JOINT VENTURE AGREEMENT

JOINT VENTURE AGREEMENT
OF
HARBOR POINT DEVELOPMENT JV, LLC
October 10, 2025 
Draft — For Discussion Purposes Only — Subject to Review by All Parties and Their Respective Counsel
Prepared by:
Calderwood & Harkness LLP 100 International Drive, Suite 2600 Baltimore, MD 21202 
Circulated to:
Whitmore, Calder & Briggs LLP 51 West 52nd Street New York, NY 10019
Attention: Samuel T. Briggs III and Megan R. Osterhaus
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JOINT VENTURE AGREEMENT OF HARBOR POINT DEVELOPMENT JV, LLC
This Joint Venture Agreement (this "Agreement") is entered into as of [_], 2025 (the "Effective Date"), by and between:
FAIRWATER HP MANAGER, LLC, a Maryland limited liability company (the "Fairwater Member" or the "Managing Member"), whose sole member is Fairwater Real Estate Investment Trust, a Maryland real estate investment trust ("Fairwater" or "FREIT"), with its headquarters located at 7200 Pratt Street, Suite 1400, Baltimore, MD 21202;
and
PRESCOTT HP INVESTOR, LLC, a Delaware limited liability company (the "Prescott Member" or the "Capital Partner" ), whose sole member is Prescott Capital Partners, LP, a Delaware limited partnership ("Prescott"), with its principal office located at 400 Lexington Avenue, 32nd Floor, New York, NY 10170.
The Fairwater Member and the Prescott Member are sometimes referred to herein individually as a "Member" and collectively as the "Members."
The Members wish to form and operate Harbor Point Development JV, LLC, a Delaware limited liability company (the "Company" or the "JV"), for the purpose of acquiring, developing, owning, operating, and ultimately disposing of certain real property and improvements located in Baltimore City, Maryland, all as more particularly described herein.
RECITALS
WHEREAS, Fairwater Real Estate Investment Trust is a publicly traded Maryland real estate investment trust listed on the New York Stock Exchange under the ticker symbol "FWT," with a diversified portfolio consisting of thirty-eight (38) mixed-use and multifamily properties located across the Mid-Atlantic region, with total assets as of fiscal year 2024 of approximately Four Billion One Hundred Million Dollars ($4,100,000,000) and fiscal year 2024 revenue of approximately Six Hundred Twelve Million Dollars ($612,000,000);
WHEREAS, Prescott Capital Partners, LP is an institutional real estate investment fund (Fund IV, with total fund commitments of Three Billion Eight Hundred Million Dollars ($3,800,000,000), 2023 vintage) managed by Prescott Capital GP, LLC, a Delaware limited liability company ;
WHEREAS, Fairwater has identified an approximately 8.2-acre waterfront development site located at 1500–1580 Wills Street, Baltimore, MD 21231 (Block 7419, Lots 1–6, Baltimore City) (the "Property"), currently owned by Harbor East Land Holdings, LLC, a Maryland limited liability company (the "Seller"), whose sole member is Vincent A. DeLuca; 
WHEREAS, the Members desire to form the JV to acquire the Property for a purchase price of Fifty-Four Million Dollars ($54,000,000) and to develop thereon a Class A mixed-use project known as "Harbor Point Towers," consisting of two (2) twenty-eight (28)-story residential towers containing approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space (the "Project");
WHEREAS, the Property is entitled under a Baltimore City Planned Unit Development approval, Ordinance No. 24-0417, approved by the Baltimore City Council on June 14, 2024, and building permits for the Project are expected to be obtained during the first quarter of 2026;
WHEREAS, the total estimated Project cost is Five Hundred Seventy-Six Million Dollars ($576,000,000) (the "Total Project Cost"),  to be funded with Two Hundred Forty Million Dollars ($240,000,000) in Member equity contributions (the "Total JV Equity") and a Three Hundred Thirty-Six Million Dollars ($336,000,000) construction loan facility (the "Construction Loan");
WHEREAS, the Members have executed a Letter of Intent dated September 22, 2025 (the "LOI"), setting forth the principal terms of their proposed joint venture arrangement, and the Members now wish to memorialize the definitive terms of their joint venture in this Agreement;
WHEREAS, Fairwater will serve as the Managing Member and operating partner of the JV, responsible for day-to-day development, construction oversight, leasing, and property management of the Project, and Prescott will serve as the non-managing capital partner with certain protective consent rights as set forth herein; and
WHEREAS, the Members desire to set forth herein their respective rights, obligations, and responsibilities with respect to the formation, capitalization, management, operation, and governance of the Company and the development and operation of the Project.
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 Members hereby agree as follows:
ARTICLE I — DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the meanings set forth below. Other capitalized terms used herein shall have the meanings assigned to them elsewhere in this Agreement.
"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" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Without limiting the generality of the foregoing, "Affiliate" shall include any entity in which a Person holds a majority ownership interest, any entity that holds a majority ownership interest in a Person, and any officer, director, trustee, general partner, or managing member of a Person.
"Approved Budget" means the annual operating and development budget for the Company and the Project as approved by   in accordance with Section 7.5 of this Agreement, as the same may be amended from time to time in accordance with the provisions of Article VII.
"Capital Account" means the capital account maintained for each Member in accordance with Section 4.4 of this Agreement and the Treasury Regulations promulgated under Section 704(b) of the Internal Revenue Code.
"Capital Commitment" means the total amount of capital that each Member has committed to contribute to the Company pursuant to Section 4.1 of this Agreement.
"Capital Contribution" means any cash contribution made by a Member to the Company in accordance with the provisions of Article IV.
"Capital Event Proceeds" has the meaning set forth in Section 6.1 of this Agreement.
"Capital Partner" means Prescott HP Investor, LLC, a Delaware limited liability company.
"Certificate of Formation" means the Certificate of Formation of the Company as filed with the Secretary of State of the State of Delaware, as the same may be amended, restated, or supplemented from time to time, substantially in the form attached hereto as Exhibit A.
"Company" means Harbor Point Development JV, LLC, a Delaware limited liability company formed pursuant to this Agreement.
