PRE-FORMATION EXPENDITURE REIMBURSEMENT AGREEMENT
by and between
HARBOR POINT DEVELOPMENT JV, LLC a Delaware limited liability company
and
FAIRWATER REAL ESTATE INVESTMENT TRUST a Maryland real estate investment trust
Effective as of January 12, 2026
PRE-FORMATION EXPENDITURE REIMBURSEMENT AGREEMENT
Effective Date: January 12, 2026
This PRE-FORMATION EXPENDITURE REIMBURSEMENT AGREEMENT (this "Agreement") is entered into as of January 12, 2026 (the "Effective Date"), concurrent with the signing of the Joint Venture Agreement and the Amended and Restated Operating Agreement of even date herewith, by and between:
HARBOR POINT DEVELOPMENT JV, LLC, a Delaware limited liability company (the "JV" or the "Company"), with its registered agent at Incorporators & Associates, Inc., 1209 Orange Street, Wilmington, Delaware 19801, Employer Identification Number: 84-6213950 (applied for); and
FAIRWATER REAL ESTATE INVESTMENT TRUST, a Maryland real estate investment trust ("Fairwater" or "FREIT"), with its principal offices located at 7200 Pratt Street, Suite 1400, Baltimore, Maryland 21202, Employer Identification Number: 52-2198437, Maryland State Department of Assessments and Taxation Identification Number: D19847321, New York Stock Exchange ticker symbol: FWT.
Each of the JV and Fairwater is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
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RECITALS
WHEREAS:
A. Fairwater is a publicly traded Maryland real estate investment trust that owns and operates a portfolio of thirty-eight (38) mixed-use and multifamily properties across the Mid-Atlantic region, with total assets of approximately Four Billion One Hundred Million Dollars ($4,100,000,000) and revenue of approximately Six Hundred Twelve Million Dollars ($612,000,000) for the fiscal year ended December 31, 2024;
B. Fairwater, acting through its wholly owned subsidiary Fairwater HP Manager, LLC, a Maryland limited liability company (Employer Identification Number: 52-2201889) (the "Managing Member"), has entered into a Joint Venture Agreement dated January 12, 2026 (the "JV Agreement") with Prescott HP Investor, LLC, a Delaware limited liability company (Employer Identification Number: 13-4603217), a wholly owned subsidiary of Prescott Capital Partners, LP, a Delaware limited partnership (Employer Identification Number: 13-4587612), to form Harbor Point Development JV, LLC for the purpose of developing the project known as "Harbor Point Towers" — consisting of two (2) twenty-eight (28)-story residential towers comprising approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space — on an approximately 8.2-acre waterfront site located at 1500–1580 Wills Street, Baltimore, Maryland 21231, more particularly described as Block 7419, Lots 1 through 6, Baltimore City (the "Property" or the "Project");
C. The total equity commitment for the JV is Two Hundred Forty Million Dollars ($240,000,000), with Fairwater HP Manager, LLC contributing thirty percent (30%) thereof, or Seventy-Two Million Dollars ($72,000,000), and Prescott HP Investor, LLC contributing seventy percent (70%) thereof, or One Hundred Sixty-Eight Million Dollars ($168,000,000); the total project cost is estimated at Five Hundred Seventy-Six Million Dollars ($576,000,000), which includes a Three Hundred Thirty-Six Million Dollar ($336,000,000) construction loan from Meridian National Bank, N.A.;
D. Prior to the formation of the JV and the execution of the JV Agreement, Fairwater, at its own cost and expense, undertook certain pre-development activities on behalf of and for the benefit of the Project, including but not limited to: (i) the negotiation and execution of a Purchase and Sale Agreement with Harbor East Land Holdings, LLC (sole member: Vincent A. DeLuca) for the acquisition of the Property at a purchase price of Fifty-Four Million Dollars ($54,000,000); (ii) the engagement of zoning counsel in connection with the Baltimore City Planned Unit Development approval (Ordinance No. 24-0417, approved June 14, 2024); (iii) the engagement of architects and design professionals for the schematic design and design development of the Project; (iv) the commissioning of environmental site assessments through Bayline Environmental Consultants, LLC (Phase I Environmental Site Assessment completed November 25, 2025); and (v) the commissioning of an ALTA/NSPS survey through Calvert Surveying & Engineering, Inc. (delivered December 3, 2025);
E. The Letter of Intent between Fairwater and Prescott Capital Partners, LP, executed September 22, 2025, contemplated that qualifying pre-formation expenditures incurred by Fairwater for the benefit of the Project would be reimbursed by the JV upon its formation and credited against Fairwater's initial capital contribution under the Capital Contribution Agreement of even date herewith; and
F. The Parties desire to set forth the terms and conditions under which the JV shall reimburse Fairwater for such pre-formation expenditures, the process for verifying and approving such expenditures, and the manner in which such reimbursement shall be applied against Fairwater HP Manager, LLC's capital contribution obligations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in the Amended and Restated Operating Agreement of Harbor Point Development JV, LLC dated January 12, 2026 (the "Operating Agreement") or the Capital Contribution Agreement of even date herewith (the "Capital Contribution Agreement"), as the context may require.
(a) "Approved Budget" means the initial project budget for the Project approved by both Members under the Operating Agreement, as such budget may be amended from time to time in accordance with the terms of the Operating Agreement.
(b) "Capital Contribution Agreement" means the Capital Contribution Agreement by and among Fairwater HP Manager, LLC and Prescott HP Investor, LLC, dated January 12, 2026, setting forth the terms and conditions of each Member's capital contribution obligations to the JV.
(c) "Eligible Pre-Formation Expenditures" has the meaning set forth in Section 2.1 of this Agreement.
(d) "Ineligible Expenditures" has the meaning set forth in Section 2.2 of this Agreement.
