RealSource Residential, Inc. 10-K [rsrt-10k_123113.htm]

EXHIBIT 10.6

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of the 12th day
of March, 2014 (the “Effective Date”), by and between RS Cambridge Apartments,
LLC, a Delaware limited liability company (“Seller”), whose address for the
purposes hereof is 2089 East Fort Union Boulevard, Salt Lake City, Utah 84121,
and RealSource Residential, Inc., a Nevada corporation (“Buyer”). In
consideration of the mutual promises and covenants contained herein, the parties
hereto agree as follows:

 

1.            Property to be Sold. Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, all of Seller’s right, title and interest in and
to the following (collectively, the “Premises”):

 

(a)           Real Estate - The land generally known as the Cambridge
Apartments, located at 10900 East Taylor Road, Gulfport, MS 39503, with all the
buildings and other improvements thereon (the “Improvements”), as specifically
described in the final title commitment obtained by Buyer with the initial
description attached hereto as Exhibit A (the “Real Estate”);

 

(b)           Fixtures - All the fixtures attached or appurtenant to or used in
connection with the Real Estate which are owned by Seller, including without
limitation, if any, all venetian blinds, window shades, screens, screen doors,
storm windows and doors, awnings, shutters, furnaces, heaters, heating
equipment, oil and gas burners, hot water heaters, and fixtures appurtenant
thereto (except related computers, if any), plumbing and bathroom fixtures,
electric and other lighting fixtures, wall-to-wall carpeting, mantels, outside
television antennas, fences, gates, trees, shrubs, plants, air conditioning
equipment and ventilators, if any (collectively, the “Fixtures”);

 

(c)           Personal Property - All appliances owned by Seller and presently
located within the tenants’ apartments (collectively, the “Personal Property”).
All other personal property, except the Fixtures, is excluded, including, but
not limited to, all model furnishings, computers, office equipment, hot water
and/or boiler computers, and all laundry equipment and other personal property
stored at the Real Estate;

 

(d)           Tenant Leases - Seller’s interest in all leases, oral or written,
tenancies, rental agreements with tenants now or hereafter occupying space in
the Improvements or otherwise having rights of occupancy or use of all or a
portion of the Real Estate;

 

(e)           Service Contracts - Seller’s interest in the contracts and
agreements assigned by Seller and assumed by Buyer at the Closing; and

 

(f)           Intangibles - All of Seller’s right, title and interest in and to
(i) all warranties or guarantees relating to the Real Estate and the Personal
Property described above, if any, and (ii) all permits, if any, related to the
operation and management of the Real Estate, in each case, to the extent
assignable without the consent of any other person.

 

 

 

 

2.            Purchase Price, Deposits.

 

(a)           Buyer agrees to pay the fair market value of the Premises as
determined using either an appraisal, a broker opinion of value, a fairness
opinion from an independent third party or some combination of these inputs
mutually agreed on by Buyer and Seller (the “Purchase Price”) for the Premises,
however, the minimum purchase price will be $11,037,637.37. Buyer and Seller are
parties to that certain Right of First Refusal and Option, dated as of December
9, 2013, with respect to the Property (the “ROFR”). Under the ROFR, Buyer was
granted the right to purchase the Property for an amount equal to the fair
market value of the Property as negotiated between Buyer and Seller (taking into
account assumed debt and other obligations relating to the Property) minus the
Option Fee. The “Option Fee” under the ROFR is (i) the amount (the “Advanced
Amount”) that Buyer paid (including reasonable and verifiable expenses) to
obtain and terminate (through conversion hereunder of the B Note into the Option
Fee) that certain Bifurcated Note B (the “B Note”), in favor of Capmark Bank
(the “Original Lender”), dated March 1, 2010 in the original principal amount of
$2,851,500.00 and subsequently acquired by German American Capital Corporation
that encumbered the Property prior to the date of the ROFR, plus (ii) 12% simple
interest per annum on the Advanced Amount from the date of the ROFR through the
date of the sale of the Property. The Option Fee is hereby converted into the
“Deposit”, which is $1,537,637.37 on the date hereof, and which shall continue
to accrue interest until the Closing as provided in Section 2(a)(ii).

 

(b)           The Purchase Price, less the Deposit, as adjusted pursuant to
Section 4, shall be paid at the Closing (as hereinafter defined) by immediately
available funds wired to Seller’s account pursuant to wiring instructions
provided by Seller prior to the Closing, or through other consideration agreed
upon by Buyer and Seller. At the Closing, Buyer shall deposit the balance of the
Purchase Price, subject to adjustment as provided herein, with the Escrow Agent.
The Deed (as hereinafter defined) shall not be released or recorded until after
the Escrow Agent has received the entire balance of the Purchase Price, and the
Escrow Agent shall be authorized to release the Deed simultaneously receipt of
the balance of the Purchase Price and the Deposit to Seller. The Escrow Agent
shall provide a “Closing Protection Letter” for the benefit of Seller. Seller
shall provide an escrow instruction letter to the Escrow Agent prior to the
Closing, with escrow instructions consistent with the terms of this Agreement.