"Construction Loan" means the construction loan facility in the principal amount of Three Hundred Thirty-Six Million Dollars ($336,000,000) to be provided by Meridian National Bank, N.A., as lead arranger and administrative agent, on the terms and conditions described in Article XVI of this Agreement .
"Default" or "Event of Default" has the meaning set forth in Section 12.1 of this Agreement.
"Defaulting Member" means a Member that has committed a Default or an Event of Default under this Agreement.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C. §18-101 et seq., as amended from time to time.
"Development Management Agreement" means the Development Management Agreement to be entered into between the Company and Fairwater Real Estate Investment Trust (or its designee), substantially in the form attached hereto as Exhibit D, pursuant to which Fairwater will provide development management services for the Project on the terms set forth therein and in Section 8.1 of this Agreement.
"Distribution" means any distribution of cash or other property by the Company to one or both of the Members pursuant to Article VI or Article XIII of this Agreement.
"Effective Date" has the meaning set forth in the Preamble.
"Effective Gross Revenue" or "EGR" means the gross revenue from the Project, including all rental income, parking income, retail revenue, and other miscellaneous income, less vacancy and credit losses as determined in accordance with generally accepted accounting principles consistently applied.
"Fair Market Value" or "FMV" means the fair market value of the Company or the Property, as applicable, as determined pursuant to the appraisal mechanism set forth in Section 11.3 of this Agreement.
"Fiscal Year" means the calendar year, or such portion thereof as applies in the case of the first and last Fiscal Years of the Company's existence.
"Funding Default" has the meaning set forth in Section 5.1 of this Agreement.
"GMP Contract" means the Guaranteed Maximum Price contract between the Company and Pinnacle General Contractors, Inc. for the construction of the Project, on terms and conditions to be approved by both Members as a Major Decision .
"Initial Capital Contribution" means the initial capital call at the equity funding and land closing in an aggregate amount equal to twenty-five percent (25%) of the Total JV Equity, which is Sixty Million Dollars ($60,000,000), to be funded by the Members in accordance with their respective Percentage Interests as set forth in Section 4.2 of this Agreement.
"Internal Revenue Code" or "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"IRR" means the internal rate of return, calculated in accordance with the methodology set forth in Schedule 1 attached hereto, including the compounding conventions and timing assumptions described therein.
"Key-Person Event" has the meaning set forth in Section 12.3(d) of this Agreement. 
"Land PSA" means the Purchase and Sale Agreement for the Property between Fairwater (as buyer and assignor) and Harbor East Land Holdings, LLC (as Seller), as such agreement may be assigned to the Company at or prior to the land closing.
"Major Decision" means any of those decisions enumerated in Section 7.3 of this Agreement that require the prior written consent of both Members.
"Managing Member" means Fairwater HP Manager, LLC, a Maryland limited liability company, or any successor managing member appointed in accordance with this Agreement.
"Member" and "Members" have the meanings set forth in the Preamble.
"Net Cash Flow" has the meaning set forth in Section 6.1 of this Agreement.
"Partnership Representative" has the meaning set forth in Section 14.3 of this Agreement.
"Percentage Interest" means, with respect to each Member, the following:
The Percentage Interests have been determined by the ratio of each Member's Capital Commitment to the Total JV Equity, and shall be subject to adjustment only as expressly provided in this Agreement, including pursuant to Section 5.2 hereof.
"Permitted Transfer" has the meaning set forth in Section 9.2 of this Agreement.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization, governmental authority, or any other entity.
"Preferred Return" means a cumulative internal rate of return of nine percent (9.0%) per annum (compounded quarterly) on unreturned Capital Contributions, calculated in accordance with the IRR methodology set forth in Schedule 1.
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"Project" means the Harbor Point Towers development to be constructed on the Property, consisting of two (2) twenty-eight (28)-story residential towers containing approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space, together with all associated parking, infrastructure, landscaping, and amenity improvements, all as more particularly described in Exhibit G attached hereto.
"Property" means the approximately 8.2-acre waterfront site located at 1500–1580 Wills Street, Baltimore, MD 21231 (Block 7419, Lots 1–6, Baltimore City, Maryland), as more particularly described by the legal description attached hereto as Exhibit B.
"Property Management Agreement" means the Property Management Agreement to be entered into between the Company and Fairwater Real Estate Investment Trust (or its designee), substantially in the form attached hereto as Exhibit E, pursuant to which Fairwater will provide property management services for the Project following stabilization.
"REIT" means a real estate investment trust as defined in Sections 856 through 860 of the Internal Revenue Code.
"Seller" means Harbor East Land Holdings, LLC, a Maryland limited liability company, whose sole member is Vincent A. DeLuca.
"Total JV Equity" means Two Hundred Forty Million Dollars ($240,000,000), representing the aggregate Capital Commitments of both Members.
"Total Project Cost" means Five Hundred Seventy-Six Million Dollars ($576,000,000), representing the total estimated cost to acquire the Property and develop the Project, as more particularly set forth in Schedule 2.
"Treasury Regulations" means the regulations promulgated by the United States Department of the Treasury under the Internal Revenue Code.
"Waterfall" means the distribution priority structure set forth in Section 6.2 of this Agreement.
All other capitalized terms used but not defined in this Article I shall have the meanings assigned to such terms elsewhere in this Agreement. Unless the context otherwise requires, words importing the singular include the plural and vice versa, and references to Articles, Sections, Schedules, and Exhibits are to those of this Agreement.
ARTICLE II — FORMATION AND ORGANIZATION OF THE COMPANY
Section 2.1 — Formation
The Company has been or shall be formed as a Delaware limited liability company by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware pursuant to Section 18-201 of the Delaware Act, substantially in the form attached hereto as Exhibit A. The name of the Company shall be Harbor Point Development JV, LLC. The registered agent of the Company in the State of Delaware shall be Incorporators & Associates, Inc., located at 1209 Orange Street, Wilmington, DE 19801. The Company's Employer Identification Number (EIN) shall be 84-6213950 (applied for with the Internal Revenue Service). The Managing Member shall take all actions necessary to cause the Certificate of Formation to be filed and to obtain the Company's EIN and all other governmental registrations and identification numbers required for the Company to conduct its business.
