Agreement For Sale & Purchase Of Membership Interests

EXHIBIT 10.25


AGREEMENT FOR SALE AND PURCHASE
OF MEMBERSHIP INTERESTS


BY AND BETWEEN


PAINEWEBBER REAL ESTATE HOLDINGS INC. AND
PW REALTY PARTNERS LLC, COLLECTIVELY, AS SELLER


AND


HEALTH SCIENCE PROPERTIES, INC. AND
HSP-QRS CORP., COLLECTIVELY, AS BUYER


Dated as of January 13, 1997 - --------------------------------------------------------------------------------


TABLE OF CONTENTS
SECTION PAGE SECTION 1 DEFINITIONS........................................................ 2


SECTION 2 ASSIGNMENT OF PURCHASE CONTRACTS; EXECUTION OF MANAGEMENT
AGREEMENTS......................................................... 11
2.1 Assignment; Reimbursement of Deposits.............................. 11
2.2 Subsequent Assignments............................................. 11
2.3 Cash Flow Deficit.................................................. 12
3.1 Transferred Interest............................................... 12
3.2 Closing............................................................ 12
3.3 Place of Closing................................................... 12
3.4 Purchase Price..................................................... 12
3.5 Computations....................................................... 14
3.6 Closing Costs...................................................... 14


SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLER........................... 14
4.1 Valid Existence of Seller.......................................... 15
4.2 Authority.......................................................... 15
4.3 No Conflicts....................................................... 15
4.4 Transferred Interest............................................... 16
4.5 Employees.......................................................... 16
4.6 Taxes.............................................................. 16
4.7 Partnership........................................................ 16


SECTION 5 REPRESENTATIONS AND WARRANTIES OF BUYER............................ 17
5.1 Valid Existence of Buyer........................................... 17
5.2 Authority.......................................................... 17
5.3 No Conflicts....................................................... 17


SECTION 6 ADDITIONAL COVENANTS OF SELLER..................................... 18
6.1 Operations During Contract Period.................................. 18
6.2 Transfers and Encumbrances of Transferred Interest and
Properties......................................................... 19
6.3 Additional Covenants............................................... 19
6.4 Covenant as to Managing Member of the LLC.......................... 20
7.1 Conditions Precedent to Seller Closing Obligations................. 20
7.2 Seller's Closing Deliveries........................................ 21


SECTION 8 BUYER'S CLOSING OBLIGATIONS; CONDITIONS PRECEDENT.................. 22
8.1 Conditions Precedent to Buyer's Closing Obligations................ 22


8.2 Buyer's Closing Deliveries....................................... 22
8.3 Payment of Purchase Price........................................ 23
SECTION 9 DEFAULT.......................................................... 23
SECTION 10 BROKER'S COMMISSION.............................................. 24
SECTION 11 ADDITIONAL AGREEMENTS............................................ 24
11.2 Acquisition Fee.................................................. 25
11.3 Reconstitution of Contributions.................................. 25
11.4 Interest Rate Cap Agreement...................................... 25
SECTION 12 MISCELLANEOUS.................................................... 26
12.1 Appraisal Procedure.............................................. 26
12.2 Entire Agreement................................................. 26
12.3 Counterparts..................................................... 26
12.4 Time of the Essence.............................................. 26
12.5 Notices.......................................................... 26
12.6 Further Assurances............................................... 28
12.7 No Representations Except as Set Forth Herein.................... 28
12.8 "As Is" Basis.................................................... 28
12.9 Severability of Provisions....................................... 28
12.10 Construction..................................................... 28
12.11 Governing Law.................................................... 28
12.12 Expenses; Indemnity.............................................. 28
12.13 Successors and Assigns........................................... 31
12.14 Exhibits, Schedules and Section References....................... 31
12.15 No Partnership between Seller and Buyer.......................... 31
12.16 WAIVER OF TRIAL BY JURY.......................................... 31


