Document:

exv10w1

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

By and between

CORNERSTONE CORE PROPERTIES REIT, INC.

as Seller,

and

J3 HARMON, L.L.C.

as Purchaser

August
31, 2011

2111 South Industrial Park Avenue, Tempe, AZ

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	1. DEFINITIONS
	 	 	1	 
	1.1 “Agreement”
	 	 	1	 
	1.2 “Business Day”
	 	 	1	 
	1.3 “Closing”
	 	 	1	 
	1.4 “Closing Date”
	 	 	1	 
	1.5 “Commitment”
	 	 	1	 
	1.6 “Deposit”
	 	 	1	 
	1.7 “Escrow Agent”
	 	 	1	 
	1.8 “Existing Surveys”
	 	 	1	 
	1.9 “Existing Title Policies”
	 	 	1	 
	1.10 “Deed”
	 	 	1	 
	1.11 “Improvements”
	 	 	2	 
	1.12 “Land”
	 	 	2	 
	1.13 “Leases”
	 	 	2	 
	1.14 “Other Property”
	 	 	2	 
	1.15 “Permitted Exceptions”
	 	 	2	 
	1.16 “Property”
	 	 	2	 
	1.17 “Purchase Price”
	 	 	2	 
	1.18 “Purchaser”
	 	 	2	 
	1.19 “Rent Roll”
	 	 	2	 
	1.20 “Seller”
	 	 	2	 
	1.21 “Survey”
	 	 	2	 
	1.22 “Title Company”
	 	 	3	 
	1.23 “Title Inspection Period”
	 	 	3	 
	 
	 	 	 	 
	2. PURCHASE AND SALE; CLOSING
	 	 	3	 
	2.1 Purchase and Sale
	 	 	3	 
	2.2 Closing
	 	 	3	 
	2.3 Payment of Purchase Price
	 	 	3	 
	2.4 Escrow Agent
	 	 	3	 
	 
	 	 	 	 
	3. TITLE, DILIGENCE MATERIALS, ETC
	 	 	4	 
	3.1 Title
	 	 	4	 
	3.2 Survey
	 	 	5	 
	3.3 Property Documents
	 	 	5	 
	3.4 Inspection Indemnity
	 	 	7	 
	 
	 	 	 	 
	4. CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE
	 	 	7	 
	4.1 Closing Documents
	 	 	7	 
	4.2 Title Policy
	 	 	8	 
	4.3 Additional Conditions
	 	 	8	 
	4.4 Waiver of Conditions
	 	 	9	 
	 
	 	 	 	 
	5. CONDITIONS TO SELLER’ OBLIGATION TO CLOSE
	 	 	9	 
	5.1 Purchase Price
	 	 	9	 

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	 	 	Page	 
	5.2 Closing Documents
	 	 	9	 
	5.3 Other Conditions
	 	 	9	 
	 
	 	 	 	 
	6. REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	9	 
	6.1 Status and Authority of the Seller
	 	 	9	 
	6.2 Action of the Seller
	 	 	9	 
	6.3 No Violations of Agreements
	 	 	9	 
	6.4 Litigation
	 	 	10	 
	6.5 Existing Leases
	 	 	10	 
	6.6 Agreements
	 	 	10	 
	6.7 Not a Foreign Person
	 	 	10	 
	6.8 Prohibited Person
	 	 	10	 
	6.9 No Approval
	 	 	10	 
	6.10 Bankruptcy
	 	 	10	 
	6.11 No Notices
	 	 	11	 
	6.12 Cause to be Untrue
	 	 	11	 
	6.13 Assessments
	 	 	11	 
	6.14 Environmental Matters
	 	 	11	 
	6.15 AS-IS
	 	 	12	 
	 
	 	 	 	 
	7. REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	14	 
	7.1 Status and Authority of the Purchaser
	 	 	14	 
	7.2 Action of the Purchaser
	 	 	14	 
	7.3 No Violations of Agreements
	 	 	14	 
	7.4 Litigation
	 	 	14	 
	7.5 Prohibited Person
	 	 	14	 
	7.6 No Approvals
	 	 	14	 
	7.7 Bankruptcy
	 	 	14	 
	 
	 	 	 	 
	8. COVENANTS OF THE SELLER
	 	 	15	 
	8.1 Approval of Leasing
	 	 	15	 
	8.2 Operation of Property
	 	 	15	 
	8.3 Compliance with Laws
	 	 	15	 
	8.4 Compliance with Agreements
	 	 	15	 
	8.5 Notice of Material Changes or Untrue Representations
	 	 	15	 
	8.6 Insurance
	 	 	15	 
	8.7 Cooperation
	 	 	16	 
	8.8 Encumbrance
	 	 	16	 
	8.9 Contracts
	 	 	16	 
	8.10 Notices
	 	 	16	 
	 
	 	 	 	 
	9. APPORTIONMENTS
	 	 	16	 
	9.1 Real Property Apportionments
	 	 	16	 
	9.2 Closing Costs
	 	 	18	 
	 
	 	 	 	 
	10. DAMAGE TO OR CONDEMNATION OF PROPERTY
	 	 	19	 
	10.1 Casualty
	 	 	19	 

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	 	 	Page	 
	10.2 Condemnation
	 	 	19	 
	10.3 Survival
	 	 	19	 
	 
	 	 	 	 
	11. DEFAULT
	 	 	20	 
	11.1 Default by the Seller
	 	 	20	 
	11.2 Default by the Purchaser
	 	 	20	 
	 
	 	 	 	 
	12. Miscellaneous
	 	 	20	 
	12.1 Brokers
	 	 	20	 
	12.2 Publicity
	 	 	21	 
	12.3 Notices
	 	 	21	 
	12.4 Waivers
	 	 	22	 
	12.5 Assignment; Successors and Assigns
	 	 	22	 
	12.6 Severability
	 	 	22	 
	12.7 Counterparts
	 	 	23	 
	12.8 Performance on Business Days
	 	 	23	 
	12.9 Attorneys’ Fees
	 	 	23	 
	12.10 Section and Other Headings
	 	 	23	 
	12.11 Time of Essence
	 	 	23	 
	12.12 Governing Law
	 	 	23	 
	12.13 Intentionally Omitted
	 	 	23	 
	12.14 Like-Kind Exchange
	 	 	23	 
	12.15 Recording
	 	 	24	 
	12.16 Non-liability of Representatives of Seller
	 	 	24	 
	12.17 Non-liability of Representatives of Purchaser
	 	 	24	 
	12.18 Waiver
	 	 	24	 
	12.19 Further Assurances
	 	 	24	 
	12.20 IRS Real Estate Sales Reporting; Affidavit of Legal Value
	 	 	24	 
	12.21 Entire Agreement
	 	 	25	 
	12.22 Interrelation
	 	 	25	 

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PURCHASE AND SALE AGREEMENT

     THIS
PURCHASE AND SALE AGREEMENT is made as of August 31, 2011 (“Effective Date”), by
and between CORNERSTONE CORE PROPERTIES REIT, INC., a Maryland corporation (“Seller”), and
J3 HARMON, L.L.C., a Nevada limited liability company (“Purchaser”).

WITNESSETH:

     WHEREAS, the Seller is the owner of the Property (this and other capitalized terms used and
not otherwise separately defined herein shall have the meanings given such terms in Section
1); and

     WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser desires to purchase
from the Seller, the Property, subject to and upon the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,
the Seller and the Purchaser hereby agree as follows:

     1. DEFINITIONS. Capitalized terms used in this Agreement shall have the meanings set
forth below or in the section of this Agreement referred to below:

          1.1 “Agreement” shall mean this Purchase and Sale Agreement, together with any
exhibits and schedules attached hereto, as it and they may be amended from time to time as herein
provided.

          1.2 “Business Day” shall mean any day other than a Saturday, Sunday or any other day
on which banking institutions in the State of Arizona are authorized by law or executive action to
close.

          1.3
“Closing” shall have the meaning given such
term in Section 2.2.

          1.4
“Closing Date” shall have the meaning given
such term in Section 2.2.

          1.5
“Commitment” shall have meaning set forth in
Section 3.1.

          1.6
“Deposit” shall have the meaning as set forth
in Section 2.3.

          1.7
“Escrow Agent” shall have the meaning set
forth in Section 2.4.

          1.8 “Existing Surveys” shall mean the existing ALTA survey, if any, and any other
“as-built” survey, for each Property.

          1.9 “Existing Title Policies” shall mean the existing title insurance policy for each
Property.

          1.10 “Deed” shall have the meaning set forth in Section 4.1(a).

 

          1.11 “Improvements” shall mean the existing buildings, fixtures and other structures
and improvements situated on, or affixed to, the Land.

          1.12 “Land” shall mean, (a) the parcel(s) of land described in Exhibit “A”
attached hereto, together with (b) all easements, rights of way, privileges, licenses and
appurtenances which the Seller may own with respect thereto.

          1.13 “Leases” shall mean the leases identified in the Rent Roll and any other leases
hereafter entered into in accordance with the terms of this Agreement, and all of Seller’s rights
and interests therein, including Seller’s rights to any security deposits held by or for Seller
pursuant to the Leases.

          1.14 “Other Property” shall mean the Seller’s entire right, title and interest in and
to (a) all fixtures, machinery, systems, equipment and items of personal property owned by the
Seller and attached or appurtenant to, located on and used in connection with the ownership, use,
operation or maintenance of the Land or Improvements, if any; (b) all freely assignable intangible
property owned by the Seller arising from or used in connection with the ownership, use, operation
or maintenance of the Land or Improvements, if any; (c) all use, occupancy, building and operating
licenses, permits, approvals, and development rights, if any; (d) all freely assignable plans and
specifications related to the Land and Improvements, if any, and (e) all water rights, mineral
rights, oil and gas rights and other rights to the subsurface of the Land. Seller shall not be
required to obtain any consents to assignment of the Other Property as a condition to closing.

          1.15 “Permitted Exceptions” shall mean, collectively, (a) liens for taxes, assessments
and governmental charges not yet due and payable; (b) the Leases, and (c) such other nonmonetary
encumbrances with respect to the Property as may be shown on any title report or supplement thereto
which are not objected to by the Purchaser (or which are objected to, and subsequently waived, by
the Purchaser) in accordance with Section 3.1.

          1.16 “Property” shall mean all of the Land, the Improvements and the Other Property.
The Property consists of an approximately 26,800 square foot industrial building known as 2111
South Industrial Park Avenue, located in the City of Tempe, County of Maricopa, State of Arizona.
Where applicable, as used herein, the term “Property” shall also mean any one of, or each, of the
Properties.

          1.17 “Purchase Price” shall mean Nine Hundred Fifty Thousand Dollars ($950,000.00) in
good funds, plus or minus all adjustments, prorations, and credits as provided in this Agreement,
and as may be allocated among the Properties as set forth in Section 2.1 below.

          1.18 “Purchaser” shall have the meaning given such term in the preamble to this
Agreement, together with any permitted successors and assigns.

          1.19 “Rent Roll” shall mean Schedule 1 to this Agreement.

          1.20 “Seller” shall have the meaning given such term in the preamble to this
Agreement, together with any permitted successors and assigns.

          1.21 “Survey” shall have meaning set forth in Section 3.2.

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          1.22 “Title Company” shall mean First American Title Company at the office set forth
in Section 12.3: Attention Title Officer.

          1.23 “Title Inspection Period” shall have the meaning set forth in Section
3.1.

     2. PURCHASE AND SALE; CLOSING.

          2.1 Purchase and Sale. In consideration of the payment of the Purchase Price by the
Purchaser to the Seller and for other good and valuable consideration, the Seller hereby agrees to
sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Seller, the Property
for the Purchase Price, subject to and in accordance with the terms and conditions of this
Agreement.

          2.2 Closing. The purchase and sale of the Property shall be consummated at a closing
(the “Closing”) to be processed at the offices of the Escrow Agent on or before
November 1, 2011 (the “Closing Date”). The Closing shall occur when the Deed for the
Property is recorded in the Maricopa County recorder’s office.

          2.3 Payment of Purchase Price.

          (a) Within two (2) Business Days of Opening of Escrow pursuant to Section 2.4,
Purchaser shall deposit in escrow with Escrow Agent (as defined in Section 2.4) as the
initial earnest money deposit the sum of Fifty Thousand Dollars ($50,000.00) (together with all
interest thereon, the “Deposit”) in cash to be held and disbursed by Escrow Agent in
accordance with the remaining provisions of this Agreement including, without limitation,
Section 3.3 below. In addition to the Deposit, Purchaser shall, concurrently with its
execution of this Agreement, deliver to Seller the amount of Twenty-Five Dollars ($25.00), which
amount Seller and Purchaser agree has been bargained for as consideration for Seller’s execution
and delivery of this Agreement and Purchaser’s right to inspect the Property. Such sum is in
addition to and independent of any other consideration or payment provided for in this Agreement
and is non-refundable in all events.

          If the Deposit is not paid on or before the date two (2) Business Days after the Opening of
Escrow, this Agreement shall automatically stand terminated without further notice in which event
Escrow Agent shall return the Deposit to Purchaser and Seller and Purchaser shall have no further
obligations under this Agreement except those that expressly survive termination hereunder.

               (b) At least one (1) business day prior to the Closing Date, the Purchaser shall deposit in
Escrow the balance of the Purchase Price in good and immediately available funds so that the funds
are released on the Closing Date, subject to adjustment as provided in Article 9.

          2.4 Escrow Agent. Purchaser and Seller hereby engage First American Title Insurance
Company (attention: Kathleen Huntsman) at the office set forth in Section 12.3 (“Escrow
Agent”) to act as agent for the parties in closing this transaction and carrying out the terms
of this Agreement on the terms and conditions set forth herein. This Agreement shall constitute
escrow instructions to Escrow Agent; provided, however, in the event of any
inconsistency between the provisions hereof and the provisions of any escrow instructions

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requested by Escrow Agent, the terms hereof shall govern and control. “Opening of Escrow”
shall mean the date on which Escrow Agent receives one (1) fully executed counterpart of this
Agreement from Seller and Purchaser together with the Deposit. Escrow Agent shall give Seller and
Purchaser written notice of the date of Opening of Escrow and its signature hereto indicating its
acceptance of the escrow instructions. Escrow and the transaction contemplated hereby shall close
(referred to herein interchangeably as the “Close of Escrow,” the “Closing,” or by
similar words) when all documents and funds necessary to close this transaction have been received
by Escrow Agent and the Deed conveying title to the Properties to Purchaser has been recorded in
accordance with Section 2.2. This Agreement will constitute the sole escrow instructions
to Escrow Agent, and the standard form escrow instructions of Escrow Agent will not be used for
this transaction. Specifically, the parties have rejected any provisions in standard form escrow
instructions pertaining to the procedure for cancellation (such as the 13-day notice provision) as
well any provisions indemnifying Escrow Agent for its negligence, or giving a broker or other third
party any interest in the escrow for this transaction.

     3. TITLE, DILIGENCE MATERIALS, ETC.

          3.1 Title. Escrow Agent is hereby instructed to, within five (5) days after the date
of Opening of Escrow, provide to Purchaser a Commitment for Title Insurance relating to the
Property (which Commitment, together with any amendments thereto is referred to as the
“Commitment”), disclosing all matters of record which relate to the title to the Property
and Escrow Agent’s requirements for both closing the escrow created by this Agreement and issuing
the policy of title insurance described in Section 4.2. Escrow Agent shall also
simultaneously cause copies of all instruments and other documents referred to in the Commitment
(collectively, the “Underlying Documents”) to be furnished to Purchaser. On or prior to
the date ten (10) business days following its receipt of the Commitment and Underlying Documents,
(the “Title Inspection Period”), the Purchaser shall give the Seller written notice
(“Title Objection Notice”) of any title exceptions set forth on the Commitment as to which
the Purchaser objects, in its sole and absolute discretion. The Seller shall have the right, but
not the obligation, to attempt to remove, satisfy or otherwise cure any exceptions to title to
which the Purchaser so objects; provided, however, that Seller shall be obligated to remove,
satisfy or otherwise eliminate, on or before Closing, all mortgages, deeds-of-trust and other
monetary liens (“Monetary Items”) (other than liens for property taxes not yet due and
payable). If Seller elects to take such actions as may be required to cause such exceptions as to
which Purchaser has objected to be removed from the Commitment, the Seller shall, on or before the
fifth (5th) Business Day following delivery of Purchaser’s Title Objection Notice, give the
Purchaser written notice thereof; it being understood and agreed that the failure of the Seller to
timely give such written notice as to any matters objected to by Purchaser shall be deemed an
election by the Seller not to remedy such matters. If the Seller elects (or is deemed to have
elected) not to cure any title defects to which the Purchaser has so objected, the Purchaser may
elect (i) to terminate this Agreement, in which case Purchaser shall receive a prompt return of the
Deposit and Purchaser and Seller shall have no further obligations to each other under this
Agreement except for those obligations hereunder which expressly survive such termination, or (ii)
to consummate the transactions contemplated hereby, notwithstanding such title defect, without any
abatement or reduction in the Purchase Price on account thereof (whereupon such objected to
exceptions or matters shall be deemed to be Permitted Exceptions). The Purchaser shall make any
such election by written notice to the Seller given on or prior to the third (3rd) Business Day
after delivery of the Seller’s notice of its unwillingness or inability to cure (or deemed election
not to

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cure) such defect and time shall be of the essence with respect to the giving of such notice.
Failure of the Purchaser to give such notice shall be deemed an election by the Purchaser to
proceed in accordance with clause (ii) above. Escrow Agent shall also promptly deliver to
Purchaser any updated or revised Commitment, and the corresponding Underlying Documents, which
reflect any new lien, encumbrance, or other exception to title first arising after the Opening of
Escrow and not shown on the original Commitment described above (a “New Title Matter”), as
to which the same procedures, rights and other provisions set forth above in this Section
3.1 shall apply, except that the Title Inspection Period with respect to any such New Title
Matter shall be five (5) days. If Seller fails to discharge or cure Monetary Items at Closing,
Purchaser shall have the right to take such title as Seller can convey, with an abatement of the
Purchase Price in the amount of the Monetary Items not cured or discharged, or terminate this
Agreement and receive a refund of the Deposit.

          3.2 Survey. Seller shall, within five (5) days after the Opening of Escrow, provide
Purchaser with any Existing Surveys to the extent such exist and are in Seller’s possession or
control. Purchaser may, at its cost, cause any such survey to be updated, or, in the event there
is no Existing Survey, cause a new survey to be prepared (collectively, the “Survey”).
Purchaser shall have until the end of the Title Inspection Period (as defined below) to object in
writing to any matter shown in the Survey. If Purchaser fails to object within such time period,
the legal description of the Property and any other matters shown in the Survey shall be deemed
approved by Purchaser. If Purchaser does object in writing to any matter shown in the Survey,
Purchaser shall specify the matter objected to in the Title Objection Notice.

