Exhibit 10.2

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JPMorgan Chase Bank, National Association

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England

March 27, 2007

 

To: Kilroy Realty, L.P. 12200 W. Olympic Boulevard, Suite 200 Los Angeles,
California 90064

Attention:   Richard E. Moran   EVP and CFO

Telephone No.:   (310) 481-8400 Facsimile No.:   (310) 481-6500 Re: Call Option
Transaction

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the call option transaction entered into among JPMorgan
Chase Bank, National Association, London Branch (“JPMorgan”), Kilroy Realty,
L.P. (“Counterparty”) and Kilroy Realty Corporation (“Parent”) on the Trade Date
specified below (the “Transaction”). This letter agreement constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation shall replace any previous agreements and serve as the final
documentation for this Transaction.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “Equity Definitions”), as published by the International Swaps
and Derivatives Association, Inc. (“ISDA”), are incorporated into this
Confirmation. In the event of any inconsistency between the Equity Definitions
and this Confirmation, this Confirmation shall govern. Certain defined terms
used herein have the meanings assigned to them in the Offering Memorandum dated
March 27, 2007 (the “Offering Memorandum”) relating to the USD 400,000,000
principal amount of 3.25% Exchangeable Senior Notes due 2012 (the “Exchangeable
Notes” and each USD 1,000 principal amount of Exchangeable Notes, an
“Exchangeable Note”) issued by Counterparty pursuant to an Indenture to be dated
as of April 2, 2007 among Counterparty, Parent, as guarantor, and U.S. Bank
National Association, as trustee (as in effect on the date of its execution, the
“Indenture”). In the event of any inconsistency between the terms defined in the
Offering Memorandum, the Indenture and this Confirmation, this Confirmation
shall govern. The parties acknowledge that this Confirmation is entered into on
the date hereof with the understanding that (i) definitions set forth in the
Indenture which are also defined herein by reference to the Indenture and
(ii) sections of the Indenture that are referred to herein will conform to the
descriptions thereof in the Offering Memorandum. If any such definitions in the
Indenture or any such sections of the Indenture differ from the descriptions
thereof in the Offering Memorandum, the descriptions thereof in the Offering
Memorandum will govern for purposes of this Confirmation. The parties further
acknowledge that the Indenture section numbers used herein are based on the
draft of the Indenture last reviewed by JPMorgan as of the date of this
Confirmation, and if any such section numbers are changed in the Indenture as
executed, the parties will amend this Confirmation in good faith to preserve the
intent of the parties. For the avoidance of doubt, references to the Indenture
herein are references to the Indenture as in effect on the date of its execution
and if the Indenture is amended following its execution, any such amendment will
be disregarded for purposes of this Confirmation unless the parties agree
otherwise in writing.

Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.

JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746. Registered

Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority

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1. This Confirmation evidences a complete and binding agreement between
JPMorgan, Counterparty and Parent as to the terms of the Transaction to which
this Confirmation relates. This Confirmation shall supplement, form a part of,
and be subject to an agreement in the form of the 2002 ISDA Master Agreement
(the “Agreement”) as if JPMorgan, Counterparty and Parent had executed an
agreement in such form (but without any Schedule except for the election of the
laws of the State of New York as the governing law) on the Trade Date. In the
event of any inconsistency between provisions of that Agreement and this
Confirmation, this Confirmation will prevail for the purpose of the Transaction
to which this Confirmation relates. The parties hereby agree that no Transaction
other than the Transaction to which this Confirmation relates shall be governed
by the Agreement.

2. The terms of the particular Transaction to which this Confirmation relates
are as follows:

General Terms:

 

        Trade Date:   March 27, 2007         Option Style:   “Modified
American”, as set forth under “Exercise and Valuation” below         Option
Type:   Call         Buyer:   Counterparty         Seller:   JPMorgan
        Shares:   The common stock of Parent, par value USD 0.01 per share
(Exchange symbol “KRC”)         Number of Options:   133,334. For the avoidance
of doubt, the Number of Options shall be reduced by any Options exercised by
Counterparty. In no event will the Number of Options be less than zero.
        Option Entitlement:   As of any date, a number equal to the Exchange
Rate as of such date (as defined in the Indenture, but without regard to any
adjustments to the Exchange Rate pursuant to Section 13.12 of the Indenture),
for each Exchangeable Note.         Strike Price:   USD 88.0440         Cap
Price:   USD 102.7180         Premium:   USD 8,333,333.33         Premium
Payment Date:   April 2, 2007         Exchange:   The New York Stock Exchange
        Related Exchange(s):   All Exchanges Exercise and Valuation:  
        Exercise Period(s):   Notwithstanding anything to the contrary in the
Equity Definitions, an Exercise Period shall occur with respect to an Option
hereunder only if such Option is an Exercisable Option (as defined below) and
the Exercise Period shall be, in respect of any Exercisable Option, the period
commencing on, and including, the relevant Exchange Date and ending on, and
including, the

 

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  Scheduled Valid Day immediately preceding the first day of the relevant
Settlement Averaging Period in respect of such Exchange Date; provided that in
respect of Exercisable Options relating to Exchangeable Notes for which the
relevant Exchange Date occurs on or after November 15, 2011, the final day of
the Exercise Period shall be the Scheduled Valid Day immediately preceding the
Expiration Date.         Exchange Date:   With respect to any exchange of
Exchangeable Notes (other than Exchangeable Notes with respect to which
Counterparty makes the direction described in Section 13.02(a) of the Indenture
and the financial institution designated by Counterparty accepts such
Exchangeable Notes in accordance with Section 13.02(b) of the Indenture), the
“Exchange Date” for such Exchangeable Notes, as defined in Section 13.03 of the
Indenture. For the avoidance of doubt, Exchangeable Notes are “accepted” for
purposes of the foregoing upon the earlier of the declaration of the designated
institution’s agreement to exchange such Exchangeable Notes or delivery of such
Exchangeable Notes to such financial institution for purposes of such exchange.
        Exercisable Options:   Upon the occurrence of an Exchange Date, a number
of Options equal to one-third of the number of Exchangeable Notes exchanged on
such Exchange Date, other than (i) Exchangeable Notes surrendered for exchange
(x) in connection with (A) an adjustment to the Exchange Rate effected by
Counterparty that was not provided under the terms of the Indenture as of the
Trade Date or (B) an agreement (other than the Indenture) by Counterparty with
the Holders (as such term is defined in the Indenture) of such Exchangeable
Notes and, in the case of either (A) or (B), the Holders of such Exchangeable
Notes receive upon exchange or pursuant to such agreement, as the case may be, a
payment of cash or delivery of Shares or any other property or value that was
not required under the terms of the Indenture as of the Trade Date or (y) after
having been acquired from a Holder by or on behalf of Counterparty or any of its
affiliates other than pursuant to an exchange by such Holder and thereafter
exchanged by or on behalf of Counterparty or any affiliate of Counterparty (each
event described in this clause (i), an “Induced Exchange”) or (ii) Exchangeable
Notes surrendered for exchange (x) pursuant to Section 13.12 of the Indenture in
connection with a transaction described in clause (1) or (2) of the definition
of Designated Event (as such term is defined in the Indenture), (y) pursuant to
Section 13.01(a)(iii) of the Indenture upon the Exchangeable Notes being called
for redemption or (z) pursuant to Section 13.01(a)(iv) of the Indenture in
connection with any other event described under the heading “Exchange upon
Specified Transactions” in the Offering Memorandum (each event described in this
clause (ii) a “Corporate Event Exchange”), shall become Exercisable Options.
        Expiration Time:   The Valuation Time         Expiration Date:   April
15, 2012, subject to earlier exercise.         Multiple Exercise:   Applicable,
as described under Exercisable Options above.