(e) "Initial Capital Call" means the initial capital call of Sixty Million Dollars ($60,000,000) (representing twenty-five percent (25%) of total JV equity), of which Fairwater HP Manager, LLC's share is Eighteen Million Dollars ($18,000,000) (representing thirty percent (30%) of the Initial Capital Call), due and payable at the closing of the Initial Capital Call as contemplated by the Capital Contribution Agreement.
(f) "JV Agreement" means the Joint Venture Agreement dated January 12, 2026 by and between Fairwater HP Manager, LLC and Prescott HP Investor, LLC, as amended, restated, supplemented, or otherwise modified from time to time.
(g) "Land PSA" means the Purchase and Sale Agreement between Fairwater and Harbor East Land Holdings, LLC (sole member: Vincent A. DeLuca) for the acquisition of the Property at a purchase price of Fifty-Four Million Dollars ($54,000,000), as amended through the date hereof.
(h) "Managing Member" means Fairwater HP Manager, LLC, a Maryland limited liability company, in its capacity as the managing member of the JV pursuant to the Operating Agreement.
(i) "Members" means, collectively, Fairwater HP Manager, LLC (holding a thirty percent (30%) membership interest) and Prescott HP Investor, LLC (holding a seventy percent (70%) membership interest), and "Member" means either of them individually.
(j) "Operating Agreement" means the Amended and Restated Operating Agreement of Harbor Point Development JV, LLC dated January 12, 2026, as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
(k) "PUD Approval" means Baltimore City Ordinance No. 24-0417, approved June 14, 2024, granting Planned Unit Development approval for the Project, together with all conditions, modifications, and supplementary approvals related thereto.
(l) "Project" means the Harbor Point Towers development, consisting of two (2) twenty-eight (28)-story residential towers comprising approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space, to be constructed on the Property.
(m) "Property" means the approximately 8.2-acre waterfront site located at 1500–1580 Wills Street, Baltimore, Maryland 21231, more particularly described as Block 7419, Lots 1 through 6, Baltimore City, as more fully described in the Land PSA.
(n) "Reimbursement Amount" means the aggregate dollar amount of Eligible Pre-Formation Expenditures approved for reimbursement under Article II and Article III of this Agreement, as reflected on the approved Reimbursement Schedule.
(o) "Reimbursement Schedule" has the meaning set forth in Section 3.1 of this Agreement.
Section 1.2 Rules of Construction. Unless the context otherwise requires: (a) words importing the singular shall include the plural and vice versa; (b) references to "Sections," "Articles," and "Exhibits" shall mean sections, articles, and exhibits of and to this Agreement; (c) the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation"; (d) the word "or" is not exclusive; (e) references to a "business day" mean any day other than a Saturday, Sunday, or day on which national banking institutions in Baltimore, Maryland or New York, New York are authorized or required by law to close; and (f) references to dollar amounts mean United States Dollars.
ARTICLE II — ELIGIBLE PRE-FORMATION EXPENDITURES
Section 2.1 Categories of Eligible Pre-Formation Expenditures. The following categories of expenditures incurred by Fairwater prior to the formation of the JV shall be eligible for reimbursement hereunder, provided that (i) each such expenditure was incurred on or after September 1, 2023, (ii) each such expenditure relates directly to the Project, and (iii) each such expenditure satisfies the documentation requirements set forth in Section 2.3 (collectively, the "Eligible Pre-Formation Expenditures"):
(a) Land PSA Deposits and Transaction Costs. Earnest money deposits, extension fees, and related transaction costs paid by Fairwater under or in connection with the Land PSA with Harbor East Land Holdings, LLC (sole member: Vincent A. DeLuca) for the acquisition of the approximately 8.2-acre Property at a purchase price of Fifty-Four Million Dollars ($54,000,000). This category includes, without limitation, initial earnest money deposits, additional deposits made pursuant to the terms of the Land PSA, any extension or inspection period fees, and any costs paid to third parties in connection with the transaction closing mechanics (excluding the purchase price itself, which shall be funded from JV equity and construction loan proceeds at the closing of the acquisition).
(b) Zoning and Entitlements Costs. Legal fees for zoning counsel, application fees, consultant costs, hearing preparation and attendance costs, and other expenses incurred by Fairwater in connection with obtaining the Baltimore City Planned Unit Development approval (Ordinance No. 24-0417, approved June 14, 2024), including any costs associated with compliance with conditions of approval, any supplementary zoning submissions, community benefit agreement negotiations, and any related regulatory filings with Baltimore City government agencies necessary to secure and maintain the PUD Approval.
(c) Architectural and Design Fees. Fees paid to architects, engineers, landscape architects, interior designers, and other design professionals for schematic design, design development, and construction documents for the Harbor Point Towers project (two (2) twenty-eight (28)-story towers, approximately six hundred ten (610) residential units, approximately forty-five thousand (45,000) square feet of ground-floor retail space), including structural engineering, MEP engineering, and any preliminary life safety or code consulting fees directly attributable to the design phase of the Project.
(d) Environmental Assessment Costs. Costs of Phase I and Phase II Environmental Site Assessments commissioned by Fairwater through Bayline Environmental Consultants, LLC (3045 Boston Street, Suite 200, Baltimore, Maryland 21224), including the Phase I Environmental Site Assessment completed on November 25, 2025, any supplemental environmental investigations, and any costs associated with the evaluation of recognized environmental conditions identified during the assessment process.
(e) Survey and Civil Engineering Costs. Costs of the ALTA/NSPS Land Title Survey and related civil engineering services provided by Calvert Surveying & Engineering, Inc. (620 North Eutaw Street, Baltimore, Maryland 21201), including the survey delivered December 3, 2025, and any supplemental survey work, topographic surveys, boundary surveys, floodplain delineations, or utility locating services directly related to the Property.
