Contract analysis

Section 1.1 — Defined Terms As used in this Agreement, the following terms shall have the meanings set forth below: "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, "Control" (including the correlative terms "Controlling," "Controlled by," and "under common Control wi

Section 1.2 — Rules of Construction For purposes of this Agreement, the following rules of construction shall apply: (a) All references to "Sections," "Articles," "Exhibits," and "Schedules" are to Sections and Articles of, and Exhibits and Schedules to, this Agreement, unless otherwise specified. (b) The words "herein," "hereof," "hereunder," and similar terms refer to this Agreement as a whole and not to any partic

ARTICLE II FORMATION AND ORGANIZATION OF THE COMPANY

Section 2.1 — Formation The Company has been formed as a Delaware limited liability company pursuant to the Delaware Act by the filing of a Certificate of Formation with the Office of the Secretary of State of the State of Delaware. The name of the Company as set forth in the Certificate of Formation is "Harbor Point Development JV, LLC." The registered agent of the Company in the State of Delaware is Incorporators &

Section 2.2 — Name The business of the Company shall be conducted under the name "Harbor Point Development JV, LLC." The Managing Member may adopt such trade names, assumed names, or fictitious names for the Company as the Managing Member may determine to be appropriate or advisable; provided, that the Managing Member shall obtain the prior written consent of the Non-Managing Member before adopting any such trade nam

Section 2.3 — Principal Office The principal office of the Company shall be located at 7200 Pratt Street, Suite 1400, Baltimore, MD 21202, or at such other location within the Baltimore, Maryland metropolitan area as the Managing Member may from time to time designate by written notice to the Non-Managing Member. The Company shall maintain its books and records at its principal office and shall make them available fo

Section 2.4 — Foreign Qualification The Managing Member shall cause the Company to qualify as a foreign limited liability company in the State of Maryland by filing the appropriate registration with the Maryland State Department of Assessments and Taxation ("MD SDAT"), and in such other jurisdictions as may be required for the Company to conduct its business and to own and operate the Property. The Managing Member sh

Section 2.5 — Term The Company shall continue in existence perpetually unless and until dissolved in accordance with Article XII of this Agreement or as otherwise required by the Delaware Act. No Member shall have the right to dissolve or terminate the Company except as expressly provided in Article XII.

Section 2.6 — Fiscal Year The fiscal year of the Company shall be the calendar year, commencing January 1 and ending December 31, unless otherwise required by the Code or applicable Treasury Regulations.

Section 2.7 — Statutory Compliance The Managing Member shall cause the Company to comply with all filing, reporting, and other requirements applicable to the Company under the Delaware Act, the laws of the State of Maryland (including the Maryland Limited Liability Company Act), and the laws of any other jurisdiction in which the Company does business, owns property, or is otherwise required to file or qualify. The M

ARTICLE III PURPOSE AND POWERS

Section 3.1 — Purpose The purpose of the Company is limited to the following activities and such other activities as are incidental or ancillary thereto: (a) To acquire the Property from Harbor East Land Holdings, LLC for the Land Acquisition Price of Fifty-Four Million Dollars ($54,000,000), by assignment of the existing Purchase and Sale Agreement from Fairwater to the Company; (b) To develop and construct the Proj

Section 3.2 — Powers The Company shall have all powers available to a Delaware limited liability company under the Delaware Act, subject to the restrictions and limitations set forth in this Agreement and the Operating Agreement. Without limiting the generality of the foregoing, the Company shall have the power and authority to: (a) Enter into, execute, deliver, and perform contracts, agreements, leases, instruments,

Section 3.3 — Limitations on Purpose (a) The Company shall not engage in any business or activity other than as described in Section 3.1 without the prior written consent of both Members. (b) The Company shall not take any action, and shall not fail to take any action, that would cause Fairwater Real Estate Investment Trust to fail to qualify as a REIT under the Code, including Sections 856 through 860 thereof. This

ARTICLE IV MEMBERS; CAPITAL CONTRIBUTIONS

Section 4.1 — Members The Members of the Company and their respective Percentage Interests and equity commitments are as follows: The Total Equity required for the Project is Two Hundred Forty Million Dollars ($240,000,000), which together with the Construction Loan in the amount of Three Hundred Thirty-Six Million Dollars ($336,000,000) constitutes the Total Project Cost of Five Hundred Seventy-Six Million Dollars (

Section 4.2 — Total Equity Commitments (a) Fairwater Member Commitment. The Fairwater Member hereby commits to contribute an aggregate amount of Seventy-Two Million Dollars ($72,000,000) (being thirty percent (30%) of Total Equity of $240,000,000) to the capital of the Company, in cash, on the terms and subject to the conditions set forth in this Article IV and the Capital Contribution Agreement. (b) Prescott Member

Section 4.3 — Initial Capital Contributions (a) The Initial Capital Call shall be in the aggregate amount of Sixty Million Dollars ($60,000,000), representing twenty-five percent (25%) of Total Equity. The Initial Capital Call shall be allocated between the Members as follows: (i) Fairwater Member: Eighteen Million Dollars ($18,000,000) (being thirty percent (30%) of $60,000,000); (ii) Prescott Member: Forty-Two Mill

Section 4.4 — Subsequent Capital Contributions (a) After the Initial Capital Contributions, additional Capital Contributions shall be made by the Members pro rata in accordance with their respective Percentage Interests (thirty percent (30%) Fairwater Member and seventy percent (70%) Prescott Member). (b) Capital Calls shall be issued by the Managing Member from time to time in accordance with the funding requirement

Section 4.5 — Capital Accounts (a) The Company shall establish and maintain a separate Capital Account for each Member in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv) and Section 704(b) of the Code. (b) Each Member's Capital Account shall be: (i) Credited with the amount of such Member's Capital Contributions, such Member's distributive share of Company income and gain (including income and gain exe

Section 4.6 — No Interest on Capital Contributions No Member shall be entitled to receive interest on its Capital Contributions or Capital Account balance. The foregoing shall not be construed to limit any Member's right to receive distributions under the distribution waterfall set forth in Article VI, including the Preferred Return.