 

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        Automatic Exercise:   Applicable; and means that in respect of an
Exercise Period, a number of Options not previously exercised hereunder equal to
the number of Exercisable Options shall be deemed to be exercised on the final
day of such Exercise Period for such Exercisable Options; provided that such
Options shall be deemed exercised only to the extent that Counterparty has
provided a Notice of Exercise to JPMorgan.         Notice of Exercise:  
Notwithstanding anything to the contrary in the Equity Definitions, in order to
exercise any Exercisable Options, Counterparty must notify JPMorgan in writing
before 5:00 p.m. (New York City time) on the Scheduled Valid Day prior to the
scheduled first day of the Settlement Averaging Period for the Exercisable
Options being exercised (the “Notice Deadline”) of (i) the number of such
Options and (ii) the scheduled first day of the Settlement Averaging Period and
the scheduled Settlement Date; provided that in respect of Exercisable Options
relating to Exchangeable Notes with an Exchange Date occurring on or after
November 15, 2011, such notice may be given on or prior to the second Scheduled
Valid Day immediately preceding the Expiration Date and need only specify the
number of such Exercisable Options; provided further that, notwithstanding the
foregoing, such notice (and the related exercise of Exercisable Options) shall
be effective if given after the Notice Deadline but prior to 5:00 p.m. (New York
City time) on the fifth Scheduled Valid Day of such Settlement Averaging Period,
in which event the Calculation Agent shall have the right to adjust the number
of Net Shares as appropriate to reflect the additional costs (including, but not
limited to, hedging mismatches and market losses) and expenses incurred by
JPMorgan in connection with its hedging activities (including the unwinding of
any hedge position) as a result of JPMorgan not having received such notice
prior to the Notice Deadline.         Notice of Gross Share Settlement:   If
Counterparty has elected to satisfy exchange obligations with respect to
Exchangeable Notes in Shares only (as described in Section 13.01(c) of the
Indenture) (the “Gross Share Settlement”) then in order to exercise any
Exercisable Options relating to such Exchangeable Notes, Counterparty (or the
Trustee on behalf of the Counterparty) must notify JPMorgan of such election
before 5:00 p.m. (New York City time) on the Exchange Business Day immediately
following the day on which Counterparty has elected Gross Share Settlement;
provided, however, that, notwithstanding the foregoing, Counterparty (or the
Trustee on behalf of the Counterparty) must notify JPMorgan of such election
before 5:00 p.m. (New York City time) on the Scheduled Valid Day immediately
preceding the 102nd Scheduled Valid Day prior to the Expiration Date.
        Valuation Time:   At the close of trading of the regular trading session
on the Exchange.         Market Disruption Event:   Section 6.3(a) of the Equity
Definitions is hereby replaced in its entirety by the following:

 

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  “Market Disruption Event” means (1) a failure by the primary United States
national or regional securities exchange or market on which the Shares are
listed or admitted to trading to open for trading during its regular trading
session or (2) the occurrence or existence prior to 1:00 p.m. (New York City
time) on any Valid Day for the Shares of an aggregate one half hour period of
any suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by the Exchange or otherwise) in the Shares or in any
options, contracts or future contracts relating to the Shares. Settlement Terms:
          Settlement Method:   Net Share Settlement         Net Share
Settlement:   JPMorgan will deliver to Counterparty, on the relevant Settlement
Date, a number of Shares equal to the Net Shares in respect of any Exercisable
Option exercised or deemed exercised hereunder. In no event will the Net Shares
be less than zero.         Net Shares:   In respect of any Exercisable Option
exercised or deemed exercised, a number of Shares equal to (i) the Option
Entitlement multiplied by (ii) the sum of the quotients, for each Valid Day
during the Settlement Averaging Period for such Exercisable Option, of (A) (1)
the amount by which the Cap Price exceeds the Strike Price, if the Relevant
Price on such Valid Day is equal to or greater than the Cap Price; (2) the
amount by which such Relevant Price exceeds the Strike Price, if such Relevant
Price is greater than the Strike Price but less than the Cap Price or (3) zero,
if such Relevant Price is less than or equal to the Strike Price; divided by (B)
such Relevant Price, divided by (iii) the number of Valid Days in such
Settlement Averaging Period; provided that, if Counterparty has elected Gross
Share Settlement of the Exchangeable Notes, then with respect to any Exercisable
Option relating to Exchangeable Notes with an Exchange Date on or following
November 15, 2011, the Net Shares shall be equal to the lesser of (i) a number
of Shares determined as described above and (ii) a number of Shares equal to the
Net Exchangeable Obligation Value for such Exercisable Option divided by the
Obligation Value Price.   JPMorgan will deliver cash in lieu of any fractional
Shares to be delivered with respect to any Net Shares valued at the Relevant
Price for the last Valid Day of the Settlement Averaging Period.         Valid
Day:   A day on which (i) trading in the Shares generally occurs on the
principal U.S. national securities exchange or market on which the Shares are
listed or admitted for trading and (ii) there is no Market Disruption Event.
        Scheduled Valid Day:   A day on which trading in the Shares is scheduled
to occur on the principal U.S. national securities exchange or market on which
the Shares are listed or admitted for trading.

 

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        Relevant Price:   On any Valid Day, the per Share volume-weighted
average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page
KRC.N <equity> AQR (or any successor thereto) in respect of the period from the
scheduled opening time of the Exchange to the Scheduled Closing Time of the
Exchange on such Valid Day (or if such volume-weighted average price is
unavailable, the market value of one Share on such Valid Day, as determined by
the Calculation Agent in a commercially reasonable manner using a
volume-weighted method).         Net Exchangeable Obligation Value:   With
respect to an Exercisable Option, (i) the Total Exchangeable Obligation Value
for such Exercisable Option minus (ii) the principal amount of an Exchangeable
Note that is being exchanged by Counterparty on the related Exchange Date
pursuant to Section 13.11(b) of the Indenture.
        Total Exchangeable Obligation Value:   With respect to an Exercisable
Option, (i) the aggregate number of Shares, if any, that Counterparty is
obligated to deliver to the holder of an Exchangeable Note for the relevant
Exchange Date pursuant to Section 13.11(b) of the Indenture, multiplied by (ii)
the Obligation Value Price.         Obligation Value Price:   The opening price
as displayed under the heading “Op” on Bloomberg page KRC.N <equity> (or any
successor thereto) on the Obligation Value Date.         Obligation Value Date:
  Settlement Date         Settlement Averaging Period:   For any Exercisable
Option, (x) if Counterparty (or the Trustee) has delivered, in accordance with
the terms set forth above, a Notice of Exercise to JPMorgan with respect to such
Exercisable Option with an Exchange Date occurring prior to November 15, 2011,
the fifty (50) consecutive Valid Day period beginning on and including the third
Scheduled Valid Day following such Exchange Date (or the one hundred (100)
consecutive Valid Days commencing on, and including, the third Scheduled Valid
Day following such Exchange Date if Counterparty has delivered a Notice of Gross
Share Settlement to JPMorgan on or prior to the second Scheduled Valid Day
following such Exchange Date) or (y) if Counterparty has, on or following
November 15, 2011 delivered a Notice of Exercise to JPMorgan with respect to
such Exercisable Option with an Exchange Date occurring on or following November
15, 2011, the fifty (50) consecutive Valid Days commencing on, and including,
the fifty second (52nd) Scheduled Valid Day immediately prior to the Expiration
Date (or the one hundred (100) consecutive Valid Days (the “Gross Physical
Settlement Averaging Period”) commencing on, and including, the one hundred and
second (102nd) Scheduled Valid Day immediately prior to the Expiration Date if
Counterparty has delivered a Notice of Gross Share Settlement to JPMorgan on or
prior to the second Scheduled Valid Day following such Exchange Date).
        Settlement Date:   For any Exercisable Option, the date Shares will be
delivered with respect to the Exchangeable Notes related to such Exercisable
Option, under the terms of the Indenture; provided