EXHIBITS Exhibit A - [Intentionally Omitted] Exhibit B - Form of Contract Assignment Exhibit C - Form of Management Agreement Exhibit D - Due Diligence Documents Exhibit E - Form of Assignment and Assumption Agreement Exhibit F - Form of Certificate of Non-Foreign Status Exhibit G - Form of Amendment to Existing Loan Agreement Exhibit H - Legal Description of Initial Property


AGREEMENT FOR SALE AND PURCHASE
OF MEMBERSHIP INTERESTS


This AGREEMENT FOR SALE AND PURCHASE OF MEMBERSHIP INTERESTS (this "AGREEMENT") is made and entered into as of the 13th day of January, 1997 by and between PAINE WEBBER REAL ESTATE HOLDINGS INC., a Delaware corporation ("HOLDINGS") and PW REALTY PARTNERS, LLC, a Delaware limited liability company ("PARTNERS"; and together with Holdings, collectively, "SELLER") and HSP-QRS CORP., a Maryland corporation ("HSP-QRS"), and HEALTH SCIENCE PROPERTIES, INC., a Maryland corporation ("HSP"; and together with HSP-QRS, collectively, "BUYER").


W I T N E S S E T H:
- - - - - - - - - -


WHEREAS, Holdings is the holder of a 1% non-managing membership interest (the "HOLDINGS INTEREST") in PW Acquisitions I, LLC, a Delaware limited liability company (the "LLC"); and


WHEREAS, Partners is the holder of a 99% managing membership interest (the "PARTNERS INTEREST", and together with the Holdings Interest, the "TRANSFERRED INTEREST") in the LLC; and


WHEREAS, HSP and the LLC have entered into that certain contract assignment dated the date hereof, pursuant to which HSP has assigned to the LLC its rights as purchaser under a certain contract for the purchase of real property, and the LLC has assumed all obligations under such contract, all on the terms and conditions set forth therein; and


WHEREAS, pursuant to and in accordance with the terms hereof, Buyer may hereafter assign to the LLC its rights under certain contracts for the purchase of real property, and the LLC may, pursuant to such contracts or otherwise, hereafter purchase real property identified by Buyer; and


WHEREAS, upon any such purchase of real property by the LLC, HSP-QRS and the LLC expect to enter into a management agreement with respect to such property pursuant to which, subject to the terms and conditions set forth therein, HSP-QRS will agree to manage such property during the Contract Period (as defined herein); and


WHEREAS, Holdings desires to sell to Buyer, and Buyer desires to purchase from Holdings, all of Holdings' right, title and interest in and to the Holdings Interest; and Partners desires to sell to Buyer, and Buyer desires to purchase from Partners, all of Partners'


right, title and interest in and to the Partners Interest, in each case on the terms and conditions set forth herein;


NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto do hereby mutually covenant and agree as follows:


SECTION 1 DEFINITIONS


CERTAIN DEFINITIONS. In addition to such other terms as are elsewhere
------------------- defined herein, as used in this Agreement, the following terms shall have the following meanings, unless the context requires otherwise:


"ACQUISITION FEE" has the meaning specified in Section 11.2 hereof.
------------


"ADDITIONAL PURCHASE PRICE" has the meaning specified in Section 11.1
------------ hereof.


"ADJUSTED EURODOLLAR RATE" means the Eurodollar Rate plus two and
---- fifty one-hundredths (2.50) percentage points.


"AFFILIATE" means with respect to any Person, any other Person that, directly or indirectly, is controlled by, or is under common control with, such Person or is a director or officer of such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, (i) to vote nine and eight-tenths percent (9.8%) or more of the securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of such Person, whether by ownership of partnership interests, stock ownership, contract or otherwise.