          3.3 Property Documents. Purchaser hereby acknowledges that Seller has delivered to
Purchaser the Rent Roll and true and correct copies of documents set forth on Schedule 2
and Seller, within five (5) days of the Effective Date, shall deliver copies of all other
non-proprietary documents relating to the Land and the Improvements, to the extent such documents
exist and are in Seller’s possession (the “Property Documents”). Seller may provide such
copies to Purchaser in electronic format. Purchaser acknowledges and agrees that Seller’s Property
Documents will be provided by Seller to accommodate and facilitate Purchaser’s investigations
relating to the Land and the Property and that, except as expressly set forth herein, Seller makes
no representations and warranties of any kind regarding the accuracy or thoroughness of the
information contained in Seller’s Property Documents and Purchaser shall not be entitled to rely on
the Property Documents. Purchaser must perform its own due diligence investigation of the
Properties.

          Subject to the terms and conditions below, Purchaser shall have until 5:00 p.m. Arizona time
on September 30, 2011 (the “Property Inspection Period”) to review the Property
Documents and perform a feasibility study or studies with respect to the Property which may include
market and engineering studies, leasing and financial investigations, soil tests, drainage studies,
confirmation that all utilities including water, electric, gas, sewer and telephone are available
to the Property, environmental investigations, confirmation of zoning, and/or such other tests,
studies or investigations with respect to the Property as Purchaser deems appropriate in its sole
and absolute discretion. Subject to the rights of tenants of the Property under their respective
leases and with reasonable advance notice to Seller, Seller shall cause reasonable access to the
Property to be available to Purchaser and the persons so designated by it during the regular
business hours of the respective Property, and shall afford them the opportunity to inspect and
perform any tests upon the Property that Purchaser deems necessary or appropriate to determine
whether the Property is suitable for Purchaser’s purposes, in Purchaser’s sole and

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absolute discretion. At Seller’s request, Seller and/or the involved tenant or its designees
shall be entitled to accompany Purchaser during any such inspection. Purchaser shall have the
right to conduct a Phase I environmental site assessment and, with Seller’s prior written consent,
to be given or withheld in Seller’s sole discretion, a Phase II environmental site assessment
(including soils borings, soil sampling and, if relevant, ground water testing, and invasive
sampling of building materials with respect to the Premises). Purchaser’s activities at the
Property shall be conducted in such a manner so as not to unreasonably interfere with the occupancy
of tenants or their employees, licensees or invitees. Notwithstanding the foregoing, Purchaser
shall not conduct any intrusive testing of any of the Properties without the prior written consent
of Seller, which may be withheld in its sole discretion.

          If Purchaser, after conducting such inspections, investigations, and tests, determines that
the Property or any part thereof or the Property Documents, or any other aspect of the Property
whatsoever, are not, in Purchaser’s sole and absolute discretion, satisfactory for any reason, or
no reason at all, then Purchaser may elect, at any time on or prior to the date of expiration of
the Property Inspection Period, to cancel this Agreement and the Escrow by written notice to Seller
and Escrow Agent, in which case Purchaser shall receive a prompt return of the Deposit and
Purchaser and Seller shall have no further obligations to each other under this Agreement except
for those obligations hereunder which expressly survive such termination. Upon termination by
Purchaser, Purchaser shall have no obligation to deliver any third-party documents obtained by or
for Purchaser with respect to its investigations of the Property. Notwithstanding anything else
contained herein to the contrary, if Purchaser has not provided Seller with a written notice of
disapproval of the Property or Property Documents prior to the end of the Property Inspection
Period, the Property and Property Documents shall be automatically deemed approved by Purchaser as
of the end of the Property Inspection Period. When Purchaser gives Seller written notice of
approval of its due diligence or is deemed to have given Seller notice of such approval, the
Deposit shall be non-refundable to Purchaser, except in the case of a breach by Seller. If
Purchaser cancels this Agreement as provided in this Section 3.3, then (i) Escrow Agent
shall return to Seller all documents Seller deposited with Escrow Agent in connection with the
Escrow; (ii) Escrow Agent shall return to Purchaser all documents Purchaser deposited with Escrow
Agent in connection with the Escrow; and (iii) Escrow Agent shall return the Deposit to Purchaser.
Upon such event, this Agreement and the Escrow shall be deemed null and void and neither party
shall have any further rights or obligations to the other hereunder or on account hereof, except
for those which by the provisions of this Agreement are expressly stated to survive or occur at
termination of this Agreement.

     Purchaser or Purchaser’s representatives, agents and/or consultants shall keep in full force
and effect general liability insurance from an insurance company and in form and substance
reasonably approved by Seller, naming Seller as an additional insured during Purchaser’s or
Purchaser’s agents, representatives and/or consultants entries and inspections of the Property, as
follows:

     A. Commercial general liability insurance with combined single limits of not less than
$1,000,000.00 per occurrence for bodily injury and property damage.

     B. Any contractor hired to perform environmental tests to the Property shall
maintain errors and omissions or professional liability insurance covering injury or damage arising
out of the rendering or failing to render professional services with limits of at least
$2,000,000.00 per claim.

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     C. All insurance maintained under this Section 3.3 shall be procured from insurance
companies reasonably satisfactory to Seller.

Any damage, disturbance or other disruption of the Improvements or the Land or other portion of the
Property caused by Purchaser or its employees, contractors or agents shall be promptly repaired
and/or placed in the condition existing prior to disturbance thereof by Purchaser or its employees,
contractors and agents upon completion of any activities by such parties on or with respect to the
Property. The obligation in the previous sentence shall survive any termination or cancellation of
this Agreement.

          3.4 Inspection Indemnity. Purchaser shall indemnify, defend and hold Seller, its
employees, directors and agents harmless for, from and against any and all losses, defaults,
liabilities, causes of action, demands, claims, damage or expenses of every kind including, without
limitation, attorneys’ fees and court costs, arising as a result of each of the inspections by
Purchaser and/or its employees, agents and contractors, and from and against any mechanic’s liens
or claims of lien resulting therefrom (“Inspection Indemnity”). The Inspection Indemnity
shall survive the Close of Escrow or any termination or cancellation of this Agreement.

     4. CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE. The obligation of the Purchaser
to acquire the Property shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date:

          4.1 Closing Documents. The Seller and Purchaser as applicable shall have delivered,
or cause to have been delivered, to the Escrow Agent the following:

               (a) A special warranty deed covering each Property in the form attached hereto as Exhibit
“G” (the “Deed”), duly executed and acknowledged by the Seller, conveying title to the
Property, free from all liens and encumbrances other than the Permitted Exceptions;

               (b) An assignment by the Seller and an assumption by the Purchaser, in the form set forth on
Exhibit “C” attached hereto (“Assignment of Leases”), duly executed by the Seller
and the Purchaser, of all of the Seller’s right, title, interest, obligations and liabilities in,
to and under the Leases;

               (c) Written notice to each of the tenants of the Property in the form set forth on Exhibit
“E” attached hereto (“Notices to Tenants”) executed by Seller and Purchaser which
notifies the tenants to pay to the Purchaser all rent and other payments made by the tenants under
the Leases from and after the Closing Date;

               (d) A general assignment by the Seller and an assumption by the Purchaser in the form set
forth on Exhibit “B” attached hereto (“General Assignment”), duly executed by the
Seller and the Purchaser, of all of the Seller’s right, title interest obligations and liabilities,
if any, in, to and under all freely transferable Other Property;

               (e) A bill of sale executed by the Seller, in the form set forth on Exhibit “D”
attached hereto (“Bill of Sale”), with respect to any personal property owned by the
Seller, situated at the Property owned by Seller and used in connection with the Property (it

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being understood and agreed that no portion of the Purchase Price is allocated to personal
property);

               (f) To the extent the same are in the Seller’s possession and not previously delivered, copies
of all material documents and agreements, plans and specifications and contracts, licenses and
permits pertaining to the Property;

               (g) To the extent the same are in the Seller’s possession or control, duly executed original
copies of the Leases; and

               (h) Such other conveyance documents, certificates, deeds and other instruments as the Escrow
Agent or the Title Company may reasonably require and as are customary in like transactions in
sales of property in similar transactions.

          4.2 Title Policy. The Title Company shall be prepared to issue, upon payment of the
title premium, a standard owner’s title policy in the aggregate amount of the Purchase Price (as
same may be allocated as provided in Section 2.1, above), insuring title to the Property is
vested in the Purchaser, subject only to the Permitted Exceptions.

          4.3 Additional Conditions.

               (a) All representations and warranties of the Seller herein shall be true, correct and
complete in all material respects on and as of the Closing Date and the Seller shall not be in
default under this Agreement.

               (b) Seller shall have obtained estoppel certificates from tenants comprising no less than
eighty percent (80%) of the square footage of the Improvements of the Property (measured as of the
Opening of Escrow) in the form prescribed by the particular tenant’s corresponding Lease, and if
(and only if) no estoppel certificate form is prescribed by the particular Lease, then in a form
attached hereto as Exhibit “F”, dated no earlier than thirty (30) days prior to Closing
(the “Tenant Estoppels”). Such Tenant Estoppels shall be consistent with each
corresponding Lease, and shall not reveal any default by landlord or tenant, any right to any
unknown offset rent by the tenant or any claim of the same, or any lease documents or other
agreements not delivered to Purchaser that would have an adverse material impact on the Lease.
Notwithstanding the foregoing, any modification by a tenant to an estoppel certificate to qualify
with a knowledge standard, or to conform a statement to the applicable Lease, shall not be grounds
for disapproval by Purchaser. Seller shall make reasonable efforts to obtain and deliver the
Tenant Estoppels required under this Section 4.3(b), provided, however, in no event shall
Seller be deemed in default under this Agreement in the event of Seller’s inability to timely
provide all of the required Tenant Estoppels hereunder, and Purchaser’s sole remedy against Seller
in the event of Seller’s inability to provide the required Tenant Estoppels shall be to terminate
this Agreement, receive a refund of its Deposit.

          At such time as Seller delivers to Purchaser executed Tenant Estoppels from tenants comprising
no less than eighty percent (80%) of the square footage of the Improvements of the Property, in the
form and satisfying the requirements provided in Section 4.3(b) above (collectively, the
“Minimum Required Tenant Estoppels”), then the Purchaser’s condition to Closing set forth
in this Section shall automatically be deemed satisfied, provided Seller

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executes any substitute Tenant Estoppels for any tenant that has not delivered an Estoppel
Certificate, which shall be made to Seller’s knowledge.

               (c) Purchaser shall not have terminated this Agreement in accordance with Section 10.1
or Section 10.2 below.

          4.4 Waiver of Conditions. If any of the conditions in this Section 4 are not
satisfied as of the Closing Date, Purchaser shall have the right to either (a) waive such condition
and complete Closing, or (b) terminate this Agreement and receive a refund of the Deposit. The
foregoing shall not affect Purchaser’s rights and remedies in the event any of the conditions are
not satisfied as a result of Seller’s default, subject to the limitations in Section 11.1
below.

     5. CONDITIONS TO SELLER’ OBLIGATION TO CLOSE. The obligation of the Seller to convey
the Property to the Purchaser is subject to the satisfaction of the following conditions precedent
on and as of the Closing Date:

          5.1 Purchase Price. The Purchaser shall deliver to the Escrow Agent the Purchase
Price payable hereunder (less the Deposit which shall be applied to the Purchase Price), subject to
the adjustments set forth in Section 2.3, together with any closing costs to be paid by the
Purchaser under Section 9.2.

          5.2 Closing Documents. The Purchaser shall have delivered to the Escrow Agent duly
executed and acknowledged counterparts of the documents described in Section 4.1, where
required.

          5.3 Other Conditions. All representations and warranties of the Purchaser herein
shall be true, correct and complete in all material respects on and as of the Closing Date and the
Purchaser shall not be in default under this Agreement.

     6. REPRESENTATIONS AND WARRANTIES OF SELLER. To induce the Purchaser to enter into
this Agreement, the Seller represents and warrants to the Purchaser as of the date of this
Agreement and as of Closing, except as qualified by Schedule 3, as follows:

          6.1 Status and Authority of the Seller. The Seller is duly organized, validly
existing and in good standing under the laws of its state of organization or formation, and has all
requisite power and authority under its organizational documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated hereby.

          6.2 Action of the Seller. The Seller has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and upon the execution and delivery of any
document to be delivered by the Seller on or prior to the Closing Date, this Agreement and such
document shall constitute the valid and binding obligation and agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting
the rights and remedies of creditors.

          6.3 No Violations of Agreements. Neither the execution, delivery or performance of
this Agreement by the Seller, nor compliance with the terms and provisions hereof, will result in
any breach of the terms, conditions or provisions of, or conflict with or

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constitute a default under, or result in the creation of any lien, charge or encumbrance upon
the Property pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other agreement or instrument by which the Seller is bound.

          6.4 Litigation. Seller has not received written notice that, nor to Seller’s actual
knowledge is there, any investigation, action, claim or proceeding is pending, asserted, or
threatened, which (i) questions the validity of this Agreement or any action taken or to be taken
pursuant hereto, (ii) involves condemnation or eminent domain proceedings against the Property or
any portion thereof, or (iii) affects the Property or Purchaser after Closing.

          6.5 Existing Leases. Subject to Section 8.1, other than the Leases listed in
the Rent Roll, the Seller has not entered into any oral or written contract or agreement with
respect to the occupancy of the Property that will be binding on the Purchaser after the Closing.
To Seller’s knowledge, the copies of the Leases and all tenant correspondence files heretofore
delivered by the Seller to the Purchaser are true, correct and complete copies thereof. To
Seller’s knowledge, the information set forth in the Rent Roll (which was prepared by Seller’s
property manager) is true, correct and complete in all material respects.

          6.6 Agreements. Other than as set forth in the Property Documents, the Seller has not
entered into any contract or agreement with respect to the Property which will be binding on the
Purchaser after the Closing other than contracts and agreements which are terminable upon thirty
(30) days notice without payment of premium or penalty.

          6.7 Not a Foreign Person. The Seller is not a “foreign person” within the meaning of
Section 1445 of the United States Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.

          6.8 Prohibited Person. For purposes of this Agreement, a “Prohibited Person”
means any of the following: (i) a person or entity that is listed in the Annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September
24, 2001) (herein called the “Executive Order”); (ii) a person or entity owned or
Controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to,
or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity that is
named as a “specifically designated national” or “blocked person” on the most current list
published by the U.S. Treasury Department’s Office of Foreign Assets Control (herein called
“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac;
(iv) a person or entity that is otherwise the target of any economic sanctions program currently
administered by OFAC; or (v) a person or entity that is affiliated with any person or entity
identified in the foregoing clauses (i), (ii), (iii), or (iv).
Seller represents and warrants to Purchaser, knowing that Purchaser is relying on such
representation and warranty, that Seller is not a Prohibited Person.

          6.9 No Approval. No authorization, consent, or approval of any governmental authority
is required for the execution and delivery by Seller of this Agreement or the performance of its
obligations hereunder.

          6.10 Bankruptcy. Seller has not (a) made a general assignment for the benefit of
creditors, (b) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary
petition by Seller’s creditors, (c) suffered the appointment of a receiver to take possession of
all or substantially all of Seller’s assets, (d) suffered the attachment or other judicial seizure
of all, or

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substantially all, of Seller’s assets, (e) admitted in writing its inability to pay its debts
as they come due, or (f) made an offer of settlement, extension or composition to its creditors
generally.

          6.11 No Notices. Seller has not received any written notice from any governmental
agency requiring the correction of any condition with respect to the Property, or any part thereof,
by reason of a violation of any applicable federal, state, county or municipal law, code, rule or
regulation (including those respecting the Americans With Disabilities Act or any law of regulation
respecting the presence of hazardous materials or toxic waste on the Property), which has not been
cured or waived.

          6.12 Cause to be Untrue. Seller will not cause any intentional action which would
cause any of the representations or warranties contained in this Agreement to be untrue as of the
Close of Escrow.

          6.13 Assessments. Except as disclosed in the Property Documents or the Commitment,
there are not now any assessments for public improvements against the Property which are unpaid by
the Seller, nor is the Property subject to or affected by any special assessments for public
improvements.

          6.14 Environmental Matters. Seller has not received any written notification that the
Property contains any Toxic Waste, Hazardous Waste, Industrial Waste or Hazardous Substance as
defined by the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §6901 et seq.;
the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), 42 U.S.C. §9601
et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”);
any implementing regulations thereunder, or any other applicable federal, state or local statutes,
regulations, ordinances or rules. There are no underground tanks on the Property.

          The representations and warranties made in this Agreement by the Seller shall be continuing
and shall be deemed remade by the Seller as of the Closing Date, with the same force and effect as
if made on, and as of, such date. All representations and warranties made in this Agreement by the
Seller shall survive the Closing for a period of one hundred eighty (180) days, and upon expiration
shall be of no further force or effect except to the extent that with respect to any particular
alleged breach, the Purchaser files a legal action in a court with appropriate jurisdiction for
breach of the representations and warranties within said 180-day period. References in this
Article 6 to the “actual knowledge” of Seller shall refer only to the actual knowledge of
Jon Carley, who Seller hereby represents to be the person most knowledgeable and qualified to make
the foregoing representations and warranties on behalf of Seller (which knowledge shall not include
any imputed or constructive knowledge), and shall not be construed to refer to the knowledge of any
other officer, agent or employee of Seller or any affiliate thereof or to impose upon such
designated individuals any duty to investigate the matter to which such actual knowledge, or the
absence thereof, pertains or to impose any personal liability on such individual. No claim for a
breach of any representation or warranty of Seller shall be actionable or payable (a) if the breach
in question results from or is based on a condition, state of facts or other matter which was
actually disclosed by Seller to Purchaser prior to Closing in writing; and (b) unless the valid
claim for any single claimed breach is more than Five Thousand and No/100 Dollars ($5,000.00).
Seller shall be deemed to have disclosed and Purchaser shall have actual knowledge of all matters
in the Underlying Documents, Property Documents and all materials obtained by Seller during its due
diligence investigation. In no event shall the total liability of

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Seller to Purchaser for all breaches of all representations and warranties of Seller in this
Agreement exceed One Hundred Thousand Dollars ($100,000.00). If prior to Closing, Seller’s
representations, as remade on the Closing Date, shall result in Seller’s Representations made as of
the Effective Date being untrue in any material respect as of the Closing Date as a result of a
change in condition occurring after opening of Escrow, then Purchaser may, at Purchaser’s option,
as its sole and exclusive remedy, terminate this Agreement by notice in writing to Seller, in which
event Escrow Agent shall promptly refund the entire Deposit to Purchaser.