 

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  that if Counterparty has delivered a Notice of Gross Share Settlement to
JPMorgan by the end of the Exercise Period for such Exercisable Option then,
other than with respect to the Exercisable Options relating to Exchangeable
Notes for which the relevant Exchange Date occurs on or after November 15, 2011,
the Settlement Date shall be the date that is one Settlement Cycle following the
last day of the applicable Settlement Averaging Period.         Settlement
Currency:   USD         Other Applicable Provisions:   The provisions of
Sections 9.1(c), 9.8, 9.9, 9.11, 9.12 and 10.5 of the Equity Definitions will be
applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Net Share Settled”. “Net
Share Settled” in relation to any Option means that Net Share Settlement is
applicable to that Option.         Representation and Agreement:  
Notwithstanding Section 9.11 of the Equity Definitions, the parties acknowledge
that any Shares delivered to Counterparty shall be, upon delivery, subject to
restrictions and limitations arising from Counterparty’s status under applicable
securities laws and Parent’s Articles of Amendment and Restatement, as amended
from time to time (the “Charter”). 3. Additional Terms applicable to the
Transaction:     Adjustments applicable to the Transaction:       Potential
Adjustment Events:   Notwithstanding Section 11.2(e) of the Equity Definitions,
a “Potential Adjustment Event” means an occurrence of any event or condition, as
set forth in Section 13.06 of the Indenture, that would result in an adjustment
to the Exchange Rate of the Exchangeable Notes; provided that in no event shall
there be any adjustment hereunder as a result of an adjustment to the Exchange
Rate pursuant to Section 13.12 of the Indenture.       Method of Adjustment:  
Calculation Agent Adjustment, which means, notwithstanding anything to the
contrary in the Equity Definitions, upon any adjustment to the Exchange Rate of
the Exchangeable Notes pursuant to the Indenture (other than Section 13.12 of
the Indenture), (i) the Calculation Agent shall make a corresponding adjustment
to any of the Strike Price, Number of Options and the Option Entitlement and
(ii) the Calculation Agent may, in its sole discretion, make any adjustment
consistent with the Calculation Agent Adjustment set forth in Section 11.2(c) of
the Equity Definitions to the Cap Price or any other variable relevant to the
exercise, settlement or payment for the Transaction to preserve the fair value
of the Options to JPMorgan after taking into account such Potential Adjustment
Event; provided further that in no event shall the Cap Price be less than the
Strike Price. Extraordinary Events applicable to the Transaction:         Merger
Events:   Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger
Event” means the occurrence of any event or condition

 

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  set forth in clause (1) of the definition of Designated Event in Section 1.01
of the Indenture.         Tender Offers:   Applicable; provided that
notwithstanding Section 12.1(d) of the Equity Definitions, a “Tender Offer”
means the occurrence of any event or condition set forth in clause (2) of the
definition of Designated Event in Section 1.01 of the Indenture.
        Consequence of Merger Events/  

        Tender Offers:

  Notwithstanding Sections 12.2 and 12.3 of the Equity Definitions, upon the
occurrence of a Merger Event or a Tender Offer:   (i) the Calculation Agent
shall make a corresponding adjustment in respect of any adjustment under the
Indenture to any one or more of the nature of the Shares, Strike Price, Number
of Options and the Option Entitlement; provided, however, that such adjustment
shall be made without regard to any adjustment to the Exchange Rate for the
issuance of additional shares as set forth in Section 13.12 of the Indenture;
and   (ii) the Calculation Agent may, in its sole discretion, make any
adjustment consistent with the Modified Calculation Agent Adjustment set forth
in Section 12.2(e) or 12.3(d) of the Equity Definitions, as applicable, to the
Cap Price or any other variable relevant to the exercise, settlement or payment
for the Transaction; provided that in no event shall the Cap Price be less than
the Strike Price;   provided that, with respect to a Merger Event, if the
consideration for the Shares includes (or, at the option of a holder of Shares,
may include) shares of an entity or person not organized under the laws of the
United States, any State thereof or the District of Columbia, Cancellation and
Payment (Calculation Agent Determination) shall apply; and provided further
that, for the avoidance of doubt, adjustments shall be made pursuant to the
provisions of subparagraphs (i) and (ii) above regardless of whether any Merger
Event or Tender Offer gives rise to a Corporate Event Exchange.
        Nationalization, Insolvency  

        or Delisting:

  Cancellation and Payment (Calculation Agent Determination); provided that, in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
will also constitute a Delisting if the Exchange is located in the United States
and the Shares are not immediately re-listed, re-traded or re-quoted on any of
the New York Stock Exchange, the American Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global Market (or their respective successors); if
the Shares are immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, the American Stock Exchange, The NASDAQ Global Select
Market or The NASDAQ Global Market (or their respective successors), such
exchange or quotation system shall thereafter be deemed to be the Exchange.

 

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        Additional Disruption Events:              Change in Law:    Applicable
          Failure to Deliver    Applicable           Determining Party:    For
all applicable Additional Disruption Events, JPMorgan         Non-Reliance:   
Applicable         Agreements and Acknowledgements
        Regarding Hedging Activities:    Applicable         Additional
Acknowledgments:    Applicable

4. Calculation Agent: JPMorgan

5. Account Details:

 

  (a) Account for payments to Counterparty:

Union Bank of California

21515 Hawthorne Blvd., Torrance, CA 90503-6564

ABA# 122 000 496

Acct: Kilroy Realty, L.P.

Acct No.: 93400-00622

Account for delivery of Shares to Counterparty:

To be provided by Counterparty

 

  (b) Account for payments to JPMorgan:

JPMorgan Chase Bank, National Association, New York

ABA: 021 000 021

Favour: JPMorgan Chase Bank, National Association – London

A/C: 0010962009 CHASUS33

Account for delivery of Shares from JPMorgan:

DTC 0060

6. Offices:

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.