 

3.            Title. The Real Estate and Fixtures are to be conveyed by a
Special Warranty Deed or the equivalent thereof containing no covenants by
Seller whatsoever except a covenant against Seller’s acts during such time as
Seller held title to the Premises (the “Deed”), and the Personal Property is to
be conveyed by a bill of sale (the “Bill of Sale”) without warranties or
representations. The Deed shall convey fee simple title to the Real Estate and
Fixtures, free from all encumbrances and encroachments from or on the Premises,
except:

 

(a)           Applicable laws, codes and regulations of any governmental
authority in effect on the date hereof or hereafter, including, but not limited
to those pertaining to building, health, safety and zoning;

 

(b)           Any lien for taxes and water and sewer charges for the then
current fiscal tax year or billing period, as the case may be, that are not due
and payable on the date of the delivery of the Deed;

 

(c)           Any liens for municipal or governmental betterments assessed after
the date of this Agreement and any other municipal or governmental liens that
are not due and payable on the date of the delivery of the Deed;

 

(d)           Leases and tenancies as specified in Section 12 in effect on the
date of the delivery of the Deed and parties having possessory rights under
agreements and contracts assumed by Buyer;

 

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(e)           Title to and rights of the public and others entitled thereto in
and to those portions of the Premises, if any, lying within the bounds of
adjacent streets and right-of-ways;

 

(f)           All easements, encumbrances and other matters of record and all
matters existing or arising prior to the date of acquisition of title to the
Premises by Seller, whether or not of record (other than any matters timely
objected to as provided in Section 7 and which Seller has agreed in writing to
cure and any other matters which Seller is otherwise obligated to cure under
this Agreement); and

 

(g)           Any state of facts that might be disclosed by a current accurate
survey or a personal inspection of the Premises (other than any matters timely
objected to as provided in Section 7 and which Seller has agreed in writing to
cure and any other matters which Seller is otherwise obligated to cure under
this Agreement).

 

4.            Adjustments.

 

(a)           Collected rents (including prepaid rents), uncollected rents for
the month of Closing, fuel oil, if applicable, electric, if applicable, water
and sewer use charges, payments for service contracts for the Premises, if any,
any escrows or reserves pertaining to the Premises held by a third party which
Seller elects to assign to Buyer at the Closing, and taxes for the then current
fiscal tax period shall be apportioned as of the Closing. Uncollected rents for
any other prior month shall be collected by Buyer but Buyer may first allocate
such collections to any then current rents owed by such tenant and then to
Seller. Buyer agrees to use reasonable efforts to collect such rents for such
prior months due to Seller, but shall not be obligated to bring legal
proceedings to collect the same. Seller reserves the right, however, to collect
its own uncollected rents at any time after the Closing by written notice to
Buyer who will in turn provide the Seller all the necessary records pertaining
to uncollected rents. Buyer shall pay all conveyance, transfer and/or recording
taxes notwithstanding the practice, custom or requirements in the location where
the Premises are located. Seller shall deliver to Buyer, to the extent the same
is in Seller’s possession, the most recent survey of the Real Estate. Buyer is
responsible, at its expense, for title examination, title insurance and survey
(and any update thereof), if required by Buyer. All adjustments shall be made as
of midnight on the date of Closing. If the funds to be paid to Seller at the
Closing are not actually received by Seller on the date of the Closing and in
sufficient time for Seller’s bank to invest such funds on that day, then Buyer
and Seller shall readjust as if the Closing occurred on the date of the receipt
by Seller and Seller’s bank of such funds. The provisions of this Subsection (a)
shall survive the Closing.

 

(b)           If the current real estate tax assessment cannot be determined at
Closing, then the real estate taxes shall be apportioned on the basis of the
taxes assessed for the preceding year. In the event that an application for real
estate tax abatement or reduction is not filed prior to the Closing, but if such
subsequent filing will benefit Seller in whole or in part, then Buyer agrees
that Seller at its request shall have the exclusive right to file and prosecute
such application, and if necessary in the name of Buyer. If such application has
been filed prior to the Closing, Seller shall also have the exclusive right to
continue the prosecution of said application. Buyer agrees to fully cooperate
with Seller with respect to any such application, and further authorizes Seller
to endorse and cash any tax abatement or reduction check which Buyer receives or
which is issued to Seller and for such purposes Buyer grants to Seller an
irrevocable power of attorney coupled with an interest. Any such tax abatement
or reduction eventually received, after adjustment for Seller’s legal fees and
other related costs incurred for the same, shall be proportionately adjusted
between the parties. If any tax abatement or reduction obtained by Seller shall
benefit Buyer after the Closing, Buyer agrees to pay a fair and equitable
portion of Seller’s legal fees incurred with respect to obtaining such abatement
or reduction. The provisions of this Subsection (b) shall survive the Closing.

 

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(c)           Security deposits and advance rents, if any, and all interest
which is required by law, if any, to be paid to the tenants, shall be accounted
for by Seller and paid to Buyer at the Closing by adjustment. Seller shall
render an accounting thereof to Buyer at the Closing.

 

5.            Possession and Condition of Premises. Possession of the Premises
shall be delivered to Buyer at the Closing, from which time all benefits and
burdens of ownership shall be transferred to Buyer. At Closing, the Real
Property and Improvements shall be in substantially the same condition as at the
end of the Inspection Period, reasonable use and wear thereof excepted, and
excepting damage by fire or other casualty as provided in Section 10.