          6.15 AS-IS. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY DOCUMENTS TO BE
DELIVERED TO THE PURCHASER AT THE CLOSING, THE SELLER HAS NOT MADE, AND THE PURCHASER HAS NOT
RELIED ON, ANY INFORMATION, PROMISE, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING THE
PROPERTY, WHETHER MADE BY THE SELLER, ON THE SELLER’S BEHALF OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, THE PHYSICAL CONDITION OF THE PROPERTY, THE FINANCIAL CONDITION OF THE TENANTS UNDER
THE LEASES, TITLE TO OR THE BOUNDARIES OF THE PROPERTY, PEST CONTROL MATTERS, SOIL CONDITIONS, THE
PRESENCE, EXISTENCE OR ABSENCE OF HAZARDOUS WASTES, TOXIC SUBSTANCES OR OTHER ENVIRONMENTAL
MATTERS, COMPLIANCE WITH BUILDING, HEALTH, SAFETY, LAND USE AND ZONING LAWS, REGULATIONS AND
ORDERS, STRUCTURAL AND OTHER ENGINEERING CHARACTERISTICS, TRAFFIC PATTERNS, MARKET DATA, ECONOMIC
CONDITIONS OR PROJECTIONS, HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TAX
CONSEQUENCES, LATENT OR PATENT PHYSICAL DEFECTS OR CONDITIONS, UTILITIES, OPERATING HISTORY OR
PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, OR THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL
LAWS. FURTHERMORE, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY DOCUMENTS TO BE
DELIVERED TO THE PURCHASER AT THE CLOSING, PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND
SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO (INCLUDING
SPECIFICALLY, WITHOUT LIMITATION, PROPERTY INFORMATION PACKAGES OR OFFERING CIRCULARS DISTRIBUTED
WITH RESPECT TO THE PROPERTY) MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, THE REAL
ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING AND ANY OTHER INFORMATION PERTAINING TO THE PROPERTY
OR THE MARKET AND PHYSICAL ENVIRONMENTS IN WHICH THEY ARE LOCATED. THE PURCHASER ACKNOWLEDGES
THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY DOCUMENTS TO BE DELIVERED TO THE
PURCHASER AT THE CLOSING, (i) THE PURCHASER HAS ENTERED INTO THIS AGREEMENT WITH THE INTENTION OF
RELYING UPON ITS OWN INVESTIGATION OR THAT OF ITS CONSULTANTS WITH RESPECT TO THE PHYSICAL,
ENVIRONMENTAL, ECONOMIC AND LEGAL CONDITION OF THE PROPERTY AND (ii) THE PURCHASER IS NOT RELYING
UPON THE PROPERTY

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DOCUMENTS OR ANY STATEMENTS, REPRESENTATIONS OR WARRANTIES OF
ANY KIND, OTHER THAN THOSE SPECIFICALLY SET FORTH IN THIS AGREEMENT OR IN ANY DOCUMENT TO BE
DELIVERED TO THE PURCHASER AT THE CLOSING, MADE. PRIOR TO THE CLOSING PURCHASER WILL HAVE HAD AN
ADEQUATE OPPORTUNITY TO INSPECT THE PROPERTY AND BECOME FULLY FAMILIAR WITH THE PHYSICAL CONDITION
THEREOF AND, SUBJECT TO THE REPRESENTATIONS AND WARRANTIES MADE IN THIS AGREEMENT, SHALL PURCHASE
THE PROPERTY IN ITS “AS-IS”, “WHERE IS” AND “WITH ALL FAULTS” CONDITION ON THE CLOSING DATE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN THE EVENT THAT PURCHASER HAS ACTUAL
KNOWLEDGE OF A DEFAULT BY SELLER (A “KNOWN DEFAULT”), BUT NONETHELESS ELECTS TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY AND PROCEEDS TO CLOSING, THEN THE RIGHTS AND REMEDIES OF
PURCHASER SHALL BE WAIVED WITH RESPECT TO SUCH KNOWN DEFAULT UPON THE CLOSING AND SELLER SHALL HAVE
NO LIABILITY WITH RESPECT THERETO. EXCEPT IN THE EVENT OF SELLER’S FRAUD, AND EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT OR IN ANY DOCUMENTS TO BE DELIVERED TO THE PURCHASER AT THE CLOSING,
FROM AND AFTER THE CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT
LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE
BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE
IRREVOCABLY AND UNCONDITIONALLY WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER’S MEMBERS,
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION EXCEPT FOR FRAUD AND SELLER’S OBLIGATIONS UNDER THIS AGREEMENT (INCLUDING
CAUSES OF ACTION IN TORT OTHER THAN FRAUD), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES
(INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN,
WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER’S MEMBERS, OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF THE
PROPERTY OR ITS OPERATION OR IN ANY OTHER WAY. IN CONNECTION WITH THE FOREGOING, PURCHASER HEREBY
EXPRESSLY AND UNCONDITIONALLY WAIVES THE BENEFITS OF ANY PROVISION OR PRINCIPLE OF ANY FEDERAL,
STATE OR LOCAL LAW OR REGULATION THAT MAY LIMIT THE SCOPE OR EFFECT OF THE FOREGOING WAIVER AND
RELEASE.

     This release by Purchaser shall constitute a complete defense to any claim, cause of action,
defense, contract, liability, indebtedness or obligation released pursuant to this release.
Nothing in this release shall be construed as (or shall be admissible in any legal action or
proceeding as) an admission by Seller or any other released party that any defense, indebtedness,
obligation, liability, claim or cause of action exists which is within the scope of those hereby
released.

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/s/ J S

Purchaser’s
Initials

     7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce the Seller to enter into
this Agreement, the Purchaser represents and warrants to the Seller as follows:

          7.1 Status and Authority of the Purchaser. The Purchaser is duly organized, validly
existing and in good standing under the laws of its state of organization or formation, and has all
requisite power and authority under its charter documents to enter into and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.

          7.2 Action of the Purchaser. The Purchaser has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and upon the execution and
delivery of any document to be delivered by the Purchaser on or prior to the Closing Date, this
Agreement and such document shall constitute the valid and binding obligation and agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.

          7.3 No Violations of Agreements. Neither the execution, delivery or performance of
this Agreement by the Purchaser, nor compliance with the terms and provisions hereof, will result
in any breach of the terms, conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any property or assets of
the Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other agreement or instrument by which the Purchaser is bound.

          7.4 Litigation. The Purchaser has received no written notice that any investigation,
action or proceeding is pending or threatened which questions the validity of this Agreement or any
action taken or to be taken pursuant hereto.

          7.5 Prohibited Person. Purchaser represents and warrants to Seller, knowing that
Seller is relying on such representation and warranty, that Purchaser is not a Prohibited Person.

          7.6 No Approvals. No authorization, consent, or approval of any governmental
authority is required for the execution and delivery by Purchaser of this Agreement or the
performance of its obligations hereunder.

          7.7 Bankruptcy. Purchaser has not (a) made a general assignment for the benefit of
creditors, (b) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary
petition by Purchaser’s creditors, (c) suffered the appointment of a receiver to take possession of
all or substantially all of Purchaser’s assets, (d) suffered the attachment or other judicial
seizure of all, or substantially all, of Purchaser’s assets, (e) admitted in writing its inability
to pay its debts as they come due, or (f) made an offer of settlement, extension or composition to
its creditors generally.

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          The representations and warranties made in this Agreement by the Purchaser shall be continuing
and shall be deemed remade by the Purchaser as of the Closing Date with the same force and effect
as if made on, and as of, such date. All representations and warranties made in this Agreement by
the Purchaser shall survive the Closing for a period of ninety (90) days, and upon expiration shall
be of no further force or effect except to the extent that with respect to any particular alleged
breach, the Seller files a legal action in a court with appropriate jurisdiction for breach of
Purchaser’s representations and warranties prior to the expiration of said period.

     8. COVENANTS OF THE SELLER. The Seller hereby covenants with the Purchaser between
the date of this Agreement and the Closing Date or earlier termination of the Agreement as follows:

          8.1 Approval of Leasing. During the term of this Agreement, Seller will not extend,
amend or terminate any existing Lease, or enter into any new Lease, or grant consent to any request
for approval made by a tenant under a Lease, without providing Purchaser the following: (a) all
material supporting documentation, including, without limitation, broker’s commissions, tenant
improvement allowances, cancellation fees and any tenant financial information to the extent in
Seller’s possession and (b) as to any such extension, amendment or termination of a Lease, or new
Lease, Seller must receive Purchaser’s prior written (e-mail delivery is acceptable) approval which
may be withheld in Purchaser’s reasonable discretion. Purchaser agrees to give Seller written
notice of approval or disapproval of a proposed amendment or termination of a Lease, or new Lease
within five (5) Business Days after Purchaser’s receipt of all of the items described above. If
Purchaser does not respond to Seller’s request within such five (5) Business Day time period, then
Purchaser will be deemed to have approved such amendment, termination or new Lease.

          8.2 Operation of Property. To continue to operate the Property substantially
consistent with past practices. Seller shall not make any material alterations or improvements to
the Property, except as required under this Agreement or to comply with any of the Leases.

          8.3 Compliance with Laws. To comply in all material respects with (i) all laws,
regulations and other requirements from time to time applicable of every governmental body having
jurisdiction of the Property, or the use or occupancy thereof, and (ii) all material terms,
covenants and conditions of all agreements affecting the Property.

          8.4 Compliance with Agreements. To comply with each and every material term, covenant
and condition contained in the Leases and any other material document or agreement affecting the
value of the Property.

          8.5 Notice of Material Changes or Untrue Representations. Upon learning of any
material adverse change affecting the Property or any event or circumstance which makes any
representation or warranty of the Seller to the Purchaser under this Agreement untrue or
misleading, promptly to notify the Purchaser thereof in writing.

          8.6 Insurance. To maintain, or cause to be maintained, all existing property
insurance relating to the Property.

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          8.7 Cooperation. The Purchaser and the Seller shall reasonably cooperate in complying
with the requirements under the Leases in connection with the transfer and assignment of the
Property and the Leases to the Purchaser.

          8.8 Encumbrance. Seller shall not enter into or create any easement, restriction,
lien or other encumbrance on title to the Property.

          8.9 Contracts. Seller shall not enter into any contracts prior to Closing that cannot
be terminated upon 30 days notice, with no penalties. Seller shall terminate all service
contracts, management contracts, brokerage contracts and all other contracts affecting the Property
as of the Closing Date.

          8.10 Notices. Seller shall promptly deliver to Purchaser copies of any written notice
received by Seller between the date of this Agreement and the Closing Date regarding all actions,
suits or other proceedings affecting the Property, or the use, possession or occupancy thereof,
which may adversely affect Purchaser or the Property.

     9. APPORTIONMENTS.

          9.1 Real Property Apportionments.

               (a) The following items shall be apportioned at the Closing as of the close of business on the
day immediately preceding the Closing Date:

                    (i) to the extent same have been paid to Seller as of the Closing Date, monthly Rents that are
not delinquent, operating costs, taxes and other charges payable under the Leases. Delinquent
rents will be handled in accordance with Section 9.1(h) below;

                    (ii) to the extent same have been paid to Seller as of the Closing Date, percentage rents and
other unfixed charges payable under the Leases;

                    (iii) fuel, electric, water and other utility costs, subject to Section 9.1(b);

                    (iv) municipal assessments and governmental license and permit fees;

                    (v) non-delinquent real estate taxes and assessments other than special assessments, based on
the rates and assessed valuation applicable in the fiscal year for which assessed;

                    (vi) water and sewer rates and charges;

                    (vii) real property taxes and rents; and

                    (viii) all other items of income and expense normally apportioned in sales of property in
similar situations in the jurisdiction where each Property is located.

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          If any of the foregoing cannot be apportioned at the Closing because of the unavailability of
the amounts which are to be apportioned, such items shall be apportioned on the basis of a good
faith estimate by the parties and reconciled as soon as practicable after the Closing Date but, in
any event, no later than twelve (12) months after the Closing Date.

               (b) If there are water, gas, electric or other utility meters located at the Property, the
Seller shall obtain readings thereof prior to the Closing Date and the unfixed water rates and
charges, sewer charges, and gas and electricity charges. Seller shall pay all rates, rents and
other charges at Closing. If such readings are not obtainable by the Closing Date, then, at the
Closing, any water rates and charges, sewer charges, rents and gas and electricity charges or other
utility charges which are based on such readings shall be prorated based upon the per diem charges
obtained by using the most recent period for which such readings shall then be available. Upon the
taking of subsequent actual readings, the apportionment of such charges shall be recalculated and
the Seller or the Purchaser, as the case may be, promptly shall make a payment to the other based
upon such recalculations. The parties agree to make such final recalculations within sixty (60)
days after the Closing Date. At Closing, Purchaser shall credit to the account of Seller all
refundable cash or other deposits posted with utility companies serving the Property, or, at
Seller’s option, Seller shall be entitled to receive and retain such refundable cash and deposits.

               (c) If any refunds of real property taxes or assessments, water rates and charges or sewer
charges shall be made after the Closing, the same shall be held in trust by the Seller or the
Purchaser, as the case may be, and shall first be applied to the any unreimbursed costs incurred in
obtaining the same, then to any required refunds to tenants under the Leases, and the balance, if
any, shall be paid to the Seller (for the period prior to the Closing Date) and to the Purchaser
(for the period commencing with the Closing Date).

               (d) No insurance policies of the Seller are to be transferred to the Purchaser, and no
apportionment of the premiums therefor shall be made. Purchaser acknowledges that Seller will
terminate its insurance policies covering the Property and that Purchaser must obtain its own
insurance for the Closing Date onward.

               (e) At the Closing, the Seller shall transfer to, or cause to be credited to, the Purchaser
the amount of all unapplied security deposits held pursuant to the terms of the Leases. Any
security deposits delivered in the form of a letter of credit shall be assigned to Purchaser at
Closing, and the original letter of credit shall be delivered to Purchaser at Closing. Prior to
Closing, Seller shall be responsible for obtaining all consents and documents from the issuer of
any such letter of credit that are necessary to assign the same to Purchaser, and Seller shall be
responsible for any transfer fees charged by the issuer of the letter of credit.

               (f) Brokerage commissions, tenant improvement expenses and other amounts payable by the Seller
as landlord (i) under Leases first entered into by the Seller after the Opening of Escrow and
approved by Purchaser pursuant to the approval procedures set forth in Section 8.1, or (ii)
due in connection with the renewal or extension of any existing Lease after the Opening of Escrow,
shall be the sole responsibility of the Purchaser. The Purchaser shall only receive a credit at
Closing for any unfunded or unpaid brokerage commissions, tenant improvement allowances, moving
allowances, free or reduced rent and other amounts payable by the Seller, or similar tenant
inducements, granted by Seller, as landlord under Leases (only to the

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extent) entered into by the Seller prior to the date of this Agreement and where such costs
are unfunded.

               (g) If a net amount is owed by the Seller to the Purchaser pursuant to this Section
9.1, such amount shall be credited against the Purchase Price. If a net amount is owed by the
Purchaser to the Seller pursuant to this Section 9.1, such amount shall be added to the
Purchase Price paid to the Seller.

               (h) If, on the Closing Date, there are past due rents with respect to any Lease, then such
delinquent rents shall not be prorated at Closing. Any delinquent rents received by the Purchaser
from a tenant after the Closing shall be applied between the parties, as follows: first, to the
actual out of pocket expenses incurred by Purchaser in collecting such rents, and second, to rents
due or to become due to Purchaser for periods after Closing, third to rents due for the calendar
month in which the Closing occurs, and fourth, to all other rents due or past due in the order in
which they became due (i.e., first to older arrearages, then to newer arrearages). Seller shall
promptly remit to Purchaser all sums received by Seller from tenants after the Closing other than
for rents for which Purchaser received credit hereunder. Seller shall have the right to attempt to
collect any past due rents or other amounts following the Closing; provided, however, Seller may
not seek to terminate any Lease or disturb any tenant’s right of possession.

               (i) The parties agree that there shall be no proration at Closing of any common area
maintenance, real estate tax, insurance and other similar reimbursements owing from the tenants
(“Additional Rent”). At the time of any final calculation and collection from the tenants of the
Additional Rents for the year in which the Closing has occurred, whether in the nature of year-end
reconciliations or payments in arrears, Seller or Purchaser shall prorate outside Escrow the
Additional Rents and corresponding charges based upon the total amount thereof no later than
April 1, 2012. If, as a result of prorations, the parties determine that either Seller or
Purchaser received from the tenants an amount of Additional Rent in excess of the amount to which
such party is entitled, such party shall pay such excess to the other party within thirty (30) days
after the proration is determined. In connection with the foregoing, Purchaser and Seller shall
cooperate with each other concerning the calculation of the post-closing proration.

          The
provisions of this Section 9.1 shall survive the Closing.

          9.2
Closing Costs.

               (a) The Purchaser shall pay (i) the costs its own diligence in connection with the
transactions contemplated hereby; (ii) all premiums, charges and fees of the Title Company in
excess of the premium for standard owner’s coverage under the title policy in the amount of the
Purchase Price including the cost of extended coverage and any affirmative endorsements; (iii)
fifty percent (50%) of the Escrow Fee; and (iv) all transfer taxes, transfer fees, documentary
stamp taxes, and other similar fees or charges.

               (b) The Seller shall pay (i) the title insurance premium for standard owner’s coverage under
an ALTA policy of title insurance in the amount of the Purchase Price, (ii) fifty percent (50%) of
the Escrow Fee, and (iii) recording fees for recording the Deed.

-18-

 

               (c) Each party shall pay the fees and expenses of its attorneys and other consultants, except
as provided in Section 12.9 of this Agreement.

               (d) Any other costs shall be allocated in accordance with customary practice in the
jurisdiction in which the relevant Property is located.

     10. DAMAGE TO OR CONDEMNATION OF PROPERTY.

          10.1 Casualty. If, after the Effective Date but prior to the Closing, any of the
building making up the Property is materially destroyed or damaged by fire or other casualty (i.e.,
fifteen percent (15%) or more of the Property), or in the event that the physical condition of any
Property otherwise suffers a material adverse change resulting in a diminution of value of fifteen
percent (15%) or more of such Property, the Seller shall promptly notify the Purchaser of such
fact. In such event, the Purchaser shall have the right to terminate this Agreement by giving
written notice to the Seller not later than ten (10) days after the giving the Seller’s notice
(and, if necessary, the Closing Date shall be extended until one day after the expiration of such
ten (10) day period). If the Purchaser elects to terminate this Agreement as aforesaid, this
Agreement shall terminate and be of no further force and effect, the Deposit shall be promptly
returned to Purchaser, and no party shall have any liability to the other hereunder. If less than
a material part of any of the building making up the Property shall be affected by fire or other
casualty or if the Purchaser shall not elect to terminate this Agreement as aforesaid, there shall
be no abatement of the Purchase Price and the Seller shall assign to the Purchaser at the Closing
the rights of the Seller to the proceeds, if any, under the Seller’s insurance policies covering
the Property with respect to such damage or destruction and there shall be credited against the
Purchase Price the amount of any deductible, any proceeds previously received by Seller on account
thereof and any deficiency in proceeds.