The Office of JPMorgan for the Transaction is: London

JPMorgan Chase Bank, National Association

London Branch

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England

 

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7. Notices: For purposes of this Confirmation:

 

  (a) Address for notices or communications to Counterparty and Parent:

Kilroy Realty, L.P.

12200 W. Olympic Boulevard, Suite 200

Los Angeles, California 90064

Attention:   Richard E. Moran   EVP and CFO

Telephone No.:   (310) 481-8400 Facsimile No.:   (310) 481-6500

with a copy to:

[COUNTERPARTY TO PROVIDE]

 

  (b) Address for notices or communications to JPMorgan:

JPMorgan Chase Bank, National Association

277 Park Avenue, 11th Floor

New York, NY 10172

Attention: Eric Stefanik

Title: Operations Analyst

EDG Corporate Marketing

Telephone No.:   (212) 622-5814 Facsimile No.:   (212) 622-8534

8. Representations and Warranties of Counterparty and Parent

The representations and warranties of Counterparty set forth in Section 3 of the
Purchase Agreement (the “Purchase Agreement”) dated as of March 27, 2007 among
Counterparty, Parent and J.P. Morgan Securities Inc., Banc of America Securities
LLC and Lehman Brothers Inc. as representatives of the Initial Purchasers party
thereto are true and correct and are hereby deemed to be repeated to JPMorgan as
if set forth herein. Counterparty and Parent hereby further represent and
warrant to, and agree with, JPMorgan as of the Trade Date that:

 

  (a) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required in connection with the
execution, delivery or performance by Counterparty or Parent of this
Confirmation, except such as have been obtained or made and such as may be
required under the Securities Act of 1933, as amended (the “Securities Act”), or
state securities laws.

 

  (b) Each of Counterparty and Parent is an “eligible contract participant” (as
such term is defined in Section 1a(12) of the Commodity Exchange Act, as amended
(the “CEA”)) because one or more of the following is true:

It is a corporation, partnership, proprietorship, organization, trust or other
entity and:

 

  (i) it has total assets in excess of USD 10,000,000;

 

  (ii) its obligations hereunder are guaranteed, or otherwise supported by a
letter of credit or keepwell, support or other agreement, by an entity of the
type described in Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or

 

  (iii) it has a net worth in excess of USD 1,000,000 and has entered into this
Agreement in connection with the conduct of its business or to manage the risk
associated with an asset or liability owned or incurred or reasonably likely to
be owned or incurred by it in the conduct of its business.

 

  (c) Each of it and its affiliates is not, on the date hereof, in possession of
any material non-public information with respect to Counterparty, Parent or the
Shares.

 

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  (d) Ownership positions held by JPMorgan or any of its affiliates solely in
its capacity as a nominee or fiduciary do not constitute Beneficial Ownership or
Constructive Ownership (as such terms are defined in the Charter) by JPMorgan.

 

  (e) Parent has all necessary corporate power and authority to execute, deliver
and perform its obligations in respect of the letter agreement (the “Waiver”)
dated as of March 27, 2007 delivered by Parent to JPMorgan and entitled “Waiver
of Ownership Limits”; such execution, delivery and performance have been duly
authorized by all necessary corporate action on Parent’s part; and the Waiver
has been duly and validly executed and delivered by Parent and constitutes its
valid and binding obligation, enforceable against Parent in accordance with its
terms.

 

  (f) Neither the execution and delivery of the Waiver nor the incurrence or
performance of obligations of Parent thereunder will conflict with or result in
a breach of the certificate of incorporation or by-laws (or any equivalent
documents) of Parent, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which Parent or any of its subsidiaries is a party or
by which Parent or any of its subsidiaries is bound or to which Parent or any of
its subsidiaries is subject, or constitute a default under, or result in the
creation of any lien under, any such agreement or instrument, or breach or
constitute a default under any agreements and contracts of Parent or any of its
significant subsidiaries filed as exhibits to Parent’s Annual Report on Form
10-K for the year ended December 31, 2006 as updated by any subsequent filings.

9. Other Provisions:

 

  (a) Opinions. Each of Counterparty and Parent shall deliver to JPMorgan an
opinion of counsel, dated as of the Trade Date, with respect to the matters set
forth in Section 3(a) of the Agreement and Sections 8(e) and (f) of this
Confirmation.

 

  (b) Amendment. If the Initial Purchasers party to the Purchase Agreement
exercise their right to purchase additional Exchangeable Notes as set forth
therein, then, at the option of Counterparty, JPMorgan, Counterparty and Parent
will either enter into a new confirmation or amend this Confirmation to provide
for such increase in Exchangeable Notes (but on pricing terms acceptable to
JPMorgan and Counterparty) (such additional confirmation or amendment to this
Confirmation to provide for the payment by Counterparty to JPMorgan of the
additional premium related thereto).

 

  (c) Repurchase Notices. Counterparty shall give JPMorgan written notice of any
repurchase of Shares (a “Repurchase Notice”) at least ten Scheduled Trading Days
prior to effecting such repurchase if, after giving effect to such repurchase,
the quotient of (x) the product of (a) the Number of Options and (b) the Option
Entitlement divided by (y) the number of Parent’s outstanding Shares (such
quotient expressed as a percentage, the “Option Equity Percentage”) would be
greater than 6.5%. Such Repurchase Notice shall set forth the number of Shares
to be outstanding after giving effect to the relevant Share repurchase. In
connection with the delivery of any Repurchase Notice to JPMorgan, (x) Parent
shall, concurrently with or prior to such delivery, publicly announce and
disclose the relevant repurchase or (y) Parent shall represent and warrant in
such Repurchase Notice that the information set forth in such Repurchase Notice
does not constitute material non-public information with respect to Parent or
the Shares.

 

  (d)

Exchange Rate Adjustments. Parent shall provide to JPMorgan written notice (such
notice, an “Exchange Rate Adjustment Notice”) at least ten Scheduled Trading
Days prior to consummating or otherwise executing or engaging in any transaction
or event (an “Exchange Rate Adjustment Event”) that would lead to an increase in
the Exchange Rate (as such term is defined in the Indenture), other than an
increase pursuant to Section 13.06(a) or (d) of the Indenture, which Exchange
Rate Adjustment Notice shall set forth the new, adjusted Exchange Rate after
giving effect to such Exchange Rate Adjustment Event (the “New Exchange Rate”);
provided that no such Exchange Rate Adjustment Notice needs to be provided
unless, after giving

 

11

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effect to such Exchange Rate Adjustment Event, the Option Equity Percentage
would be greater than 6.5%. In connection with the delivery of any Exchange Rate
Adjustment Notice to JPMorgan, (x) Parent shall, concurrently with or prior to
such delivery, publicly announce and disclose the Exchange Rate Adjustment Event
or (y) Parent shall, concurrently with such delivery, represent and warrant that
the information set forth in such Exchange Rate Adjustment Notice does not
constitute material non-public information with respect to Parent or the Shares.

 

  (e) Regulation M. Neither Counterparty or Parent is on the date hereof engaged
in a distribution, as such term is used in Regulation M under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), of any securities of
Counterparty or Parent, as applicable, other than (i) a distribution meeting the
requirements of the exception set forth in Rules 101(b)(10) and 102(b)(7) of
Regulation M and (ii) the distribution of the Exchangeable Notes. Neither
Counterparty nor Parent shall, until the second Scheduled Trading Day
immediately following the Trade Date, engage in any such distribution.