Section 4.7 — No Return of Capital Contributions No Member shall have the right to demand or receive the return of its Capital Contributions except as provided in Article VI (Distributions) or Article XII (Dissolution and Winding Up). No Member shall be liable for the return of the Capital Contributions of any other Member.

Section 4.8 — Pre-Formation Expenditure Reimbursement Prior to the formation of the Company, Fairwater Real Estate Investment Trust incurred certain qualifying pre-formation expenditures in connection with the Project, including land deposits, zoning counsel fees, architectural design fees, environmental assessment costs, survey costs, and other development-related expenses. Such pre-formation expenditures shall be r

ARTICLE V MANAGEMENT AND GOVERNANCE

Section 5.1 — Managing Member (a) Fairwater HP Manager, LLC is hereby designated as, and shall serve as, the Managing Member of the Company. Subject to the Major Decision consent requirements set forth in Section 5.3 and the other limitations set forth in this Agreement and the Operating Agreement, the Managing Member shall have full power and authority to manage and direct the day-to-day business and affairs of the

Section 5.2 — Non-Managing Member (a) Prescott HP Investor, LLC shall serve as the Non-Managing Member of the Company. The Non-Managing Member shall not participate in the day-to-day management or operations of the Company and shall have no right, power, or authority to act on behalf of or bind the Company, except as expressly provided in this Agreement. (b) Notwithstanding the foregoing, the Non-Managing Member shal

Section 5.3 — Major Decisions Requiring Non-Managing Member Consent The following actions shall constitute "Major Decisions" and shall not be taken by the Managing Member or the Company without the prior written consent of the Non-Managing Member (Prescott Member): (a) Approval of the Annual Budget (whether a development budget or an operating budget) and any amendment, modification, or supplement thereto that would

Section 5.4 — Officers (a) The Managing Member may, from time to time, appoint officers of the Company, including a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as the Managing Member deems necessary or appropriate to act on behalf of the Company in the ordinary course of business. Officers shall serve at the pleasure of the Managing Member and may be removed at any time w

Section 5.5 — Key Person Provisions (a) The Members acknowledge and agree that the continued active involvement of the Key Persons — Harold K. Brennan (CEO & Chairman, Fairwater Real Estate Investment Trust) and Marcus D. Okonkwo (EVP, Development, Fairwater Real Estate Investment Trust) — in the management and operations of the Company and Fairwater's real estate development business is a material factor in the Non-

Section 5.6 — Budgets and Reporting (a) The Managing Member shall prepare and submit to the Non-Managing Member for approval the following budgets and reports: (i) Initial Development Budget. Prior to the commencement of construction, the Managing Member shall prepare and submit to the Non-Managing Member for approval a comprehensive development budget for the Project, which upon approval by both Members shall consti

Section 5.7 — Bank Accounts (a) The Company shall maintain one or more bank accounts at Meridian National Bank, N.A. or at such other nationally recognized financial institution(s) as the Managing Member may designate by written notice to the Non-Managing Member. (b) Authorized signatories on such bank accounts shall be designated by the Managing Member, subject to the provisions of the Operating Agreement. The Manag

Section 5.8 — Exculpation and Standard of Care (a) The Managing Member shall perform its duties and exercise its authority under this Agreement in good faith and in a manner that the Managing Member reasonably believes to be in the best interests of the Company. The Managing Member shall exercise the degree of care and diligence that a reasonably prudent person in a like position would exercise under similar circumst

Section 6.1 — Distribution Waterfall — Net Cash Flow and Capital Events All distributions of Net Cash Flow and proceeds from Capital Events (including Dispositions) shall be made to the Members in the following order of priority: Tier 1 — Return of Capital. First, one hundred percent (100%) to the Members, pro rata in accordance with their respective Percentage Interests (thirty percent (30%) to the Fairwater Member

Section 6.2 — Timing of Distributions (a) Quarterly Distributions. Distributions of Net Cash Flow shall be made quarterly, within forty-five (45) days after the end of each calendar quarter (or as soon thereafter as practicable), based on the Net Cash Flow for such quarter as determined by the Managing Member. (b) Capital Event Distributions. Distributions of proceeds from Capital Events (including the proceeds of an

Section 6.3 — REIT Required Distributions Notwithstanding any other provision of this Agreement to the contrary, the Fairwater Member shall have the right, exercisable by written notice to the Managing Member and the Non-Managing Member, to require the Company to distribute to the Fairwater Member at least one hundred percent (100%) of the REIT taxable income (as determined under Sections 857(a) and 4981 of the Code)