          10.2 Condemnation. If, prior to the Closing, a material part of any of the individual
land making up any Property (i.e., a portion of and/or interest in the Property comprising fifteen
percent (15%) or more of the value of any Property), is taken by eminent domain (or is the subject
of a pending taking which has not yet been consummated, or is sold or conveyed in lieu of such
taking), the Seller shall notify the Purchaser of such fact promptly after obtaining knowledge
thereof and the Purchaser shall have the right to terminate this Agreement by giving written notice
to the Seller not later than ten (10) days after the giving of the Seller’s notice (and, if
necessary, the Closing Date shall be extended until one day after the expiration of such ten (10)
day period). If the Purchaser elects to terminate this Agreement as aforesaid, this Agreement
shall terminate and be of no further force and effect, the Deposit shall be promptly returned to
Purchaser, and no party shall have any liability to the other hereunder. If less than a material
part of any of the individual buildings making up the Property shall be affected or if the
Purchaser shall not elect to terminate this Agreement as aforesaid, the sale of the Property shall
be consummated as herein provided without any adjustment to the Purchase Price (except to the
extent of any condemnation award received by the Seller prior to the Closing) and the Seller shall
assign to the Purchaser at the Closing all of the Seller’s right, title and interest in and to all
awards, if any, for the taking, and the Purchaser shall be entitled to receive and keep all awards
for the taking of the Property or portion thereof.

          10.3 Survival. The parties’ obligations, if any, under this Section 10 shall
survive the Closing.

-19-

 

     11. DEFAULT.

          11.1 Default by the Seller. If the Closing fails to occur solely as a result of a
default by Seller hereunder, the Purchaser may, as its sole and exclusive remedy, either (a)
terminate this Agreement and receive a refund of its Deposit, plus Purchaser’s actual documented
out-of-pocket third party expenses incurred in conducting its due diligence with respect to the
transaction contemplated by this Agreement, subject to a cap of Twenty-Five Thousand Dollars
($25,000.00), or (b) pursue an action for specific performance provided that Purchaser files such
action in a court with appropriate jurisdiction within thirty (30) days of Seller’s default.

          11.2 Default by the Purchaser. IN THE EVENT OF A DEFAULT BY THE PURCHASER HEREUNDER,
THEN SELLER’S SOLE AND EXCLUSIVE RIGHT AND REMEDY FOR SUCH BREACH SHALL BE TO TERMINATE THIS
AGREEMENT AND CANCEL THE ESCROW BY WRITTEN NOTICE TO PURCHASER AND ESCROW AGENT IN WHICH EVENT
ESCROW AGENT SHALL PAY THE DEPOSIT AND ALL ACCRUED INTEREST THEREON TO SELLER. THE DEPOSIT SHALL
CONSTITUTE LIQUIDATED DAMAGES. THE PARTIES ACKNOWLEDGE AND AGREE THAT IT WOULD BE IMPRACTICABLE OR
EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES THAT SELLER WOULD INCUR AS A RESULT OF THE BREACH BY
PURCHASER OF ITS OBLIGATION TO PURCHASE THE PROPERTY. THE PARTIES AGREE THAT THE DEPOSIT IS A
REASONABLE ESTIMATE OF SELLER’S DAMAGES, AND SHALL CONSTITUTE LIQUIDATED DAMAGES IN ACCORDANCE WITH
ALL LAWS APPLICABLE TO THIS TRANSACTION INCLUDING WITHOUT LIMITATION ALL LAWS OF THE JURISDICTION
IN WHICH THE PROPERTY IS LOCATED. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED
DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED
DAMAGES TO SELLER. SELLER WAIVES ALL OTHER REMEDIES FOR PURCHASER’S BREACH OF ITS OBLIGATION TO
PURCHASE THE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, PROVIDED HOWEVER NOTHING
HEREIN SHALL LIMIT SELLER’S RIGHT TO RECOVERY FOR (i) PURCHASER’S INDEMNITY OBLIGATIONS; (ii) ANY
RIGHT TO ATTORNEY’S FEES UNDER THIS AGREEMENT; OR (iii) PURCHASER’S OBLIGATION TO PROVIDE COPIES OF
PURCHASER’S DUE DILIGENCE DOCUMENTS TO SELLER.

	 	 	 

	/s/ J S

	 	/s/ T R
	 

	 	 
	Purchaser’s Initials

	 	Seller’s Initials

     12. Miscellaneous.

          12.1 Brokers. Each of the parties hereto represents to the other parties that it
dealt with no broker, finder or like agent in connection with this Agreement or the transactions
contemplated hereby other than CB Richard Ellis and Cutler Commercial which Seller shall
compensate under a separate written agreement if and only if the Closing occurs. Each party shall
indemnify and hold harmless the other party and its respective legal representatives, heirs,
successors and assigns from and against any loss, liability or expense, including reasonable

-20-

 

attorneys’ fees, charges and disbursements arising out of any claim or claims for commissions
or other compensation for bringing about this Agreement or the transactions contemplated hereby
made by any other broker, finder or like agent, if such claim or claims are based in whole or in
part on dealings with the indemnifying party. The provisions of this Section 12.1 shall
survive the Closing.

          12.2 Publicity. The parties agree that, during the period prior to Closing, and
except as otherwise required by law and except for the exercise of any remedy hereunder or the
performing of due diligence investigation, no party shall, with respect to this Agreement and the
transactions contemplated hereby, contact or conduct negotiations with public officials, make any
public pronouncements, issue press releases or otherwise furnish information regarding this
Agreement or the transactions contemplated to any third party (other than such party’s consultants,
attorneys, experts, and prospective lenders and investors) without the consent of the other party,
which consent shall not be unreasonably withheld or delayed.

          12.3 Notices.

               (a) Any and all notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed adequately given if in
writing and the same shall be delivered either in hand, by telecopier/facsimile with confirmed
receipt, or by mail or Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postpaid and registered or certified with return receipt requested (if by
mail), or with all freight charges prepaid (if by Federal Express or similar carrier).

               (b) All notices required or permitted to be sent hereunder shall be deemed to have been given
for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice
by telecopier/facsimile, and, in all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day which is not a Business Day or
is required to be delivered on or before a specific day which is not a Business Day, the day of
receipt or required delivery shall automatically be extended to the next Business Day.

               (c) All such notices shall be addressed,

	 	 	 	 	 

	 

	 	if to the Seller, to:
	 	Cornerstone Core Properties REIT, Inc.

1920 Main Street 

Suite 400

Irvine, CA 92614

Attn: Mr. Jon Carley/Dag Wilkinson, Esq.

[Telecopier No. (949) 250- 0592]
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Rutan and Tucker, LLP 

611 Anton Boulevard, 14th Floor 

Costa Mesa, CA 92626

Attn: Joe Maga, Esq.

[Telecopier No. (714) 546-9035]

-21-

 

	 	 	 	 	 

	 

	 	if to the Purchaser, to:
	 	J3 Harmon L.L.C. 

C/O 2150 E. Highland, Suite 207

Phoenix, Arizona 85016

Attn: Rod Crotty

[Telecopier No. (602) 955-2828]

rcrotty@cutlercommercial.com 

elena@j2properties.com
	 
	 	 	 	 
	 

	 	If to Escrow Agent, to:
	 	First American Title 

5 First American Way 

Santa Ana, CA 92707

Attn: Kathleen Huntsman

[Telecopier No. (714) 242-7479]

khuntsman@firstam.com

               (d) By notice given as herein provided, the parties hereto and their respective successors and
assigns shall have the right from time to time and at any time during the term of this Agreement to
change their respective addresses effective upon receipt by the other parties of such notice and
each shall have the right to specify as its address any other address within the United States of
America.

          12.4 Waivers. Subject to the terms of the last paragraph of Section 6, any
waiver of any term or condition of this Agreement, or of the breach of any covenant, representation
or warranty contained herein, in any one instance, shall not operate as or be deemed to be or
construed as a further or continuing waiver of any other breach of such term, condition, covenant,
representation or warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure at any time or times to enforce or require performance of any provision hereof
operate as a waiver of or affect in any manner such party’s right to at a later time enforce or
require performance of such provision or any other provision hereof. This Agreement may not be
amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom enforcement of any
amendment, waiver, change, modification, consent or discharge is sought.

          12.5 Assignment; Successors and Assigns. Subject to Section 12.14, this
Agreement and all rights and obligations hereunder shall not be assignable, directly or indirectly,
by any party without the written consent of the other, except that the Purchaser may assign this
Agreement without Seller’s consent to any entity owned, directly or indirectly, and controlled or
managed by Purchaser, provided that Purchaser shall give Seller written notice of such assignment
at least five (5) Business Days before the Closing Date; provided, however, that, any assignment
shall not release the original parties to this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. This Agreement is not intended and shall
not be construed to create any rights in or to be enforceable in any part by any other persons.

          12.6 Severability. If any provision of this Agreement shall be held or deemed to be,
or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in

-22-

 

any
jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of
any provision with any constitution or statute or rule of public policy or for any other
reason, such circumstance shall not have the effect of rendering the provision or provisions in
question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other provisions are not themselves actually
in conflict with such constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such provision reformed so that it
would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or
in such case.

          12.7 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and shall supersede and take the place of any other instruments
purporting to be an agreement of the parties hereto relating to the subject matter hereof. The
parties may also exchange signatures by facsimile or electronic mail.

          12.8 Performance on Business Days. In the event the date on which performance or
payment of any obligation of a party required hereunder is other than a Business Day, the time for
payment or performance shall automatically be extended to the first Business Day following such
date.

          12.9 Attorneys’ Fees. If any lawsuit, or arbitration or other legal proceeding arises
in connection with the interpretation or enforcement of this Agreement, the prevailing party
therein shall be entitled to receive from the other party the prevailing party’s costs and
expenses, including reasonable attorneys’ fees and expert witness fees incurred in connection
therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any
judgment therein.

          12.10 Section and Other Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation of this
Agreement.

          12.11 Time of Essence. Time shall be of the essence with respect to the performance
of each and every covenant and obligation, and the giving of all notices, under this Agreement.

          12.12 Governing Law. This Agreement shall be interpreted, construed, applied and
enforced in accordance with the laws of Arizona.

          12.13 Intentionally Omitted.

          12.14 Like-Kind Exchange. At either party’s request, the non-requesting party will
take all actions reasonably requested by the requesting party in order to effectuate all or any
part of the transactions contemplated by this Agreement a like-kind exchange for the benefit of the
requesting party in accordance with Section 1031 of the Internal Revenue Code, including executing
an instrument acknowledging and consenting to any assignment by the requesting

-23-

 

party of its rights
hereunder to a qualified intermediary or an exchange accommodation
titleholder. In furtherance of the foregoing and notwithstanding anything contained in this
Agreement to the contrary, the requesting party may assign its rights under this Agreement to a
“qualified intermediary” or an “exchange accommodation titleholder” in order to facilitate, at no
cost or expense to the other, a forward or reverse like-kind exchange under Section 1031 of the
Internal Revenue Code; provided, however, that such assignment will not relieve the requesting
party of any of its obligations hereunder. The non-requesting party will also agree to issue all
closing documents, including the deed, to the applicable qualified intermediary or exchange
accommodation titleholder if so directed by the requesting party prior to Closing. Notwithstanding
the foregoing, in no event shall the non-exchanging party incur or be subject to any liability that
is not otherwise provided for in this Agreement; the Closing Date shall not be delayed as the
result of such exchange; all additional costs in connection with such exchange shall be borne by
the exchanging party; and the exchanging party shall indemnify the non-exchanging party and hold
the non-exchanging party harmless from and against any and all claims, demands, liabilities, costs,
expenses, penalties, damages and losses, including, without limitation, reasonable attorneys’ fees
relating to the non-exchanging party’s participation in such exchange. This Agreement is not
subject to or conditioned upon the ability to consummate an exchange.

          12.15 Recording. Neither this Agreement nor any memorandum thereof may be recorded
without the prior written consent of both parties.

          12.16 Non-liability of Representatives of Seller. No trustee, officer, shareholder,
employee or agent of the Seller shall be held to any personal liability, jointly or severally, for
any obligation of, or claim against, the Seller. Purchaser shall look only to the assets of the
Seller for the payment of any sum or the performance of any obligation hereunder.

          12.17 Non-liability of Representatives of Purchaser. Subject to Section 11.2,
no trustee, officer, shareholder, employee or agent of Purchaser shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against, Purchaser. Seller shall
look only to the assets of Purchaser for the payment of any sum or the performance of any
obligation hereunder.

          12.18 Waiver. The Purchaser hereby acknowledges that it is a sophisticated purchaser
of real properties and that it is aware of all disclosures the Seller is or may be required to
provide to the Purchaser in connection with the transactions contemplated hereby pursuant to any
applicable law, rule or regulation.

          12.19 Further Assurances. In addition to the actions recited herein and contemplated
to be performed, executed, and/or delivered by the Seller and the Purchaser, the Seller and the
Purchaser agree to perform, execute and/or deliver or cause to be performed, executed and/or
delivered at the Closing or after the Closing any and all such further acts, instruments, deeds and
assurances as may be reasonably required to establish, confirm or otherwise evidence the Seller’s
satisfaction of any disclosure obligations or to otherwise consummate the transactions contemplated
hereby.

          12.20 IRS Real Estate Sales Reporting; Affidavit of Legal Value. Purchaser and Seller
hereby appoint Escrow Agent as, and Escrow Agent agrees to act as,
“the person responsible for closing” the transaction which is the subject of this Agreement pursuant to

-24-

 

Internal Revenue Code
Section 6045(e). Escrow Agent shall prepare and file all informational
returns, including, without limitation, IRS Form 1099-S and shall otherwise comply with the
provisions of Internal Revenue Code Section 6045(e). Escrow Agent agrees to comply with the
provisions of Executive Order 13224 regarding the Specially Designated Nationals Blocked Persons
list. Purchaser and Seller hereby authorize Escrow Agent to complete and file the affidavit of
legal value required under A.R.S. §11-1133 on behalf of each party when recording the Deed.

          12.21 Entire Agreement. This Agreement and all Exhibits hereto and the instruments
referred to herein contain the entire agreement and understanding between the parties hereto
relating to the subject matter hereof.

          12.22 Interrelation. This Agreement is in all respects intended by each party hereto
to be deemed and construed to have been jointly prepared by the parties. The parties hereby
expressly agree that any uncertainty or ambiguity existing herein shall not be interpreted against
either of them as a result of the actual identity of the draftsman.

[SIGNATURES ON FOLLOWING PAGE]

-25-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as a sealed
instrument as of the date first above written.

	 	 	 	 	 
	 	SELLER:

CORNERSTONE CORE PROPERTIES REIT, 

INC., a Maryland corporation

 	 
	 	By:  	/s/ Terry Roussel	 
	 	 	Name:  	Terry Roussel	 
	 	 	Its: 	Authorized
Signatory	 
	 

	 	 	 	 	 
	 	PURCHASER:

J3 HARMON, L.L.C.,

a Nevada limited liability company

	 	By:  	/s/ Jordan Sills	 
	 	 	Name:  	Jordan Sills	 
	 	 	Its: 	 	 
	 

-26-

 

EXHIBIT “A”

Land

[Legal Description]

 

 

EXHIBIT “B”

General Assignment and Assumption

[See Attached Copy]

 

 

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

     This ASSIGNMENT AND ASSUMPTION OF CONTRACTS (this “Assignment”) is made as of _____________,
2011 (“Effective Date”) by and between CORNERSTONE CORE
PROPERTIES REIT, INC., a Maryland corporation (“Assignor”), and _____________________, a ____________________________
(“Assignee”).

RECITALS

     A. Assignor and Assignee are parties to that certain Purchase and Sale Agreement (the
“Purchase Agreement”), dated as of August __, 2011, with respect to that certain real property (the
“Property”) more specifically described in “Exhibit 1” attached hereto and made a part
hereof.

     B. Concurrently with the execution and delivery of this Assignment, Assignor is conveying the
Property to Assignee.

     C. Assignor desires to assign, transfer and convey to Assignee to the extent assignable, and
Assignee desires to obtain, all of Assignor’s right, title, interest, liabilities and obligations
in and to the Contracts (as hereinafter defined).

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

     As of the Effective Date Assignor does hereby sell, assign, convey and transfer unto Assignee,
to the extent assignable, and without representation or warranty of any kind or nature whatsoever,
express or implied, all of Assignor’s right, title, interest, liabilities and obligations in and to
the service contracts and assignable equipment leases (“Contracts”) described on “Exhibit
2” attached hereto and made a part hereof, provided, however, that Assignor makes no
representation or warranty with respect to the assignability of same.

     By execution of this Assignment, as of the Effective Date Assignee unconditionally assumes and
agrees to perform all of the covenants, agreements, liabilities and obligations under the Contracts
binding on Assignor or the Property arising after the Effective Date. Assignee hereby agrees to
indemnify, hold harmless and defend Assignor from and against any and all third party obligations,
liabilities, costs and claims actions, expenses and fees (including reasonable attorney’s fees)
arising as a result of or with respect to any of the Contracts that are attributable to the period
of time from and after the Effective Date.

     ASSIGNEE ACKNOWLEDGES THAT IT HAS INSPECTED THE CONTRACTS AND THAT THIS ASSIGNMENT IS MADE BY
ASSIGNOR AND ACCEPTED BY ASSIGNEE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED
OR STATUTORY, AND WITHOUT RECOURSE AGAINST ASSIGNOR.

-1-

 

     EXECUTED to be effective ___, 2011.

	 	 	 	 	 
	 	ASSIGNOR:

CORNERSTONE CORE PROPERTIES REIT, INC.,

a Maryland corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 
	 
	 	ASSIGNEE:

_______________________________,

a ______________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 

-2-

 

	 	 	 	 	 

Exhibit 1 to Assignment and Assumption of Contracts

LEGAL DESCRIPTION

 

 

Exhibit 2 to Assignment and Assumption of Contracts

LIST OF CONTRACTS

 

 

EXHIBIT “C”

Assignment and Assumption of Leases

[See Attached Copy]

 

 

ASSIGNMENT AND ASSUMPTION OF LEASES

     This ASSIGNMENT AND ASSUMPTION OF LEASES is hereby entered into as of __________________, 2011
(“Effective Date”), by and between CORNERSTONE CORE PROPERTIES REIT, INC., a Maryland corporation
(“Assignor”), and _______________________, a __________________________ (“Assignee”).