 

  (f) No Manipulation. Neither Counterparty nor Parent is entering into this
Transaction to create actual or apparent trading activity in the Shares (or any
security convertible into or exchangeable for the Shares) or to raise or depress
or otherwise manipulate the price of the Shares (or any security convertible
into or exchangeable for the Shares) or otherwise in violation of the Exchange
Act.

 

  (g) Number of Repurchased Shares. Each of Counterparty and Parent represents
that it could have purchased a number of Shares equal to (i) the product of the
Number of Options, Option Entitlement and the amount by which the Cap Price
exceeds the Strike Price, divided by (ii) the Cap Price, on the Exchange or
otherwise, in compliance with applicable law, its organizational documents and
any orders, decrees and contractual agreements binding upon Counterparty or
Parent, on the Trade Date.

 

  (h) Board Authorization. Each of this Transaction and the issuance of the
Exchangeable Notes was approved by its board of directors and publicly
announced, solely for the purposes stated in such board resolution and public
disclosure and, prior to any exercise of Options hereunder, Counterparty’s and
Parent’s board of directors will have duly authorized any repurchase of Shares
pursuant to this Transaction. Each of Counterparty and Parent further represents
that there is no internal policy, whether written or oral, of Counterparty or
Parent that would prohibit Counterparty or Parent from entering into any aspect
of this Transaction, including, but not limited to, the purchases of Shares to
be made pursuant hereto.

 

  (i)

Transfer or Assignment. Counterparty or Parent may not transfer any of its
rights or obligations under this Transaction without the prior written consent
of JPMorgan. JPMorgan may, without Counterparty’s and Parent’s consent, transfer
or assign all or any part of its rights or obligations under this Transaction to
any third party (the “Transferee”) with a rating for its long term, unsecured
and unsubordinated indebtedness equal to or better than the lesser of (i) the
credit rating of JPMorgan at the time of the transfer and (ii) A- by Standard
and Poor’s Rating Group, Inc. or its successor (“S&P”), or A3 by Moody’s
Investor Service, Inc. (“Moody’s”) or, if either S&P or Moody’s ceases to rate
such debt, at least an equivalent rating or better by a substitute agency rating
mutually agreed by Counterparty and JPMorgan (the “Minimum Agency Credit
Rating”); provided that the Transferee agrees not to transfer or assign all or
any part of its rights or obligations under such transferred or assigned portion
of this Transaction (the “Transferred Transaction”) to any third party unless
such third party has a rating for its long term, unsecured and unsubordinated
indebtedness equal to or better than the lesser of (i) the credit rating of the
Transferee at the time of the transfer and (ii) the Minimum Agency Credit
Rating; and provided further that the Transaction will not, at the time of
transfer, exceed the Threshold Value (as defined below) with respect to the
Transferee and such Transferee agrees (i) to comply with Section 9(aa) of this
Confirmation with respect to its securities and (ii) not to transfer or assign
all or any portion of the Transferred Transaction to any other third party
unless such third party agrees to comply with Section 9(aa) of this Confirmation
with respect to its securities (it being

 

12

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understood that all references therein to JPMorgan shall instead refer to such
Transferee or such subsequent third party, as applicable). If after JPMorgan’s
commercially reasonable efforts, JPMorgan is unable to effect such a transfer or
assignment on pricing terms reasonably acceptable to JPMorgan and within a time
period reasonably acceptable to JPMorgan of a sufficient number of Options to
reduce (i) the aggregate “beneficial ownership” (within the meaning of
Section 13 of the Exchange Act and rules promulgated thereunder) of JPMorgan and
any of its affiliates with which it is required to aggregate “beneficial
ownership” under Section 13 of the Exchange Act and rules promulgated thereunder
(“JPMorgan Group”) to 7.5% of Parent’s outstanding Shares or less, (ii) the
Option Equity Percentage to 6.5% or less, (iii) J.P. Morgan Chase & Co.’s
(“Bank”) Beneficial Ownership or Constructive Ownership (as such terms are
defined in the Charter) of Common Stock (as such term is defined in the Charter)
to 8.0% or less or (iv) the percentage of the total vote or the total value of
JPMorgan’s securities that this Transaction represents to 9.5% or less, JPMorgan
may designate any Exchange Business Day as an Early Termination Date with
respect to a portion (the “Terminated Portion”) of this Transaction, such that
(i) the JPMorgan Group’s “beneficial ownership” following such partial
termination will be equal to or less than 7.5%, (ii) the Option Equity
Percentage following such partial termination will be equal to or less than
6.5%, (iii) Bank’s Beneficial Ownership or Constructive Ownership (as such terms
are defined in the Charter) of Common Stock (as such term is defined in the
Charter) following such partial termination will be equal to or less than 8.0%
or (iv) the percentage of the total vote or the total value of JPMorgan’s
securities that this Transaction represents to or less than 9.5%. If the Waiver
terminates or ceases to be valid, binding or enforceable against Counterparty
JPMorgan may designate any Exchange Business Day as an Early Termination Date
with respect to all or a portion of this Transaction. Solely for purposes of
this subsection, following receipt of any Repurchase Notice or Exchange Rate
Adjustment Notice, (i) JPMorgan Group’s “beneficial ownership” (within the
meaning of Section 13 of the Exchange Act and rules promulgated thereunder) with
respect to Shares, (ii) the Options Equity Percentage and (iii) Bank’s
Beneficial Ownership or Constructive Ownership (as such terms are defined in the
Charter) with respect to the Common Stock (as such term is defined in the
Charter), as the case may be, shall incorporate the deemed effect of the
relevant Share repurchase (in the case of a Repurchase Notice) or New Exchange
Rate (in the case of an Exchange Rate Adjustment Notice). In the event that
JPMorgan so designates an Early Termination Date with respect to a portion of
this Transaction, a payment shall be made pursuant to Section 6 of the Agreement
as if (i) an Early Termination Date had been designated in respect of a
Transaction having terms identical to this Transaction and a Number of Options
equal to the Terminated Portion, (ii) Counterparty shall be the sole Affected
Party with respect to such partial termination and (iii) such Transaction shall
be the only Terminated Transaction (and, for the avoidance of doubt, the
provisions of Section 9(q) shall apply to any amount that is payable by JPMorgan
to Counterparty pursuant to this sentence as if Counterparty was not the
Affected Party). Notwithstanding any other provision in this Confirmation to the
contrary requiring or allowing JPMorgan to purchase, sell, receive or deliver
any shares or other securities to or from Counterparty, JPMorgan may designate
any of its affiliates to purchase, sell, receive or deliver such shares or other
securities and otherwise to perform JPMorgan’s obligations in respect of this
Transaction and any such designee may assume such obligations. JPMorgan shall be
discharged of its obligations to Counterparty to the extent of any such
performance.