 

6.            Representations and Warranties of Seller; Premises Sold “AS IS”.

 

(a)           Except as specifically provided in this Agreement, Buyer
acknowledges and agrees that Seller has not made, does not make and specifically
negates and disclaims any representations, warranties, promises, covenants,
agreements or guaranties of any kind or character whatsoever, whether express or
implied, oral or written, past, present or future, of, as to, concerning or with
respect to (i) the value, nature, quality or condition of the Premises,
including, without limitation, the structure, water, soil and geology, and the
presence or absence of hazardous waste or oil substances, (ii) the income to be
derived from the Premises or the expenses to be incurred, (iii) the suitability
of the Premises for any and all activities and uses which Buyer may conduct
thereon, (iv) the compliance or non-compliance of or by the Premises or its
operation with any laws, rules, ordinances or regulations of any applicable
governmental authority or body, including, without limitation, all zoning and
environmental matters, (v) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY,
PROFITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE PREMISES, INCLUDING
ALL REAL AND PERSONAL PROPERTY SOLD HEREIN, (vi) the manner or quality of the
construction of materials, if any, incorporated into the Premises, (vii) the
manner, quality, state of repair or lack of repair of the Premises, or (viii)
any other matter with respect to the Premises. Buyer further acknowledges and
agrees that it has already investigated and examined the Premises and is
afforded the further opportunity to do so pursuant to Section 7; is relying
solely on its own investigation of the Premises and not on any information
provided or to be provided by Seller; that any information provided or to be
provided with respect to the Premises was obtained from a variety of sources and
that Seller has not made any independent investigation or verification of such
information and makes no representations as to the accuracy or completeness of
such information. Seller is not liable or bound in any manner by any verbal or
written statement, representations or information pertaining to the Premises, or
the operation thereof, furnished by a real estate broker, agent, employee,
servant or other person. Buyer further acknowledges and agrees that, to the
maximum extent permitted by law, the sale of the Premises as provided for herein
is made on an “AS IS” condition and basis with all faults and defects, whether
known or unknown, and that Seller would not agree to sell the Premises to Buyer
for the purchase price without the disclaimers, agreements and other statements
set forth in this Subsection (a).

 

(b)           It is understood and agreed that all oral or written statements,
representations or promises, if any, and all prior negotiations are superseded
by this Agreement and are merged into this Agreement, which alone fully and
completely expresses the parties’ agreement, neither party relying upon any
statement or representation not embodied in this Agreement, made by the other.

 

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7.            Inspections and Financing Contingency.

 

(a)           Inspection Period. Buyer (at its sole expense) shall have until
5:00 p.m. Mountain time of the day which is 30 days prior to the Closing Date
(the period from the Effective Date to and including such date being referred to
herein as the “Inspection Period”), to investigate the title to the Real Estate
and to conduct any and all necessary non-intrusive inspections and
investigations of the Premises, including but not limited to examination of the
title records, survey and examination for encroachments and other defects, if
any, verification of compliance of the Premises with applicable zoning,
building, health and safety laws, regulations and codes, inspection for
hazardous waste, environmental testing (including, without limitation, a risk
assessment or inspection for the presence of lead-based paint and/or lead-based
paint hazards) and any other inspections or investigations of the Premises.
Notwithstanding anything in this Section 7 to the contrary, Buyer shall not
conduct or allow any physically intrusive testing of, on or under the Premises
without first obtaining Seller’s written consent as to the timing and scope of
the testing to be performed.

 

(b)           Buyer and Buyer’s agents shall be allowed access to the Premises
during the Inspection Period and thereafter for the purpose of inspecting the
same, provided that Seller receives reasonable advance notice (three (3)
calendar days’ oral notice being agreed to be sufficient) from Buyer and Buyer
is accompanied by a representative of Seller at all times. Seller agrees to
cooperate in making a representative available for such purposes during normal
business hours. After the Inspection Period, however, such access shall be
restricted solely to the portions of the Premises not occupied by tenants. Buyer
agrees that, in conducting any inspections, investigations or testing Buyer or
Buyer’s agents will carry not less than One Million Dollars ($1,000,000.00)
comprehensive general liability insurance with contractual liability endorsement
which insures Buyer’s indemnity obligations hereunder, and upon request of
Seller will provide written evidence of such insurance, will not interfere
unreasonably with the activity of tenants or any persons occupying or providing
service at the Premises, will not reveal to any third party not approved by
Seller the results of its inspections, investigations or tests, and will
promptly restore any physical damage caused by such inspections, investigations
or tests. Buyer agrees to promptly provide Seller with a copy of all inspection,
investigation and test reports upon Seller’s written request. Buyer agrees to be
responsible for the conduct of its employees and agents and shall indemnify,
defend and hold the Seller harmless from any losses, injuries, damages, claims
or expenses, including reasonable attorney’s fees and costs, due to the conduct
of Buyer or its employees or agents or which are due to any such inspections,
investigations or testing. Buyer’s obligations under this Subsection 7(b) shall
survive the Closing, or if the Closing does not occur, the termination of this
Agreement.

 

