Purchase & Sale Agrmt. & Joint Escrow Instructions

PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS


by


and


between


MISSION LAND COMPANY,
a California corporation
("MISSION")


and


MISSION-VACAVILLE, L.P.
a California limited partnership
("MISSION-VACAVILLE")


COLLECTIVELY, "SELLER"


and


KILROY REALTY, L.P.,
a Delaware limited partnership


"PURCHASER"


Dated as of
April 30, 1997


TABLE OF CONTENTS


Page


1. IDENTIFICATION OF PARTIES............................................. 1


2. DESCRIPTION OF THE PROPERTY........................................... 1


3. THE PURCHASE PRICE.................................................... 3


4. TITLE................................................................. 4


5. INSPECTION; DUE DILIGENCE PERIOD...................................... 5


6. REPRESENTATIONS AND WARRANTIES OF SELLER.............................. 7


7. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................... 9


8. RELEASE BY PURCHASER.................................................. 10


9. DELIVERY OF DOCUMENTS................................................. 11


10. CONFIDENTIALITY....................................................... 12


11. CONDITIONS PRECEDENT TO CLOSING....................................... 12


12. COVENANTS OF SELLER................................................... 14


13. SELLER'S CLOSING DELIVERIES........................................... 15


14. PURCHASER'S CLOSING DELIVERIES........................................ 16


15. PRORATIONS, ADJUSTMENTS; RELEASE OF BONDS AND OTHER
SECURITY DEVICES...................................................... 17


16. CLOSING............................................................... 20


17. CLOSING COSTS......................................................... 21


18. RISK OF LOSS; TAKING.................................................. 21


19. DEFAULT............................................................... 23


20. BROKER'S COMMISSION................................................... 24


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21. ESCROW................................................................ 24


22. MISCELLANEOUS......................................................... 25


EXHIBITS


EXHIBIT A Legal Description of The Land


EXHIBIT B Schedule of Leases


EXHIBIT C Schedule of Trade Names


EXHIBIT D Allocated Purchase Prices and Allocated Deposits


EXHIBIT E Schedule of PTRs and Surveys


EXHIBIT F Form of Grant Deed


EXHIBIT G Bill of Sale


EXHIBIT H General Assignment


EXHIBIT I Assignment of Leases


EXHIBIT J Certification of Non-Foreign Status of Mission Land Company


EXHIBIT K Assumption Agreement


EXHIBIT L-1 Form of Tenant Estoppel Certificate


EXHIBIT L-2 Form of Seller Certificate


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INDEX OF DEFINED TERMS


Definition Section


Advance Deposit.......................................... 3(b) Advance Deposit Account.................................. 3(b) Affiliate................................................ 2(c) Agreement................................................ 1 Allocated Deposit........................................ 3(b) Allocated Purchase Price................................. 3(a) Assignment of Leases..................................... 13(d) Assumption Agreement..................................... 14(c) Attorneys' fees.......................................... 21(j) Attorneys' fees and costs................................ 21(j) Bill of Sale............................................. 13(b) Business Day............................................. 3(d) Certificate of Non-Foreign Status........................ 13(e) Closing.................................................. 16 Closing Date............................................. 16 Contracts................................................ 2(b)(vii) Control.................................................. 2(c) Deposit.................................................. 3(b) Deposit Account.......................................... 3(a) Disapproval Notice....................................... 5(d) Disapproved Exceptions................................... 4(b) Disapproved Property..................................... 5(d) Due Diligence Materials.................................. 6(c) Due Diligence Period..................................... 5(a) Environmental Laws....................................... 8(a) Escrow Company........................................... 3(b) Execution Date........................................... 1 Existing Security Items.................................. 15(c) Form 590................................................. 13(f) General Assignment....................................... 13(c) Grant Deed............................................... 13(a) Hazardous Substance...................................... 8(a) Improvements............................................. 2(b)(ii) Land..................................................... 2(b)(i) Leases................................................... 2(b)(iii) Liquidated Damages Deposit............................... 3(b) Liquidated Damages Deposit Account....................... 3(b) Materially Damaged Property.............................. 18(a) Materially Taken Property................................ 18(b) Outside Closing Date..................................... 16