 

  (j) Staggered Settlement. If upon advice of counsel with respect to applicable
legal and regulatory requirements, including any requirements relating to
JPMorgan’s hedging activities hereunder, JPMorgan reasonably determines that it
would not be practicable or advisable to deliver, or to acquire Shares to
deliver, any or all of the Shares to be delivered by JPMorgan on the Settlement
Date for the Transaction, JPMorgan may, by notice to Counterparty on or prior to
any Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares
on two or more dates (each, a “Staggered Settlement Date”) as follows:

 

 

(i)

in such notice, JPMorgan will specify to Counterparty the related Staggered
Settlement Dates (the first of which will be such Nominal Settlement Date and
the last of which will be no later than the twentieth (20th) Exchange Business
Day following such Nominal

 

13

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Settlement Date) and the number of Shares that it will deliver on each Staggered
Settlement Date;

 

  (ii) the aggregate number of Shares that JPMorgan will deliver to Counterparty
hereunder on all such Staggered Settlement Dates will equal the number of Shares
that JPMorgan would otherwise be required to deliver on such Nominal Settlement
Date;

 

  (iii) Net Share Settlement terms will apply on each Staggered Settlement Date,
except that the Net Shares will be allocated among such Staggered Settlement
Dates as specified by JPMorgan in the notice referred to in clause (i) above;
and

 

  (iv) if Counterparty declares a dividend or other distribution with respect to
Shares with an ex dividend date falling on or after a Nominal Settlement Date
and prior to a Staggered Settlement Date, then in addition to any Shares it
delivers on such Staggered Settlement Date, JPMorgan shall deliver to
Counterparty the amount of such dividend or other distribution in respect of
such Shares on the Exchange Business Day next following its receipt of such
dividend or distribution.

 

  (k) Early Unwind. In the event the sale of Exchangeable Notes is not
consummated with the Initial Purchasers for any reason or Counterparty fails to
deliver to JPMorgan opinions of counsel to Counterparty as required pursuant to
Section 9(a) by the close of business in New York on April 2, 2007 (or such
later date as agreed upon by the parties) (April 2, 2007 or such later date as
agreed upon being the “Early Unwind Date”), this Transaction shall automatically
terminate (the “Early Unwind”) on the Early Unwind Date and (i) the Transaction
and all of the respective rights and obligations of JPMorgan, Counterparty and
Parent under the Transaction shall be cancelled and terminated and (ii) each
party shall be released and discharged by the other party from and agrees not to
make any claim against the other party with respect to any obligations or
liabilities of the other party arising out of and to be performed in connection
with the Transaction either prior to or after the Early Unwind Date; provided
that if the sale is not consummated for any reason other than a default by any
Initial Purchaser, the Counterparty shall purchase from JPMorgan on the Early
Unwind Date all Shares purchased by JPMorgan or one or more of its affiliates
and reimburse JPMorgan for any costs or expenses (including market losses)
relating to the unwinding of its hedging activities in connection with the
Transaction (including any loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position).
The amount of any such reimbursement shall be determined by JPMorgan in its sole
good faith discretion. JPMorgan shall notify Counterparty of such amount and
Counterparty shall pay such amount in immediately available funds on the Early
Unwind Date. Each of JPMorgan and Counterparty represents and acknowledges to
the other that, subject to the proviso included in this paragraph, upon an Early
Unwind, all obligations with respect to the Transaction shall be deemed fully
and finally discharged.

 

  (l) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan
Securities Inc., an affiliate of JPMorgan (“JPMSI”), has acted solely as agent
and not as principal with respect to this Transaction and (ii) JPMSI has no
obligation or liability, by way of guaranty, endorsement or otherwise, in any
manner in respect of this Transaction (including, if applicable, in respect of
the settlement thereof). Each party agrees it will look solely to the other
party (or any guarantor in respect thereof) for performance of such other
party’s obligations under this Transaction.

 

  (m) Dividends. If at any time during the period from and including the Trade
Date, to but excluding the Expiration Date, (i) an ex-dividend date for a cash
dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and that
dividend is less than the Regular Dividend on a per Share basis or (ii) if no
Ex-Dividend Date for a cash dividend occurs with respect to the Shares in any
quarterly dividend period of Counterparty, then the Calculation Agent will
adjust the Cap Price to preserve the fair value of the Options to JPMorgan after
taking into account such dividend or lack thereof. “Regular Dividend” shall mean
USD 0.555 per Share per quarter.

 

14

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  (n) Additional Termination Events. Notwithstanding anything to the contrary in
this Confirmation, (i) upon the occurrence of an Exchange Date with respect to
an Induced Exchange or a Corporate Event Exchange, as applicable:

(A) Counterparty shall within one Scheduled Trading Day provide written notice
(an “Excluded Exchange Notice”) to JPMorgan specifying the number of
Exchangeable Notes exchanged on such Exchange Date and identifying the related
exchanges as Induced Exchanges or Corporate Event Exchanges, as applicable;

(B) such Induced Exchange or Corporate Event Exchange, as applicable, shall
constitute an Additional Termination Event hereunder with respect to the number
of Options relating to the number of Exchangeable Notes surrendered for exchange
in connection with such Induced Exchange or Corporate Event Exchange, as
applicable, (the “Affected Number of Options”), in which case (x) the sole
Affected Transaction shall consist of a transaction identical to the Transaction
except that Number of Options for such Affected Transaction shall equal the
Affected Number of Options and Counterparty shall be deemed the sole Affected
Party and (y) the Transaction shall remain in full force and effect, except that
the Number of Options subject to the Transaction immediately prior to the
Exchange Date for such Induced Exchange or Corporate Event Exchange, as
applicable, shall as of such Exchange Date be reduced by the Affected Number of
Options;

(C) notwithstanding anything to the contrary in the Agreement, JPMorgan shall
designate an Early Termination Date in respect of such Affected Transaction,
which shall be no earlier than one Scheduled Trading Day following the Exchange
Date for the related Induced Exchange or Corporate Event Exchange, as
applicable;

(D) notwithstanding anything to the contrary in the Agreement, the amount
payable in respect of such Affected Transaction in respect of each Option that
is part of such Affected Transaction (an “Affected Option”) shall equal the
lesser of (i) the amount payable pursuant to Section 6 of the Agreement in
respect of each Affected Option and (ii) the total value deliverable by
Counterparty in respect of each $1,000 principal amount of such Exchangeable
Notes in excess of $1,000, whether in cash and/or in Shares (the value of Shares
deliverable by Counterparty to be based on the opening price as displayed under
the heading “Op” on Bloomberg page KRC.N <equity> (or any successor thereto) on
the Settlement Date for such Exchangeable Notes, as determined by the
Calculation Agent);

(E) for the avoidance of doubt, in determining the amount payable in respect of
such Affected Transaction pursuant to Section 6 of the Agreement, the
Calculation Agent shall assume that (w) the relevant Induced Exchange or
Corporate Event Exchange, as applicable, had not occurred, (x) in the case of an
Induced Exchange, any adjustments, agreements, payments, deliveries or
acquisitions by or on behalf of Counterparty or any affiliate of Counterparty
leading thereto, had not occurred, (y) no adjustments to the Exchange Rate have
occurred pursuant to Section 13.12 of the Indenture and (z) the corresponding
Exchangeable Notes remain outstanding, and

(ii) if an event of default with respect to Counterparty shall occur under the
terms of the Exchangeable Notes as set forth in Section 6.01 of the Indenture
and the Exchangeable Notes are accelerated, then such event of default shall
constitute an Additional Termination Event applicable to the Transaction and,
with respect to such event of default (A) Counterparty shall be deemed to be the
sole Affected Party and the Transaction shall be the sole Affected Transaction
and (B) JPMorgan shall be the party entitled to designate an Early Termination
Date pursuant to Section 6(b) of the Agreement.