(f) Appraisal Costs. Costs incurred for the independent MAI appraisal of the Property and proposed Project commissioned by Fairwater through Stonebridge Appraisal Associates, LLC (211 East Lombard Street, Suite 300, Baltimore, Maryland 21202), including the appraisal delivered December 15, 2025, and any supplemental or updated valuation analyses prepared in connection with the Project.
(g) Title and Recording Costs. Title search, examination, and preliminary title commitment costs incurred through Tidewater Insurance Group, Inc. (9100 Greenspring Avenue, Lutherville, Maryland 21093), including the title commitment issued December 9, 2025, and any related costs for curative title work, UCC searches, judgment searches, tax lien searches, or other title-related investigations undertaken prior to the formation of the JV.
(h) Legal Fees. Legal fees and expenses of Calderwood & Harkness LLP (100 International Drive, Suite 2600, Baltimore, Maryland 21202) incurred by Fairwater in connection with the negotiation and execution of the Land PSA, the PUD Approval process, and other pre-formation project-related legal work directly attributable to the development of the Project. For the avoidance of doubt, this category expressly excludes legal fees and expenses related to the formation and structuring of the JV, the negotiation and drafting of the JV Agreement, the Operating Agreement, this Agreement, the Capital Contribution Agreement, the Development Management Agreement, or any other ancillary JV formation document, all of which shall be borne by Fairwater as its own cost and shall not constitute Eligible Pre-Formation Expenditures.
(i) Other Pre-Development Costs. Geotechnical investigations, subsurface explorations, market studies, demand analyses, traffic impact studies, parking studies, utility capacity analyses, stormwater management analyses, and other due diligence costs directly attributable to the Project, in each case as mutually agreed by the Members. Any expenditure claimed under this subsection (i) that was not specifically identified in a prior written communication between Fairwater and Prescott Capital Partners, LP (or its affiliates) shall be subject to the approval process set forth in Article III.
Section 2.2 Ineligible Expenditures. Notwithstanding anything to the contrary in Section 2.1, the following categories of costs and expenses shall NOT constitute Eligible Pre-Formation Expenditures and shall not be subject to reimbursement under this Agreement (collectively, "Ineligible Expenditures"):
(a) Any internal overhead, employee salaries, wages, benefits, bonus payments, or general and administrative costs of Fairwater or any of its affiliates, including but not limited to allocations of corporate overhead, office rent, technology expenses, or insurance premiums attributable to Fairwater's general operations;
(b) Costs of negotiating, drafting, reviewing, or executing the JV Agreement, the Operating Agreement, the Capital Contribution Agreement, the Development Management Agreement, the Tax Protection Agreement, this Agreement, or any other ancillary JV formation or governance documents, including all legal fees, financial advisory fees, tax advisory fees, and accounting fees incurred in connection therewith;
(c) Costs related to Fairwater's internal investment committee review process, board of trustees approvals, independent trustee deliberations, shareholder communications, or SEC disclosure obligations relating to the JV or the Project;
(d) Any costs incurred prior to September 1, 2023, regardless of their relationship to the Project or the Property;
(e) Any costs that are duplicative of services to be performed by, or fees to be earned by, Fairwater or any of its affiliates under the Development Management Agreement dated January 12, 2026, pursuant to which Fairwater HP Manager, LLC is entitled to a development management fee of three and one-half percent (3.5%) of hard costs, equaling approximately Fifteen Million One Hundred Twenty Thousand Dollars ($15,120,000) over the course of the Project, or any other fee arrangement between Fairwater (or its affiliates) and the JV; and
(f) Any expenditure for which Fairwater has received or is entitled to receive reimbursement, credit, or payment from any third party, including but not limited to any governmental incentive program, tax credit, insurance recovery, or settlement payment.
Section 2.3 Documentation Requirements. Each claimed Eligible Pre-Formation Expenditure must be supported by the following documentation, which shall be submitted to the JV and to Prescott HP Investor, LLC in accordance with the procedures set forth in Article III:
(a) Original or certified copies of all invoices, receipts, engagement letters, contracts, change orders, or other agreements evidencing the expenditure and the services or goods received in connection therewith;
(b) Proof of payment by Fairwater, including wire transfer confirmations, cancelled checks, bank statements reflecting the payment, or other commercially reasonable evidence of payment;
(c) A brief written description of the nature of each expenditure, the identity of the service provider or payee, the date of the expenditure, and a statement explaining the direct relationship of the expenditure to the Project and its classification under the applicable subsection of Section 2.1; and
(d) A written certification by an authorized officer of Fairwater — specifically, Patricia S. Liang, Chief Financial Officer, or Theresa M. Calloway, General Counsel — substantially in the form attached hereto as Exhibit B, certifying that the expenditure is accurate, was incurred solely for the benefit of the Project, has not been previously reimbursed or credited by any third party, and does not constitute an Ineligible Expenditure.
Section 2.4 Cooperation. Fairwater agrees to cooperate fully with the JV and Prescott HP Investor, LLC in connection with the verification of any claimed Eligible Pre-Formation Expenditure, including by making available for inspection and copying any books, records, files, correspondence, or other materials in Fairwater's possession or control relating to the expenditures claimed hereunder. Such cooperation obligation shall continue for a period of two (2) years following the Effective Date.
ARTICLE III — SUBMISSION AND APPROVAL PROCESS
Section 3.1 Submission of Reimbursement Request. Within thirty (30) calendar days following the Effective Date of this Agreement (i.e., on or before February 11, 2026), Fairwater shall prepare and submit to the JV (at its principal office, attention: Marcus D. Okonkwo, EVP, Development) and to Prescott HP Investor, LLC (at the address set forth in Section 9.4) a detailed schedule of all claimed Eligible Pre-Formation Expenditures (the "Reimbursement Schedule"), substantially in the form attached hereto as Exhibit A. The Reimbursement Schedule shall set forth, for each claimed expenditure, the following information: (a) a sequential line item number; (b) the applicable category under Section 2.1; (c) a description of the expenditure; (d) the identity of the third-party vendor or payee; (e) the invoice date; (f) the invoice amount; (g) the date paid by Fairwater; and (h) a cross-reference to the supporting documentation provided. The Reimbursement Schedule shall be accompanied by all supporting documentation required under Section 2.3 and a completed Officer's Certificate in the form of Exhibit B.