"AGGREGATE PROPERTY VALUE" means the aggregate fair market value of the Properties determined by applying the IPO Multiple to the "Funds from Operations generated by the Properties" (as herein defined), it being understood that Buyer currently intends to raise the funds necessary to effect the transactions contemplated hereby through an IPO. Notwithstanding the foregoing, if, on the Closing Date, a preliminary prospectus with respect to an IPO has not been printed and broadly distributed to prospective investors or a registration statement with respect to an IPO has not been declared effective by the Securities and Exchange Commission, then (A) in the event of a Closing pursuant to which some or all of the Properties are sold to a Person other than HSP or an Affiliate thereof, "AGGREGATE PROPERTY VALUE" shall mean the amount of consideration (net of actual, reasonable and customary out-of-pocket transaction costs incurred in connection with such third-party sale) paid by such Person for such Properties; and (B) otherwise, "AGGREGATE PROPERTY VALUE" shall mean the aggregate fair market value of the Properties as determined pursuant to the Appraisal Procedure. "FUNDS FROM OPERATIONS GENERATED BY THE PROPERTIES" shall equal total gross revenues (including, without limitation, rents, recoveries, expense reimbursements and management fees to be paid to Buyer) expected to be generated by the Properties in calendar year 1997, or such later twelve month period as is, or


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is expected to be, utilized in the "Distribution" or"Distribution Policy" section of the final prospectus for the IPO less the sum of (I) direct property operating expenses expected for the same period, excluding interest expense, management fees, depreciation, amortization, capital expenditures and capital reserves; and (II) a general and administrative expense allocation equal to 2.5% of total revenues. Consistent with the foregoing definition, revenue and expense amounts utilized in the calculation of "Funds from Operations generated by the Properties" shall be determined in accordance with GAAP.


"APPRAISAL PROCEDURE" means the procedure described in Section 12.1
------------ hereof.


"ASSIGNMENT AND ASSUMPTION AGREEMENT" means, for Seller, the Assignment of Membership Interest, dated as of the Closing Date, between Seller and Buyer, by which Seller shall assign its Transferred Interest to Buyer, subject to the terms and conditions of this Agreement.


"BANKRUPTCY ACTION" means, with respect to a Buyer or Seller, as applicable, (i) commencing any case, proceeding or other action seeking protection for such Person as a debtor under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, (ii) consenting to the entry of an order for relief in or institution of any case, proceeding or other action brought by any third party against such Person as a debtor under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, (iii) filing an answer in any involuntary case or proceeding described in clause (ii) above admitting the material allegations of the petition therein or otherwise failing to contest any such involuntary case or proceeding, (iv) seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Person or for a substantial portion of its properties, (v) making any general assignment for the benefit of the creditors of such Person, or (vi) admitting in writing the inability of such Person generally to pay its debts as they mature or that such Person generally is not paying its debts as they become due.


"BASIC RETURN" has the meaning specified in Section 3.4.
-----------


"BUSINESS DAY" means all days other than Saturday, Sunday and legal holidays under the laws of the State of New York, or which is a day on which banking institutions located in the State of New York are authorized or required by law or other governmental action to close.


"BUYER" has the meaning specified in the Preamble to this Agreement.


"BUYER CONDITIONS PRECEDENT" has the meaning specified in Section 8.1.
-----------


"CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.


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"CASH FLOW DEFICIT" means the amount, if any, by which cash receipts from the Properties for any period are insufficient to pay the sum of (A) all costs and expenses (when due and payable without penalty) of maintaining and operating the Properties consistent with the Property Standard (as defined in the Management Agreement) and (B) the Basic Return for such period.


"CLASS A CONTRIBUTION" means 73.65% of all Contributed Amounts.


"CLASS B CONTRIBUTION" means 26.35% of all Contributed Amounts, and any contribution made by Seller in respect of a Cash Flow Deficit.


"CLOSING" has the meaning specified in Section 3.2.
-----------


"CLOSING DATE" has the meaning specified in Section 3.2.
-----------


"CLOSING DOCUMENTS" means this Agreement, an Assignment and Assumption Agreement by Seller, and the other certificates and agreements executed by any of Buyer, Seller and/or the LLC, as applicable, in connection with the sale of the Transferred Interests.