 

  (o) Amendments to Equity Definitions. (i) Section 11.2(a) of the Equity
Definitions is hereby amended by deleting the words “diluting or concentrative”
and replacing them with the word “material”.

 

15

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(ii) Section 11.2(c) of the Equity Definitions is hereby amended by
(x) replacing the words “a diluting or concentrative” with “an” and (y) deleting
the phrase “(provided that no adjustments will be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity relative
to the relevant Shares)” and replacing it with the phrase “(and, for the
avoidance of doubt, adjustments may be made to account solely for changes in
volatility, expected dividends, stock loan rate or liquidity relative to the
relevant Shares).”

(iii) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by
(1) deleting from the fourth line thereof the word “or” after the word
“official” and inserting a comma therefor, and (2) deleting the semi-colon at
the end of subsection (B) thereof and inserting the following words therefor “or
(C) at JPMorgan’s option, the occurrence of any of the events specified in
Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to
that Issuer.”

(iv) Section 12.9(b)(i) of the Equity Definitions is hereby amended by
(1) replacing “either party may elect” with “JPMorgan may elect” and
(2) replacing “notice to the other party” with “notice to Counterparty” in the
first sentence of such section.

 

  (p) No Collateral or Setoff. Notwithstanding any provision of the Agreement or
any other agreement between the parties to the contrary, the obligations of
Counterparty hereunder are not secured by any collateral. Obligations under this
Transaction shall not be set off against any other obligations of the parties,
whether arising under the Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation of law or otherwise, and no
other obligations of the parties shall be set off against obligations under this
Transaction, whether arising under the Agreement, this Confirmation, under any
other agreement between the parties hereto, by operation of law or otherwise,
and each party hereby waives any such right of setoff.

 

  (q) Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If in respect of this Transaction, an amount is payable by
JPMorgan to Counterparty (i) pursuant to Section 12.7 or Section 12.9 of the
Equity Definitions or (ii) pursuant to Section 6(d)(ii) of the Agreement (a
“Payment Obligation”), Counterparty may request JPMorgan to satisfy any such
Payment Obligation by the Share Termination Alternative (as defined below)
(except that Counterparty shall not make such an election in the event of a
Nationalization, Insolvency or Merger Event, in each case, in which the
consideration to be paid to holders of Shares consists solely of cash, or an
Event of Default in which Counterparty is the Defaulting Party or a Termination
Event in which Counterparty is the Affected Party, other than an Event of
Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or
(viii) of the Agreement or a Termination Event of the type described in
Section 5(b) of the Agreement or an Additional Termination Event as a result of
an Induced Exchange in each case that resulted from an event or events outside
Counterparty’s control) and shall give irrevocable telephonic notice to
JPMorgan, confirmed in writing within one Currency Business Day, no later than
12:00 p.m. New York local time on the Merger Date, the Announcement Date (in the
case of Nationalization, Insolvency or Delisting), Early Termination Date or
date of cancellation, as applicable. For the avoidance of doubt, the parties
agree that in calculating the Payment Obligation the Determining Party may
consider the purchase price paid in connection with the purchase of Share
Termination Delivery Property.

 

Share Termination Alternative:   Applicable and means that JPMorgan shall
deliver to Counterparty the Share Termination Delivery Property on, or within a
commercially reasonable period of time after, the date when the Payment
Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of the Equity
Definitions or Section 6(d)(ii) and 6(e) of the Agreement, as applicable (the
“Share Termination Payment Date”), in satisfaction of the Payment Obligation in

 

16

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  the manner reasonably requested by Counterparty free of payment. Share
Termination Delivery Property:   A number of Share Termination Delivery Units,
as calculated by the Calculation Agent, equal to the Payment Obligation divided
by the Share Termination Unit Price. The Calculation Agent shall adjust the
Share Termination Delivery Property by replacing any fractional portion of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:   The value to JPMorgan of property contained in
one Share Termination Delivery Unit, as determined by the Calculation Agent in
its discretion by commercially reasonable means and notified by the Calculation
Agent to JPMorgan at the time of notification of the Payment Obligation. Share
Termination Delivery Unit:   One Share or, if a Merger Event has occurred and a
corresponding adjustment to this Transaction has been made, a unit consisting of
the number or amount of each type of property received by a holder of one Share
(without consideration of any requirement to pay cash or other consideration in
lieu of fractional amounts of any securities) in such Merger Event, as
determined by the Calculation Agent. Failure to Deliver:   Applicable Other
applicable provisions:   If this Transaction is to be Share Termination Settled,
the provisions of Sections 9.9, 9.11, 9.12 and 10.5 (as modified above) of the
Equity Definitions will be applicable, except that all references in such
provisions to “Physically-settled” shall be read as references to “Share
Termination Settled” and all references to “Shares” shall be read as references
to “Share Termination Delivery Units”. “Share Termination Settled” in relation
to this Transaction means that Share Termination Settlement is applicable to
this Transaction.

 

  (r)

Registration. Counterparty hereby agrees that if, in the good faith reasonable
judgment of JPMorgan, the Shares (“Hedge Shares”) acquired by JPMorgan for the
purpose of hedging its obligations pursuant to this Transaction cannot be sold
in the public market by JPMorgan without registration under the Securities Act,
Counterparty shall, at its election, either (i) in order to allow JPMorgan to
sell the Hedge Shares in a registered offering, make available to JPMorgan an
effective registration statement under the Securities Act and enter into an
agreement, in form and substance satisfactory to JPMorgan, substantially in the
form of an underwriting agreement for a registered secondary offering; provided,
however, that if JPMorgan, in its sole reasonable discretion, is not satisfied
with access to due diligence materials, the results of its due diligence
investigation, or the procedures and documentation for the registered offering
referred to above, then clause (ii) or clause (iii) of this paragraph shall
apply at the election of Counterparty, (ii) in order to allow JPMorgan to sell
the Hedge Shares in a private placement, enter into a private placement
agreement on commercially reasonable terms substantially similar to private
placement

 

17

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purchase agreements customary for private placements of equity securities, in
form and substance satisfactory to JPMorgan (in which case, the Calculation
Agent shall make any adjustments to the terms of this Transaction that are
necessary, in its reasonable judgment, to compensate JPMorgan for any
commercially reasonable discount from the public market price of the Shares
incurred on the sale of Hedge Shares in a private placement), or (iii) purchase
the Hedge Shares from JPMorgan at the Relevant Price (as such term is defined in
the Equity Definitions) on such Trading Days, and in the amounts, requested by
JPMorgan.