Section 3.2 Review by Prescott. Prescott HP Investor, LLC (or its duly authorized representative, Andrew M. Castellano, Senior Principal, or such other person as Prescott HP Investor, LLC may designate in writing from time to time) shall have twenty (20) business days following receipt of the complete Reimbursement Schedule and all accompanying supporting documentation (the "Review Period") to review and either approve or object to any line item set forth therein. During the Review Period, Prescott HP Investor, LLC may request additional documentation, clarification, or information from Fairwater with respect to any claimed expenditure, and Fairwater shall respond to any such request promptly and in good faith. If Prescott HP Investor, LLC requests additional documentation or information, the Review Period shall be tolled from the date of such request until the date on which Fairwater provides a complete response thereto.
Section 3.3 Dispute Resolution for Contested Items. If Prescott HP Investor, LLC objects in writing to any claimed expenditure set forth on the Reimbursement Schedule during the Review Period, the following dispute resolution procedures shall apply:
(a) Good Faith Negotiation. The Parties (including, for this purpose, Prescott HP Investor, LLC as an intended third-party beneficiary with approval rights under this Article III) shall negotiate in good faith for a period of fifteen (15) business days following Prescott's delivery of written objection (the "Negotiation Period") to resolve the dispute with respect to the contested line item(s). During the Negotiation Period, each Party shall designate a senior representative with authority to resolve the dispute, and such representatives shall confer in person or by video conference at least once during the Negotiation Period.
(b) Independent Accountant Determination. If the Parties are unable to resolve the dispute within the Negotiation Period, any remaining disputed line item(s) shall be submitted to Alderman & Fields, CPAs, LLP (engagement partner: Robert E. Alderman, CPA, 1 South Street, Suite 1800, Baltimore, Maryland 21202) (the "Independent Accountant") for independent review and determination. The Independent Accountant shall be engaged pursuant to a joint engagement letter executed by Fairwater and Prescott HP Investor, LLC, and the costs of the Independent Accountant's engagement shall be borne equally by Fairwater and Prescott HP Investor, LLC. Each Party shall submit to the Independent Accountant its position in writing, together with supporting documentation, within ten (10) business days following the engagement of the Independent Accountant, and the Independent Accountant shall render its determination within twenty (20) business days following receipt of all submissions.
(c) Binding Determination. The determination of the Independent Accountant with respect to any disputed line item shall be final and binding on the Parties (and on Prescott HP Investor, LLC as third-party beneficiary) absent manifest error. For purposes of this subsection (c), "manifest error" means an obvious and demonstrable error of fact or calculation that is apparent on the face of the Independent Accountant's determination, and does not include any disagreement with the Independent Accountant's exercise of professional judgment.
Section 3.4 Approval Deemed Given. Any line item set forth on the Reimbursement Schedule to which Prescott HP Investor, LLC does not deliver a written objection within the Review Period shall be deemed approved as of the expiration of the Review Period, without further action by any Party.
Section 3.5 Final Reimbursement Amount. Upon the completion of the review and approval process set forth in this Article III (including the resolution of any disputed items pursuant to Section 3.3), the Parties shall prepare and execute a certificate setting forth the final, approved Reimbursement Amount, which certificate shall be appended to this Agreement as a supplemental schedule and shall be binding on the Parties and Prescott HP Investor, LLC for all purposes under this Agreement, the Operating Agreement, and the Capital Contribution Agreement.
ARTICLE IV — REIMBURSEMENT MECHANICS
Section 4.1 Credit Against Initial Capital Contribution. The approved Reimbursement Amount shall be credited against Fairwater HP Manager, LLC's initial capital contribution obligation of Eighteen Million Dollars ($18,000,000) (being thirty percent (30%) of the Initial Capital Call of Sixty Million Dollars ($60,000,000), due at the closing of the Initial Capital Call, targeted for January 30, 2026). Accordingly, at the closing of the Initial Capital Call, Fairwater HP Manager, LLC shall fund in cash an amount equal to Eighteen Million Dollars ($18,000,000) minus the approved Reimbursement Amount, and the Reimbursement Amount shall be treated as a deemed capital contribution by Fairwater HP Manager, LLC to the JV in the full amount thereof. For the avoidance of doubt, upon the crediting of the Reimbursement Amount against Fairwater HP Manager, LLC's initial capital contribution obligation and the funding by Fairwater HP Manager, LLC of the balance in cash, Fairwater HP Manager, LLC shall be deemed to have fully satisfied its obligations with respect to the Initial Capital Call.
Section 4.2 Capital Account Treatment. The approved Reimbursement Amount shall be credited to Fairwater HP Manager, LLC's capital account as of the date of the Initial Capital Call closing, in the same manner as a cash capital contribution, and shall be reflected on the JV's books and records accordingly. Such capital account treatment shall be consistent with Treasury Regulations Section 1.704-1(b)(2)(iv) and the capital account maintenance provisions of the Operating Agreement, and shall be made in accordance with Sections 704(b) and 704(c) of the Internal Revenue Code of 1986, as amended (the "Code"), and the allocation provisions set forth in Article IX of the Operating Agreement. The JV's tax matters partner (or Partnership Representative, as applicable) shall ensure that the JV's tax returns and capital account statements reflect this treatment.
