date for more than one (1) month. 20 (vii) To Seller's knowledge, no guarantor(s) of the Lease has been released or discharged, voluntarily or involuntarily, or by operation of law, from any obligation under or in connection with the Lease or any transaction related thereto. (viii) There are no brokers' commissions, finders' fees, or other charges payable or to become payable to any third party on behalf of Seller as a result of or in connection with the Lease or any transaction related thereto, including, but not limited to, any exercised or unexercised option(s) to expand or renew. (ix) Tenant has no right to renew or extend the term of the Lease. Tenant has no: (1) option to purchase the Land or Improvements; or (2) right of first refusal to purchase the Land or Improvements or to lease additional space in the Improvements. (y) Material Facts. To Seller's knowledge neither this Agreement nor -------------- any certificate, statement or other document furnished or to be furnished to Buyer by or on behalf of Seller in connection with the transactions contemplated hereunder and the Exhibits hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. (z) Tenant has not paid any security deposit under the Lease. Section 5.2. Knowledge Defined. References to the "knowledge" of ----------------- Seller shall refer only to the actual knowledge of the Designated Employees (as hereinafter defined) of Seller or Seller's property manager, and shall not be construed, by imputation or otherwise, to refer to the knowledge of Seller or any affiliate of Seller, or to any other officer, agent, manager, representative or employee of Seller or any affiliate thereof. As used herein, the term "Designated Employees" shall refer to Burrel Magnusson, Karen Fredericks, and -------------------- Larry Martinez, who are the only personnel likely to have detailed knowledge of the Property. Section 5.3. Survival of Seller's Representations and Warranties. The --------------------------------------------------- representations and warranties of Seller set forth in Section 5.1 hereof as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period of one (1) year. Section 5.4. Covenants of Seller. Seller hereby covenants with Buyer ------------------- as follows: (a) From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall operate and maintain the Property in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof, and Seller further will not create nor permit the creation of any title exceptions such as easements or liens to encumber the Property without Buyer's prior written approval. Seller has commenced and/or completed some of the works of improvement described in paragraph I of the OREDS Letter but is not obligated hereunder to complete such work; (b) Except as provided hereinbelow, Seller agrees not to amend, renew or expand the Lease or enter into any new Lease between the Effective Date and the Closing without 21 the prior written approval of Buyer. Seller will submit to Buyer, prior to execution by Seller any such amendment, renewal, expansion or new Lease and Buyer shall have ten (10) business days after its receipt thereof to notify Seller in writing of either its approval or disapproval thereof. If Buyer fails to notify Seller in writing of its approval or disapproval within the ten (10) business day period set forth above, Buyer shall be deemed to have disapproved such amendment, renewal, expansion or new Lease. (c) Commencing upon the Effective Date and through the first anniversary of the Closing Date, Seller shall comply with the provisions of Exhibit T hereto. - --------- Section 5.5. Representations and Warranties of Buyer. Buyer hereby --------------------------------------- makes the following representations and warranties to Seller as of the Effective Date, which representations and warranties shall be deemed to have been made again as of the Closing, subject to Section 4.3(b) hereof: (a) Organization and Authority. Buyer has been duly organized and is -------------------------- validly existing under the laws of Delaware. Buyer has the full right and authority to enter into this Agreement and to consummate or cause to be consummated the transaction contemplated by this Agreement. The person signing this Agreement on behalf of Buyer is authorized to do so; (b) Pending Actions. There is no action, suit, arbitration, --------------- unsatisfied order or judgment, government investigation or proceeding pending or to Buyer's knowledge, threatened against Buyer which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement. (c) Authorization. This Agreement has been, and on the Closing Date, ------------- all documents to be executed by Buyer hereunder will have been, duly authorized, executed and delivered by Buyer, and constitute and will constitute the valid and binding obligations of Buyer enforceable against it in accordance with their respective terms. (d) No Violations. The execution and delivery of this Agreement, and ------------- all other documents to be executed by Buyer hereunder, compliance with the provisions hereof and thereof and the consummation of the transactions contemplated hereunder and thereunder will not result in (a) a breach or violation of (i) any governmental requirement applicable to Buyer or the Property now in effect; (ii) the organizational documents of Buyer; (iii) any judgment, order or decree of any governmental authority binding upon Buyer; or (iv) any agreement or instrument to which Buyer is a party or by which it is bound. Section 5.6. Survival of Buyer's Representations and Warranties. The -------------------------------------------------- representations and warranties of Buyer set forth in Section 5.5 hereof as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period of one (1) year. 22 ARTICLE VI. DEFAULT Section 6.1. Default by Buyer. If the sale of the Property as ---------------- contemplated hereunder is not consummated due to Buyer's default hereunder, Seller shall be entitled, as its sole remedy, to terminate this Agreement and receive the Deposit as liquidated damages for the breach of this Agreement, it being agreed between the parties hereto that the actual damages to Seller in the event of such breach are impractical to ascertain and the amount of the Deposit is a reasonable estimate thereof. Section 6.2. Default by Seller. If the sale of the Property as ----------------- contemplated hereunder is not consummated due to Seller's default hereunder, Buyer shall be entitled, as its sole remedy, either (a) to receive the return of the Deposit, which return shall operate to terminate this Agreement and release Seller from any and all liability hereunder, or (b) to enforce specific performance of Seller's obligation to convey the Property to Buyer in accordance with the terms of this Agreement. Section 6.3. Recoverable Damages. Notwithstanding Sections 6.1 and 6.2 ------------------- hereof, in no event shall the provisions of Sections 6.1 and 6.2 limit the damages recoverable by either party against the other party due to the other party's obligation to indemnify such party in accordance with this Agreement. ARTICLE VII. RISK OF LOSS Section 7.1. Minor Damage. In the event of loss or damage to the ------------ Property or any portion thereof which is not "Major" (as hereinafter defined), this Agreement shall remain in full force and effect provided that Seller shall, at Buyer's option, either (a) perform any necessary repairs, or (b) assign to Buyer all of Seller's right, title and interest in and to any claims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question. If Seller performs repairs upon the Property, Seller shall use reasonable efforts to commence and complete such repairs promptly, and the date of Closing shall be extended a reasonable time in order to allow for the completion of such repairs. If Seller assigns a casualty claim to Buyer, the Purchase Price shall be reduced by an amount equal to the lesser of the deductible amount under Seller's insurance policy or the cost of such repairs as determined in accordance with Section 7.3 hereof. Upon Closing, full risk of loss with respect to the Property shall pass to Buyer. Section 7.2. Major Damage. In the event of a "Major" loss or damage, ------------ either Seller or Buyer may terminate this Agreement by written notice to the other party, in which event the Deposit and all interest thereon shall be returned to Buyer. If neither Seller nor Buyer elects to terminate this Agreement within ten (10) business days after Seller sends Buyer written notice of the occurrence of such Major loss or damage (which notice shall state the cost of repair or restoration thereof as opined by an architect or other qualified expert in accordance with Section 23 7.3 hereof), then Seller and Buyer shall be deemed to have elected to proceed with Closing. In that event Seller shall, at Buyer's option, either (a) perform any necessary repairs, or (b) assign to Buyer all of Seller's right, title and interest in and to any cla ims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question. If Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to commence and complete such repairs promptly, and the date of Closing shall be extended a reasonable time in order to allow for the completion of such repairs. If Seller assigns a casualty claim to Buyer, the Purchase Price shall be reduced by an amount equal to the lesser of the deductible amount under Seller's insurance policy or the cost of such repairs as determined in accordance with Section 7.3 hereof. Upon Closing, full risk of loss with respect to the Property shall pass to Buyer. Section 7.3. Definition of "Major" Loss or Damage. For purposes of ------------------------------------ Sections 7.1 and 7.2, "Major" loss or damage refers to the following: (a) loss ----- or damage to the Property hereof such that the cost of repairing or restoring the premises in question to substantially the same condition which existed prior to the event of damage would be, in the opinion of an architect or other qualified expert selected by Seller and reasonably approved by Buyer, equal to or greater than Five Hundred Thousand Dollars ($500,000), and (b) any loss due to a condemnation which permanently and materially impairs the current use of the Property. If Buyer does not give written notice to Seller of Buyer's reasons for disapproving an architect or other qualified expert within ten (10) business days after receipt of notice of the proposed architect or other qualified expert, Buyer shall be deemed to have approved the architect or other qualified expert selected by Seller. ARTICLE VIII. BROKERAGE COMMISSIONS With respect to the transaction contemplated by this Agreement, Seller represents that its brokers are Voit Commercial Brokerage and Essex Realty Management Inc. ("Seller's Brokers"), and Buyer represents that it is not ---------------- represented by a broker. Buyer shall not be responsible for the payment of a real estate brokerage commission relative to the transaction contemplated by this Agreement, but rather Seller shall pay the full amount of any such brokerage commission owing to Seller's Brokers. Each party hereto agrees that if any person or entity, other than Seller's Brokers, makes a claim for brokerage commissions or finder's fees related to the sale of the Property by Seller to Buyer, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives, said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including reasonable attorneys' fees) in connection therewith. The provisions of this paragraph shall survive Closing or any termination of this Agreement. 24 ARTICLE IX. DISCLAIMERS Except as expressly stated herein, Seller makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller or its brokers or agents to Buyer in connection with the transaction contemplated hereby. ARTICLE X. MISCELLANEOUS Section 10.1 Confidentiality. Buyer and its representatives shall --------------- hold in confidence all data and information obtained with respect to Seller or its business, whether obtained before or after the execution and delivery of this Agreement, and shall not disclose the same to others; provided, however, that Buyer may disclose (a) prior to the Closing, to the employees, lenders, consultants, accountants and attorneys of Buyer, any such data and information, if such persons agree in writing to treat such data and information confidentially, (b) on and after the Closing, to the public, the fact that Buyer has acquired the Property and the Purchase Price paid therefor, and (c) at any time, to governmental officials or other third parties (including the public, respecting information contained in public reports), any such data and information as may be required to comply with applicable laws and/or Buyer's reporting requirements. If this Agreement is terminated or Buyer fails to perform hereunder, Buyer shall promptly return to Seller any statements, documents, schedules, exhibits or other written information obtained from Seller in connection with this Agreement or the transaction contemplated herein. Section 10.2. Public Disclosure. Prior to and after the Closing, any ----------------- release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in the form approved by Buyer. The provisions of this Section 10.2 shall survive the Closing or any termination of this Agreement. Section 10.3. Assignment. Subject to the provisions of this Section ---------- 10.3, the terms and provisions of this Agreement are to apply to and bind the permitted successors and assigns of the parties hereto. Buyer may assign its rights under this Agreement if Buyer and the proposed assignee execute and deliver to Seller an assignment and assumption of this Agreement in form and substance reasonably satisfactory to Seller. In no event shall any assignment of this Agreement release or discharge Buyer from any liability or obligation hereunder. Any transfer, directly or indirectly, of more than fifty percent (50%) of any stock, partnership interest or other ownership interest in Buyer shall constitute an assignment of this Agreement. The provisions of this Section 10.3 shall survive the Closing or any termination of this Agreement. Section 10.4. Notices. Any notice pursuant to this Agreement shall be ------- given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, or (d) legible facsimile transmission, sent to the intended addressee at the address set forth below, or 25 to such other address or to the attention of such other person as the addressee shall have designated by written notice sen t in accordance herewith. Any notice so given shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile transmission, as of the date of the facsimile transmission provided that an original of such facsimile is also sent to the intended addressee by means described in clauses (a), (b) or (c) above. Unless changed in accordance with the preceding sentence, the addresses for notices given pursuant to this Agreement shall be as follows: If to Buyer: Kilroy Realty, L.P. 2250 East Imperial Highway El Segundo, California 90245 Attention: Jeffrey C. Hawken Telephone No. (213) 772-1193 Facsimile No. (310) 322-5981 with a copy to: Latham & Watkins 650 Town Center Drive 20th Floor Costa Mesa, California 92626 Attention: Bruce A. Tester Telephone No. (714) 540-1235 Facsimile No. (714) 755-8290 If to Seller: Pullman Carnegie Associates c/o Essex Realty Management, Inc. 3146 Redhill Avenue, Suite 150 26 Costa Mesa, California 92626 Attention: Burrel Magnusson Telephone No. (714) 540-5188 Facsimile No. (714) 540-3741 with a copy to: Allen, Matkins, Leck, Gamble & Mallory 88 Kearny Street, Suite 1750 San Francisco, California 94108 Attention: Richard C. Mallory Telephone No. (415) 837-1515 Facsimile No. (415) 837-1516 If to Escrow Holder: Commerce Escrow Company 1545 Wilshire Blvd., Suite 600 Los Angeles, California 90017 Attention: Mark Minsky or Phil Graff Telephone No. (213) 484-0855 Facsimile No. (213) 484-0417 Section 10.5. Modifications. This Agreement cannot be changed orally, ------------- and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. Section 10.6. Entire Agreement. This Agreement, including the exhibits ---------------- and schedules hereto, contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter, other than any confidentiality agreement executed in connection with the Property. Section 10.7. Further Assurances. Each party agrees that it will ------------------ execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate the transaction contemplated by this Agreement. The provisions of this Section 10.7 shall survive Closing. Section 10.8. Counterparts. This Agreement may be executed in ------------ counterparts, all such executed counterparts shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. Section 10.9. Facsimile Signatures. In order to expedite the -------------------- transaction contemplated herein, telecopied signatures may be used in place of original signatures on this Agreement or any document delivered pursuant hereto. Seller and Buyer intend to be bound by the signatures on the telecopied document, are aware that the other party will rely on the telecopied signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature. 27 Section 10.10. Severability. If any provision of this Agreement is ------------ determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect; provided that the invalidity or unenforceability of such provision does not materially adversely affect the benefits accruing to any party hereunder. Section 10.11. Applicable Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State in which the Property is located. Buyer and Seller agree that the provisions of this Section 10.11 shall survive the Closing or any termination of this Agreement. Section 10.12. No Third Party Beneficiary. The provisions of this -------------------------- Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Buyer only and are not for the benefit of any third party; and, accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing. Section 10.13. Captions. The section headings appearing in this -------- Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof. Section 10.14 Construction. The parties acknowledge that the parties ------------ and their counsel have reviewed and revised this Agreement and that the normal rule of construction to take effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto. Section 10.15. Recordation. This Agreement many not be recorded by any ----------- party hereto without the prior written consent of the other party hereto. The provisions of this Section 10.15 shall survive the Closing or any termination of this Agreement. 28 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date. SELLER: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: /s/ Burrel D. Magnusson ---------------------------- Name: Burrel D. Magnusson Its: President BUYER: KILROY REALTY, L.P., a Delaware limited partnership By: KILROY REALTY CORPORATION, a Maryland corporation, its General Partner By: /s/ Jeffrey C. Hawken ----------------------------------- Name: Jeffrey C. Hawken ----------------------------------- Its: Executive Vice President ----------------------------------- 29 ACKNOWLEDGMENTS --------------- Escrow Holder executes this Agreement below solely for the purpose of acknowledging that it agrees to be bound by the provisions of Sections 1.4, 1.5, 1.6 and 1.7 hereof and Article IV hereof. ESCROW HOLDER: COMMERCE ESCROW COMPANY By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Weyerhaeuser Venture Co. executes this Agreement below in its individual corporate capacity solely for the purpose of acknowledging that it agrees to be bound by the provisions of Section 1.4(b) hereof. WEYERHAEUSER VENTURE CO., a Nevada corporation By: /s/ Robert J Plavchak _______________________________ Name: Robert J Plavchak Its Senior Vice President By: /s/ Stephen M. Margolin ------------------------------- Name: Stephen M. Margolin ------------------------------- Its: Executive Vice President ------------------------------- 30 EXHIBIT A DESCRIPTION OF LAND Parcel 1, in the City of Santa Ana, County of Orange, State of California, as shown on Map filed in Book 60, Page 40 of Parcel maps, in the office of the County Recorder of Orange County, California. EXHIBIT B LIST OF PERSONAL PROPERTY NONE EXHIBIT C FORM OF ASSIGNMENT OF LEASE THIS ASSIGNMENT OF LEASE (the "Assignment") is made as of this ____ day of June, 1997 between PULLMAN CARNEGIE ASSOCIATES, a California limited partnership ("Assignor"), and KILROY REALTY, L.P., a Delaware limited partnership ("Assignee"). Assignor is the owner of that certain real property located in the City of Santa Ana, County of Orange, State of California, more particularly described in Schedule 1 attached hereto (the "Property"). Assignor hereby ---------- assigns, transfers, sets over and conveys to Assignee all of Assignor's right, title and interest in, to and under that certain lease, as amended, described on Schedule 2 attached hereto and incorporated herein by this reference (the - ---------- "Lease"). Assignee does hereby assume and agree to perform all of Assignor's obligations under or with respect to the Lease accruing from and after the date hereof, including without limitation, any and all obligations to pay leasing commissions and finder's fees which are due or payable after the date hereof with respect to the Lease. Assignee agrees to indemnify, protect, defend and hold Assignor harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) directly or indirectly arising out of or related to any breach or default in Assignee's obligations hereunder. Assignor shall remain liable for all of Assignor's obligations under or with respect to the Lease accruing prior to the date hereof. Assignor agrees to indemnify, protect, defend and hold Assignee harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) directly or indirectly arising out of related to any breach or default in Assignor's obligations hereunder. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, executors, administrators, successors and assigns. This Assignment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, Assignor and Assignee have each executed this Assignment as of the date first written above. ASSIGNOR: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: ____________________________ Name: Burrel D. Magnusson Its: President ASSIGNEE: KILROY REALTY, L.P., a Delaware limited partnership By: KILROY REALTY CORPORATION, a Maryland corporation, its General Partner By: ________________________________ Name: ________________________________ Title: ________________________________ 2 SCHEDULE 1 LEGAL DESCRIPTION ----------------- Parcel 1, in the City of Santa Ana, County of Orange, State of California, as shown on Map filed in Book 60, Page 40 of Parcel maps, in the office of the County Recorder of Orange County, California. SCHEDULE 2 LEASE ----- 1. Lease dated April 28, 1988 executed between Pullman Carnegie Associates ("Landlord") and State of California ("Tenant") for those premises located at 2501 Pullman Avenue, Santa Ana, California, and 1700 Carnegie Avenue, Santa Ana, California. 2. First Amendment to Lease dated ___________, executed between Landlord and Tenant. 3. Second Amendment to Lease dated _________, executed between Landlord and Tenant. EXHIBIT D LIST OF OPERATING AGREEMENTS
VENDOR AGREEMENT CANCELLATION NAME DATE PURPOSE TERM CLAUSE Avila Landscape 11/12/89 Landscaping $1,000/mo. 30 day written notice Contemporary 4/11/89 HVAC 30 day written notice Heating & Air Bldg. A $1,095/qtr. Bldg. B $1,155/qtr 10/20/92 HVAC 30 day written notice Cooling Tower $225/mo. 2/12/97 HVAC "TMC" $720/qtr 30 day written notice West Coast 1/7/88 Sweeping 30 day written notice Sweeping $85.00 Am-Tech 10/17/95 Elevator Main. 30 day written notice Elevator Bldg. A $125 Bldg. B $125 Wells Fargo 7/13/87 Fire Alarm 5 yrs. Terminates 12/4/97 Monitoring then 30 day notice Telewatch 12/1/96 Elevator phone monitoring 1 yr. Terminates 12/31/97 $60/qtr. Firemaster 6/92 Sprinkler Maintenance 60 days notice Inspections $175/qtr. Annual test of precaution System $400.00
EXHIBIT E OREDS LETTER AND RELATED CORRESPONDENCE 1. Letter from Karen Fredericks of Essex Realty to Tony Macris of OREDS dated May 13, 1997. 2. Letter from Robert Lawson of Robert Lawson, Structural Engineers to Karen Fredericks of Essex Realty dated December 16, 1996. 3. Letter from Bill Casella of Pacific Building to Karen Fredericks of Essex Realty dated December 16, 1996. 4. Letter from Bill Casella of Pacific Building to Karen Fredericks of Essex Realty dated December 3, 1996. 5. Letter from Randy Peterson of Contemporary Heating & Air Conditioning to Pullman Carnegie Associates dated December 3, 1996. 6. Letter from Kenneth Kaino of Tsuchiyama & Kaino to Burrel Magnusson of Essex Realty dated November 21,1996. 7. Letter from Tony Macris of OREDs to Burrel Magnusson and Karen Fredericks of Essex Realty dated November 13, 1996. 8. Letter from Robert Lawson of Robert Lawson, Structural Engineers to Michael Lawson of Pacific Building dated October 3, 1996. 9. Report from Mark Gorman of Dames & Moore to Joel McRonald, Division of State Architect dated August 9, 1996. EXHIBIT F FORM OF QUIT CLAIM DEED EXHIBIT G ESCROW HOLDER'S GENERAL PROVISIONS EXHIBIT H LIST OF ENVIRONMENTAL REPORTS 1. Report on Tank Removal Operations/Investigation, dated April 3, 1987, by Hydrotech Consultants Inc. EXHIBIT I TENANT ESTOPPEL FORM June ___, 1997 KILROY REALTY, L.P. 2250 East Imperial Highway El Segundo, California 90245 PULLMAN CARNEGIE ASSOCIATES c/o Essex Realty Management, Inc. 3146 Redhill Avenue, Suite 150 Costa Mesa, California 92626 Re: Lease dated April 28, 1988 executed between Pullman Carnegie Associates ("Landlord"), and State of California ("Tenant") , for those premises located at 2501 Pullman Avenue, Santa Ana, California, and 1700 Carnegie Avenue, Santa Ana, California as amended and/or extended (the "Lease"). Gentlemen: The following information is furnished in lieu of an Estoppel Certificate requested by you. It is not the policy of the State of California to execute Estoppel Certificate Documents; however, we do acknowledge the following: 1. Under the Lease, the State of California, by and through its duly appointed, qualified and acting Director of General Services, leases from certain premises described in said Lease. 2. The State leases approximately 124,921 net square feet of office space for a term commencing on May 1, 1989 and ending on April 30, 1999. The State may terminate the Lease at any time effective on or after by giving written notice to Landlord at least 30 days prior to the date when such termination shall become effective. 3. The present monthly rent for the facilities is $188,006.11 which is paid in arrears on the last day of each month. A portion of the monthly rental is subject to adjustment by any increase or decrease of the Consumer Price Index (CPI) in accordance with Paragraph 31 of the Lease. 4. The Lease is in full force and effect. 5. At the present time, the State has no apparent claim against Landlord which might be set off by accruing rentals. 6. No advance rental or deposit has been paid by State to Landlord. 7. This letter may be relied upon by any lender which finances or refinances all or any portion of the purchase price of the Property, or any lender of Buyer who disburses loan proceeds based upon the collateralization of the Property to secure said loan. If you have any further questions concerning the Lease, please do not hesitate to contact me. Should any changes occur regarding the terms of the Lease in the future, the State will acknowledge appropriate and legally sufficient notification and/or documentation received in that event and proceed accordingly. Any such notification and/or documentation should be mailed to the State in accordance with Lease Paragraph 5. Sincerely, Real Estate Officer 2 EXHIBIT J FORM OF DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: LATHAM & WATKINS 650 Town Center Drive, 20th Floor Costa Mesa, California 92626-1925 Attn: Bruce Tester, Esq. - -------------------------------------------------------------------------------- (Space Above This Line For Recorder's Use Only) GRANT DEED FOR VALUE RECEIVED, PULLMAN CARNEGIE ASSOCIATES, a California limited partnership, hereby grants to KILROY REALTY, L.P., a Delaware limited partnership, all of its right, title and interest in and to that certain real property situated in the City of Santa Ana, County of Orange, State of California, described on Schedule 1 attached hereto and by this reference incorporated herein. SAID PROPERTY IS CONVEYED SUBJECT TO; (a) All liens, encumbrances, easements, covenants, conditions and restrictions of record; (b) All matters which would be revealed or disclosed in an accurate survey of the Property; and (c) Interests of tenants in possession. IN WITNESS WHEREOF, the undersigned has executed this Grant Deed dated as of _________________________, 19__. PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: ________________________________ Name: Burrel D. Magnusson Its: President SCHEDULE 1 LEGAL DESCRIPTION ----------------- Parcel 1, in the City of Santa Ana, County of Orange, State of California, as shown on Map filed in Book 60, Page 40 of Parcel maps, in the office of the County Recorder of Orange County, California. STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On __________________________, 1997 before me, __________________________, a notary public in and for said State, personally appeared _______________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (Seal) EXHIBIT K FORM OF BILL OF SALE FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, PULLMAN CARNEGIE ASSOCIATES, a California limited partnership ("Seller") does hereby sell and convey to KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"), any and all of Sellers' right, title and interest in and to all tangible personal property located upon the land described on Schedule 1 attached hereto and hereby made a part hereof (the ---------- "Land") or within the improvements located thereon, including, without limitation, any and all appliances, furniture, carpeting, draperies and curtains, tools and supplies, and other items of personal property owned by Seller (excluding cash and any software), used exclusively in the operation of the Land and/or the improvements located thereon. TO HAVE AND TO HOLD all of said personal property unto Buyer, its successors and assigns, to its own use forever. IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the ____ day of June, 1997. SELLER: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: ___________________________ Name: Burrel D. Magnusson Its: President SCHEDULE 1 LEGAL DESCRIPTION ----------------- Parcel 1, in the City of Santa Ana, County of Orange, State of California, as shown on Map filed in Book 60, Page 40 of Parcel maps, in the office of the County Recorder of Orange County, California. EXHIBIT L FORM OF ASSIGNMENT OF CONTRACTS THIS ASSIGNMENT AND ASSUMPTION OF CONTRACTS AND INTANGIBLES (the "Assignment") is made as of this ____ day of June, 1997 between PULLMAN CARNEGIE ASSOCIATES, a California limited partnership ("Assignor"), and KILROY REALTY, L.P., a Delaware limited partnership ("Assignee"). Assignor is the owner of that certain parcel of Real Property located in the City of Santa Ana, County of Orange, State of California, more particularly described in Schedule 1 attached hereto and incorporated herein by --------- reference (the "Property"). Assignor hereby assigns, transfers, sets over and conveys to Assignee all of Assignor's right, title and interest, to the extent assignable, in, to and under any and all of the following: (i) the contracts and agreements listed and described on Schedule 2 attached hereto and incorporated herein by this ---------- reference (the "Contracts"); (ii) all existing warranties and guaranties (express or implied) issued to Assignor in connection with the improvements or the personal property being conveyed to Assignee by Bill of Sale on the date hereof; and (iii) all existing permits, licenses, approvals and authorizations issued by any governmental authority in connection with the Property. All items described in (i), (ii) and (iii) above are hereinafter collectively referred to as "Intangible Property." Assignee does hereby assume and agree to perform all of Assignor's obligations under the Contracts and Intangible Property accruing from and after the date hereof. Assignee agrees to indemnify, protect, defend and hold Assignor harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) directly or indirectly arising out of or related to any breach or default in Assignee's obligations hereunder. Assignor shall remain liable for all of Assignor's obligations under the Contracts and Intangible Property accruing prior to the date hereof. Assignor agrees to indemnify, protect, defend and hold Assignee harmless from and against any and all liabilities, losses, costs , damages and expenses (including reasonable attorneys' fees) directly or indirectly arising out of or related to any breach or default in Assignor's obligations hereunder. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, executors, administrators, successors and assigns. This Assignment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, Assignor and Assignee have each executed this Assignment as of the date first written above. ASSIGNOR: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By:________________________________________ Name: Burrel D. Magnusson Its: President ASSIGNEE: KILROY REALTY, L.P., a Delaware limited partnership By: KILROY REALTY CORPORATION, a Maryland corporation, its General Partner By: ___________________________________________ Name: ___________________________________________ Its: ___________________________________________ 2 SCHEDULE 1 LEGAL DESCRIPTION ----------------- Parcel 1, in the City of Santa Ana, County of Orange, State of California, as shown on Map filed in Book 60, Page 40 of Parcel maps, in the office of the County Recorder of Orange County, California. SCHEDULE 2 CONTRACTS --------- [To be attached] EXHIBIT M-1 FORM OF FIRPTA CERTIFICATE CERTIFICATE REGARDING FOREIGN INVESTMENT ---------------------------------------- IN REAL PROPERTY TAX ACT ------------------------ (ENTITY TRANSFEROR) Section 1445 of the Internal Revenue Code provides that the transferee of a United States property interest must withhold tax if the transferor is a foreign person. To inform Kilroy Realty, L.P. ("Buyer") that withholding of tax is not required upon the disposition of a United States real property interest by Pullman Carnegie Associates, a California limited partnership ("Seller"), and with the knowledge that Buyer will rely upon the following statements, Seller hereby certifies the following facts to Buyer: 1. Seller is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Internal Revenue Code and Income Tax Regulations). 2. Seller's United States Employer Identification Number/Social Security Number is: _______________. 3. Seller's office/home address is __________________________ ___________________________________________________________ ___________________________________________________________. Seller understands that this certification may be disclosed to the Internal Revenue Service by Buyer and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, the undersigned declare that I/we have examined this Certificate and, to the best of my/our knowledge and belief, it is true, correct and complete, and I/we further declare that I/we have authority to sign this document on behalf of Seller. Dated as of ________, 1997 SELLER: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: _______________________________ Name: Burrel D. Magnusson Its: President 2 EXHIBIT M-2 FORM OF CALFIRPTA CERTIFICATE EXHIBIT N FORM OF TENANT NOTICE TENANT NOTIFICATION LETTER June 24, 1997 TO: State of California, Department of General Services RE: Notification Regarding Change of Ownership This letter is to notify you as a Tenant at 2501 Pullman Avenue and 1700 Carnegie Avenue, Santa Ana, California (the "Property"), that the Property has been sold by Pullman Carnegie Associates, a California limited partnership ("Seller"), to Kilroy Realty, L.P., a Delaware limited partnership ("Buyer"). As of the date hereof, your Lease has been assigned by Seller to Buyer. From the date of this letter, any and all unpaid rent as well as all future rent, or any other amounts due under the terms of your Lease, shall be directed as follows: TO: KILROY REALTY, L.P. ATTN: Jeffrey C. Hawken 2250 East Imperial Highway El Segundo, CA 90245 Any and all payments of rent (or other sums due under your Lease) hereafter paid to any party other than Buyer shall not relieve you of the obligation of making said payment to Buyer.