 

  (s) Indemnification. Counterparty and Parent jointly and severally agree to
indemnify and hold harmless JPMorgan and its affiliates and their respective
officers, directors, employees, affiliates, advisors, agents and controlling
persons (each, an “Indemnified Person”) from and against any and all losses
(including, without limitation, losses relating to JPMorgan’s hedging or trading
activities, losses relating to JPMorgan’s hedging activities as a consequence of
becoming, or of the risk of becoming, a Section 16 “insider,” any losses
resulting from the operation of any ownership limitations contained in the
Charter and any losses in connection therewith with respect to this
Transaction), claims, damages, judgments, liabilities and expenses (including
reasonable attorney’s fees), joint or several, which an Indemnified Person may
become subject to, as a result of (i) Parent’s failure to publicly announce and
disclose the contents of any Repurchase Notice or Exchange Rate Adjustment
Notice, as the case may be, or (ii) Parent’s failure to provide JPMorgan with a
Repurchase Notice on the day and in the manner specified in Section 9(c); and to
reimburse, within 30 days, upon written request, each of such Indemnified
Persons for any reasonable legal or other expenses incurred in connection with
investigating, preparing for, providing testimony or other evidence in
connection with or defending any of the foregoing. If any suit, action,
proceeding (including any governmental or regulatory investigation), claim or
demand shall be brought or asserted against the Indemnified Person as a result
of Parent’s failure to publicly announce and disclose the contents of any
Repurchase Notice or Exchange Rate Adjustment Notice, as the case may be, such
Indemnified Person shall promptly notify Parent in writing, and Counterparty
and/or Parent, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others Counterparty and/or Parent may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. Counterparty and Parent shall not be liable for any settlement of
any proceeding contemplated by this subsection that is effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, Counterparty and Parent jointly and severally agree
to indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Counterparty and Parent shall not,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding contemplated by this
subsection that is in respect of which any Indemnified Person is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding on terms reasonably satisfactory to such Indemnified Person. If
the indemnification provided for in this subsection is unavailable to an
Indemnified Person or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then Counterparty and Parent hereunder, in lieu
of indemnifying such Indemnified Person thereunder, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities. The remedies provided for in this subsection are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Party at law or in equity. The indemnity and
contribution agreements contained in this subsection shall remain operative and
in full force and effect regardless of the termination of this Transaction.

 

  (t)

Notice of Merger Consideration. Parent covenants and agrees that, as promptly as
practicable following the public announcement of any transaction or event
described in clause (1) of the definition of Designated Event in Section 1.01 of
the Indenture, Parent shall notify JPMorgan in writing of the types and amounts
of consideration that holders of Shares have elected to receive upon
consummation of such transaction or event (the date of such notification, the

 

18

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“Consideration Notification Date”); provided that in no event shall the
Consideration Notification Date be later than the date on which such transaction
or event is consummated.

 

  (u) Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Counterparty, Parent and each of its employees,
representatives, or other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to Counterparty or Parent relating to such tax treatment and tax
structure.

 

  (v) Right to Extend. JPMorgan may postpone, in whole or in part, any Valid Day
or Valid Days during the Settlement Averaging Period with respect to some or all
of the relevant Options (in which event the Calculation Agent shall make
appropriate adjustments to the number of Options with respect to one or more of
the Valid Days during such Settlement Averaging Period) if JPMorgan determines,
based upon advice of counsel, that such extension is reasonably necessary or
appropriate to preserve JPMorgan’s hedging or hedge unwind activity hereunder in
light of existing liquidity conditions or to enable JPMorgan to effect purchases
or sales of Shares in connection with its hedging or settlement activity
hereunder, in each case, in a manner that would, if JPMorgan were Parent or an
affiliated purchaser of Parent, be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and
procedures applicable to JPMorgan.

 

  (w) Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees that this
Confirmation is not intended to convey to JPMorgan rights against Counterparty
with respect to the Transaction that are senior to the claims of unitholders of
Counterparty in any U.S. bankruptcy proceedings of Counterparty or Parent;
provided that nothing herein shall limit or shall be deemed to limit JPMorgan’s
right to pursue remedies in the event of a breach by Counterparty or Parent of
its obligations and agreements with respect to the Transaction; provided,
further, that nothing herein shall limit or shall be deemed to limit JPMorgan’s
rights in respect of any transactions other than the Transaction.

 

  (x) Securities Contract; Swap Agreement. The parties hereto intend for:
(a) the Transaction to be a “securities contract” and a “swap agreement” as
defined in the Bankruptcy Code (Title 11 of the United States Code) (the
“Bankruptcy Code”), and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 555 and 560 of the
Bankruptcy Code; (b) a party’s right to liquidate the Transaction and to
exercise any other remedies upon the occurrence of any Event of Default under
the Agreement with respect to the other party to constitute a “contractual
right” as described in the Bankruptcy Code; (c) any cash, securities or other
property provided as performance assurance, credit support or collateral with
respect to the Transaction to constitute “margin payments” and “transfers” under
a “swap agreement” as defined in the Bankruptcy Code; and (d) all payments for,
under or in connection with the Transaction, all payments for the Shares and the
transfer of such Shares to constitute “settlement payments” and “transfers”
under a “swap agreement” as defined in the Bankruptcy Code.

 

  (y) Governing Law. New York law (without reference to choice of law doctrine).

 

  (z) Waiver of Jury Trial. Each party waives, to the fullest extent permitted
by applicable law, any right it may have to a trial by jury in respect of any
suit, action or proceeding relating to this Transaction. Each party
(i) certifies that no representative, agent or attorney of either party has
represented, expressly or otherwise, that such other party would not, in the
event of such a suit, action or proceeding, seek to enforce the foregoing waiver
and (ii) acknowledges that it and the other party have been induced to enter
into this Transaction, as applicable, by, among other things, the mutual waivers
and certifications provided herein.

 

  (aa)

Additional Provision. JPMorgan will use good faith efforts to ensure that the
Transaction will not represent more than 10% (the “Threshold Value”) of the
total vote or total value of all of JPMorgan’s outstanding securities, for
purposes of Sections 856(c)(4)(B)(iii)(II) and (III) of the

 

19

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Internal Revenue Code of 1986, as amended. JPMorgan hereby agrees to notify
Counterparty promptly when it has determined that the Threshold Value has been
exceeded.

 

20

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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to EDG Confirmation
Group, J.P. Morgan Securities Inc., 277 Park Avenue, 11th Floor, New York, NY
10172-3401, or by fax to (212) 622 8519.

 

Very truly yours,

J.P. Morgan Securities Inc., as agent for

JPMorgan Chase Bank, National Association

By:  

/s/ Santosh Sreenivasan

Authorized Signatory Name: Santosh Sreenivasan

Accepted and confirmed

as of the Trade Date:

 

Kilroy Realty, L.P. By   Kilroy Realty Corporation     its General Partner   By:
 

/s/ Tyler H. Rose

  Name:   Tyler H. Rose   Title:   Senior Vice President   By:  

/s/ Richard E. Moran Jr.

  Name:   Richard E. Moran Jr.   Title:  

Executive Vice President

Chief Financial Officer

  Kilroy Realty Corporation By:  

/s/ Tyler H. Rose

  Name:   Tyler H. Rose   Title:   Senior Vice President   By:  

/s/ Richard E. Moran Jr.

  Name:   Richard E. Moran Jr.   Title:  

Executive Vice President

Chief Financial Officer

 

JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746. Registered

Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority