UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
FORM 8-K
 
 CURRENT REPORT
 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
  Date of Report (Date of earliest event reported): December 29, 2017
 
 SeD Intelligent Home Inc.
 (Exact name of registrant as specified in its charter)
 
Nevada
 
000-55038
 
27-1467607
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
4800 Montgomery Lane, Suite 210
Bethesda, MD
 
 
20814
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: 301-971-3940
 
N/A
 (Former name or former address, if changed since last report)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
 
Emerging growth company  ☒
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐    
 

 
 
 
Throughout this Report on Form 8-K, the terms the “Company,” “we,” “us” and “our” refer to SeD Intelligent Home Inc., and “our board of directors” refers to the board of directors of SeD Intelligent Home Inc.
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
This Current Report on Form 8-K contains forward-looking statements regarding, among other things, our future operating results and financial position, our business strategy, and other objectives for our future operations. The words “anticipate,” “believe,” “intend,” “expect,” “may,” “estimate,” “predict,” “project,” “potential” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements including those set forth in the section of this Current Report entitled “Risk Factors.” We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
 
You should read this Current Report on Form 8-K and the documents that we have filed as exhibits to this Current Report on Form 8-K completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Current Report on Form 8-K are made as of the date of this Current Report on Form 8-K, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
 
Item 1.01 Entry into a Material Definitive Agreement.
 
On December 29, 2017, the Company, SeD Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company (the “Merger Sub”), SeD Home Inc. (“SeD Home”), a Delaware corporation, and SeD Home International, Inc., a Delaware corporation entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into SeD Home, with SeD Home surviving as a wholly-owned subsidiary of the Company. The closing of this transaction (the “Closing”) also took place on December 29, 2017 (the “Closing Date”). Prior to the Closing, SeD Home International, Inc. was the owner of 100% of the issued and outstanding common stock of SeD Home and was also the owner of 99.96% of the Company’s issued and outstanding common stock. The Company acquired all of the outstanding common stock of SeD Home Inc. from SeD Home International, Inc. in exchange for issuing to SeD Home International, Inc. 630,000,000 shares of the Company’s common stock. Accordingly, SeD Home International, Inc. remains the Company’s largest shareholder, and the Company is now the sole shareholder of SeD Home. The Agreement and the transactions contemplated thereby were approved by the Board of Directors of each of the Company, the Merger Sub, SeD Home International, Inc., and SeD Home.
 
SeD Home International, Inc. is wholly owned by Singapore eDevelopment Limited (referred to herein as “Singapore eDevelopment”), a Singapore based company traded on the Catalist Board of the Singapore Exchange Securities Trading Limited (SGX-ST). The Chief Executive Officer and Chairman of Singapore eDevelopment is Mr. Fai H. Chan. Mr. Fai H. Chan is also, through an entity he controls, the majority shareholder of Singapore eDevelopment. Mr. Fai H. Chan was a member of the Board of each of the Company, the Merger Sub, SeD Home International, Inc., SeD Home on the Closing Date; he remains on the Board of the Company,   SeD Home International, Inc. and SeD Home, and will now serve as Co-CEO of both the Company and its subsidiary SeD Home. Moe T. Chan, who is the son of Mr. Fai H. Chan, will serve as Co-CEO and as a member of the Board of both the Company and SeD Home as well. Moe T. Chan is also on the Board of Directors of Singapore eDevelopment. Alan W. L. Lui, the Chief Financial Officer of Singapore eDevelopment will also serve as Co-CFO of both the Company and SeD Home. The other officers and directors of SeD Home will also serve in such positions with the Company.
 
 
2
 
 
SeD Home’s main business is land development. SeD Home purchases land and develops it into residential communities. Development activities are contracted out, including planning, platting, design, and construction, as well as other work with engineers, surveyors and architects. The developed lots are sold to builders for the construction of new homes. SeD Home’s main assets are two property development projects: one located north of Houston, Texas (referred to as our “Black Oak” project) and one located near Washington D.C. in Frederick, Maryland (referred to as our “Ballenger Run” project), in each case as further described below. The Company intends to commence additional land development activities at new locations in the future. These opportunities will be identified and appropriate financing obtained or with the investment of additional capital on reasonable terms. The Company, through SeD Home and its subsidiaries, intends to expand into new real estate related businesses, although such expansion remains in the planning stages. As a result of this transaction, we believe that SeD Home will be able to more effectively access capital markets.
 
A copy of the Agreement is included as Exhibit 2.1 to this Current Report and is hereby incorporated by reference. All references to the Agreement and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.
 
The information contained in Item 2.01 below relating to the Agreement and the transaction contemplated thereby is incorporated herein by reference.
 
Item 2.01 Completion of Acquisition or Disposition of Assets.
 
As described in item 1.01 above, and as incorporated herein by reference thereto, on December 29, 2017, the Company effected a transaction pursuant to which it became the sole shareholder of SeD Home and issued to SeD Home International 630,000,000 shares of the Company’s common stock.
 
As a result, the Company is no longer a “shell company” as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act and the Company’s business operations will now be those operations that SeD Home International is currently conducting, and may conduct in the future.
 
FORM 10 DISCLOSURE
 
Set forth below is the information required by Form 10 Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934.
 
BUSINESS
 
SeD Intelligent Home Inc., formerly known as Homeownusa, was incorporated in the State of Nevada on December 10, 2009 with the intention of entering into the home equity lease/rent to own business. The Company is no longer pursuing this business plan. Our address is 4800 Montgomery Lane, Suite 210, Bethesda, MD, 20814. Our telephone number is 301-971-3940. We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups (JOBS) Act.
 
On December 31, 2013, the Company’s sole director and officer and nine other shareholders sold their interest in the Company to CloudBiz International Pte, Ltd (“CloudBiz”), a Singapore corporation. The total number of shares purchased was 15,730 which represented a 69% interest in the Company’s issued and outstanding common stock (the “Transaction”). Along with the Transaction, the sole director and officer resigned and Mr. Conn Flanigan was appointed as the Company’s Chief Executive Officer and sole director. On July 7, 2014 CloudBiz invested $37,000 in the Company. For such investment, CloudBiz received an additional 74 million shares of the Company’s common stock. In October 2014, the Company issued 20,534 shares to 30 new investors for total proceeds of $2,053. On December 22, 2016 Cloudbiz International Pte. Ltd transferred 74,015,730 common shares to Singapore eDevelopment. Singapore eDevelopment subsequently contributed its ownership in the Company to its subsidiary SeD Home International, Inc. (which also owned SeD Home until December 29, 2017, at which time SeD Home International, Inc. contributed its shares of SeD Home to the Company). The majority of the Company’s common stock continues to be owned by SeD Home International, Inc. On January 10, 2017, our board of directors appointed Fai H. Chan as Director. On March 10, 2017, Mr. Rongguo (Ronald) Wei, CPA, was appointed as Chief Financial Officer of the Company.
 
 
3
 
 
In connection with the acquisition of SeD Home, the Company has appointed new officers and directors. Fai H. Chan and Moe T. Chan will now serve as co-Chief Executive Officers;Rongguo (Ronald) Wei and   Alan W. L. Lui will serve as Co-Chief Financial Officers, and our Board of Directors will include Fai H. Chan, Moe T. Chan, Conn Flanigan and Charley MacKenzie.
 
With the completion of the Company’s acquisition of SeD Home, we are now in the business of land development. While the Company will own real estate, the Company does not intend to be a REIT for federal tax purposes.
 
SeD Home was incorporated in Delaware on February 24, 2015, and was named SeD Home USA, Inc. before changing its name in May of 2015. The officers and directors of SeD Home are the same six individuals who are the officers and directors of the Company (listed above). SeD Home’s Black Oak project is a 162-acre land sub-division development north of Houston, Texas. SeD Home’s Ballenger Run project is a 197-acre sub-division development near Washington D.C. in Frederick County, Maryland. SeD Home conducts its operations through nine wholly and partially owned subsidiaries. SeD Home’s affiliates will provide project and asset management via separate agreements with consultants.
 
The land development business involves converting undeveloped land into buildable lots. When possible, in future projects we will attempt to mitigate risk by attempting to enter into contracts with strategic home building partners for the sale of lots to be developed. In such circumstances, it is our intention that (i) we will conduct a feasibility study on a particular land development; (ii) both SeD Home and the strategic home building partners will work together in connection with acquisition of the appropriate land; (iii) strategic home building partners will typically agree to enter into agreements to purchase up to 100% of the buildable lots to be developed; (iv) SeD Home and the strategic home building partners will enter into appropriate agreements;and (v) SeD Home will proceed to acquire the land for development and will be responsible for the infrastructure development, ensuring the completion of the project and delivery of buildable lots to the strategic home building partner.
 
We also intend, to the fullest extent practicable, to source land where local government agencies (including county, district and other municipalities) and public authorities, such as improvement districts, will reimburse the majority of infrastructure costs incurred by the land developer for developing the land to build taxable properties. The developers and public authorities enter into agreements whereby the developers are reimbursed for their costs of infrastructure.
 
The Company will also consider the potential to purchase foreclosure property development projects from banks, if attractive opportunities should arise.
 
The Company, utilizing the extensive business network of its management and majority shareholder, may from time to time attempt to forge joint ventures with other parties. Through its subsidiaries, SeD Home may manage such joint ventures.
 
In addition to the completion of our current projects, we intend to seek additional land development projects in diverse regions across the United States. Such projects may be within both the for-sale and for-rent markets, and we may expand from residential properties to other property types, including but not limited to commercial and retail properties. We will consider projects in diverse regions across the United States, however, SeD Home and its management and consultants have longstanding relationships with local owners, brokers, managers, lenders, tenants, attorneys and accountants to help it source deals throughout Maryland and Texas. SeD Home will continue to focus on off-market deals and raise appropriate financing.
 
SeD Home, via a subsidiary, is presently exploring opportunities to expand its current portfolio by developing communities solely designed for renters. SeD Home is exploring the potential to pursue this new endeavor in part to improve cash flow and smooth out the inconsistencies of income in residential land development. SeD will continue to attempt to mitigate risk and maximize returns.
 
Entering into the business of building homes with the intention of owning and renting those homes would provide an opportunity for SeD Home to create value by (i) acquiring properties for horizontal and vertical development; (ii) providing fee generation via property management and leasing; and (iii) capturing rent escalations over long term periods. SeD Home and its affiliates would provide property management for customers seeking to offload home maintenance and lawn care.
 
 
4
 
 
Through our subsidiaries, we will explore the potential to pursue other business opportunities related to real estate. The Company is evaluating the potential to enter into activities related to real estate and home technologies, although we note that these potential opportunities remain at the exploratory stage, and we may not pursue these opportunities at the discretion of our management. The Company is particularly exploring opportunities related to smart home and eco-friendly home technologies.
 
We also intend to enlarge the scope of property-related services. Additional planned activities, which we intend to be carried out through SeD Home, include financing, home management, realtor services, insurance and home title validation. We may particularly provide these services in connection with homes we build. These activities are also in the planning stages.
 
As of September 30, 2017, our subsidiary SeD Home had total assets of $59,922,551 and total liabilities of $26,628,663. Total assets as of December 31, 2016 were $56,101,434 and total liabilities were $27,007,067.
 
Employees
 
At the present time, our subsidiary SeD Development Management LLC has four full time employees, and no part time employees. Much of our work is done by contractors retained for projects, and at the present time we have no full or part time employees outside of SeD Development Management LLC.
 
Compliance with Government Regulation
 
The development of our real estate projects will require the Company to comply with federal, state and local environmental regulations. Such costs are reflected in construction progress costs in our financial statements. The compliance costs of our existing projects are anticipated to be significant, and will increase if we add additional real estate projects and become involved in homebuilding in the future. We will incur additional expenses related to complying with U.S. securities reporting requirements now that SeD Home is owned by SeD Intelligent Home, Inc.
 
At the present time, we believe that we have all of the material government approvals that we need to conduct our business as currently conducted. We are subject to periodic local permitting that must be addressed, but we do not anticipate that such requirements for government approval will have a material impact on our business as presently conducted. We are required to comply with government regulations and to make filings from time to time with various government entities. Such work is typically handled by outside contractors we retain.
 
Intellectual Property
 
At the present time, the Company does not own any trademarks, but we anticipate filing trademark applications as we expand into new areas of business.
 