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(c)           At any time during the Inspection Period, Buyer may elect, by
written notice received by the Seller before the expiration of the Inspection
Period, to (A) terminate this Agreement which termination may be made regardless
of reason or (B) notify Seller of any title or other defects in the Premises
(“Defects”) that Buyer requests Seller to cure. If Buyer timely notifies Seller
of any such Defects as provided above, including its reasons in detail and
copies of any reports with respect to such Defects, Seller shall have five (5)
business days after receipt of such notice to give written notice to Buyer of
the actions, if any, that Seller proposes to take with respect to such Defects.
In the event that Buyer shall not be satisfied with Seller’s proposed actions or
in the event that Seller does not elect to take any proposed actions, Buyer
shall have the right, on or prior to the date which is five (5) business days
after receipt of such notice from Seller, to give Seller notice of Buyer’s
intention not to proceed with the consummation of the transaction contemplated
by this Agreement (if Buyer shall fail to deliver such notice of Buyer’s
intention not to proceed, then Buyer shall be deemed to have accepted Seller’s
proposals with respect to the Defects and this Agreement shall remain in full
force and effect). Upon receipt by Seller of such notice or the notice of
termination referred to in (A) of this Subsection (c), and provided such notice
is timely given, this Agreement shall terminate, in which event the Deposit
shall be refunded to Buyer, and the parties shall have no further liability or
responsibility to each other, except for the hold harmless obligations of Buyer
pursuant to Section 7(b). In the event that Buyer does not timely object to any
Defects or in the event that notice to terminate is not timely given as provided
above, Buyer shall be conclusively deemed to have approved the title to and
condition of the Premises, including, without limitation, the matters described
in Section 3, liens, encumbrances and other title matters, any state of facts
that would be disclosed by a current accurate survey or personal inspection of
the Premises, zoning, building, environmental, health, safety and other
statutory, regulatory and code compliance, and all other matters pertaining to
the Premises, waived its right to terminate and obtain a refund of the Deposit
pursuant to this Subsection (c) and agreed to purchase the Premises subject to
any and all Defects (other than mortgages created or assumed by Seller, which
Seller shall cause to be discharged at the Closing or through escrow as provided
in Section 9(f), whether or not objected to by Buyer and other than encumbrances
and other material adverse title matters affecting the Premises first arising or
first appearing on the public records after such date and not cured by Seller by
the Closing Date or any extension thereof, as the case may be), except to the
extent that Seller has expressly agreed, in its written notice given to Buyer as
provided above, to resolve or cure such Defects. If Seller does not give such
notice on or prior to the fifth (5th) business day after receipt of Buyer’s
written objection to Defects, then, unless Buyer shall waive all such
objections, this Agreement shall terminate on such fifth (5th) business day, in
which event the Deposit shall be refunded to Buyer and the parties shall have no
further liability or responsibility to each other, except for the hold harmless
obligations of Buyer pursuant to Section 7(b). In the event of any termination
of this Agreement, Seller shall be entitled to copies of all of Buyer’s reports
as provided above as a condition to the release of the Deposit to Buyer.

 

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(d)           The provisions of Section 9 below shall apply to any and all
Defects that Seller has agreed to cure as provided above. All Defects that
Seller does not agree to cure as provided above shall be deemed waived by Buyer
if Buyer does not elect to terminate the Agreement as provided above. Buyer
shall not be entitled to terminate this Agreement or obtain a return of the
Deposit or any part thereof as provided in Section 9 because of any Defects not
timely objected to before expiration of the Inspection Period (other than any
mortgages created or assumed by Seller as provided above, which Seller shall
cause to be discharged at the Closing or through escrow as provided above).

 

(e)           All inspections, investigations and testing, including but not
limited to title, survey and the issuance of any title insurance shall be solely
at Buyer’s expense.

 

8.            Closing.

 

(a)           The consummation of the purchase and sale of the Premises (the
“Closing”) shall take place on a date agreed upon by Buyer and Seller (the
“Closing Date”) provided, however, that the Closing Date shall not be prior to
August 1, 2014. The Closing is subject to receipt of all consents required for
the transfer of the Property, including, without limitation, the consent of any
lienholder on the Property, any required consent of directors or shareholders of
Buyer, and any required consent of members and managers of Seller. The Closing
shall be conducted through an escrow with an escrow agent agreed upon by Buyer
and Seller (the “Escrow Agent”), with the reasonable escrow fees to be split
between the parties.

 

(b)           At the Closing, Seller shall provide to Buyer the following:

 

(1)           The Deed and the Bill of Sale.

 

(2)           An assignment (without warranty) of the leases and tenancies in
effect at the time of the Closing, pursuant to which Buyer shall assume all of
Seller’s obligations therefor arising after the Closing, including all of
Seller’s obligations with respect to all security deposits, advance rents and
interest thereon, if any, for which Buyer receives an adjustment or payment at
the Closing. Also, an assignment (without warranty) of all agreements and
contracts listed on Exhibit B as referred to in Section 13 as well as all
subsequent agreements and contracts referred to in Section 13, pursuant to which
Buyer shall assume all of Seller’s obligations therefor arising after the
Closing.

 

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(3)           A letter to all tenants notifying them of the change of ownership
of the Premises and directing such tenants to pay all future rentals to Buyer or
Buyer’s designee and further advising tenants that specific security deposits,
advance rents and interest thereon, if any, have been transferred to Buyer.

 

(4)           To the extent the same are in Seller’s possession, originals or
copies of all operating manuals, warranties, and guarantees, if any, relating to
the Premises, all of which shall be left at the Premises.

 

(5)           An affidavit to the Escrow Agent restricted to mechanic’s liens
and tenants in possession and a FIRPTA affidavit.

 

(6)           At the request of the Escrow Agent, Seller shall provide a copy of
its certificate of formation and limited liability company agreement.

 

(7)           A signed copy of a closing statement prepared by Seller or the
Escrow Agent and agreed upon by Seller and Buyer (the “Closing Statement”).

 

(c)           At the Closing, Buyer shall also provide to Seller the following:

 

(1)           The assumptions required in Subsection (b)(2) above.

 

(2)           The Purchase Price in full as required in this Agreement.

 

(3)           A signed copy of the Closing Statement.

 

(d)           Seller shall have ten (10) business days after the Closing to
remove from the Premises its personal property not sold hereunder, and Seller
shall have reasonable access to the Premises for such purpose.