     1. Assignment. As of the Effective Date Assignor does hereby sell, assign, transfer
and set over unto Assignee, without representation or warranty of any kind or nature whatsoever,
express or implied, all of Assignor’s interest as landlord in and to (i) all leases of all or any
portion of the building or other improvements located on the land
described on Exhibit “1”
attached hereto and made a part hereof (the “Property”), which leases are more particularly
described in Exhibit “2” attached hereto and made a part hereof, and all guaranties of, or
relating to, those leases and/or any portion of any lease, if any (collectively, the “Leases”), and
(ii) all security deposits, advanced rentals and all letters of credit, paid or deposited by
tenants or occupants under the Leases (the “Security Deposits”).

     2. Assumption. Assignee, for itself and its successors and assigns, (i) hereby
accepts the foregoing assignment, and (ii) agrees to, and hereby does, assume and agree to keep,
pay, perform, observe and discharge all of the terms, covenants, conditions, agreements, provisions
and obligations contained in Leases to be kept, paid, performed, observed and discharged by the
landlord thereunder from and after the Effective Date, including without limitation, the payment of
all broker’s commissions and tenant improvement allowances.

     3. Indemnities. Assignee agrees to, and hereby does, indemnify, defend and hold
harmless Assignor from and against all claims, liabilities, damages and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements) which may be asserted against or
imposed on or incurred by Assignor by reason of Assignee’s failure to perform any of its
obligations under the Leases after the Effective Date, and including, without limiting the
generality of the foregoing, by reason of Assignee’s disposition or alleged disposition of any of
the Security Deposits. Assignor shall indemnify, defend and hold Assignee harmless from and
against all losses, costs, damages, liabilities and expenses (including attorneys’ fees) suffered
or incurred by Assignee by reason of Assignor’s failure to comply with any of the terms of the
Lease prior to the Effective Date.

     4. Attorneys’ Fees. In the event of any action between Assignor and Assignee seeking
enforcement or interpretation of any of the terms and conditions to this Assignment, the prevailing
party in such action, whether by fixed judgment or settlement, shall be entitled to recover, in
addition to damages, injunctive or other relief, its actual costs and expenses, including, but not
limited to, actual attorneys’ fees, court costs and expert witness fees. Such costs shall include
attorneys’ fees, costs and expenses incurred in (a) post-judgment motions, (b) contempt
proceedings, (c) garnishment, levy and debtor and third-party examination, (d) discovery, and (e)
bankruptcy litigation.

     5. Successors. This Assignment shall inure to the benefit of Assignor and Assignee,
and their respective heirs, assigns and successors in interest.

-1-

 

     6. Counterparts. This Assignment may be signed by the parties in different
counterparts and the signature pages combined to create a document binding on all parties.

     IN WITNESS WHEREOF, this Assignment and Assumption of Leases, has been executed by Assignor
and Assignee as of the day set forth above.

	 	 	 	 	 
	 	ASSIGNOR:

CORNERSTONE CORE PROPERTIES REIT, INC.,

 a Maryland
corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 
	 
	 	ASSIGNEE:

_________________________,

a ____________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 

-2-

 

	 	 	 	 	 

EXHIBIT 1

LEGAL DESCRIPTION OF PROPERTY

 

 

EXHIBIT 2

SCHEDULE OF LEASES

 

 

EXHIBIT “D”

Bill of Sale

[See Attached Copy]

 

 

BILL OF SALE

     This BILL OF SALE (this “Bill of Sale”) is made as of the _____ day of
__________________, 2011 (“Effective Date”), by and between CORNERSTONE CORE PROPERTIES
REIT, INC., a Maryland corporation (“Assignor”), and
_____________________________, a _____________________ (“Assignee”).

     For good and valuable consideration, receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee hereby agree as follows:

     1. Assignor hereby sells, transfers, assigns and conveys to Assignee as of the Effective Date,
to the extent assignable, all right, title and interest of Assignor in and to all tangible personal
property (“Personalty”) located on, and used in connection with the management, maintenance
or operation of that certain land and improvements located on the real property, as more
particularly described in Exhibit “1” hereto and made a part hereof (“Real
Property”), but excluding tangible personal property owned or leased by Assignor’s property
manager or the tenants of the Real Property.

     2. This Bill of Sale is given pursuant to that certain Purchase and Sale Agreement (as
amended, the “Purchase Agreement”) dated as of August __, 2011, between Assignor and
Assignee. Except as set forth in the Purchase Agreement, the Personalty conveyed hereunder is
conveyed by Assignor and accepted by Assignee AS IS, WHERE IS, AND WITH ALL FAULTS AND EXCLUDES ALL
WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR ANY PARTICULAR PURPOSE, WARRANTIES CREATED BY ANY AFFIRMATION OF FACT OR PROMISE OR BY ANY
DESCRIPTION OF THE PROPERTY CONVEYED HEREUNDER, OR BY ANY SAMPLE OR MODEL THEREOF, AND ALL OTHER
WARRANTIES WHATSOEVER CONTAINED IN OR CREATED BY THE UNIFORM COMMERCIAL CODE.

     3. Assignee hereby accepts the assignment of the Personalty and agrees to assume and
discharge, in accordance with the terms thereof, all of the obligations thereunder from and after
the Effective Date hereof.

[Signatures set forth on following page.]

-1-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Bill of Sale as of the date first
above written.

	 	 	 	 	 
	 	ASSIGNOR:

CORNERSTONE CORE PROPERTIES REIT, INC., 

a Maryland
corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 
	 
	 	ASSIGNEE:

_________________________,

a ____________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its:  	 

-2-

 

	 	 	 	 	 

Exhibit 1 to Bill of Sale

LEGAL DESCRIPTION OF PROPERTY

 

 

EXHIBIT “E”

Notices to Tenants

[See Attached Copy]

 

 

NOTICE TO TENANTS

______________, 2011

____________________

____________________

____________________

____________________

Dear ________:

     You are hereby notified that _____________________ (“Seller”), the current owner of
__________________ (the “Property”) and the current owner of the landlord’s interest in
your lease in the Property, has sold the Property to _______________________ (“New Owner”),
as of the above date. In connection with such sale, Seller has assigned and transferred its
interest in your lease and your security deposit thereunder in the amount of $____________ (the
“Security Deposit”) to New Owner, and New Owner has assumed and agreed to perform all of
the landlord’s obligations under your lease (including any obligations set forth in your lease or
under applicable law to repay or account for the Security Deposit) arising after the above date.
New Owner acknowledges that New Owner has received from Seller and is responsible for the Security
Deposit.

     Accordingly, (a) all your obligations under the lease from and after the date hereof,
including your obligation to pay rent, shall be performable to and for the benefit of New Owner,
its successors and assigns, and (b) all the obligations of the landlord under the lease arising
after the above date, including any obligations thereunder or under applicable law to repay or
account for the Security Deposit, shall be the binding obligation of New Owner and its successors
and assigns.

     Unless and until you are otherwise notified in writing by New Owner, the address of New Owner
for all purposes under your lease is:

____________________

____________________

____________________

____________________

-1-

 

Please immediately forward a new certificate of insurance naming New Owner as an additional insured
under your liability policy as required by your lease.

	 	 	 	 	 
	 	Very truly yours,

SELLER:

_____________________________,

a ______________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 
	 
	 	NEW OWNER:

_____________________,

a _________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 

-2-

 

	 	 	 	 	 

EXHIBIT “F”

Form of Estoppel Certificate

[See Attached Copy]

 

 

FORM OF TENANT ESTOPPEL CERTIFICATE

JR HARMON, L.L.C.

____________________

____________________

____________________

____________________

     Re: _________________________, __________ (the “Property”)

Gentlemen:

     The purpose of this Tenant Estoppel Certificate is to provide information to JR HARMON,
L.L.C., a ________ limited liability company, and/or its assignee (the “Buyer”) regarding certain
premises leased by us located at the Property. We, the undersigned tenant of the Property (the
“Tenant”), do hereby certify to Buyer that:

     1. (a) Name of Landlord:

          (b) Name of Tenant:

          (c) Date of Lease:

          (d) Date of Amendments or Modifications:

          (e) Current Term Expiration Date:

          (f) Unexercised Renewal Options (if any):

          (g) Current Monthly Rent:

          (h) Current Additional Rent Payment (CAM, Insurance and Taxes):

          (i) Current or future rent concessions (if any):

          (j) Security Deposit:

     2. The lease (as amended, the “Lease”) as described in Paragraph 1 above, is in full force and
effect and has not been amended, superseded or modified either orally or in writing except as
specified in paragraph 1(d) above; a copy of the Lease is attached as Schedule A to this
Certificate. There are no other agreements relating to the Lease or the leased premises between
Landlord and Tenant. Tenant has no first rights of offer or refusal, options to purchase, or right
to participate in any income, profits, or sales or refinancing proceeds derived from the Property
or the leased premises.

     3.
The Tenant is a tenant in full and complete possession of the leased premises under the
terms of the Lease. Tenant has not assigned the Lease or sublet all or any part of the leased
premises except as follows: ____________________________________________________.

     4.
All rent, charges, or other payments due to the Landlord under the Lease have been paid
through ____________________________, and there have been no prepayments of rent or other
obligations more than one month in advance. Any operating expense escalation, tax

-1-

 

escalation and other additional rent and percentage rent due under the Lease, to the Landlord, has
been paid for the period covering ______________________ through ____________________.

     5. All construction, improvements, other installations and parking facilities, to the extent
required of Landlord under the Lease, have been completed and paid for pursuant to the terms of the
Lease and to the satisfaction of Tenant except as follows: ______________________

 

____________________________________________________________________.

     6. To the best of Tenant’s knowledge, neither Landlord nor Tenant is in default in any
material respect under any of the terms, covenants and conditions of the Lease, nor has any event
occurred that, with the passage of time or the giving of notice or both, would constitute a default
in any material respect by either party under the Lease. No notice to terminate has been given to
or by Tenant.

     7. There are no actions or proceedings involving Tenant under the Bankruptcy or insolvency
laws of the United States or any State.

     8. All notices to be given to Tenant under, or in connection with, the Lease shall be in
writing and shall be delivered by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:

________________

________________

________________

     9. This certification shall be binding upon and inure to the benefit of the parties hereto,
their heirs, personal representatives, successors and assigns.

     10. The assignment by Landlord of its interest under the Lease to Buyer shall not constitute
an event of default under the Lease, and after receiving notification that such assignment has been
consummated, Tenant shall deliver all subsequent payments required under the Lease to Buyer or as
directed by Buyer.

Tenant acknowledges that Buyer is relying upon the statements in this Tenant Estoppel Certificate
and does hereby warrant and affirm to and for the benefit of Buyer, and its successors and assigns
that each of the foregoing statements is true, correct and complete as of the date hereof.

     IN WITNESS WHEREOF, Tenant has caused this Tenant Estoppel Certificate to be executed by its
duly authorized officer (set forth below) this __ day of _________________, 2011.

	 	 	 	 	 
	 	_________________________
[TENANT]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

-2-

 

	 	 	 	 	 

Schedule 1

Form of Deed

[See Attached Copy]

 

 

Schedule 2

List of Property Documents

Property Information

	 	•	 	ALTA Survey
	 
	 	•	 	Phase I Environmental Assessment prepared by ENVIRON International Corporation dated
August 15, 2006 (Report and 3 Appendices)
	 
	 	•	 	Title Commitment prepared by First American Title Insurance dated June 2011

Lease and Tenant Information

	 	•	 	Lease Abstracts as of August 17, 2010

	 	•	 	Arizona Milk Transport
	 
	 	•	 	Brandon Gore dba Gore Design Co
	 
	 	•	 	Jeff & Nicole Caruso DBA Affordable Windows, LLC
	 
	 	•	 	Kevin & Elizabeth Blankers dba Fourte Imprints
	 
	 	•	 	Latrice & Jimmy Cannon dba Cannon Southwest Upholstery LLC
	 
	 	•	 	Milky Way Transportation
	 
	 	•	 	Niagra Testing West Corporation
	 
	 	•	 	Rockwest Technology Group LLC
	 
	 	•	 	Paul D. Coggeshall dba PXRD LLC
	 
	 	•	 	S & C Associated, LLC dba Miracle Method

	 	•	 	Leases

	 	•	 	Arizona Milk Transport 1st Amendment to Lease dated January 29, 2010
	 
	 	•	 	Brandon Gore dba Gore Design Co 5th Amendment to Lease dated January
29, 2010
	 
	 	•	 	Jeff & Nicole Caruso dba Affordable Windows, LLC Amendment to Lease
dated October 2, 2009
	 
	 	•	 	Kevin & Elizabeth Blankers dba Fourte Imprints Amendment & Lease
Renewal dated January 29, 2010
	 
	 	•	 	Latrice & Jimmy Cannon dba Cannon Southwest Upholstery LLC Amendment &
Lease Renewal dated July 21, 2009
	 
	 	•	 	Milky Way Transportation 1st Amendment to Lease dated February 16, 2010

	 
	 	•	 	Niagra Testing West Corporation lease dated July 29, 2008
	 
	 	•	 	Paul D. Coggeshall dba PXRD LLC Amendment to Lease dated September 25,
2009
	 
	 	•	 	Rockwest Technology Group LLC Amendment & Lease Renewal dated October
26, 2009
	 
	 	•	 	S & C Associated, LLC dba Miracle Method lease dated June 24, 2008

Budgets and Tax Information

	 	•	 	2010 Budget
	 
	 	•	 	2011 YTD Budget
	 
	 	•	 	Estimated Property Taxes per Tax Appeal Vendor

-1-`

Exhibit 10.1

ADVISORY AGREEMENT

     THIS ADVISORY AGREEMENT (this “Agreement”) is made as of September 6, 2011 (the “Effective
Date”), by and between CM REIT, INC., a Maryland corporation (the “Company”), and 2020 CAPITAL
ADVISORS, LLC, a Delaware limited liability company (the “Advisor”).

RECITALS:

     A. The Company intends to use the net proceeds of borrowings and security offerings and the
net returns on its investments which are not otherwise distributed to stockholders in Investments
(defined herein) in a manner which allows the Company to qualify as a “real estate investment
trust” under the Internal Revenue Code of 1986, as amended (the “Code”) and to qualify for an
exemption from being an “investment company” under the Investment Company Act of 1940, as amended
(the “Investment Company Act”).

     B. The Company desires that the Advisor undertake, on the Company’s behalf, the duties and
responsibilities set forth in this Agreement, subject to the direction and oversight of the Board
of Directors of the Company (the “Board of Directors”), on the terms and conditions set forth in
this Agreement.

     C. The Advisor desires to undertake, on the Company’s behalf, the duties and responsibilities
set forth in this Agreement, subject to the direction and oversight of the Board of Directors, on
the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties
hereto, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENTS:

1. Definitions. Capitalized terms used in this Agreement shall have the respective
meanings assigned to them below:

     1.1 “Advisor” has the meaning set forth in the Preamble to this Agreement, and shall include
any successor thereto.

     1.2 “Advisor Obligations” has the meaning set forth in Section 2.4.2 of this Agreement.

     1.3 “Advisor Refund” has the meaning set forth in Section 6.2.1(2) of this Agreement.

     1.4 “Affiliate” means, when used with reference to a specified person, any person that
directly, or indirectly through one or more intermediaries, controls or is controlled by, or is
under common control with, the specified person. For purposes of this definition, the term
“person” means and includes individuals, corporations, general and limited partnerships, stock
companies,

Advisory Agreement—Page 1

 

 

land trusts, business trusts and other entities and governments and agencies and political
subdivisions thereof. For purposes of this definition, “control” (including the correlative
meanings of the terms “controlled by” and “under common control with”), as used with respect to any
person, shall mean the possession, directly, or indirectly through one or more intermediaries, of
the power to direct or cause the direction of the management and policies of such person, whether
by contract, through the ownership of voting securities, partnership interests or other equity
interests or otherwise.

     1.5 “Annual Second-Tier Amount” shall have the meaning set forth in Section 6.2.1(2) of this
Agreement.

     1.6 “Agreement” means this Advisory Agreement dated as of the Effective Date, by and between
the Company and the Advisor, as it is amended from time to time in accordance with the terms of
this Agreement.

     1.7 “Average Invested Assets” means for any period the average of the aggregate book value of
the Company’s assets invested, directly or indirectly, in Investments, before reserves for
depreciation or bad debts or other similar non-cash reserves computed by taking the average of such
values at the end of each month during any given period.

     1.8 “Average Net Worth” means for any period the average of the net worth of the Company at
the end of each month during the period. For purposes of determining the Average Net Worth, the
“net worth” means the difference between (i) the aggregate book value of the consolidated assets of
the Company and its subsidiaries, before reserves for depreciation, bad debts or other similar
non-cash items, and (ii) the aggregate book value of debt of the Company and its subsidiaries.

     1.9 “Board of Directors” has the meaning set forth in Recital B of this Agreement.

     1.10 “Cause” means a reasonable good faith determination of the Board of Directors based on
findings of fact which are disclosed to the Advisor that the Advisor was grossly negligent, acted
with reckless disregard or engaged in willful misconduct or active fraud while discharging its
material duties under this Agreement.

     1.11 “Change of Control” means in any transaction or series of transactions (i) any sale,
lease, assignment, transfer or other conveyance of all or substantially all of the Company’s
assets, or (ii) any consolidation or merger involving the Company in which all of the stockholders
of the Company immediately prior to the consummation of such transaction, considered collectively,
do not immediately following the transaction own shares of the surviving entity constituting at
least a majority of the voting power of the surviving entity, (iii) any reclassification or other
exchange of capital stock, or any other recapitalization of the Company in which any person or
group, as those terms are used in Rule 13d-1 promulgated under the Securities Exchange Act of 1934,
as amended, that owned 30% of the voting power of the Company immediately prior to the consummation
of such transaction do not immediately following the transaction own at least 30% of the voting
power of the Company or in which any person or group that owned less than 30% of the voting power
of the Company immediately prior to the consummation of the transaction do not immediately
following the transaction own

Advisory Agreement—Page 2

 

 

more than 30% of the voting power of the Company, (iv) any liquidation, dissolution or winding
up of the Company, or (v) any time fewer than two members of the Board of Directors are individuals
which were selected by the Advisor. In instances where a natural person selected by the Advisor
and immediately thereafter appointed to the Board of Directors either resigns or dies, then a
Change of Control under clause (v) of the preceding sentence shall not be triggered if (i) the
Board of Directors does not elect to terminate the Advisor within 30 days after the first director
resigns or dies, or (ii) the qualified individual next selected by the Advisor is appointed as soon
as possible after such selection and the Board of Directors does not take any action from the time
the Advisor selects the next individual until the time the next Advisor-selected director is
appointed.

     1.12 “Code” has the meaning set forth in Recital A of this Agreement.

     1.13 “Company” has the meaning set forth in the Introductory Paragraph of this Agreement, and
shall include any successor thereto.