 
5
 
 
Corporate Organization
 
The following chart describes the Company’s ownership of various subsidiaries:
 
 
 
6
 
 
Black Oak
 
Black Oak is a 162 acre land infrastructure development and sub-division project situated in Magnolia, Texas north of Houston. Our initial equity investment of US$4.3 million was made in February 2014. Since then we have increased our ownership in 150 CCM Black Oak, Ltd. (“Black Oak LP”) from an original ownership of 60% ownership to 69%. Black Oak LP is owned by a general partner and three limited partners. Black Oak LP is controlled by SeD Home through its indirect ownership and control of the general partner and a majority of the limited partnership interests. The general partner of Black Oak LP, a Texas corporation called 150 Black Oak GP, Inc., is wholly owned by SeD USA, LLC, which in turn is wholly owned by SeD Home. A majority of the limited partnership interests are owned by SeD Development USA, Inc., which is wholly owned by SeD Home. 150 Black Oak GP, Inc. was previously jointly owned with a partner, but is now entirely owned by SeD USA LLC. The limited partners in Black Oak LP include SeD Development USA, Inc., American Real Estate Investments LLC and the Fogarty Family Trust II. As the only Class A limited partner, SeD Development USA, Inc. is entitled to a preferred return of five percent (5%) on its capital contribution prior to distributions to any other limited partner. As of September 30, 2017, Black Oak had total outstanding debts of $11,482,447.64 to SeD Development USA, Inc. and $6,305,229.10 to SeD Builder, Inc., each of which is one of our subsidiaries. Such loans are at an annual interest rate of 15% per year and are secured by deeds on the Black Oak property.
 
Black Oak LP is obligated under its Limited Partnership Agreement (as amended) to pay certain monthly consultant fees to SeD Home’s subsidiary SeD Development USA, LLC, as well as Arete Real Estate and Development Company and limited partner American Real Estate Investments LLC. Black Oak LP incurred combined fees of $108,500 and $203,195 to Arete Real Estate and Development Company and American Real Estate Investments LLC for the years ended December 31, 2016 and 2015, respectively. Black Oak LP will be required to continue to pay these fees if certain criteria are met.
 
The site plan at Black Oak is being revised to allow for approximately 420-500 residential lots of varying sizes. We anticipate that our involvement in land development aspects of this project will take approximately three to five additional years to complete. Since February of 2015, we have completed several important tasks related to the project, including clearing certain portions of the property, paving certain roads within the project and complying with the local improvement district to ensure reimbursement of these costs. We project selling lots and the construction of homes will take place in 2018. We are presently in negotiations with multiple builders for lot takedowns or in some cases entire phases of the project.
 
The Black Oak project is applying for reimbursement of certain construction of roads, sewer, water etc. While we may be entitled to reimbursements from a local improvement district, the amount and timing of such payments is uncertain. The timing of such potential reimbursements will be impacted by certain bond sales by the Harris County Improvement District #17.
 
In December 2015, the project obtained a US$6.0 million construction loan from Revere High Yield Fund, LP. This loan was paid off in October of 2017.
 
In August of 2017, we entered into a listing agreement for the Black Oak project with a nationally recognized land broker in Houston, Texas. Should we receive an acceptable offer for all or part of this project, we would strongly consider selling the project. There can be no guarantee that we will receive an offer at an acceptable amount. We continue to move forward with our development plans. If we are able to sell this project at an attractive price, we anticipate utilizing the net proceeds from such sale for the development of new projects and our expansion into new areas of business.
 
Ballenger Run
 
In November 2015, we completed the US$15.65 million acquisition of Ballenger Run, a 197-acre land sub-division development located in Frederick County, Maryland. The acquisition consideration was funded in part from a US$5.6 million deposit from NVR Inc. (“NVR”). The balance of US$10.05 million was derived from a total equity contribution of US$15.2 million by SeD Ballenger LLC (“SeD Ballenger”) and CNQC Maryland Development LLC (a unit of Qingjian International Group Co, Ltd, China, “CNQC”). The project is owned by SeD Maryland Development, LLC (“SeD Maryland”). SeD Maryland is 83.55% owned by SeD Ballenger and 16.45% by CNQC.
 
 
7
 
 
One of our subsidiaries, SeD Development Management, LLC is the manager of Ballenger Run pursuant to a Management Agreement. Under the Management Agreement, SeD Development Management, LLC shall manage, operate and administer SeD Maryland’ s day-to-day operations, business and affairs, subject to the supervision of SeD Maryland, and shall have only such functions and authority as SeD Maryland may delegate to it. For performing these services, SeD Development Management, LLC is entitled to a base management fee of five percent of the gross revenue (including reimbursements) of Ballenger Run. The base management fee shall be earned and paid in monthly installments of $38,650. SeD Development Management, LLC may also earn incentive compensation of twenty percent of any profit distributions to SeD Maryland above a 30% pre-tax internal rate of return.
 
This property is zoned for 443 entitled Residential Lots, 210 entitled Multi-family Units and 200 entitled Continuing Care Retirement   Community (“CCRC”) units approved for twenty (20) years from the date of a Developers Rights & Responsibilities Agreement dated October 8, 2014, as amended on September 6, 2016. We anticipate that the completion of our involvement in this project will take approximately five years from the date of this Current Report.
 
Revenue from Ballenger Run is anticipated to come from four main sources:
 
●
The sale of 443 entitled and constructed residential lots to NVR;
●
The sale of the lot for the 210 entitled multi-family units;
●
The sale of the lot for the 200 entitled CCRC units; and
●
The sale of 443 front foot benefit assessments.
 
The total project revenue is estimated to be approximately $68 million (prior to costs). Revenues may be lower, however, if we fail to attain certain goals and meet certain conditions.
 
Financing from Xenith Bank (f/k/a The Bank of Hampton Roads or Shore Bank) closed simultaneous with the settlement on the land on November 23, 2015, pursuant to a subsequent amendment to the terms of this loan, the loan provides (i) for a maximum of $11 million outstanding; (ii) that the maturity of this loan will be December 31, 2019; and (iii) includes an $800,000 letter of credit facility, with an annual rate of 1.5% on all issued letters of credit.
 
This loan is to fund the development of the first 276 lots, the multi-family parcel and senior living parcel, the amenities associated with these phases, and certain Ballenger Creek Pike improvements.
 
Expenses from Ballenger Run include, but not be limited to costs associated with land prices, closing costs, hard development costs, cost in lieu of construction, soft development costs and interest costs. We presently estimate these costs to be between $58 and $60 million. We may also encounter expenses which we have not anticipated, or which are higher than presently anticipated.
 
This project will have four phases. The first phase has been completed and the second phase has begun.
 
 
8
 
 
Sale of Residential Lots
 
The 443 Residential Lots were contracted for sale under a Lot Purchase Agreement to NVR, a company based in the US and listed on the New York Stock Exchange. NVR is a home builder which is engaged in the construction and sale of single-family detached homes, townhouses and condominium buildings. It also operates a mortgage banking and title services business. Under the Lot Purchase Agreements, NVR provided SeD Home with an upfront deposit of $5.6 million and has agreed to purchase the lots at a range of prices. The total estimated revenue to be received pursuant to these agreements, if all lots are sold, is approximately $59 million. The lot types and quantities include the following:
 
Lot Type
 
Quantity
 
Single Family Detached Large
    85  
Single Family Detached Small
    89  
Single Family Detached Neo Traditional
    33  
Single Family Attached 28’ Villa
    85  
Single Family Attached 20’ End Unit
    46  
Single Family Attached 16’ Internal Unit
    105  
Total
    443  
 
There are five different types of Lot Purchase Agreements (“LPAs”), which are essentially the same except for the price and unit details for each type of lot. The sub-divided lots will be progressively handed over to NVR. The sale of 13 model lots to NVR began in May of 2017. NVR has started marketing the property, and has commenced sales. Additional homes are currently for sale by NVR.
 
Sale of Lots for the Multi-family Units
 
On July 20, 2016 a contract was signed with Orchard Development Corporation to sell the multifamily parcel for $5,250,000. Orchard Development Corporation’s study period expired in November 2016 and they elected to continue forward into the closing period and increased their deposit to a non-refundable $250,000. Orchard Development Corporation is progressing through the site development process and is scheduled to close no later than March 31, 2018.
 
Sale of the Front Foot Benefit Assessments
 
We have established a front foot benefit assessment on all of the NVR lots. This is a 30 year annual assessment allowed in Frederick County which requires homeowners to pay the developer to reimburse the costs of installing public water and sewer to the lots. These assessments become effective as homes are settled at which time we can sell the collection rights to the assessments to investors who will pay a lump sum up front so we can realize the revenue sooner. Overall, we project that these front foot benefits will result in additional profits of approximately $900,000. Front foot benefit assessments are subject to amendment by regulatory agencies, legislative bodies, and court rulings, and any changes to front foot benefit assessments could cause us to reassess these projections.
 
 
9
 
 
Wetland Impact Permit
 
The Ballenger project will require a joint wetland impact permit, which requires the review of several state and federal agencies, including the US Army Corps of Engineers. The permit is primarily required for Phase 3 construction which will not start until 2019 or later but it also affects a pedestrian trail at the Ballenger project and the multi-family sewer connection. The US Army Corps of Engineers allowed us to proceed with construction on Phase 1, but required archeological testing. As of the date of this report, the archeological testing has been completed with no further recommendations on Phase 1 of the project. Required architectural studies on the final phase of development will likely result in the loss of only one lot, however, we cannot be certain of future reviews and their impact on the project.
 
K-6 Grade School Site
 
In connection with getting the necessary approvals for the Ballenger Project, we agreed to transfer thirty acres of land that abuts the development for the construction of a local K-6 grade school. We will not be involved in the construction of such school.
 
Home Incubation Project
 
Recognizing that large land sub-division projects have a longer time horizon, we previously introduced a home incubation initiative to market completed U.S. single-family homes, with existing tenants, to investors in Asia (the “Home Incubation Project”).
 
Under the Home Incubation Project, we purchased 27 homes, mostly located in Texas. We sold 24 of the homes by the end of 2016 and an additional two in 2017. The Group also purchased a terrace residential property in Washington DC, U.S. and renovated and sold the property in 2017.
 
Competition
 
There are a number of companies engaged in the development of land. Should we expand our operations into the business of constructing homes ourselves, we will face increased competition, including competition from large, established and well-financed companies, some of which may have considerable ties and experience in the geographical areas in which we seek to operate. Similarly, as we consider other opportunities we may wish to pursue in addition to our current land development business, we anticipate that we will face experienced competitors.
 
We will compete in part on the basis of the skill, experience and innovative nature of our management team, and their track record of success in diverse industries.
 
RISK FACTORS
 
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this report before making a decision to invest in our common stock. If any of the following risks and uncertainties develop into actual events, our business, results of operations and financial condition could be adversely affected. In those cases, the trading price of our common stock could decline and you may lose all or part of your investment.
 
Risks Related to Our Company
 
We will need additional capital to expand our current operations or to enter into new fields of operations.
 
Both the expansion of our current land development operations into new geographic areas and the proposed expansion of the Company into new businesses in the real estate industry will require additional capital. We will need to seek additional financing either through borrowing, private offerings of our securities or through strategic partnerships and other arrangements with corporate partners. We cannot be assured that additional financing will be available to us, or if available, will be available to us on terms favorable to us. If adequate additional financing is not available on acceptable terms, we may not be able to implement our business development plan or expand our operations.
 
 
10
 
 
We must retain key personnel for the success of our business.
 
Our success is highly dependent on the skills and knowledge of our management team, including their knowledge of our projects and network of relationships. If we are unable to retain the members of such team, or adequate substitutes, this could have a material adverse effect on our business and financial condition.
 
If we fail to effectively manage our growth our future business results could be harmed and our managerial and operational resources may be strained.
 
As we proceed with the expansion of our operations, we expect to experience significant and rapid growth in the scope and complexity of our business. We will need to hire additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a materially adverse effect on our business and financial condition.
 
There are risks related to conflicts of interest with our partners.
 
The two projects will be dependent upon SeD Development for the services required for their operations. The interlocking interests of our officers and directors create a number of conflicts of interest between our Company and our partners in the two projects. Neither of the two current projects has any employees, and will be dependent upon SeD Development and its affiliates for the services required for their operations.
 
SeD Development will receive fees and reimbursements for the services it provides to the limited partnerships and may realize income from operations and upon the liquidation of the limited partnerships. The agreements and arrangements between the limited partnerships and SeD Development and its affiliates, including those relating to compensation, were not negotiated at arm’s-length. Although the aggregate amount of reimbursements SeD Development may receive is limited by the limited partnership’s Management Agreement, the amount of services that SeD Development provides, and therefore the amount of reimbursement it receives within these limits, will be determined in the first instance by SeD Development. Potential conflict with our partners regarding the management of the limited partnerships could undermine our ability to effectively implement our vision for these projects, and could result in costly and time-consuming litigation.
 
Members of our management may face competing demands relating to their time, and this may cause our operating results to suffer.
 
Our Co-Chief Executive Officers, Fai H. Chan and Moe T. Chan, are both officers and directors of Singapore eDevelopment, the entity which owns SeD Home International, Inc., our majority shareholder. They are involved in a number of other projects other than our Company’s real estate business, and will continue to be so involved. Both of our Co-Chief Executive Officers have their primarily residences and business offices in Asia, and accordingly, there will be limits on how often they are able to visit the locations of our real estate investments. Similarly, our Co- Chief Financial Officers are both also engaged in non-real estate activities of Singapore eDevelopment, and only one of our Co-Chief Financial Officers resides and works in the United States (at an office located in Bethesda, MD).
 
Our relationship with our majority shareholder and its parent and affiliates may be on terms which are perceived by investors as more or less favorable than those that could be obtained from third parties.
 