 

9.            Clearing Title, Etc. If Buyer has not terminated this Agreement
before the expiration of the Inspection Period as provided in Section 7, then -

 

(a)           If, on the Closing, Seller shall be unable to give title, make
conveyance or deliver possession of the Premises as provided in this Agreement,
including the failure of Seller to cure any Defect that Seller agreed to cure as
provided in Section 7, or if any material condition to Closing or other material
provision of this Agreement is not complied with by Seller as herein provided,
then, and in any of said events, Buyer, subject to Subsection 9(b), shall have
the option, to be promptly exercised by the scheduled Closing Date, to (i)
terminate this Agreement by written notice to Seller, in which event the Deposit
shall be refunded to Buyer, this Agreement shall be terminated, and the parties
shall have no further liability or responsibility to each other, except for the
hold harmless obligations of Buyer pursuant to Section 7(b); or (ii) consummate
the sale without reduction of the Purchase Price upon all of the terms and
conditions of this Agreement, except those relating to the matter with which
Seller is unable to comply or has not complied. Notwithstanding the foregoing,
in the event that the provisions of this Section shall be made applicable as the
result of Seller’s failure to cure any Defect that Seller had agreed to cure as
provided above, Buyer shall have the right to specific performance as provided
in Subsection 9(e). Seller’s obligations hereunder shall be subject to Seller’s
receipt of a release of the existing mortgage encumbering the Premises from the
existing lender.

 

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(b)           If, however, Seller is unable to comply with this Agreement as
described in Subsection 9(a), Seller shall also have the right to extend the
Closing for up to an additional thirty (30) days if it desires to attempt to
cure its inability to comply with this Agreement. Seller may exercise this
option by written notice to the Buyer on or before the scheduled Closing Date.
If, after the expiration of the extended period, Seller shall be unable to cure
such inability or elects not to do so, for whatever reason, then, as Buyer’s
exclusive remedies, Buyer shall have the same options provided in Subsection
9(a).

 

(c)           Notwithstanding the aforesaid Subsections of this Section 9 to the
contrary, Buyer shall not have the right to terminate this Agreement if the
matter which causes Subsections 9(a) or 9(b) to apply was deemed approved by
Buyer pursuant to the provisions of Section 7.

 

(d)           In all events, Buyer shall have the option to accept such title as
Seller can deliver and to waive any condition or provision of this Agreement not
complied with, without reduction of the Purchase Price.

 

(e)           Buyer shall have no other recourse to or rights against Seller,
except as provided herein. In the event that Seller shall knowingly and
intentionally default in its obligation to convey the Premises to Buyer pursuant
to this Agreement or in its obligation to cure any Defects that Seller has
agreed to cure as provided above, Buyer may, as its sole and exclusive remedy,
either (i) enforce specific performance of that obligation against Seller, so
long as Buyer brings an action for specific performance against Seller within
thirty (30) days after the date of Seller’s default, or (ii) terminate this
Agreement by written notice to Seller and the Escrow Agent, in which event the
Deposit shall be returned to Buyer and the parties shall have no further
obligations to each other, except for the hold harmless obligations of Buyer
pursuant to Section 7(b). In no event shall Seller’s default be considered
knowing and intentional if such default is the result of a good faith dispute or
the result of the Seller’s inability to deliver title due to a lien or defect
which was not voluntarily created or placed on the Premises by Seller, except to
the extent that the same is a Defect that Seller agreed to cure. In no event
shall Seller be liable to Buyer for any actual, punitive, speculative,
consequential or other damages.

 

(f)           To enable Seller to make conveyance as provided in this Agreement,
Seller may use the purchase money or any portion thereof to clear title of any
encumbrance(s) or defect(s), provided that all instruments so clearing title are
recorded simultaneously with the Deed or appropriate escrows or other mutually
satisfactory arrangements have been established for delivery and recording of
the appropriate instruments subsequent to the Closing in order to clear title.

 

10.          Casualty, Eminent Domain, Fire Insurance. If Buyer has not
terminated this Agreement before the expiration of the Inspection Period as
provided in Section 7, then -

 

(a)           In the event of any material damage (as defined below) to the
Premises, then, at Buyer’s option, by written notice to Seller within five (5)
days after Buyer receives notice or becomes aware of the same, Buyer shall
either (i) terminate this Agreement, in which event the Deposit shall be
refunded to Buyer, this Agreement shall be terminated, and the parties shall
have no further obligations to each other except for the hold harmless
obligations of Buyer pursuant to Section 7(b), or (ii) elect to consummate the
sale without reduction of the Purchase Price on account of the same. If Buyer
shall fail to deliver the foregoing notice, then Buyer shall be deemed to have
elected to consummate the sale as provided in subpart (ii) above. Buyer shall,
however, be obligated to close hereunder if such damage shall not exceed two
million and 00/100 Dollars ($2,000,000.00) and is fully covered by insurance
(except for deductibles) (“material damage”). In either case, whether Buyer
elects or is obligated to close, Seller shall assign to Buyer all claims and
rights, if any, on account of or arising out of any of the foregoing damage, to
the extent such damage is not repaired by Seller by the Closing (or Seller has
agreed in writing reasonably acceptable to Buyer to pay for repair of such
portion of the damage as is not paid by the insurer and has escrowed purchase
proceeds sufficient therefor). To the extent not covered within the preceding
sentence, Buyer will receive a credit at Closing for any deductible applicable
to such damage under Seller’s insurance coverage.