Section 4.3 Limitation on Reimbursement Amount. In no event shall the aggregate Reimbursement Amount credited against Fairwater HP Manager, LLC's initial capital contribution obligation exceed Eighteen Million Dollars ($18,000,000). If the aggregate approved Eligible Pre-Formation Expenditures exceed Eighteen Million Dollars ($18,000,000), the excess amount shall be credited against Fairwater HP Manager, LLC's obligations under subsequent capital calls made pursuant to the Capital Contribution Agreement, on a dollar-for-dollar basis, in the order in which such subsequent capital calls are issued, until the full amount of the approved Eligible Pre-Formation Expenditures has been credited. In no event shall the aggregate reimbursement (whether credited against the Initial Capital Call or subsequent capital calls) exceed the total Eligible Pre-Formation Expenditures actually incurred and approved in accordance with this Agreement.
Section 4.4 No Cash Reimbursement. Except as expressly provided in Section 4.3 with respect to credits against subsequent capital calls, reimbursement under this Agreement shall be effected solely as a credit against Fairwater HP Manager, LLC's capital contribution obligations to the JV. Fairwater shall not be entitled to any cash reimbursement, cash distribution, or cash payment from the JV, the Members, or any other Person for Eligible Pre-Formation Expenditures. This Section 4.4 does not limit or affect any other rights of Fairwater or Fairwater HP Manager, LLC under the Operating Agreement, the Development Management Agreement, or any other agreement between or among the Parties.
Section 4.5 Prescott's Capital Contribution Unaffected. The credit mechanism established under this Article IV shall not reduce, alter, offset, or otherwise affect Prescott HP Investor, LLC's capital contribution obligations under the Capital Contribution Agreement or the Operating Agreement, which remain Forty-Two Million Dollars ($42,000,000) for the Initial Capital Call (representing seventy percent (70%) of the Sixty Million Dollar ($60,000,000) Initial Capital Call) and One Hundred Sixty-Eight Million Dollars ($168,000,000) in the aggregate (representing seventy percent (70%) of total JV equity of Two Hundred Forty Million Dollars ($240,000,000)), in each case as set forth in the Capital Contribution Agreement and the Operating Agreement. Nothing in this Agreement shall be construed to create any right of contribution, offset, or reduction in favor of Prescott HP Investor, LLC with respect to the Reimbursement Amount.
ARTICLE V — ASSIGNMENT AND ASSUMPTION OF CONTRACTS AND RIGHTS
Section 5.1 Assignment of Third-Party Contracts. To the extent that Fairwater holds contracts, engagement letters, work authorizations, or other agreements with third parties that were entered into in connection with the Eligible Pre-Formation Expenditures and that are assignable (whether by their terms or with the consent of the applicable third party), Fairwater shall assign, transfer, and convey all of its right, title, and interest in and to such contracts and agreements to the JV promptly following the Effective Date, and in any event within thirty (30) days of the Effective Date, including without limitation:
(a) Any rights under the Phase I Environmental Site Assessment engagement with Bayline Environmental Consultants, LLC, including any reliance letters, warranties, or indemnities running in favor of Fairwater under such engagement;
(b) Reliance letters, engagement letters, or work authorizations with Calvert Surveying & Engineering, Inc. for the ALTA/NSPS Land Title Survey delivered December 3, 2025, and any supplemental survey work;
(c) Any architectural or design contracts for the Project, including schematic design agreements, design development agreements, and preliminary construction document agreements, together with all intellectual property licenses, usage rights, and work-for-hire provisions contained therein;
(d) Reliance rights under the MAI appraisal prepared by Stonebridge Appraisal Associates, LLC, delivered December 15, 2025, including the right to rely upon the appraisal for financing, equity investment, and insurance purposes; and
(e) Rights under the preliminary title commitment issued by Tidewater Insurance Group, Inc. on December 9, 2025, including all rights to extend, amend, or convert such commitment into a final title insurance policy in the name of the JV or its designee.
Section 5.2 Deliverables. Concurrently with the assignment of contracts under Section 5.1, and in any event within thirty (30) days of the Effective Date, Fairwater shall deliver to the JV originals or certified copies of all work product, reports, studies, analyses, surveys, plans, drawings, specifications, and other deliverables generated from or in connection with the Eligible Pre-Formation Expenditures, including without limitation:
(a) Phase I Environmental Site Assessment reports prepared by Bayline Environmental Consultants, LLC (completed November 25, 2025);
(b) ALTA/NSPS Land Title Survey maps and field notes prepared by Calvert Surveying & Engineering, Inc. (delivered December 3, 2025);
(c) All architectural drawings, renderings, design development documents, schematic design documents, and any preliminary construction documents;
(d) Market studies, demand analyses, and feasibility reports;
(e) Geotechnical investigation reports and subsurface exploration data;
(f) All zoning applications, submissions, correspondence with Baltimore City planning and zoning agencies, community meeting materials, and PUD Approval documentation (Ordinance No. 24-0417, approved June 14, 2024), including the full text of the ordinance and all conditions of approval;
(g) The preliminary title commitment issued by Tidewater Insurance Group, Inc. (dated December 9, 2025), together with all underlying title search documents, exception documents, and survey endorsements;
(h) The independent MAI appraisal prepared by Stonebridge Appraisal Associates, LLC (dated December 15, 2025); and
(i) Traffic impact studies, parking analyses, stormwater management reports, and utility capacity analyses, to the extent commissioned by Fairwater in connection with the Project.
Section 5.3 Risk of Non-Assignability. If any contract, engagement letter, or right described in Section 5.1 is not assignable without the prior written consent of the applicable third party, Fairwater shall use commercially reasonable efforts to obtain such consent within forty-five (45) days following the Effective Date. In the event that such consent cannot be obtained within such period despite commercially reasonable efforts, Fairwater shall: (a) hold such contract or right in trust for the benefit of the JV; (b) cooperate in good faith to make the benefits of such contract or right available to the JV as if the assignment had been effected; (c) take all actions reasonably requested by the JV to enforce rights under such contract or agreement for the JV's benefit; and (d) promptly remit to the JV any payments, proceeds, or benefits received by Fairwater under such contract or agreement. The inability to obtain any such third-party consent shall not affect the status of the underlying expenditure as an Eligible Pre-Formation Expenditure for purposes of reimbursement under this Agreement.