Our majority shareholder, SeD Home International, Inc., presently owns 99.96% of our issued and outstanding common stock. While we anticipate that such percentage will be diluted over time, our majority shareholder, its parent and affiliates will be perceived as having influence over our management and operations, and any loans or other agreements which we may enter into with our majority shareholder and its parents and affiliates may be perceived by investors as being on terms that are less favorable than we could otherwise receive; such perception could adversely impact the price of our common stock. Similarly, such agreements could be perceived as being on terms more favorable than those that could be obtained from third parties, and any unwillingness by our majority shareholder and its parent and affiliates to engage with our common stock could discourage investors.
 
 
11
 
 
Risks Relating to the Real Estate Industry
 
The market for Real Estate is subject to fluctuations that may impact the value of the land or housing inventory that we hold, which may impact the price of our common stock.
 
Investors should be aware that the value of any real estate we own may fluctuate from time to time in connection with broader market conditions and regulatory issues which we cannot predict or control, including interest rates, the availability of credit, the tax benefits of homeownership and wage growth, unemployment and demographic trends in the regions in which may conduct business. Should the price of real estate decline in the areas in which we have purchased land decline, the price at which we will be able to sell lots to home builders, or if we build houses, the price at which can sell such houses to buyers, will decline.
 
The regulation of mortgages could adversely impact home buyers willingness to buy new homes which we may be involved in building and selling.
 
If we become active in the construction and sale of homes to customers, the ability of home buyers to get mortgages could have an impact on our sales, as we anticipate that the majority of home buyers will be financed through mortgage financing.
 
An increase in interest rates will cause a decrease in the willingness of buyers to purchase land for building homes and completed home.
 
An increase in interest rates will likely impact sales, reducing both the number of homes and lots we can sell and the price at which we can sell them.
 
Our business, results of operations and financial condition could be adversely impacted by significant inflation or deflation.
 
Significant inflation could have an adverse impact on us by increasing the costs of land, materials and labor. We may not be able to offset cost increases caused by inflation. In addition, our costs of capital, as well as those of our future business partners, may increase in the event of inflation, which may cause us to need to cancel projects. Significant deflation could cause the value of our inventories of land or homes to decline, which could sharply impact our profits.
 
New environmental regulations could create new costs for our land development business, and other business in which we may commence operations.
 
At the present time, we are subjected to a number of environmental regulations. If we expand into the business of building homes ourselves, we will be subjected to an increasing number of environmental regulations. The number and complexity of local, state and federal regulations may increase over time. Additional environmental regulations can add expenses to our existing business, and to businesses which we may enter into the future, which may reduce our profits.
 
Zoning and land use regulations impacting the land development and homebuilding industries may limit our activities and increase our expenses, which would adversely affect our profits.
 
We must comply with zoning and land use regulations impacting the land development and home building industries. We will need to obtain the approval of various government agencies to expand our operations as currently into new areas and to commence the building of homes. Our ability to gain the necessary approvals is not certain, and the expense and timing of approval processes may increase in ways that adversely impact our profits.
 
The availability and cost of skilled workers in the building trades may impact the timing and profitability of projects that we participate in.
 
Should there be a lack of skilled workers to be retained by our Company and its partners, the ability to complete land development and potential construction projects may be delayed.
 
 
12
 
 
Shortages in required materials could impact the profitability of construction partnerships we may participate in.
 
Should a shortage of required materials occur, such shortage could cause added expense and delays that will undermine our profits.
 
Our ability to have a positive relationship with local communities could impact our profits.
 
Should we develop a poor relationship with the communities in which we will operate, such relationship will impact our profits.
 
We may face litigation in connection with either our current activities or activities which we may conduct in the future.
 
As we expand our activities, the likelihood of litigation shall increase. The expenses of such litigation may be substantial. We may be exposed to litigation for environmental, health, safety, breach of contract, defective title, construction defects, home warranty and other matters. Such litigation could include expensive class action matters. We could be responsible for matters assigned to subcontractors, which could be both expensive and difficult to predict.
 
As we expand operations, we will incur greater insurance costs and likelihood of uninsured losses.
 
If we expand our operations into home building, we may experience material losses for personal injuries and damage to property in excess of insurance limits. In addition, our premiums may raise.
 
Health and safety incidents that occur in connection with our potential expansion into the home building business could be costly.
 
If we commence operations in the homebuilding business, we will be exposed to the danger of health and safety risks to our employees and contractors. Health and safety incidents could result in the loss of the services of valued employees and contractors and expose us to significant litigation and fines. Insurance may not cover, or may be insufficient to cover, such losses.
 
Adverse weather conditions, natural disasters and man-made disasters may delay our projects or cause additional expenses.
 
The land development operations which we currently conduct and the construction projects which we may become involved in at a later date may be adversely impacted by unexpected weather and natural disasters, including but not limited to storms, hurricanes, tornados, floods, blizzards, fires, earthquakes. Man-made disasters including terrorist attacks, electrical outages and cyber-security incidents may also impact the costs and timing of the completion of our projects. Cyber-security incidents, including those that result in the loss of financial or other personal data, could expose us to litigation and reputational damage. If insurance is unavailable to us on acceptable terms, or if our insurance is not adequate to cover business interruptions and losses from the conditions described above and similar incidents, or results of operations will be adversely affected. In addition, damage to new homes caused by these conditions may cause our insurance costs to increase.
 
Risks Associated with Real Estate-Related Debt and Other Investments
 
Any real estate debt security that we originate or purchase is subject to the risks of delinquency and foreclosure.
 
We may originate and purchase real estate debt securities, which are subject to numerous risks including delinquency and foreclosure. We will not have recourse to the personal assets of our tenants. The ability of a lessee to pay rent depends primarily upon the successful operation of the property, rather than upon the existence of independent income or assets of the tenant.
 
 
13
 
 
Any hedging strategies we utilize may not be successful in mitigating our risks.
 
We may enter into hedging transactions to manage, for example, the risk of interest rate or price changes. To the extent that we may occasionally use derivative financial instruments, we will be exposed to credit, basis and legal enforceability risks. Derivative financial instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. We may not be able to manage these risks effectively.
 
Risks Related to Our Potential Expansion into New Fields of Operations
 
If we pursue the development of new technologies, we will be required to respond to rapidly changing technology and customer demands.
 
In the event that the Company enters the business of developing “Smart Home” and similar technologies (an area which we are presently exploring), the future success of such operation will depend on our ability to adapt to technological advances, anticipate customer demands and develop new products. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of products. Also, we may not be able to adapt new or enhanced services to emerging industry standards, and our new products may not be favorably received.
 
Risks Related To Our Common Stock
 
The shares of our common stock are currently not being traded and there can be no assurance that there will be an active market in the future.
 
Our shares of common stock are not publicly traded, and if trading commences, the price may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock in the future. As a result, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business.
 
It is possible that we will not establish an active market unless our stock is listed for trading on an exchange, and we cannot assure you that we will ever satisfy exchange listing requirements.
 
It is possible that a significant trading market for our shares will not develop unless the shares are listed for trading on a national exchange. Exchange listing would require us to satisfy a number of tests as to corporate governance, public float, shareholders, equity, assets, market makers and other matters, some of which we do not currently meet. We cannot assure you that we will ever satisfy listing requirements for a national exchange or that there ever will be significant liquidity in our shares.
 
If we issue additional shares of our common stock, you will experience dilution of your ownership interest.
 
We may issue shares of our authorized but unissued equity securities in the future. Such shares may be issued in connection with raising capital, acquiring assets or firing or retaining employees or consultants. If we issue such shares, your ownership will be diluted.
 
We do not intend to pay dividends in the foreseeable future, and investors should not purchase our stock expecting to receive dividends.
 
We have not paid any dividends on our common stock in the past, and we do not anticipate that we will pay dividends in the foreseeable future. Accordingly, some investors may decline to invest in our common stock, and this may reduce the liquidity of our stock.
 
 
14
 
 
The limitations on liability for officers, directors and employees under the laws of the State of Nevada and the existence of indemnification rights for our officers, directors and employees could result in substantial expenditures by the Company and could discourage lawsuits against our officers, directors and employees.
 
Our Articles of Incorporation contain a specific provision that eliminates the liability of our officers and directors for monetary damages to our company and shareholders. Further, we intend to provide indemnification to our officers and directors to the fullest extent permitted by the laws of the State of Nevada. We may also enter into employment and other agreements in the future pursuant to which we will have indemnification obligations. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against officers and directors. These obligations may discourage the filing of derivative litigation by our shareholders against our officers and directors even where such litigation may be perceived as beneficial by our shareholders.
 
SeD Home will incur increased costs and compliance risks as a result of becoming a public company.
 
As a public company, SeD Home will incur significant legal, accounting and other expenses that SeD Home did not occur prior to being acquired by the Company.
 
 
 
15
 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This Current Report on Form 8-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Current Report on Form 8-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
 
Results of Operations for the nine months ended September 30, 2017 and 2016
 
Summary of Statements of Operations for the Nine Months Ended September 30, 2017 and 2016:
 
 
 
Nine Months Ended
 
 
 
September 30, 2017
 
 
September 30, 2016
 
Rental Income
  $ 88,438  
  $ 176,887  
Property Sales
  $ 2,703,736  
  $ 664,100  
Gross Profit
  $ 221,992  
  $ 138,035  
Sales, General and Administrative Expenses
  $ (814,568 )
  $ (1,070,543 )
Other Income (Expenses)
  $ 53,412  
  $ 25,875  
Net Loss
  $ (539,164 )
  $ (906,633 )
 
Revenue
 
Revenue was $2,792,174 for the nine months ended September 30, 2017 as compared to $840,987 for the nine months ended September 30, 2016. This increase in revenue is primarily attributable to the Company having an increase in property sales from the Ballenger Project, starting in May of 2017. We anticipate a higher level of revenue from sales in 2018. Rental income declined from $176,887 in the period ended September 30, 2016 to $88,438 in the period ended September 30, 2017 as certain rental properties were sold. Unless we acquire additional rental-income producing assets, such rental income may decline further in 2018.
 
Operating Expenses
 
Operating expenses increased to $3,384,750 for the nine months ended September 30, 2017 from $1,773,495 for the nine months ended September 30, 2016. This increase is caused by increased costs relating to increased sales, which cost of sales increased from $702,952 in the nine months ended September 30, 2016 to $2,570,182 in the nine months ended September 30, 2017. Accrued construction expenses were allocated to lot sales. We anticipate total cost of sales will increase as revenue increases.
 
Loss from Operations
 
Our loss from operations decreased from $932,508 to $592,576 in the nine month period ended September 30, 2016 to September 30, 2017, in large part because of our increased property sales. In 2018, we anticipate further decline in losses relating to our current operations, however, the addition of new operations may cause new expenses that delay any profitability.
 
 
16
 
 
Liquidity and Capital Resources
 
Our real estate assets have increased to $56,588,763 as of September 30, 2017 from $52,915,566 as of December 31, 2016. This increase largely reflects an increase in construction in progress to $31,262,668 as of September 30, 2017 from $26,146,557. Our cash has increased from $392,172 as of December 31, 2016 to $595,457 as of September 30, 2017. Our liabilities declined from $27,007,067 at December 31, 2016 to $26,628,663 at September 30, 2017. Our total assets have increased to $59,922,551 as of September 30, 2017 from $56,101,434 as of December 31, 2016.
 
Off-Balance Sheet Arrangements
 
As of September 30, 2017, we did not have any off-balance sheet arrangements, as defined under applicable SEC rules.
 
Results of Operations for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
 
 
 
Year Ended
 
 
 
December 31, 2016
 
 
December 31, 2015
 
Rental Income
  $ 230,059  
  $ 190,361  
Property Sales
  $ 800,000  
  $ 2,965,400  
Gross Profit
  $ 59,662  
  $ 543,115  
Sales, General and Administrative Expenses
  $ (1,158,149 )
  $ (1,327,715 )
Other Income (Expenses)
  $ 41,745  
  $ 3,599  
Net Loss
  $ (1,056,742 )
  $ (781,001 )
 
Revenue
 
Revenue was $1,030,059 for the year ended December 31, 2016 as compared to $3,155,761 for the year ended December 31, 2015. This decrease in revenue is primarily attributable to the Company having larger property sales in 2015 than in 2016, including having sold a larger number of homes in 2015. Property sales were $2,965,400 in the year ended December 31, 2015 and $800,000 in the year ended December 31, 2016.
 
Operating Expenses
 
Operating expenses decreased to $2,128,546 for the year ended December 31, 2016 from $3,940,361 for the year ended December 31, 2015. This change was largely caused by decreased costs of sales, which cost of sales decreased from $2,612,646 in the year ended December 31, 2015 to $970,397 in the year ended December 31, 2016. Expenses described in part because a majority of our incubation homes were sold in 2015. Accrued construction expenses were allocated to lot sales. We anticipate total cost of sales will increase as revenue increases.
 
Loss from Operations
 
Our loss from operations increased from $784,600 in the year ended December 31, 2015 to $1,098,487 in the year ended December 31, 2016, in large part because of our decreased property sales. Similarly, net loss increased from $781,001 in the year ended December 31, 2015 to $1,056,742 in the year ended December 31, 2016. Sales have increased in the period subsequent to December 31, 2016, and we anticipate declining losses in 2018 relating to our current operations, however, the addition of new operations may cause new expenses that delay any potential profitability.
 