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INDEX OF DEFINED TERMS
(Continued)


Definition Section


Parcel................................................... 2(b)(i) Permits.................................................. 2(b)(viii) Permitted Exception...................................... 4(b) Permitted Exceptions..................................... 4(b) Personal Property........................................ 2(b)(v) Properties............................................... 2(h) Property................................................. 2(h) PTR...................................................... 4(a) Purchase Price........................................... 3(a) Purchaser................................................ 1 Purchaser's Conditions Precedent......................... 11(a) Real Property............................................ 2(b)(iv) Seller................................................... 1 Seller's Actual Knowledge................................ 5 Real Property............................................ 2(d) Seller Certificate....................................... 11(a)(vi) Seller's Conditions Precedent............................ 11(b) Seller Has Received No Written Notice.................... 6 Seller Releasees......................................... 8(a) Surveys.................................................. 4(a) Tenant Estoppel Certificate.............................. 11(a)(vi) Title Company............................................ 4(a) Title Curative Endorsements.............................. 17(a) Title Policy............................................. 11(a)(ii) Trade Names.............................................. 2(b)(vi) Unresolved Exceptions.................................... 4(c)


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PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS


1. IDENTIFICATION OF PARTIES.
-------------------------


THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this "AGREEMENT") is entered into as of April 30, 1997 (the "EXECUTION DATE"), by and between MISSION LAND COMPANY, a California corporation ("MISSION") and MISSION- VACAVILLE, L.P., a California limited partnership ("MISSION-VACAVILLE") (collectively, "SELLER") and KILROY REALTY, L.P., a Delaware limited partnership ("PURCHASER").


2. DESCRIPTION OF THE PROPERTY.
---------------------------


(a) The following terms have the following meanings:


(i) The "BAXTER PROJECT" means the industrial building consisting
of approximately 153,566 square feet located at 821 South Rockefeller
Avenue, Ontario, California.


(ii) The "BREA LAND" means the approximately 9.87 acres of land
located at the corner of Lambert Road and Puente Street in Brea,
California.


(iii) The "BREA PROJECT" means the seven industrial buildings
consisting of an aggregate of approximately 276,278 square feet located in
the Brea Industrial Complex, Brea, California.


(iv) The "GARDEN GROVE PROJECT" means the six industrial
buildings consisting of an aggregate of approximately 275,971 square feet
located in the Garden Grove Industrial Complex, Garden Grove, California.


(v) The "TELO PROJECT" means the two industrial buildings
consisting of an aggregate of approximately 79,967 square feet located in
Torrance, California.


(b) Seller hereby agrees to sell, assign and convey to Purchaser, and Pur chaser hereby agrees to purchase from Seller all of Seller's right, title and interest in and to the following:


(i) Those certain parcels of real property more particularly
described on Exhibit A attached hereto (the "LAND"). The Land is divided
---------
for purposes of this Agreement into various portions, each of which is
described in a separate section of Exhibit A (each portion of the Land is
---------
referred to in this Agreement individually, as a "PARCEL");


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(ii) All improvements located on the Land (the "IMPROVEMENTS");


(iii) All leases covering the Land and Improvements (such
leases, together with any and all amendments, modifications or supplements
thereto and guaranties thereof, are hereinafter referred to collectively as
the "LEASES" and are identified on the Schedule of Leases attached hereto
as Exhibit B);
---------


(iv) All rights, privileges, easements, rights-of-way and ap
purtenances used or connected with the beneficial use or enjoyment of the
Land (the Land, the Improvements, the Leases and such rights, privileges,
easements, rights-of-way, and appurtenances are sometimes collectively
hereinafter referred to as the "REAL PROPERTY");


(v) All personal property and fixtures (if any) owned by Seller,
located on the Real Property and used in the operation or maintenance of
the Real Property (collectively, the "PERSONAL PROPERTY");