ARTICLE VI — REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties of Fairwater. Fairwater hereby represents and warrants to the JV and, for purposes of Section 9.9, to Prescott HP Investor, LLC, as of the Effective Date, as follows:
(a) Accuracy of Expenditures. Each Eligible Pre-Formation Expenditure was actually incurred by Fairwater, is accurately described in the Reimbursement Schedule, and either has been paid in full or is currently payable in the ordinary course of business. No Eligible Pre-Formation Expenditure has been inflated, artificially increased, or mischaracterized in any material respect.
(b) No Prior Reimbursement. No Eligible Pre-Formation Expenditure has been previously reimbursed, credited, offset, or otherwise paid by any third party, including any governmental agency, insurance carrier, joint venture partner, co-investor, or other Person. Fairwater has not submitted, and will not submit, any claim for reimbursement of any Eligible Pre-Formation Expenditure to any Person other than the JV pursuant to this Agreement.
(c) Arm's-Length Transactions. Each expenditure was incurred in the ordinary course of business and on terms that are no less favorable to Fairwater than those that would have been obtained in a comparable arm's-length transaction with an unaffiliated third party. No service provider or payee identified on the Reimbursement Schedule is an affiliate of Fairwater or any of its trustees, officers, or employees, except as expressly disclosed on the Reimbursement Schedule.
(d) No Claims or Liens. Fairwater has not received any notice of claim, lien, demand, lawsuit, arbitration, or dispute from any service provider, contractor, consultant, or other Person relating to the work product, deliverables, or services underlying the Eligible Pre-Formation Expenditures. To Fairwater's knowledge, no such claim, lien, or dispute exists or is threatened as of the Effective Date.
(e) Due Organization and Good Standing. Fairwater is duly organized and validly existing as a Maryland real estate investment trust under the laws of the State of Maryland, is in good standing with the Maryland State Department of Assessments and Taxation (SDAT Identification Number: D19847321), and has full power and authority to execute, deliver, and perform its obligations under this Agreement.
(f) Due Authorization. The execution and delivery of this Agreement by Fairwater, and the performance by Fairwater of its obligations hereunder, have been duly authorized by all necessary action on the part of Fairwater, including approval by Fairwater's board of trustees. No further consent, approval, authorization, or action by any governmental authority or other Person is required in connection with the execution, delivery, or performance of this Agreement by Fairwater.
(g) No Duplicative Fees. The Reimbursement Schedule does not include any amounts constituting internal overhead, general and administrative costs, or fees that would be duplicative of fees payable to Fairwater or any of its affiliates under the Development Management Agreement, the Property Management Agreement, or any other agreement between Fairwater (or its affiliates) and the JV.
(h) Enforceability. This Agreement has been duly executed and delivered by Fairwater and constitutes the legal, valid, and binding obligation of Fairwater, enforceable against Fairwater in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
Section 6.2 Representations and Warranties of the JV. The JV, acting through its Managing Member (Fairwater HP Manager, LLC), hereby represents and warrants to Fairwater as of the Effective Date, as follows:
(a) Due Formation and Good Standing. The JV is duly formed and validly existing as a Delaware limited liability company under the laws of the State of Delaware, and is, or promptly following the Effective Date will be, duly qualified to transact business in the State of Maryland as a foreign limited liability company.
(b) Due Authorization. The execution and delivery of this Agreement by the JV, and the performance by the JV of its obligations hereunder, have been duly authorized under the Operating Agreement and the Initial Resolutions of the JV adopted as of the Effective Date. The Managing Member has been duly authorized to execute this Agreement on behalf of the JV pursuant to the authority granted under the Operating Agreement.
(c) No Conflicts. The execution, delivery, and performance of this Agreement by the JV does not and will not conflict with, violate, or result in a breach of any provision of the JV Agreement, the Operating Agreement, the Capital Contribution Agreement, or any other material agreement or instrument to which the JV is a party or by which the JV or any of its assets may be bound.
ARTICLE VII — INDEMNIFICATION
Section 7.1 Fairwater's Indemnity. Fairwater shall indemnify, defend, and hold harmless the JV, each of its Members, and their respective officers, directors, trustees, managers, partners, agents, employees, affiliates, successors, and assigns (each, an "Indemnified Party") from and against any and all losses, claims, damages, liabilities, costs, or expenses (including reasonable attorneys' fees and expenses, court costs, and costs of investigation) (collectively, "Losses") arising out of, relating to, or resulting from:
(a) Any breach or inaccuracy of any representation or warranty made by Fairwater under Article VI of this Agreement;
(b) Any third-party claim, demand, action, or proceeding relating to the pre-formation work product, deliverables, or services for which reimbursement is sought under this Agreement, to the extent that such claim, demand, action, or proceeding arose from acts, omissions, or events occurring prior to the assignment of the applicable contract or right to the JV pursuant to Article V; and
(c) Any material inaccuracy, misstatement, or omission in the Reimbursement Schedule or the Officer's Certificate delivered pursuant to Section 2.3(d) and Exhibit B.
Section 7.2 Indemnification Procedures. Any Indemnified Party seeking indemnification under this Article VII shall provide Fairwater with prompt written notice of the claim, demand, or action giving rise to the indemnification obligation, together with a reasonably detailed description of the facts and circumstances thereof. The failure to provide prompt notice shall not relieve Fairwater of its indemnification obligations except to the extent that Fairwater is materially prejudiced by such failure. Fairwater shall have the right to assume and control the defense of any third-party claim for which indemnification is sought, using counsel reasonably acceptable to the Indemnified Party, provided that the Indemnified Party shall have the right to participate in such defense at its own cost and expense. Fairwater shall not settle any third-party claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned, or delayed) if such settlement would impose any obligation or liability on the Indemnified Party other than the payment of money covered by Fairwater's indemnification obligation.