Liquidity and Capital Resources
 
Our real estate assets have increased from $37,279,041 as of December 31, 2015 to $52,915,566 as of December 31, 2016. Our total assets increased from $42,329,092 as of December 31, 2015 to $56,101,434 as of December 31, 2016, although our cash dropped from $2,291,529 as of December 31, 2015 to $392,172 as of December 31, 2016. Our total liabilities declined from $40,055,189 as of December 31, 2015 to $27,007,067 as of December 31, 2016.
 
 
17
 
 
Seasonality
 
The real estate business is subject to seasonal shifts in costs as certain work in more likely to perform at certain times of year. This may impact the expenses of SeD Home from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location.
 
Off-Balance Sheet Arrangements
 
As of December 31, 2016, we did not have any off-balance sheet arrangements, as defined under applicable SEC rules.
 
PROPERTIES
 
Black Oak
 
The Black Oak property is located in Montgomery County in Magnolia, Texas. This property is located east of FM 2978 via Standard Road to Dry Creek Road and South of the Woodlands, one of the most successful, fastest growing master planned communities in Texas. This residential land development consists of 450 lots on 162   acres. Black Oak LP is the primary developer responsible for all infrastructure development. This property is included in Harris County Improvement District #17.
 
Ballenger Run
 
Ballenger Run is a residential land development project located in Frederick County in Frederick, Maryland. This property is located approximately 40 miles from Washington, DC, 50 miles from Baltimore and is located less than four miles from I-70 and I-270. Ballenger Run is situated on approximately 197 acres of land and entitled for 853 residential units consisting of 443 residential Lots, 210 multi-family units and 200 age restricted units. SeD Development Management is the primary developer responsible for all infrastructure development.
 
Office Space
 
At the present time, the Company is renting offices in Houston, Texas and Bethesda, Maryland through SeD Home. At the present time, our office space is sufficient for our operations as presently conducted, however, as we expand into new projects and into new areas of operations we anticipate that we will require additional office space.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
Pre-Closing Security Ownership
 
The following table sets forth, as of December 29, 2017, prior to the Closing, the number and percentage of our outstanding shares of common stock owned by (i) each person known to us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer and significant employee, and (iv) all officers and directors as a group.
 
 
18
 
 
The number of shares listed below includes shares that each shareholder listed in the table has the right to acquire beneficial ownership of within 60 days.
 
 
Name and Address (2)
 
Number of Common Shares Beneficially Owned
 
 
Percentage of Outstanding Common Shares (1)
 
Fai H. Chan (3)
    74,015,730  
    99.96 %
Conn Flanigan
    0  
    0.00 %
Rongguo (Ronald) Wei
    0  
    0.00 %
All Directors and Officers (3 individuals)
    74,015,730  
    99.96 %
Singapore eDevelopment (3)
    74,015,730  
    99.96 %
 SeD Home International, Inc. (3)
    74,015,730  
    99.96 %
 
(1)        
Based upon 74,043,324 outstanding common shares as of December 29, 2017, prior to the Closing.
(2) 
The mailing address for each individual and entity set forth above is c/o SeD Intelligent Home Inc., 4800 Montgomery Lane, Suite 210, MD 20814.
(3) 
Fai H. Chan may be deemed to be the beneficial owner of those 74,015,730 shares held by Singapore eDevelopment’s subsidiary SeD Home International, Inc. prior to the Closing, as he is the Chief Executive Officer and majority shareholder of Singapore eDevelopment.
 
Post-Closing Security Ownership
 
The following table sets forth, as of December 29, 2017, following the Closing and the issuance of 630,000,000 shares of our common stock, the number and percentage of our outstanding shares of common stock owned by (i) each person known to us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer and significant employee, and (iv) all officers and directors as a group.
 
The number of shares listed below includes shares that each shareholder listed in the table has the right to acquire beneficial ownership of within 60 days.
 
Name and Address (2)
 
Number of Common Shares Beneficially Owned
 
 
Percentage of Outstanding Common Shares (1)
 
Fai H. Chan (3)
    704,015,730  
    99.99 %
Moe T. Chan
    0  
    0.00 %
Conn Flanigan
    0  
    0.00 %
Charley MacKenzie
    0  
    0.00 %
Rongguo (Ronald) Wei
    0  
    0.00 %
Alan W. L. Lui
    0  
    0.00 %
All Directors and Officers (6 individuals)
    704,015,730  
    99.99 %
Singapore eDevelopment (3)
    704,015,730  
    99.99 %
SeD Home International, Inc. (3)
    704,015,730  
    99.99 %
 
(1)      
Based upon 704,043,324 outstanding common shares as of December 29, 2017.
(2) 
The mailing address for each individual and entity set forth above is c/o SeD Intelligent Home Inc., 4800 Montgomery Lane, Suite 210, MD 20814.
(3) 
Fai H. Chan may be deemed to be the beneficial owner of those 704,015,730 shares held by Singapore eDevelopment’s subsidiary SeD Home International, Inc. following the Closing, as he is the Chief Executive Officer and majority shareholder of Singapore eDevelopment.
 
Changes in Control
 
The Company is not aware of any arrangement which may at a subsequent date result in a change in control of the Company.
 
 
19
 
 
DIRECTORS AND EXECUTIVE OFFICERS
 
The name, age and position of our officers and directors are set forth below:
 
Name
 
Age
 
Position(s)
Fai H. Chan
 
73
 
Co-Chief Executive Officer and Chairman of the Board of Directors
Moe T. Chan
 
39
 
Co-Chief Executive Officer and Member of the Board of Directors
Conn Flanigan
 
49
 
Secretary and Member of the Board of Directors
Charley MacKenzie
 
46
 
Member of the Board of Directors
Rongguo (Ronald) Wei
 
46
 
Co-Chief Financial Officer
Alan W. L. Lui
 
47
 
Co-Chief Financial Officer
                                          
The mailing address for each of the officers and directors named above is c/o of the Company at: 4800 Montgomery Lane, Suite 210, Bethesda, MD, 20814.
 
Business Experience
 
Fai H. Chan. Fai H. Chan has served as a member of our Board of Directors since January 10, 2017, and has served as Co-Chief Executive Officer of the Company since December 29, 2017. Mr. Chan is an expert in banking and finance, with years of experience in these industries. He has also restructured 35 companies in various industries and countries in the past 40 years. Mr. Chan serves as the CEO of Singapore eDevelopment, a limited company listed on the Catalist of the Singapore Exchange Securities Trading Limited. He was appointed director of Singapore eDevelopment on March 1, 2014. He is also Non-Executive Director of ASX-listed bio-technology company Holista Colltech Ltd. Mr. Chan served as a member of the Board of Directors of HotApp International, Inc. since October of 2014 and served as the Company’s CEO from December of 2014 until June of 2017. From 1992 until 2015, Mr. Chan also served as Managing Chairman of HKSE-listed Heng Fai Enterprises Limited, now known as ZH International Holdings, Ltd. He also served as director of Global Medical REIT Inc. (NYSE: GMRE) from 2013 until 2015 and as director of American Housing REIT Inc. from 2013 to 2015. Mr. Chan was also formerly (i) the Managing Director of SGX Catalist-listed SingHaiyi Group Ltd, which under his leadership, transformed from a failing store-fixed business provider with net asset value of less than S$10 million into a property trading and investment company and finally to a property development company with net asset value over S$150 million before Mr. Chan ceded controlling interest in late 2012; (ii) the Executive Chairman of China Gas Holdings Limited, a formerly failing fashion retail company listed on SEHK which, under his direction, was restructured to become one of a few large participants in the investment in and operation of city gas pipeline infrastructure in China; (iii) a director of Global Med Technologies, Inc., a medical company listed on NASDAQ engaged in the design, development, marketing and support information for management software products for healthcare-related facilities; (iv) a director of Skywest Ltd, an ASX-listed airline company; and (v) the Chairman and Director of American Pacific Bank.
 
Director Qualifications of Fai H. Chan:
 
The board of directors appointed Mr. Chan in recognition of his abilities to assist the Company in expanding its business and the contributions he can make to the Company’s strategic direction.
 
Moe T. Chan. Moe Chan was appointed Co-Chief Executive Officer of our Company on December 29, 2017. Moe Chan has served as the Chief Development Officer of Singapore eDevelopment since July of 2015 and is responsible for Singapore eDevelopment’s international property development business (including serving as Co-Chief Executive Officer and a member of the Board of SeD Home). Moe Chan has served as an Executive Director of Singapore eDevelopment since January of 2016. Moe Chan was previously the Chief Operating Officer of SEHK-listed ZH International Holdings Ltd (formerly known as Heng Fai Enterprises Limited), and was responsible for that company’s global business operations consisting of REIT ownership and management, property development, hotels and hospitality, as well as property and securities investment and trading. Prior to that, he was an executive director and the chief of project development of SGX-ST Catalist-listed SingHaiyi Group Ltd, overseeing its property development projects. He was also a non-executive director of the Toronto Stock Exchange-listed RSI International Systems Inc.
 
 
20
 
 
Moe T. Chan has a diverse background and experience in the fields of property, hospitality, investment, technology and consumer finance. He holds a Master’s Degree in Business Administration with honours from the University of Western Ontario, a Master’s Degree in Electro-Mechanical Engineering with honours and a Bachelor’s Degree in Applied Science with honours from the University of British Columbia. Moe Chan is the son of Fai H. Chan.
 
Director Qualifications of Moe T. Chan:
 
The board of directors appointed Moe Chan in recognition of his extensive knowledge of real estate and ability to assist the Company in expanding its business.
 
Conn Flanigan. Mr. Flanigan is a practicing attorney specializing in corporate, real estate, and securities law. Mr. Flanigan is a legal advisor to Singapore eDevelopment and has served as officer and director to several US subsidiaries of Singapore eDevelopment. Mr. Flanigan served as the Secretary and General Counsel for Global Medical REIT Inc. (NYSE:GMRE) from December 2013 to May 2017. From September 4, 2013 to May 2017, Mr. Flanigan also served as General Counsel and Secretary, and as a director, of American Housing REIT Inc. Mr. Flanigan served as a member of the Board Directors of Amarantus Bioscience Holdings, Inc., a biotech company, from February 23, 2017 until May 12, 2017. Mr. Flanigan has served a director of HotApp International Inc. since October 23, 2014 and as legal counsel and secretary since December 31, 2014. Additionally, Mr. Flanigan has served as General Counsel with several US subsidiaries of ZH International Holdings, Ltd, (f/k/a Heng Fai Enterprises, Ltd), a Hong Kong public company. Mr. Flanigan received a B.A. in International Relations from the University of San Diego in 1990 and a Juris Doctor Degree from the University of Denver Sturm College Of Law in 1996.
 
Director Qualifications of Conn Flanigan:
 
Mr. Flanigan’s service as an officer, director and employee of various entities has provided him with significant knowledge and experience regarding corporate financial and governance matters.
 
Charley MacKenzie. Mr. MacKenzie is currently the Chief Development Officer for SeD Development Management, a subsidiary of SeD Home, Inc. Mr. MacKenzie is also a member of the Board of Directors of SeD Home, Inc. He was previously the Chief Development Officer for Inter-American Development (IAD), a subsidiary of Heng Fai Enterprises. Mr. MacKenzie focuses on acquisitions and development of residential and mixed-use projects within the United States. Mr. MacKenzie specializes in site selection, contract negotiations, marketing and feasibility analysis, construction and management oversight, building design and investor relations. Mr. MacKenzie has developed over 1,300 residential units inclusive of single family homes, multi-family, and senior living dwellings totaling more than $110M and over 650,000 square feet of commercial valued at over $100M. Mr. MacKenzie received a BA and graduate degree from St. Lawrence University where he served on Board of Trustees from 2003-2007.
 
Director Qualifications of Charley MacKenzie:
 
The board of directors appointed Charley MacKenzie in recognition of his extensive knowledge of real estate and ability to assist the Company in expanding its business.
 
Rongguo (Ronald) Wei. Mr. Wei has served as the Company’s Chief Financial Officer since March 10, 2017. Mr. Wei, is a finance professional with more than 15 years of experience working in public and private corporations in the United States. As the Chief Financial Officer of SeD Development Management LLC, Mr. Wei is responsible for oversight of all finance, accounting, reporting, and taxation activities for that company. Prior to joining SeD Development Management LLC in 2016, Mr. Wei worked for several different US multinational and private companies including serving as Controller at American Silk Mill, LLC from 2014-2016, serving as a Senior Financial Analyst at Air Products & Chemicals, Inc. from 2013-2014 and serving as a Financial/Accounting Analyst at First Quality Enterprise, Inc. from 2011-2012. Before Mr. Wei came to US, he worked as an equity analyst in Hong Yuan Securities, in Beijing, China, concentrating on industrial and public company research and analysis. Mr. Wei is a Certified Public Accountant and received his MBA from the University of Maryland and a Master of Business Taxation from the University of Minnesota. Mr. Wei also holds a Master in Business degree from Tsinghua University and a Bachelor degree from Beihang University. Mr. Wei served as a member of the Board Directors of Amarantus Bioscience Holdings, Inc., a biotech company, from February 23, 2017 until May 3, 2017, and has served as Chief Financial Officer of such company since February 23, 2017.
 