Section 2.2 — Foreign Qualification
The Company shall promptly qualify as a foreign limited liability company in the State of Maryland by filing the requisite registration documents with the Maryland State Department of Assessments and Taxation (MD SDAT), as the Company will conduct business and own real property in Baltimore City, Maryland. The Managing Member shall cause such filing to be made prior to the Company's acquisition of the Property or the commencement of any business activities in the State of Maryland. The Company shall also register and qualify in any other jurisdiction where the nature and extent of its activities require such registration or qualification.
Section 2.3 — Purpose
The purpose of the Company shall be strictly limited to:
(a) acquiring the Property from Harbor East Land Holdings, LLC, for a purchase price of Fifty-Four Million Dollars ($54,000,000) pursuant to the Land PSA;
(b) developing, constructing, owning, leasing, operating, managing, and maintaining the Project on the Property;
(c) obtaining and maintaining the Construction Loan from Meridian National Bank, N.A., and such other financing as may be approved by both Members in accordance with this Agreement;
(d) eventually marketing, selling, refinancing, or otherwise disposing of the Project and/or the Property; and
(e) engaging in any and all activities that are necessary, incidental, or ancillary to the foregoing purposes.
Without limiting the generality of the foregoing, the Company shall at all times operate as a single-purpose entity in compliance with the requirements of the Construction Loan documents and any other financing documents, and shall observe the following single-purpose entity covenants: (i) the Company shall not own any assets other than the Property and those assets incidental to the Project; (ii) the Company shall not engage in any business other than the ownership, development, operation, and management of the Project; (iii) the Company shall maintain its own books, records, and bank accounts separate and apart from those of any other Person; (iv) the Company shall hold itself out to the public as a legal entity separate and distinct from any other Person; (v) the Company shall not commingle its assets with those of any other Person; and (vi) the Company shall observe all limited liability company formalities required under the Delaware Act. 
Section 2.4 — Term
The Company shall continue in existence from the date of the filing of the Certificate of Formation until dissolved and its affairs wound up in accordance with Article XIII of this Agreement. The Company shall have a perpetual term and shall not be subject to any fixed termination date; provided, however, that the Company shall be dissolved upon the occurrence of any event of dissolution set forth in Section 13.1 of this Agreement.
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Section 2.5 — Principal Office
The principal office of the Company shall be located at 7200 Pratt Street, Suite 1400, Baltimore, MD 21202, care of Fairwater Real Estate Investment Trust, or at such other location within the Baltimore metropolitan area as the Managing Member may designate from time to time with the consent of the Capital Partner. The Company may establish such additional offices as the Managing Member may determine are reasonably necessary for the conduct of the Company's business, subject to the Approved Budget.
Section 2.6 — Title to Property
All property acquired by the Company, whether real, personal, or mixed, tangible or intangible, shall be held in the name of the Company. No Member shall have any individual ownership interest in any Company property. Each Member's interest in the Company shall constitute personal property, and no Member shall have any interest in the specific assets or property of the Company, except as expressly provided under the Delaware Act or this Agreement.
ARTICLE III — MEMBERS AND PERCENTAGE INTERESTS
Section 3.1 — Members
The Members of the Company and their respective holding entities are as follows:
(a) Fairwater HP Manager, LLC (Managing Member) — a Maryland limited liability company, EIN: 52-2201889, whose sole member is Fairwater Real Estate Investment Trust, a Maryland real estate investment trust (NYSE: FWT), EIN: 52-2198437, MD SDAT ID: D19847321, with headquarters at 7200 Pratt Street, Suite 1400, Baltimore, MD 21202.
(b) Prescott HP Investor, LLC (Capital Partner) — a Delaware limited liability company, EIN: 13-4603217, whose sole member is Prescott Capital Partners, LP, a Delaware limited partnership (Fund IV), EIN: 13-4587612, with principal offices at 400 Lexington Avenue, 32nd Floor, New York, NY 10170.
Section 3.2 — Percentage Interests
The Percentage Interests of the Members in the Company are as follows:
The Percentage Interests have been determined based on the ratio of each Member's Capital Commitment to the Total JV Equity. The Percentage Interests shall be subject to adjustment only as expressly provided in this Agreement, including pursuant to the dilution provisions of Section 5.2 in the event of a Funding Default. Except as otherwise provided in this Agreement, all matters requiring action by the Members shall be determined by the affirmative vote or consent of Members holding a majority of the Percentage Interests; provided, however, that Major Decisions shall require the affirmative vote or consent of both Members as set forth in Section 7.3.
Section 3.3 — Representations and Warranties of Members
Each Member hereby represents and warrants to the other Member, as of the Effective Date, as follows:
(a) Organization and Good Standing. Such Member is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation, and has full power and authority to own its assets, carry on its business, and enter into and perform its obligations under this Agreement.
(b) Authority. The execution, delivery, and performance of this Agreement by such Member have been duly authorized by all necessary action on the part of such Member, including, as applicable, action by its sole member, board of directors, board of trustees, general partner, investment committee, or other governing body. This Agreement constitutes a valid and binding obligation of such Member, enforceable against such Member 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.
(c) No Conflicts. The execution, delivery, and performance of this Agreement by such Member does not and will not (i) violate or conflict with the organizational documents of such Member or its sole member, (ii) violate any applicable law, statute, regulation, order, judgment, or decree, or (iii) result in a breach of, or constitute a default under, any material agreement, instrument, or obligation to which such Member or its sole member is a party or by which such Member or its sole member is bound.
(d) No Litigation. There is no litigation, arbitration, governmental investigation, or other proceeding pending or, to the knowledge of such Member, threatened against such Member or its sole member that would materially impair such Member's ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby.
(e) Sophisticated Investor. Such Member is a sophisticated investor with substantial experience in real estate investment and development transactions, has the financial capacity to bear the economic risk of its investment in the Company, and has conducted such due diligence as it deems appropriate.