     1.14 “Effective Date” has the meaning set forth in the Preamble of this Agreement.

     1.15 “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

     1.16 “First-Tier Management Compensation” has the meaning set forth in Section 6.1 of this
Agreement.

     1.17 “GAAP” means generally accepted accounting principles, as applied in the United States.

     1.18 “Governing Instruments” means the articles of incorporation or charter, as the case may
be, and the bylaws of the Company and its subsidiaries, as those documents may be amended from time
to time.

     1.19 “Gross Proceeds” means the aggregate purchase price of all shares of the Company’s common
stock sold for the account of the Company through an Offering, without deduction for Organization
and Offering Expenses or volume or other discounts.

     1.20 “Independent Directors” are those who are not associated and have not been associated
within the last two years, directly or indirectly, with the Company or the Advisor.

     1.21 “Investment Company Act” has the meaning set forth in Recital A of this Agreement.

     1.22 “Investments” means any investments by the Company and its subsidiaries in properties,
loans and all other investments in which the Company and its subsidiaries may acquire an interest,
either directly or indirectly, other than short-term investments acquired for purposes of cash
management.

     1.23 “Last Auditor” has the meaning set forth in Section 6.3 of this Agreement.

Advisory Agreement—Page 3

 

 

     1.24 “Management Compensation” means the First-Tier Management Compensation and Second-Tier
Management Compensation.

     1.25 “Mortgage Assets” means the following:

	 	(i)	 	mortgage securities (or interests therein), including (a) pass-through
certificates (including GNMA certificates, FNMA certificates and FHLMC certificates),
(b) collateralized mortgage obligations, (c) securities representing interests in, or
secured by, mortgages on real property other than pass-through certificates and CMOs,
(d) certificates and other securities collateralized by loans, mortgage derivative
securities, subordinated interests and other mortgage-backed and
mortgage-collateralized obligations, (e) mortgage derivative securities and (f)
subordinated interests;
	 
	 	(ii)	 	mortgage loans, including (a) conforming mortgage loans (i.e., mortgage loans
which comply with requirements for inclusion in credit support programs sponsored by
FHLMC, FNMA or GNMA or are FHA or VA Loans, all of which are secured by first mortgages
or deeds of trust on single-family (one to four units) residences, multifamily
residences or commercial properties) and (b) non-conforming mortgage loans; and
	 
	 	(iii)	 	short-term investments, including short-term bank certificates of deposit,
short-term U.S. Treasury securities, short-term U.S. government agency securities,
commercial paper, repurchase agreements, short-term CMOs, short-term asset-backed
securities and other similar types of short-term investment instruments, all of which
will have maturities or average lives of less than one year.

     1.26 “Net Income” means for any period the taxable income of the Company and its subsidiaries
before deducting (i) the Second-Tier Management Compensation, (ii) any net operating loss
deductions arising from losses in prior periods and (iii) any items which the Code permits to be
deducted when calculating taxable income for a REIT.

     1.27 “Offering” means any public offering and sale of shares of the Company’s common stock
pursuant to an effective registration statement filed under the Securities Act other than a public
offering of shares under a distribution reinvestment plan and shares offered under any employee
benefit plan.

     1.28 “Organization and Offering Expenses” means all expenses incurred by or on behalf of the
Company in connection with and in preparing the Company for registration of and subsequently
offering and distributing its shares to the public, which may include, but are not limited to,
total underwriting and brokerage discounts and commissions (including fees of the underwriters’
attorneys); expenses for printing, engraving and mailing; salaries of employees while engaged in
sales activities; salaries and non-transaction-based compensation paid to employees of the Advisor
for performing organizational and offering services for the Company (including, support,
accounting, human resources, information technology and marketing support), charges of transfer
agents, registrars, trustees, escrow holders, depositaries and experts;

Advisory Agreement—Page 4

 

 

and expenses of qualification of the sale of the securities under federal and state laws,
including taxes and fees; and accountants’ and attorneys’ fees.

     1.29 “Reconciliation Notice” has the meaning set forth in Section 6.3 of this Agreement.

     1.30 “REIT” means a “real estate investment trust” as defined under the Code.

     1.31 “REIT Provisions of the Code” means Sections 856 through 860 of the Code.

     1.32 “Remaining Amount” has the meaning set forth in Section 6.2.1(2) of this Agreement.

     1.33 “Second-Tier Amount” has the meaning set forth in Section 6.2.1(1) of this Agreement.

     1.34 “Second-Tier Management Compensation” has the meaning set forth in Section 6.2 of this
Agreement.

     1.35 “Short-Term Investments” means short-term bank certificates of deposit, short-term U.S.
Treasury securities, short-term U.S. government agency securities, commercial paper, repurchase
agreements, short-term CMOs, short-term asset-backed securities and other similar types of
short-term investment instruments, all of which will have maturities or average lives of less than
one year.

     1.36 “Sub-Advisor” means any third party (other than the Advisor) which has been selected by
the Advisor and approved by the Board of Directors to manage all or a portion of the day-to-day
operations of the Company and perform the services and other activities described in Section 2.1 of
this Agreement. Any approval of a Sub-Advisor by the Board of Directors may be conditioned or
limited in any manner determined by the Board of Directors, including, without limitation, the
terms and conditions of any such agreement with a Sub-Advisor.

     1.37 “Ten-Year U.S. Treasury Rate” means for any period the average of the weekly average
yields to maturity for actively traded current coupon U.S. Treasury fixed interest rate securities
(adjusted to a constant maturity of ten years) published by the Federal Reserve Board for each week
during such period, or, if such rate is not published by the Federal Reserve Board, any Federal
Reserve Bank or agency or department of the federal government selected by the Company. If the
Company determines in good faith that the Ten-Year U.S. Treasury Rate cannot be calculated as
provided above, then the rate shall be the arithmetic average of the per annum average yields to
maturities, based upon closing asked prices on each business day during such period, for each
actively traded marketable U.S. Treasury fixed interest rate security with a final maturity date
not less than eight nor more than 12 years from the date of the closing asked prices as chosen and
quoted for each business day in each such period in New York City by at least three recognized
dealers in U.S. government securities selected by the Company.

     1.38 “Threshold Return” has the meaning set forth in Section 6.2.3 of this Agreement.

     1.39 “Tiered Percentage” has the meaning set forth in Section 6.2.2 of this Agreement.

Advisory Agreement—Page 5

 

 

     1.40 “Total Operating Expenses” means the aggregate expenses of every character paid or
incurred by the Company as determined under GAAP, including the Management Compensation, but
excluding (i) the expenses or raising capital such as organization and offering expenses, legal
audit, accounting, underwriting, brokerage, listing registration and other fees, printing and other
such expenses, and tax incurred in connection with the issuance, distribution, transfer,
registration, and stock exchange listing of the Company’s shares; (ii) interest payments; (iii)
taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v)
incentive fees, if any, paid to the Advisor in connection with the gain from the sale of the
Company’s assets; and (vi) acquisition fees, acquisition expenses, real estate commissions on
resale of property and other expenses connected with the acquisition, disposition, and ownership of
real estate interests, mortgage loans, or other property, (such as the costs of foreclosure,
insurance premiums, legal services, maintenance, repair and improvement of property).

2. General Duties of the Advisor.

     2.1 Services. Subject at all times to the direction and oversight of the Board of
Directors, the Advisor shall (i) generally manage the day-to-day operations of the Company and
perform the services and other activities described below, and (ii) to the extent directed by the
Board of Directors, perform similar management and services for any subsidiary of the Company. The
Advisor, in its sole discretion with the approval of the Board of Directors, may elect to cause the
duties of the Advisor under this Agreement to be provided by a Sub-Advisor. The Advisor shall
perform the following services from time to time as may be required for the management of the
Company and its assets:

          2.1.1 serving as the Company’s consultant with respect to the formulation of
investment criteria and the preparation of policy guidelines by the Board of Directors;

          2.1.2 assisting the Company in developing criteria for Mortgage Asset purchase
commitments that are consistent with the Company’s long-term investment objectives and
making available to the Company its knowledge and experience with respect to Mortgage
Assets;

          2.1.3 representing the Company in connection with the purchase, sale and commitment
to purchase or sell Investments that meet in all material respects the Company’s
investment criteria;

          2.1.4 managing the Company’s portfolio of Investments;

          2.1.5 advising the Company and negotiating the Company’s agreements with
third-party lenders for borrowings by the Company;

          2.1.6 making available to the Company statistical and economic research and
analysis regarding the Company’s activities and the services performed for the Company
by the Advisor;

Advisory Agreement—Page 6

 

 

          2.1.7 investing or reinvesting any money of the Company in accordance with the
Company’s policies and procedures;

          2.1.8 providing the executive and administrative personnel, office space and
services required in rendering services to the Company, in accordance with and subject
to the terms of this Agreement;

          2.1.9 administering the day-to-day operations of the Company and performing and
supervising the performance of such other administrative functions necessary to the
management of the Company as may be agreed upon by the Advisor and the Board of
Directors, including the collection of revenues and the payment of the Company’s debts
and obligations from the Company’s accounts, and the maintenance of appropriate computer
systems to perform such administrative functions;

          2.1.10 advising the Board of Directors in connection with policy decisions;

          2.1.11 evaluating and recommending hedging strategies to the Board of Directors
and, upon approval by the Board of Directors, engaging in hedging activities on behalf
of the Company consistent with the Company’s status as a REIT;

          2.1.12 supervising compliance by the Company with the REIT Provisions of the Code
and maintenance of its status as a REIT;

          2.1.13 qualifying and causing the Company to qualify to do business in all
applicable jurisdictions and obtaining and maintaining all appropriate licenses;

          2.1.14 assisting the Company in any executive search for executive officers;

          2.1.15 assisting the Company to retain qualified accountants and tax experts to
assist in developing and monitoring appropriate accounting procedures and testing
systems and to conduct quarterly compliance reviews as the Board of Directors may deem
necessary or advisable;

          2.1.16 assisting the Company in its compliance with all federal (including the
Sarbanes-Oxley Act of 2002), state and local regulatory requirements applicable to the
Company in respect of its business activities, including preparing or causing to be
prepared all financial statements required under applicable regulations and contractual
undertakings and all reports, documents and filings, if any, required under the
Securities Exchange Act of 1934, as amended, or other federal or state laws;

          2.1.17 assisting the Company in its compliance with federal, state and local tax
filings and reports and generally enabling the Company to maintain its status as a REIT,
including soliciting stockholders, as defined below, for required information to the
extent provided in the REIT Provisions of the Code;

Advisory Agreement—Page 7

 

 

          2.1.18 assisting the Company in its maintenance of an exemption from the Investment
Company Act and monitoring compliance with the requirements for maintaining an exemption
from the Investment Company Act;

          2.1.19 coordinating and managing the operations of any joint venture or
co-investment interests held by the Company and conducting all matters with the joint
venture or co-investment collaborators;

          2.1.20 advising the Company as to its capital structure and capital raising
activities;

          2.1.21 handling and resolving all claims, disputes or controversies (including all
litigation, arbitration, settlement or other proceedings or negotiations) in which the
Company may be involved or to which the Company may be subject arising out of the
Company’s day-to-day operations, subject to the approval of the Board of Directors;

          2.1.22 engaging and supervising, on behalf of the Company and at the Company’s
expense, the following, without limitation: independent contractors to provide
investment banking services, leasing services, mortgage brokerage services, securities
brokerage services, other financial services and such other services as may be deemed by
the Advisor and the Board of Directors to be necessary or advisable from time to time;
and

          2.1.23 so long as the Advisor does not incur additional costs or expenses,
performing such other services as may be required from time to time for management and
other activities relating to the assets of the Company as the Board of Directors shall
reasonably request or the Advisor shall deem appropriate under the particular
circumstances.

     2.2 Obligations of the Advisor.

          2.2.1 Verify Conformity with Investment Criteria. Subject to the direction
of the Board of Directors, the Advisor shall use commercially reasonable efforts to
ensure that each Investment acquired by the Company conforms in all material respects to
the investment criteria of the Company and shall seek to cause each seller or transferor
of Investments to the Company to make such representations and warranties regarding such
Investments as may, in the reasonable judgment of the Advisor, be necessary and
appropriate, subject to market custom. In addition, the Advisor shall take such other
action as it deems reasonably necessary or appropriate in seeking to protect the
Company’s Investments to the extent consistent with its duties under this Agreement.

          2.2.2 Conduct Activities in Conformity with REIT Status and All Applicable
Restrictions. Subject to the direction of the Board of Directors, the Advisor shall
refrain from any action which, in its sole judgment made in good faith, would adversely
affect the status of the Company or, if applicable, any subsidiary of

Advisory Agreement—Page 8

 

 

the Company as a REIT or (i) which, in its sole judgment made in good faith, would
violate any material law, rule or regulation of any governmental body or agency having
jurisdiction over the Company or any such subsidiary or (ii) which would otherwise not
be permitted by the Company’s or such subsidiary’s Governing Instruments, any material
operating policies adopted by the Company, or any agreements actually known by the
Advisor, except in each of clauses (i) and (ii) as could not reasonably be expected to
have a material adverse effect on the Company. If the Advisor is directed to take any
such action by the Board of Directors, the Advisor shall promptly notify the Board of
Directors of the Advisor’s judgment that such action would adversely affect such status
or cause such violation or not be permitted as aforesaid.

          2.2.3 Reports. Upon the request of the Board of Directors and at the sole
cost and expense of the Company, the Advisor shall cause an annual compliance report of
the Company to be prepared to determine compliance with the REIT Provisions of the Code
and related matters. In addition, the Advisor shall prepare regular reports for the
Board of Directors that will review the Company’s Investments, portfolio composition and
characteristics, credit quality (if applicable), performance and compliance with the
Company’s investment policies and policies that enable the Company to maintain its
qualification as a REIT and to maintain its exemption from being deemed an “investment
company” under the Investment Company Act.

          2.2.4 Portfolio Transactions. In placing portfolio transactions and
selecting brokers or dealers, the Advisor shall seek to obtain on behalf of the Company
commercially reasonable terms. In assessing commercially reasonable terms for any
transaction, the Advisor shall consider all factors it deems relevant, including the
breadth of the market for the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the reasonableness of
the commission, if any, both for the specific transaction and on a continuing basis.

     2.3 Cooperation of the Company. The Company (including the Board of Directors) agrees
to take all actions reasonably required to permit and enable the Advisor to carry out its duties
and obligations under this Agreement, including, without limitation, all steps reasonably necessary
to allow the Advisor to file any registration statement on behalf of the Company in a timely
manner. The Company further agrees to use commercially reasonable efforts to make available to the
Advisor all resources, information and materials reasonably requested by the Advisor to enable the
Advisor to satisfy its obligations hereunder, including its obligations to deliver financial
statements and any other information or reports with respect to the Company. If the Advisor is not
able to provide a service, or in the reasonable judgment of the Advisor it is not prudent to
provide a service, without the approval of the Board of Directors or the Independent Directors, as
applicable, then the Advisor shall be excused from providing such service (and shall not be in
breach of this Agreement) until the applicable approval has been obtained.

Advisory Agreement—Page 9

 

 

     2.4 Engagement of Third Parties.

          2.4.1 Other Third Parties. The Advisor is authorized to retain, for and on
behalf of the Company, the services of third parties (including Affiliates of the
Advisor), including, without limitation, accountants, legal counsel, appraisers,
insurers, brokers, dealers, transfer agents, registrars, developers, investment banks,
financial advisors, banks and other lenders and others as the Advisor deems reasonably
necessary or advisable in connection with the management and operations of the Company.
The costs and expenses related to the retention of third parties shall be the sole cost
and expense of the Company except to the extent the third party is retained to make
decisions to invest in and dispose of Investments, provide administrative, data
processing or clerical services, prepare the financial records of the Company or prepare
a report summarizing the Company’s acquisitions of Investments, portfolio compensation
and characteristics, credit quality (if applicable) or performance of the portfolio, in
which case it shall be at the sole cost and expense of the Advisor unless otherwise
approved by the Board of Directors (collectively, “Advisor Obligations”).

          2.4.2 Affiliates. Notwithstanding anything contained in this Agreement to
the contrary, the Advisor shall have the right to cause any services under this
Agreement to be rendered by the Advisor’s employees or Affiliates of the Advisor. The
Company shall pay or reimburse the Advisor or its Affiliates for the cost and expense of
performing services by the Affiliate if (i) the costs and expenses of such Affiliate
would have been reimbursable under this Agreement if such Affiliate were an unaffiliated
third party, and (ii) the costs and expenses of such Affiliate have been approved by a
majority of the Independent Directors or incurred in accordance with a policy adopted by
a majority of the Independent Directors.

3. Additional Activities of the Advisor and its Affiliates.

     3.1 Other Activities of the Advisor. Except as provided in the last sentence of this
Section 3.1, nothing in this Agreement shall (i) prevent the Advisor, any Sub-Advisor or any of
their respective Affiliates, officers, directors or employees, from engaging in other businesses or
from rendering services of any kind to any other person or entity, including, without limitation,
investing in, or rendering advisory service to others investing in, any type of Investments or
other real estate investments (including, without limitation, investments that meet the principal
investment objectives of the Company), whether or not the investment objectives or policies of any
such other person or entity are similar to those of the Company, or (ii) in any way bind or
restrict the Advisor, any Sub-Advisor or any of their respective Affiliates, officers, directors or
employees from buying, selling or trading any securities or commodities for their own accounts or
for the account of others for whom the Advisor, the Sub-Advisor or any of their respective
Affiliates, officers, directors or employees may be acting. The Company acknowledges that the
Advisor will base allocation decisions on the procedures the Advisor reasonably and in good faith
considers fair and equitable, including, without limitation, such considerations as investment
objectives, restrictions and time horizon, availability of cash and the amount of existing
holdings. While information and recommendations supplied to the Company shall, in the Advisor’s
reasonable and good faith judgment, be appropriate under the circumstances and in

Advisory Agreement—Page 10

 

 

light of the investment objectives and policies of the Company, they may be different from the
information and recommendations supplied by the Advisor, any Sub-Advisor, any Affiliate of the
Advisor or any Sub-Advisor to other investment companies, funds and advisory accounts. The Company
shall be entitled to equitable treatment under the circumstances in receiving information,
recommendations and any other services, but the Company recognizes that it is not entitled to
receive preferential treatment as compared with the treatment given by the Advisor, any
Sub-Advisor, any Affiliate of the Advisor or any Sub-Advisor to any investment company, fund or
advisory account other than any fund or advisory account which contains only funds invested by the
Advisor (and not of any of its clients or customers) or its officers and directors.
Notwithstanding anything to the contrary in this Section 3.1, for so long as the Advisor is the
exclusive advisor of the Company (unless the Advisor is not the exclusive advisor of the Company
because the Company has engaged a Sub-Advisor) pursuant to this Agreement, neither the Advisor nor
any of its Affiliates shall sponsor any other mortgage REIT that invests primarily in mortgages for
the acquisition of, development of and construction on real estate in the Las Vegas, Nevada area
other than Desert Capital REIT, Inc., unless otherwise approved by a majority of the Independent
Directors.