Section 7.3 Limitation on Indemnification. In no event shall Fairwater's aggregate liability under this Article VII exceed the Reimbursement Amount. This limitation shall not apply to Losses arising from fraud or intentional misrepresentation by Fairwater.
Section 7.4 Survival. The indemnification obligations under this Article VII shall survive the execution and delivery of this Agreement for a period of two (2) years following the Effective Date. Any claim for indemnification that is asserted in writing within such two (2)-year period (with reasonable specificity as to the facts and circumstances giving rise to the claim) shall survive until final resolution of such claim, notwithstanding the expiration of the survival period.
ARTICLE VIII — TAX MATTERS
Section 8.1 Tax Treatment. The Parties intend that the credit of the Reimbursement Amount against Fairwater HP Manager, LLC's capital contribution obligation shall be treated, for federal income tax purposes and for Maryland state income tax purposes, as a contribution of property (i.e., the pre-formation expenditures and related work product, deliverables, and contract rights) by Fairwater HP Manager, LLC to the JV under Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"), and not as a sale, exchange, or other taxable transaction. The JV, as a partnership for federal income tax purposes (with the Partnership Representative designated as Fairwater HP Manager, LLC, or such other Person as may be designated under the Operating Agreement), shall report on its federal, state, and local tax returns in a manner consistent with this intended tax treatment, and neither Party shall take a position on any tax return, amendment, or other filing that is inconsistent with such treatment unless required to do so by a final determination of the Internal Revenue Service or a court of competent jurisdiction.
Section 8.2 Section 704(c) Allocations. To the extent that any property contributed by Fairwater HP Manager, LLC to the JV (including the rights, work product, and deliverables associated with the Eligible Pre-Formation Expenditures) has a fair market value that differs from its adjusted tax basis in the hands of Fairwater HP Manager, LLC at the time of contribution, the JV shall make allocations of income, gain, loss, and deduction with respect to such contributed property in accordance with Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, using the allocation method (traditional method, traditional method with curative allocations, or remedial allocation method) specified in the Operating Agreement. Such allocations shall be consistent with the principles set forth in Article IX of the Operating Agreement and the Tax Protection Agreement of even date herewith.
Section 8.3 Maryland Pass-Through Entity Tax. The treatment of the Reimbursement Amount for purposes of any Maryland pass-through entity tax elections made by the JV pursuant to Title 10, Subtitle 1 of the Tax-General Article of the Annotated Code of Maryland shall be consistent with the elections made pursuant to the Operating Agreement and as advised by Alderman & Fields, CPAs, LLP, the JV's independent accountant. The Parties agree to cooperate in good faith to ensure that the Maryland pass-through entity tax treatment is consistent with the federal income tax treatment described in Section 8.1.
Section 8.4 Cooperation. Each Party shall cooperate with the other Party and with the JV's independent accountants and tax advisors in connection with the preparation and filing of all tax returns, information returns, and other filings relating to the transactions contemplated by this Agreement, including by providing such information, documentation, and certifications as may be reasonably requested.
ARTICLE IX — MISCELLANEOUS
Section 9.1 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to any conflicts of law principles that would require the application of the laws of any other jurisdiction. Each Party irrevocably submits to the exclusive jurisdiction of the federal and state courts located in Baltimore City, Maryland, for the purposes of any action, suit, or proceeding arising out of or relating to this Agreement, and each Party irrevocably waives any objection to venue in such courts.
Section 9.2 Integration with JV Documents. This Agreement is entered into in connection with and as a condition to the transactions contemplated by the JV Agreement, the Operating Agreement, and the Capital Contribution Agreement, each dated January 12, 2026, and shall be interpreted and construed in light of those agreements. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Operating Agreement, the Operating Agreement shall control. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Capital Contribution Agreement, the Capital Contribution Agreement shall control with respect to capital contribution mechanics and this Agreement shall control with respect to the determination of Eligible Pre-Formation Expenditures and the Reimbursement Amount.
Section 9.3 Amendments. This Agreement may be amended, modified, supplemented, or waived only by a written instrument duly executed by the JV (acting through its Managing Member with the approval of Prescott HP Investor, LLC, as required under the Operating Agreement) and Fairwater. No oral modification, amendment, or waiver of any provision of this Agreement shall be effective for any purpose.
Section 9.4 Notices. All notices, requests, demands, consents, and other communications required or permitted under this Agreement shall be in writing and shall be deemed duly given: (a) when delivered personally; (b) one (1) business day after being sent by nationally recognized overnight courier service (with written confirmation of delivery); (c) five (5) business days after being mailed by certified or registered mail, return receipt requested, postage prepaid; or (d) when sent by email with confirmed receipt (provided that a copy is also sent by overnight courier within one (1) business day thereafter), addressed as follows:
If to the JV:
Harbor Point Development JV, LLC c/o Fairwater HP Manager, LLC 7200 Pratt Street, Suite 1400 Baltimore, Maryland 21202
Attention: Marcus D. Okonkwo, Executive Vice President, Development
Email: mokonkwo@fairwaterreit.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 100 International Drive, Suite 2600 Baltimore, Maryland 21202
Attention: Douglas Fairchild, Esq.
Email: dfairchild@calderwoodharkness.com
If to Fairwater:
Fairwater Real Estate Investment Trust 7200 Pratt Street, Suite 1400 Baltimore, Maryland 21202
Attention: Theresa M. Calloway, General Counsel
Email: tcalloway@fairwaterreit.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 100 International Drive, Suite 2600 Baltimore, Maryland 21202
Attention: Douglas Fairchild, Esq.
