Contract analysis

Section 1.1 — Defined Terms As used in this Agreement, the following terms shall have the meanings set forth below: "Adjusted Tax Basis" means, with respect to any Company property, the adjusted basis of such property for federal income tax purposes, as determined under Section 1011 of the Code, taking into account all adjustments to basis required or permitted under the Code and the Treasury Regulations, including a

Section 1.2 — Cross-References to Operating Agreement Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Operating Agreement. In the event of any inconsistency between the definition of a term in this Agreement and the definition of such term in the Operating Agreement, the definition in this Agreement shall control for purposes of this

Section 1.3 — Construction Unless the context otherwise requires: (a) references to "Sections" and "Articles" are to sections and articles of this Agreement; (b) references to any statute, regulation, or other law include all statutory and regulatory provisions consolidating, amending, replacing, or interpreting such statute, regulation, or law and any reference to any statute, regulation, or law shall also be deemed

ARTICLE II — SECTION 704(c) ALLOCATIONS

Section 2.1 — Identification of Protected Gain (a) Upon the acquisition of the Property by the Company from Harbor East Land Holdings, LLC at a purchase price of Fifty-Four Million Dollars ($54,000,000) (with the land closing targeted for January 30, 2026), the Property's initial Book Value shall equal Fifty-Four Million Dollars ($54,000,000) for purposes of the Company's books and Capital Account maintenance under T

Section 2.2 — Protected Period (a) The "Protected Period" with respect to each item or layer of Section 704(c) Property shall begin on the date of the initial contribution of such property to the Company (or, in the case of a reverse 704(c) layer, the date of the revaluation event creating such layer) and shall continue for a period of ten (10) years thereafter, unless earlier terminated by the mutual written consent

Section 2.3 — Method of Allocation (a) The Company shall apply the "traditional method with curative allocations" as described in Treasury Regulation Section 1.704-3(c) for all Section 704(c) Allocations with respect to Section 704(c) Property, unless the Members unanimously agree in writing to adopt a different reasonable method permitted under Treasury Regulation Section 1.704-3 (including, without limitation, the

Section 2.4 — Ceiling Rule Limitations (a) To the extent that the "ceiling rule" under Treasury Regulation Section 1.704-3(b)(1) would limit the amount of tax items that can be allocated to a non-contributing Member with respect to Section 704(c) Property, thereby resulting in a distortion of allocations as compared to the allocations of corresponding book items, the Company shall use curative allocations of other ta

Section 2.5 — Reverse 704(c) Layers (a) Upon any revaluation of Company assets in connection with a capital event (including, without limitation, the admission of additional members, the distribution of property to a Member, an adjustment to reflect a change in membership interests, or any other event described in Treasury Regulation Section 1.704-1(b)(2)(iv)(f)), the Company shall create reverse 704(c) layers with r

ARTICLE III — GAIN PROTECTION PROVISIONS

Section 3.1 — Tax Protection Obligation (a) During the Protected Period with respect to any Section 704(c) Property, the Company shall not undertake, authorize, or permit any Disposition of such Section 704(c) Property if such Disposition would result in the recognition of Tax Gain to a Protected Member in excess of the Tax Protection Amount, except as expressly provided in Section 3.1(b) below. (b) The "Tax Protecti

Section 3.2 — Minimum Debt Maintenance Obligation (a) During the Protected Period, the Company shall use commercially reasonable efforts to maintain outstanding Company indebtedness (whether the construction loan from Meridian National Bank, N.A. in the original principal amount of Three Hundred Thirty-Six Million Dollars ($336,000,000), or any replacement, substitute, or refinanced indebtedness) in an aggregate prin

Section 3.3 — Limitation on Debt Prepayment During the Protected Period, the Company shall not voluntarily prepay, defease, retire, or otherwise reduce the outstanding principal balance of any Company indebtedness (whether the construction loan from Meridian National Bank, N.A. or any other Company indebtedness) to the extent that such prepayment, defeasance, retirement, or reduction would cause any Protected Member'

Section 3.4 — Refinancing Limitations (a) Any Refinancing of Company indebtedness during the Protected Period shall be structured so that the resulting allocation of Company liabilities under Section 752 of the Code and the Treasury Regulations thereunder does not reduce any Protected Member's share of Company liabilities below the amount of such Protected Member's Protected Gain as of the date of such Refinancing. (

Section 3.5 — Like-Kind Exchange and Installment Sale Provisions (a) If the Company proposes to undertake a Disposition of the Property (or any portion thereof) during the Protected Period, and a Protected Member desires that such Disposition be structured on a tax-deferred or tax-efficient basis, such Protected Member may, within fifteen (15) business days after receiving notice of the proposed Disposition, deliver