     3.2 Service to the Company; Execution of Documents. Directors, officers, employees
and agents of the Advisor and its Affiliates may serve as trustees, directors, officers, employees,
agents, nominees or signatories for the Company or any subsidiary of the Company, to the extent
permitted by the Governing Instruments, as from time to time amended, or by any resolutions duly
adopted by the Board of Directors pursuant to the Governing Instruments. When executing documents
or otherwise acting in such capacities for the Company, such persons shall use their respective
titles in the Company.

4. Bank Accounts. At the direction of the Board of Directors, the Advisor may establish
and maintain one or more bank accounts in the name of the Company or any subsidiary of the Company,
and may collect and deposit into any such account or accounts, and disburse funds from any such
account or accounts in a manner consistent with this Agreement, including, without limitation, the
following: (a) the payment of the Management Compensation, (b) the payment (or advance) of
reimbursable costs and expenses, and (c) such other amounts authorized by the Board of Directors.
The Advisor shall from time to time render appropriate accountings of such collections and payments
to the Board of Directors and, upon request, to the auditors of the Company or any subsidiary of
the Company.

5. Records; Confidentiality. The Advisor shall maintain appropriate and accurate books of
account and records relating to services performed under this Agreement, and such books of account
and records shall be accessible for inspection by representatives (including the auditors) of the
Company or any subsidiary of the Company at any time during normal business hours. Except in the
ordinary course of business of the Company, the Advisor shall, and shall use commercially
reasonable efforts to cause each of its Affiliates to, keep confidential any and all information it
(or such Affiliates) may obtain from time to time in connection with the services it (or such
Affiliates) renders under this Agreement.

Advisory Agreement—Page 11

 

 

6. Compensation of the Advisor.

     6.1 First-Tier Management Compensation. For services rendered under this Agreement,
the Company shall pay to the Advisor monthly in arrears commencing on the Effective Date annual
first-tier management compensation equal to 1% of the first $200,000,000 of Average Invested Assets
during each fiscal year, plus 0.8% of the Average Invested Assets during such year in excess of
$200,000,000 (the “First-Tier Management Compensation”). The portion of the First-Tier Management
Compensation payable each month shall be calculated by the Advisor within 15 days after the end of
such month, and a written statement documenting such calculation in reasonable detail shall be
promptly delivered to the Company thereafter. The Company shall pay any amount payable pursuant to
this Section 6.1 for such month within 15 days after the receipt of the written statement setting
forth the computation of the First-Tier Management Compensation, or, at the Advisor’s election, the
Advisor may deduct such amount from the Company’s account or accounts, in any case without demand,
deduction, offset or delay (other than any deduction or offset for the liquidated sum of any
Advisor Refund).

     6.2 Calculation of Second-Tier Management Compensation. In addition to the First-Tier
Management Compensation, the Advisor shall receive second-tier management compensation for each
month (the “Second-Tier Management Compensation”).

          6.2.1 The Second-Tier Management Compensation shall be calculated by the Advisor
and paid or refunded (as applicable) as follows:

     (1) At the end of each month during each fiscal year, the Advisor shall
calculate the Tiered Percentage of the difference of (i) the Net Income for such
month (or lesser portion thereof), minus (ii) the Threshold Return for such month
(or lesser portion thereof) (the “Quarterly Second-Tier Amount”). If the
Second-Tier Amount is a positive number, then at the end of each such month the
Company shall pay the Advisor the Second-Tier Amount.

     (2) At the end of each fiscal year and upon any termination of this Agreement,
the Advisor shall calculate the Tiered Percentage of the difference of (i) the Net
Income for such year (or lesser portion thereof), minus (ii) the Threshold Return
for such year (or lesser portion thereof) (the “Annual Second-Tier Amount”). If the
aggregate of the Second-Tier Amounts received by the Advisor for such year (but not
taking into account any prior years) is less than the Annual Second-Tier Amount,
then the Company shall pay the Advisor such shortfall (the “Remaining Amount”). On
the other hand, if the aggregate of the Second-Tier Amounts received by the Advisor
during such year (but not taking into account any prior years) exceeds the Annual
Second-Tier Amount, then the Advisor shall pay the Company such excess (the “Advisor
Refund”). The Advisor Refund for any particular year shall not exceed the aggregate
of the Second-Tier Amounts received by the Advisor during such year.

          6.2.2 The “Tiered Percentage” shall mean for any period the weighted average of the
following percentage rates (weighting to be based on Average Invested Assets
attributable to each percentage rate): (i) 20% for the first $200,000,000 of

Advisory Agreement—Page 12

 

 

Average Invested Assets; and (ii) 10% for the Average Invested Assets in excess of
$200,000,000.

          6.2.3 The “Threshold Return” shall mean for any period the amount of Net Income for
such period that would produce an annualized return on the Company’s average Gross
Proceeds equal to the sum of (i) the Ten-Year U.S. Treasury Rate for such period plus
(ii) 1.0%.

          6.2.4 Payment Procedure. The Advisor shall calculate the Second-Tier
Management Compensation, the Second-Tier Amount, any Remaining Amount and any Advisor
Refund and deliver to the Company a written statement setting forth such computation in
reasonable detail within 15 days after the end of each month, fiscal year and after the
date of any termination of this Agreement, as applicable. The Company shall pay to the
Advisor all Second-Tier Amounts and all Remaining Amounts (or, at the Advisor’s
election, the Advisor may deduct such amount from the Company’s account or accounts)
with respect to each month or year (or lesser portion thereof) within 15 days following
the delivery to the Company of the written statement setting forth the computation of
the Second-Tier Management Compensation for such month or year (or lesser portion
thereof), as applicable, without demand, deduction, offset or delay (other than any
deduction or offset for the liquidated sum of any Advisor Refund). The Advisor shall
pay the Advisor Refund, if any, with respect to a particular fiscal year within 15 days
following the delivery to the Company of the written statement setting forth the
computation of the Second-Tier Management Compensation for such year (or lesser portion
thereof), without demand or delay. In connection with the Company’s annual audit (or
any audit upon termination of this Agreement), the Advisor shall determine any year-end
adjustments to the Second-Tier Management Compensation and Advisor Refund payable under
this Section 6.2 and deliver to the Company a written statement setting forth such
computation within 90 days after the end of each fiscal year. Any required adjustments
to the Second-Tier Management Compensation or the Advisor Refund shall be paid by the
Company to the Advisor or by the Advisor to the Company, respectively, within 15 days
after delivery of such computation to the Company by the Advisor, without demand,
deduction, offset or delay (other than any deduction or offset for the liquidated sum of
any Advisor Refund).

          6.2.5 Compensation Limitation. Notwithstanding any other provision of this
Section 6, the Total Operating Expenses of the Company shall (in the absence of a
satisfactory showing to the contrary) be deemed to be excessive if they exceed in any
fiscal year the greater of 2% of its Average Invested Assets or 25% of its Net Income
for such year. In the event the Independent Directors do not determine such excess
expenses are justified, the Advisor agrees to reimburse the Company at the end of the
twelve month period the amount by which the aggregate annual expenses paid or incurred
by the Company exceed the limitations herein provided.

          6.2.6 Payment in Cash. All Management Compensation shall be paid by the
Company in cash. Any Advisor Refund shall also be paid in cash.

Advisory Agreement—Page 13

 

 

     6.3 Annual Reconciliation. The calculation of the Management Compensation shall be
subject to audit and reconciliation at the end of each fiscal year and upon any termination of this
Agreement. If at any time the Advisor disagrees with such audit and reconciliation and the dispute
cannot be resolved between the Independent Directors and the Advisor within 10 business days after
the Advisor’s receipt of such audit and reconciliation provides written notice to the Company of
the dispute (the “Reconciliation Notice”), then the matter shall be resolved by an independent
auditor of recognized standing selected jointly by the Independent Directors and the Advisor within
not more than 20 days after the Reconciliation Notice. In the event the Independent Directors and
the Advisor cannot agree with respect to such selection within the aforesaid 20 day time-frame, the
Independent Directors shall select one such independent auditor and the Advisor shall select one
independent auditor within five business days after the expiration of the 20 day period, with one
additional such auditor (the “Last Auditor”) to be selected by the auditors so designated within
five business days after their selection, and these three auditors together shall determine the
final amount of the amounts in question. Any decision made by the auditors shall be deemed final
and binding upon the Board of Directors and the Advisor and shall be delivered to the Advisor and
the Company within not more than 15 days after the selection of the Last Auditor. The expenses of
the auditors shall be paid by the party with the estimate which deviated the furthest from the
final valuation decision made by the auditors.

7. Expenses of the Advisor and the Company.

     7.1 Expenses of the Advisor. The Advisor shall be responsible for the following
expenses:

          7.1.1 except as set forth in Section 7.2 of this Agreement, employment expenses of
the personnel employed by the Advisor (including the executive officers of the Company
which are also employed by the Advisor), including, without limitation, salaries, wages,
payroll taxes and the cost of employee benefit plans of such personnel;

          7.1.2 rent, telephone, utilities, office furniture, equipment, machinery and other
office, internal and overhead expenses of the Advisor required for the Company’s
day-to-day operations, including bookkeeping, clerical and back-office services provided
by the Advisor; provided, however, that the Company shall reimburse the Advisor for the
Company’s pro rata portion of such rent, telephone, utilities, office furniture,
equipment, machinery and other office, internal and overhead expenses to the extent that
the Company’s employees, officers, representatives and/or agents (who are not also
employed by the Advisor) use such facilities or incur such expenses; and

          7.1.3 unless otherwise approved by the Board of Directors, the cost and expense of
the Sub-Advisor, if any.

     7.2 Expenses of the Company. The Company shall pay all of the costs and expenses of
the Company and the Advisor incurred on behalf of the Company or any subsidiary or in connection
with this Agreement, excepting only those expenses that are specifically the

Advisory Agreement—Page 14

 

 

responsibility of the Advisor pursuant to Section 7.1 of this Agreement. Without limiting the
generality of the foregoing, it is specifically agreed that the following costs and expenses of the
Company or any subsidiary of the Company shall be paid by the Company and shall not be paid by the
Advisor or the Affiliates of the Advisor:

          7.2.1 Organization and Offering Expenses; provided, however, that the Company shall
not reimburse the Advisor to the extent such reimbursement would cause the total amount
spent by the Company on Organization and Offering Expenses to exceed 15%, or 11.5% after
at least $2,500,000 of Gross Proceeds have been raised, of the Gross Proceeds raised as
of the date of the reimbursement and provided further that within 60 days after the end
of the month in which an Offering terminates, the Advisor shall reimburse the Company to
the extent the Company incurred Organization and Offering Expenses exceeding 15%, or
11.5% after at least $2,500,000 of Gross Proceeds have been raised, of the Gross
Proceeds raised in the completed Offering; the Company shall not reimburse the Advisor
for any Organization and Offering Expenses that are not fair and commercially reasonable
to the Company, and the Advisor shall reimburse the Company for any Organization and
Offering Expenses that are not fair and commercially reasonable to the Company;

          7.2.2 all costs and expenses in connection with the acquisition, disposition,
financing, hedging, administration and ownership of the Company’s or any subsidiary’s
Investments (including, without limitation, the Mortgage Assets) and, including, without
limitation, costs and expenses incurred in contracting with third parties, including
Affiliates of the Advisor, to provide such services, such as legal fees, accounting
fees, consulting fees, trustee fees, appraisal fees, insurance premiums, commitment
fees, brokerage fees, guaranty fees, ad valorem taxes, costs of foreclosure,
maintenance, repair and improvement of property and premiums for insurance on property
owned by the Company or any subsidiary of the Company;

          7.2.3 all costs and expenses relating to the acquisition of, and maintenance and
upgrades to, the Company’s portfolio accounting systems to the extent such upgrades are
required for the Company’s business and operations;

          7.2.4 all costs and expenses of money borrowed by the Company or its subsidiaries,
including, without limitation, principal, interest and the costs associated with the
establishment and maintenance of any credit facilities, warehouse loans and other
indebtedness of the Company and its subsidiaries (including commitment fees, legal fees,
closing and other costs);

          7.2.5 all taxes and license fees applicable to the Company or any subsidiary of the
Company, including interest and penalties thereon;

          7.2.6 all legal, audit, accounting, underwriting, brokerage, listing, filing,
rating agency, registration and other fees, printing, engraving, clerical, personnel and
other expenses and taxes incurred in connection with the issuance, distribution,
transfer, registration and stock exchange listing of the Company’s or any subsidiary’s
equity securities or debt securities;

Advisory Agreement—Page 15

 

 

          7.2.7 other than for the Advisor Obligations, all fees paid to and expenses of
third-party advisors and independent contractors, consultants, advisors and other agents
(other than the Advisor or any Sub-Advisor) engaged by the Company or any subsidiary of
the Company or by the Advisor for the account of the Company or any subsidiary of the
Company (other than the Advisor or Sub-Advisor) and all employment expenses of the
personnel employed by the Company or any subsidiary of the Company (including, without
limitation, a chief financial officer of the Company, but excluding any personnel which
are also employed by the Advisor or Sub-Advisor), including, without limitation, the
salaries, wages, equity based compensation of such personnel, payroll taxes and the
incremental cost for administering employee benefit plans of the Advisor which are used
by such personnel;

          7.2.8 all insurance costs incurred by the Company or any subsidiary of the Company,
including, without limitation, any costs to obtain liability or other insurance to
indemnify the Advisor and underwriters of any securities of the Company;

          7.2.9 all custodian, transfer agent and registrar fees and charges;

          7.2.10 all compensation and fees paid to directors of the Company or any subsidiary
of the Company (excluding those directors who are also employees of the Advisor), all
expenses of directors of the Company or any subsidiary of the Company (including those
directors who are also employees of the Advisor), the cost of directors and officers
liability insurance and premiums for errors and omissions insurance, and any other
insurance deemed necessary or advisable by the Board of Directors for the benefit of the
Company and its directors and officers (including those directors who are also employees
of the Advisor);

          7.2.11 all third-party legal, accounting and auditing fees and expenses and other
similar services relating to the Company’s or any subsidiary’s operations (including,
without limitation, all quarterly and annual audit or tax fees and expenses);

          7.2.12 all legal, expert and other fees and expenses relating to any actions,
proceedings, lawsuits, demands, causes of action and claims, whether actual or
threatened, made by or against the Company, or which the Company is authorized or
obligated to pay under applicable law or its Governing Instruments or by the Board of
Directors;

          7.2.13 any judgment or settlement of pending or threatened proceedings (whether
civil, criminal or otherwise) against the Company or any subsidiary of the Company, or
against any trustee, director or officer of the Company or any subsidiary of the Company
in his capacity as such for which the Company or any subsidiary of the Company is
required to indemnify such trustee, director or officer by any court or governmental
agency, or settlement of pending or threatened proceedings;

Advisory Agreement—Page 16

 

 

          7.2.14 all travel and related expenses of directors, officers and employees of the
Company and the Advisor, incurred in connection with attending meetings of the Board of
Directors or holders of securities of the Company or any subsidiary of the Company or
performing other business activities that relate to the Company or any subsidiary of the
Company, including, without limitations, travel and expenses incurred in connection with
the purchase, financing, refinancing, sale or other disposition of Investments or other
investments of the Company; provided, however, that the Company shall only be
responsible for a proportionate share of such expenses, as determined by the Advisor in
good faith, where such expenses were not incurred solely for the benefit of the Company;

          7.2.15 all expenses of organizing, modifying or dissolving the Company or any
subsidiary of the Company and costs preparatory to entering into a business or activity,
costs of winding up or disposing of a business of activity of the Company or its
subsidiaries;

          7.2.16 all expenses relating to payments of dividends or interest or distributions
in cash or any other form made or caused to be made by the Board of Directors to or on
account of holders of the securities of the Company or any subsidiary of the Company,
including, without limitation, in connection with and dividend reinvestment plan;

          7.2.17 all expenses of third parties relating to communications to holders of
equity securities or debt securities issued by the Company or any subsidiary of the
Company and the other bookkeeping and clerical work necessary in maintaining relations
with holders of such securities and in complying with the continuous reporting and other
requirements of governmental bodies or agencies, including any costs of computer
services in connection with this function, the cost of printing and mailing certificates
for such securities and proxy solicitation materials and reports to holders of the
Company’s or any subsidiary’s securities and reports to third parties required under any
indenture to which the Company or any subsidiary of the Company is a party;

          7.2.18 subject to Section 7.1, all expenses relating to any office or office
facilities maintained by the Company or any subsidiary of the Company exclusive of the
office of the Advisor and/or Affiliates of the Advisor, including, without limitation,
rent, telephone, utilities, office furniture, equipment, machinery and other office
expenses for any persons or employees the Board of Directors authorizes the Company to
hire;

          7.2.19 all costs and expenses related to the design and maintenance of the
Company’s web site or sites and associated with any computer software or hardware that
is used solely for the Company;

          7.2.20 other than for the Advisor Obligations, all other costs and expenses
relating to the Company’s business and investment operations, including, without
limitation, the costs and expenses of acquiring, owning, protecting, maintaining,

Advisory Agreement—Page 17

 

 

developing and disposing of Investments, including, without limitation, appraisal,
reporting, audit and legal fees;

          7.2.21 other than for the Advisor Obligations, all other expenses actually incurred
by the Advisor, its Affiliates or any Sub-Advisor or their respective officers,
employees, representatives or agents, or any Affiliates thereof, which are reasonably
necessary for the performance by the Advisor of its duties and functions under this
Agreement (including, without limitation, any fees or expenses relating to the Company’s
compliance with all governmental and regulatory matters); and

          7.2.22 all other expenses of the Company or any subsidiary of the Company that are
not the responsibility of the Advisor under Section 7.1 of this Agreement.

     7.3 Expense Reimbursement to the Advisor. Any individual cost or expense exceeding
$100,000 (or such other limit as may be approved by the Board of Directors from time to time) shall
be approved by the Board of Directors, unless such item was previously reflected in the Company’s
budget approved by the Board of Directors. Costs and expenses incurred by the Advisor on behalf of
the Company shall be reimbursed monthly to the Advisor or, at the Advisor’s election, offset
against any funds of the Company in the Company’s account or accounts held by the Advisor or
otherwise. The Advisor shall prepare a written statement in reasonable detail documenting the
costs and expenses of the Company and those incurred by the Advisor on behalf of the Company during
each month, and shall deliver such written statement to the Company within 15 days after the end of
each month. Unless deducted directly by the Advisor as aforesaid, the Company shall pay all
amounts payable to the Advisor pursuant to this Section 7.3 within three days after the receipt of
the written statement without demand, deduction, offset or delay. Cost and expense reimbursement to
the Advisor shall be subject to adjustment at the end of each calendar year in connection with the
annual audit of the Company.