 
21
 
 
Alan W. L. Lui has served as Chief Financial Officer of HotApp International Inc. since May 12, 2016 and has served as a director of one of HotApp’s subsidiaries since July of 2016. Mr. Lui has been Chief Financial Officer of Singapore eDevelopment, the Company’s majority shareholder, since November 1, 2016 and served as its Acting Chief Financial Officer since June 22, 2016. Since October of 2016, Mr. Lui has also served as a director of BMI Capital Partners International Ltd, a Hong Kong company, and International Real Estate Transaction Limited, a company formed in the People’s Republic of China. From 1997 through 2016, Mr. Lui served in various executive roles at ZH International Holdings Ltd. (a Hong Kong-listed company formerly known as Heng Fai Enterprises Ltd), including Financial Controller. Mr. Lui oversaw the financial and management reporting and focusing on its financing operations, treasury investment and management. He has extensive experience in financial reporting, taxation and financial consultancy and management in Hong Kong. He also managed all financial forecasts and planning. Mr. Lui is a certified CPA in Australia and received a Bachelor’s Degree in Business Administration from the Hong Kong Baptist University in 1993.
 
Code of Ethics
 
We have not adopted a code of ethics that applies to our officers, directors and employees. When we do adopt a code of ethics, we will disclose it in a Current Report on Form 8-K.
 
Committees and Independent Directors
 
Our Board of Directors has no nominating or compensation committees. Our Board believes that the functions of such committees can be performed by the entire Board until independent directors have been appointed. The Company’s current audit committee consists of Conn Flanigan. Our Board intends to create nominating and compensation committees, and to appoint a member to our audit committee that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is independent, in the near future.
 
Our Board has voluntarily adopted the corporate governance standards defining the independence of our directors imposed by the NASDAQ Capital Market's requirements for independent directors pursuant to Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market LLC.
 
EXECUTIVE COMPENSATION
 
At the present time, neither SeD Intelligent Home, Inc. nor SeD Home and its subsidiaries is a party to any compensation arrangements with any officer or director of either entity, and has made no provisions for paying cash or non-cash compensation to such officers and directors, except for Charley MacKenzie and Rongguo (Ronald) Wei.
A subsidiary of SeD Home is paying salaries to four employees at the present time, which includes Mr. Wei, and pays has consulting arrangements with certain individuals, including Mr. MacKenzie.
 
Mr. Wei is presently compensated by SeD Development Management LLC for his services to SeD Home at a rate of $112,800 per year, plus benefits valued at approximately $10,000 per year. Prior to the Closing Date, Mr. Wei was not paid by SeD Intelligent Home, Inc. SeD Development Management LLC will now compensate Mr. Wei for his services to both SeD Intelligent Home and SeD Home.
 
A company controlled by Mr. MacKenzie is paid consulting fees of approximately $20,000 per month, which includes payment for his services to SeD Home and its subsidiaries.
 
Mr. Flanigan serves in various director and officer positions with subsidiaries of Singapore eDevelopment. Mr. Flanigan’s law firm has been paid legal fees by various subsidiaries of Singapore eDevelopment. Mr. Fai H. Chan is compensated by Singapore eDevelopment, where he serves as Chief Executive Officer. Mr. Moe T. Chan and Mr. Alan Lui are also employed by Singapore eDevelopment. Neither SeD Intelligent Home, Inc. nor SeD Home and its subsidiaries is charged for the services of Fai H. Chan, Moe T. Chan and Alan Lui.
 
In connection with the acquisition of SeD Home by SeD Intelligent Home Inc., SeD Intelligent Home and its subsidiaries intend to enter into revised compensation agreements with officers, directors and certain employees in the immediate future.
 
 
22
 
 
The table below summarizes all compensation awarded to, earned by, or paid to SeD Intelligent Home, Inc.’s named executive officer for all services rendered in all capacities to us for the period from January 1, 2015 through December 31, 2016.
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
 
 
Year
 
 
Salary
 
 
 
Bonus
 
 
 
Stock Awards
 
 
 
Option Awards
 
 
Non-Equity Incentive Plan Comp
 
 
Nonqualified deferred Comp Earnings
 
 
 
All Other Comp
 
 
 
Total
 
Conn Flanigan
 
2016
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
President
 
2015
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
 
SeD Intelligent Home Inc. did not pay any salaries to any officer, director or employee in the fiscal years ended December 31, 2015 and December 31, 2016. Mr. Flanigan was the sole officer and director of SeD Intelligent Home Inc. in 2015 and 2016.
 
SeD Home also did not compensate its executive officers and directors in the fiscal years ended December 31, 2015 and December 31, 2016, only employees and consultants.
 
As of the date of this Report, the Company does not have any stock option plans, retirement, pension, or profit sharing plans for the benefit of any of our officers or directors.
 
Outstanding Equity Awards at Fiscal Year-End
 
There were no grants of stock options through the date of this report.
 
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
 
The board of directors of the Company has not adopted a stock option plan. The company has no plans to adopt it but may choose to do so in the future. If such a plan is adopted, this may be administered by the board or a committee appointed by the board (the “Committee”). The committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. The Company may develop an incentive based stock option plan for its officers and directors.
 
Stock Awards Plan
 
The company has not adopted a Stock Awards Plan, but may do so in the future. The terms of any such plan have not been determined.
 
 
23
 
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE
 
Family Relationships
 
Fai H. Chan, our Co-Chief Executive Officer, Chairman of our Board and Chairman of the Board and Chief Executive Officer of our majority shareholder and its corporate parent is the father of Moe T. Chan, our other Co-Chief Executive Officer and a Member of our Board.
 
Transactions with Related Persons, Promoters, and Certain Control Persons
 
SeD Intelligent Home, Inc.
 
The majority shareholder of SeD Intelligent Home Inc. is SeD Home International, Inc., a wholly owned subsidiary of Singapore eDevelopment.
 
On July 7, 2014 CloudBiz International Pte. Ltd (“Cloudbiz”) invested $37,000 in SeD Intelligent Home Inc. At such time CloudBiz was the shareholder holding a majority of our common stock. For such investment, CloudBiz received an additional 74 million shares of the common stock of SeD Intelligent Home Inc. Cloudbiz was under the control of Fai H. Chan, our current Co-Chief Executive Officer and Chairman.
 
In February and October of 2016, we received $58,000 from CloudBiz. $37,000 were applied to “discount on common stock” and the remaining proceeds were applied to additional paid-in-capital.
 
On December 22, 2016 Cloudbiz International Pte. Ltd transferred 74,015,730 shares of our common stock to Singapore eDevelopment, which were subsequently transferred to SeD Home International Inc.
 
Pursuant to the Agreement, on December 29, 2017, we issued 630,000,000 shares of our common stock to SeD Home International, Inc., the sole shareholder of SeD Home, in exchange for all of the issued and outstanding shares of SeD Home. Such securities were not registered under the Securities Act of 1933, and were issued pursuant to the exemption under Section 4(2) of the Securities Act.
 
Other than as described above, there has been no transaction, since January 1, 2015, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of our total assets at year-end for the last completed fiscal year, and in which any of the following persons had or will have a direct or indirect material interest:
 
(i)          
Any director or executive officer of our company;
(ii) 
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
(iii)       
Any of our promoters and control persons; and
(iv) 
Any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
 
In light of the relationships between each of our four directors and our majority shareholder and its corporate parent, none of our directors may be deemed to be independent. Our board of directors has no nominating or compensation committees. The Company’s current Audit Committee consists of Conn Flanigan. Our board of directors has voluntarily adopted the corporate governance standards defining the independence of our directors imposed by the NASDAQ Capital Market's requirements for independent directors pursuant to Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market LLC.
 
 
24
 
 
SeD Home
 
Since its inception, SeD Home has received advances from Singapore eDevelopment. These advances are unsecured, bear interest at 5% per annum and are payable on demand. As of December 31, 2015, SeD Home had outstanding principal due of $12,293,715 and accrued interest of $2,161,055 due to this related party.
 
SeD Home has also received advances from certain wholly-owned subsidiaries of Singapore eDevelopment to fund development costs and operation costs. The advances are unsecured, bear interest at 5% per annum and are payable on demand. As of December 31, 2015, SeD Home had outstanding principal due of $4,300,930 and accrued interest of $1,461,058 due to this related party.
 
On September 30, 2015, SeD Home received a $10,500,000 interest free loan, with a maturity date of March 31, 2016, from Hengfai Business Development Pte, Ltd, owned by Fai H. Chan, the Chief Executive Officer and Chairman of Singapore eDevelopment, specifically for Ballenger Run project. On April 1, 2016, SeD Home extended the note on the same terms through December 31, 2016. This resulted in an additional $933,647 of new imputed interest which was amortized during 2016.
 
At December 31, 2016, SeD Home restructured the loans from these affiliates. The restructuring process was done to transfer the principal of the loans to Singapore eDevelopment, which was then forgiven and recorded into additional paid in capital. The principal forgiven was $26,913,525. SeD Home still maintained the accrued interest of $6,282,329. The remaining accrued interest does not bear interest.
 
In 2016, SeD Home received advances from SeD Home Limited (an affiliate of Singapore eDevelopment), to fund development costs and operation costs. The loan bears interest at 10% and is payable on demand. As of December 31, 2016, SeD Home had outstanding principal due of $500,000 and accrued interest of $1,095.
 
SeD Maryland Development LLC was obligated under the terms of a Project Development and Management Agreement with MacKenzie Development Company LLC and Cavalier Development Group LLC to provide various services for the development, construction and sale of the projects. SeD Home incurred fees of $186,095 and $210,684 for the years ended December 31, 2016 and 2015, respectively, and an addition $132,000 for the nine months ended September 30, 2017. Charley MacKenzie, who has been appointed to the Boards of both SeD Intelligent Home Inc. and SeD Home, is related to the owner of MacKenzie Development Company LLC. In November of 2017, MacKenzie Development Company LLC was replaced with Adams-Aumiller LLC.
 
On November 29, 2016 an affiliate of SeD Home entered into three $500,000 bonds that are to incur annual interest at eight percent and the principal shall be paid in full on November 29, 2019. SeD Home agreed to guarantee the payment obligations of these bonds. Further, at the maturity date, the bondholder has the right to propose to acquire a property built by SeD Home, and SeD will facilitate that transaction. The proposed acquisition purchase price would be at SeD Home's cost. If the cost price is more than $500,000, the proposed acquirer would pay the difference, and if the cost price is below $500,000, the affiliate of SeD would pay the difference in cash.
 
LEGAL PROCEEDINGS
 
The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.
 
There are no material proceedings to which any director, officer or affiliate of the Company, or any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
 
 
25
 
 
MARKET PRICE AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
Market Information
 
There is presently no established public trading market for our shares of common stock. We do plan to reapply for quoting of our common stock on the OTC Bulletin Board. However, we can provide no assurance that our shares of common stock will be quoted on the Bulletin Board or, if traded, that a public market will materialize.
 
Holders
 
At December 29, 2017, the Company had 53 shareholders.
  
Securities authorized for issuance under equity compensation plans.
 
The Company does not have securities authorized for issuance under any equity compensation plans.
 
RECENT SALES OF UNREGISTERED SECURITIES
 
On July 7, 2014 CloudBiz International Pte, Ltd invested $37,000 in the Company. For such investment, CloudBiz received an additional 74 million shares of the Company’s common stock pursuant to Regulation S. In October 2014, the Company issued 20,534 shares to 30 new accredited investors pursuant to Rule 506 of Regulation D for total proceeds of $2,053.
 
Pursuant to the Agreement, on December 29, 2017, we issued 630,000,000 shares of our Common Stock to SeD Home International, Inc., the sole shareholder of SeD Home, in exchange for all of the issued and outstanding shares of SeD Home. Such securities were not registered under the Securities Act of 1933, and were issued pursuant to the exemption under Section 4(2) of the Securities Act.
 
DESCRIPTION OF REGISTRANT’S SECURITIES
 
The Company has authorized 1,000,000,000 shares of common stock, $0.001 par value per share, of which 74,043,324 shares were issued and outstanding prior to the Closing, and 704,043,324 are issued and outstanding following the Closing.
 
No shares of preferred stock have been authorized nor issued. 
 
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders.
 
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our board of directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our board of directors may deem relevant.
 
Rule 144 Restriction on Resale
 
Prior to transaction with SeD Home, we were considered a “shell company” within the meaning of rule 12b-2 under the Exchange Act, in that we had nominal operations and assets. Rule 144 promulgated under the Securities Act, which permits the resale of the shares of Common Stock, subject to various terms and conditions, is not available until one year has elapsed since the filing of this Form 8-K containing “Form 10 information” and only if we are current in meeting our SEC filing requirements. As a result, your ability to sell your shares may be limited.
 