SELLER: BUYER: PULLMAN CARNEGIE ASSOCIATES, KILROY REALTY, L.P., a California limited partnership a Delaware limited partnership By: Bay-Santa Ana Partners, By: KILROY REALTY a California limited partnership, its General CORPORATION, a Maryland corporation, its General Partner By: Bay Development Corporation, a By: __________________________________ California corporation, its General Name: __________________________________ Partner Its: __________________________________ By: _________________________________ Name: Burrel D. Magnusson Its: President
EXHIBIT O LIST OF SPECIFIED LITIGATION NONE EXHIBIT P LIST OF BROKERAGE AGREEMENTS 1. Sale listing with Voit Commercial. EXHIBIT Q LIST OF VIOLATION NOTICES NONE EXHIBIT R RENT ROLL [TO BE ATTACHED] EXHIBIT S CERTAIN TENANT COSTS AND COMMISSIONS NONE EXHIBIT T 8-K AND AUDIT REQUIREMENTS For the period of time commencing on the Effective Date and continuing through the first anniversary of the Closing Date, Seller shall, from time to time, upon reasonable advance notice from Buyer, provide Buyer and its representatives, agents and employees with access to all financial and other information pertaining to the period of Seller's ownership and operation of the Property, which information is relevant and reasonably necessary, in the opinion of Buyer's outside, third party accountants (the "Accountants"), to enable Buyer and its Accountants to prepare financial statements in compliance with any or all of (a) Rule 3-14 of Regulation S-X of the Securities and Exchange Commission (the "Commission"); (b) any other rule issued by the Commission and applicable to Buyer, and (c) any registration statement, report or disclosure statement filed with the Commission by, or on behalf of Buyer; provided, however, that in any such event(s), Buyer shall reimburse Seller for those third party, out-of- pocket costs and expenses that Seller incurs in order to comply with the foregoing requirement. Seller shall provide such information, and documentation on a per-building basis, if available. Seller agrees to provide the following information and documentation that Buyer and the Accountants may require in order to comply with (a), (b) and (c) above: 1. Rent rolls for the calendar month in which the Closing occurs and the eleven (11) calendar months immediately preceding the calendar month in which the Closing occurs; 2. Seller's written analysis of both (a) scheduled increases in base rent required under the Lease in effect on the Closing Date; and (b) rent concessions imposed by the Lease, and the straight line effect of (a) and (b); 3. Seller's internally-prepared operating statements; 4. Most currently available real estate tax bills; 5. Access to Seller's cash receipt journal(s)) and bank statements for the Property; 6. Seller's general ledger with respect to the Property; 7. Seller's schedule of expense reimbursements required under the Lease in effect on the Closing Date; 8. Schedule of those items of repairs and maintenance performed by, or at the direction of Seller, during Seller's final fiscal year in which Seller owns and operates the Property (the "Final Fiscal Year"); 9. Schedule of those capital improvements and fixed asset additions made by, or at the direction of, Seller during the Final Fiscal Year; 10. Access to Seller's invoices with respect to expenditures made during the Final Fiscal Year; 11. Access (during normal and customary business hours) to responsible personnel to answer accounting questions; and 12. A representation letter in such form as is reasonably required by Buyer, signed by the individual(s) responsible for Seller's financial reporting, as prescribed by generally accepted auditing standards promulgated by the Auditing Standards Division of the American Institute of Certified Public Accountants, which representation letter may be required to assist the Accountants in rendering an opinion on such financial statements. 2 EX-10.59 3 AMENDMENT TO PURCHASE & SALE AGREEMENT EXHIBIT 10.59 AMENDMENT TO ------------- PURCHASE AND SALE AGREEMENT --------------------------- AND ESCROW INSTRUCTIONS ----------------------- THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS ("Amendment") is dated as of June 27, 1997 by and between PULLMAN CARNEGIE ASSOCIATES, a California limited partnership ("Seller"), and KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"). WHEREAS, Buyer and Seller are parties to that certain Purchase and Sale Agreement and Escrow Instructions dated as of May 5, 1997 with respect to Escrow No. 97-26849 at Commerce Escrow Company, Los Angeles, California (the "Purchase Agreement"); and WHEREAS, Buyer and Seller wish to amend the Purchase Agreement in certain respects as set forth below; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller hereby amend the Purchase Agreement as follows: The capitalized terms used herein shall have the same meanings as set forth in the Purchase Agreement. The Contingency Period shall expire upon the full execution and delivery of telecopied counterparts of this Amendment, which Buyer and Seller anticipate shall occur on Friday, June 27, 1997. The Closing shall be June 30, 1997. The Purchase Price shall remain Fifteen Million Four Hundred Fifty Thousand Dollars ($15,450,000); however, at the Closing, Escrow Holder shall retain and transfer to a money market account at Union Bank, or such other account as may be specified by Buyer and Seller, the sum of One Million Three Hundred Thousand Dollars ($1,300,000) (the "Holdback"), which sum shall be disbursed to Seller or to Buyer, as applicable, together with any accrued interest, pursuant to the following: (a) Upon receipt of a copy of a fully executed amendment to the April 28, 1988 Lease with the State of California ("Caltrans") extending the term thereof (other than pursuant to a "holdover" agreement on a month- to-month or other short term basis) on terms and conditions acceptable to Buyer in its sole discretion, the Holdback shall be delivered by Escrow Holder to Seller. (b) Upon receipt of a notice from Buyer and Seller that the condition set forth in Paragraph 4(a) of this Amendment has not been satisfied prior to the expiration of the term of the April 28, 1988 Lease, the Holdback shall be distributed to Buyer. Subparagraphs (a) and (b) above are intended to document the basic agreement of Buyer and Seller that, if Caltrans does not renew the term of the April 28, 1988 Lease, Buyer shall receive the Holdback and, if Caltrans does renew the term of the April 28, 1988 Lease, Seller is entitled to the Holdback. 5. An additional holdback in the sum of Four Hundred Seventy Thousand Dollars ($470,000) from the distribution to Seller of the Purchase Price, together with any accrued interest thereon, shall remain in a money market account at Union Bank or such other account as may be specified by Buyer and Seller (the "Renovation Holdback"), which Renovation Holdback shall be disbursed to Seller by Escrow Holder upon receipt by Escrow Holder, from time to time, of invoices, countersigned by Buyer and Seller, from contractors performing works of improvement to the Real Property at Buyer's direction which are for the cost of construction of "Qualified Items." As used herein, the term "Qualified Items" shall mean and refer to works of improvement to the Real Property which are included in the list of items set forth in Paragraph I of the May 13, 1997 letter to Tony Macris of OREDS from Karen Fredericks of Essex Realty Management. The countersignatures of Buyer and Seller shall evidence that the submitted invoice is a "Qualified Item." When such work of improvement of the Qualified Items is completed, as evidenced by a written notice delivered to Escrow Holder by Buyer and Seller to such effect, any undisbursed portion of the Renovation Holdback, together with any accrued interest thereon, shall be promptly disbursed by Escrow Holder to Seller. If the cost of completing such work of improvement exceeds the Renovation Holdback, Seller shall promptly pay such excess cost. To securitize the agreement of Seller to timely pay its obligations under this Paragraph 5, this Amendment has been acknowledged by Weyerhaeuser Venture Company ("WVC"), by which acknowledgment WVC hereby unconditionally guarantees and promises to pay to Buyer any such payment which Seller fails to timely make, together with interest thereon at a rate of ten percent (10%) per annum accruing from the date which is thirty (30) days after the invoice date for such payment; provided however, that such payment by WVC shall not exceed the amount actually received by WVC as a distribution from Seller out of the net sales proceeds under the Purchase Agreement (currently estimated, based on a trial closing balance, at One Million Five Hundred Fifty Thousand Dollars ($1,550,000)). Seller hereby agrees that it will promptly distribute all net sale proceeds to WVC that WVC is entitled to receive. In the event that WVC fails to receive such funds to which it is entitled, WVC hereby agrees to take all necessary and appropriate legal actions against Seller to recover such funds. 6. Buyer and Seller have anticipated that Caltrans will require certain works of improvement ("Lease Incentive Items") to be made to the Real Property as a condition to the renewal by Caltrans of the April 28, 1988 Lease. Buyer and Seller currently estimate the Lease Incentive Items to cost Three Hundred Eighty Thousand Dollars ($380,000). If negotiations with Caltrans result in a commitment by Buyer to construct Lease Incentive Items at a cost in excess of Three Hundred Eighty Thousand Dollars ($380,000), Seller shall contribute to such costs a -2- sum of money, not to exceed One Hundred Twenty Thousand Dollars ($120,000). By way of illustration, if Caltrans renews its Lease and obtains a commitment from Buyer to construct Lease Incentive Items at a cost of Five Hundred Fifty Thousand Dollars ($550,000), Buyer shall pay the first Three Hundred Eighty Thousand Dollars ($380,000), Seller shall pay the next One Hundred Twenty Thousand Dollars ($120,000), and Buyer shall pay the final Fifty Thousand Dollars ($50,000). To securitize the agreement of Seller to fund up to One Hundred Twenty Thousand Dollars ($120,000) as required in this paragraph, this Amendment has been acknowledged to such effect by WVC, by which acknowledgment WVC hereby unconditionally guarantees and promises to pay to Buyer up to One Hundred Twenty Thousand Dollars ($120,000), to the extent the cost of the Lease Incentive Items exceed Three Hundred Eighty Thousand Dollars ($380,000) and Seller fails to pay such amount. 7. Except to the extent modified by this Amendment, the Agreement remains in full force and effect. This Amendment also constitutes an amendment to the instructions to Escrow Holder. If any provision of this Amendment contradicts or is inconsistent with any provision of the Agreement, then the provisions of this Amendment shall prevail. 8. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, this Amendment has been executed by Buyer and Seller as of this 27th day of June, 1997. SELLER: PULLMAN CARNEGIE ASSOCIATES, a California limited partnership By: Bay-Santa Ana Partners, a California limited partnership, its General Partner By: Bay Development Corporation, a California corporation, its General Partner By: ------------------------------ Name: Burrel D. Magnusson Its: President [SIGNATURES CONTINUED] -3- BUYER: KILROY REALTY, L.P., a Delaware limited partnership By: Kilroy Realty Corporation, a Maryland corporation, its General Partner By: ___________________________ Name:___________________________ Its: ___________________________ -4- ACKNOWLEDGMENTS --------------- Escrow Holder hereby executes this Amendment as of June 27, 1997 solely for the purpose of acknowledging that it agrees to be bound by the provisions applicable to Escrow Holder as set forth in Paragraphs 4, 5 and 6 hereof. ESCROW HOLDER: COMMERCE ESCROW COMPANY By: __________________________ Name: __________________________ Its: __________________________ Weyerhaeuser Venture Company hereby executes this Amendment as of June 27, 1997 in its individual corporate capacity solely for the purposes of acknowledging that it agrees to be bound by the provisions applicable to Weyerhaeuser Venture Company in Paragraphs 5 and 6 hereof. WEYERHAEUSER VENTURE COMPANY, a Nevada corporation By: _____________________________ Name: Robert J. Plavchak Its: Senior Vice President By: ____________________________ Name:____________________________ Its: ____________________________ -5- EX-10.60 4 PURCHASE & SALE AGREEMENT EXHIBIT 10.60 AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ------------------------- AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------- TABLE OF CONTENTS -----------------
Page ---- 1. Purchase and Sale................................... 1 2. Purchase Price...................................... 1 3. Payment of Purchase Price........................... 2 4. Escrow.............................................. 2 5. Condition of Title.................................. 2 6. Title Policy........................................ 3 7. Conditions to Close of Escrow....................... 3 8. Deposits by Seller.................................. 7 9. Deposits by Buyer................................... 8 10. Costs and Expenses.................................. 8 11. Prorations.......................................... 8 12. Disbursements and Other Actions by Escrow Holder.... 8 13. Seller's Representations and Warranties............. 9 14. Buyer's Covenants, Representations and Warranties... 10 15. Liquidated Damages.................................. 12 16. Waiver Of Right To Specific Performance............. 13 17. Damage or Condemnation Prior to Closing............. 14 18. Notices............................................. 14 19. Brokers............................................. 15 20. Legal Fees.......................................... 15 21. Assignment.......................................... 16 22. Miscellaneous....................................... 16
Exhibit "A" Legal Description Of Property Exhibit "B" Grant Deed Exhibit "C" Seller's Federal Certificate Exhibit "D" Seller's California Certificate Exhibit "E" Bill of Sale Exhibit "F" Assignment of Contracts AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS -----------------------------
TO: First American Title Insurance Company Escrow No. 9762747M 114 East Fifth Street Escrow Officer: Ms. Judith M. Moore Santa Ana, California 92701 Title Order No. OR-9762747 ("Escrow Holder") Title Officer: Mr. Eric Bowen
This AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ("Agreement") is made and entered into as of this 12th day of June, 1997 (the "Effective Date"), by and between MAZDA MOTOR OF AMERICA, INC., a California corporation ("Seller"), and KILROY REALTY L.P., a Delaware limited partnership ("Buyer"), with respect to the following: R E C I T A L S : ---------------- A. Seller is the owner of that certain real property located in the City of Irvine ("City"), County of Orange, State of California, consisting of approximately twenty (20) acres of improved land (the "Land"), all of which is described on Exhibit "A" attached hereto, together with (i) a warehouse building ----------- located thereon containing approximately 244,800 square feet of space and the fixtures therein, including, without limitation, all floor coverings, draperies, curtains and light fixtures (the "Warehouse Building"), (ii) an office building located thereon containing approximately 27,200 square feet of space and the fixtures therein, including, without limitation, all floor coverings, draperies, curtains and light fixtures (the "Office Building"), and (iii) associated parking areas and other improvements located thereon (the "Parking and Other Improvements"). The Warehouse Building, the Office Building, and the Parking and Other Improvements shall hereinafter be collectively referred as the "Improvements." The Land, together with the Improvements, shall hereinafter be collectively referred to as the "Property." B. 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 hereby agree that the terms and conditions of this Agreement and the instructions to Escrow Holder with regard to the escrow ("Escrow") created pursuant hereto are as follows: A G R E E M E N T : ------------------ 1. Purchase and Sale. Seller agrees to sell the Property to Buyer, ----------------- and Buyer 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 Seventeen Million Twenty-Five Thousand Dollars ($17,025,000). 3. Payment of Purchase Price. The Purchase Price for the Property ------------------------- shall be paid by Buyer as follows: (a) Deposit. Prior hereto, Buyer has deposited with Escrow ------- Holder, in cash, by 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 One Million Dollars ($1,000,000) (the "Deposit"). Escrow Holder has placed the Deposit in an interest bearing account. The Deposit shall be refundable to Buyer if Buyer terminates this Agreement in accordance with any of its rights to do so prior to the expiration of the Contingency Period. The Deposit and the interest accrued thereon shall be applicable to the Purchase Price upon the "Close of Escrow" (as defined in Paragraph 4(b) below) and, upon the expiration of the Contingency Period, the Deposit shall be nonrefundable to Buyer unless (i) a condition to the Close of Escrow for the benefit of Buyer contained in this Agreement fails to timely be satisfied or waived in writing by Buyer, or (ii) Seller fails to convey the Property to Buyer as provided herein and such failure constitutes a default by Seller hereunder. (b) Closing Funds. At least one (1) business day prior to the ------------- Close of Escrow, Buyer shall deposit or cause to be deposited with Escrow Holder, in Immediately Available Funds, the balance of the Purchase Price plus Escrow Holder's estimate of 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 was opened on May 6, 1997 (the "Opening of Escrow"). 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 inconsistency between the provisions of such supplemental instructions and the provisions of this Agreement, the provisions of this Agreement shall control. (b) Close of Escrow. For purposes of this Agreement, the "Close --------------- of Escrow" shall be defined as the date that the grant deed ("Grant Deed"), the form of which is attached hereto as Exhibit "B", conveying the Property to ----------- Buyer, is recorded in the Official Records of the Orange County, California Recorder's Office (the "Official Records"). This Escrow shall close three (3) business days following the expiration of the Contingency Period (as the Contingency Period may be extended by Seller pursuant to Paragraph 7(c) below) (the "Closing Date"). 5. Condition of Title. It shall be a condition to the Close of ------------------ Escrow for Buyer's benefit that title to the Property shall be conveyed to Buyer by the Grant Deed subject only to the following condition of title ("Condition of Title"): (a) A lien to secure payment of general and special real property taxes and assessments, not delinquent. (b) The lien of supplemental taxes assessed pursuant to Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation Code. -2- (c) Matters affecting the Condition of Title created by or with the written consent of Buyer (including, without limitation, the Lease [as defined in Paragraph 7(c)(i) below]). (d) All matters which a correct survey and inspection of the Property would disclose. (e) All exceptions to title which are approved or deemed approved by Buyer as provided in Paragraph 7(a)(ii) below. (f) All applicable laws, ordinances, rules and governmental regulations (including, but not limited to, those relative to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Property. 6. Title Policy. Title shall be evidenced by the willingness of ------------ Escrow Holder in its capacity as title insurer ("Title Company") to issue its ALTA Extended Coverage Owner's Form Policy of Title Insurance ("Title Policy") in the amount of the Purchase Price showing title to the Property vested in Buyer. 7. Conditions to Close of Escrow. ----------------------------- (a) Conditions to Buyer's Obligations. Buyer's obligation to --------------------------------- consummate the transaction contemplated by this Agreement is subject to the satisfaction of the following conditions for Buyer's benefit (or Buyer's waiver thereof, it being agreed that Buyer may waive any or all of such conditions) on or prior to the dates designated below for the satisfaction of such conditions. In the event Buyer terminates this Agreement and the Escrow due to the nonsatisfaction of any of such conditions, then Buyer shall be entitled to the return of the Deposit and all interest accrued thereon and both Seller and Buyer shall be relieved of all further obligations and liabilities under this Agreement (except for the indemnity and insurance obligations of Buyer set forth in Paragraph 7(a)(i)(A) below and the covenants of Buyer set forth in Paragraph 22(a) below, which shall survive any such termination). (i) Contingency Matters. Buyer has satisfied itself, in ------------------- Buyer's sole and absolute discretion, as to the following matters: (A) Buyer's Review of the Property and Related Matters. -------------------------------------------------- All aspects of the Property and its condition and suitability for Buyer's intended use thereof, including, without limitation, the zoning for the Property and the availability of all permits, licenses, variances and the like necessary for Buyer's intended use of the Property. During the term of this Escrow, Buyer, its agents, contractors and subcontractors shall have the right to enter upon the Property, at reasonable times during hours specified by Seller following not less than twenty-four (24) hours prior notice to Seller, to make such inspections, surveys and tests as may be necessary in Buyer's discretion, including, without limitation, soils tests, toxic waste analysis, geological and/or engineering studies and land use or related studies; provided, however, if Buyer proposes to make any tests in connection with any Phase II environmental report or any other tests which involve drilling, boring or other similar intrusive or invasive action on or under the Property, then Buyer shall obtain Seller's written consent prior to making any such tests, which consent may be withheld in Seller's sole, absolute and subjective discretion. Buyer shall use care and consideration in connection with any of its inspections or tests and Seller shall have the right to be present during any inspection of the Property by Buyer or its agents. Buyer shall restore the Property to its original condition after any and all tests and/or inspections. Buyer hereby indemnifies, protects, defends (with counsel chosen by Seller) and holds Seller and the Property free and harmless from and against any and all costs, losses, -3- liabilities, damages, lawsuits, judgments, actions, proceedings, penalties, demands, attorneys' fees, mechanic's liens, or expenses of any kind or nature whatsoever, arising out of or resulting from (i) any entry and/or activities upon the Property by Buyer, Buyer's agents, contractors and/or subcontractors, and/or the contractors and subcontractors of such agents, or (ii) from the enforcement of this agreement of indemnity or the assertion by Buyer of any defense to its obligations hereunder. Prior to any entry upon the Property by Buyer's agents, contractors, subcontractors or employees, Buyer shall deliver to Seller an original endorsement to 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 acceptable to Seller, covering (i) the activities of Buyer, and Buyer's agents, contractors, subcontractors and employees on or upon the Property, and (ii) Buyer's indemnity obligation contained in Paragraph 7(a)(i)(A) above. Such endorsement to such insurance policy shall evidence that such insurance policy shall have a per occurrence limit of at least Two Million Dollars ($2,000,000) and an aggregate limit of at least Five Million Dollars ($5,000,000), shall name Seller as an additional insured, shall be primary and noncontributing with any other insurance available to Seller and shall contain a full waiver of subrogation clause. (B) Review and Approval of Documents and Materials. The ---------------------------------------------- documents, reports, bills and plans heretofore delivered to Buyer by Seller concerning the entitlements to, construction, ownership, condition, maintenance, and operation of, the Property (the "Documents and Materials"). (ii) Buyer's Review of Title. ----------------------- (A) Buyer acknowledges receipt and approval of that certain Commitment for Title Insurance relating to the Property dated May 1, 1997 issued by the Title Company under order no. 9762747 (which, together with the supplements and amendments thereto delivered to Buyer prior to the Effective Date and the underlying documents relating to the Schedule B exceptions set forth in such Commitment, is collectively referred to herein as the "Report"). Buyer may, at or prior to Close of Escrow, notify Seller in writing (the "Gap Notice") of any objections to title which are adverse to Buyer and which are (i) raised by the Title Company between the Effective Date and the Close of Escrow (the "Gap Period") and (ii) not disclosed by the Title Company or otherwise known to Buyer prior to the commencement of the Gap Period (a "Gap Exception"); provided that Buyer must notify Seller of such objection to title within two (2) business days of being made aware of the existence of such exception. The failure of Buyer to timely give to Seller a Gap Notice shall be deemed to constitute Buyer's approval of the applicable Gap Exception. (B) If Buyer sends a Gap Notice, then Seller may, but shall have no obligation to, within five (5) days after its receipt thereof ("Seller's Election Period"), elect to eliminate the disapproved Gap Exceptions by giving Buyer written notice ("Seller's Title Notice") of those disapproved Gap Exceptions, if any, which Seller agrees to so eliminate by the Closing Date. (C) If Seller does not elect to eliminate any disapproved Gap Exceptions, or if Seller fails to timely deliver Seller's Title Notice, then Buyer shall have the right, upon delivery to Seller and Escrow Holder (on or before five (5) days following the expiration of Seller's Election Period) of a written notice, to either (a) waive its prior disapproval, in which event said disapproved matters shall be deemed approved, or (b) terminate this Agreement and the Escrow created pursuant hereto. Failure to take either one of the actions described in clauses (a) and (b) above shall be deemed to be Buyer's election to take the action described in clause (a) above. Notwithstanding anything to the contrary contained in this Paragraph 7(a)(ii), Seller agrees to, on or before the Close of Escrow, release all voluntary -4- monetary liens affecting the Property, other than non-delinquent real property taxes and assessments. Further notwithstanding anything to the contrary contained in this Paragraph 7(a)(ii), during the term of this Escrow, Seller will not voluntarily change the condition of title approved by Buyer in a manner adverse to Buyer. (D) If, in Seller's Title Notice, Seller has agreed to eliminate by the Closing Date certain disapproved Gap Exceptions described in Buyer's Gap Notice, but Seller is unable to do so despite having made reasonable efforts, then Buyer shall have the right (which shall be Buyer's sole and exclusive right or remedy for such failure), upon delivery to Seller and Escrow Holder (on or before one (1) business day prior to the Closing Date) of a written notice to either (a) waive its prior disapproval, in which event said disapproved matters shall be deemed approved, or (b) terminate this Agreement and the Escrow created pursuant hereto, in which event Buyer shall be entitled to the return of the Deposit, together with all interest accrued thereon while in Escrow. Failure to take either one of the actions described in clauses (a) and (b) above shall be deemed to be Buyer's election to take the action described in clause (a) above. In the event this Agreement is terminated by Buyer pursuant to the provisions of this Paragraph 7(a)(ii), neither party shall have any further rights or obligations hereunder except that the indemnity and insurance obligations of Buyer set forth in Paragraph 7(a)(i)(A) above and the covenants of Buyer set forth in Paragraph 22(a) below shall survive any such termination. (E) The Closing Date shall be postponed to the extent necessary to comply with the foregoing time frames set forth in this Paragraph 7(a)(ii). (F) Buyer agrees that its acceptance of the Title Policy shall be in full satisfaction of any express or implied warranty of Seller as to the condition of title to the Property, and in the event there are any title exceptions or defects, including, without limitation, liens, encumbrances, covenants, conditions, reservations, restrictions, rights, rights of way, or easements, which, in Buyer's opinion, constitute a defect in title not shown or revealed in the Report, the Title Policy, or otherwise contemplated in Paragraph 5 of this Agreement above, Buyer shall look solely to the remedies available to Buyer under the Title Policy, and Seller shall have no responsibility or liability therefor. (iii) Seller's Obligations. As of the Close of Escrow, -------------------- Seller shall have timely performed in all material respects, all covenants and agreements contained in this Agreement required to be performed by Seller under this Agreement. (iv) Conditions Generally. Buyer hereby acknowledges -------------------- that Seller shall have no duty or obligation of any kind whatsoever to amend, modify or in any way ameliorate or attempt to amend, modify or ameliorate any matter disapproved by Buyer, and Buyer's sole and exclusive remedy in the event Buyer disapproves any one or more of such matters shall be to cancel this Agreement in accordance with Buyer's rights to do so contained herein. (v) Seller's Representations and Warranties. All of --------------------------------------- the representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects as of the Close of Escrow. In the event that any representation or warranty of Seller needs to be modified due to changes or additional information regarding the Property which becomes available following the Effective Date, Seller shall deliver to Buyer a certificate identifying any representation or warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Seller be liable to Buyer for, or be deemed to be in default hereunder by reason of, any breach of representation or warranty which results from any change that (A) occurs between the Effective Date and the Close of Escrow, and (B) is not prohibited under the terms of this Agreement or is -5- beyond the reasonable control of Seller to prevent, or is the result of additional information regarding the Property which becomes available; provided, however, that the occurrence of a change which is not permitted hereunder or is beyond the reasonable control of Seller to prevent or the availability of additional information regarding the Property, shall, if materially adverse to Buyer, constitute the non-fulfillment of the condition set forth herein; if, despite changes or other matters described in such certificate, the Close of Escrow occurs, such representations and warranties shall be deemed to have been modified by all statements made in such certificate. (b) Conditions to Seller's Obligations. For the benefit of ---------------------------------- Seller, the Close of Escrow shall be conditioned upon the occurrence or satisfaction (or Seller's waiver thereof, it being agreed that Seller may waive such condition) of the condition that Buyer shall have timely performed all of the obligations required by the terms of this Agreement to be performed by Buyer. (c) Conditions to the Obligations of Both Seller and Buyer. For ------------------------------------------------------ the benefit of both Buyer and Seller, the Close of Escrow shall be conditioned upon the occurrence or satisfaction of the following conditions. If the parties cannot agree upon the form of the Lease and resolve the Roof Issue prior to the expiration of the Contingency Period, then either Buyer or Seller may, at its sole option, but without any obligation to do so, elect to extend the Contingency Period as to the open issue only for up to fifteen (15) business days. If the parties still cannot agree upon the form of the Lease and resolve the Roof Issue prior to the expiration of the extended Contingency Period, if applicable, then either party may terminate this Agreement and the Escrow created pursuant hereto by delivering written notice to the other party and Escrow Holder on or before the expiration of the Contingency Period (as extended, if applicable), in which event (A) this Agreement and the Escrow shall terminate and be of no further force or effect (except for the indemnity and insurance obligations of Buyer contained in Paragraph 7(a)(i)(A) above and the covenants of Buyer set forth in Paragraph 22(a) below, which shall survive any such termination), (B) Escrow Holder shall return to Buyer the Deposit and all interest accrued thereon (less Buyer's share of escrow cancellation charges), (C) Buyer shall return to Seller all Documents and Materials received by Buyer from Seller, and (D) Buyer shall deliver to Seller all surveys, reports, studies and the like that Buyer may have theretofore procured with respect to the Property: (i) Lease. Buyer and Seller shall have agreed upon ----- the form of, on or before the date which is ten (10) business days following the Effective Date (such period of time shall be referred to herein as the "Contingency Period"), a lease for the Property, or a portion thereof (the "Lease"), pursuant to which Seller shall lease back the Property, or a portion thereof, from Buyer upon the Close of Escrow. The Lease shall contain at least the following provisions, as well as such other terms and conditions as Buyer and Seller may be willing to agree upon during the Contingency Period: (A) The original term of the Lease will be for three (3) years, with two (2) one-year options to extend exercisable upon not less than one hundred twenty (120) days' prior written notice. (B) The Lease will be triple net to the Buyer, with Seller being responsible for paying its pro rata share of taxes, insurance and maintenance expenses. (C) The rental rate per square foot per month within the Warehouse Building will be forty-five cents ($0.45), increasing annually by one penny ($0.01) per month, including the option terms. -6- (D) The rental rate per square foot per month within the Office Building will be eighty-five cents ($0.85), increasing annually by two pennies ($0.02) per month, including the option terms. (E) By not less than one hundred twenty (120) days' written notice to Buyer, Seller will have the right to reduce the portion of the Warehouse Building it leases to between approximately 150,000 and 200,000 square feet, approximately 124,400 square feet of which will be in the south half of the Warehouse Building and the balance of which will be in the easterly portion of the north half. The effective date of the reduction will not be later than the last day of the 24th month of the original Lease term. Buyer will have the right to market the space in the Warehouse Building being given back by Seller upon receipt of Seller's written notification that it has elected such reduction. The cost of constructing any demising walls required to separate the new, smaller portion of the Warehouse Building from the remainder of the Warehouse Building will be the sole responsibility of the Seller. (F) By not less than one hundred twenty (120) days' written notice to Buyer, Seller will have the one time right to cancel the Lease as to the Office Building, effective between the first day of the 6th month and the last day of the 18th month of the original Lease term. Buyer will have the right to market the Office Building upon receipt of Seller's written cancellation notice. (G) The Lease will not cover the approximately four (4) acre portion of the Land directly to the east of the Warehouse Building (presently undeveloped), which Buyer will have the right to hold, develop or dispose of, provided Seller's use and possession of the Improvements is not interfered with. (H) The Lease will specify that, upon vacation of the Property by Seller, Seller will be able to remove those certain items identified in the Lease, provided Seller repairs all damage to the Improvements resulting from the removal. (ii) Roof. Buyer and Seller shall have resolved the ---- issue (the "Roof Issue") of who will pay what, if anything, toward the cost of repairing or replacing either or both of the Warehouse Building roof and/or the Office Building roof. 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, in the form attached hereto as ---------- Exhibit "B", duly executed by Seller and acknowledged. - ----------- (b) Seller's Certificates of Non-Foreign Status. Certificates of ------------------------------------------- non-foreign status ("Firpta Certificate" and "Calfirpta Certificate"), duly executed by Seller, in the forms attached hereto as Exhibit "C" and Exhibit "D". ----------- ----------- (c) Lease. A counterpart of the Lease, duly executed by Seller. ----- (d) Title Company Documents. Such evidence as the Title Company ----------------------- may reasonably require as to the authority of the person or persons executing documents on behalf of Seller, such affidavits as may be customarily and reasonably required by the Title Company, and an executed closing statement acceptable to Seller. (e) Bill of Sale. The "Bill of Sale" in the form attached hereto ------------ as Exhibit "E". ----------- -7- (f) Assignment of Contracts. A counterpart of the "Assignment of ----------------------- Contracts," duly executed by Seller in the form of Exhibit "F" attached hereto. (g) Other Documents. Such other documents and instruments as may --------------- be required in order in order to comply with the terms of Paragraph 22(b) hereof. 9. Deposits by Buyer. Buyer shall deposit or cause to be deposited ----------------- with Escrow Holder the Deposit which is to be applied towards the payment of the Purchase Price and the balance of the Purchase Price in the amounts and at the times set forth in Paragraph 3 above. In addition, at least one (1) business day prior to the Close of Escrow, Buyer shall deposit with Escrow Holder the following documents and instruments: (a) Lease. A counterpart of the Lease, duly executed by Buyer. ----- (b) Assignment of Contracts. A counterpart of the Assignment of ----------------------- Contracts, duly executed by Buyer. (c) Other Documents. Such other documents and instruments as may --------------- be required in order to comply with the terms of Paragraph 22(b) hereof. 10. Costs and Expenses. The cost of the CLTA portion of the Title ------------------ Policy shall be paid by Seller and the premium and any additional costs for the ALTA extended coverage additional to the premium for CLTA coverage and the cost of any endorsements to the Title Policy shall be paid by Buyer. The escrow fee of Escrow Holder shall be shared equally by Seller and Buyer. Seller shall pay all documentary transfer taxes and recording fees payable in connection with the recordation of the Grant Deed. Buyer and Seller shall pay, respectively, the Escrow Holder's customary charges to buyers and sellers for document drafting 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. There will be no prorations, since Seller will ---------- remain responsible for all taxes, utilities and the like applicable to the period of time following the Close of Escrow pursuant to the Lease. 12. Disbursements and Other Actions by Escrow Holder. Upon the Close ------------------------------------------------ of Escrow, Escrow Holder shall promptly undertake all of the following in the manner indicated: (a) Recording. Cause the Grant Deed 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. (b) Funds. Disburse from funds deposited by Buyer with Escrow ----- Holder towards payment of all items chargeable to the account of Buyer pursuant hereto in payment of such costs, including, without limitation, the payment of the Purchase Price to Seller, and disburse the balance of such funds, if any, to Buyer. (c) Title Policy. Direct the Title Company to issue the Title ------------ Policy to Buyer. (d) Documents to Seller. Deliver to Seller counterparts of the ------------------- Lease and the Assignment of Contracts executed by Buyer. -8- (f) Documents to Buyer. Deliver to Buyer the Bill of Sale, the ------------------ Calfirpta Certificate, and the and Firpta Certificate and counterparts of the Lease and the Assignment of Contracts executed by Seller. 13. Seller's Representations and Warranties. In consideration of --------------------------------------- Buyer entering into this Agreement and as an inducement to Buyer to purchase the Property from Seller, Seller hereby makes the following representations and warranties to Buyer as of the date of this Agreement, each of which is material and being relied upon by Buyer; and the truth and accuracy in all material respects of each of which shall be a condition to Buyer's obligations to close the Escrow: (a) Authority. Seller has been duly organized and is validly --------- existing under the laws of the State of California. Seller has the legal right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement have been duly authorized and no other action by Seller is requisite to the valid and binding execution, delivery and performance of this Agreement, except as otherwise expressly set forth in this Agreement. (b) Foreign Person Affidavit. Seller is not a foreign person as ------------------------ defined in Section 1445 of the Internal Revenue Code, nor is Buyer required to withhold taxes from the payment of sales proceeds under any applicable state or local tax laws based upon the status of Seller as foreign or resident of a state other than California. (c) Pending Actions. Seller has received no written notice of --------------- any action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending, and to Seller's knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding threatened, against Seller which, if adversely determined, could individually or in the aggregate, materially interfere with the consummation of the transaction contemplated by this Agreement. There is no litigation which has been filed against Seller that arises out of the ownership of the Property and would materially affect the Property or use thereof, or Seller's ability to perform hereunder. (d) Eminent Domain. To Seller's actual knowledge, there is no -------------- actual or pending proceeding against the Property in eminent domain. (e) Hazardous Materials. To Seller's actual knowledge, there are ------------------- no "Hazardous Materials" (as defined in Paragraph 14(b) below) located on the Property in violation of any applicable laws, rules or regulations in existence as of the date of this Agreement. (f) No Leases. No leasehold or subleasehold estates currently --------- affect the Property. (g) Operating Agreements. To Seller's knowledge, there are no -------------------- agreements concerning the operation and maintenance of the Property or a portion of the Property entered into by Seller that will not be terminable by Buyer or Seller by thirty (30) days (or less) notice given following termination of the Lease or a portion of the Lease. (h) Violations. Seller has not received written notice of any ---------- uncured violation of any federal, state or local law relating to the use or operation of the Property which would materially, adversely affect the Property or use thereof. -9- (i) No Consents Required. To Seller's knowledge, no consent, -------------------- approval or other authorization of, or registration, declaration or filing with, any governmental authority is required for the due execution and delivery of this Agreement and/or any of the documents to be executed by Seller hereunder, or for the performance by or the validity or enforceability thereof against Seller, other than the recording or filing for recordation of the Grant Deed. (j) No Violations. The execution and delivery of this Agreement, ------------- and all other documents to be executed by Seller hereunder, compliance with the provisions hereof and thereof and the consummation of the transactions contemplated hereunder and thereunder will not result in (i) a breach or violation of (A) any governmental requirement applicable to Seller or the Property now in effect; (B) the organizational documents of Seller; (C) any judgment, order or decree of any governmental authority binding upon Seller; or (D) any agreement or instrument to which Seller is a party or by which it is bound; (ii) the acceleration of any obligation of Seller; or (iii) the creation of any lien, encumbrance or other matter affecting title (other than those matters affected by the Condition of Title) to the Property. (k) Physical Condition. To Seller's knowledge, there is no ------------------ existing material, patent or latent structural or other physical defect of deficiency in the condition of the Property, or any component or portion thereof, that would or could impair or impose costs upon the use, occupancy or operation of the Property, and that has not been fully corrected. (l) Easements and Other Agreements. To Seller's knowledge, ------------------------------ Seller is not in default in complying with the terms and provisions of any of the covenants, conditions, restrictions, right-of-way or easements constituting any Condition of Title. The "knowledge" of Seller, as used in this Paragraph 13, means the actual, present knowledge of Seller as of the date of this Agreement, without any investigation or inquiry of any kind or nature whatsoever. The representations and warranties set forth in Paragraph 13 hereof as updated as of the Close of Escrow in accordance with the terms of this Agreement, shall survive Close of Escrow for a period of one (1) year. No claim for a breach of any representation or warranty shall be actionable or payable if the breach in question results from or is based on a condition, state of facts or other matter which was known to Buyer prior to Close of Escrow. 14. Buyer's Covenants, 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) Authority. Buyer has the legal right, power and authority to --------- enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement have been duly authorized and no other action by Buyer is requisite to the valid and binding execution, delivery and performance of this Agreement, except as otherwise expressly set forth in this Agreement. (b) "AS IS." Except for the express representations and ------ warranties of Seller set forth in Paragraph 13 above, Buyer is acquiring the Property "AS-IS" without any representation or warranty of Seller, express, implied or statutory, as to the nature or condition of or title to the Property or its fitness for Buyer's intended use of same. Buyer is, or as of the expiration of the Contingency Period will be, familiar with the Property. Except for the express representations and warranties of Seller set forth in Paragraph 13 above, Buyer is relying solely upon, and as of the expiration of the Contingency Period will -10- have conducted, its own, independent inspection, investigation and analysis of the Property as it deems necessary or appropriate in so acquiring the Property from Seller, including, without limitation, an analysis of any and all matters concerning the condition of the Property and its suitability for Buyer's intended purposes, and a review of all applicable laws, ordinances, rules and governmental regulations (including, but not limited to, those relative to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Property. Without limiting the generality of the foregoing, Buyer hereby expressly waives and relinquishes any and all rights and remedies Buyer may now or hereafter have against Seller, whether known or unknown, with respect to any past, present or future presence or existence of "Hazardous Materials" (as herein defined) on, under or about the Property or with respect to any past, present or future violations of any "Environmental Laws" (as herein defined), except to the extent any such presence or existence of Hazardous Materials or violations of Environmental Laws is attributable to the acts or omissions (where there is a duty to act) of Seller or its agents or employees. As used herein, the term "Environmental Laws" includes all rules, regulations or laws, now or hereafter enacted, regulating or governing the use, handling, storage or disposal of Hazardous Materials, including, without limitation, (i) any and all rights Buyer may now or hereafter have to seek contribution from Seller under Section 113(f)(i) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C.A. (S)9613), as the same may be further amended or replaced by any similar law, rule or regulation, (ii) any and all rights Buyer may now or hereafter have against Seller under the Carpenter- Presley-Tanner Hazardous Substance Account Act (California Health and Safety Code, Section 25300 et seq.), as the same may be further amended or replaced by -- --- any similar law, rule or regulation, and (iii) any and all claims, whether known or unknown, now or hereafter existing, with respect to the Property under Section 107 of CERCLA (42 U.S.C.A. (S)9607). As used herein, the term "Hazardous Material(s)" includes, without limitation, any hazardous or toxic materials, substances or wastes, such as (A) those materials identified in Sections 66680 through 66685 and Sections 66693 through 66740 of Title 22 of the California Administrative Code, Division 4, Chapter 30, as amended from time to time, (B) those materials defined in Section 25501(j) of the California Health and Safety Code, (C) any materials, substances or wastes which are toxic, ignitable, corrosive or reactive and which are regulated by any local governmental authority, any agency of the state of California or any agency of the United States Government, (D) asbestos, (E) petroleum and petroleum based products, (F) urea formaldehyde foam insulation, (G) polychlorinated biphenyls (PCBs), and (H) freon and other chlorofluorocarbons. BUYER HEREBY ACKNOWLEDGES THAT IT HAS READ AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542 ("SECTION 1542"), WHICH IS SET FORTH BELOW: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." -11- BY INITIALLING BELOW, BUYER HEREBY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE MATTERS WHICH ARE THE SUBJECT OF THE FOREGOING WAIVERS AND RELEASES: /s/ JH ---------------- Buyer's Initials The waivers and releases by Buyer herein contained shall survive the Close of Escrow and the recordation of the Grant Deed and shall not be deemed merged into the Grant Deed upon its recordation. (c) Limitation on Seller's Liability. Buyer represents and -------------------------------- covenants that Seller shall not have any liability, obligation or responsibility of any kind with respect to the following: (i) The content or accuracy of any report, study, opinion or conclusion of any soils, toxic, environmental or other engineer or other person or entity who has examined the Property or any aspect thereof. (ii) The content or accuracy of any information released to Buyer by an engineer or planner in connection with the development of the Property. (iii) The availability of building or other permits or approvals for the Property by any state or local governmental bodies with jurisdiction over the Property. (iv) The availability or capacity of sewer, water or other utility connections to the Property. (v) Any of the items delivered to Buyer pursuant to Buyer's review of the condition of the Property (but Seller will be liable for a material inaccuracy in any of such items to the extent they are prepared by Seller). (vi) The content or accuracy of any other development or construction cost, projection, financial or marketing analysis or other information given to Buyer by Seller or reviewed by Buyer with respect to the Property. 15. LIQUIDATED DAMAGES. ------------------ (a) BREACH BY BUYER. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH --------------- IN THIS AGREEMENT AND PROVIDED THAT SELLER IS NOT IN MATERIAL BREACH OF THIS AGREEMENT AND PROVIDED FURTHER THAT ALL CLOSING CONDITIONS IN FAVOR OF BUYER SET FORTH IN THIS AGREEMENT HAVE BEEN SATISFIED, THE DEPOSIT (BUT NOT THE INTEREST EARNED FROM THE INVESTMENT THEREOF) SHALL BE RETAINED BY SELLER AS LIQUIDATED DAMAGES IN THE EVENT THE SALE OF THE PROPERTY, AS CONTEMPLATED IN THIS AGREEMENT, IS NOT CONSUMMATED AS A RESULT OF BUYER'S REFUSAL OR INABILITY TO CLOSE UNDER THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN THE EVENT THAT THE SALE IS NOT SO CONSUMMATED WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY SEPARATELY INITIALING THIS PARAGRAPH 15(a) BELOW, THE PARTIES ACKNOWLEDGE THAT THE NONREFUNDABLE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE -12- PARTY'S REASONABLE ESTIMATE OF SELLER'S DAMAGES, AND AS SELLER'S EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT THE CLOSING DOES NOT OCCUR AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER ARISING FROM SUCH FAILURE OF THE SALE TO CLOSE. NOTWITHSTANDING THE FOREGOING, THIS PARAGRAPH 15(a) SHALL NOT LIMIT THE DAMAGES RECOVERABLE BY SELLER RESULTING FROM A BREACH OTHER THAN BUYER'S REFUSAL OR INABILITY TO PURCHASE THE PROPERTY. BY THEIR SEPARATELY INITIALING THIS PARAGRAPH 15(a) BELOW, BUYER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE ABOVE PROVISION COVERING LIQUIDATED DAMAGES, AND THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS EXECUTED. JB JH ----------------- ---------------- Seller's Initials Buyer's Initials (b) BREACH BY SELLER. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH ---------------- IN THIS AGREEMENT AND PROVIDED THAT BUYER IS NOT IN MATERIAL BREACH OF THIS AGREEMENT AND PROVIDED FURTHER THAT ALL CLOSING CONDITIONS IN FAVOR OF SELLER SET FORTH IN THIS AGREEMENT HAVE BEEN SATISFIED, IN THE EVENT THE SALE OF THE PROPERTY, AS CONTEMPLATED IN THIS AGREEMENT, IS NOT CONSUMMATED AS A RESULT OF SELLER'S REFUSAL OR INABILITY TO CLOSE UNDER THIS AGREEMENT, SELLER SHALL PAY TO BUYER LIQUIDATED DAMAGES IN THE AMOUNT OF ONE MILLION AND 00/100 DOLLARS ($1,000,000.00). THE PARTIES ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES IN THE EVENT THAT THE SALE IS NOT SO CONSUMMATED WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY SEPARATELY INITIALING THIS PARAGRAPH 15(b) BELOW, THE PARTIES ACKNOWLEDGE THAT THE FOREGOING $1,000,000.00 AMOUNT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S DAMAGES, AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER IN THE EVENT THE CLOSING DOES NOT OCCUR AND AS BUYER'S SOLE AND EXCLUSIVE REMEDY AGAINST SELLER ARISING FROM SUCH FAILURE OF THE SALE TO CLOSE. NOTWITHSTANDING THE FOREGOING, THIS PARAGRAPH 15(b) SHALL NOT LIMIT THE DAMAGES RECOVERABLE BY BUYER RESULTING FROM A BREACH OTHER THAN SELLER'S REFUSAL OR INABILITY TO SELL THE PROPERTY. BY THEIR SEPARATELY INITIALING THIS PARAGRAPH 15(b) BELOW, BUYER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE ABOVE PROVISION COVERING LIQUIDATED DAMAGES, AND THAT EACH PARTY WAS REPRESENTED BY COUNSEL TO EXPLAIN THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS EXECUTED. JB JH ----------------- ---------------- Seller's Initials Buyer's Initials 16. WAIVER OF RIGHT TO SPECIFIC PERFORMANCE. IF SELLER SHALL FAIL TO --------------------------------------- CONVEY THE PROPERTY TO BUYER IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND SUCH FAILURE CONSTITUTES A DEFAULT HEREUNDER, THEN BUYER SHALL BE ENTITLED TO THE REMEDY SET FORTH IN PARAGRAPH 15(b) ABOVE AND THE RETURN OF THE DEPOSIT AND ALL INTEREST ACCRUED THEREON WHILE IN -13- ESCROW BUT BUYER SHALL NOT HAVE THE RIGHT TO RECEIVE ANY EQUITABLE RELIEF, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO RECORD A LIS PENDENS AGAINST THE PROPERTY UNDER APPLICABLE LAW, OR TO PURSUE THE SPECIFIC PERFORMANCE OF THIS AGREEMENT. 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. JB JH ----------------- ---------------- Seller's Initials Buyer's Initials 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, Buyer may, at its option, 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 registered or certified mail, postage prepaid, return receipt requested, delivered by overnight courier such as FedEx, Express Mail, etc. for next business day delivery, or sent by telecopy, and shall be deemed received upon the earlier of (i) if personally delivered, the business day of delivery to the address of the person to receive such notice, (ii) if mailed, three (3) business days after the date of posting by the United States post office, (iii) if given by telecopy, when received as evidenced by the confirmation report, provided it is received before 5:00 p.m. Pacific Time (if received later, the notice will be deemed received on the next business day), or (iv) if delivered by overnight courier, the next business day. Any notice, request, demand, direction or other communication sent by telecopy must be confirmed within forty-eight (48) hours by letter mailed or delivered in accordance with the foregoing. To Buyer: Kilroy Realty 2250 E. Imperial Highway El Segundo, California 90245 Attention: Mr. Jeffrey C. Hawken Telephone: (213) 772-1193 Telecopy: (310) 322-5981 With a copy to: Latham & Watkins 650 Town Center Drive, Suite 2000 Costa Mesa, California 92626 Attention: Bruce A. Tester, Esq. Telephone: (714) 540-1235 Telecopy: (714) 755-8290 -14- To Seller: Mazda Motor of America, Inc. 7755 Irvine Center Drive Irvine, California 92618-2922 Attention: Mr. Robert Belzer Telephone: (714) 727-6393 Telecopy: (714) 727-6256 With a copy to: Mazda Motor of America, Inc. 7755 Irvine Center Drive Irvine, California 92618-2922 Attention: General Counsel Telephone: (714) 727-1990 Telecopy: (714) 727-6260 With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP 18400 Von Karman, Fourth Floor Irvine, California 92612 Attention: Bradley N. Schweitzer, Esq. Telephone: (714) 553-1313 Telecopy: (714) 553-8354 To Escrow Holder: First American Title Insurance Company 114 East Fifth Street Santa Ana, California 92701 Attention: Ms. Judith M. Moore Telephone: (714) 647-4466 Telecopy: (714) 647-2235 Notice of change of address shall be given by written notice in the manner detailed in this Paragraph 18. 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 real estate ------- brokerage commissions to Collins Commercial Corporation and Lee & Associates with respect to this transaction in accordance with escrow instructions previously signed by Seller and Seller hereby agrees to indemnify and hold Buyer free and harmless from such commission obligations. If any additional claims for brokers' or finders' fees for the consummation of this Agreement arise, then Buyer hereby agrees to indemnify, save harmless and defend Seller from and against such claims if they shall be based upon any statement or representation or agreement by Buyer, and Seller hereby agrees to indemnify, save harmless and defend Buyer if such claims shall be 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. -15- For the purposes of this paragraph, Costs shall include, without limitation, attorneys' fees, costs and expenses incurred in (a) postjudgment motions, (b) contempt proceeding, (c) garnishment, levy, and debtor and third party examination, (d) discovery, and (e) bankruptcy litigation. 21. Assignment. Neither party shall assign, transfer or convey its ---------- rights and/or obligations under this Agreement and/or with respect to the Property without the prior written consent of the other, which consent the other party may withhold in its sole, absolute and subjective discretion; provided, however, without Buyer's consent, Seller may assign its rights and/or delegate its duties under this Agreement and/or the Lease to a successor corporation, provided Buyer shall receive written notice thereof. Any permitted assignments shall not relieve the assigning party from its liability under this Agreement. 22. Miscellaneous. ------------- (a) Confidentiality. Buyer acknowledges that, prior to the Close --------------- of Escrow, it is in the best interest of Buyer and Seller to maintain the confidentiality of the terms and provisions of this Agreement and/or the Lease and the materials relating hereto and thereto. Except as may be required by law or court order or as otherwise provided or contemplated herein, prior to the Close of Escrow, Buyer shall not disclose any of the terms or provisions of this Agreement to any person or entity not a party to this Agreement, nor shall Buyer issue any press releases or make any public statements relating to this Agreement or Buyer's intended use of the Property, and Buyer shall keep all materials provided or made available to Buyer by Seller, and all materials generated by Buyer in the course of conducting its inspections, review of books and records, and other due diligence activities relating to the Property (including, without limitation, matters relating to the environmental condition of the Property), whether obtained through documents, oral or written communications, or otherwise (collectively, the "Information"), in the strictest confidence. Under no circumstances shall any of the Information be used for any purpose other than the investigation of the Property in connection with its purchase by Buyer as contemplated under this Agreement. Buyer shall cause the confidentiality obligations set forth in this Paragraph 22(a) to be agreed to by its attorneys, auditors, consultants, accountants and any other third parties which Buyer may employ or with which Buyer may work in connection with this transaction and the investigations contemplated hereunder. If this Agreement terminates for any reason, Buyer shall return to Seller all original materials, together with any copies made by Buyer, and all copies of any reports or compilations of data generated from materials or other Information provided to Buyer, and Buyer will cause third parties acting on behalf of Buyer to deliver to Seller all such materials in their possession. (b) Required Actions of Buyer and Seller. Buyer and Seller agree ------------------------------------ to execute such instruments and documents and to diligently undertake such actions as may reasonably be required in order to consummate the purchase and sale herein contemplated and shall use good faith efforts to accomplish the Close of Escrow in accordance with the provisions hereof. The provisions of this Paragraph 22(b) shall survive the Close of Escrow and shall not be deemed merged into the Grant Deed upon its recordation. (c) Time of Essence. Time is of the essence of each and every --------------- term, condition, obligation and provision hereof. All references herein to a particular time of day shall be deemed to refer to Los Angeles, California time. (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 one and the same instrument. -16- (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 and enforced in accordance with the laws of the State of California. (k) Fees and Other Expenses. Except as otherwise provided ----------------------- herein, each of the parties shall pay its own fees and expenses in connection with this Agreement. (l) Entire Agreement. This Agreement supersedes any prior ---------------- agreements, negotiations and communications, oral or written (including, without limitation, that certain nonbinding letter of intent dated May 6, 1997), 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 shall be of any effect unless it is in writing and executed by the party to be bound thereby. (m) Partial Invalidity. If any portion of this Agreement as ------------------ applied to either party or to any circumstances shall be adjudged by a court to be void or unenforceable, such portion shall be deemed severed from this Agreement and shall in no way effect the validity or enforceability of the remaining portions of this Agreement. (n) Successors and Assigns. Subject to the provisions of ---------------------- Paragraph 21 hereof, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. (o) Facsimile Signatures. In order to expedite the transaction -------------------- contemplated herein, telecopied signatures may be used in place of original signatures on this Agreement or any document delivered pursuant hereto, provided original signatures are delivered the next business day. Seller and Buyer intend to be bound by the signatures on the telecopy document, are aware that the other party will rely on the telecopied signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature. (p) Business Days. In the event any date described in this ------------- Agreement relative to the performance of actions hereunder by Buyer, Seller and/or Escrow Holder falls on a Saturday, Sunday or legal holiday, such date shall be deemed postponed until the next business day thereafter. -17- (q) Covenant of Seller. If any governmental agency requires the ------------------ existing 100-gallon diesel tank located on the Property to have a permit, Seller will obtain such permit at Seller's sole expense. This covenant shall survive the Close of Escrow and shall not be deemed merged into the Grant Deed upon its recordation. 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: Kilroy Realty Corporation, a Maryland corporation, Its General Partner By: /s/Jeffrey C. Hawken ------------------------------- Print Name: Jeffrey C. Hawken ------------------- Print Title: EVP & COV ------------------- "Seller" MAZDA MOTOR OF AMERICA, INC., a California corporation By: /s/ Jeff Baortale ----------------------------------- Print Name: Jeff Baortale ------------------------ Print Title: Vice President Finance ----------------------- ACCEPTANCE BY ESCROW HOLDER: First American Title Insurance Company hereby acknowledges that it has received originally executed counterparts or a fully executed original 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 perform the terms thereof as such terms apply to Escrow Holder. Dated: June 13, 1997 FIRST AMERICAN TITLE INSURANCE COMPANY By: /s/ Judith M. Moore ----------------------------------- Print Name: Judith M. Moore, A.V.P. ------------------------ Its Authorized Agent -18- LEGAL DESCRIPTION OF PROPERTY ----------------------------- ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF IRVINE, DESCRIBED AS FOLLOWS: PARCEL 1, AS SHOWN ON A PARCEL MAP FILED IN BOOK 185, PAGES 1 TO 3 INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM ANY AND ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM, AND OTHER MATERIAL RESOURCES AND ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER SAID LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR, AND STORING IN AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN SAID LAND, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF SAID LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF SAID LAND, AS RESERVED IN THAT DEED RECORDED JANUARY 11, 1984 AS INSTRUMENT NO. 84-014635 OF OFFICIAL RECORDS, BY THE IRVINE COMPANY, GRANTOR THEREIN. ALSO EXCEPTING THEREFROM ANY AND ALL WATER, RIGHTS OR INTERESTS THEREIN, NO MATTER HOW ACQUIRED BY GRANTOR IN THE ABOVE MENTIONED DEED, AND OWNED OR USED BY GRANTOR IN CONNECTION WITH OR WITH RESPECT TO SAID LAND, TOGETHER WITH THE RIGHT AND POWER TO EXPLORE, DRILL, REDRILL, REMOVE AND STORE THE SAME FROM SAID LAND OR TO DIVERT OR OTHERWISE UTILIZE SUCH WATER, RIGHTS OR INTERESTS ON ANY OTHER PROPERTY OWNED OR LEASED BY GRANTOR, WHETHER SUCH WATER RIGHTS SHALL BE RIPARIAN, OVERLYING, APPROPRIATIVE, LITTORAL, PERCOLATING, PRESCRIPTIVE, ADJUDICATED, STATUTORY OR CONTRACTUAL, BUT WITHOUT, HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF THE LAND IN THE EXERCISE OF SUCH RIGHTS, AS RESERVED IN THE ABOVE MENTIONED DEED. EXHIBIT "A" ----------- WHEN RECORDED MAIL THIS GRANT DEED AND ALL TAX STATEMENTS TO: - -------------------------------- - -------------------------------- - -------------------------------- - -------------------------------- - -------------------------------------------------------------------------------- (ABOVE SPACE FOR RECORDER'S USE ONLY) GRANT DEED ---------- The undersigned grantor declares: Documentary transfer tax is $____________ (X) computed on full value of property conveyed, or ( ) computed on full value, less value of liens and encumbrances remaining at time of sale. FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, MAZDA MOTOR OF AMERICA, INC., a California corporation, hereby GRANTS to _________________________, a _______________________, the following described real property (the "Property") located in the City of Irvine, County of Orange, State of California: SEE SCHEDULE "1" ATTACHED HERETO AND INCORPORATED ------------ HEREIN BY THIS REFERENCE SUBJECT TO: 1. Taxes and assessments. 2. All other covenants, conditions, restrictions, reservations, rights, rights of way, easements, encumbrances, liens and title matters of record or visible from an inspection or survey of the Property. EXHIBIT "B" ----------- IN WITNESS WHEREOF, Grantor has caused this Grant Deed to be executed as of the _____ day of ________________, 1997__. - MAZDA MOTOR OF AMERICA, INC., a California corporation By:________________________________ Print Name:_____________________ Print Title:____________________ [Attach Legal Description and Acknowledgment] B-2 SELLER'S FEDERAL CERTIFICATE ---------------------------- To inform _________________________________ (the "Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") will not be required by MAZDA MOTOR OF AMERICA, INC._________________________________, a California corporation________________ (the "Transferor") upon the transfer of certain real property by the Transferor to the Transferee, the undersigned hereby certifies the following: 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, the undersigned declares that it has examined this Certification and to the best of its knowledge and belief, it is true, correct and complete. MAZDA MOTOR OF AMERICA, INC., a California corporation By:___________________________________ Print Name:________________________ Print Title:_______________________ EXHIBIT "C" ----------- SELLER'S CALIFORNIA CERTIFICATE ------------------------------- YEAR WITHHOLDING EXEMPTION CERTIFICATE FOR CALIFORNIA FORM - -------- ----------------- 19______ REAL ESTATE SALES 590-RE (FOR USE BY SELLERS OF CALIFORNIA REAL ESTATE) ================================================================================ FILE THIS FORM WITH YOUR WITHHOLDING AGENT OR BUYER. WITHHOLDING AGENT'S NAME - -------------------------------------------------------------------------------- Seller's name - -------------------------------------------------------------------------------- Seller's address (number and street) Seller's daytime telephone number ( ) - -------------------------------------------------------------------------------- City State ZIP code - -------------------------------------------------------------------------------- Read the following carefully and check the box that applies to the seller: [ ] CERTIFICATE OF RESIDENCY - INDIVIDUALS: I am a resident of California and I reside at the address shown above. See Side 2 for the definition of a resident. [ ] CERTIFICATE OF PRINCIPAL ADDRESS - INDIVIDUALS: The California real property located at _________________________________ qualifies as my principal residence within the meaning of the Internal Revenue Code Section 1034. See Side 2 for the definition of a principal residence. [ ] CORPORATIONS: The above-named corporation has a permanent place of business in California at the address shown above or is qualified to do business in California. See Side 2 for the definition of permanent place of business. [ ] PARTNERSHIPS: The above-named entity is a partnership and the recorded title to the property is in the name of the partnership. The partnership will file a California return to report the sale and will withhold on foreign and domestic nonresident partners when required. [ ] LIMITED LIABILITY COMPANIES (LLCs): The above-named entity is an LLC and the recorded title to the property is in the name of the LLC. The LLC will file a California return to report the sale and will withhold on foreign and domestic nonresident partners when required. [ ] TAX EXEMPT ENTITIES AND NONPROFIT ORGANIZATIONS: The above-named entity is a exempt from tax under California or federal law. [ ] IRREVOCABLE TRUSTS: At least one trustee of the above-named irrevocable trust is a California resident. The trust will file a California fiduciary return reporting the sale and will withhold on foreign and domestic nonresident beneficiaries when required. [ ] CERTIFICATE OF RESIDENCY OF DECEASED PERSON - ESTATES: I am the executor of the above-named person's estate. The decedent was a California resident at the time of death. The estate will file a California fiduciary return reporting the sale and will withhold on foreign and domestic nonresident beneficiaries when required. [ ] BANK: The above-named entity is a bank or a bank acting as a fiduciary for a trust. - -------------------------------------------------------------------------------- CERTIFICATE: Please complete and sign below. Under penalties of perjury, I hereby certify that the information provided herein is, to the best of my knowledge, true and correct. If conditions change, I will promptly inform the withholding agent. Seller's name and title (type or print)_________________________________________ Seller's social security number, California corporation number, FEIN or Californa Secretary of State file number___________________________ (NOTE: Failure to provide your identification number will render this certificate void.) Seller's signature___________________________________ Date_____________________ For Privacy Act Notice, see form FTB 1131 (individuals only). - -------------------------------------------------------------------------------- Form 590-RE C2 (REV. 1996) Side 1 EXHIBIT "D" ----------- BILL OF SALE ------------ THIS BILL OF SALE is made as of _________________, 1997 (the "Effective Date"), by and between KILROY REALTY, L.P., a Delaware limited partnership ("Buyer"), and MAZDA MOTOR OF AMERICA, INC., a California corporation. R E C I T A L S : ---------------- A. Seller is the owner of that certain real property located in the City of Irvine, County of Orange, State of California, consisting of approximately twenty (20) acres of improved land described in Schedule 1 ---------- attached hereto (the "Land"). B. This Bill of Sale is made pursuant to that certain Agreement of Purchase and Sale and Joint Escrow Instructions (the "Agreement of Purchase and Sale") dated _________________, 1997 (as the same may have been amended), by and between Seller and Buyer. C. Pursuant to the Agreement of Purchase and Sale, Buyer has agreed to purchase the Land, together with (1) a warehouse building located thereon containing approximately 244,800 square feet of space and the fixtures (as defined below) therein (the "Warehouse Building"), (2) an office building located thereon containing approximately 27,200 square feet of space and the fixtures therein (the "Office Building"), and (3) associated parking areas and other improvements located thereon (the "Parking and Other Improvements"). The Warehouse Building, Office Building, and the Parking and Other Improvements are referred to herein collectively as the "Property." D. This Bill of Sale is also made pursuant to that certain Standard Industrial/Commercial Single-Tenant Lease-Net, dated _________________, 1997 (the "Lease") pursuant to which Seller has agreed to lease a portion of the Property for a term of three (3) years with the option to extend the term of the Lease for two (2) additional one (1) year periods. E. This Bill of Sale is subject to the terms and provisions of the Agreement of Purchase and Sale and the Lease and in the event of any inconsistency between either of (1) the Agreement of Purchase and Sale or the Lease and (2) this Bill of Sale, the terms and provisions of the former shall control. F. Seller currently operates a business at the Property and intends to continue the operation of such business at the Property hereafter as tenant under the Lease. In such business, Seller will employ the use of personal property, of which it is, and will continue to be, the owner, and employ the use of fixtures attached to the Warehouse Building, the Office Building and the Parking and Other Improvements as tenant under the Lease. G. Seller and Buyer acknowledge that the law is sometimes unclear concerning the dividing line between fixtures and personal property. Pursuant to this Bill of Sale, Buyer desires to purchase, and Seller desires to sell, those fixtures that may otherwise be considered personal property such EXHIBIT "E" ----------- that ownership thereof would not otherwise transfer to Buyer pursuant to the Agreement of Purchase and Sale. A G R E E M E N T : ------------------ NOW, THEREFORE, in consideration of the parties hereto entering into the Agreement of Purchase and Sale and the Lease and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged: Seller does hereby sell and convey to Buyer, without warranty of title or use and without warranty, express or implied, as to merchantability or fitness for any purpose, all of Seller's right, title and interest, if any, in and to all tangible personal property, if any, affixed to the Land or the Property, including, without limitation, any and all affixed appliances, HVAC, carpeting, draperies and curtains, wall coverings, lighting and lighting systems, window washing equipment, water, gas, electrical, storm and sanitary sewer facilities and all other utilities, sprinklers, landscaping, built-in shelving and other items of personal property owned by Seller that are used exclusively in the maintenance or operation of the Property, provided, however, -------- ------- that such personal property shall exclude any items which can be removed without materially damaging the Property, such as, without limitation, furniture, furnishings, warehouse racking, computers, office machines and supplies, equipment, telephones (but not the lines), machinery, plans, specifications, shop drawings, goods, tools, tooling, inventory, raw materials, work in process, finished goods and materials used or consumed in Seller's business, accessories, parts, repossessions and returns thereof that are not affixed to the Property (the property conveyed hereunder being the "Conveyed Personal Property"). Without limiting the generality of the foregoing, there shall be specifically excluded from the Conveyed Personal Property the items listed on the inventories attached hereto as Schedule 2, which inventories are acknowledged to be outdated ---------- and incomplete. To have and to hold all of said personal property unto Buyer, its successors and assigns, to its own use forever. IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the _____ day of _________________, 1997. MAZDA MOTOR OF AMERICA, INC., a California corporation By:_______________________________________________ Print Name:____________________________________ Print Title:___________________________________ [SCHEDULES 1 AND 2 NEED TO BE ATTACHED] E-2 ASSIGNMENT OF CONTRACTS ----------------------- This ASSIGNMENT AND ASSUMPTION OF CONTRACTS (the "Assignment") is made as of the ___ day of ___________________, 19__ between MAZDA MOTOR OF AMERICA, INC., a California limited partnership ("Assignor"), and KILROY REALTY, L.P., a Delaware limited partnership ("Assignee"). Assignor is the owner of that certain real property located in the City of Irvine, County of Orange, State of California, more particularly described in Schedule 1 attached hereto and incorporated herein by reference ---------- (the "Property"). Assignor hereby assigns, transfers, sets over and conveys to Assignee, without warranty of title or use and without warranty, express or implied, as to merchantability or fitness for any purpose, all of Assignor's right, title and interest, if any and to the extent assignable, in, to and under any and all of the following: (i) the contracts and agreements listed and described on Schedule 2 attached hereto and incorporated herein by this reference (the ---------- "Contracts"); (ii) all existing warranties and guaranties (express or implied) issued to Assignor in connection with the personal property being conveyed to Assignee by Bill of Sale on the date hereof; and (iii) all existing permits, licenses, approvals and authorizations issued by any governmental authority in connection with the Property. All items described in (ii) and (iii) above are hereinafter collectively referred to as "Intangible Property." Assignee does hereby assume and agree to perform all of Assignor's obligations under the Contracts and Intangible Property accruing from and after the date hereof. Assignor shall remain liable for all of Assignor's obligations under the Contracts and Intangible Property accruing prior to the date hereof. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, executors, administrators, successors and assigns. This Assignment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF. Assignor and Assignee have each executed this Assignment as of the date first written above. "Seller" MAZDA MOTOR OF AMERICA, INC., a California corporation By:_______________________________________ Print Name:____________________________ Print Title:___________________________ [SIGNATURES CONTINUED] EXHIBIT "F" ---------- "Buyer" KILROY REALTY L.P., a Delaware limited partnership By: Kilroy Realty Corporation, a Maryland corporation, Its General Partner By:_______________________________________________ Print Name:____________________________________ Print Title:___________________________________ [SCHEDULES 1 AND 2 NEED TO BE ATTACHED] F-2 [LETTERHEAD OF FIRST AMERICAN TITLE INSURANCE COMPANY] SELLER'S CLOSING STATEMENT ESCROW STATEMENT OF: Escrow: 9762747M MAZDA DISTRIBUTORS (PACIFIC), INC. Escrow Officer: Judith M. Moore Date: June 16, 1997 Closing Date: 06/20/97 Estimated Purchaser: KILROY REALTY L.P. Property Address: 9451 TOLEDO WAY IRVINE, CA 92618 TOTAL CONSIDERATIONS 17,025,000.00 REIMBURSEMENTS/CREDITS TOTAL CREDITS: 17,025,000.00 ------------- LESS: CHARGES AND DEDUCTIONS/DEBITS COMMISSION(S) LISTING BROKER: LEE & ASSOCIATES COMMISSION 17,250.00 SELLING BROKER: COLLINS COMMERCIAL CORPORATION COMMISSION 17,250.00 TITLE CHARGES TO FIRST AMERICAN-TITLE INSURANCE CO. OWNERS ALTA POLICY FOR $17,025,000.00 15,322.50 TRANSFER TAX 18,727.50 ESCROW CHARGES TO FIRST AMERICAN TITLE ESCROW FEE 3,104.25 RECORDING FEES: DEED 50.00 TOTAL DEBITS: 377,704.25 ------------- BALANCE DUE YOU 16,647,295.75 =============
EX-10.61 5 AMENDMENT TO PURCHASE & SALE AGREEMENT EXHIBIT 10.61 FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ----------------------------------------------- This FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS ("Amendment") is made and entered into as of this 30th day of June, 1997, by and between MAZDA MOTOR OF AMERICA, INC., a California corporation ("Seller"), and KILROY REALTY L.P., a Delaware limited partnership ("Buyer"), with respect to the following: R E C I T A L S - - - - - - - - A. Buyer and Seller are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated June 12, 1997 (the "Purchase Agreement"), pursuant to which Seller has agreed to sell to Buyer, and Buyer has agreed to purchase from Seller, certain property in Irvine, California, more particularly described in the Purchase Agreement as the "Property." B. Defined terms which are used in this Amendment without definition have the meanings given to the them in the Purchase Agreement. C. Buyer and Seller desire to confirm the satisfaction of certain conditions set forth in the Purchase Agreement as more particularly provided in this Amendment below. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows: A G R E E M E N T - - - - - - - - - 1. The form of Lease to which Buyer and Seller have agreed pursuant to the terms of Paragraph 7(c)(i) of the Purchase Agreement is attached to this Amendment. The Roof Issue described in Paragraph 7(c)(ii) of the Purchase Agreement has been resolved as provided in the Lease attached hereto, and the parties acknowledge by execution of this Amendment that the conditions set forth in Paragraph 7(c) of the Purchase Agreement have been satisfied. 2. In all other respects, the Purchase Agreement remains unmodified and in full force and effect. 3. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same Amendment. IN WITNESS WHEREOF, Buyer and Seller have executed this Amendment as of the date first written above. "Buyer" KILROY REALTY L.P., a Delaware limited partnership By: Kilroy Realty Corporation, a Maryland corporation, Its General Partner By:__________________________ Print Name:_______________ Print Title:______________ "Seller" MAZDA MOTOR OF AMERICA, INC., a California corporation By:_______________________________ Print Name:____________________ Print Title:___________________ EX-10.62 6 AGREEMENT FOR PURCHASE & SALE OF 2100 COLORADO AVE EXHIBIT 10.62 AGREEMENT FOR PURCHASE AND SALE OF 2100 COLORADO AVENUE, SANTA MONICA, CALIFORNIA JUNE 16, 1997 _______________ TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I BASIC DEFINITIONS............................................ -1- ARTICLE II PURCHASE AND SALE............................................ -3- Section 2.1 Purchase and Sale.............................................. -3- Section 2.2 Purchase Price................................................. -3- Section 2.3 Buyer's Review and Seller's Disclaimer......................... -3- Section 2.4 Permitted Title Exceptions..................................... -5- ARTICLE III CONDITIONS PRECEDENT......................................... -6- Section 3.1 Conditions..................................................... -6- Section 3.2 Failure or Waiver of Conditions Precedent...................... -7- ARTICLE IV COVENANTS. WARRANTIES AND REPRESENTATIVES.................... -8- Section 4.1 Seller's Warranties and Representations........................ -8- Section 4.2 Seller's Covenants............................................. -9- Section 4.3 Buyer's Warranties and Representations......................... -10- Section 4.4 Limitations.................................................... -10- Section 4.5 Seller's Certificate........................................... -11- Section 4.6 Indemnifications............................................... -11- Section 4.7 Completion of Seismic Retrofit Work............................ -12- ARTICLE V DEPOSIT...................................................... -12- ARTICLE VI ESCROW AND CLOSING .......................................... -13- Section 6.1 Escrow Arrangements............................................ -13- Section 6.2 Closing........................................................ -15- Section 6.3 Prorations..................................................... -15- Section 6.4 Other Closing Costs............................................ -16-
TABLE OF CONTENTS ----------------- (continued)
PAGE ---- Section 6.5 Further Documentation ......................................... -16- ARTICLE VII MISCELLANEOUS................................................ -17- Section 7.1 Damage or Destruction.......................................... -17- Section 7.2 Brokerage Commissions and Finder's Fees........................ -17- Section 7.3 Successors and Assigns......................................... -18- Section 7.4 Notices........................................................ -18- Section 7.5 Time........................................................... -19- Section 7.6 Possession..................................................... -19- Section 7.7 Incorporation by Reference..................................... -19- Section 7.8 No Deductions or Off-Sets...................................... -19- Section 7.9 Attorneys' Fees................................................ -19- Section 7.10 Construction.................................................. -19- Section 7.11 Governing Law................................................. -19- Section 7.12 Confidentiality............................................... -20- Section 7.13 Counterparts.................................................. -20- Section 7.14 Entire Agreement: Amendments.................................. -20- Section 7.15 Further Assurances............................................ -20- Section 7.16 Partial Invalidity............................................ -20- Section 7.17 Waivers....................................................... -21- Section 7.18 Damages....................................................... -21-
EXHIBIT A DISCLOSURE STATEMENT EXHIBIT B INSPECTION LETTER EXHIBIT C LIST OF CONTRACTS AND WARRANTIES EXHIBIT D PROPERTY DESCRIPTION EXHIBIT E DEED EXHIBIT F BILL OF SALE EXHIBIT G ASSIGNMENT OF LEASES AND INTANGIBLE PROPERTY EXHIBIT H DUE DILIGENCE MATERIALS EXHIBIT I ESCROW AGREEMENT EXHIBIT I FORM OF SONY ESTOPPEL EXHIBIT K FORM OF DEVELOPMENT AGREEMENT ESTOPPEL EXHIBIT L FORM OF MTA LEASE ESTOPPEL EXHIBIT M FORM OF THETFORD ASSIGNMENT -ii- AGREEMENT FOR PURCHASE AND SALE OF 2100 COLORADO AVENUE, SANTA MONICA, CALIFORNIA THIS AGREEMENT FOR PURCHASE AND SALE OF 2100 COLORADO AVENUE, SANTA MONICA, CALIFORNIA ("Agreement") is made and entered into as of June 16, 1997, by and between Santa Monica Number Seven Associates L.P., a Delaware limited partnership ("Seller"), and Kilroy Realty L.P., a Delaware limited partnership ("Buyer"). RECITALS -------- A. Seller owns certain improved real property consisting of an office building commonly known as the Sony Building and located at 2100 Colorado Avenue, Santa Monica, California, together with associated tangible and intangible personal property. B. Buyer desires to purchase from Seller and Seller desires to sell to Buyer, subject to the terms and conditions contained in this Agreement, the foregoing real property and any and all associated tangible and intangible personal property owned by Seller. AGREEMENT --------- NOW, THEREFORE, Buyer and Seller do hereby agree as follows: ARTICLE I BASIC DEFINITIONS ----------------- For purposes of this Agreement, and in addition to the other terms defined in this Agreement, each of the following terms, when used with an initial capital letter, shall have the following meaning: CC&R's. The term "CC&R's" shall mean that certain Second Declaration ------- of Protective Covenants, Conditions and Restrictions and Reciprocal Easement Agreement for the Arboretum dated as of November 8, 1994 and recorded November 23, 1994 as Instrument No. 94-2115484 of the Official Records of Los Angeles County, as amended by that certain First Amendment to Second Declaration of Protective Covenants, Conditions and Restrictions and Reciprocal Easement Agreement for the Arboretum dated December 5, 1994 and recorded May 2, 1995 as Instrument No. 95-717712 in the Official Records of Los Angeles County. Closing Date. The term "Closing Date" shall mean June 24, 1997, or ------------- another date approved in writing by both Buyer and Seller. For purposes of this Agreement, the Closing Date shall be deemed to have occurred on the date of the recordation of the Deed and payment of the Purchase Price to Seller. Contract Period. The term "Contract Period" shall mean the period from ---------------- the date of this Agreement through and including the Closing Date. Development Agreement. The term "Development Agreement" shall mean ---------------------- that certain Development Agreement affecting the Property dated December 16,1987 and recorded December 17, 1987 as Instrument No. 87-1996737 in the Official Records of Los Angeles County, as amended by (i) Amendment No. 1 to Development Agreement dated December 28,1988 and recorded January 5,1989 as Instrument No. 89-15234 in the Official Records of Los Angeles County, (ii) an Assignment and Assumption Agreement dated February 22, 1989 and recorded February 22, 1989 as Instrument No. 89-282004 in the Official Records of Los Angeles County, and (iii) Amendment No. 2 to Development Agreement dated March 16,1995 and recorded April 11,1995 as Instrument No. 95-504419 in the Official Records of Los Angeles County. Disclosure Statement. The term "Disclosure Statement" shall mean the --------------------- statement set forth as Exhibit A to this Agreement. --------- Estoppel Certificate. The term "Estoppel Certificate" shall have the --------------------- meaning set forth in Section 3.1(a)(iii). Inspection Period. The term "Inspection Period" shall mean the period ------------------ commencing on the date of this Agreement and ending at [5pm] Pacific Time on [June 24], 1997, subject to extension as may be approved in writing by both Buyer and Seller or extended pursuant to Section 2.3(c) below; provided that the Inspection Period may end earlier at Buyer's election upon delivery by Buyer to Seller of the Inspection Letter (representing the conclusive waiver by Buyer of any further Inspection Period). RN -- Inspection Letter. The term "Inspection Letter" shall mean a letter ------------------ in the form attached as Exhibit B to this Agreement, to be delivered by Buyer to --------- Seller on or prior to the close of the Inspection Period pursuant to Section 3.2 below. Intangible Property. The term "Intangible Property" shall mean -------------------- Seller's rights and interests in: (a) any and all transferable or assignable permits, building plans and specifications, certificates of occupancy, operating permits, sign permits, development rights and approvals, certificates, licenses, warranties and guarantees, trade names, service marks, engineering, soils, pest control and other reports relating to the Property, tenant lists, advertising materials, and telephone exchange numbers identified with the Property; (b) all maintenance, service and other operating contracts), equipment leases and other arrangements or agreements to which Seller is a party affecting the ownership, repair, maintenance, management, leasing or operation of the Property, not terminated pursuant to Section 4.2(c) including, without limitation, the contracts and warranties listed on Exhibit C hereto; (c) all other transferable --------- intangible property, miscellaneous -2- rights, benefits or privileges of any kind or character with respect to the Property; (d) Seller's rights (but reserving to Seller any indemnification rights of Seller) under the Development Agreement and the CC&R's; and (e) all rights, claims or remedies of seller against Dimitry Vergun arising with respect to the Retrofit Work. MTA Lease. The term "MTA Lease" shall mean that certain Commercial ---------- Lease dated March 12, 1979, between the Metropolitan Transit Authority of Los Angeles ("MTA"),as successor-in-interest to Southern Pacific Transportation Company, a Delaware corporation, and Seller, as successor-in-interest to Santa Monica Lowe Partners, L.P.,a Delaware limited partnership. Personal Property. The term "Personal Property" shall mean all ------------------ furniture, furnishings, trade fixtures, building systems and equipment (including, without limitation, HVAC, security and life safety systems) and other tangible personal property owned by Seller that is located at and used in connection with the operation of the Real Property. Property. The term "Property" shall mean the Real Property, Seller's --------- interest in the MTA Lease, the Thetford Agreement, the Sony Lease, the Personal Property located on and used in connection with the Real Property and the Intangible Property that pertains to the Real Property. Real Property. The term "Real Property" shall mean that certain real -------------- property (including, without limitation, any and all improvements thereon, all easements and rights appurtenant thereto, all strips and gores of land owned by Seller and adjacent thereto and any interest of Seller in the SMNSA Garage and the other improvements on the adjacent Lot 6) commonly known as the Sony Building and situated at 2100 Colorado Avenue, Santa Monica, California, the land component of which is legally described in Exhibit D attached to this --------- Agreement. Seller's Knowledge. The term "Seller's Knowledge" shall have the ------------------- meaning set forth in Section 4.1 below. Sony. The term "Sony" shall mean Sony Music Entertainment Inc., a ----- Delaware corporation. Sony Lease. The term "Sony Lease" shall mean that certain Office ----------- Lease by and between Seller, as landlord, and Sony, as tenant, dated to be effective as of January 1, 1997, together with a Guaranty of Lease executed by Sony Corporation of America and dated as of January 1, 1997. Thetford Agreement. The term "Thetford Agreement" shall mean that ------------------- certain Wastewater Treatment Agreement dated August 21,1991 between Thetford Systems, Inc., a Michigan corporation and Seller, as successor-in-interest to Santa Monica Lowe Partners, a Delaware limited partnership. Title Company. The term "Title Company" shall mean Chicago Title -------------- Insurance Company, whose address is 700 South Flower Street, Suite 900, Los Angeles, California 90017; Attn: Nate Glover (telephone no. 213 488-4361). -3- ARTICLE II PURCHASE AND SALE ----------------- Section 2.1 Purchase and Sale. Seller agrees to sell the Property to Buyer, ------------------ and Buyer agrees to purchase the Property upon all of the terms, covenants and conditions set forth in this Agreement. Section 2.2 Purchase Price. The purchase price for the Property (the --------------- "Purchase Price") shall be the sum of Thirty-One Million Dollars ($31,000,000). The entire amount of the Purchase Price (less the Deposit delivered pursuant to Article V below) shall be payable by Buyer to Seller in cash on the Closing Date through the escrow described in Section 6.1 below. Section 2.3 Buyer's Review and Seller's Disclaimer. --------------------------------------- (a) Seller has previously delivered, or will deliver, to Buyer for its review and evaluation copies of (i) the Sony Lease, (ii) all leasing agent contracts currently in effect with respect to the Property, (iii) the most recent survey of the Real Property in Seller's possession or control, and (iv) a set of environmental and physical inspection reports performed on behalf of and held by seller. In addition, subject to the provisions of subsection 2.3(c) below, during the Inspection Period, following reasonable notice, Buyer shall be permitted to make a complete review and inspection of all materials within Seller's possession or control relating to the physical, legal, economic and environmental condition of the Property, including, without limitation, the tenant correspondence files and records maintained by Seller or its agents relating to the Property, rent rolls for the