(vi) The trade names and trademarks used or useful in connection
with the Real Property, but only to the extent that the same are not
trademarks or trade names of Seller or any of Seller's Affiliates (such
trade names and trademarks are hereinafter collectively referred to as the
"TRADE NAMES" and are identified on the Schedule of Trade Names attached
hereto as Exhibit C);
---------


(vii) The contracts and agreements relating to the Real Property
which Purchaser has elected to assume pursuant to Section 5(e) (such
------------
contracts and agreements are hereinafter collectively referred to as the
"CONTRACTS");


(viii) All permits, licenses, authorizations, consents,
entitlements, approvals and certificates relating to the Property, to the
extent assignable (collectively, the "PERMITS"). (The Real Property, the
Personal Property, the Trade Names, the Contracts and the Permits with
respect to each Parcel is individually referred to in this Agreement as the
"PROPERTY" and are collectively referred to in this Agreement as the
"PROPERTIES").


(c) The Property does not include (i) the Existing Security Items, (ii) cash and cash equivalents of Seller and its Affiliates, (iii) any accounts receivable or claims of Seller or its Affiliates existing on or attributable to any period prior to the Closing Date (subject to the provisions of Section 15),
---------- (iv) any right to use the name, marks or insignia of Seller or its Affiliates, or (v) except as provided in Section 18, any rights under insurance policies
---------- maintained by Seller with respect to the Properties. As used in this Agreement, an "AFFILIATE" means with respect to Seller or Purchaser, any person or entity directly or indirectly controlling, controlled by or under common control with such other person or entity. For purposes of this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies whether through the ownership of voting securities, by contract or otherwise.


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3. THE PURCHASE PRICE.
------------------


(a) Subject to increase in accordance with Section 16, the aggregate
---------- purchase price for the Properties is Forty Three Million Six Hundred Eighteen Thousand Dollars ($43,618,000.00) (the "PURCHASE PRICE"). Seller and Purchaser agree that the Purchase Price is allocated among the Properties in accordance with Exhibit D attached hereto (each allocated purchase price is referred to in
--------- this Agreement as an "ALLOCATED PURCHASE PRICE"). The Purchase Price shall be paid to Seller by Purchaser by the Closing (as hereinafter defined) as follows:


(b) Within two (2) Business Days after the execution of this Agreement by Seller and Purchaser, Purchaser shall deliver to First American Title Company ("ESCROW COMPANY") a deposit equal to Ten Million Dollars ($10,000,000) (the "DEPOSIT"). If Purchaser fails to timely deliver the Deposit, Purchaser shall be in breach of this Agreement and Seller shall be entitled to terminate this Agreement and shall be entitled to liquidated damages pursuant to
Section 19(b). Escrow Company shall deposit One Million Dollars ($1,000,000) of - ------------- the Deposit (the "LIQUIDATED DAMAGES DEPOSIT") into an interest bearing deposit account established in the name of Seller (the "LIQUIDATED DAMAGES DEPOSIT ACCOUNT") and the remaining Nine Million Dollars ($9,000,000) of the Deposit (the "ADVANCE DEPOSIT") into an interest bearing account established in the name of Purchaser and selected by Purchaser to be credited to the Purchase Price (the "ADVANCE DEPOSIT ACCOUNT"). As used herein, the "DEPOSIT" means the Deposit plus any interest actually earned thereon and held in the Liquidated Damages Deposit Account or the Advance Deposit Account, as the case may be, at the relevant time. Seller and Purchaser agree that the Deposit shall be allocated among the Properties, in the same proportion that the Allocated Purchase Price for each property bears to the aggregate Purchase Price and in accordance with
Exhibit D (such allocated portion of the Deposit being the "ALLOCATED DEPOSIT"). - --------- Provided that Purchaser has not terminated the Agreement in the manner specified in Section 5 prior to the expiration of the Due Diligence Period, Escrow Company
--------- shall immediately release One Million Dollars ($1,000,000.00) from the Liquidated Damages Deposit Account to Seller upon the expiration of the Due Diligence Period without the need for authorization or consent of Purchaser. Upon written notice to the Escrow Holder and Seller, Purchaser shall be entitled to receive periodically (but not more frequently than once per week) from the Liquidated Damages Deposit Account or the Advance Deposit Account, as the case may be, interest actually paid on the amount of the Deposit held therein.