 
26
 
 
Transfer Agent
 
Our stock transfer agent is Direct Transfer LLC. Their mailing address is 500 Perimeter Park Drive Suite D, Morrisville NC 27560, and their telephone number is (919) 744-2722.
 
INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
Section 78.138 of the Nevada Revised Statutes (“NRS”) provides that a director or officer will not be individually liable unless it is proven that (i) the director's or officer's acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law.
 
Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.
 
Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise.
 
Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
 
Our articles of incorporation provide for the indemnification of our officers and directors, but does not eliminate or limit the liability of an officer or director for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or the payment of distributions in violation of Section 78.300 of NRS.
 
Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling the company pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding, which may result in a claim for such indemnification.
 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The information provided below in Item 9.01 of this Current Report on Form 8-K is incorporated by reference into this Item.
 
 
27
 
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
 
Not Applicable
 
FINANCIAL STATEMENTS AND EXHIBITS
 
The information provided below in Item 9.01 of this Current Report on Form 8-K is incorporated by reference into this Item.  
 
Item 3.02 Unregistered Sales of Equity Securities.
 
Pursuant to the Agreement, on December 29, 2017, we issued 630,000,000 shares of our Common Stock to SeD Home International, Inc., the sole shareholder of SeD Home. Such securities were not registered under the Securities Act of 1933, and were issued pursuant to the exemption under Section 4(2) of the Securities Act.
 
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
On December 29, 2017, Conn Flanigan resigned as the Chief Executive Officer of the Company. Mr. Flanigan shall continue to serve as the Secretary of the Company, and as a member of the Company’s Board of Directors.
 
Effective as of December 29, 2017, Fai H. Chan, a member of our Board of Directors, has been appointed as the Chairman of our Board of Directors and Co-Chief Executive Officer of our Company.
 
Effective as of December 29, 2017, Moe T. Chan has been appointed as Co-Chief Executive Officer of our Company, to serve along Mr. Fai H. Chan, and as a member of our Board of Directors. Moe T. Chan is the son of Fai H. Chan, the Chairman and Co-Chief Executive Officer of our Company.
 
Effective as of December 29, 2017, Alan W. L. Lui was appointed as Co-Chief Financial Officer of our Company, to serve along with Rongguo (Ronald) Wei, our current Chief Financial Officer.
 
Effective as of December 29, 2017, Charley MacKenzie was appointed as a member of our Board of Directors.
 
Biographical information for each of our officers and directors is set forth in Item 2.01, which is incorporated herein by reference.
 
Each of our officers and directors is presently compensated by Singapore eDevelopment, the corporate parent of the Company’s majority shareholder, at no cost to the Company, except for Mr. Wei and Mr. MacKenzie. The Company has not entered into any compensation arrangements with any of our officers and directors except for Mr. Wei, who is compensated by SeD Development Management, LLC, a subsidiary of SeD Home, and Mr. MacKenzie, who is compensated pursuant to a consulting agreement with SeD Development Management LLC. Information regarding the compensation arrangements for each of Mr. Wei and Mr. MacKenzie is set forth in Item 2.01, which is incorporated herein by reference.
 
Item 5.06 Change in Shell Company Status.
 
A result of the transaction described in Item 1.01 and Item 2.01, the management of SeD Intelligent Home Inc. (the “Company”) has determined that we are not a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
 
Item 2.01(f) of Form 8-K states that if the registrant was a shell company, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10 under the Securities Exchange Act of 1934, as amended. Accordingly, we have provided the information that would be included in a Form 10 registration statement in Item 2.01.
 
 
28
 
 
Item 9.01 Financial Statements and Exhibits.
 
(a) Financial Statements of Business Acquired. The Audited Financial Statements of SeD Home, Inc. for the fiscal years ended December 31, 2015 and December 31, 2016 are filed as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference. The Unaudited Financial Statements of SeD Home, Inc. for the fiscal period ended September 30, 2017 are filed as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by reference.
 
(d) Exhibits.
 
Exhibit No.
 
Description
 
Acquisition Agreement and Plan of Merger dated December 29, 2017 by and among SeD Intelligent Home Inc., SeD Acquisition Corp., SeD Home International, Inc. and SeD Home, Inc.
 
Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 20, 2010.
 
Bylaws of the Company, incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 20, 2010.
 
Amendment to the Company’s Articles of Incorporation, incorporated herein by reference to Exhibit 3.3 to Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 2, 2017.
 
Certificate of Incorporation of SeD Home, Inc.
 
Bylaws of SeD Home, Inc.
 
Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., dated as of March 20, 2014, by and between 150 Black Oak GP, Inc. and CCM Development USA Corporation, American Real Estate Investments, LLC and the Fogarty Family Trust II.
 
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., dated as of November 7, 2014, by and between 150 Black Oak GP, Inc. and CCM Development USA Corporation, American Real Estate Investments, LLC and the Fogarty Family Trust II.
 
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., by and between 150 Black Oak GP, Inc. and CCM Development USA Corporation, American Real Estate Investments, LLC and the Fogarty Family Trust II.
 
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., dated as of September 26, 2014, by and between 150 Black Oak GP, Inc. and CCM Development USA Corporation, American Real Estate Investments, LLC and the Fogarty Family Trust II.
 
Form of Lot Purchase Agreement for Ballenger Run, entered into as of December 10, 2014, by and among SeD Maryland Development, LLC and NVR, Inc. d/b/a Ryan Homes.
 
Management Agreement, entered into as of July 15, 2015, by and between SeD Maryland Development, LLC and SeD Development Management, LLC.
 
Amended and Restated Limited Liability Company Agreement of SeD Maryland Development, LLC, dated as of September 16, 2015, by and between SeD Maryland Development, LLC and SeD Development Management, LLC.
 
Consulting Services Agreement, dated as of May 1, 2017, between SeD Development Management LLC and MacKenzie Equity Partners LLC.
 
Subsidiaries of the Company.
 
SeD Home, Inc.’s audited financial statements for the years ended December 31, 2015 and December 31, 2016.
99.2
 
SeD Home, Inc.’s unaudited financial statements for the nine months ended September 30, 2017.
99.3
 
Pro Forma Financial Information.
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
29
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
SeD Intelligent Home Inc.
 
 
 
 
 
Date: December 29, 2017
By:  
/s/ Rongguo (Ronald) Wei
 
 
 
 Name: Rongguo (Ronald) Wei
 
 
   
 Title: Co-Chief Financial Officer
 
 
 
 
 
 
 
 
30
 
Exhibit 2.1
 
ACQUISITION AGREEMENT AND PLAN OF MERGER
 
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into on this 29 th day of December, 2017, by and among SeD Intelligent Home Inc., a Nevada corporation (the “Public Company”), SeD Acquisition Corp., a Delaware corporation (the “Merger Sub”), SeD Home International, Inc., a Delaware corporation (“SeD Home International”), and SeD Home, Inc., a corporation incorporated under the laws of the State of Delaware (“SeD Home”).
 
W I T N E S S E T H:
 
WHEREAS, the Public Company is the sole shareholder of the Merger Sub;
 
WHEREAS, SeD Home International, Inc. is the sole shareholder of SeD Home;
 
WHEREAS, SeD Home International, Inc. is the owner of the majority of the shares of the common stock of the Public Company, and owns 74,015,730 of the 74,043,324 issued and outstanding shares of the common stock of the Public Company;
 
WHEREAS, the board of directors of each of the Public Company and the Merger Sub have each determined that a merger of the Merger Sub with and into SeD Home (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement, is in the best interests of the Merger Sub, the Public Company, and the shareholders thereof, and accordingly, their respective boards of directors have each approved the Merger;
 
WHEREAS, the board of directors of each of SeD Home and its sole shareholder SeD Home International have determined that the Merger, upon the terms and subject to the conditions set forth in this Agreement, is in the best interests of the shareholders of SeD Home and SeD Home International, and accordingly each board of directors has approved the Merger;
 
WHEREAS, each of the Public Company, Merger Sub, SeD Home International and SeD Home acknowledge that the Public Company is a “shell” company, as that term is defined in Rule 12b-2 under the Exchange Act of 1934, as amended (17 CFR 240.12b-2), and accordingly has nominal activities and assets;
 
WHEREAS, SeD Home International has determined that it is advisable to transfer the ownership of all of the issued and outstanding shares of SeD Home to the Public Company, with the understanding that the Public Company’s ownership of SeD Home will be beneficial to SeD Home International;
 
WHEREAS, each of the Public Company, Merger Sub, SeD Home International and SeD Home acknowledge that SeD Home International has agreed to the transfer of all of the issued and outstanding shares of SeD Home only as a result of its present ownership of 74,015,730 shares of the Public Company’s common stock;
 
WHEREAS, the Public Company has agreed to issue 630,000,000 shares of the Public Company’s common stock to SeD Home International;
 
WHEREAS, each of the Public Company, Merger Sub, SeD Home International and SeD Home desire to make certain representations, warranties, covenants and agreements in connection with the Merger; and
 
WHEREAS, for federal income tax purposes, the parties intend that the Merger shall qualify as a reorganization under the provisions of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the “Code”) and shall be a tax free exchange;
 
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein, the parties agree as follows:
 
 
 
 
ARTICLE I.
DEFINITIONS
 
When used in this Agreement, the following terms shall have the following meanings:
 
1.01 Certificate of Merger. “Certificate of Merger” shall mean a Certificate of Merger in substantially the form attached to this Agreement as Exhibit A and to be filed with the Secretary of State of the State of Delaware.
 
1.02 Closing. “Closing” and “Closing Date” shall mean the closing of the transactions contemplated by this Agreement.
 
1.03 Effective Time. “Effective Time” shall mean the date of which the Certificate of Merger is properly filed with the Secretary of State of the State of Delaware, as required under the applicable provisions of the law of such jurisdiction, or at such other time as is permissible in accordance with the DGCL.
 
1.04 SeD Home Shares. “SeD Home Share(s)” shall mean the shares of common stock, par value $0.0001 per share, of SeD Home, Inc.
 
1.05 Material Adverse Change; Material Adverse Effect. “Material Adverse Change” or “Material Adverse Effect” means, when used in connection with SeD Home, the Public Company or Merger Sub, any change or effect that either individually or in the aggregate with all other such changes or effects is materially adverse to the business, assets, properties, condition (financial or otherwise) or results of operations of such party taken as a whole.
 
1.06 Person. “Person” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity.
 
1.07 Subsidiary. A “Subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests) is owned directly or indirectly by such first person.
 
1.08 Surviving Corporation. “Surviving Corporation” shall have the meaning set forth in Section 2.01.
 
 
ARTICLE II.
THE MERGER
 
2.01 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, the Certificate of Merger and in accordance with the Delaware General Corporation Law (the “DGCL”), at the Effective Time of the Merger, the Merger Sub shall merge with SeD Home, and SeD Home shall continue as a subsidiary of the Public Company and shall continue its corporate existence under the laws of the State of Delaware (the “Surviving Corporation”).
 
2.02 Effective Time. The Merger shall become effective on the date and at the time the Certificate of Merger is filed with the Secretary of State of Delaware in accordance with provisions of the DGCL, or at such other time as is permissible in accordance with the DGCL. The time at which the Merger shall become effective as aforesaid is referred to hereinafter as the “Effective Time.”
 
2.03 Closing. The closing of the Merger (the “Closing”) shall occur concurrently with the Effective Time (the “Closing Date”). The Closing shall occur at 4800 Montgomery Lane, Suite 210, Bethesda, MD 20814, unless another place is agreed to in writing by the parties hereto.
 
 
 
 
2.04 Manner and Basis of Converting Shares.  At the Effective Time, the 500,000,000 SeD Home Shares that shall be outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into 630,000,000 shares of the common stock of the Public Company to be held by SeD Home International.  As of the Effective Time, all of the common stock of the Merger Sub issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be exchanged for 500,000,000 shares of SeD Home, all of which shares of SeD Home shall be held by the Public Company as the sole shareholder of the Surviving Corporation following the Effective Time.  Accordingly, SeD Home International shall have received an aggregate total of 630,000,000 shares of the common stock of the Public Company and the Public Company shall own all of the issued and outstanding shares of SeD Home.  All shares to be issued hereby shall be issued as of the Effective Time of the Merger, by virtue of the Merger and without any action on the part of SeD Home International.  The 630,000,000 shares of the Public Company’s common stock to be issued to SeD Home International pursuant to this Agreement shall upon issuance be duly authorized, validly issued, fully paid and non-assessable.  The 500,000,000 shares of the Surviving Corporation to be issued to the Public Company shall be duly authorized, validly issued, fully paid and non-assessable.  The certificates representing the shares of common stock to be issued pursuant to this Agreement shall bear an appropriate legend indicating that such shares have not been registered pursuant to the Securities Act of 1933, as amended.
 
2.05 Effective Date of Merger. As soon as practicable, the parties shall file the Certificate of Merger with the Secretary of State of the State of Delaware executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required thereunder. The Merger shall become effective at such date as the Certificate of Merger is duly filed with the Secretary of State of Delaware, or at such other time as is permissible in accordance with the DGCL (the time the Merger becomes effective being the “Effective Time of the Merger”). The Public Company shall use reasonable efforts to have the Closing Date and the Effective Time of the Merger to be the same day.
 