 

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(b)           If, prior to the Closing, all or any material portion of the
Premises shall be taken for any public use (other than minor takings for street
widening) or access to or from the Premises shall be permanently taken or
materially impaired, or any change(s) to public way(s) or the grade(s) thereof
shall be made which materially and adversely affects or is likely to materially
and adversely affect the commercial value of the Premises, or notice of any of
the foregoing shall be made public or otherwise come to Buyer’s attention
(unless such action is terminated by the Closing), then, and in any of said
events, by written notice to Seller within five (5) days after Buyer receives
notice or becomes aware of the same, Buyer shall either (i) terminate this
Agreement, in which event this Agreement shall terminate, the Deposit shall be
refunded to Buyer, and the parties shall have no further liability or
responsibility to each other except for the hold harmless obligations of the
Buyer pursuant to Section 7(b), or (ii) elect to consummate the sale without
reduction of the Purchase Price on account of same, in which event Seller shall
assign to Buyer all claims and rights, if any, on account of or arising out of
any of the foregoing.

 

(c)           Until the Closing, Seller shall maintain insurance on the Premises
against fire and hazards covered by standard extended coverage endorsement as
presently insured.

 

11.          Seller’s Management. Except as otherwise expressly provided herein,
Seller shall continue to manage, maintain and repair, rent and operate the
Premises in its usual course of business until the Closing and in accordance
with its past practices.

 

12.          Current Leases and Tenancies. Within five (5) business days after
the date hereof, Seller shall provide Buyer with a rent roll which shall list
all present tenants of the Premises, whether with or without written leases, and
shall contain, as to each tenant, the name of the tenant, location of the
apartments rented, the monthly rent rate and the expiration date of each lease
(the “Initial Rent Roll”). Seller shall provide an updated rent roll with the
same scope of data for the Closing (the “Closing Rent Roll”). Seller represents
that each of the Initial Rent Roll and the Closing Rent Roll will be
substantially accurate as of the date set forth thereon. Buyer shall be afforded
the opportunity to inspect all the outstanding leases, tenant records and
operating and expense statements with respect to the Premises during the
Inspection Period referred to in Section 7. Seller, however, makes no warranties
or representations with respect to such statements and records.

 

13.          Service or Other Non-Lease Agreements. Seller represents that the
Premises are not subject to any agreements or contracts as of the present date
that will survive the Closing, except for apartment leases, tenancies, recorded
agreements or contracts, and except for those agreements and contracts, if any,
listed on Exhibit B attached hereto. Seller agrees that it shall not enter into
any new agreements or contracts which will pertain to the Premises, other than
apartment leases and tenancies, unless such agreements or contracts are
cancelable by not more than thirty (30) days notice or are approved by Buyer,
which approval shall not be unreasonably withheld or delayed. Buyer agrees to
assume all of the aforesaid agreements and contracts at the Closing.

 

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14.          Representations, Warranties and Additional Covenants by Buyer. As a
material inducement to Seller to enter into this Agreement and consummate the
transaction contemplated hereby, Buyer represents and warrants to Seller and
covenants and agrees with Seller as follows:

 

(a)           Buyer has full legal right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein, and this
Agreement constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.

 

(b)           If Buyer is not a natural person, Buyer, upon request of Seller,
at Closing shall deliver to Seller such documentation as Seller or its attorney
may require to evidence the matters set forth above, including, without
limitation, certified copies of Buyer’s organizational documents and appropriate
resolutions or consents authorizing the transaction contemplated herein.

 

(c)           In addition to the actions recited herein and contemplated to be
performed, executed and delivered by Buyer, Buyer shall perform, execute and
deliver or cause to be performed, executed and delivered at the Closing or
thereafter any and all further acts, deeds and assurances as Seller or the
Escrow Agent may reasonably require to consummate or evidence the consummation
of the transaction contemplated herein.

 

(d)           Buyer hereby agrees to indemnify, protect, defend, save and hold
Seller harmless from and against any and all debts, duties, obligations,
liabilities, suits, claims, demands, causes of actions, damages, losses, costs
and expenses (including, without limitation, reasonable legal expenses and
attorneys’ fees with respect to the same or to enforce this indemnity), in any
way relating to, connected with or arising out of the Premises or the ownership,
leasing, use, operation, maintenance and management thereof from and after the
Closing, including, without limitation, any debts, duties, obligations,
liabilities, suits, claims, demands, causes of action, damages, losses, costs
and expenses in any way relating to, connected with or arising under any of the
leases, tenancies, or contracts or agreements assumed by Buyer from and after
the Closing. The indemnification contained in this Subsection shall survive the
Closing.

 

15.          Miscellaneous.

 

(a)           Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when mailed, postage prepaid, by
U.S. registered or certified mail (with return receipt requested), by telecopy
(with proof of transmission) or by recognized overnight air courier service
(with proof of delivery); if intended for the Seller, addressed to the Seller
c/o RealSource Equity Services, LLC, 2089 East Fort Union Boulevard, Salt Lake
City, Utah 84121, Attention: Michael S. Anderson (telephone no. (801) 601-2700,
facsimile no. (801) 563-3937); and if intended for Buyer, addressed to Buyer at
2089 East Fort Union Boulevard, Salt Lake City, Utah 84121, Attention: V. Kelly
Randall (telephone no. (801) 601-2700, facsimile no. (801) 563-3937).