"CODE" means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.


"CONTRACT ASSIGNMENT" means one or more contract assignments, substantially in the form of Exhibit B hereto, by and between any Buyer and the LLC, pursuant to which such Buyer assigns all of its rights, title and interest in and to, and the LLC assumes all obligations under the Initial Sales Contract and one or more other Sales Contracts, subject to the terms and conditions set forth therein.


"CONTRACTS" means all outstanding management, operating, maintenance, repair, service, pest control and supply contracts (including, without limitation, janitorial, elevator, scavenger and landscaping agreements), equipment rental agreements (including but not limited to equipment leases and conditional sales agreements), all contracts for repair or capital replacement to be performed at a Property, and any other contracts relating to or affecting a Property (other than Leases), in each case to which the LLC or Buyer is a party.


"CONTRACT PERIOD" means the period from and after the date hereof through the earlier of (A) the Closing Date, or (B) the date the obligations of Buyer and Seller to purchase and sell the Transferred Interests are terminated, either pursuant to the terms hereof or by mutual agreement.


"CONTRIBUTED AMOUNTS" means all amounts contributed to the LLC by Seller (including any permitted successor thereto) in connection with the acquisition of the Properties (such contributions to include all amounts necessary to pay the Acquisition Fees payable to Seller


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pursuant hereto and any reasonable out-of-pocket legal fees (subject to the cap contained in Section 12.12) incurred by Seller or the LLC in connection with the
------------- acquisition of the Properties), excluding amounts contributed to eliminate Cash Flow Deficits (which shall be Class B Contributions hereunder).


"EURODOLLAR RATE" means, for any period, (i) the rate per annum appearing on Telerate page 3750 (or such display substituted therefor as is then customarily used to quote the London interbank offering rate as determined by Seller in its reasonable discretion) as of approximately 11:00 a.m. (London time) on the Rate Determination Date for such period (assuming, in the case of any period of under thirty (30) days, a period of thirty (30) days), or (ii) if on the Rate Determination Date for any period no such rate appears on Telerate page 3750 (or such display substituted therefor as is then customarily used to quote the London interbank offering rate as determined by Seller in its reasonable discretion), a rate determined by Seller as the arithmetic mean (rounded upwards as aforesaid) of the rates quoted at approximately 11:00 a.m., London time, on such period Rate Determination Date by four major banks, as selected by Seller, in the London interbank market, to prime banks in the London interbank market for U.S. Dollar deposits commencing on the first day of such period with a maturity date corresponding to the last day of such period (assuming, in the case of any period of under thirty (30) days, a period of thirty (30) days) and in a principal amount equal to an amount that is representative for a single transaction in such market at such time; it being understood that Seller will request the principal London office of each of such four major banks to provide a quotation of its respective rate in accordance with the foregoing, and if at least two such quotations are provided, the Eurodollar Rate for such period will be the arithmetic mean of such quotations, and if fewer than two quotations are provided as requested, the Eurodollar Rate for such period will be the arithmetic mean of the rates quoted by such major banks in New York City as shall be selected by Seller, as of approximately 11:00 a.m., New York City time, on the first Business Day of the period for loans in U.S. Dollars to leading European banks with a maturity date corresponding to the last day of such period (assuming, in the case of any period of under thirty (30) days, a period of thirty (30) days) commencing on the first day of such period in a principal amount equal to an amount that is representative for a single transaction in such market at such time.