(c) If the purchase and sale of the Properties is consummated as contemplated herein, the Deposit shall be credited against the Purchase Price. If the purchase and sale of the Properties is not consummated because of a default under this Agreement on the part of Seller, a failure of a Purchaser's Condition Precedent or a failure of Seller's Condition Precedent (excluding Purchaser's default under this Agreement), the Deposit shall be immediately refunded to Purchaser. If the purchase and sale of the Properties is not consummated because of a default under this Agreement by Purchaser, the Liquidated Damages Deposit shall be retained by Seller pursuant to Section
------- 19(b). - -----


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(d) The balance of the Purchase Price shall be paid to Seller in immediately available funds at Closing, which balance shall be deposited by wire transfer into escrow with Escrow Company no later than one (1) Business Day prior to the Closing. As used herein, "BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in the State of California are authorized or obligated by law or executive order to be closed.


4. TITLE.
-----


(a) Within five (5) days after the Execution Date, Seller shall deliver to Purchaser (i) for each of the Properties, the preliminary title reports listed on Exhibit E attached hereto issued by First American Title
--------- Company (the "TITLE COMPANY"), together with copies of all documents relating to the title exceptions referred to therein (collectively, the "PTRS"), and (ii) the ALTA surveys described on Exhibit E attached hereto (collectively, the
--------- "SURVEYS").


(b) Within twenty (20) days after the Execution Date, Purchaser shall notify Seller in writing of any title exceptions shown in any PTR that Purchaser disapproves and the exceptions disapproved in such timely notice shall constitute "DISAPPROVED EXCEPTIONS". Thereafter, if any written update to any PTR reveals a material exception to title not shown on such PTR, then Purchaser shall notify Seller in writing of Purchaser's disapproval of such new exception within ten (10) days after Purchaser's receipt of such update, and the exceptions disapproved in such timely notice shall also be Disapproved Exceptions. Any exception not disapproved in writing within such twenty (20) day period (for review of the PTRs) or within such ten (10) day period (for review of updates) shall be deemed approved by Purchaser, and shall constitute a "PERMITTED EXCEPTION" hereunder. Notwithstanding anything to the contrary herein, all of the following shall also constitute Permitted Exceptions (regardless of whether Purchaser disapproves of them): (i) real estate taxes and assessments, existing bond or special district assessments, personal property taxes, water and/or meter charges, sewer taxes, charges or rents, in each case not yet due and payable, (ii) liens, encumbrances or other matters made, created or suffered by or on behalf of Purchaser, including, without limitation, liens arising as a result of any act or omission of Purchaser or Purchaser's agents, contractors or representatives, (iii) zoning and other land use restrictions and ordinances, (iv) rights of tenants under the Leases, (v) printed exceptions and exclusions set forth in the Title Company's standard form policy of title insurance, and (vi) matters which would be disclosed by a current and accurate survey or an inspection of the Property.


(c) Within three (3) days after receiving Purchaser's written notice disapproving any title exceptions contained in the PTRs (or update thereof), Seller shall notify Purchaser in writing of any disapproved title exceptions which Seller is unable or unwilling to cause to be removed or insured against prior to or at Closing (the "UNRESOLVED EXCEPTIONS"). Seller's failure to deliver its notice within such three (3) day period shall be deemed to be Seller's election to treat such disapproved title exceptions as Unresolved Exceptions. Notwithstanding the foregoing and prior to or at Closing, Seller shall, at


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Seller's sole cost and expense, remove all deeds of trusts encumbering the Properties (and pay all prepayment fees and expenses required in connection therewith) and such deeds of trust will not be Unresolved Exceptions. With respect to any Unresolved Exception, Purchaser shall elect within two (2) days after receipt of Seller's notice, either to (i) deliver its Disapproval Notice (as defined in Section 5(d) with respect to any Property affected by such
------------ Unresolved Exception, or (ii) waive its disapproval of such Unresolved Exception, in which event, each such Unresolved Exception shall then be deemed to be a Permitted Exception. Purchaser's failure to deliver its Disapproval Notice with respect to any Property affected by such Unresolved Exceptions within such two (2) day period shall be deemed to be Purchaser's election to treat such Unresolved Exceptions as Permitted Exceptions.