Email: dfairchild@calderwoodharkness.com
Copy to Prescott (required for all notices):
Prescott HP Investor, LLC c/o Prescott Capital Partners, LP 400 Lexington Avenue, 32nd Floor New York, New York 10170
Attention: Andrew M. Castellano, Senior Principal
Email: acastellano@prescottcap.com
with a copy (which shall not constitute notice) to:
Whitmore, Calder & Briggs LLP 51 West 52nd Street New York, New York 10019
Attention: Samuel T. Briggs III, Esq.
Email: sbriggs@whitmorecalder.com
Any Party may change its address for notice purposes by providing written notice to the other Parties in accordance with this Section 9.4.
Section 9.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign, transfer, or delegate any of its rights or obligations under this Agreement without the prior written consent of the other Party, and any attempted assignment without such consent shall be null and void. Notwithstanding the foregoing, Fairwater may assign its rights (but not its obligations) under this Agreement to Fairwater HP Manager, LLC without the consent of the JV, provided that Fairwater shall remain liable for the performance of all of its obligations hereunder.
Section 9.6 Entire Agreement. This Agreement, together with the JV Agreement, the Operating Agreement, the Capital Contribution Agreement, the Development Management Agreement, the Tax Protection Agreement, and the exhibits and schedules attached hereto and thereto, constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings relating to the subject matter hereof, including the provisions relating to pre-formation expenditure reimbursement contained in the Letter of Intent dated September 22, 2025.
Section 9.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission (including PDF, Brightwater Software, or similar electronic signature platform) shall be effective as delivery of a manually executed counterpart.
Section 9.8 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT HEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION 9.8.
Section 9.9 Third-Party Beneficiaries. Prescott HP Investor, LLC is an intended third-party beneficiary of this Agreement with respect to: (a) the approval rights set forth in Article III (including the right to review, approve, and object to line items on the Reimbursement Schedule and to participate in the dispute resolution process under Section 3.3); (b) the representations and warranties set forth in Article VI; and (c) the indemnification provisions set forth in Article VII (as an Indemnified Party). Prescott HP Investor, LLC shall have the right to enforce the foregoing provisions directly against the Parties as though it were a Party hereto. Except as expressly set forth in this Section 9.9, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the Parties and their permitted successors and assigns any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement.
Section 9.10 Severability. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any Person or circumstance, is held by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable, the remainder of the terms, provisions, covenants, and conditions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated, and the Parties shall negotiate in good faith to replace such invalid, illegal, void, or unenforceable provision with a valid and enforceable provision that, to the greatest extent possible, achieves the original intent of the Parties.
Section 9.11 Further Assurances. Each Party shall, upon the reasonable request of the other Party, execute and deliver such additional documents, instruments, conveyances, and assurances, and take such additional actions, as may be reasonably necessary or desirable to carry out and effectuate the provisions and purposes of this Agreement and the transactions contemplated hereby.
Section 9.12 Expenses. Except as otherwise expressly provided in this Agreement (including Section 3.3(b) with respect to the costs of the Independent Accountant), each Party shall bear its own costs and expenses in connection with the negotiation, execution, delivery, and performance of this Agreement.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Parties have caused this Pre-Formation Expenditure Reimbursement Agreement to be executed and delivered as of the date first written above.
HARBOR POINT DEVELOPMENT JV, LLC a Delaware limited liability company
By: Fairwater HP Manager, LLC,
a Maryland limited liability company, its Managing Member
By: ________
Name: Marcus D. Okonkwo
Title: Authorized Signatory
Date: January 12, 2026
FAIRWATER REAL ESTATE INVESTMENT TRUST a Maryland real estate investment trust
By: ________
Name: Patricia S. Liang
Title: Chief Financial Officer
Date: January 12, 2026
By: ________
Name: Theresa M. Calloway
Title: General Counsel
Date: January 12, 2026
ACKNOWLEDGED AND AGREED (as Intended Third-Party Beneficiary)
PRESCOTT HP INVESTOR, LLC a Delaware limited liability company
By: Prescott Capital Partners, LP,
a Delaware limited partnership, its Sole Member
By: Prescott Capital GP, LLC,
a Delaware limited liability company, its General Partner
By: ________
Name: Andrew M. Castellano
Title: Senior Principal
Date: January 12, 2026
EXHIBIT A
FORM OF REIMBURSEMENT SCHEDULE
(Pursuant to Section 3.1 of the Pre-Formation Expenditure Reimbursement Agreement dated January 12, 2026)
Instructions: This Reimbursement Schedule is to be completed by Fairwater Real Estate Investment Trust and submitted to Harbor Point Development JV, LLC and Prescott HP Investor, LLC within thirty (30) calendar days following the Effective Date of the Agreement (i.e., on or before February 11, 2026), together with all supporting documentation required under Section 2.3 of the Agreement.
CERTIFICATION
The undersigned hereby certifies that the foregoing Reimbursement Schedule is true, complete, and accurate in all material respects, and that each expenditure listed herein constitutes an Eligible Pre-Formation Expenditure as defined in the Pre-Formation Expenditure Reimbursement Agreement dated January 12, 2026 (the "Agreement"). The undersigned further certifies that: (i) each expenditure listed herein was actually incurred by Fairwater Real Estate Investment Trust in good faith and at arm's-length terms; (ii) no expenditure listed herein has been previously reimbursed, credited, or offset by any third party; (iii) no expenditure listed herein is duplicative of any fee or cost payable under the Development Management Agreement; (iv) no expenditure listed herein constitutes an Ineligible Expenditure as defined in Section 2.2 of the Agreement; and (v) all supporting documentation referenced herein is authentic, complete, and has been provided to the JV and Prescott HP Investor, LLC concurrently with the delivery of this Reimbursement Schedule.
FAIRWATER REAL ESTATE INVESTMENT TRUST
By: ________
Name: Patricia S. Liang
Title: Chief Financial Officer