8. Limits of Advisor Activities; Indemnity.

     8.1 Limits of Advisor Activities. Notwithstanding any provision in this Agreement to
the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith,
would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT
under the Code, (ii) subject the Company to regulation under the Investment Company Act, (iii)
violate any law, rule, regulation or statement of policy of any governmental body or agency having
jurisdiction over the Company, its shares or its other securities, (iv) require the Advisor to
register as a broker-dealer with the SEC or any state, or (v) violate the Governing Documents of
the Company. In the event that an action would violate (i) through (v) of the preceding sentence
but such action has been ordered by the Board of Directors, the Advisor shall notify the Board of
Directors of the Advisor’s judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from the Board of
Directors. In such event, the Advisor, any Sub-Advisor and their respective Affiliates, directors,
officers, stockholders, equity holders, employees, representatives and agents, and any Affiliates
thereof, shall have no liability for acting in accordance with the specific instructions of the
Board of Directors so given.

Advisory Agreement—Page 18

 

 

     8.2 Indemnification by Company. Except as prohibited by the restrictions provided by
the laws of the State of Maryland, the Governing Documents, or this Section 8.2, the Company and
its subsidiaries shall reimburse, indemnify and hold harmless the Advisor, any Sub-Advisor, and
their respective Affiliates, directors, officers, stockholders, equity holders, employees,
representatives and agents, and any Affiliates thereof (each, an “indemnitee”) from and against any
and all expenses, losses, costs, damages, liabilities, demands, charges and claims of any nature
whatsoever, actual or threatened (including, without limitation, reasonable attorneys’ fees),
arising from or in respect of any acts or omissions, errors of judgment or mistakes of law (or any
alleged acts or omissions, errors of judgment or mistakes of law) performed or made while acting in
any capacity contemplated under this Agreement or pursuant to any underwriting agreement or similar
agreement to which Advisor is a party that is related to the Company’s activities to the extent
that such expenses, losses, costs, damages, liabilities, demands, charges and claims are not fully
reimbursed by insurance. The Company shall not indemnify or hold harmless any indemnitee for any
liability or loss suffered by the indemnitee, nor shall it provide that any indemnitee be held
harmless for any loss or liability suffered by the Company, unless all of the following conditions
are met: (i) the indemnitee has determined, in good faith, that the course of conduct which caused
the loss or liability was in the best interests of the Company; (ii) the indemnitee was acting on
behalf of or performing services for the Company; (iii) such liability or loss was not the result
of negligence or misconduct by the indemnitee; and (iv) such indemnification is recoverable only
out of the Company’s net assets and not from the Company’s stockholders. Notwithstanding the
foregoing, the Company shall not indemnify any indemnitee for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws by such party
unless one or more of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged securities law violations as to the
particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court
of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the court considering
the request for indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory authority in which
securities of the Company were offered or sold as to indemnification for violations of securities
laws.

     8.3 Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable
legal expenses and other costs incurred by the Advisor, any Sub-Advisor, and their respective
Affiliates, directors, officers, stockholders, equity holders, employees, representatives and
agents, and any Affiliates thereof, in advance of the final disposition of a proceeding only if (in
addition to the procedures required by the Maryland General Corporation Law, as amended from time
to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with
respect to the performance of duties or services on behalf of the Company; (b) the legal proceeding
was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or
her capacity as such, a court of competent jurisdiction approves such advancement; and (c) the
indemnitee undertakes to repay the amount paid or reimbursed by the Company, together with the
applicable legal rate of interest thereon, if it is ultimately determined that the particular
indemnitee is not entitled to indemnification.

Advisory Agreement—Page 19

 

 

9. No Joint Venture. The Company and the Advisor are not partners or joint venturers with
each other, and nothing in this Agreement shall be construed to make them such partners or joint
venturers or impose any liability as such on any of them. The Advisor is an independent contractor
and, except as expressly provided or authorized in this Agreement, shall have no authority to act
for or represent the Company.

10. Term; Termination.

     10.1 Term. This Agreement shall commence on the Effective Date and shall have an
initial term of one year. Thereafter, this Agreement shall automatically renew for an additional
year, unless terminated in accordance with the terms and conditions of this Agreement.

     10.2 Termination Without Cause. Notwithstanding any other provision of this Agreement
to the contrary, after the first anniversary of the Effective Date, (i) the Company shall have the
right to terminate this Agreement without cause at any time after 60-days prior written notice to
the Advisor and the affirmative vote of a majority of the Independent Directors to do so and (ii)
the Advisor shall have the right to terminate this Agreement without cause at any time after
60-days prior written notice to the Board of Directors. If the Company terminates this Agreement
without cause, the Company shall pay to the Advisor within 15 days after the effective date of
termination without demand, deduction, offset or delay or, at the Advisor’s election, the Advisor
may deduct such payments from any account or accounts of the Company, all unpaid reimbursable costs
and expenses permitted under the Agreement and all earned and unpaid Management Compensation.

     10.3 Termination by Company for Cause. In the event that the Independent Directors
shall have made a reasonable good faith determination based on findings of fact which are disclosed
to the Advisor that cause exists, then a majority of the Independent Directors shall have the right
to terminate this Agreement for cause at the following time: (i) immediately, if the Independent
Directors determined in good faith that its claims are based primarily on criminal activity or
active fraud or (ii) after not less than 30 days after written notice to the Advisor, if the
Independent Directors determined in good faith that its claims are based other than as described in
clause (i) above and the Independent Directors shall have determined that cause still exists after
written notice to the Advisor disclosing the findings of the Independent Directors and a reasonable
opportunity to cure. In the event that the Agreement is terminated for “cause” in accordance with
the provisions of this Section 10.3, the Company shall pay the Advisor all unpaid reimbursable
costs and expenses and all earned and unpaid Management Compensation.

     10.4 Change of Control. In the event of a Change of Control of the Company, the
Advisor shall have the right to terminate this Agreement upon 60 days prior written notice,
provided that the Advisor delivers such notice within 90 days after such Change of Control has
occurred. In the event of a termination of this Agreement in connection with a Change in Control,
the Company shall pay the Advisor all unpaid reimbursable costs and expenses permitted under the
Agreement and all earned and unpaid Management Compensation.

11. Action Upon Termination. From and after the effective date of termination of this
Agreement, except as specified in Section 10.2, 10.3 or 10.4 of this Agreement, the Advisor shall
not be entitled to any payment or compensation and as of the date of termination, this Agreement

Advisory Agreement—Page 20

 

 

shall terminate and be cancelled without consideration. Upon such termination, the Advisor shall
promptly:

          11.1.1 pay over to the Company or any subsidiary of the Company all money collected
and held for the account of the Company or any subsidiary of the Company pursuant to
this Agreement;

          11.1.2 pay over to the Company any unpaid Advisor Refund and any amounts payable to
the Company pursuant to Section 6.2.5 hereof;

          11.1.3 deliver to the Board of Directors an accounting, including a statement
showing all payments collected by it and a statement of all money held by it, covering
the period following the date of the last accounting furnished to the Board of Directors
with respect to the Company or any subsidiary of the Company; and

          11.1.4 deliver to the Board of Directors all property and documents of the Company
or any subsidiary of the Company then in the custody of the Advisor.

12. Limited Right to Offset; Survival of Payments. Notwithstanding anything to the
contrary, the Company shall not have any right to offset any amount whatsoever from any payments in
Sections 6, 7, 10, 11 or otherwise and the Company’s obligation to make such payments shall survive
the termination of this Agreement, except that the Company shall have the right to offset against
the liquidated sum of any Advisor Refund.

13. Assignments.

     13.1 Assignment by the Advisor. Other than transfers and assignments by operation of
law (including transfers in connection with a change of control of the Advisor), this Agreement
shall terminate automatically in the event that the Advisor assigns this Agreement, unless such
assignment is consented to in advance in writing by the Company with the consent of a majority of
the Independent Directors. In the event an assignment by the Advisor is consented to by the
Company in accordance with this Section 13.1, such assignment shall bind the assignee under this
Agreement in the same manner as the Advisor is bound, and the Advisor shall be released from all of
its obligations, duties and responsibilities under this Agreement and all liability therefore and
in respect hereof. In addition, the assignee shall execute and deliver to the Company a
counterpart of this Agreement naming such assignee as Advisor.

     13.2 Assignment by the Company. This Agreement shall not be assigned by the Company
without the prior written consent of the Advisor.

14. Release of Money or Other Property Upon Written Request. The Advisor agrees that any
money or other property of the Company or any subsidiary of the Company held by the Advisor under
this Agreement shall be held by the Advisor as custodian for the Company or such subsidiary, and
the Advisor’s records shall be appropriately marked clearly to reflect the ownership of such money
or other property by the Company or such subsidiary.

     14.1 Procedures. Upon the receipt by the Advisor of a written request signed by a
duly authorized officer of the Company or an authorized member of the Board of Directors requesting

Advisory Agreement—Page 21

 

 

the Advisor to release to the Company or any subsidiary of the Company any money or other
property then held by the Advisor for the account of the Company or any subsidiary of the Company
under this Agreement, the Advisor shall release such money or other property to the Company or such
subsidiary of the Company within a reasonable period of time, but in no event later than 90 days
following such request; provided, however, that the Advisor shall have the right to offset any
First-Tier Management Compensation, Second-Tier Management Compensation reimbursable costs or any
other sums due and owning to the Advisor under this Agreement against payment of any money or
property held by the Advisor for the account of the Company or any subsidiary of the Company under
this Agreement.

     14.2 Limitations. The Advisor, any Sub-Advisor and their respective Affiliates,
directors, officers, stockholders, equity holders, employees, representatives and agents, and any
Affiliates thereof, shall not be liable to the Company, any subsidiaries of the Company, the
Independent Directors or the Company’s or its subsidiaries’ stockholders for any acts performed or
omissions to act by the Company or any subsidiary of the Company in connection with the money or
other property released to the Company or any subsidiary of the Company in accordance with this
Section 14, except to the extent that the Board of Directors shall have made a reasonable good
faith determination based upon findings of fact which are disclosed to the Advisor that the Advisor
was grossly negligent, acted with reckless disregard or engaged in willful misconduct or active
fraud while discharging its material duties under this Agreement.

     14.3 Indemnification. The Company and any subsidiary of the Company shall indemnify
the Advisor, any Sub-Advisor and their respective Affiliates, directors, officers, stockholders,
equity holders, employees, representatives and agents, and any Affiliates thereof, against any and
all expenses, costs, losses, damages, liabilities, demands, charges and claims of any nature
whatsoever, which arise in connection with the Advisor’s (or a Sub-Advisor’s) release of such money
or other property to the Company or any subsidiary of the Company in accordance with the terms of
this Section 14, if all of the following conditions are met:

          14.3.1 The indemnitee has determined, in good faith, that the course of conduct
which caused the loss or liability was in the best interests of the Company.

          14.3.2 The indemnitee was acting on behalf of or performing services for the
Company.

          14.3.3 Such liability or loss was not the result of negligence or misconduct by the
indemnitee.

          14.3.4 Such indemnification is recoverable only out of the Company’s net assets and
not from its stockholders.

     Indemnification pursuant to this provision shall be in addition to any right of the Advisor,
any Sub-Advisor and their respective Affiliates, directors, officers, stockholders, equity holders,
employees, representatives and agents, and any Affiliates thereof, to indemnification under Section
8 of this Agreement.

Advisory Agreement—Page 22

 

 

15. Representations, Warranties and Covenants.

     15.1 Company in Favor of the Advisor. The Company hereby represents and warrants to
the Advisor as follows:

          15.1.1 Due Formation. The Company is duly organized, validly existing and
in good standing under the laws of Maryland, has the power to own its assets and to
transact the business in which it is now engaged and is duly qualified to do business
and is in good standing under the laws of each jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that could not in the aggregate have
a material adverse effect on the business operations, assets or financial condition of
the Company and its subsidiaries, taken as a whole. The Company does not do business
under any fictitious business name.

          15.1.2 Power and Authority. The Company has the power and authority to
execute, deliver and perform this Agreement and all obligations required under this
Agreement and has taken all necessary action to authorize this Agreement on the terms
and conditions hereof and the execution, delivery and performance of this Agreement and
all obligations required under this Agreement. Except as shall have been obtained, no
consent of any other person, including, without limitation, stockholders and creditors
of the Company, and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any governmental
authority is required by the Company in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all obligations
required under this Agreement. This Agreement has been, and each instrument or document
required under this Agreement will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument or document
required under this Agreement when executed and delivered under this Agreement will
constitute, the legally valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.

          15.1.3 Execution, Delivery and Performance. The execution, delivery and
performance of this Agreement and the documents or instruments required under this
Agreement will not violate any provision of any existing law or regulation binding on
the Company, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on the Company, or the Governing Instruments of, or any
securities issued by, the Company or of any mortgage, indenture, lease, contract or
other agreement, instrument or undertaking to which the Company is a party or by which
the Company or any of its assets may be bound, the violation of which would have a
material adverse effect on the business operations, assets or financial condition of the
Company and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues pursuant
to the provisions of any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking (other than

Advisory Agreement—Page 23

 

 

the pledge of amounts payable to the Advisor under this Agreement to secure the
Advisor’s obligations to its lenders).

     15.2 Advisor in Favor of the Company. The Advisor hereby represents and warrants to
the Company as follows:

          15.2.1 Due Formation. The Advisor is duly organized, validly existing and
in good standing under the laws of Delaware, has the power to own its assets and to
transact the business in which it is now engaged and is duly qualified to do business
and is in good standing under the laws of each jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that could not in the aggregate have
a material adverse effect on the business operations, assets or financial condition of
the Advisor and its subsidiaries, taken as a whole. The Advisor does not do business
under any fictitious business name.

          15.2.2 Power and Authority. The Advisor has the power and authority to
execute, deliver and perform this Agreement and all obligations required under this
Agreement and has taken all necessary corporate action to authorize this Agreement on
the terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required under this Agreement. Except as shall have been
obtained, no consent of any other person including, without limitation, stockholders and
creditors of the Advisor, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with, any
governmental authority is required by the Advisor in connection with this Agreement or
the execution, delivery, performance, validity or enforceability of this Agreement and
all obligations required under this Agreement. This Agreement has been and each
instrument or document required under this Agreement will be executed and delivered by a
duly authorized officer of the Advisor, and this Agreement constitutes, and each
instrument or document required under this Agreement when executed and delivered under
this Agreement will constitute, the legally valid and binding obligation of the Advisor
enforceable against the Advisor in accordance with its terms.

          15.2.3 Execution, Delivery and Performance. The execution, delivery and
performance of this Agreement and the documents or instruments required under this
Agreement will not violate any provision of any existing law or regulation binding on
the Advisor, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on the Advisor, or the governing instruments of, or any
securities issued by, the Advisor or of any mortgage, indenture, lease, contract or
other agreement, instrument or undertaking to which the Advisor is a party or by which
the Advisor or any of its assets may be bound, the violation of which would have a
material adverse effect on the business operations, assets or financial condition of the
Advisor and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues pursuant
to the provisions of any such mortgage indenture, lease, contract or other agreement,
instrument or undertaking.

Advisory Agreement—Page 24

 

 

16. Notices. Unless expressly provided otherwise in this Agreement, all notices, requests,
demands and other communications required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given, made and received when (1) delivered by hand, (2)
otherwise delivered against receipt therefor, or (3) upon actual receipt of registered or certified
mail, postage prepaid, return receipt requested. The parties may deliver to each other notice by
electronically transmitted facsimile copies, provided that such facsimile notice is followed within
24 hours by any type of notice otherwise provided for in this Section 16. Any notice shall be duly
addressed to the parties as follows:

if to the Company:

CM REIT, Inc.

1291 W. Galleria Drive, Suite 200

Henderson, Nevada 89014

Attention: G. Steven Dawson

Telephone: (205) 986-7452

with a copy given in the manner prescribed above (which shall not constitute notice), to:

Locke Lord Bissell & Liddell LLP

2200 Ross Avenue

Suite 2200

Dallas, Texas 75201

Attn: X. Lane Folsom, Esq.

if to the Advisor:

2020 Capital Advisors, LLC

1291 W. Galleria Drive

Henderson, Nevada 89014

Attention: Todd B. Parriott

Telephone: (702) 795-7930

Any party may alter the address to which communications or copies are to be sent by giving notice
of such change of address in conformity with the provisions of this Section 16 for the giving of
notice.

17. Binding Nature of Agreement; Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns as provided in this Agreement.

18. Entire Agreement. This Agreement contains the entire agreement and understanding among
the parties hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance or usage of the trade inconsistent

Advisory Agreement—Page 25

 

 

with any of the terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.

19. Controlling Law. This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Maryland, notwithstanding any Maryland or
other conflict of law provisions to the contrary.

20. No Waivers. Neither the failure nor any delay on the part of a party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of
such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have granted such waiver.

21. Titles Not to Affect Interpretation. The titles of paragraphs and subparagraphs
contained in this Agreement are for convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction or interpretation hereof.

22. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as the signatories.

23. Provisions Severable. The provisions of this Agreement are independent of and
severable from each other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.

24. Gender. Words used herein regardless of the number and gender specifically used shall
be deemed and construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.

25. Attorneys’ Fees. Should any action or other proceeding be necessary to enforce any of
the provisions of this Agreement or the various transactions contemplated hereby, the prevailing
party will be entitled to recover its actual reasonable attorneys’ fees and expenses from the
non-prevailing party.

26. Amendments. This Agreement may not be amended, modified or changed (in whole or in
part), except by a formal, definitive written agreement expressly referring to this Agreement,
which agreement is executed by all of the parties hereto and, in the case of the Company, approved
by a majority of the Independent Directors. The parties hereto expressly acknowledge that no
consent or approval of the Company’s stockholders is required in connection with any amendment,
modification or change to this Agreement.

Advisory Agreement—Page 26

 

 

27. Authority. Each signatory to this Agreement warrants and represents that he is
authorized to sign on behalf of and to bind the party on whose behalf he, she or it is signing.

[Signature page follows]

Advisory Agreement—Page 27

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

	 	 	 	 	 
	 	THE COMPANY:

CM REIT, INC.,

a Maryland corporation

 	 
	 	By:  	/s/ G. Steven Dawson
 	 
	 	 	G. Steven Dawson 	 
	 	 	Chief Financial Officer 	 
	 
	 	THE ADVISOR:

2020 CAPITAL ADVISORS, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Todd B. Parriott
 	 
	 	 	Todd B. Parriott 	 
	 	 	Chief Executive Officer 	 

Advisory Agreement—Page 28

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