Property, operating statements of Seller, the most recent real estate tax bills for the Property, Seller's schedule, if any, of expense reimbursements to tenants, Seller's schedules, if any, of repairs or capital improvements to the Property for 1996 and the first quarter of 1997, Seller's invoices for Property expenditures within the last 12 months, boundary and other survey-related issues relating to the Real Property, reports relating to pest control matters, soil condition, asbestos, PCB, hazardous waste, toxic substance or other environmental matters, evidence of compliance with building, health, safety, land use and zoning laws, regulations and orders, plans and specifications, reports relating to structural, life safety, HVAC and other building system and engineering characteristics, traffic patterns and all other information pertaining to the Property. The materials previously delivered or to be delivered to, or otherwise made available for review by, Buyer pursuant to the preceding two sentences are referred to collectively in this Agreement as the "Due Diligence Materials". The Due Diligence Materials are those materials listed on Exhibit H hereto. Upon --------- reasonable notice and request, Seller agrees to provide Buyer with access to all of the Due Diligence Materials in its possession or control at the Property, at Buyer's offices in Los Angeles or at the offices of Lowe Enterprises in Los Angeles. Buyer acknowledges (i) that Buyer has entered into this Agreement with the intention of making and relying upon its own investigation of the physical, environmental, economic and legal condition of the Property and (ii) that Buyer is not relying upon any representations and warranties, other than those specifically set forth in this Agreement or in any of the documents to be -4- executed and delivered by Seller on the Closing Date or as a condition to the closing, made by Seller or anyone acting or claiming to act on Seller's behalf concerning the Property. Buyer further acknowledges that it has not received from Seller any accounting, tax, legal, architectural, engineering, property management or other advice with respect to this transaction and is relying solely upon the advice of its own accounting, tax, legal, architectural, engineering, property management and other advisors. Subject to the provisions of Section 4.1 of this Agreement, Buyer shall purchase the Property in its "as is" condition on the Closing Date and except as otherwise provided in this Agreement, assumes the risk that adverse physical, environmental, economic or legal conditions may not have been revealed by its investigation. Buyer hereby approves all physical, environmental, economic, legal and all other matters relating to the Property and Buyer's review of the Property, with the exception of (i) the status of title to the property as it relates to item #16 of the Chicago title preliminary report dated May 13, 1997, (ii) review of the scope of work, budget and amount of holdback for the completion of the Retrofit Work (as defined below) (such excepted items being the "Remaining Due Diligence ----------------------- Items"). Buyer's expression of approval in this subparagraph shall not deny - ----- Buyer the benefit of the conditions set forth in Sections 3.1(a)(iii)- (vi). RN HG -- -- (b) Except with respect to any claims arising out of (i) any breach of express covenants, representations or warranties set forth in this Agreement or any of the documents to be executed and delivered by Seller on the Closing Date or as a condition of the closing or (ii) Seller's commission of fraudulent misrepresentation or omission or fraud in the inducement of this transaction: Buyer, for itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges Seller, its agents, affiliates, successors and assigns from any and all rights, claims and demands at law or in equity, whether known or unknown at the time of this Agreement, which Buyer has or may have in the future, arising out of the physical, environmental, economic or legal condition of the Property, including, without limitation, any claim for indemnification or contribution arising under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601, et. seq.), as amended, or any similar federal, state or local statute, rule or ordinance relating to liability of property owners for environmental matters (collectively, "Environmental Laws"). For the foregoing purposes, Buyer hereby specifically waives the provisions of Section 1542 of the California Civil Code and any similar law of any other state, territory or jurisdiction. Section 1542 provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. -5- Buyer hereby specifically acknowledges that Buyer has carefully reviewed this subsection and discussed its import with legal counsel and that the provisions of this subsection are a material part of this Agreement. The foregoing provisions of release shall not apply to claims against Seller for indemnification or contribution based on rights arising under Environmental Laws based upon the generation or release (which, for such purposes, shall not be deemed to include mere movement of substances [unless moved by or on behalf of Seller] under the Property which were present as of the date of Seller's acquisition of the Property, any migration of substances from adjoining Property or any matters as to which Buyer has actual knowledge as of the Closing Date) of toxic or hazardous substances on or about the Property during Seller's ownership of the Property, except for claims based solely on the unauthorized acts of trespassers, invitees or tenants of the Property. HG ------------------- Buyer (c) Buyer's exercise of the rights of review and inspection set forth in subsection (a) shall be subject to the following limitations: (i) any entry onto the Real Property by Buyer, its agents or representatives, shall be during normal business hours, following reasonable prior notice to Seller and delivery to Seller of satisfactory evidence of Buyer's general liability insurance, and, at Seller's discretion, accompanied by a representative of Seller; (ii) Buyer shall not conduct any drilling, test borings or other disturbance of the Real Property for review of soils, compaction, environmental, structural or other conditions without Seller's prior written consent; (iii) any discussions or interviews with Sony or its personnel shall be conducted in the presence of Seller or its representatives; (iv) Buyer shall exercise reasonable diligence not to disturb the use or occupancy of any occupant of the Property; and (v) Buyer shall indemnify, defend and hold Seller harmless from all loss, cost, and expense resulting from any personal injury or property damage caused by any entry or inspections performed by Buyer, its agents or representatives except to the extent such property damage is covered by Seller's property insurance policy. Any request for Seller's consent to any matter described in clause (ii) above shall be made in writing (which may be sent by facsimile with telephone confirmation of receipt) to Seller's representative, Michael Pepper. Seller shall respond as promptly as reasonably possible to any such request and, if Seller does not respond to any such request within two (2) business days, the Inspection Period shall be extended on a day by day basis for each day of delay in Seller's response. Buyer's obligations under clause (v) above shall survive any termination of this Agreement. Section 2.4 Permitted Title Exceptions. During the Inspection Period, --------------------------- Buyer shall obtain from Title Company and review a preliminary title report or commitment with respect to the Real Property ("Title Report"), together with all documents and information pertaining to the exceptions to title listed in the Title Report. In addition, Seller will deliver to Buyer a copy of any survey of the Real Property in Seller's possession ("Survey"). At Buyer's sole cost and expense, Buyer may have the Survey updated and certified as Buyer and the surveyor may agree during the Inspection Period. Buyer may advise Seller in writing and in reasonable detail, not later -6- than the close of the Inspection Period, what exceptions to title, if any, listed in the current preliminary report for the Real Property or disclosed on the Survey (as it may be further refined by Buyer, as provided above) or other title or survey matters are not acceptable to Buyer with respect to the Real Property ("Title Objections"). Prior to notifying Seller of any Title Objections, Buyer shall endeavor in good faith to cause Title Company to modify and update the preliminary report to reflect requested corrections and revisions. Seller shall have one (1) business day after receipt of Buyer's Title Objections to give Buyer notice that (a) Seller will remove any Title Objections from title (or, if acceptable to Buyer, in its sole discretion, afford the Title Company necessary information or certifications to permit it to insure over such exceptions) or (b) Seller elects not to cause such exceptions to be removed or to cause the Title Company to insure over such exceptions. Seller's failure to provide notice to Buyer within such 1-business day period as to any Title Objection shall be deemed an election by Seller not to remove the Title Objection. If Seller so notifies or is deemed to have notified Buyer that Seller shall not remove any or all of the Title Objections, Buyer shall have until the close of the Inspection Period to determine whether (i) to proceed with the purchase and take the Property subject to such exceptions or (ii) to terminate this Agreement and cause a concurrent release of the Deposit and any accrued interest to Buyer. Buyer's delivery of the Inspection Letter shall constitute Buyer's conclusive agreement to accept the Property subject to the Permitted Exceptions. "Permitted Exceptions" shall include and refer to (x) any and all exceptions to title disclosed by the Title Report or the Survey, excepting solely Title Objections which are timely identified by Buyer and which Seller has notified Buyer pursuant to this Section that Seller is willing to remove and (y) any other exceptions to title (i) caused by the acts or omissions of, or (ii) approved by, Buyer. Notwithstanding the foregoing, Seller shall be responsible for the removal from title of any mortgage liens or mechanic's liens for work or services provided at the Property prior to the Closing Date and post-closing with respect to the Seismic Retrofit Work. ARTICLE III CONDITIONS PRECEDENT -------------------- Section 3.1 Conditions. ----------- (a) Notwithstanding anything in this Agreement to the contrary, Buyer's obligation to purchase the Property shall be subject to and contingent upon the satisfaction or waiver of the following conditions precedent: (i) Buyer's inspection and approval in its sole discretion, within the Inspection Period, of the Remaining Due Diligence Items, as evidenced by Buyer's delivery of the Inspection Letter; (ii) The willingness of Title Company to issue, upon the sole condition of the payment of its premium as approved by Buyer during the Inspection Period, its American Land Title -7- Association extended coverage Owner's Policy of Title Insurance [1970-B Form] ("Title Policy"), insuring Buyer in the amount of the Purchase Price that fee title to the Real Property is vested of record in Buyer on the Closing Date subject only to the printed conditions and exceptions of such policy and the Permitted Exceptions; (iii) Execution and delivery of the Sony Lease, and Buyer's receipt from Sony, on or prior to the Closing Date, of an estoppel certificate in substantially the form attached hereto as Exhibit J, executed by Sony and any guarantor ---------- of the Sony Lease (the "Sony Lease Estoppel") and -------------------- delivery of the Sony Lease Estoppel to the guarantor of the Sony Lease with a request that such Guarantor execute same, provided that the failure of such guarantor to execute the Sony Lease Estoppel shall not be deemed a failure of this condition precedent; (iv) Confirmation by Buyer that the lease previously in effect between Sony and Seller has been terminated, that Sony has agreed to waive the benefit of the first sentence of the last paragraph of Section 4.2 of the Sony Lease which reads as follows: Tenant shall not be liable for payment of any increase in Taxes which is solely attributable. . . from the date of such sale through August 31, 1997" (the "Proposition 13 Provision") and that Sony has -------------------------- received the sums owing to Sony on account of the incremental difference between rent due and payable by Sony pursuant to the Sony Lease and rent previously paid by Sony on account of the prior lease in effect between Seller and Sony; (v) Buyer's receipt, on or prior to the Closing Date, from the City of Santa Monica of an estoppel certificate with respect to the Development Agreement, pursuant to Section 30 of the Development Agreement, substantially in the form attached hereto as Exhibit K ("the Development --------- Agreement Estoppel"); (vi) Seller's delivery to MTA, on or prior to the Closing Date, of an estoppel with respect to the MTA Lease, in the form attached hereto as Exhibit L (the "MTA Lease --------- Estoppel"), and Seller's delivery to Buyer of the conveyance documents necessary to transfer the interest of the lessee under the MTA Lease to Buyer; (vii) Execution, on or prior to the Closing Date, of an agreement between Seller and the owner of the parcel adjacent to the Property, in recordable form satisfactory to Buyer (the "Lot 6/7 Agreement"); and -8- (viii) Seller's performance or tender of performance of all material obligations under this Agreement and the truth and accuracy of Seller's express representations and warranties, as of the Closing Date. Buyer's receipt from the MTA of an executed MTA Lease estoppel shall not be a condition precedent to Buyer's obligation to purchase the Property, nor shall the failure of MTA to deliver an executed MTA Lease Estoppel or Buyer's receipt of an estoppel from MTA that varies from the form of the MTA Lease Estoppel be a condition subsequent to Buyer's obligation to purchase the Property or afford Buyer any legal or equitable rights or remedies against Seller. (b) Notwithstanding anything in this Agreement to the contrary, Seller's obligation to sell the Property shall be subject to and contingent upon the satisfaction or waiver of the following conditions precedent: (i) Buyer's performance or tender of performance of all material obligations under this Agreement and the truth and accuracy of Buyer's express representations and warranties, as of the Closing Date; and (ii) The satisfaction or Buyer's written waiver of the conditions set forth in subparagraphs (a)(i), (ii) and (iii) above. Section 3.2 Failure or Waiver of Conditions Precedent. In the event ------------------------------------------ any of the conditions set forth in Section 3.1 are not fulfilled or waived, the party benefitted by such condition may, by written notice to the other party, terminate this Agreement, whereupon all then remaining rights and obligations hereunder of each party shall be at an end and, in the event of the failure of a condition set forth in Section 3.1(a), the Deposit, together with interest, shall be returned to Buyer. Either party may, at its election, at any time or times on or before the date specified for the satisfaction of the condition, waive in writing the benefit of any of the conditions set forth in Section 3.1(a) and 3.1(b) above. Notwithstanding the foregoing, Buyer's failure to deliver to Seller on or prior to the close of the Inspection Period an executed Inspection Letter in the form attached as Exhibit B, without modification or ---------- qualification in any manner whatsoever, shall be deemed a failure of the condition set forth in Section 3.1(a)(i) above. In any event, Buyer's consent to the close of escrow pursuant to this Agreement shall waive any remaining unfulfilled conditions. In the event this Agreement is terminated by Buyer prior to the end of the Inspection Period based on the failure of a condition set forth in Section 3.1(a)(i) (as evidenced by written notice of such termination given by Buyer to Seller and Title Company on or prior to the close of the Inspection Period), then, within two (2) business days following Title Company's receipt of Buyer's demand therefor, Title Company is hereby instructed, without the need for further mutual instructions from the parties (and notwithstanding any contrary instruction from either Buyer or Seller), to immediately deliver the Deposit and all interest accrued thereon to Buyer and to cancel the Escrow. Title Company is instructed not to accept any modification of this instruction unless such modification is on a single document signed by both Buyer and -9- Seller. If either Buyer or Seller should attempt to break the mutuality of this instruction, Title Company is authorized to return to the party attempting to do so any documents purporting to do so and to continue with the instructions set forth herein. Each of Buyer and Seller acknowledge that they are sophisticated parties with extensive experience in commercial real estate transactions, that they have been represented by legal counsel in negotiating the agreement set forth herein and that they have consulted with such counsel in respect of the execution of this agreement. Each of Buyer and Seller agree to indemnify Title Company for following the instructions set forth herein. Any party attempting to break the mutuality of this agreement hereby agrees to indemnify, defend, protect and hold harmless the other party from and against any all loss, cost, damage, liability and expense (including without limitation attorneys' fees and costs) incurred as a result or arising out of such attempt, including without limitation any loss, cost, damage, liability or expense incurred under the indemnity set forth in the immediately preceding sentence. ARTICLE IV COVENANTS, WARRANTIES AND REPRESENTATIVES ----------------------------------------- Section 4.1 Seller's Warranties and Representations. Seller hereby ---------------------------------------- makes the following representations and warranties to Buyer as of the date of this Agreement; provided that each of such representations and warranties shall be deemed to be modified by any contrary or qualifying information set forth on the Disclosure Statement: (a) Seller is a limited partnership duly formed and in good standing under the laws of the State of Delaware and is duly qualified to conduct business in California. Seller has the power, right and authority to enter into this Agreement and the instruments and documents referenced herein, and to consummate the transaction contemplated hereby. The persons executing this Agreement on behalf of Seller have the right, power and authority to bind Seller. (b) All requisite action has been taken by Seller and all requisite consents have been obtained in connection with the entering into this Agreement and the instruments and documents referenced herein, and the consummation of the transaction contemplated hereby, and no consent of any other party is required. (c) This Agreement is, and all Agreements, instruments and documents to be executed by Seller pursuant to this Agreement shall be, duly executed by Seller and are, or shall be, valid and legally binding upon Seller and enforceable in accordance with their respective terms subject to the effect of applicable bankruptcy, insolvency, reorganization or other similar laws affecting the rights of creditors generally. (d) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby shall result in a breach of or constitute a default under any Agreement, document, instrument or other obligation to which Seller is a party or by which Seller may be bound, or under any law, statute, ordinance, rule, -10- governmental regulation or any writ, injunction, order or decree of any court or governmental body, applicable to Seller or to the Property. (e) The Sony Lease constitutes the only lease or rental agreement presently in effect with respect to the Real Property; the copy of the Sony Lease delivered to Buyer is true, correct and complete and sets forth all written agreements in effect with Sony with respect to Sony's occupancy of the Property; and, to Seller's Knowledge, (i) the copies of the correspondence related to the Sony Lease delivered or made available to Buyer are true, correct and complete, (ii) there have been no prepayments of rent under the Sony Lease, (iii) except as may be set forth in the Sony Lease, Sony shall not become entitled to any concession, rebate, allowance or free rent for any period subsequent to the Closing Date, and (iv) the Sony Lease is in full force and effect. (f) To Seller's Knowledge, (i) Seller has received no written notice that Sony intends to terminate the Sony Lease prior to the expiration of its scheduled term, (ii) no default by Seller as Landlord or by Sony as Tenant exists under the Sony Lease, and (iii) no event has occurred which, with the giving of notice or the passage of time or both, would constitute a default under the Sony Lease by Seller or Sony. (g) To Seller's Knowledge, Seller has received no written notice from any governmental authority that any of the improvements located on the Real Property are presently in violation of any applicable building codes, zoning or land use laws, or other law, order, ordinance, rule or regulation affecting the Real Property, including the Development Agreement (collectively, "Applicable Laws"). (h) To Seller's Knowledge, Seller has received no written notice from any governmental authority that the current use of the Real Property is presently in violation of any Applicable Laws. (i) To Seller's Knowledge, Seller possesses all licenses, permits and approvals required in connection with the ownership and operation of the Property. (j) To Seller's Knowledge: the copies of the service and equipment contracts listed on Exhibit C and delivered to Buyer as part of the Due --------- Diligence Materials include all such contracts affecting the Real Property which will be binding upon Buyer following the Closing Date; the copies of all such contracts (collectively, the "Contracts") which Seller has delivered or made available to Buyer pursuant to this Agreement, are true, correct and complete copies of such documents; Seller has received no written notice of a default by Seller under any of the Contracts; and no event has occurred which, with the giving of notice or the passage of time or both, would constitute a default under any of the Contracts. (k) To Seller's Knowledge, Seller has received no written notice from any governmental authorities that eminent domain proceedings for the condemnation of the Real Property are pending or threatened. -11- (1) To Seller's Knowledge, Seller has received no written notice of (i) any threatened or pending litigation, governmental investigation or arbitration affecting the Property (other than litigation arising in the ordinary course of the operation of the Property and covered by insurance) or (ii) any threatened or pending litigation, governmental investigation or arbitration against Seller which would materially and adversely affect Seller's capacity to perform under this Agreement. (m) Seller has no employees who, by reason of any governmental regulations, employment contract or other reason, would become employees of Buyer as a result of Buyer's purchase of the Property. Seller is not a party to any collective bargaining agreements or multi-employer pension funds covering employees who service the Property. (n) To Seller's Knowledge, (i) Seller is not in default under the Development Agreement, the Thetford Agreement or the MTA Lease, (ii) no event has occurred which, with the giving of notice or the passage of time or both, would constitute a default by Seller under the Development Agreement, the Thetford Agreement or the MTA Lease, (iii) there exists no basis for a right of termination of the MTA Lease based on a discontinuation of use for more than ninety (90) days and (iv) Seller has received no written notice of any default by any other party to the MTA Lease. (o) To Seller's Knowledge, Seller is not in material default under the CC&R's. (p) To Seller's Knowledge, Seller has received no written notice of any default by any party under the Development Agreement. (q) To Seller's Knowledge, (i) the copies of the CC&R's and the MTA Lease delivered to Buyer are true, correct and complete, and (ii) the CC&R's and the MTA Lease are in full force and effect. (r) Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). As used herein, the term "Seller's Knowledge" or words of similar effect shall mean the current actual subjective knowledge of Michael Pepper, Rick Newman and Peter Kristensen, without duty of independent inquiry. Neither such individuals nor any party other than Seller shall bear responsibility for any breach of representation. Seller, however, represents and warrants that Messrs. Pepper, Newman and Kristensen are the individuals associated with Seller that have principal administrative and oversight responsibility for the Property. Section 4.2 Seller's Covenants. Seller hereby covenants and agrees as ------------------- follows: (a) During the Contract Period, (i) Seller shall ensure that the Property is operated and maintained in a manner consistent with past practices and maintain -12- current levels and coverages of insurance, (ii) Seller shall not create or acquiesce in the creation of liens or exceptions to title other than the Permitted Exceptions or voluntarily take any action (other than as may be permitted pursuant to subparagraphs (b) and (c) of this Section 4.2) to cause any of the representations or warranties of Seller set forth in Section 4.1 to be materially incorrect, (iii) Seller shall promptly provide Buyer with copies of any of the notices enumerated in Sections 4.1(c)-(e) and (g)-(i) received by Seller and (iv) Seller shall exercise reasonable efforts, consistent with past practices and without incurring any capital or extraordinary operating expense, to comply with the contracts affecting the Property, the CC&R's, the Development Agreement, the MTA Lease and the Sony Lease. (b) Upon Buyer's written request, Seller will give notice as of the Closing Date terminating any Contracts which Buyer does not elect to assume, in a written notice to Seller delivered during the Inspection Period. Such notices of termination shall be effective as provided in the applicable Contracts. (c) Following the Closing Date, Seller shall pay to Buyer, in accordance with a separate escrow agreement in the form attached hereto as Exhibit I, a supplement to base rent due and payable by Sony pursuant to the - ----------- Sony Lease. Section 4.3 Buyer's Warranties and Representations. Buyer hereby --------------------------------------- represents and warrants to Seller that (a) Buyer has and as of the Closing Date shall have, full power and lawful authority to enter into and carry out the terms and conditions of this Agreement and to execute and deliver all documents which are contemplated by this Agreement, (b) all actions necessary to confer such power and authority upon the persons executing this Agreement and all documents which are contemplated by this Agreement to be executed on behalf of Buyer or its assignee have been taken, and (c) Buyer has received no written notice of any threatened or pending litigation which would materially and adversely affect Buyer's capacity to perform under this Agreement. Section 4.4 Limitations. The parties agree that (a) Seller's ------------- warranties and representations contained in this Agreement and in any document executed by Seller pursuant to this Agreement shall survive Buyer's purchase of the Property only for a period of 12 months after the Closing Date (the "Limitation Period"), (b) Seller shall have no liability to Buyer for any matters disclosed to Buyer in the Due Diligence Materials or any other due diligence materials procured by Buyer in connection with its review of the Property, (c) Seller's aggregate liability for claims arising out of such representations and warranties shall not exceed $500,000 in the aggregate, and (d) Buyer shall provide actual written notice to Seller prior to the expiration of the Limitation Period of any breach of such applicable warranties or representations and shall allow Seller 30 days within which to cure such breach, or, if such breach cannot reasonably be cured within 30 days, an additional reasonable time period, so long as such cure has been commenced within such 30 days and diligently pursued to completion within 90 days. If Seller fails to cure such breach after written notice and within such cure period, Buyer's sole remedies shall be either an action at law for damages or, assuming the character of the breach meets the requirements for such a remedy, rescission, as a -13- consequence thereof, either of which remedies must be commenced, if at all, within the Limitation Period; provided, however, that if within the Limitation --------- Period Buyer gives Seller written notice of such a breach and Seller gives Buyer written notice of its commencement of a cure and thereafter terminates such cure effort by giving written notice to Buyer of such termination, Buyer shall have an additional 30 days from the date of such termination (and the Limitation Period shall be deemed extended for such additional 30-day period) within which to commence an action at law for damages or a suit for rescission as a consequence of Seller's failure to cure. The Limitation Period referred to herein shall apply to known as well as unknown breaches of such warranties or representations. Section 4.5 Seller's Certificate. Seller shall deliver to Buyer on the ---------------------- Closing Date a certificate (a "Seller's Certificate") updating the representations and warranties of Seller set forth in Section 4.1 with respect to the Property through the then current date; provided, however, that if Seller becomes aware during the Contract Period of any matters which make any of such representations or warranties untrue, Seller shall disclose such matters in writing to Buyer promptly upon becoming aware of them (and shall also disclose such matters in the Seller's Certificate). In the event that Seller discloses any matters to Buyer which make any of Seller's representations or warranties untrue (whether such disclosure is made in the Seller's Certificate or otherwise) or in the event any matters which make any of Seller's representations or warranties materially untrue in any material respect are otherwise disclosed to or discovered by Buyer during the Contract Period, Seller shall bear no liability for such matters (provided that Seller has not breached an express covenant set forth in this Agreement), but Buyer shall have the right to elect in writing (a) to waive such matters and complete the purchase of the Property in accordance with the terms of this Agreement, or (b) as to any matters disclosed or discovered following the expiration of the Inspection Period, to terminate this Agreement, if at all, prior to the Closing Date. Buyer's delivery of the Inspection Letter shall constitute Buyer's conclusive agreement to accept or waive any such matters disclosed to or discovered by Buyer prior to the close of the Inspection Period. Section 4.6 Indemnifications. Subject to the foregoing limitations: ----------------- (a) Seller shall indemnify and defend Buyer against and hold Buyer harmless from any and all claims, liabilities, losses, damage, costs and expenses, including, without limitation, all reasonable attorneys' fees, asserted against or suffered by Buyer resulting from (i) any breach by Seller of this Agreement, (ii) the untruth, inaccuracy or breach of any of the representations and warranties made by Seller pursuant to this Agreement, subject to the limitations of Section 4.4, or (iii) any claim, liability or obligation arising in connection with the Property and accruing prior to the Closing Date (except as may be expressly assumed by Buyer pursuant to the operation of Section 6.3). For purposes of this subparagraph, no claim, liability or obligation arising on or following the Closing Date shall be deemed to accrue prior to the Closing Date based on a causal or other relationship to the physical, environmental or legal condition of the Property as of the Closing Date. -14- (b) Buyer shall indemnify and defend Seller against and hold Seller harmless from any claim, loss, damage, or expense, including any reasonable attorneys' fees, asserted against or suffered by Seller resulting from (i) any breach by Buyer of this Agreement, (ii) the untruth, inaccuracy or breach of any of the representations or warranties made by Buyer pursuant to this Agreement, (iii) any liability or obligation arising in connection with the Property accruing following the Closing Date, or (iv) any liability or obligation expressly assumed by Buyer arising in connection with the Property accruing prior to the Closing Date pursuant to the operation of Section 6.3. Section 4.7 Completion of Seismic Retrofit Work. Within one hundred ------------------------------------ eighty (180) days following the Closing Date, Seller shall complete or cause the completion of certain seismic retrofit work at the Property as provided in the Scope of Work and Specifications contained in that certain Abbreviated Form of Agreement Between Owner and Contractor (the "Construction Contract") between ----------------------- Seller and Lowe Enterprises Commercial Group dated March 27, 1997, as approved by Dimitry Vergun and including any changes in the Scope of Work and Specifications approved by Dimitry Vergun or recommended by Dimitry Vergun in writing (such written recommendation having been reasonably approved by Seller) or required by any applicable governmental authority (the "Retrofit Work"). To -------------- ensure Seller's timely completion of the Retrofit Work, Seller shall deposit into an escrow account the amount necessary to complete the Retrofit Work, as agreed to between Seller and Buyer, together with 25% of such amount. The rights and responsibilities of Buyer and Seller with respect to the Retrofit Work and the release of the funds in the escrow account shall be governed by the terms of the Escrow Agreement to be executed in the form attached hereto as Exhibit I. ---------- Seller shall not be deemed to have made any representation or warranty to Buyer with respect to the design, sufficiency or workmanship of the Retrofit Work by virtue of its agreement to complete the Retrofit Work, provided, however, that Seller shall assign to Buyer any warranty rights or legal or equitable rights and remedies set forth in the Construction Contract and with any other contractors, subcontractors and suppliers. ARTICLE V DEPOSIT ------- Within two (2) business days following execution of this Agreement, Buyer shall deliver to Title Company for deposit into the escrow described in Section 6.1 below, the sum of $500,000 (the "Initial Deposit"). At the close of the Inspection Period, if Buyer has not then elected to terminate this Agreement as provided herein, Buyer shall deliver to Title Company, for deposit into the escrow described in Section 6.1 below, the additional sum of $500,000 (which amount, together with the Initial Deposit and any interest that may accrue thereon in escrow, referred to herein as the "Deposit"). The Initial Deposit and the Deposit shall be kept by Title Company in an interest-bearing account. In the event that the sale of the Property to Buyer is consummated as contemplated by this Agreement, then the entire amount of the Deposit, including any interest accrued thereon, shall be credited against the Purchase Price. The entire amount of the Initial Deposit or Deposit, as applicable, including any interest accrued thereon, shall be returned immediately to Buyer in the event that Buyer is entitled to -15- terminate this Agreement due to the failure of any of the conditions precedent set forth in Section 3.l(a) or pursuant to Sections 2.4, 4.5 or 7.l(b), in each case, prior to the Closing Date as contemplated in this Agreement, or in the event that (a) the conditions precedent set forth in Section 3.1(b) shall have been satisfied or waived, (b) Buyer shall have performed fully or tendered performance of its obligations hereunder and (c) Seller shall be unable or fail to perform its obligations under this Agreement to close the sale of the Property. The return of the Deposit shall be governed by the automatic procedures of Section 3.2 if the termination of the Agreement is based on a failure of the condition set forth in Section 3.1(a)(i). IF THE CLOSING DOES NOT OCCUR FOR THE PROPERTY ON OR BEFORE THE DATE PROVIDED THEREFOR IN THIS AGREEMENT DUE TO A DEFAULT BY BUYER, THEN THE ENTIRE [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -15A- AMOUNT OF THE DEPOSIT SHALL BE RETAINED BY SELLER AS LIQUIDATED DAMAGES, AND BUYER SHALL EXECUTE ANY REASONABLE DOCUMENTATION REQUIRED BY TITLE COMPANY IN ORDER TO RELEASE THE DEPOSIT TO SELLER. BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER'S DAMAGES IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY BUYER WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT IS THE PARTIES' BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES SELLER WOULD SUFFER IN THE EVENT THE SALE OF THE PROPERTY TO BUYER FAILS TO CLOSE ON OR BEFORE THE CLOSING DATE CONTEMPLATED BY THIS AGREEMENT, AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT. BUYER AND SELLER AGREE THAT SELLER'S RIGHT TO RETAIN THE DEPOSIT SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF SELLER AT LAW IN THE EVENT OF A BREACH OF THIS AGREEMENT BY BUYER THAT PREVENTS THE SALE OF THE PROPERTY FROM CLOSING. ACCEPTED AND AGREED TO: Ron Newman, Jr. Hugh Greenup - ------------------------------ ------------------------------ Seller Buyer ARTICLE VI ESCROW AND CLOSING ------------------ Section 6.1 Escrow Arrangements. An escrow for the purchase and sale ------------------- contemplated by this Agreement has been opened by Buyer and Seller with Title Company. Not later than one business day prior to the Closing Date, Seller and Buyer shall each deliver escrow instructions to the Title Company consistent with this Article VI, and the parties shall deposit in escrow the funds and documents described below. (a) Seller shall deposit (or cause to be deposited): (i) a duly executed and acknowledged grant deed in favor of Buyer from Seller with respect to the Real Property in the form attached to this Agreement as Exhibit E, with the ---------- statement of documentary transfer tax separately affixed (the "Deed"); (ii) a duly executed bill of sale with respect to the Personal Property in the form attached to this Agreement as Exhibit F (the "Bill of Sale"); --------- (iii) two duly executed counterparts of an assignment and assumption of Seller's interest in the Sony Lease, the MTA -16- Lease and Intangible Property in the form attached to this Agreement as Exhibit G (the "Assignment of Leases and --------- Intangible Property") pertaining to the Property; (iv) three (3) counterparts of the Assignment of the Thetford Agreement, executed by Seller and Thetford in the form attached hereto to Exhibit M (the "Thetford Assignment"); --------- (v) a certificate from Seller certifying the information required by Sections 18662 and 26131 of the California Revenue and Taxation Code to establish that the transaction contemplated by this Agreement is exempt from the tax withholding requirements of the State of California (the "California Certificate"); (vi) a certificate from Seller certifying the information required by (S)1445 of the Internal Revenue Code and the regulations issued thereunder to establish, for the purposes of avoiding Buyer's tax withholding obligations, that Seller is not a "foreign person" as defined in Internal Revenue Code (S)1445(f)(3) (the "FIRPTA Certificate"); (vii) the Seller's Certificate; (viii) an executed notice to Sony, informing Sony of the transfer of the Property and directing the payment of rent as requested by Buyer; (ix) a notice to the City of Santa Monica of the transfer of the Property as may be required pursuant to the Development Agreement; (x) a notice to the other Lot owners under the CC&R's of the transfer of the Property as may be required pursuant to the CC&R's; and (xi) customary affidavits as may be reasonably requested by Title Company. (b) Buyer shall deposit: (i) at least one (1) business day prior to the Closing Date, immediately available funds sufficient to pay the balance of the Purchase Price, plus sufficient additional cash to pay Buyer's share of all applicable escrow costs and closing expenses; -17- (ii) two duly executed counterparts of the Assignment of Leases and Intangible Property pertaining to the Property; and (iii) three (3) counterparts of the Thetford Assignment executed by Buyer; (iv) a certificate duly executed by Buyer in favor of Seller confirming the waivers and acknowledgments set forth in Sections 2.3(a) and (b) above with respect to the Property. Section 6.2 Closing. Title Company shall close escrow for the sale of ------- the Property by: (a) recording the Deed [, the Lot 6/7 Agreement] and other recordable documents, if any, and causing conformed copies to be delivered to Buyer and Seller; (b) issuing the Title Policy to Buyer; (c) delivering to Buyer the Bill of Sale, the FIRPTA Certificate, the California Certificate, the Seller's Certificate and one counterpart of the Assignment of Leases and Intangible Property, each executed by Seller; (d) delivering to Seller one counterpart of the Assignment of Leases and Intangible Property executed by Buyer, the certificate described in Section 6.1(b)(iii) above, and funds in the amount of the Purchase Price, as adjusted for credits, prorations and closing costs in accordance with this Article VI; and (e) filing the information return for the sale of the Property required by Section 6045 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder. Section 6.3 Prorations. ---------- (a) Real estate taxes and assessments, personal property taxes, if any, rental income and all other items of income and expense with respect to the Property shall be prorated between Seller and Buyer as of the Closing Date. Income and expenses for the Property shall be prorated on the basis of the actual number of days in the month and on the basis of the accrual method of accounting. All items of income and expense for the Property attributable to the period through and including the Closing Date shall be credited and debited, respectively, to Seller; all items of income and expense attributable to the period following the Closing-Date shall be credited and debited, respectively, to Buyer. Buyer shall be credited in escrow with (i) any portion of deposits made by Sony with respect to the Property held by Seller and which are refundable to Sony and (ii) rent prepaid by Sony beyond the Closing Date. Buyer shall not be entitled to any interest on deposits made by Sony or prepaid rent accrued on or -18- before the Closing Date, except for any interest required to be paid to Sony under Applicable Law or pursuant to the terms of the Sony Lease. Seller shall be credited in escrow with any refundable deposits or bonds held by any utility, governmental agency or service contractor with respect to the Property (to the extent the same are assignable and assigned to Buyer in connection with the sale of the Property). Buyer shall be credited in escrow with any leasing commissions, other allowances or leasing costs (collectively, "Leasing Costs") attributable to the Sony Lease which Seller has not paid on or prior to the Closing Date, and the budgeted amount for the Sony Work agreed upon between Buyer and Seller. (b) Buyer and Seller shall cooperate to produce prior to the Closing Date a schedule of prorations to be made on and after the Closing Date pertaining to the Property as complete and accurate as reasonably possible. All prorations which can be liquidated accurately or reasonably estimated as of the Closing Date shall be made in escrow on the Closing Date. All other prorations, and adjustments to initial estimated prorations, shall be made by the parties with due diligence and cooperation within 30 days following the Closing Date, or such later time as may be required to obtain necessary information for proration, by immediate cash payment to the party yielding a net credit from such prorations from the other party. (c) On or prior to the Closing Date, Seller shall pay to Sony any sums owing to Sony on account of the incremental difference' between rent due and payable by Sony pursuant to the Sony Lease and rent previously paid by Sony on account of the prior lease in effect between Seller and Sony. (d) On the Closing Date, Seller shall pay Sony through escrow the amount due to Sony, as agreed between Seller and Sony, in order for Sony to waive the benefit of the Proposition 13 Provision of the Sony Lease. Section 6.4 Other Closing Costs. ------------------- (a) Buyer shall pay (i) the cost of the Survey, (ii) 50% of any escrow or other costs charged by or reimbursable to the Title Company (other than the title premium), (iii) the cost of the Title Policy in excess of the premium borne by Seller pursuant to subsection (b)(iii) below, and (iv) all fees and expenses of its legal counsel and other third party consultants engaged by or on behalf of Buyer in connection with this transaction. (b) Seller shall pay (i) 100% of any state or county governmental documentary transfer or transaction taxes or fees due on the transfer of the Property, (ii) 100% of any charter city governmental documentary transfer or transaction taxes or fees due on the transfer of the Property, (iii) the premium for the Title Policy -- up to the amount of the premium which would be charged for a CLTA standard coverage Owner's policy (i.e., excluding any premium attributable to extended coverage insurance and any endorsements), (iv) 50% of any escrow or other costs charged by or reimbursable to the Title Company (other than the title premium) and (v) all fees and expenses of its legal -19- counsel and other third party consultants engaged by or on behalf of Seller in connection with this transaction. (c) Any costs and expenses of closing that are not expressly identified in subparagraph (a) or (b) above shall be allocated between the parties in accordance with prevailing custom in Los Angeles County, California. Section 6.5 Further Documentation. Buyer and Seller shall provide to --------------------- each service contractor of the Real Property written notice advising such contractors of the sale of the Real Property by Seller to Buyer, and including any other information required by applicable local law. At or following each such close of escrow, Buyer and Seller each shall execute any certificate or other instruments required by law or local custom or otherwise reasonably requested by the other party to effect the transaction contemplated by this Agreement. ARTICLE VII MISCELLANEOUS ------------- Section 7.1 Damage or Destruction. --------------------- (a) Subject to subparagraph (b) below, Buyer shall be bound to purchase the Property for the Purchase Price as required by the terms of this Agreement without regard to the occurrence or effect of any damage to or destruction of the improvements on the Real Property, provided that if Buyer is so bound to purchase the Property, notwithstanding the occurrence of damage or destruction, upon the Closing Date for the Property: (A) in the event of damage fully covered by insurance, Buyer shall receive a credit against the Purchase Price in the amount of the estimated cost of repairs as a result of any such damage or destruction; and (B) in the event of damage not fully covered by insurance, Buyer shall receive a credit in the amount of the estimated cost to repair the damage. (b) Notwithstanding the foregoing, Buyer may terminate this Agreement by written notice of election given promptly to Seller following the event if there occurs damage or destruction to the Property prior to the Closing Date therefor (i) which involves a repair cost in excess of $500,000 (whether or not covered by insurance), excluding the cost of any remaining portion of the seismic retrofit work described in Section 4.7, or (ii) which affords Sony the right to terminate the Sony Lease. Seller shall have the right to terminate this Agreement if the repair costs not covered by insurance are in excess of $250,000 (excluding the cost of any remaining portion of the seismic retrofit work described in Section 4.7), provided that in such case Buyer shall have the right to pay for the estimated cost of repair in excess of $250,000 and proceed with the closing of its acquisition of the Property pursuant to the terms of this Agreement. Section 7.2 Brokerage Commissions and Finder's Fees. --------------------------------------- (a) Each party to this Agreement warrants to the other that, except as provided in subsection (b) below, no person or entity can properly claim a right to a real -20- estate commission, real estate finder's fee, real estate acquisition fee or other real estate brokerage-type compensation (collectively, "Real Estate Compensation") based upon the acts of that party with respect to the transaction contemplated by this Agreement. Each party hereby agrees to indemnify and defend the other against and to hold the other harmless from any and all loss, cost, liability or expense (including but not limited to attorneys' fees and returned commissions) resulting from any claim for Real Estate Compensation by any person or entity based upon such acts. (b) The parties hereby acknowledge that Beitler Commercial, on behalf of Buyer, and Lowe Development, on behalf of Seller (the "Brokers"), have acted as brokers in connection with this transaction. Buyer and Seller shall be responsible for paying any commission due to their respective Brokers in connection with this transaction. Section 7.3 Successors and Assigns. Buyer may not assign any of ---------------------- Buyer's rights or duties hereunder without the prior written consent of Seller; provided that Buyer may assign this Agreement, (a) without Seller's prior consent, to a title-holding corporation whose stock is wholly owned, directly or indirectly, by Buyer or (b) to any other entity affiliated with Buyer, provided that such assignee has, in Seller's reasonable judgment, the financial capacity to perform the obligations of Buyer hereunder. No assignment by Buyer shall relieve Buyer of its obligations under this Agreement. Subject to the limitations on assignment expressed in this Section 7.3, this Agreement shall be binding upon, and inure to the benefit of, Buyer and Seller and their respective successors and assigns. Section 7.4 Notices. All notices or other communications required or ------- provided to be sent by either party shall be in writing and shall be sent by United States Postal Service, postage prepaid or certified mail, return receipt requested, by any nationally known overnight delivery service, by courier, or in person. All notices shall be deemed to have been given forty-eight (48) hours following deposit in the United States Postal Service or upon personal delivery if sent by facsimile, overnight delivery service, courier or personally delivered. All notices shall be addressed to the party at the address below: To Seller: Lowe Enterprises 11777 San Vicente Blvd. #900 Los Angeles, CA 90049 Attn: Mr. Rick Newman Facsimile: (310) 207- 1132 with a copy to: c/o AEW Capital Management, L.P. 225 Franklin Street Boston, Massachusetts 02110 Attn: General Counsel Facsimile: (617) 261-9555 with a copy to: c/o AEW Capital Management, L.P. -21- 601 S. Figueroa Street, Suite 2150 Los Angeles, CA 90017-3405 Attn: Mr. Michael Pepper Facsimile: (213) 629-9160 and with a copy to: Heller, Ehrman, White & McAuliffe 333 Bush Street San Francisco, California 94104 Attn: Brian Smith, Esq. Facsimile: (415) 772-6268 To Buyer: Kilroy Realty L.P. 2250 East Imperial Highway El Segundo, California 90245 Attn: Mr. Jeffrey C. Hawken Facsimile: (310) 322-5981 with a copy to: Appel & Associates 1875 Century Park East, Suite 700 Los Angeles, CA 90067 Attn: Brian J. Appel, Esq. Facsimile: (310) 785-1010 Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section 7.4. The inability to deliver because of a changed address of which no notice was given, or rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. Section 7.5 Time. Time is of the essence of every provision contained ---- in this Agreement. Section 7.6 Possession. The rights of possession of the Property ---------- (subject to the Sony Lease) shall be delivered to Buyer on the Closing Date. Section 7.7 Incorporation by Reference. All of the exhibits attached -------------------------- to this Agreement or referred to herein and all documents in the nature of such exhibits, when executed, are by this reference incorporated in and made a part of this Agreement. Section 7.8 No Deductions or Off-Sets. Buyer acknowledges that the ------------------------- Purchase Price to be paid pursuant to this Agreement is a net amount and shall not be subject to any off-sets or deductions except as specifically provided in this Agreement. Section 7.9 Attorneys' Fees. In the event any dispute between Buyer --------------- and Seller should result in litigation, the prevailing party shall be reimbursed for all -22- reasonable costs incurred in connection with such litigation, including, without limitation, reasonable attorneys' fees. Section 7.10 Construction. The parties acknowledge that each party ------------ and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. Section 7.11 Governing Law. This Agreement shall be construed and ------------- interpreted in accordance with and shall be governed and enforced in all respects according to the laws of the State of California. Section 7.12 Confidentiality. Each of Seller and Buyer hereby --------------- acknowledges and agrees that the existence of this Agreement, and the terms and conditions set forth herein, are to be kept strictly confidential. Accordingly, except as may be required by law or court order, neither Seller nor Buyer shall, without the prior written consent of the other, release, publish or otherwise distribute (and shall not authorize or permit any other person or entity to release, publish or otherwise distribute) any information concerning this Agreement or the transaction contemplated herein to any person or entity other than such party's prospective lenders and such party's legal and financial advisors or other consultants engaged in connection with this transaction, each of whom shall agree to hold such information strictly confidential as if such persons were bound by the provisions of this Section 7.12. The foregoing shall not prevent either party from disclosing the existence, but not the terms, of this transaction to other persons, including, without limitation, prospective property managers and/or leasing brokers. Buyer and Seller shall exercise reasonable efforts to secure the agreement of their respective Brokers identified in Section 7.2 to keep the existence of this Agreement and its terms confidential. Buyer and Seller acknowledge that they will cooperate to prepare a mutually acceptable press release announcing the sale of the Property to Buyer. Section 7.13 Counterparts. This Agreement may be executed in one or ------------ more counterparts. All counterparts so executed shall constitute one contract, binding on all parties, even though all parties are not signatory to the same counterpart. Section 7.14 Entire Agreement: Amendments. This Agreement and the ---------------------------- attached exhibits, which are by this reference incorporated herein, and all documents in the nature of such exhibits, when executed, contain the entire understanding of the parties and supersede any and all other written or oral understanding. This Agreement may not be amended or modified except by a written instrument signed by Buyer and Seller. Section 7.15 Further Assurances. From and after the date of this ------------------ Agreement, Seller and Buyer agree to do such things, perform such acts, and make, execute, acknowledge and deliver such documents as may be reasonably necessary or proper and usual to complete the transactions contemplated by this Agreement and to -23- carry out the purpose of this Agreement in accordance with this Agreement. Seller agrees that for a period of sixty (60) days following the closing, Seller or its representatives will provide, at no cost to Buyer, Seller's time and personnel for the purposes of (a) providing reasonable assistance to Buyer in the transition of the Property to new ownership, including familiarizing Buyer with the Property files and introducing Buyer to vendors, contractors and tenant representatives at the Property and (b) enabling Buyer to review any Due Diligence Materials that may be necessary for Buyer to comply with regulatory compliance requirements applicable to Buyer; provided. that such activities -------- shall in no way operate to supplement or expand the limited representations and warranties of Seller contained in this Agreement. Section 7.16 Partial Invalidity. If any provision of this Agreement is ------------------ determined by a proper court to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement and this Agreement shall remain in full force and effect without such invalid, illegal or unenforceable provision. Section 7.17 Waivers. No waiver of any provision of this Agreement or ------- any breach of this Agreement shall be effective unless such waiver is in writing and signed by the waiving party and any such waiver shall not be deemed a waiver of any other provision of this Agreement or any other or subsequent breach of this Agreement. Section 7.18 Damages. Subject to the limitations of Section 4.4 and ------- except as provided below, Buyer agrees that any liability of Seller under any claim brought prior to the Closing Date pursuant to this Agreement or any document or instrument delivered simultaneously or in connection with, or pursuant to this Agreement, shall be limited solely to its interest in the Property, and no other assets of Seller shall be subject to levy or execution With respect to any such claim brought following the Closing Date, any liability of Seller shall be limited solely to the assets of Seller, provided that Seller agrees that it shall, during the Limitation Period, maintain assets or permit Buyer recourse to assets, of at least $500,000 to cover any claims that may be asserted by Buyer under this Agreement following the Closing Date, in addition to the amounts held in the Escrow Account pursuant to the Escrow Agreement. In addition, in the event that any legal action is commenced by Buyer against Seller during the Limitation Period based on a claim arising out of this Agreement, Seller shall, until such claim is resolved, maintain or permit Buyer recourse to assets equal to the lesser of (a) the amount of such claim, or (b) $500,000, in addition to the amounts held in the Escrow Account pursuant to the Escrow Agreement. The minimum amounts described in the preceding two sentences shall be referred to herein as the "Minimum Assets". Except as expressly -------------- provided in this Section 7.18,Seller shall be under no obligation to retain, or afford Buyer recourse to, any assets of Seller following the Closing Date. In no event shall either party seek satisfaction for any claim asserted by such party against the other from any of the other party's trustees, beneficiaries or partners or from any partners, shareholders, directors, officers, employees, agents, legal representatives, successors or assigns of such party or such party's trustees, beneficiaries or partners, nor shall any such person or entity have any personal liability for any such obligations of the other party, provided (i) notwithstanding anything to the contrary in this Agreement, - -------- including without limitation -24- Section 4.4 hereof, that the foregoing shall not limit Buyer's ability to trace, and have recourse to, the proceeds of the sale of the Property to the extent that the cost to complete the Retrofit Work exceeds the amount of funds in the Escrow Account established pursuant to the terms of the Escrow Agreement attached hereto as Exhibit I and (ii) except as provided in subsection (i) --------- above, that Buyer shall have the right to seek satisfaction for claims following the Closing Date from AEW Partners, L.P., a Delaware limited partnership, solely if Seller has either liquidated, dissolved or failed to maintain the pertinent Minimum Assets during or following the -24A- Limitation Period, provided further that any such claims shall remain subject to ---------------- the limitations set forth in Section 4.4 above. AEW Partners has executed this Agreement in the space provided below the parties' signature blocks for the sole purpose of confirming the foregoing conditional right of action of Buyer. In no event shall AEW Partners, L.P. have any other liability or obligation arising out of this Agreement. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the day and year first written above. BUYER: SELLER: KILROY REALTY L.P.,a Maryland SANTA MONICA NUMBER SEVEN Limited Partnership ASSOCIATES L.P., a Delaware limited partnership By: KILROY REALTY CORPORATION, A Maryland Corporation By: COLORADO PHASE III L.P.,a Its General Partner California Limited Partnership Its General Partner By: /s/ HUGH GREENUP ------------------------- By: COLORADO PHASE III, Name: Hugh Greenup --------------------- INC., a California corporation Title: General Counsel --------------------- Its General Partner By: /s/ RICHARD NEWMAN JR. By: ---------------------- _________________________ Name: RICHARD NEWMAN JR. Name: -------------------- _____________________ Title: VICE PRESIDENT Title: -------------------- _____________________ -25- Solely for the limited purpose described in the final sentence of Section 7.18 above: AEW Partners L.P.,a Delaware limited partnership doing business in Arizona as AEW Partners Limited Partnership. By: AEW/L.P., a Delaware limited partnership, its general partner By: AEW Inc., a Delaware Corporation, its general partner By: [SIGNATURE ILLEGIBLE] --------------------- Its: Vice President --------------------- -26- EXHIBIT A --------- DISCLOSURE STATEMENT All capitalized terms used herein but not otherwise defined shall have the meanings given them in the Agreement. 1. Matters disclosed by any environmental reports and audits, structural, soils and other physical inspection reports, title reports and surveys delivered to Buyer prior to the end of the Inspection Period or included in the materials delivered to or made available to Buyer pursuant to Section 2.3 of the Agreement. 2. The Personal Property and the improvements located on the Real Property, and their structural components, the building systems and other mechanical systems, and the parking and loading areas are, and have been, subject to normal wear and tear and obsolescence as the result of the age of such items. 3. Seller received notice from the Santa Monica Fire Marshal that the Property needs to have street address numbers at least 6" in height with a 3/4" wide stroke at rear entrance. Currently the Property has numbers 3" in height with a 1/2" wide stroke. Seller has asked for a variance as of June 3, 1997, but has not yet received a response. 4. To Seller's Knowledge, Seller possesses all licenses, permits and approvals required in connection with the ownership and operation of the Property with the exception of the Waste Water Treatment Plant, for which licensing and permits are currently under application with the Air Quality Management District. All the matters set forth on this Disclosure Statement are limited to Seller's Knowledge. Seller does not make any representations or warranties, other than as expressly set forth in the Agreement, regarding the scope or content of the matters referenced in this Disclosure Statement. Neither the foregoing list nor the materials referred to therein are intended to be an exhaustive enumeration of issues relevant to the Property, nor are they intended to fully inform you of any particular issue or its ramifications. Rather this Disclosure Statement is presented to you pursuant to Section 4.1 of the Agreement and is merely intended to assist you with your investigation of the Property by flagging for you those matters which, to Seller's Knowledge, may affect the Property or Seller's warranties and representations set forth in Section 4.1 of the Agreement. EXHIBIT B --------- INSPECTION LETTER __________, 1997 AEW Capital Management, L.P. 225 Franklin Street Boston, Massachusetts 02110 Attn: General Counsel Re: Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California dated June 16, 1997 (the "Purchase Agreement") between Santa Monica Number Seven Associates L.P. ("Seller") and Kilroy Realty L.P. ("Buyer") Gentlemen & Ladies: This letter constitutes the Inspection Letter contemplated by the above referenced Purchase Agreement and is delivered to confirm the satisfaction of the condition precedent described in Section 3.1(a)(i) of the Purchase Agreement. Buyer hereby expressly confirms to Seller (and to its trustees and beneficiaries and their respective agents, employees, successors and assigns) that Buyer has completed to its satisfaction the inspection and review of the Remaining Due Diligence Items (as such term is defined in Section 2.3(a) of the Purchase Agreement. Buyer, moreover, hereby ratifies and affirms all of the acknowledgements, waivers and releases set forth in Section 2.3 of the Purchase Agreement. Accordingly, based on its inspection and review of the Property, Buyer is prepared to proceed with the purchase of the Property in accordance with the terms of the Purchase Agreement subject only to the satisfaction of the conditions described in Sections 3.1(a)(ii)-(vii) of the Purchase Agreement. Very truly yours, KILROY REALTY L.P.,a Maryland limited partnership By: Kilroy Realty Corporation, a Maryland corporation Its General Partner By:__________________________ Name:________________________ Title:_______________________ By:__________________________ Name: _______________________ Title:_______________________ EXHIBIT C --------- LIST OF CONTRACTS AND WARRANTIES 1. Roofing and Waterproofing Warranty - Owen Pacific 2. Pest Control Service Agreement - ORKIN 3. Parking Management Contract - Century Parking, Inc. 4. Landscaping Agreement - Live Art Plantscapes 5. Carpet/Wood Floors Agreement - InTex Services 6. HVAC Service Contract - Imperial Air Conditioning Corp. 7. Elevator Maintenance Agreement- Schindler Elevator Corp. 8. Water Waste Treatment Agreement - Integrated Performance 9. Fire Alarm System - TRL Systems, Inc. 11. Property Management Agreement - Santa Monica Lowe Partners 12. Fish Pond Service - Asahi Fancy Koi, Inc. 13. Property Tax Audit - Red Estate Tax Services EXHIBIT D --------- PROPERTY DESCRIPTION DESCRIPTION - ------------------------------------------------------------------------------- PARCEL 1: LOT 7 OF TRACT NO. 49694, IN THE CITY OF SANTA MONICA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1175 PAGES 37 TO 40 INCLUSIVE, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL 2: THAT PORTION OF THE RIGHT-OF-WAY, 100.00 FEET WIDE, OF THE SOUTHERN PACIFIC RAILROAD COMPANY, IN THE CITY OF SANTA MONICA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 40 PAGE 282 OF DEEDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CURVED NORTHWESTERLY LINE OF SAID RIGHT-OF- WAY, 100.00 FEET WIDE, WITH THE CURVED NORTHWESTERLY LINE OF THE LAND DESCRIBED IN PARCEL 3 OF THE FINAL ORDER OF CONDEMNATION NO. 496651, FILED JULY 23, 1945 AND ENTERED JULY 24, 1945 IN JUDGMENT BOOK 1553 PAGE 27, SUPERIOR COURT RECORDS OF SAID STATE; SAID LAST MENTIONED CURVE BEING CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 905.00 FEET; A RADIAL LINE OF SAID CURVE TO SAID INTERSECTION BEARS NORTH 51 DEGREES 34 MINUTES 36 SECONDS WEST; THENCE SOUTHWESTERLY AND CONTINUING ALONG SAID CURVE, 94.25 FEET THROUGH A CENTRAL ANGLE OF 5 DEGREES 58 MINUTES 02 SECONDS TO A POINT IN A CURVED LINE BEING CONCENTRIC WITH AND DISTANT SOUTHEASTERLY 40.00 FEET MEASURED RADIALLY FROM SAID NORTHWESTERLY LINE OF SAID RIGHT-OF-WAY, 100.00 FEET WIDE; SAID LAST DESCRIBED CURVE BEING CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 11,663.40 FEET; A RADIAL LINE OF SAID CURVE TO SAID POINT BEARS NORTH 29 DEGREES 38 MINUTES 43 SECONDS WEST; THENCE SOUTHWESTERLY 636.65 FEET ALONG SAID CONCENTRIC CURVE THROUGH A CENTRAL ANGLE OF 3 DEGREES 07 MINUTES 39 SECONDS, TO THE NORTHEASTERLY LINE OF TWENTIETH STREET, 70.00 FEET WIDE, AS SHOWN ON THE MAP OF TRACT NO. 9774 IN SAID CITY AND RECORDED IN BOOK 140 PAGES 64 AND 65 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG SAID LAST DESCRIBED NORTHEASTERLY LINE NORTH 44 DEGREES 45 MINUTES 25 SECONDS WEST 40.88 FEET TO ITS INTERSECTION WITH SAID CURVE NORTHWESTERLY LINE OF SAID RIGHT-OF-WAY, 100.00 FEET WIDE; SAID LAST MENTIONED CURVE BEING CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 11,703.40 FEET; A RADIAL LINE OF SAID CURVE TO SAID INTERSECTION BEARS NORTH 32 DEGREES 48 MINUTES 53 SECONDS WEST; THENCE NORTHEASTERLY 732.79 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 3 DEGREES 35 MINUTES 15 SECONDS TO THE POINT OF BEGINNING. PARCEL 3. NON-EXCLUSIVE EASEMENTS FOR THE PURPOSES OF VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS, PARKING TOGETHER WITH THE RIGHT TO USE A PARKING TICKET COLLECTION BOOTH, AS PROVIDED FOR IN THAT CERTAIN DOCUMENT ENTITLED "SECOND DECLARATION OF PROTECTIVE COVENANTS AND RESTRICTIONS AND RECIPROCAL EASEMENT AGREEMENT FOR THE ARBORETUM" RECORDED NOVEMBER 23, 1994 AS INSTRUMENT NO. 94-2115484, OVER LOT 6 AND THOSE PORTIONS OF LOTS 4 AND 5 OF TRACT NO. 49694, RECORDED IN BOOK 1175 PAGES 37 TO 40 INCLUSIVE OF MAPS, SHOWN AS PARCEL C OF THE CERTIFICATE OF COMPLIANCE NO. WPM 96-01, RECORDED APRIL 4, 1997 AS INSTRUMENT NO. 97-512250. - -------------------------------------------------------------------------------- EXHIBIT E --------- DEED [Form attached] DEED ---- RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: MAIL TAX STATEMENTS TO: - -------------------------------------------------------------------------------- (Above Space For Recorder's Use Only) The undersigned grantor declares: Documentary Transfer Tax is shown on a separate sheet attached to this deed and is not a part of the public record. - -------------------------------------------------------------------------------- GRANT DEED FOR A VALUABLE CONSIDERATION, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, Santa Monica Number Seven Associates L.P., a Delaware limited partnership ("Grantor"), hereby grants to Kilroy Realty L.P., a Maryland limited partnership, that certain real property described on Exhibit "A" attached hereto and made a part ----------- hereof (the "Property"), TOGETHER with all improvements located thereon and all rights, privileges, easements and appurtenances of Grantor appertaining to the Property and all right, title and interest of Grantor in, to and under adjoining streets, rights-of-way and easements. DATED: _____________, 1997 GRANTOR: SANTA MONICA NUMBER SEVEN ASSOCIATES L.P., a Delaware limited partnership By: COLORADO PHASE III L.P., a California limited partnership Its General Partner By: COLORADO PHASE III, INC., a California corporation Its General Partner By:___________________________ Name:_________________________ SEPARATE STATEMENT OF DOCUMENTARY TRANSFER TAX ------------------------ County Recorder Los Angeles County Gentlemen: In accordance with Revenue and Taxation Code Section 11932, it is requested that this Statement of Documentary Transfer Tax due not be recorded with the attached deed, but be affixed to the deed after recordation and before return as directed on the deed. The deed names the undersigned as Grantor, and Kilroy Realty L.P.,a Maryland limited partnership, as Grantee. The undersigned Grantor declares: A. The purchase price for the property is $31,000,000. B. The documentary transfer tax is $34,100,based upon $1.10 per $1,000 of property value. C. The real property being transferred is located in the City of Santa Monica, County of Los Angeles, State of California, as more particularly described in the deed. Very Truly Yours, SANTA MONICA NUMBER SEVEN ASSOCIATES L.P., a Delaware limited partnership By: COLORADO PHASE III L.P., a California limited partnership Its General Partner By: COLORADO PHASE III, INC., a California corporation Its General Partner By:___________________________ Name:_________________________ EXHIBIT F --------- BILL OF SALE FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby expressly acknowledged, Santa Monica Number Seven Associates L.P., a Delaware limited partnership, hereby assigns, transfers and conveys a fee interest to Kilroy Realty L.P., a Maryland limited partnership ("Buyer"), in and to all of the Personal Property (including the personal property listed on Schedule 1 attached hereto) and Intangible Property of Seller, as such terms are - ---------- defined in that certain Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California dated as of June 16, 1997, by and between Seller and Buyer (the "Purchase Agreement"). The foregoing conveyance is made pursuant to, and is subject to the terms and conditions of, the Purchase Agreement. Seller hereby warrants to Buyer that it is the lawful owner of the Personal Property and the Intangible Property, that the Personal Property and Intangible Property are free of all encumbrances and that Seller has good right to sell the Personal Property and the Intangible Property. IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of _________ 1997. SELLER: SANTA MONICA NUMBER SEVEN ASSOCIATES L.P., a Delaware limited partnership By: COLORADO PHASE III L.P., a California limited partnership Its General Partner By: COLORADO PHASE III, INC., a California corporation Its General Partner By:___________________________ Name:_________________________ SCHEDULE 1 ---------- Personal Property . Miscellaneous power and hand tools located at the Property. . Plans, files and documents stored on-site at the Property. EXHIBIT G --------- ASSIGNMENT OF LEASES AND INTANGIBLE PROPERTY FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby expressly acknowledged, Santa Monica Number Seven L.P., a Delaware limited partnership ("Assignor"), hereby assigns, transfers and conveys to Kilroy Realty L.P., a Maryland limited partnership ("Assignee"), all of the landlord's right, title and interest in and to the Sony Lease and the Intangible Property, as those terms are defined in that certain Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California dated June 16, 1997 (the "Agreement"), entered into by and between Assignor, as "Seller," and Assignee, as "Buyer." In accordance with the Agreement, Assignee hereby assumes all obligations of Seller as landlord under the Sony Lease, as tenant under the MTA Lease and as owner of the Intangible Property (including, without limitation, Assignor's rights and interests as a party to the Contracts) to the extent such obligations arise on or after the date of this Assignment (collectively, the "Assigned Obligations"), and Assignee agrees to indemnify and defend Assignor against, to hold Assignor harmless from, and to reimburse Assignor for, any and all loss, cost, liability and expense (including attorneys' fees) arising out of or relating to any breach or alleged breach of the Assigned Obligations occurring (or alleged to have occurred) on or after the date of this Assignment. Assignor agrees to indemnify and defend Assignee against, to hold Assignee harmless from, and to reimburse Assignee for, any and all loss, cost, liability and expense (including attorneys' fees) arising out of or relating to any breach or alleged breach of any obligations of the Landlord under the Lease or as owner of the Intangible Property (including the Contracts) occurring (or alleged to have occurred) prior to the date of this Assignment. This Assignment may be executed in one or more counterparts. All counterparts so executed shall constitute one contract, binding on all parties, even though all parties are not signatory to the same counterpart. Any liability which may arise as a consequence of the execution of this Assignment by or on behalf of either Assignor or Assignee shall be a liability of Assignor or Assignee, as applicable, and not the personal liability of any trustee, corporate officer of a trustee, corporate officer of such party or employee of such party. IN WITNESS WHEREOF, Assignor and Assignees have executed this Assignment of Leases and Intangible Property as of _________, 1997. ASSIGNEE: ASSIGNOR: KILROY REALTY L.P., a Maryland SANTA MONICA NUMBER SEVEN limited partnership ASSOCIATES L.P., a Delaware limited partnership By: Kilroy Realty Corporation, A By: COLORADO PHASE III L.P., a Maryland corporation California limited partnership Its General Partner Its General Partner By:_____________________ By: COLORADO PHASE III, INC., a California Name:___________________ corporation Its General Partner Title:__________________ By:______________________ By:_____________________ Name:____________________ Name:___________________ Title:___________________ Title:__________________ Exhibit G - Page 2 EXHIBIT H --------- DUE DILIGENCE MATERIALS DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 1. Materials provided on or before May 30, 1997 from Lowe Enterprises: A. SOIL REPORTS ------------ Report of Foundation Investigation - (June 13, 1991) Law/Crandall REPORT OF PRELIMINARY FOUNDATION INVESTIGATION - (OCT08ER 3, 1985) Report of Ground Motion Studies - (December 26, 1989) LeRoy Crandall And Associates Report of Geotechnical Investigation - (April 17, 1997) Law/Crandall Report of Foundation Investigation - (December 4, 1989) Geotechnical Executive Summary - (Letter dated April 10, 1997) Proposal for Geotechnical Investigation (Letter dated February 24, 1997) B ENVIRONMENTAL ------------- Report of Environmental Assessment - (November 3, 1988) LeRoy Crandall And Associates Environmental Materials packet Report of Building Survey For Asbestos-Containing Materials - (dated November 2, 1988) Letco Associates, Inc. Letter RE: Hydrocarbon Leakage - (dated October 15, 1986 Southmark Pacific Corp. Report of Environmental Assessment And Geologic-Seismic Hazards Study - (dated November 3, 1988). LeRoy Crandall And Associates Memo from Mac to Marcia with attachments - (dated November 1, 1996) Supplementary Environmental Information LeRoy Crandall And Associates Report of Phase I Environmental Site Assessment - (dated November 21, 1996) Law/Crandall C. COPIES OF SERVICE AGREEMENTS & CONTRACTS - (Delivered 5/30 via FEDX) -------------------------------------------------------------------- L.E. PROPERTY MANAGEMENT FILES 1. Property Management Agreement - Santa Monica Lowe Partners 2. Roofing And Waterproofing Warranty - Owen Pacific 3. Pest Control Service Agreement - ORKIN 4. Parking Management Contract - Century Parking, Inc. 5. Landscaping Agreement - Live Art Plantscapes 6. Carpet/Wood Floors Agreement- InTex Services 7. HVAC Service Contract - Imperial Air Conditioning Corp. 8. Elevator Maintenance Agreement - Schindler Elevator Corp. 9. Water Waste Treatment Agreement - Integrated Performance 10. Window Washing - Skyline Services 11. Fish Pond Service - Asahi Fancy Koi, Inc. 1 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- D. Preliminary Title Report as of May 8th 1997 E. Amended CC&R's F. Copy of Certificate of Occupancy G. Plans for the Sony Music Project: . Architectural . Electrical . Structural . Plumbing . HVAC H. Closure report from Clean Up Technologies, RE: Soils I. Water Treatment Agreement & Plans J. Schindler Elevator Corporation Contract K. Real Estate Tax Services Contract L. Monthly Operating Reports - 01/97 - 04/97 II. Due Diligence Documentation - (Delivered May 5, 1997 by AEW) 1. Year End Financial Statements: 1994-1996 2. Non Reimbursable Expense Worksheet 3. Development Agreement 4. Declaration of Protective Covenants, Conditions, and Restrictions and Reciprocal Easement Agreement for the Arboretum 5. Arboretum Settlement Agreement 6. Director's Action by Unanimous Written Consent, The Arboretum Association 7. Memo re: Parking Requirement Calculations 8. MTA Lease 9. Sony Music Lease 10. Correspondence re: Lease Renewal 11. Structural Engineering Reports 12. Correspondence re: facade Repair/Retrofit Project 13. First Cause of Action/Lowe Development Corp. vs. Orange County Plastering 14. Correspondence re: Orange County Plastering lawsuit 15. Settlement Agreement 16. Sony Office Lease 17. Operating Expense Reconciliation 18. CLA File C-1439 Site Observation Report #1 through #6 19. Preliminary Project Report 20. Excerpt from December 1995 Appraisal 21. Floor Plans 22. Certificate of Insurance 23. Replacement Cost Memorandum 24. Correspondence: Remediation Program 25. Phase I Environmental Assessment (performed for Lincoln Property Co. on the Arboretum site which is adjacent to Sony Music Campus). 2 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- III List of all files/information in Lowe Enterprises Possession: A. SONY ASSET MANAGEMENT FILES --------------------------- LE - 9TH Floor - (S. Sanchez/R. Newman files) 1. ADP 2. Aldrich Eastman Waltch 3. Budget 1996 4. Business Plan 5. Correspondence 6. Credit Lyonnais 7. Development/Property Management Agreement 8. Earthquake Costs 9. Insurance 10. Leaks 11. Sony Lease 12. John Lewis 13. Monthly Reports 14. Parking 15. Business Plan & Quarterly Operating Reports 16. Property Management 17. Operating Expense Reconciliation 18. City of Santa Monica 19. Soils (closure) 20. SMNSA Budget 21. CCR's 22. Development Agreement 23. Environmental 24. Soils Reports B. ARBORETUM DEVELOPMENT & SONY FILES ---------------------------------- LE - FILE STORAGE (9TH FLOOR) 1. DA Amendment City Council 2. ADP/SMNSA - Final Settlement Agreement 3. EIR/Planning Commission for Processing of ARBO-DA Amendment #2 - 1994 4. Arboretum Development Agreement Amendment Two 5. Development Agreement 6. ADP Settlement Agreement - 11/94 7. Amendment Arboretum CC&R's - 11/94 8. Architectural Committee 9. ADP Arboretum DA Amendment - City Council 10. Sony/Arbor Business License 11. ADP/SMNSA - Issues/Settlement 12. ADP/SMNSA - Issues/Settlement - 1993 13. ADP/SMNSA - Declarancy Suit/Settlement Agreement 14. ADP/SMNSA-DA-Amendment Suit 15. Arbor Association 3 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 16. ADP/SMNSA 17. ARBO - Watergarden vs. ADP 18. SMNSA 1993 Financials 19. ADP - CC&R's 20. Arboretum - Development/Property Management 21. Arboretum - Lawrence & Harding 22 Sony - Earthquake Restoration 23. Sony - Earthquake Costs/Draws 24. Sony - "C of O" 25. SMNSA Tax Appeal 26. SMNSA Monthly Reports 27. Sony Correspondence 28. Sony - Water damage/Kemper 29. Sony - Leaks 30. Sony - "Awards" files 31. Sony Soils 32. Sony "Sale" Proposal 33. Sony Music Campus/SM (Law/Crandall, Inc.) 34. Sony Music Campus City of S.M. 35. ARBOR 20/20 Video 36. RTC/San Jacinto Loon Pool v Purchase 37. Sub-Contractors/Suppliers List 38. Sub-Lease Form 39. Personnel 40. Service Call Log 41. Chron File 42. Outstanding Leases 43. Arboretum Aerials 44. Arboretum Hotel Site 45. Arboretum - Project Description 46. Arboretum- Peck/Jones 47. Pre-Construction Agreement 48. Arboretum - Gensler Architectural Contract with S.M Lowe Partners, L.P. C. ADP/SMNSA FILES --------------- LE - BOXED IN STORAGE ROOM 1. ADP Suit O9.13.1994 2. ADP/Lowe/AEW Fraud Suit (correspondence) 3. ADP/Lowe/AEW Fraud Suite 4. ADP/SMNSA - "Declarancy Suit" 5. ADP/SMNSA - "Declarancy Suits" (correspondence) 6. ADP/SMNSA - DA Suite Discovery 7. ADP/SMNSA "# Votes" Association Suit 8. ADP/SMNSA DA Amendment Suit 9. ADP/SMNSA DA Amendment Suit (correspondence) 10. ADP/SMNSA Settlement Drafts/Discussions 4 EXHIBIT 1l - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 11. Number Two (7/26/94) 12. Sony to be approved (Charlotte's Construction Administration) D. CONSTRUCTION PLANS & FILES -------------------------- Sony Garage Storage 1. Construction Plans: TI And Shell 2. Construction Files: Reports, Budgets, Draws Process, Inspections, etc. E. SONY PROPERTY MANAGEMENT FILES ------------------------------ LE - 9th Floor Files - Property Management 1. Air Quality Management 2. American Industrial Supply 3. Appraisal 1995 4. Awnings 5. Back-up Power System 6. Browning Ferris Industries 7. Business License 8. Business Plan/Budget 9. Budget & Business Plan 10. Budget Notes 11. Carpet - Masland Carpets Inc. 12. Carpet/Wood Floors - Intex Services 13. Carpet/Wood Floors - Service Tickets (Intex) 14. Carpet/Wood Floors - 1995 15. Certificate of Occupancy 16. Chambers of Commerce 17. City of Santa Monica 18. Claim Handling Procedures 19. Columbia - Reception Desk 20. Columbia - West Conference Room 21. Columbia - Conference Room 22. Columbia - Mat 23. Columbia - Skylight 24. Construction - Agreement 25. Construction - Saunders Construction 26. Construction Loan 27. Correspondence - Lease 28. Correspondence - NewLowe Construction 29. Correspondence - Sergio Navarro 30. COX Industrial 31. CPI Increases 32. Credit Applications 33. Dalon Engineering 34. Draperies 35. Doors - Hardware (S&S) 5 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 36. Doors 37. Doors - (Walters & Wolf) 38. Employee Listings 39. Earthquake - ACCO 40. Earthquake - Releases 41. Earthquake - Carpets 42. Earthquake - AEW Draw Requisition 43. Earthquake - Revised Earthquake Budget 44. Earthquake - Damage Meeting 45. Earthquake - EDA Reports 46. Earthquake - Emergency Shut Offs 47. Earthquake - Facility Memorandums 48. Earthquake - Indoor Air Quality 49. Earthquake - Information to Tenants 50. Earthquake - Related Invoices 51. Earthquake - Punch Lists 52. Earthquake - Painting 53. Earthquake - Repairs- LDC 54. Earthquake - Seismic Engineering Association 55. Earthquake - Studio 56. Earthquake - Thetford 57. Earthquake - Video Tapes 58. Earthquake - TRL 59. Earthquake - Water Damage/lnsurance 60. Earthquake - Waterproofing Repairs 61. Electrical - Halo Electric 62. Elevators - Permits 63. Elevators - Schindler 64. Elevators- Safety Materials 65. Emergency Contact List 66. Environment Air Quality 67. Phantom Direct (Vacuum Cleaner) 68. Fire - Fire Life & Safety 69. Fire - Instant Fire Protection 70. Fire - Studio Pre-action System 71. Fire - Monitoring 72. FIRE - Grinnel Fire Protection 73. FIRE - Fire Sprinklers 74. Fire - World Fire Protection 75. Floor Cleaning 76. Furniture Floor Plans 77. Flooring - Pacific Flooring Inc. 78. Garage Door- Vortex 79. Garbage Collection (BFI) 80. GILL Construction (Energy Management) 81. Glass - Glass Table/Columbia Building 82. Glass - Lynden Glass Company 83. Glass - Swartz Glass Company 84. Hazardous Waste Manifest 6 EXHIBIT H-DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 85. HVAC-Imperial A/C 86. HVAC-A/C Data Room 87. HVAC-Notes 88. Indoor Air Quality 89. Images of 90. Insurance-Insurance Claims Procedures 91. Insurance-Miscellaneous Certificates 92. Insurance-Sony 93. Insurance-Vendor Correspondence 1994 94. Janitorial-Gemini Excellence In Maintenance 95. Janitorial-MainTech 96. Janitorial-John Kalodner 97. Landscaping-Landscaping 98. Landscaping-Live Art PlantScapes 99. Leaks-Leaks 100.Leaks-Water Leaks 101.Legal-Bisno Settlement Agreement 102.Legal-Greenwood Suit 103.Legal-Legal 1 104.Legal-Legal 2 105.Legal-Notices 106.Lighting-3rd Floor Conference Room 107.Lighting-Art Gate Lighting 108.Lighting-Christopher Electrical Service 109.Lighting-Graham Lighting 110.Lighting-Midwest Wholesale Lighting 111.Lighting-Regency Lighting 112.Lock-Lock Combinations 113.Lock-Master Keys 114.Lock-Manchester Lock & Key 115.Mailroom 116.Maintenance Logs-Jan-June 1997 117.Maintenance Logs-Jul-Dec 1997 118.Maintenance Requests 1996 119.Preventive Maintenance Calendar 120.Metropolitan Transportation Authority 121.1994 Operating Expense Reconclliation 122.1994 Actual Operating Expense-Reimbursement 123.Operating Expenses 124.Painting-A-1 Work Painting 125.Painting-Duggan & Associates 126.Painting-Painting 127.Parking 128.Parking-Century 129.Parking Fees 130.Pest Control-Orkin Pest Control 131.Pest Control-Advance 132.Photographs 133.Pizzulli Associates, Inc 7 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 134. Planter Drains 135. Plumbing - All Area Plumbing Inc. 136. Plumbing - Backflow Testing 137. Plumbing - Plumbing Information 138. Plumbing - Faucets 139. Plumbing - Fish Pond 140. Plot Plan 141. Property Management File 142. Proposition 65 Signage 143. Power Outage/Generator 144. Prudential Overall Supply 145. Roof - Warranty File 146. Roof - Owen Pacific Roofing 147. Roof - San Marino Roof Company, Inc. 148. Sam's U-Drive 149. Satellite Dish 150. Security - GuardsMark Incident Reports 151. Security - Melvin Barnum Security 152. Security - ADT Access Card 153. Security - Security Access Fax 154. Signage - Carl Berkhout, Inc. 155. Signage - CAS 156. Signage - Signage Page 157. Signage - Plan 158. Power - Southern CA Edison 159. Power - Southern CA Millwork 160. Power - Door Veneers 161. Stairwells - Vinyl Samples 162. Stairwells - Railing Corp. Building 163. Studio 164. Studio - Notices - Phil Kaye 165. Studio Security 166. Studio - Correspondence 167. Studio- Sample (Marmoleum) 168. Studio Basketball Court 169. Sub-contractors List 170. Sump Pump (Cox Industry) 171. Tape Library 172. Taxes - Tax Appeal 173. Taxes - Real Estate Tax Service 174. Taxes - KRMG Peat Marwick 175. Taxes - Property Tax Appeal 176. Teleco Room 177. Teledata Room 178. Teledata Room Expansion 179. T.I. Buildout 180. Tool Inventory 181. TRL Systems 182. Valuation Data Summary 8 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 183. Wall Finishing (Interior) 184. Warehouse - AVID Room 185. Water Heater Temps 186. Water Leaks 187. Water Treatment 186. Waste Treatment - (IPC) 189. Waste Treatment - (Thetford Systems) 190. West Coast Elevator Pads 191. Westwood Wholesale Electric 192. Window Washing - Skyline Service 193. Wood Trends 194. Zee Medical Service. F. CONSTRUCTION FILES ------------------ Jamie Daugherty's files at NewLowe (1) SONY STRUCTURAL RETROFIT CONTRACT FILES --------------------------------------- 1. AEW/Santa Monica Number Seven Associates 2. Dimitry Vergun 3. Owner/Contractor Agreement (Santa Monica #7 & LECG) 4. Sony Music 5. Ted Gropman 6. TruForm Construction 7. Tuttle & Taylor 8. Building Analytics 9. Bob Dampf - Expense Reports 10. Chris Barr Painting 11. Daily Construction Reports 12. Memos - Rick Newman 13. Memos - Aida Goodbarian 14. Memos - Bob Dampf 15. Settlement Information - Orange County Plastering 16. Santa Monica Number Seven 17. Truform Construction 18. Memos to Aida Goodbarian 19. Memos to Bob Dampf (2) SONY EARTHQUAKE REPAIR - CONTRACT FILES --------------------------------------- 1. ACCO 2. Advanced Waterproofing 3. Aldrich, Eastman & Waltch 4. American Bonding Company 5. Arend & Associates 6. Booth, Mitchell & Strange 7. Carmel Architectural Sales 8. Carnevale & Lohr 9. Chris Barr Painting 9 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 10. Christopher Electric 11. Civic Engineering 12. Clean Up Technology 13. CAN Insurance 14. Continental Studio Builders 15. Dalan Engineering 16. Devco Engineering 17. Dimitry Vergun 18. Duggan & Associates 19. Fetzers, Inc. 20. GSC Associates 21. Harry S. Peterson 22. Home Insurance 23. Integrated Performance Consultants 24. International Marble 25. Intex Service (3) EARTHQUAKE REPAIR (2-LEAF) -------------------------- 1. Arend & Associates 2. As-Built Information 3. Attic Stock Carpet 4. Backup Power System 5. Bid Analysis 6. Budget Estimates - Earthquake 7. Building Department 8. Carpet Issues - Masland Mills 9. Closeout Schedule 10. Construction Estimates 11. Devco Design Calculations 12. Door Survey 13. Earthquake Repair Log - Exterior Damage 14. Earthquake Repair Log Interior Damage 15. Elevator Information 16. Epic Facade Failure Repair Costs 17. Estimates - Misc. T.I.'s 18. Estep & Sons 19. GC Fee Calculation 20. Har-Bro Construction - EQ Retro Estimate 21. Halco Electric 22. Integrated Performance Consultants 23. Job Cost Information 24. Karmey Waterproofing - Insurance Claim 25. Leak Survey 26 Maintenance 27. Masland Carpets Inc. 28. Mediation Information 29. Meeting Minutes - Sony 30. Memos Aida Goodbarian 10 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 31. Memos Angie Olmos 32. Memos Cindy Buddes 33. Memos Debra Masuda 34. Memos Diane Thompson 35. Memos Gary Bertisch 36. Memos Janice Clark 37. Memos Jeanette Iverson 38. Memos Jim Arend 39. Memos Mitch Rozalsky 40. Memos Rick Newman 41. Memos Vincent Adams 42. Metalurgical Testing Corporation 43. Planters 44. Punchlist 45. Schedules 46. Settlement Information - O.C.P. 47. Shapiro - Ben Basat 48. Sony Music Lease 1630 21st 49. Structural Information 50. Subcontractor List 51. Waterproofing 52. Westland Heating & Air 53. Zenon (4) SONY PROJECT EARTHQUAKE REPAIRS #2 ---------------------------------- 1. Advance Waterproofing 2. Daily Reports 3. Pizzulli 4. Ismail & Otova 5. Steven Ehrlich 6. Seismic Engineering Assoc. 7. ACCO 8. Truform Construction 9. Continental Studio builders 10. Fetzers Inc. 11. Sony 12. Deimitry K. Vergun 13. Kemper Insurance 14. Sheldon Pollack; 15. International Marble 16. Devco Engineering 17. AEW 18. Smith Emery Company 19. Home Insurance 20. Ted Gropman 21. GSC & Associated 22. CNA Insurance 23. Toshco 11 EXHIBIT H - DUE DILIGENCE MATERIALS - -------------------------------------------------------------------------------- 24. Cleanup Technology 25. Western Office Interiors 26. American Bonding Company 27. Thetford Systems 28. Intex Services, Inc. 29. Christopher Electric 30. Johnson & Higgins 31. Civic Engineering 32. Marks & Golia 33. Kirtland & Packard 34. Sedgwick, Detert, Moran & Arnold 35. Booth Mitchel & Strange 36. Dalan Engineering 37. Twining Laboratories 38. Carnevale & Lohr, Inc. 39. San Marino Roofing 40. So. Cal. Millwork 41. Truform Construction 42. Orange County Plastering 43. Lynden Glass 44. HSP 45. Duggan Painting 46. Chris Barr Painting 47. Pacific Flooring 48. Masland Carpets 12 IV. AEW - SONY FILES ---------------- A. Sony (Also, See Iron Mountain List) 1993 Business Plan 1994 Budget From Lowe Development 1994 Business Plan 1995 ABP 1995 ABP - Draft Budget(s) 1995 ABP - Leasing Assumptions & Market Info. 1995 ABP - Valuation Arboretum Association Articles Issue: Power Outages Issue: Remediation Program: Clean-up Technology (cut) Issue: SCE Under Billing Issue: Seismic/PMI. Evaluation Issue: Soil Remediation Program Issue: Renewal/Expansion Litigation - 2O/20 Video v. CP Phase III, L.P., et al Litigation - Greenwood & Co. Development Corp. v. Lowe Development Corp.et al Litigation - Legal Bills Market - Water Garden Note Purchase Market - Water Garden Phase II Sale Marketing/Leasing Project Notes Roof Guarantees - Post Earthquake Tax Appeal - 1995/1996 Valuation Strategy & Related Information (2/95) B. IRON MOUNTAIN FILES 1.9 Sony Bisno Dispute Bisno Dispute - ADP's Motion for Summary Adjudication Bisno Dispute - AEW Answer to Complaint (8/16/94) Bisno Dispute - AEW Response to Interrogatories Bisno Dispute - Association Issue Bisno Dispute - Attorney Evaluation Bisno Dispute - Comments for Public Hearing Planning Commission Bisno Dispute - Development Agreement Amendment Bisno Dispute - Draft EIR Bisno Dispute - Gensfer & Associates: Urban Design 1 Issues & Principles Paper/Drawings (11/94) Bisno Dispute - Litigation Strategy & Assessment by Tuttle & Taylor (9/94) Bisno Dispute - Response to Draft EIR Bisno Dispute - Legal Bills Bisno Dispute - Letters To/From Adjacent Property/Land Owners Bisno Dispute - Litigation File Bisno Dispute - Memorandum of Right of First Refusal Bisno Dispute - "Nuisance" Lawsuit Bisno Dispute - Planning Staff Report/Correspondence (11/9/94) Bisno Dispute - Proposed Market Development Bisno Dispute - Real Estate Development Plans Bisno Dispute - Request For Resolution via Binding Arbitration Bisno Dispute - RTC Approval of Development Agreement (DA) Amendment Bisno Dispute - Settlement Agreement (Fully Executed Original) Bisno Dispute - Settlement Proposal/Notes Bisno Dispute - SMNSA Opposition To Summary Adjudication Bisno Dispute - SMNSA Response to Planning Commission Bisno Dispute - SMNSA Responses to Specially Prepared Interrogatories (11/94) Bisno Dispute - Status Report Bisno Dispute - Stipulation for Protective Order & Letters To/From RTC Bisno Dispute - Summaries of Settlement Proposal Bisno Dispute - Urban Design Issues & Principles Bisno Dispute - Verified Complaint for Damages Bisno Dispute - Zoning Administrator Appeal Earthquake Earthquake - Change Orders Earthquake - Construction Related Correspondence Earthquake - Draw Request #1 Earthquake - Draw Request #2 Earthquake - Draw Request #3 Earthquake - Draw Request #4 Earthquake - Draw Request #5 Earthquake - Draw Request #6 Earthquake - Draw Request #7 Earthquake - Draw Request #8 Earthquake - Facade Failure/O.C. Plastering Earthquake - Landscape Planter Repairs Earthquake - Lease Review & Settlement Discussion Earthquake - LDC Fee Negotiation 2 Earthquake - UT Testing Report Earthquake - Videotapes (2) of Earthquake Damage Earthquake - Water Damage Claim & Correspondence 3 INDEX REFERENCE LIST - BOTTOM FILE DRAWER ARBORETUM/BISNO RESTRUCTURING FILES FILE NO. FILE NAME AB 1.1 Arboretum/Bisno: Acquisition letters/memos/corresp AB 2.1 Arboretum/Bisno: Market Data Information AB 3.4 Arboretum/Bisno: TransAction Background Report AB 3.5 Arboretum/Bisno: 1993 AEW Business Plan AB 4.1 Arboretum/Bisno: Grubb & Ellis Appraisal/Info. AB 4.2 Arboretum/Bisno: Lease/Sale Proposals/Offers AB 5.3 Arboretum/Bisno: Loan Restructuring AB 6.1 Arboretum/Bisno: Joint Venture Agreement AB 6.3 Arboretum/Bisno: AEW Investment Committee Minutes AR 7.3 Arboretum/Bisno: Marketing Agreement AB 7.6 Arboretum/Bisno: Letters of Intent AB 7.6 Arboretum/Bisno: Supermarket Proposals ARBORETUM/SONY MUSIC CAMPUS FILES AS 2.1 Arboretum/Sony: West Side Office Market Data AS 3.1 Arboretum/Sony: Hazardous Waste AS 3.3 Arboretum/Sony: Lowe General Contractor AS 3.3 Arboretum/Sony: Marx/Okubo Review of Plans/Specs AS 3.4 Arboretum/Sony: Owners' Representative Proposals AS 3.6 Arboretum/Sony: 1991 Business Plan AS 3.6.1 Arboretum/Sony: 1993 AEW Business Plan AS 4.1 Arboretum/Sony: KTR Appraisal 11/92 AS 4.1 Arboretum/Sony: CB Appraisal 5/17/91 AS 4.1 Arboretum/Sony: Brown, Chudleigh Appraisal AS 4.1 Arboretum/Sony: LEA Assoc. Appraisal 6/21/91 AS 4.2 Arboretum/Sony: Lease/Hotel Proposal AS 5.3 Arboretum/Sony: Credit Lyonnaise Financing AS 5.3 Arboretum/Sony: FNBC Construction Loan/Guaranty: Enviorn. Side Ltr. AS 5.4 Arboretum/Sony: First Chicago AS 5.4 Arboretum/Sony: SO PAC Restructure AS 5.6 Arboretum/Sony: Financing Proposals AS 5.7 Arboretum/Sony: Real Estate Taxes AS 6.1 Arboretum/Sony: Santa Monica #7 Assoc. L.P. Agreement AS 7.2 Arboretum/Sony: Change Orders AS 7.2 Arboretum/Sony: Architect's Agreement (Chrlich 4/11/91) AS 7.7 Arboretum/Sony: Release of Lot #7 - Release Docs. 5/12/91 EXHIBIT I --------- ESCROW AGREEMENT ---------------- This Escrow Agreement (this "Agreement") is entered into as of ___________, --------- 1997, by and among Santa Monica Number Seven Associates, L.P., a Delaware limited partnership ("Seller"), Kilroy Realty, L.P., a Delaware limited ------ partnership ("Buyer") and Chicago Title Insurance Company ("Escrow Holder"). ----- -------------- RECITALS -------- A. Buyer and Seller are the parties to that certain Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California dated as of June __, 1997 (the "Purchase Agreement"), pursuant to which Buyer has agreed to ------------------ purchase from Seller certain real property and improvements located at 2100 Colorado Avenue and commonly known as the Sony Arboretum Building in Santa Monica, California and more particularly described in the Purchase Agreement, in accordance with the terms of the Purchase Agreement. Capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement. B. Buyer and Seller have agreed in the Purchase Agreement to establish an escrow account with respect to certain post-closing obligations of Seller. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Buyer, Seller and Escrow Holder do hereby agree as follows: 1. Appointment of Escrow Agent. Seller and Buyer hereby appoint and --------------------------- designate Escrow Holder as the escrow agent for the purposes set forth herein, and Escrow Holder hereby accepts such appointment. 2. Deposit and Investment of Funds. Escrow Holder shall retain as of ------------------------------- the date of this Agreement, as trustee and fiduciary of Buyer and Seller, the Sony Lease Amount (as defined below) and the Seismic Retrofit Amount (as defined below) in an escrow account in the name of Buyer and Seller (the "Escrow ------ Account"), to be released from such Escrow Account only in accordance with the - ------- terms of this Agreement. Escrow Holder shall invest all amounts deposited into the Escrow Account (and all payments, collections, interest and other proceeds of any such investments) in (i) securities that are direct obligations of the United States of America for the full and timely payment of which the full faith and credit of the United States of America are pledged, maturing not later than 180 days following the date of this Agreement and cancelable at any time with prorated interest accrual and without penalty as to interest or principal or (ii) money market accounts, bank repurchase agreements or such other investments as Seller may direct in writing, provided that Seller covenants to Buyer that all such investments shall be consistent with prudent institutional standards for short-term cash management investments and involve de minimis risk of loss of principal. Escrow Holder shall have -1- no liability for any loss incurred by reason of any such investments, except for actions which result from its negligence or willful misconduct. All interest received with respect to the amounts in the Escrow Account shall be disbursed by Escrow Holder as provided in this Agreement. 3. Sony Lease Payments. Seller shall deposit into the Escrow ------------------- Account, from the proceeds of the Purchase Price on the Closing Date, an amount equal to $____________ (the "Sony Lease Amount") for the payment to Buyer of a ----------------- supplement to base rent due and payable by Sony pursuant to the Sony Lease. Escrow Holder shall release to Buyer from the Escrow Account, on the first day of each month following the Closing Date and until release of the last payment for December 1, 1997, an amount equal to $72,081.44. If the Closing Date should occur on any date that is not the first day of the month, then the first such release of funds to Buyer shall be made on the Closing Date and prorated according to the number of days remaining in the month in which the Closing Date occurs. Any amounts payable to Buyer pursuant to this paragraph shall not be subject to increase based upon (i) any failure of Sony to pay in a full and timely fashion any rental due under the Sony Lease or (ii) any termination or modification of the Sony Lease by Buyer. 4. Seismic Retrofit Escrow. ----------------------- (a) Amount of Holdback. Seller shall deposit into the Escrow Account, ------------------ from the proceeds of the Purchase Price on the Closing Date, an amount (the "Seismic Retrofit Holdback") equal to the sum of (i) the estimated cost to complete the Retrofit Work determined pursuant to Section 4.7 of the Purchase Agreement (the "Seismic Retrofit Amount"); plus (ii) twenty-five percent (25%) of the Seismic Retrofit Amount, as adjusted from time to time (the "Seismic Retrofit Contingency"). If the estimated cost to complete the Retrofit Work is increased after the Close of Escrow, then the Seismic Retrofit Amount and the Seismic Retrofit Contingency shall be increased accordingly. The Retrofit Work shall be supervised by Seller to its completion in accordance with the Construction Contract. (b) Progress Payments. Seller shall have the right to a release of ----------------- portions of the Seismic Retrofit Amount upon satisfaction of the following conditions: i. Seller's written request (delivered not more often than once per month) for a portion of the Seismic Retrofit Amount to be released, delivered to Buyer and Escrow Holder along with copies of invoices evidencing such amounts, certification by Dimitry Vergun that the work covered by such request and invoices has been completed, conditional lien releases for the work covered by the payment request and unconditional lien releases for any work covered by prior payment requests; ii. Seller's and the general contractor's statement of the estimated cost to complete the Retrofit Work; iii. Buyer's approval of the work covered by the payment request, provided that if Buyer fails to disapprove of any such work within five (5) -2- business days after receipt of such payment request, Buyer shall be deemed to have approved of same; and iv. Seller having deposited in the Escrow Account the amount by which the estimated cost to complete the Retrofit Work (as adjusted from time to time) exceeds the unfunded portion of the Seismic Retrofit Amount, plus the amount by which the Seismic Retrofit Contingency has been increased due to the increase in estimated cost to complete the Retrofit Work. (c) Release of Balance of Seismic Retrofit Holdback. The Seismic ----------------------------------------------- Retrofit Contingency shall not be released to Seller until the conditions set forth in this Section (c) are satisfied. The unfunded portion of the Seismic Retrofit Holdback shall be released to Seller upon the satisfaction of the following conditions: i. Completion of the Retrofit Work and certification by Dimitry Vergun that the Retrofit Work has been completed; ii. Correction of any work disapproved by Buyer in Buyer's reasonable opinion, provided that if Buyer fails to disapprove of any such work within five (5) business days after receipt of such payment request, Buyer shall be deemed to have approved of same; iii. Receipt of all governmental approvals, certificates of occupancy and final sign-offs as may be required by applicable laws; iv. Provision to Buyer of all photographs, deputy inspector's certificates, records and descriptions of the Retrofit Work in Seller's possession, as the same may be reasonably requested by Buyer; v. Receipt of unconditional lien releases from the general contractor and all subcontractors and suppliers; and vi. The expiration of the mechanics' lien period without any lien having been filed. (d) Objection to Release of Funds. Escrow Holder shall release the ----------------------------- requested funds to Seller unless Buyer delivers written notice to Escrow Holder of its objection to such release within seven (7) business days of Buyer's receipt of the applicable request, provided that Buyer may only object to such release on the basis that the conditions set forth in Sections (c) and (d) above have not been satisfied. (e) Completion: Resolution of Disputes. Seller shall complete the ---------------------------------- Retrofit Work within one hundred eighty (180) days following the Closing Date. If the Retrofit Work has not been completed by such date, then, in addition to any other rights and remedies which Buyer may have, Buyer shall have a right to the release of funds then resident in the Escrow Account with respect to the Seismic Retrofit Amount. Buyer shall only be entitled to use such funds for the completion of the Retrofit Work. If the -3- funds so released to Buyer exceed the amount necessary for Buyer to complete the Retrofit Work; Buyer shall retain such excess. Any disputes regarding the completion of the Retrofit Work shall be resolved by a neutral third party agreed upon between Buyer and Seller, whose decision shall be binding. If Buyer and Seller are unable to agree on a neutral third party, either party may apply to the court to appoint a neutral structural engineer with experience in projects similar to the Retrofit Work. 5. Release of Other Funds. ---------------------- (a) Seller shall have the right to withdraw from time to time any interest accrued on funds resident in the Escrow Account. (b) Seller shall have the right to a release of all funds then resident in the Escrow Account with respect to the Sony Payment Amount following the final monthly release of funds by Escrow Holder to Buyer on account of the Sony Lease on December 1, 1997. 6. Termination. This Agreement shall terminate upon the written ----------- instruction of each of the parties to this Agreement. 7. Hold Harmless. Buyer and Seller jointly and severally hereby ------------- agree to protect, defend, indemnify and hold harmless Escrow Holder from and against any and all liability, claims, including without limitation demands, losses, damages, actions and causes of action, and to reimburse expenses, costs and reasonable attorneys' fees which Escrow Holder, at any time, may sustain or incur in connection with this Agreement, excepting claims, demands, losses, damages, actions and causes of action caused by the negligence or willful misconduct of Escrow Holder. Escrow Holder may act upon any instrument or other writing believed by it in good faith to be genuine and to have been signed or presented by the proper person and shall not be liable to any party hereto in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. Escrow Holder's duties shall be determined only with reference to this Escrow Agreement and applicable laws, and Escrow Holder is not charged with knowledge of or any duties or responsibilities in connection with any other document or agreement. If in doubt as to its duties and responsibilities hereunder, Escrow Holder may (i) consult with counsel of its choice and shall be protected in any action taken or omitted in connection with the written advice or opinion of such counsel; or (ii) place the matter before any court of competent jurisdiction, transferring to the court the entire balance of the Escrow Account, whereupon Escrow Holder shall be relieved of any further obligations hereunder. 8. Escrow Costs and Fees. All fees and costs of Escrow Holder in --------------------- connection with the escrow contemplated by this Agreement shall be shared equally by Seller and Buyer. 9. Notices. All notices or other communications required or provided ------- to be sent by either party shall be in writing and shall be sent by United States Postal Service, postage prepaid or certified mail, return receipt requested, by any nationally -4- known overnight delivery service, by courier, facsimile or in person. All notices shall be deemed to have been given forty-eight (48) hours following deposit in the United States Postal Service or upon delivery (as evidenced by a courier receipt or facsimile transmission confirmation) if sent by overnight delivery service, facsimile, courier or personally delivered. All notices shall be addressed to the party at the address below: To Seller: Lowe Enterprises 11777 San Vicente Blvd. #900 Los Angeles, CA 90049 Attn: Mr. Rick Newman Facsimile: (310) 207-1132 with a copy to: c/o AEW Capital Management, L.P. 601 S. Figueroa Street, Suite 2150 Los Angeles, CA 90017-3405 Attn: Mr. Michael Pepper Facsimile: (213) 629-9160 and with a copy to: Heller, Ehrman, White & McAuliffe 333 Bush Street San Francisco, California 94104 Attn: Brian Smith, Esq. Facsimile: (415) 772-6268 To Buyer: Kilroy Realty L.P. 2250 East Imperial Highway El Segundo, California 90245 Attn: Mr. Jeffrey C. Hawken Facsimile: (310) 322-5981 with a copy to: Appel & Associates 1875 Century Park East, Suite 700 Los Angeles, CA 90067 Attn: Brian J. Appel, Esq. Facsimile: (310) 785-1010 To Escrow Holder: Chicago Title Insurance Company 700 South Flower Street, Suite 900 Los Angeles, CA 90017 Attn: Mr. Nate Clover Facsimile: (213) 488-4361 Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section 7. The inability to deliver because of a changed address of which no notice was given, or rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such -5- inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. 10. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of California. 11. Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the parties and their respective successors and assigns. 12. Attorneys' Fees. In the event any dispute between Buyer and --------------- Seller should result in litigation, the prevailing party shall be reimbursed for all reasonable costs incurred in connection with such litigation, including, without limitation, reasonable attorneys' fees. 13. Miscellaneous. This Agreement may be executed in two or more ------------- counterparts, each of which shall be a duplicate original and all of which shall constitute one and the same agreement. No amendment or modification of this Agreement shall be effective unless in writing and executed by each of the parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. BUYER: SELLER: KILROY REALTY L.P., a Delaware SANTA MONICA NUMBER SEVEN limited partnership ASSOCIATES L.P., a Delaware limited partnership By: Kilroy Realty Corporation, By: COLORADO PHASE III, L.P.,a Maryland corporation California limited partnership Its General Partner Its General Partner By:___________________________ By: COLORADO PHASE III, Name:_________________________ INC., a California Title:________________________ corporation Its General Partner By:___________________________ By: ___________________ Name:_________________________ Title:________________________ Name:__________________ Title:_________________ -6- ESCROW HOLDER: CHICAGO TITLE INSURANCE COMPANY By: _______________________ Its:_______________________ -7- EXHIBIT J FORM OF SONY ESTOPPEL -1- ESTOPPEL CERTIFICATE TO: KILROY REALTY, L.P. 2250 East Imperial Highway El Segundo, CA 90245 Attn; Mr. Jeffrey C. Hawken LEASE: OFFICE LEASE by and between SANTA MONICA NUMBER SEVEN ASSOCIATES, L.P. ("Landlord") and SONY MUSIC ENTERTAINMENT INC.("Tenant") dated January 1, 1997 (the "Lease"), regarding the real property and improvements located at 2100 Colorado Avenue, Santa Monica, California (the "Premises") KILROY REALTY L.P., a Maryland limited partnership ("Purchaser") has entered into a purchase agreement with Landlord for the purchase of the real property and improvements located at 2100 Colorado Avenue, Santa Monica, California, along with the assignment of Landlord's leasehold interest in the Lease. In connection with the purchase and assignment, Tenant's certification to the terms and conditions of the Lease are necessary. The undersigned hereby certifies to Purchaser as follows, with the understanding that Purchaser has agrees to purchase the real property and improvements, which includes the Premises, and that Purchaser and Purchaser's lenders and successors and assigns will be relying on this certificate in connection with such purchase: 1. Attached to this certificate is a true, correct and complete copy of the Lease covering the Premises. The Lease is in full force and effect and has not been amended, modified or supplemented, and constitutes a legally enforceable and legally binding obligation of Tenant. The Lease represents the entire agreement between Tenant and Landlord with respect to the Premises. 2. The commencement date of the Lease was JANUARY 1, 1997 and the term will expire on DECEMBER 31, 2003. Tenant has TWo (2) options to extend the term of the Lease for an additional term of FIVE (5) YEARS each. Tenant does not have any other rights to renew or extend the term of the Lease. 3. The monthly rent, not including any additional rent, presently payable under the terms of the Lease is equal to one-twelfth (1/12) of the annual Base Rent as noted on the Base Rent Schedule attached hereto to this Estoppel Certificate. The monthly rent, not including any additional rent, has been paid through JUNE 30, 1997. No rent or other charges under the Lease have been paid for more than thirty (30) days in advance of its due date. Tenant has no right to any free rent, tenant improvement allowance or other concession (rental or otherwise) or similar compensation. 4. There has been no security deposit or any other deposit of funds held by Landlord under the terms of the Lease. Estoppel Certificate Page 2 5. The Landlord under the Lease is not in default of any provision under the Lease and no event has occurred which, with the passage of time or giving of notice or both, would constitute a default by the Landlord under the Lease. As of the date hereof, Tenant has no right of setoff or counterclaim against the Landlord under the Lease. 6. Tenant is obligated under the terms of the Lease to lease and pay for 230 reserved, subterranean parking spaces, and 45 uncovered, unreserved, surface parking spaces. Tenant is being provided 230 reserved, subterranean parking spaces in the parking garage. Tenant is presently paying One Hundred Twenty-Five Dollars ($125) per month for each subterranean parking space and Sixty Dollars ($60) per month for each surface parking space. Tenant has not presently exercised the option to lease an additional 38 uncovered, unreserved surface parking spaces. 7. This Estoppel Certificate may be relied upon by Purchaser and Purchaser's lenders, successors and assigns. 8. The provisions of this Estoppel Certificate shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of the Purchaser and its successors and assigns. IN WITNESS WHEREOF, this Estoppel Certificate has been duly executed and delivered by the Tenant as of ________________ 1997. "Tenant" SONY MUSIC ENTERTAINMENT INC., a Delaware corporation By:_______________________ Name:_____________________ Title:____________________ By:_______________________ Name:_____________________ Title:____________________ Estoppel Certificate Page 3 The Lease and the obligations of Tenant are guaranteed by SONY CORPORATION OF AMERICA ("Guarantor") for the benefit of the Landlord, its successors or assigns, pursuant to EXHIBIT C - GUARANTY OF LEASE by Guarantor dated January 1, ----------------------------- 1997 (the "Guaranty"). Guarantor has read the foregoing Estoppel Certificate and hereby certifies to Purchaser that (i) the foregoing information contained in this Estoppel Certificate is true, correct, and complete, (ii) a true, correct, and complete copy of the Guaranty is attached hereto, (iii) the Guaranty is in full force and effect, and (iv) further, that there are no defaults on behalf of the Landlord or defenses on the part of Guarantor that would affect the obligations of Guarantor under the Guaranty or the Lease. Signed this __ day of _______________, 1997 "Guarantor" SONY CORPORATION OF AMERICA a New York corporation By: _________________________ Name:________________________ Title:_______________________ By: _________________________ Name:________________________ Title:_______________________ EXHIBIT K FORM OF DEVELOPMENT AGREEMENT ESTOPPEL -1- ESTOPPEL CERTIFICATE -------------------- TO: Santa Monica Number Seven Associates, L.P. c/o Lowe Enterprises Commercial Group 11777 San Vicente Boulevard Suite 900 Los Angeles, CA 90049 Attn: Richard G. Newman, Jr. ("Owner") ----- FROM: City of Santa Monica ("City) ---- 1685 Main Street Santa Monica, CA 90401 The undersigned understands that Owner is the fee owner of that certain real property known as the Sony Music Campus located within the City of Santa Monica and, more particularly, constituting a portion of the Real Property, as such term is defined in that certain Development Agreement dated as of December 16, 1987, by and between Owner, as successor-in-interest to SoPac Properties, Inc. (with respect to a portion of the Real Property described therein), and City (as amended and modified to date, the "Development ----------- Agreement"). City hereby certifies the following information with respect to the - --------- Development Agreement: 1. The Development Agreement is in full force and effect and constitutes a binding obligation of the parties. 2. The Development Agreement has not been amended or modified, either orally or in writing, except by the following written amendments: a. Memorandum of Clarification dated as of December 16, 1987, between the City and SoPac Properties, Inc. b. Second Memorandum of Clarification dated as of December 16, 1987, between the City, and SoPac Properties, Inc. and SoPac Development Co. c. Amendment Number One to Development Agreement dated as of December 28, 1988, between the City and SoPac Properties, Inc., which was recorded in the Official Records of the County of Los Angeles on January 5, 1989 as Instrument Number 89-15234. d. Amendment Number Two to Development Agreement dated as of March 16, 1995, between the City and Arboretum Development Partners, L.P., which was recorded in the Official Records of the County of Los Angeles on April 11, 1995 as Instrument Number 95-504419. 3. Owner is not in default in the performance of its obligations under the Development Agreement, except as described on Attachment "1" attached hereto and incorporated herein by this reference. 4. City acknowledges that this Estoppel Certificate may be relied upon by Owner, by any transferee of Owner's interest in the Development Agreement, or any Mortgagee (as such term is defined in the Development Agreement). This Estoppel Certificate has been executed by the City as of ____________________________, 1997. Approved as to form: CITY OF SANTA MONICA, a Municipal corporation ____________________________ By:__________________________________________ City Attorney Attest:______________________________________ Attachment "1" Nature and Amount of Default EXHIBIT L FORM OF MTA LEASE ESTOPPEL LESSOR'S ESTOPPEL CERTIFICATE TO KILROY REALTY L.P. 2250 East Imperial Highway El Segundo, CA 90245 Attn: Mr. Jeffrey C. Hawken LEASE: Commercial Lease by and between METROPOLITAN TRANSIT AUTHORITY OF LOS ANGELES ("Lessor"), successor in interest to SOUTHERN PACIFIC TRANSPORTATION COMPANY and SANTA MONICA PLUMBER SEVEN ASSOCIATES ("Lessee"), successor in interest to PARKER MANUFACTURING COMPANY, dated March 12, 1979, as amended (the "Lease"), concerning that certain real property located in the City of Santa Monica, County of Los Angeles, California, as illustrated on Lessor's Los Angeles Division Drawing No. A-12498, Sheet 2, as revised September 21, 1978 (the "Premises"). The undersigned, Lessor, hereby certifies to Purchaser as follows, with the understanding that Purchaser has agreed to purchase the leasehold interest as Lessee in the Lease, and that Purchaser and Purchaser's lenders and successors and assigns will be relying on this certificate in connection with such purchase: 1. Attached to this certificate is a true, correct and complete copy of the Lease covering the Premises. The Lease is in full force and effect and has not been amended, modified or supplemented, except as follows: ASSIGNMENT OF LEASE 187808, DATED FEBRUARY 11,1986; AND ASSIGNMENT DATED FEBRUARY 22, 1989, and the Lessee under the Lease has no other obligations to or agreements with Lessor. True, correct and complete copies of such assignments are attached. The Lease and the foregoing documents represent the entire agreement between Lessor and Lessee with respect to the Premises. 2. Lessor is the successor in interest to the prior lessor, Southern Pacific Transportation Company. Lessor's interest in the Lease or the Premises has not been assigned, sublet, licensed, or hypothecated, and Lessor has not agreed to do any of the foregoing. 3. The commencement date of the Lease was JUNE l, 1979 and the term will expire on MAY 31. 2004. Lessee under the Lease has THREE (3) options to extend the term of the Lease for an additional term of FIVE (S) YEARS each. 4. The monthly rent presently payable under the terms of the Lease is S2,300.00. The Estoppel Certificate Page 2 monthly rent has been paid through JUNE 30, 1997, and is current The monthly rent shall increase to $2,990.00 per month commencing JUNE 1, 1999 through MAY 31, 2004. The rent during the option periods shall be the reasonable and fair rental value established bY the parties pursuant to the terms of the Lease. 5 The Lessee is not in, and the use of the Premises by Lessee does not constitute, a default of any provision under the Lease. No event has occurred which, with the passage of time or giving of notice or both, would constitute a default by Lessee under the Lease. 6. The provisions of this certificate shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of Purchaser and its successors and assigns. 7. This certificate may be relied upon by Purchaser and Purchaser's lenders, successors and assigns. IN WITNESS WHEREOF, this certificate has been duly executed and delivered by the Lessor as of________ 1997. "Lessor" METROPOLITAN TRANSIT AUTHORITY OF LOS ANGELES a municipal corporation By:_____________________ Name:___________________ Title:__________________ By:_____________________ Name:___________________ Title:__________________ EXHIBIT M FORM OF THETFORD ASSIGNMENT -2 - RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Appel & Associates 1875 Century Park East, Suite 700 Los Angeles, CA 90067 Attn: Brian J. Appel, Esq. ________________________________________________________________________________ ASSIGNMENT [OF] AND ASSUMPTION --- OF WASTEWATER TREATMENT AGREEMENT THIS ASSIGNMENT AND ASSUMPTION OF WASTEWATER TREATMENT AGREEMENT (the "ASSIGNMENT") is entered into as of this _ day of_________, 1997, by and between SANTA MONICA NUMBER SEVEN ASSOCIATES, L.P., a Delaware limited partnership ("ASSIGNOR") and KILROY REALTY L.P., a Maryland limited partnership ("ASSIGNEE") with reference to the following facts: 1. Recitals. --------- 1.1 Assignor is the owner of that certain real property located in the City of Santa Monica, County of Los Angeles, State of California, as more fully described in EXHIBIT A, attached hereto, together with all buildings and other --------- improvements thereon ("the PROPERTY"). The Property is being conveyed to Assignee pursuant to the terms and conditions of that certain Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica, California (the "PURCHASE AGREEMENT") by and between Assignor and Assignee. 1.2 Assignor succeeded to the interest of Santa Monica Lowe partners, L.P., a Delaware limited partnership ("SMLP") in that certain Wastewater Treatment Agreement (the "Agreement") dated August 21, 1991 by and between SMLP and THETFORD SYSTEMS, INC., a Michigan corporation ("THETFORD"), a memorandum of which was recorded January 6, 1992 as Instrument No. 92-20062 in the official records of the Los Angeles County Recorder's Office. The Agreement provides for the construction, operation and maintenance of a wastewater treatment facility to be located on the adjoining Property by Thetford, and further, that Thetford would accept, treat, filter and recycle wastewater from the site for renewable four (4) year terms. 1.3 The Purchase Agreement contemplates that Assignor will assign its rights, obligations and interests in and to the Agreement to Assignee and that Assignee will assume Assignor's obligations thereunder. 1.4 Accordingly, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows. 2. The effective date of this Assignment shall be the date first above written. 3. Assignor is the successor in interest to SMLP, and Assignor has the proper authority, power and right to assign all of SMLP's interests in the Agreement to Assignee. 4. Assignor hereby assigns, transfers and conveys to Assignee all of its rights, obligations, and interests in and to the Agreement. Assignor hereby covenants and warrants to Assignee that Assignor shall remain liable for all of its obligations accruing prior to the effective date of this Assignment. Assignor shall indemnify and defend Assignee, and hold Assignee, its successor and assigns, harmless against any and all claims, demands, liabilities, costs, judgments, or expenses of any kind or nature arising out of any matter relating to the Agreement prior to the effective date of the Assignment hereof. 5. Assignee hereby acknowledges that the Assignment of the Agreement is subject to the terms, covenants, and conditions of the Purchase Agreement. 6. Assignee hereby accepts all of the rights, obligations, and interests of Assignor in the Agreement, and assumes all of Assignor's obligations arising from and after the effective date of this Assignment. Assignee specifically --------------------- assumes all of Assignor's obligations with respect to the cost of upgrading the - ------------------------------------------------------------------------------- wastewater treatment facility so that it is fully operational. Assignee shall - -------------------------------------------------------------- indemnify and defend Assignor, and hold Assignor harmless against any and all claims, demands, liabilities, costs, judgments, or expenses of any kind or nature arising out of any matter relating to the Agreement subsequent to the effective date of the Assignment hereof. 7. The provisions of this Assignment shall be binding upon and inure to the benefit of Assignor and Assignee, and their respective successors and permitted assigns. 8. This Assignment may be executed in counterparts, all of which when taken - - ------------------------------------------------------------------------ together shall - -------------- 2 CONSTITUTE ONE AGREEMENT - ------------------------ IN WITNESS WHEREOF, the parties have executed this Assignment effective as of the date first above written. "Assignor" SANTA MONICA NUMBER SEVEN ASSOCIATES, L.P. a Delaware Limited partnership By: COLORADO PLACE PHASE III, L.p., ------------------------------- A CALIFORNIA LIMITED PARTNERSHIP ------------------------------- ITS GENERAL PARTNER ------------------- BY: COLORADO PLACE PHASE III, INC., ----------------------------------- A CALIFORNIA CORPORATION - ------------------------------- ITS GENERAL PARTNER - ------------------------- BY: - ----------------------------------- PRINT NAME: - ----------------------------------- ITS: - ----------------------------------- BY:---------------------------- PRINT NAME:-------------------- ITS:--------------------------- "Assignee" KILROY REALTY L.P., A DELAWARE LIMITED PARTNERSHIP BY: KILROY REALTY CORPORATION. - ----------------------------- A MARYLAND CORPORATION. - --------------------------- ITS GENERAL PARTNER - ----------------------- BY: - ----------------------------------- PRINT NAME: - ----------------------------------- ITS: - ----------------------------------- BY: - ----------------------------------- PRINT NAME: - ----------------------------------- Its: - ----------------------------------- 3 State of California County of Los Angeles On__________ before me_______________________________), personally appeared______________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature__________________(Seal) State of California County of Los Angeles On__________________before me_________________________), personally appeared ________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s)) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s),acted, executed the instrument. WITNESS my hand and official seal. Signature__________________(Seal) 4 CONSENT TO ASSIGNMENT The undersigned, THETFORD SYSTEMS. INC., hereby consents to the Assignment of the Wastewater Treatment Agreement from Assignor to Assignee, and Assignee being substituted as the facility user in the Agreement, subject to all of the terms, covenants and conditions as set forth in the Agreement. THETFORD SYSTEMS, INC., a Michigan corporation By:_______________________________ Name:_____________________________ Title:____________________________ By:_______________________________ Name:_____________________________ Title:____________________________ State of California County of Los Angeles On_______________before me______________________), personally appeared ________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed thE instrument. WITNESS my hand and official seal. Signature___________________(Seal) 6 EXHIBIT A --------- LEGAL DESCRIPTION ----------------- -----END PRIVACY-ENHANCED MESSAGE-----