In addition to the foregoing mutual representations and warranties:
(f) Fairwater Additional Representations. The Fairwater Member additionally represents and warrants that (i) Fairwater Real Estate Investment Trust is a publicly traded real estate investment trust listed on the New York Stock Exchange under the ticker symbol "FWT" and has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code;  (ii) Fairwater's Board of Trustees has duly authorized the transactions contemplated by this Agreement; and (iii) Fairwater requires the REIT compliance protections set forth in Article X of this Agreement to maintain its qualification as a REIT.
(g) Prescott Additional Representations. The Prescott Member additionally represents and warrants that (i) the investment committee of Prescott Capital Partners, LP (Fund IV) has approved the investment contemplated by this Agreement, with such approval having been obtained on November 5, 2025; (ii) Prescott Capital Partners, LP (Fund IV) has available committed capital sufficient to fund Prescott Member's Capital Commitment in full; and (iii) each of Prescott HP Investor, LLC, Prescott Capital Partners, LP, and Prescott Capital GP, LLC is an "accredited investor" within the meaning of Regulation D under the Securities Act of 1933, as amended, and a "qualified purchaser" within the meaning of Section 2(a)(51) of the Investment Company Act of 1940, as amended.
Section 3.4 — No Admission of Additional Members
No additional members may be admitted to the Company without the prior written consent of both Members, which consent may be withheld by either Member in its sole and absolute discretion. The admission of any additional member to the Company shall constitute a Major Decision under Section 7.3 of this Agreement. Any additional member admitted to the Company shall execute a joinder agreement in form and substance reasonably satisfactory to both existing Members, agreeing to be bound by the terms and conditions of this Agreement.
ARTICLE IV — CAPITAL CONTRIBUTIONS
Section 4.1 — Capital Commitments
Each Member hereby commits to contribute capital to the Company in the following aggregate amounts (each, a "Capital Commitment"):
Each Member's Capital Commitment represents such Member's maximum obligation to contribute equity capital to the Company, and each Member shall fund its Capital Commitment in accordance with the capital call procedures set forth in this Article IV. The Members acknowledge that the Total JV Equity of Two Hundred Forty Million Dollars ($240,000,000), together with the Construction Loan of Three Hundred Thirty-Six Million Dollars ($336,000,000), is intended to fund the Total Project Cost of Five Hundred Seventy-Six Million Dollars ($576,000,000).
Section 4.2 — Initial Capital Contributions
At the initial equity funding and land closing (the "Initial Closing"), targeted to occur on or about January 30, 2026, or such other date as the Members may mutually agree, each Member shall contribute to the Company twenty-five percent (25%) of its total Capital Commitment (the "Initial Capital Contribution"), as follows:
The Initial Capital Contributions, together with the initial advance under the Construction Loan (if available at the Initial Closing), shall be used to fund the acquisition of the Property from the Seller for the purchase price of Fifty-Four Million Dollars ($54,000,000), to pay closing costs and expenses associated with the acquisition, and to fund initial pre-development and development costs as set forth in the Approved Budget. Each Member shall deliver its Initial Capital Contribution by wire transfer of immediately available funds to the Company's designated bank account on or before the date of the Initial Closing. The failure of a Member to fund its Initial Capital Contribution on or before the Initial Closing date shall constitute a Funding Default under Section 5.1.
Section 4.3 — Subsequent Capital Calls
Following the Initial Closing, the Managing Member may from time to time issue capital call notices (each, a "Capital Call Notice") to the Members for additional Capital Contributions on a pro rata basis in accordance with their respective Percentage Interests (30% Fairwater / 70% Prescott) to fund amounts required under the Approved Budget that are not funded by Construction Loan advances or operating revenues. Each Capital Call Notice shall be in writing, substantially in the form attached hereto as Exhibit C, and shall specify:
(a) the aggregate amount of the capital call;
(b) each Member's pro rata share of such capital call;
(c) the purpose or purposes for which the capital call proceeds will be used, with reasonable specificity and reference to the applicable line item(s) of the Approved Budget;
(d) the date on which such Capital Contribution is due (the "Funding Date"), which shall be not less than fifteen (15) business days after the date of delivery of the Capital Call Notice; and
(e) the wire transfer instructions for the Company's designated bank account. 
All subsequent capital calls shall be subject to and consistent with the Approved Budget as approved pursuant to Section 7.5 of this Agreement. No Capital Call Notice shall be issued for amounts in excess of the applicable Member's remaining unfunded Capital Commitment without the prior written consent of such Member. Each Member shall fund its pro rata share of each capital call by wire transfer of immediately available funds to the Company's designated bank account on or before the applicable Funding Date.
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Section 4.4 — Capital Accounts
A separate Capital Account shall be established and maintained for each Member in accordance with Section 704(b) of the Internal Revenue Code and the Treasury Regulations thereunder. Each Member's Capital Account shall be:
(a) credited with (i) the amount of cash contributed by such Member to the Company, (ii) the fair market value of any property contributed by such Member (net of liabilities assumed or taken subject to), and (iii) allocations of income, gain, and items thereof to such Member; and
(b) debited for (i) the amount of cash distributed to such Member, (ii) the fair market value of any property distributed to such Member (net of liabilities assumed or taken subject to), and (iii) allocations of loss, deduction, and items thereof to such Member.
The Capital Accounts shall be maintained in accordance with the rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv), including the rules for revaluation of Company property upon the occurrence of specified events, and shall be adjusted as necessary to comply with the capital account maintenance requirements of such Treasury Regulations. The Managing Member shall cause the Company's accountant to determine Capital Account balances as of the end of each Fiscal Year and as of the date of any significant capital event.
Section 4.5 — No Interest on Capital
No Member shall earn or be entitled to receive any interest on its Capital Contributions or its Capital Account balance by reason of such contributions or balance; provided, however, that nothing in this Section 4.5 shall be construed to limit any Member's right to receive the Preferred Return under Article VI, which Preferred Return is a distribution priority and not interest on capital.