 

(b)           Construction. The headings of the various Sections of this
Agreement are for convenience of reference only and are not a part hereof. No
modification, alteration or amendment of this Agreement shall be binding unless
in writing duly executed by both Buyer and Seller. Where the context requires or
admits, the plural shall include the singular, and vice versa, and words of one
gender shall include all genders. If Buyer shall consist of more than one
individual and/or entity, liability of each shall be joint and several. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Utah, and, in the event of any legal dispute between the parties which
may result in litigation, such litigation may only be commenced within said
jurisdiction, with service permitted by U.S. registered or certified mail,
return receipt requested, addressed as provided in Subsection (a) above. In the
event of any such litigation, the parties hereby waive their rights to trial by
jury. This Agreement may be executed in multiple copies, each of which shall be
an original for all purposes. All of the terms and provisions of this Agreement
have been negotiated by Seller and Buyer with the assistance of their respective
attorneys. Therefore, it is the intent of Seller and Buyer that this Agreement
not be construed for or against either of the parties hereto, and that neither
of the parties hereto be deemed the drafter of this Agreement.

 

11

 

 

(c)           Binding Effect. This Agreement shall be binding upon and inure
(subject to Subsection (d) below) to the benefit of the respective heirs,
executors, administrators, successors and assigns of each party hereto.

 

(d)           Buyer’s Nominee. Buyer may transfer its rights under this
Agreement. Buyer shall, however, remain jointly and severally liable with such
transferee for all of Buyer’s obligations under this Agreement, and such
transferee shall be required to assume joint and several liability for all such
obligations. Buyer shall give Seller prompt written notice of any such transfer
at least seven (7) days before the scheduled Closing, which notice shall include
sufficient information to identify the transferee entity or nominee and
certified copies of its organizational documents. No assignment shall be valid
unless Seller has approved the agreement pursuant to which the assignment is
consummated.

 

(e)           Survival. The express representations and warranties of Seller, if
any, set forth in this Agreement all relate to the period of time prior to
Closing. Any claim of a breach of such representations or warranties may be made
only after Buyer actually suffers a loss as a result of such breach, Buyer
delivers written notice of such breach to Seller within thirty (30) days
thereafter, and such breach remains uncured for a period of thirty (30) days
after Seller has received such written notice, and further that Buyer files a
lawsuit for breach of such representation or warranty in a court of competent
jurisdiction in Salt Lake County, Utah, within six (6) months after the Closing.
If such conditions precedent are not timely satisfied, then any action for
breach of such representations and warranties shall forever thereafter be
barred. Seller shall not be deemed to have breached a representation and
warranty hereunder unless a false representation and warranty was knowingly made
by Seller hereunder. In no event shall Seller be liable to Buyer for punitive,
speculative or consequential damages.

 

(f)            Confidentiality. Buyer shall not disclose the terms, provisions
and conditions of this Agreement to any person or entity, except to its proposed
lender or its advisors, without the written consent of Seller, and Buyer shall
require its lender and advisors to agree to such confidentiality. All
information provided to or obtained by Buyer in connection with Buyer’s
pre-closing due diligence, inspections, investigations and the like shall be
received and held by Buyer in confidence and solely for the purpose of enabling
Buyer to evaluate its purchase of the Premises under this Agreement and shall
promptly be returned to Seller (or destroyed, at Seller’s election), if this
Agreement is terminated prior to Closing. Buyer’s obligations of confidentiality
shall survive the Closing or termination of this Agreement, as the case may be.

 

(g)           Zoning Etc. Buyer shall not attempt to obtain any zoning change,
modification or variance for the Premises or any part thereof at anytime prior
to the Closing without Seller’s prior written consent.

 

(h)           Third Party Exchanges. Buyer and Seller agree to cooperate with
each other in order for Seller and/or Buyer to accomplish a real estate exchange
pursuant to Section 1031 of the Internal Revenue Code, provided such exchanges
do not cause Buyer or Seller to incur any liability, do not require Buyer or
Seller to take title to any other property, do not delay the Closing and do not
cause Buyer or Seller to incur any additional cost or expense, other than
nominal expense for their attorneys to review any applicable documents.

 

12

 

 

(i)           No Recording. Buyer shall not cause or permit this Agreement, or
any short form variation thereof or any notice of contract, to be filed of
record in any office or place of public record (unless filed by Seller). If
Buyer shall breach this Subsection it shall be deemed a material default
hereunder, and, at Seller’s option, this Agreement shall terminate, and Seller
shall retain the Deposit as liquidated damages, and the parties shall have no
further liability or responsibility to each other, except for the hold harmless
obligations of Buyer pursuant to Section 7(b).

 

(j)           Time Of The Essence. Time is of the essence as to each and every
provision of this Agreement requiring performance within a specified time and
particularly with respect to any termination rights herein afforded to Buyer and
with respect to the Closing.

 

(k)           Non-Offer. The submission of this Agreement for examination or for
execution by Buyer, or the negotiation of the transaction described herein does
not constitute an offer to sell by Seller, and this Agreement confers no rights
upon Buyer nor imposes any obligations on Seller and shall not constitute a
binding contract unless and until Buyer and Seller shall have executed this
Agreement and any required consents to this Agreement have been obtained,
including, without limitation, the consent of any lender to Seller.

 

(l)           Invalid Provision. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, and if such
provision is not essential to the effectuation of the basic purposes of this
Agreement, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never been a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect.