Section 3.6 — Interaction with Distribution Waterfall (a) The protections set forth in this Article III are independent of, and shall not modify, supersede, or otherwise affect, the distribution waterfall and promote structure set forth in the Operating Agreement. For reference, the Operating Agreement provides for the following distribution priorities: (i) return of capital contributions to the Members pro rata (30%

ARTICLE IV — SPECIAL REIT PROTECTION PROVISIONS

Section 4.1 — Prohibited Transaction Protection (a) The Company and each Member acknowledge and agree that the Fairwater Member's sole member, Fairwater Real Estate Investment Trust (NYSE: FWT; EIN: 52-2198437; Maryland State Department of Assessments and Taxation ID: D19847321), is a publicly traded real estate investment trust that has elected to be taxed as a REIT under Sections 856 through 860 of the Code, and th

Section 4.2 — Dealer Status Protections (a) The Company shall not engage in a pattern of Dispositions or other activities that could reasonably be expected to cause the Company's real property assets (including the Property) to be characterized as property "held primarily for sale to customers in the ordinary course of a trade or business" within the meaning of Section 1221(a)(1) of the Code (i.e., "dealer property")

Section 4.3 — REIT Income and Asset Testing Coordination (a) The obligations of this Section 4.3 are in addition to, and are intended to complement, the provisions set forth in the REIT Compliance Side Letter of even date herewith between the Fairwater Member and the Prescott Member. (b) The Company shall cooperate with the Fairwater Member to ensure that the Company's income, assets, and operations do not cause Fair

Section 4.4 — Required REIT Distributions (a) Consistent with the Operating Agreement and the REIT Compliance Side Letter, the Company shall distribute to the Fairwater Member, upon the Fairwater Member's written request, at least one hundred percent (100%) of the Fairwater Member's allocable share of "REIT taxable income" (within the meaning of Section 857(b)(2) of the Code, determined without regard to the dividend

Section 5.1 — Indemnification for Breach (a) If the Company or any Member breaches any of its obligations under this Agreement and such breach results in the recognition of Tax Gain by a Protected Member (or such Protected Member's direct or indirect owners) during the Protected Period, the breaching Party shall indemnify, defend, and hold harmless the affected Protected Member and its direct and indirect owners from

Section 5.2 — Limitation on Indemnification Notwithstanding anything to the contrary in Section 5.1, no indemnification shall be owed by any Party under this Article V with respect to: (a) Tax Gain resulting from actions taken with the prior written consent of the affected Protected Member, provided that such consent was given after the Protected Member was informed in writing of the potential tax consequences of suc

Section 5.3 — Dispute Resolution for Tax Indemnification Claims (a) Any dispute between the Parties regarding the amount of Tax Gain recognized, the applicable tax rate, the computation of the indemnification amount (including the gross-up amount), or any other matter arising under this Article V shall be submitted for resolution to an independent nationally recognized accounting firm mutually selected by the disputi

ARTICLE VI — PARTNERSHIP REPRESENTATIVE AND TAX MATTERS

Section 6.1 — Partnership Representative (a) Fairwater HP Manager, LLC shall serve as the Partnership Representative of the Company under Section 6223 of the Code (as amended by the Bipartisan Budget Act of 2015), as provided in the Operating Agreement. Fairwater HP Manager, LLC shall have the authority and responsibility to act on behalf of the Company in connection with all federal income tax audits, examinations,

Section 6.2 — Tax Returns and Reporting (a) The Company's federal, state, and local income tax returns shall be prepared by Alderman & Fields, CPAs, LLP (engagement partner: Robert E. Alderman; principal office: 1 South Street, Suite 1800, Baltimore, Maryland 21202) in accordance with this Agreement, the Operating Agreement, and applicable law. (b) Draft tax returns shall be provided to each Member for review and com

Section 6.3 — Push-Out Election (a) In the event of a federal income tax adjustment under the centralized partnership audit rules (Sections 6221–6241 of the Code) with respect to the Company, the Partnership Representative shall, upon the written request of either Member (delivered within thirty (30) days after the Partnership Representative notifies the Members of such adjustment), make an election under Section 622

Section 6.4 — Maryland PTE Tax Elections (a) The Company shall make elections to pay the Maryland pass-through entity tax ("Maryland PTE Tax") as agreed by the Members, in accordance with the Operating Agreement and the Tax Structure Memorandum prepared by Sylvia Hartwell of Calderwood & Harkness LLP, dated December 2025 (the "Tax Structure Memorandum"), which analyzes the benefits and mechanics of the Maryland PTE T

ARTICLE VII — REPRESENTATIONS AND WARRANTIES

Section 7.1 — Representations of the Company The Company hereby represents and warrants to each Member as follows: (a) Organization and Good Standing. The Company is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Delaware. The Company's registered agent in Delaware is Incorporators & Associates, Inc., 1209 Orange Street, Wilmington, Delaware 19801. The C