Section 4.6 — No Withdrawal of Capital
No Member may withdraw or reduce its Capital Contribution or its Capital Account, in whole or in part, except through distributions authorized under Article VI or Article XIII of this Agreement. No Member shall have the right to demand or receive the return of its Capital Contribution or any portion thereof, and no Member shall have the right to receive property other than cash in return for its Capital Contribution, except as may otherwise be provided in this Agreement in connection with the dissolution and winding up of the Company.
Section 4.7 — Pre-Formation Expenditure Reimbursement
The Members acknowledge that Fairwater Real Estate Investment Trust has incurred certain pre-formation expenditures on behalf of the Project prior to the formation of the Company, including deposits made under the Land PSA, zoning counsel fees, architectural and design fees, environmental assessment costs (including Phase I and Phase II environmental site assessments), survey costs, geotechnical investigation costs, and other pre-development expenses (collectively, the "Pre-Formation Expenditures").  A   accounting of the Pre-Formation Expenditures shall be set forth in a separate Pre-Formation Expenditure Reimbursement Agreement to be entered into between the Company and Fairwater, substantially in the form to be agreed upon by the Members prior to the Initial Closing. The Company shall reimburse Fairwater for the Pre-Formation Expenditures in accordance with such Pre-Formation Expenditure Reimbursement Agreement. To the extent provided therein, the Pre-Formation Expenditures reimbursed to Fairwater shall be credited against the Fairwater Member's Initial Capital Contribution under Section 4.2, reducing the amount of cash required to be funded by the Fairwater Member at the Initial Closing by a corresponding amount. 
ARTICLE V — DEFAULT ON CAPITAL CONTRIBUTIONS; DILUTION
Section 5.1 — Failure to Fund
If any Member fails to fund its pro rata share of a capital call within the fifteen (15)-business-day notice period set forth in Section 4.3 (or, in the case of the Initial Capital Contribution, on or before the Initial Closing date) (a "Funding Default"), the non-defaulting Member (the "Non-Defaulting Member") shall have the following remedies, which remedies shall be in addition to, and not in limitation of, any other rights or remedies available to the Non-Defaulting Member at law or in equity, subject to the cure period set forth in Section 5.3:
(a) Default Loan. The Non-Defaulting Member may elect to fund the Defaulting Member's unfunded share of the capital call as a priority loan to the Defaulting Member (a "Default Loan"), bearing interest at a rate of   per annum (the "Default Interest Rate"), compounded monthly, from the date of such funding until repaid in full. The Default Loan, together with all accrued and unpaid interest thereon, shall be repaid from, and shall be a first priority charge against, any Distributions otherwise payable to the Defaulting Member under Article VI, prior to any other distributions to the Defaulting Member. The Defaulting Member hereby grants to the Non-Defaulting Member a security interest in its interest in the Company to secure the repayment of any Default Loan.
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(b) Dilution. The Non-Defaulting Member may elect to fund the Defaulting Member's unfunded share of the capital call as an additional Capital Contribution by the Non-Defaulting Member, resulting in a dilution of the Defaulting Member's Percentage Interest in accordance with the dilution mechanics set forth in Section 5.2.
(c) Buy-Sell. The Non-Defaulting Member may elect to exercise the buy-sell provisions of Article XI, notwithstanding the five (5)-year lockout period otherwise applicable under Section 11.1, by delivering a Buy-Sell Notice to the Defaulting Member at any time following the Funding Default and the expiration of the cure period under Section 5.3.
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The foregoing remedies are not mutually exclusive, and the Non-Defaulting Member may elect any one or more of such remedies with respect to a Funding Default; provided, however, that the Non-Defaulting Member may not simultaneously elect both the Default Loan remedy under clause (a) and the dilution remedy under clause (b) with respect to the same unfunded amount. The Non-Defaulting Member shall notify the Defaulting Member of its election within thirty (30) days following the expiration of the cure period under Section 5.3.
Section 5.2 — Dilution Mechanics
If the Non-Defaulting Member elects the dilution remedy under Section 5.1(b), the Percentage Interests of the Members shall be adjusted as follows:
(a) The Non-Defaulting Member's additional Capital Contribution (equal to the Defaulting Member's unfunded share of the capital call) shall be credited to the Non-Defaulting Member's Capital Account.
(b) The Percentage Interests shall be recalculated based on the relative adjusted Capital Account balances of the Members immediately following the additional Capital Contribution, with the Defaulting Member's Percentage Interest reduced, and the Non-Defaulting Member's Percentage Interest increased, proportionally.
(c) All references in this Agreement to the Members' Percentage Interests, including the distribution Waterfall under Article VI, the promote structure under Tiers 3 through 5 of the Waterfall, and all voting and consent rights, shall be deemed modified to reflect the adjusted Percentage Interests, effective as of the date of the Non-Defaulting Member's additional Capital Contribution.
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The Managing Member shall promptly prepare an amended schedule reflecting the revised Percentage Interests and shall circulate such amended schedule to both Members. The Members acknowledge that the dilution remedy is intended to provide a meaningful economic consequence for a Funding Default and to compensate the Non-Defaulting Member for the additional capital risk assumed.
Section 5.3 — Cure Period
Upon the occurrence of a Funding Default, the Non-Defaulting Member shall deliver written notice thereof to the Defaulting Member (a "Default Notice"). The Defaulting Member shall have a period of ten (10) business days following receipt of such Default Notice (the "Cure Period") within which to cure the Funding Default by funding the full amount of its unfunded share of the capital call, together with interest thereon at the Default Interest Rate from the original Funding Date through the date of cure. If the Defaulting Member fails to fund such amount within the Cure Period, the Non-Defaulting Member may exercise any of the remedies set forth in Section 5.1 without further notice to the Defaulting Member.
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ARTICLE VI — DISTRIBUTIONS
Section 6.1 — Definitions
For purposes of this Article VI:
"Net Cash Flow" means, for any period, the gross receipts of the Company from all sources during such period (including rental income, retail revenue, parking income, interest income, and all other revenues) less the following: (i) operating expenses of the Project and the Company for such period , (ii) debt service payments on the Construction Loan and any other Company indebtedness, (iii) capital expenditures funded from operating revenues during such period, and (iv) reasonable reserves established by the Managing Member  in accordance with the Approved Budget for future operating expenses, capital expenditures, debt service, tenant improvements, leasing commissions, and other anticipated obligations . Net Cash Flow shall be determined by the Managing Member on a quarterly basis in accordance with the Approved Budget and generally accepted accounting principles consistently applied.
"Capital Event Proceeds" means the net proceeds received by the Company from any sale, exchange, transfer, or other disposition of the Property or any material portion thereof, any refinancing of the Construction Loan or other Company indebtedness, any condemnation or eminent domain award, or any other capital transaction, after (i) repayment of all outstanding Company indebtedness, including the Construction Loan, (ii) payment of all transaction costs and expenses, including brokerage commissions, legal fees, title insurance premiums, transfer taxes, and closing costs, and (iii) establishment of reasonable reserves for Company obligations.
Section 6.2 — Distribution of Net Cash Flow
Net Cash Flow shall be distributed to the Members on a quarterly basis, within forty-five (45) days after the end of each calendar quarter, in the following order of priority (the "Waterfall"):
Tier 1 — Return of Capital. First, one hundred percent (100%) to the Members, pro rata in accordance with their respective Percentage Interests (30% to Fairwater Member / 70% to Prescott Member), until each Member has received cumulative distributions under this Tier 1 equal to such Member's aggregate Capital Contributions (i.e., a full return of capital).
Tier 2 — Preferred Return. Second, one hundred percent (100%) to the Members, pro rata in accordance with their respective Percentage Interests (30% to Fairwater Member / 70% to Prescott Member), until each Member has received cumulative distributions under Tiers 1 and 2 sufficient to yield such Member a cumulative internal rate of return of nine percent (9.0%) per annum (compounded quarterly) on its unreturned Capital Contributions (the "Preferred Return"), calculated in accordance with the IRR methodology set forth in Schedule 1.
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Tier 3 — Catch-Up. Third, sixty percent (60%) to the Fairwater Member and forty percent (40%) to the Prescott Member, until the Fairwater Member has received cumulative distributions in respect of Tiers 2 and 3 (i.e., cumulative distributions above return of capital) equal to twenty percent (20%) of the total cumulative distributions made in respect of Tiers 2 and 3 combined. The purpose of this Tier 3 is to "catch up" the Fairwater Member's promoted interest to the target promote level on distributions above return of capital.
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Tier 4 — Residual Split (Base). Fourth, twenty percent (20%) to the Fairwater Member and eighty percent (80%) to the Prescott Member, until the project-level IRR (measured as the IRR to the Company as a whole, calculated in accordance with Schedule 1) has exceeded fifteen percent (15%).
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Tier 5 — Residual Split (Second Promote Tier). Thereafter, upon the project-level IRR exceeding fifteen percent (15%), the residual split shall shift to thirty percent (30%) to the Fairwater Member and seventy percent (70%) to the Prescott Member, with such split applying to all amounts distributed after the 15% IRR threshold has been achieved.
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For the avoidance of doubt, the distribution Waterfall set forth above shall be applied on a cumulative basis, taking into account all prior distributions made to the Members under all Tiers.
Section 6.3 — Distribution of Capital Event Proceeds
Capital Event Proceeds shall be distributed to the Members through the same Waterfall (Tiers 1 through 5) as set forth in Section 6.2, applied cumulatively with all prior distributions of Net Cash Flow. Upon a final liquidating distribution in connection with the dissolution and winding up of the Company, all remaining assets of the Company (after satisfaction of Company debts and liabilities, and the establishment of any reserves for contingent liabilities) shall be distributed to the Members in accordance with the Waterfall, and thereafter in accordance with positive Capital Account balances after giving effect to all allocations under Article XIV.
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Section 6.4 — Tax Distributions
Notwithstanding the foregoing distribution provisions, the Company shall make quarterly estimated tax distributions (each, a "Tax Distribution") to each Member in an amount sufficient to cover such Member's estimated federal and state income tax liability attributable to allocations of taxable income from the Company for the applicable quarter. For purposes of this Section 6.4, each Member's estimated tax liability shall be computed by applying the highest marginal combined federal and applicable state income tax rates for individuals or corporations, as applicable, to such Member's allocable share of the Company's taxable income for such quarter . Tax Distributions shall be treated as advances against, and shall offset and reduce, subsequent distributions otherwise payable to the applicable Member under the Waterfall set forth in Section 6.2 and Section 6.3. Tax Distributions shall be made within   days after the end of each calendar quarter, or more frequently if necessary to enable Members to make timely estimated tax payments. In no event shall the Company be required to make a Tax Distribution to the extent such distribution would violate applicable law or any covenant under the Construction Loan documents.
Section 6.5 — REIT Required Distributions
Notwithstanding the foregoing, the Company shall distribute to the Fairwater Member at least one hundred percent (100%) of the REIT taxable income (as defined under Sections 856 through 860 of the Internal Revenue Code and the Treasury Regulations thereunder) attributable to Fairwater's interest in the Company, to the extent necessary for Fairwater Real Estate Investment Trust to satisfy its annual REIT distribution requirements under Section 857(a) of the Code. The Fairwater Member shall provide the Managing Member (or the Capital Partner, if the Managing Member has been removed) with a written certification setting forth the amount of REIT taxable income required to be distributed, together with reasonable supporting calculations , within thirty (30) days after the end of each Fiscal Year (or more frequently during the year if interim distributions are necessary). Distributions made pursuant to this Section 6.5 shall be treated as advances against, and shall offset and reduce, subsequent distributions otherwise payable to the Fairwater Member under the Waterfall. Additional provisions regarding REIT compliance distributions are set forth in Article X and shall be further detailed in a REIT Compliance Side Letter to be entered into between the Members.
Section 6.6 — Withholding
The Company shall be entitled to withhold from any distribution to a Member any amounts required to be withheld by applicable federal, state, or local tax law, including any withholding required under Sections 1441 through 1446 of the Internal Revenue Code or any state or local equivalent. Any amounts so withheld shall be treated as having been distributed to the relevant Member for all purposes of this Agreement, including for purposes of computing such Member's Capital Account and distributions under the Waterfall. The Managing Member shall provide prompt written notice to any Member from whose distribution an amount is withheld, specifying the amount and basis for such withholding.
ARTICLE VII — MANAGEMENT AND GOVERNANCE
Section 7.1 — Managing Member
Fairwater HP Manager, LLC shall serve as the Managing Member of the Company. Fairwater, acting through the Managing Member, shall be responsible for the day-to-day management and operations of the Company and the Project,  including:
(a) day-to-day management and oversight of all Company affairs;
(b) development and construction oversight of the Project, including coordination with architects, engineers, general contractors, subcontractors, and other design and construction professionals;
(c) leasing and marketing of the residential units and retail spaces within the Project;
(d) engagement and supervision of all contractors, architects, engineers, consultants, attorneys, accountants, and other professionals retained by the Company;
(e) property management of the Project following stabilization, including rent collection, tenant relations, maintenance, and repair;
(f) preparation and implementation of the Approved Budget, including the initial Project development budget and annual operating budgets;
(g) financial reporting and recordkeeping for the Company as required by this Agreement; and
(h) such other duties as are customarily performed by a managing member or operating partner in a real estate development joint venture of this type.
The primary business contact for the JV shall be Marcus D. Okonkwo, Executive Vice President of Development at Fairwater Real Estate Investment Trust. The Managing Member shall devote such time and attention to the affairs of the Company as are reasonably necessary to carry out its duties and responsibilities under this Agreement and shall perform its duties with the care, skill, and diligence  .
Section 7.2 — Authority of Managing Member
Subject to the Approved Budget and the Major Decision requirements of Section 7.3, the Managing Member shall have full authority to act on behalf of the Company in the ordinary course of the Company's business, including the authority to:
(a) execute, deliver, and perform contracts, agreements, instruments, and other documents on behalf of the Company in connection with the acquisition, development, construction, leasing, operation, and management of the Project ;
(b) open and maintain bank accounts in the name of the Company, and make deposits, withdrawals, and transfers from such accounts, subject to the dual-signature requirements of Section 7.7;
(c) hire, engage, supervise, and terminate employees, agents, independent contractors, and consultants of the Company;
(d) prosecute, defend, settle, or compromise claims, actions, suits, or proceedings in the name of and on behalf of the Company, subject to the litigation threshold set forth in Section 7.3;
(e) make draws under the Construction Loan in accordance with the Construction Loan documents;
(f) file tax returns, registrations, and other governmental filings on behalf of the Company; and
(g) take all other actions that are reasonably necessary, appropriate, or incidental to the management of the Company's business and the development and operation of the Project.
The Capital Partner acknowledges that the Managing Member shall have the right to act on behalf of the Company without the prior consent of the Capital Partner in all matters that do not constitute Major Decisions, provided that such actions are within the scope of the Approved Budget and consistent with the terms of this Agreement. 
Section 7.3 — Major Decisions Requiring Consent of Both Members
Notwithstanding the authority granted to the Managing Member in Section 7.2, the following actions shall require the prior written consent of both the Managing Member and the Capital Partner (each, a "Major Decision"), and the Managing Member shall not take or cause the Company to take any Major Decision without such prior written consent:
1.  Approval of the initial Project development budget and the annual operating budget for each Fiscal Year, and any amendments to any Approved Budget that would result in any budgeted line item being exceeded by more than five percent (5%) of the budgeted amount for such line item or any increase in the Total Project Cost.
2.  Any single expenditure or commitment exceeding Five Hundred Thousand Dollars ($500,000) that is not included in the Approved Budget and is not otherwise contemplated by this Agreement.
3.  Entering into, modifying, extending, refinancing, or terminating the Construction Loan, or any other financing, loan, mortgage, deed of trust, or encumbrance of the Property or any other Company asset.
4.  Any sale, transfer, exchange, conveyance, or other disposition of the Property or any material portion thereof (including any individual building, tower, or phase of the Project), or any agreement or commitment to do the same.
5.  Any sale, transfer, pledge, hypothecation, encumbrance, or other disposition of a Member's interest in the Company, except for Permitted Transfers under Section 9.2.
6.  Admission of additional members to the Company.
7.  Settlement of any litigation, arbitration, governmental investigation, or claim involving the Company or the Project with a settlement value or exposure in excess of Two Hundred Fifty Thousand Dollars ($250,000).
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8.  Any election to rebuild, restore, or wind down the Project and the Company following a casualty loss or condemnation event affecting all or a material portion of the Property or the Project.
9.  Any voluntary filing for bankruptcy, receivership, insolvency, or dissolution of the Company, or any consent to an involuntary filing.
10.  Entering into any transaction, agreement, or arrangement with an Affiliate of any Member (other than the Development Management Agreement, the Property Management Agreement, and such other Affiliate agreements as are expressly contemplated by this Agreement on terms previously approved by both Members), or any amendment, modification, or termination of any such Affiliate agreement.
11.  Selection, replacement, or termination of the Company's independent auditor or tax return preparer (currently Alderman & Fields, CPAs, LLP).
12.  Execution of, or any material modification to, the GMP Contract with Pinnacle General Contractors, Inc., or selection of a replacement general contractor.
13.  Any action or omission that would cause the Company to fail to comply with the single-purpose entity covenants set forth in Section 2.3, or that would cause Fairwater Real Estate Investment Trust to fail to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code or to violate any REIT requirement.
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The consent of both Members to a Major Decision may be evidenced by written approval delivered by each Member, including by electronic mail, and shall be documented in the records of the Company. The failure of a Member to respond to a request for consent to a Major Decision within fifteen (15) business days after receipt of such request (together with all reasonably necessary supporting documentation) shall not be deemed consent or a waiver of the consent requirement.
Section 7.4 — Deadlock
If the Members are unable to agree on any Major Decision after   (a "Deadlock"), either Member may invoke the buy-sell provisions of Article XI (subject to the five (5)-year lockout period for non-deadlock triggers under Section 11.1, which lockout period shall not apply to a Deadlock).
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Section 7.5 — Budgets and Reporting
The Managing Member shall prepare and submit to the Capital Partner the following budgets and reports:
(a) Initial Development Budget. An initial Project development budget (which shall be consistent with the Total Project Cost of $576,000,000 as set forth in Schedule 2), to be submitted to and approved by both Members prior to the Initial Closing. The initial development budget shall include the following line items:
The capital structure of the Project shall be as follows:
(b) Annual Operating Budget. An annual operating budget for each Fiscal Year of the Company, to be submitted to the Capital Partner for approval not less than sixty (60) days prior to the commencement of such Fiscal Year. The annual operating budget shall include projected revenues, operating expenses, capital expenditures, debt service, reserves, and distributions. If the annual operating budget for any Fiscal Year is not approved by both Members prior to the commencement of such Fiscal Year, the prior year's approved budget shall apply, adjusted for non-discretionary increases (such as real estate tax assessments, insurance premiums, and utility costs), until a new budget is approved.
(c) Monthly Construction Reports. During the construction and development phase of the Project, monthly construction progress reports, including: (i) a narrative summary of construction progress and any material delays, issues, or change orders; (ii) a comparison of actual costs incurred to the Approved Budget; (iii) a summary of Construction Loan draws and remaining availability; (iv) an updated construction schedule; and (v) copies of the general contractor's monthly requisitions and draw requests.
(d) Quarterly Financial Statements. Within forty-five (45) days after the end of each calendar quarter, unaudited financial statements of the Company for such quarter, prepared in accordance with generally accepted accounting principles consistently applied, including a balance sheet, income statement, statement of cash flows, and summary of Capital Account balances.
(e) Annual Audited Financial Statements. Within ninety (90) days after the end of each Fiscal Year, audited financial statements of the Company for such Fiscal Year, prepared by Alderman & Fields, CPAs, LLP (engagement partner: Robert E. Alderman, 1 South Street, Suite 1800, Baltimore, MD 21202), in accordance with generally accepted accounting principles, accompanied by an independent auditor's report.
The Capital Partner shall have the right, at its own expense, to conduct periodic inspections of the Company's books and records and the Project site, upon   notice to the Managing Member.  The Managing Member shall provide the Capital Partner with such additional information regarding the Company and the Project as the Capital Partner may reasonably request from time to time.
Section 7.6 — Officers and Authorized Signatories
The Managing Member may designate officers of the Company, including a president, one or more vice presidents, a secretary, and a treasurer, to act on behalf of the Company in connection with the administration of its day-to-day affairs. Such officers shall serve at the pleasure of the Managing Member and shall have such authority and responsibilities as the Managing Member may delegate to them. The initial authorized signatories of the Company shall be designated by resolutions of the Members adopted on or before the Initial Closing. The Managing Member shall provide the Capital Partner with written notice of any changes to the Company's authorized signatories within five (5) business days of such change.
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Section 7.7 — Bank Accounts
All Company funds shall be deposited in accounts at one or more financial institutions approved by both Members. The Managing Member shall be authorized to open and manage such accounts in the name of the Company, subject to the following: (a) withdrawals from any Company bank account in an amount exceeding   shall require dual signatures of one (1) authorized signatory designated by the Managing Member and one (1) authorized signatory designated by the Capital Partner; and (b) the Managing Member shall provide the Capital Partner with monthly bank statements and reconciliations for all Company bank accounts. The Company shall not commingle its funds with those of any Member, Affiliate, or other Person.
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ARTICLE VIII — FEES AND COMPENSATION
Section 8.1 — Development Management Fee
The Company shall pay to Fairwater Real Estate Investment Trust (or its designee) a development management fee (the "Development Management Fee") equal to three and one-half percent (3.5%) of hard costs incurred in connection with the development and construction of the Project. Based on total estimated hard costs of Four Hundred Thirty-Two Million Dollars ($432,000,000), the aggregate Development Management Fee is estimated to be Fifteen Million One Hundred Twenty Thousand Dollars ($15,120,000). The Development Management Fee shall be payable monthly during the construction period of the Project, pro rata to hard costs incurred during such month, upon submission of a monthly invoice by Fairwater accompanied by documentation of hard costs incurred (including copies of the general contractor's approved requisitions and applicable lien waivers). The scope of services to be provided by Fairwater in consideration of the Development Management Fee, together with detailed performance standards, milestone requirements, and termination provisions, shall be set forth in a separate Development Management Agreement between the Company and Fairwater, substantially in the form attached hereto as Exhibit D.
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Section 8.2 — Property Management Fee
Following the stabilization of the Project (defined as the date on which the Project has achieved and maintained an average physical occupancy of ninety-three percent (93%) or greater for a period of three (3) consecutive months), the Company shall pay to Fairwater Real Estate Investment Trust (or its designee) a property management fee (the "Property Management Fee") equal to three percent (3.0%) of Effective Gross Revenue, payable monthly. The Property Management Fee shall be in consideration of Fairwater's provision of comprehensive property management services for the Project, including leasing, tenant relations, rent collection, maintenance and repair, common area management, vendor management, and financial reporting. The terms and conditions of such engagement shall be set forth in a separate Property Management Agreement between the Company and Fairwater, substantially in the form attached hereto as Exhibit E.
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Section 8.3 — Disposition Fee
Upon any sale, exchange, or other disposition of the Property or any material portion thereof, the Company shall pay to Fairwater Real Estate Investment Trust (or its designee) a disposition fee (the "Disposition Fee") equal to one percent (1.0%) of the gross sale price realized upon such disposition. The Disposition Fee shall be payable at the closing of such disposition and shall be deducted from gross sale proceeds in calculating Capital Event Proceeds under Section 6.1. The Disposition Fee shall be payable in addition to, and not in lieu of, any brokerage commissions payable to unaffiliated third-party brokers retained by the Company in connection with such disposition.
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Section 8.4 — No Other Compensation
Except as expressly set forth in this Article VIII and the Development Management Agreement, Property Management Agreement, and Pre-Formation Expenditure Reimbursement Agreement referenced here