"EVENT OF DEFAULT" means the occurrence of any of the following: (i) if any representation or warranty made by Buyer herein or in any Related Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished by Buyer to Seller in connection with this Agreement or any of the Related Documents or any of the Properties being inaccurate or misleading in any material respect as of the date such representation or warranty is made or deemed made; (ii) if Buyer shall fail to close the transactions contemplated hereby on the Closing Date upon the satisfaction or waiver of all conditions precedent to Buyer's obligation to close hereunder; (iii) if Buyer shall continue to be in default under any of the other terms, covenants or conditions of this Agreement or any other Related Document for ten (10) Business Days after written notice to Buyer from Seller, in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after written notice to Buyer from Seller in the case of any other default (unless during such thirty (30) day period Buyer shall have commenced to cure such default, and such default is not capable of being cured within such


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thirty (30) day period, in which case an Event of Default shall be deemed to have occurred if Buyer shall continue to be in default for ninety (90) days after such written notice); (iv) the occurrence of any Cash Flow Deficit in any calendar month (including for this purpose any Cash Flow Deficit, even if such Cash Flow Deficit shall have been eliminated through a Class B Contribution by Seller), unless with respect to such Cash Flow Deficit Buyer shall have caused the Closing Date to be adjourned as described in Section 3.2 hereof; or (v) if any "Event of Default" as defined in the Existing Loan Agreement or any Related Document shall occur.


"EXISTING LOAN" means the transactions effected pursuant to the Existing Loan Agreement.


"EXISTING LOAN AGREEMENT" means that certain Second Amended and Restated Loan Agreement dated as of September 9, 1996 between HSP-QRS Corp., as Borrower, and PaineWebber Incorporated, as Lender, as amended by that certain First Amendment to Second Amended and Restated Loan Agreement dated as of even date herewith, and as the same may hereafter be amended, restated, supplemented or otherwise modified from time to time.


"GAAP" means generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination.


"GOVERNMENTAL AUTHORITY" means any and all governmental or quasi- governmental bodies, agencies, bureaus, departments, boards, commissions, instrumentalities or other entities having or asserting jurisdiction over the LLC, Seller, Buyer, any Affiliate of Seller or Buyer, or any Property.


"HSP" means Health Science Properties, Inc., a Maryland corporation, or any successor thereto.


"HSP APPROVED EXPENSES" means the expenses incurred by HSP (or any Affiliate) and approved by Seller (such approval not to be unreasonably withheld) with respect to diligence on the Properties or legal fees related to the acquisition of the Properties by the LLC, including, without limitation, the legal fees of Skadden, Arps, Slate, Meagher & Flom LLP in connection with such acquisition.


"IMPROVEMENTS" means all buildings and other improvements located on any Property.


"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness for borrowed money to the extent such indebtedness is fully recourse to the assets of that Person, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability


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on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services, which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument (and in any event including, in the case of Buyer, its obligations hereunder), and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person to the extent that the indebtedness secured thereby is fully recourse to the assets of that Person.


"INDEMNIFIED LIABILITIES" has the meaning specified in Section 12.12.
-------------


"INDEMNITEES" means, collectively, Seller and its successors and assigns, and its and their respective officers, directors, agents, employees and Affiliates.


"INITIAL PROPERTY" means the parcel or parcels of real property described on Exhibit I hereto, together with all buildings and improvements located thereon.


"INITIAL SALES CONTRACT" means that certain Purchase and Sale Agreement and Joint Escrow Instructions dated November 27, 1996 by and between HSP and American Medical Laboratories, Inc. (as amended).


"INTEREST RATE CAP AGREEMENT" means a written interest rate cap agreement between the LLC and a counterparty, the long-term debt obligations of which counterparty are rated "AA" or better by the Rating Agencies and which counterparty is otherwise reasonably acceptable to Seller, which agreement (i) provides for a "strike price" based on one-month LIBOR of 8.0% per annum, (ii) provides for monthly payments to the LLC equal to the product of (x) the excess of one-month LIBOR over 8.0% per annum and (y) a notional amount not less than the aggregate Class A Contributions therefore made at the relevant time of determination, (iii) expires on or after the earlier to occur of the third anniversary of the date hereof or the Closing Date, and (iv) is otherwise in form and substance reasonably acceptable to Seller.


"IPO MULTIPLE" means the multiple determined by dividing Equity Market Capitalization by Total Funds from Operations. For this purpose, "Equity Market Capitalization" shall equal the public offer ...