(d) Purchaser, at Purchaser's option, may obtain additional title endorsements and other extended title coverage at Purchaser's sole cost and expense, including without limitation, any costs of surveys or survey updates as may be required to obtain such coverage.


5. INSPECTION; DUE DILIGENCE PERIOD.
--------------------------------


(a) From the Execution Date and continuing until 5:00 p.m. Los Angles time on the twenty-fifth (25th) day after the Execution Date (i.e., May 25, 1997) (the "DUE DILIGENCE PERIOD") and with reasonable advance notice to Seller, Purchaser, its agents and representatives shall be entitled to enter onto the Properties during regular business hours (subject to the rights of tenants in possession) to perform inspections and tests of the Properties with respect to the physical and the environmental condition of the Properties; provided,
-------- however, that in no event shall Purchaser or its agents or representatives (i) - ------- unreasonably disturb the on-going operation of the Properties, (ii) unreasonably disturb any tenants or occupants of the Properties, or (iii) drill or bore on or through the surface of the Land without Seller's prior written consent, which consent may be given or withheld in Seller's reasonable discretion. Prior to Purchaser entering any Property to conduct the inspections and tests described above, Purchaser shall obtain and maintain, and shall cause each of its contractors and agents to maintain (and shall deliver to Seller evidence thereof), at Purchaser's sole cost and expense, general liability insurance, from an insurer reasonably acceptable to Seller, in the amount of One Million Dollars ($1,000,000) combined single limit for personal injury and property damage per occurrence and Two Million Dollars ($2,000,000) in the aggregate, such policies to name Seller as an additional insured party, which insurance shall provide coverage against any claim for personal liability or property damage caused by Purchaser or its agents, employees or contractors in connection with such inspections and tests. After making such tests and inspections, Purchaser shall promptly restore the Properties to its condition prior to such tests and inspections. Purchaser shall pay all costs and expenses relating to such tests and inspections of the Properties and any restoration of the Property in accordance with the terms of this Section 5. Seller or its representatives
---------- may accompany Purchaser during Purchaser's inspections.


(b) Purchaser shall keep the Properties free from all liens and shall indemnify, defend, and hold harmless Seller from and against all loss, liability, damage, cost


5


and expense (including, but not limited to, reasonable attorneys' fees and costs) incurred, suffered by, or claimed against Seller by reason of any actual damage to the Properties or injury to persons caused by Purchaser and/or its agents, employees or contractors in exercising its rights under Section 5(a).
------------ This indemnity shall survive the Closing or any termination of this Agreement.


(c) Purchaser shall provide to Seller, upon Purchaser's receipt thereof, copies of all environmental and physical inspection reports, studies, test results and similar data obtained by Purchaser in the course of its due diligence investigation other than any attorney-client privileged communications; provided, however, the foregoing shall be delivered to Seller
----------------- without representation, warranty or liability to Purchaser, and Seller shall have no right to rely on such reports unless the party preparing such reports so agrees.


(d) On or before 5:00 p.m. Los Angeles time on the last day of the Due Diligence Period, Purchaser may give written notice to Seller (the "DISAPPROVAL NOTICE") of its desire to terminate the Agreement with respect to one or more Properties (each, a "DISAPPROVED PROPERTY") because of the physical or environmental condition of the Property, land use entitlement or any other criteria deemed appropriate by Purchaser. If Purchaser disapproves of all of the Properties, this Agreement shall be terminated in its entirety and the Escrow Company shall refund the Deposit to Purchaser and Purchaser shall pay all title or escrow cancellation fees related ...