 

(m)           No Waiver. The waiver by either party of the performance of any
covenant, condition or promise shall not invalidate this Agreement, nor shall it
be construed as a waiver of any other covenant, condition or promise herein. The
waiver by either party of the time for performing any act shall not constitute a
waiver of the time for performing any other act or any incidental act required
to be performed at a later time. The delay or forbearance by either party in
exercising any remedy or right, the time for the exercise of which is not
specifically and expressly limited or specified in this Agreement shall not be
considered a waiver of or an estoppel against the latter exercise of such remedy
or right.

 

(n)           Specific Waiver. Buyer hereby waives the applicability,
protections and provisions of any applicable law governing deceptive or unfair
trade practices and the like, if any, only to the extent that such waiver is
permitted under applicable law. Buyer represents and warrants to Seller that (1)
Buyer is not in a significantly disparate bargaining position in connection with
the transaction contemplated by this Agreement, (2) Buyer is represented by
legal counsel in connection with this transaction and Agreement, and (3) the
transaction described in this Agreement is for business-commercial purposes and
is not a consumer transaction.

 

(o)           Back-Up Offers. Seller shall have the right to receive back-up
offers and to enter into agreements for the purchase and sale of the Premises,
contingent upon the expiration or termination of this Agreement, until such time
as the Inspection Period and all other contingencies under this Agreement have
expired.

 

13

 

 

(p)           Default Provision. In the event that Buyer’s default consists of a
breach of any of Buyer’s obligations which expressly survive termination of this
Agreement or the Closing, or in the event Buyer files a lis pendens or an action
for specific performance against Seller or otherwise clouds Seller’s title to
the Premises or any part thereof, or if Buyer takes action to prevent Seller
from obtaining the Deposit when Seller is entitled thereto, and if, in any such
case, Buyer fails to prevail in a final, non-appealable judgment, Seller shall
be entitled to any remedies available at law or in equity with respect thereto,
including, but not limited to, its damages, attorney’s fees and costs.

 

(q)           Limited Recourse. Anything in this Agreement to the contrary
notwithstanding, Buyer agrees that it shall look solely to the estate and
property of Seller in the Premises, and subject to prior rights of any
mortgagee, for the collection of any judgment (or other judicial process)
requiring the payment of money by Seller in the event of any default or breach
by Seller with respect to any of the terms, covenants, and conditions of this
Agreement to be observed and/or performed by Seller, and no other assets of
Seller or any of its members, managers, employees, attorneys, agents,
affiliates, partners, shareholders, successors, or assigns shall be subject to
levy, execution, or other procedures for the satisfaction of Buyer’s remedies.
This Subsection (q) shall survive the Closing.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above mentioned.

 

SELLER:   BUYER:               RS Cambridge Apartments, LLC   RealSource
Residential, Inc.               By: RS Cambridge Management, LLC,           its
manager                       By: /s/ V. Kelly Randall   By: /s/ Nathan Hanks
Name: V. Kelly Randall   Name:  Nathan Hanks Title: Vice President of RS
Cambridge   Title: President     Management LLC,  Manager                      

14

 

 

EXHIBIT A

 

Legal Description

 

Real property in the City of Gulfport, County of Harrison, State of Mississippi,
described as follows:

 

PARCEL 1:

 

Commence at the Southeast (SE) corner of the Southwest Quarter of the Southeast
Quarter (SW 1/4 of SE 1/4), of Section 19, Township 7 South, Range 10 West, City
of Gulfport, Harrison County, Mississippi, and run North 139.33 feet to the
point of beginning: thence continue North for 1060.67 feet; thence run South 89
degrees 53 minutes 18 seconds West for 629.91 feet; thence run South 00 degrees
00 minutes 20 seconds East for 1157.82 feet to the North right-of-way of East
Taylor Road; thence run South 89 degrees 55 minutes 09 seconds East and along
the North right-of-way of East Taylor Road for 618.49 feet; thence run North 6
degrees 30 minutes 05 seconds East along the North right-of-way of East Taylor
Road for 99.89 feet back to the point of beginning.

 

The above described parcel lies entirely within and is part of the Southwest
Quarter (SW 1/4) of the Southeast Quarter (SE 1/4) of Section 19, Township 7
South, Range 10 West, City of Gulfport, Mississippi, Harrison County,
Mississippi.

 

The above described land being the same land described in survey by Gary A.
Durbin dated July 24, 2007, last revised September 19, 2007 as follows:

 

Commencing at the Southeast corner of the SW ¼ of the SE ¼ of Section 19,
Township 7 South, Range 10 West, City of Gulfport, Harrison County, Mississippi
, and run North 140.33 feet to the Point of Beginning; thence continue North for
1060.67 feet; thence run S 89°56'22" W for 630.35 feet; thence run S 00°01'38" E
for 1158.38 feet to the North right of way of East Taylor Road; thence run S
89°55'09" E, and along the North right of way of East Taylor Road for 618.49
feet; thence run N 06°30'05" E along the North right of way of East Taylor Road
for 99.89 feet back to the Point of Beginning.

 

The above described parcel lies entirely within and is part of the SW ¼ of the
SE ¼ of Section 19, T 7 S, R 10 W, City of Gulfport, Harrison County,
Mississippi.

 

PARCEL 2:

 

Easement granted by Southern Pre-Engineered Builders, Inc., a Mississippi
corporation unto Cambridge, Inc., a Mississippi corporation and the terms and
conditions thereof, recorded September 28, 2007 as Instrument No. 2007 9751 D-J1
of Official Records.

 

15

 

 

EXHIBIT B

 

Contracts and Agreements

 

 

16