2.06 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL.
 
2.07 Articles of Incorporation; Bylaws; Purposes.
 
(a)           The Articles of Incorporation of SeD Home in effect immediately prior to the Effective Time of the Merger shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. SeD Home shall be a wholly-owned subsidiary of the Public Company. The Public Company’s Articles of Incorporation shall not be amended or changed hereby.
 
(b)           The Bylaws of SeD Home in effect at the Effective Time of the Merger shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. The Public Company’s Bylaws shall not be amended or changed hereby.
 
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.01 Representations and Warranties of SeD Home. SeD Home represents and warrants to the Public Company as follows:
 
(a)           Organization, Standing and Corporate Power. SeD Home is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
 
 
 
 
(b)           Capital Structure. The issued and outstanding shares of SeD Home consists of 500,000,000 shares that are held by one (1) shareholder. SeD Home has no other securities of any nature issued or outstanding. All outstanding SeD Home Shares are duly authorized, validly issued, fully paid and non-assessable.
 
(c)           Authority; Non-contravention. SeD Home has the requisite power and authority to enter into this Agreement and to consummate the Merger. The execution and delivery of this Agreement by SeD Home and the consummation by SeD Home of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of SeD Home. This Agreement has been duly executed and delivered by SeD Home and constitutes a valid and binding obligation of SeD Home, enforceable against SeD Home in accordance with its terms.
 
3.02 Representations and Warranties of the Public Company and Merger Sub. The Public Company and the Merger Sub each represent and warrant to each of SeD Home and SeD Home International as follows:
 
 (a)           Organization, Standing and Corporate Power. The Public Company and Merger Sub are duly incorporated, validly existing and in good standing under the laws of the State of Nevada and Delaware, respectively, and each has the requisite corporate power and authority to carry on its business as now being conducted. The Public Company and Merger Sub are duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a Material Adverse Effect.
 
(b)           Subsidiaries. The Public Company has no Subsidiaries other than the Merger Sub. Merger Sub is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Merger Sub was formed solely to effectuate the Merger and has not conducted any business operations since its organization. The Public Company has delivered or made available to SeD Home complete and accurate copies of the charter, bylaws or other organizational documents of the Merger Sub. The Merger Sub has no assets, it has no liabilities or other obligations, and it is not in default under or in violation of any provision of its charter, bylaws or other organizational documents. All shares of the Merger Sub are owned by the Public Company free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, security interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Public Company or the Merger Sub is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of the Merger Sub (except as contemplated by this Agreement).
 
(c)           Capital Structure. The authorized capital stock of the Public Company consists of 1,000,000,000 shares of common stock, $.001 par value, of which 74,043,324 shares are issued and outstanding as of the date hereof. There are no outstanding bonds, debentures, notes or other indebtedness or other securities of the Public Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Public Company may vote. There are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Public Company is a party or by which it is bound obligating the Public Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional common stock of the Public Company or other equity or voting securities of the Public Company or obligating the Public Company to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding contractual obligations, commitments, understandings or arrangements of the Public Company to repurchase, redeem or otherwise acquire or make any payment in respect of any common stock of the Public Company or any other securities of the Public Company. Those 74,015,730 shares of the Public Company’s common stock presently owned by SeD Home International were validly issued by the Public Company.
 
 
 
 
(d)           Authority; Non-contravention. The Public Company and the Merger Sub have all requisite authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Public Company and Merger Sub and the consummation by the Public Company and Merger Sub of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Public Company and Merger Sub. This Agreement has been duly executed and delivered by and constitutes a valid and binding obligation of the Public Company and Merger Sub, enforceable in accordance with its terms. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to loss of a material benefit under, or result in the creation of any lien upon any of the assets of the Public Company or Merger Sub under, (i) the Articles of Incorporation or bylaws of the Public Company or Merger Sub or the comparable charter or organizational documents of any other Subsidiary of the Public Company or Merger Sub, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the Public Company, Merger Sub or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to the Public Company, Merger Sub or their respective assets other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate could not have a Material Adverse Effect with respect to the Public Company or Merger Sub or could not prevent, hinder or materially delay the ability of the Public Company or Merger Sub to consummate the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any governmental entity is required by or with respect to the Public Company or Merger Sub in connection with the execution and delivery of this Agreement by the Public Company or Merger Sub or the consummation by the Public Company or Merger Sub, as the case may be, of any of the transactions contemplated by this Agreement, except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, as required.
 
(e)           SEC Documents; Undisclosed Liabilities. The Public Company has filed all reports, schedules, forms, statements and other documents as required by the U.S. Securities and Exchange Commission (the “SEC”) and the Public Company has delivered or made available to SeD Home all reports, schedules, forms, statements and other documents filed with the SEC (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the “Public Company SEC Documents”). The Public Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Public Company SEC documents, and none of the Public Company SEC Documents (including any and all consolidated financial statements included therein) as of such date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Public Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Public Company included in such Public Company SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Public Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and changes in cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments as determined by the Public Company’s independent accountants). Except as set forth in the Public Company SEC Documents, at the date of the most recent audited financial statements of the Public Company included in the Public Company SEC Documents, neither the Public Company nor any of its subsidiaries had, and since such date neither the Public Company nor any of such subsidiaries has incurred, any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect with respect to the Public Company.
 
 
 
 
(f)           Absence of Certain Changes or Events. Except as disclosed in the Public Company SEC Documents, since the date of the most recent financial statements included in the Public Company SEC Documents, there is not and has not been: (i) any Material Adverse Change with respect to the Public Company or Merger Sub; or (ii) any condition, event or occurrence which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or give rise to a Material Adverse Change with respect to the Public Company or Merger Sub.
 
(g)           Litigation; Compliance with Laws.
 
(i) 
There is no suit, action or proceeding or investigation pending or threatened against or affecting the Public Company or Merger Sub or any basis for any such suit, action, proceeding or investigation that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect with respect to the Public Company or Merger Sub or prevent, hinder or materially delay the ability of the Public Company or Merger Sub to consummate the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any governmental entity or arbitrator outstanding against the Public Company or Merger Sub having, or which, insofar as reasonably could be foreseen by the Public Company or Merger Sub, in the future could have, any such effect.
 
(ii) 
The conduct of the business of the Public Company has complied with all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or arbitration awards applicable thereto.
 
(h)           Material Contract Defaults. The Public Company and Merger Sub are not, or have not, received any notice or have any knowledge that any other party is, in default in any respect under any Material Contract; and there has not occurred any event that with the lapse of time or the giving of notice or both would constitute such a material default. For purposes of this Agreement, a “Material Contract” means any contract, agreement or commitment that is effective as of the Closing Date to which the Public Company or Merger Sub is a party (i) with expected receipts or expenditures in excess of $25,000, (ii) requiring the Public Company or Merger Sub to indemnify any person, (iii) granting exclusive rights to any party, (iv) evidencing indebtedness for borrowed or loaned money in excess of $25,000 or more, including guarantees of such indebtedness, or (v) which, if breached by the Public Company or Merger Sub in such a manner would (A) permit any other party to cancel or terminate the same (with or without notice of passage of time) or (B) provide a basis for any other party to claim money damages (either individually or in the aggregate with all other such claims under that contract) from the Public Company or Merger Sub or (C) give rise to a right of acceleration of any material obligation or loss of any material benefit under any such contract, agreement or commitment.
 
(i)           Financial Statements. The audited financial statements and unaudited interim financial statements of the Public Company included in the SEC Documents (i) complied as to form in all material respects with applicable accounting requirements and, as appropriate, the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly present the consolidated financial condition, results of operations and cash flows of the Public Company as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent with the books and records of the Public Company.
 
(j)           Undisclosed Liabilities. Neither of the Public Company nor the Merger Sub has any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet contained in the most recent Form 10-Q filed with the SEC, (b) liabilities which have arisen since the date of the balance sheet contained in the most recent Form 10-Q filed with the SEC in the ordinary course of business which do not exceed $25,000.00 in the aggregate and (c) contractual and other liabilities incurred in the ordinary course of business which are not required by GAAP to be reflected on a balance sheet.
 
 
 
 
ARTICLE IV.
INDEMNIFICATION AND RELATED MATTERS
 
4.01 Survival of Representations and Warranties. The representations and warranties of the parties made in Article III of this Agreement shall not survive beyond the ten (10) year anniversary of the Effective Time.
 
4.02 Indemnification by the Public Company. The Public Company shall indemnify SeD Home International in respect of, and hold it harmless against, loss, liability, deficiency, damages, expense or cost (including without limitation amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation, arbitration or otherwise) (“Damages”) incurred or suffered by SeD Home International resulting from:
 
(a)           any misrepresentation, inaccurate representation, including but not limited to any inaccurate representation regarding the validity of shares previously issued or to be issued to SeD Home International or any predecessor in interest thereof, breach of warranty or failure to perform any covenant or agreement of Public Company or Merger Sub contained in this Agreement;
 
(b)           any claim by a stockholder or former stockholder of the Public Company or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of the common stock of the Public Company; (ii) any rights under the certificate of incorporation or bylaws of the Public Company or Merger Sub; (iii) any claim that his, her or its shares of common stock lost value as a result of the transactions contemplated hereby; or (iv) any claim that any shares of the Public Company’s common stock are not validly owned by SeD Home International, including but not limited to those 74,015,730 shares of the Public Company’s common stock owned by SeD Home International prior to the Closing Date or the 630,000,000 shares of the Public Company’s common stock to be issued hereby or any challenge to any issuance of shares of the Public Company’s common stock to any predecessor to SeD Home International.
 
ARTICLE V.
GENERAL PROVISIONS
 
5.01 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
 
(a) if to the Public Company or Merger Sub:
 
SeD Intelligent Home Inc.
4800 Montgomery Lane, Suite 210
Bethesda, MD 20814
 
(b) if to SeD Home and SeD Home International, Inc.:
 
SeD Home, Inc.
4800 Montgomery Lane, Suite 210
Bethesda, MD 20814
 
 
 
 
5.02 Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
 
5.03 Entire Agreement. This Agreement constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement.
 
5.04 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party hereto against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Delaware or in the federal courts located in the state of Delaware. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The parties hereto agree to submit to the in person am jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
 
5.05 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, except that SeD Home International may assign its rights hereunder without the consent of the other parties hereto. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
 
5.06 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
 
5.07 Counterparts. This Agreement may be executed in one or more identical counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more such counterparts shall have been executed by each of the parties and delivered to the other parties.
 
[signature page follows]
 
 
 
 
 
 
 
IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first above written.
 
 
SED INTELLIGENT HOME INC., as Public Company
 
 
By: /s/ Rongguo Wei                                                       
Name: Rongguo Wei
Title: Chief Financial Officer
 
 
SED ACQUISITION CORP., as Merger Sub
 
 
By: /s/ Rongguo Wei                                                                 
Name: Rongguo Wei
Title: Chief Financial Officer
 
 
SED HOME INTERNATIONAL, INC.
 
By: /s/ Fai H. Chan                                                        
Name: Fai H. Chan
Title: Chairman
 
 
SED HOME, INC.
 
 
By: /s/ Fai H. Chan                                                       
Name: Fai H. Chan
Title: Chairman and Co-Chief ExecutiveOfficer
 
 
 
 
 
EXHIBIT A
 
FORM OF CERTIFICATE OF MERGER
 
CERTIFICATE OF MERGER
 
OF
 
SED ACQUISITION CORP.
 
INTO
 
SED HOME, INC.
 
Pursuant to Section 251 of the Delaware General Corporation Law
 
 
The undersigned, being the surviving corporation, hereby sets forth as follows:
 
FIRST: The name of the surviving corporation is SeD Home, Inc. ; its state of incorporation is Delaware.
 
SECOND: The name of the non-surviving corporation is SeD Acquisition Corp. ; its state of incorporation is Delaware.
 
THIRD: An Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each constituent corporation in accordance with Section 251 of the State of Delaware General Corporation Law.
 
FOURTH: The Certificate of Incorporation of SeD Home, Inc. shall be the Certificate of Incorporation of the surviving corporation.
 
FIFTH: The executed Agreement of Merger is on file at a place of business of the surviving corporation; the address of said place of business is c/o SeD Home, Inc., 4800 Montgomery Lane, Suite 210, Bethesda, MD 20814.
 
SIXTH: A copy of the Agreement of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation.

 
 
 
IN WITNESS WHEREOF, this certificate is hereby executed this 29 th day of December, 2017.
 
 
SeD Home, Inc.
 
 
/s/ Rongguo Wei
Name: Rongguo Wei
Title: Co-Chief Financial Officer
 
 
 
 
 
 
 
 
 
  Exhibit 3.4
 
 
 
 
 
 
 
Exhibit 3.5
BYLAWS OF
SeD HOME, INC.
 
1. OFFICES & AGENT
 
Section 1.01. Registered Office and Agent . The Corporation shall have and continuously maintain a registered office and registered agent in accordance with the Delaware General Corporation Law (“DGCL”).
 
Section 1.02 Other Offices. The Corporation may have offices at such place or places within or without the State of Delaware as the Board of Directors may from time to time appoint or the business of the Corporation may require or make desirable.
 
2. SHAREHOLDERS’ MEETINGS
 
Section 2.01. Place of Meetings . All meetings of the shareholders shall be held at a place or in a manner as may be fixed from time to time by the Board of Directors.
 
Section 2.02. Annual Meetings. An annual meeting of the shareholders shall be held at such date and time as may be fixed by resolution of the Board of Directors for the purpose of electing Directors and transacting such other business as may properly be brought before the meeting.
 
Section 2.03. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by the DGCL or the Certificate of Incorporation, may be called by the Chairman of the Board (the “Chairman”) or the Corporation’s Chief Executive Officer; and shall be called by the Chairman or the Secretary: (i) when so directed by the Board of Directors, or (ii) at the written request of shareholders owning shares representing at least twenty-five percent of voting power of the Corporation in the election of Directors. A request for a special meeting shall state the purpose or purposes of the proposed meeting.
 
Section 2.04. Notice of Meetings . Except as otherwise required or permitted by the DGCL or the Certificate of Incorporation, written notice of each meeting of the shareholders, whether annual or special, shall be served either personally or by mail, upon each shareholder of record entitled to vote at such meeting, not less than 10 nor more than 60 days before such meeting. If mailed, such notice shall be directed to a shareholder at his post office address last shown on the records of the Corporation. Notice of any special meeting of shareholders shall state the purpose or purposes for which the meeting is called. Notice of any meeting of shareholders shall not be required to be given to any shareholder who, in person or by his attorney thereunto authorized, either before or after such meeting, shall waive such notice by means of a signed writing. Attendance of a shareholder at a meeting, either in person or by proxy, shall of itself constitute waiver of notice and waiver of any and all objections to the place of the meeting, the time of the meeting, and the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection or objections to the transaction of business. Notice of any adjourned meeting need not be given otherwise than by announcement at the meeting at which the adjournment is taken.
 
 
 
 
 
Section 2.05. Quorum. Shareholders owning shares entitling them to exercise at least one third of the voting power in the election of directors shall constitute a quorum at any meeting of the shareholders for the transaction of business, except as otherwise provided by the DGCL, by the Certificate of Incorporation, or by these Bylaws. If, however, the required number shall not be present or represented at any meeting of the shareholders, the shareholders present and entitled to vote shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. At any adjourned meeting at which a quorum is present any business may be transacted that might have been transacted at the meeting as originally called.
 
Section 2.06. Voting. If a quorum exists, action on a matter by the shareholders (other than the election of Directors) is approved if the votes cast by the holders of the shares represented at the meeting and entitled to vote on the subject matter favoring the action exceed the votes cast opposing the action (with ‘abstentions’ and ‘broker non-votes’ not counted as a vote cast with respect to that matter), unless a greater number of affirmative votes is required by the Certificate of Incorporation or is mandatory under the DGCL. Unless otherwise provided in the Certificate of Incorporation, Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present (with ‘abstentions’ and ‘broker non-votes’ not counted as a vote cast with respect to that director).
 
Section 2.07. Conduct of Meetings . The Chairman of the Board of Directors, or in his absence the Chief Executive Officer, or in their absence a person appointed by the Board of Directors, shall preside at meetings of the shareholders. The Secretary of the Corporation, or in the Secretary's absence, any person appointed by the individual presiding at the meeting shall act as Secretary for meetings of the shareholders. Meetings shall be governed by procedures prescribed by the person presiding at the meeting or by the Board so long as they are not inconsistent with these Bylaws.
 
Section 2.08. Written Consents . Any action required or permitted to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting if written consent, setting forth the action so taken, shall be signed by persons who would be entitled to vote at a meeting with the voting power necessary to authorize or take such action at a meeting at which all shares entitled to vote were present and voted.
 
3. BOARD OF DIRECTORS
 
Section 3.01. Authority. The property and business of the Corporation shall be managed by its Board of Directors. In addition to the powers and authority expressly conferred by these Bylaws, the Board of Directors may exercise all powers of the Corporation and do all such lawful acts and things as are not by the DGCL, by the Certificate of Incorporation, or by these Bylaws directed or required to be exercised or done by the shareholders.
 
Section 3.02. Number and Term . The Board of Directors shall consist of a set number of members to be fixed by a resolution of the Board of Directors from time to time. Except as provided in the Certificate of Incorporation, each Director (whether elected at an annual meeting of shareholders or otherwise) shall hold office until the annual meeting of shareholders held next after this election, and until a successor shall be elected and qualified, or until his earlier death, resignation, incapacity to serve, or removal. Directors need not be shareholders.
 
 
2
 
 
 
Section 3.03. Vacancies . A vacancy on the Board of Directors shall exist upon the death, resignation, removal, or incapacity to serve of any Director; upon the increase in the number of authorized Directors; and upon the failure of the shareholders to elect the full number of Directors authorized. During a vacancy or vacancies, the remaining Directors shall continue to act. Except as required by the Certificate of Incorporation, vacancies may be filled by the Directors, at any meeting held during the existence of such vacancy. Any Director appointed by the Board of Directors to fill a vacancy, shall serve as a Director until the next annual meeting of the shareholders.
 
Section 3.04. Place of Meetings. The Board of Directors may hold its meetings at any place or places within or without the State of Delaware or by remote communication.
 
Section 3.05. Compensation of Directors . Directors may be allowed such compensation for attendance at regular or special meetings of the Board of Directors and of any special or standing committees of the Board of Directors as may from time to time be determined by the Board of Directors.
 
Section 3.06. Qualifications. No person shall qualify for service as a Director if he or she is a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, or has received any such compensation or other payment from any person or entity other than the Corporation, in each case in connection with candidacy or service as a director of the Corporation. Agreements providing only for indemnification and/or reimbursement of out-of-pocket expenses in connection with candidacy as a director (but not, for the avoidance of doubt, in connection with service as a director) and any pre-existing employment agreement a candidate has with his or her employer (not entered into in contemplation of the employer's investment in the Corporation or such employee's candidacy as a director), shall not be disqualifying under this bylaw.
 
Section 3.07. Resignation . Any Director may resign by giving written notice to the Board of Directors. The resignation shall be effective on receipt, unless the notice specifies a later time for the effective date. If the resignation is effective at a future time, a successor may be elected before that time to take office when the resignation becomes effective.
 
Section 3.08. Removal. Except as stated in the Certificate of Incorporation, the Shareholders may declare the position of a Director vacant, and may remove such Director for cause if the Director has been declared of unsound mind by a final order of court; the Director has been convicted of a felony; the Director has failed to attend at least 75% of the meetings of the Board during a twelve month period or the Director has been presented with one or more written charges, has been given at least ten days' notice of a hearing at which he may have legal counsel present, and has been given opportunity for such a hearing at a meeting of the Shareholders. Except as stated in the Certificate of Incorporation, the Shareholders may also declare the position of a Director vacant, and may remove such Director without cause, by a majority vote cast by the shares entitled to vote at a meeting at which a quorum is present.
 
Section 3.09. Notice of Meetings . Regular meetings of the Board of Directors may be held at such time and place within or without the State of Delaware as shall from time to time be determined by the Board of Directors by resolution, and that resolution, without more, will constitute notice
 
 
3
 
 
 
Section 3.10. Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board or the Chief Executive Officer on not less than one day’s notice by mail, electronic transmission or personal delivery to each Director and shall be called by the Chairman of the Board, the Chief Executive Officer, or the Secretary in like manner and on like notice on the written request of any four or more Directors.
 
Section 3.11. Notice - Purpose of Meeting. No notice of any special meeting of the Board of Directors need state the purposes for the meeting, and notice is sufficient if it states the time and place or manner of participating in the meeting and the person or persons calling such meeting.
 
Section 3.12. Quorum. At all meetings of the Board of Directors, the presence of a majority of the Directors then serving shall be necessary and sufficient to constitute a quorum for the transaction of business. The act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically required by the DGCL, by the Certificate of Incorporation or by these Bylaws. In the absence of a quorum, a majority of the Directors present at any meeting may adjourn the meeting from time to time until a quorum is present. Notice of my adjourned meeting need only be given by announcement at the meeting at which the adjournment is taken.
 
Section 3.13. Telephonic Participation . Directors may participate in meetings of the Board of Directors through use of conference telephone or other remote communications equipment, so long as all Directors participating in the meeting can hear and speak to each other. Such participation is equivalent to personal presence at the meeting.
 
Section 3.14. Action by Written Consent . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent is signed by all members of the Board or of such committee, as the case may be, and the written consent is filed with the minutes of the proceedings of the Board or committee.
 
4. COMMITTEES OF THE BOARD
 
Section 4.01. Executive Committee. The Board of Directors may, by resolution adopted by a majority of the entire Board, designate an Executive Committee of three or more Directors. Each member of the Executive Committee shall hold office until the first meeting of the Board of Directors after the annual meeting of the shareholders next following his election and until his successor member of the Executive Committee is elected, or until his death, resignation, removal, or until he shall cease to be a Director.
 
Section 4.02. Executive Committee-Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee may exercise all the powers of the Board of Directors in the management of the business affairs of the Corporation, including all powers specifically granted to the Board of Directors by these Bylaws or by the Certificate of Incorporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have the power to amend or repeal any resolution of the Board of Directors that by its terms does not provide for amendment or repeal by the Executive Committee, and the Executive Committee shall not have the authority of the Board of Directors in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by this chapter to be submitted to stockholders for approval or (ii) adopting, amending or repealing any bylaw of the corporation.
 
 
4
 
 
 
Section 4.03. Executive Committee-Meetings. The Executive Committee shall meet from time to time on call of the Chairman of the Board, the Chief Executive Officer, or of any two or more members of the Executive Committee. Meetings of the Executive Committee may be held at such place or places, within or without the State of Delaware, as the Executive Committee shall determine or as may be specified or fixed in the respective notices of such meetings. The executive Committee may fix its own rules of procedure, including provision for notice of its meetings, shall keep a record of its proceedings, and shall report these proceedings to the Board of Directors at the meeting thereof held next after such meeting of the Executive Committee. All such proceedings shall be subject to revision or alteration by the Board of Directors except to the extent that action shall have been taken pursuant to or in reliance upon such proceedings prior to any such revision or alteration. The Executive Committee shall act by majority vote of its members.
 
Section 4.04. Executive Committee-Alternate Members. The Board of Directors, by resolution adopted in accordance with Section 4.01, may designate one or more Directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee.
 
Section 4.05. Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate one or more additional committees, each committee to consist of three or more of the Directors of the Corporation, which shall have such name or names and shall have and may exercise such powers of the Board of Directors in the management of the business and affairs of the Corporation, except the powers denied to the Executive Committee, as may be determined from time to time by the Board of Directors.
 
Section 4.06. Removal of Committee Members. The Board of Directors shall have power at any time to remove any or all of the members of any committee, with or without cause, and to fill vacancies in and to dissolve any such committee.
 
5. OFFICERS
 
Section 5.01. Election of Officers. The Board of Directors, at its first meeting after each annual meeting of shareholders, shall elect a Chief Executive Officer and may elect such other Officers as it shall deem necessary who shall hold their offices for such terms as shall be determined by the Board of Directors, and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors or the Chairman of the Board.
 
Section 5.02. Compensation. The salaries of the Officers of the Corporation shall be fixed by the Board of Directors, except that the Board of Directors may delegate to any Officer or Officers the power to fix the compensation of any Officer.
 
 
5
 
 
 
Section 5.03. Term. Removal. Resignation. Each Officer of the Corporation shall hold office until his successor is chosen or until his earlier resignation, death, removal, or termination of his office. Any Officer may be removed with or without cause by a majority vote of the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. Any Officer may resign by giving written notice to the Board of Directors. The resignation shall be effective upon receipt, or at such time as may be specified in such notice.
 
Section 5.04. Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall be ex officio a member of all standing committees, unless otherwise provided in the resolution appointing the same. The Chairman of the Board shall determine the meeting agenda, call meetings of the shareholders, the Board of Directors, and the Executive Committee to order and shall act as chairman of such meetings.
 
Section 5.05. Chief Executive Officer. When no Chairman of the Board has been elected, or if a Chairman has been elected and not declared to be the Chief Executive Officer, or in the event of the death or disability of the Chairman of the Board or at his request, the Chief Executive Officer (if such an officer is appointed) shall have all of the powers and perform the duties of the Chairman of the Board. The Chief Executive Officer shall also have such powers and perform such duties as are specifically imposed upon him by law and as may be assigned to him by the Board of Directors or the Chairman of the Board. In the absence of a Chairman of the Board serving as Chief Executive Officer, the Chief Executive Officer shall determine the meeting agenda, call meetings of the shareholders, the Board of Directors, and the Executive Committee to order and shall act as chairman of such meetings. If no other Officers are elected, the Chief Executive Officer shall also have all of the powers and perform the duties of Secretary and Treasurer.
 
Section 5.06. Secretary. The Secretary shall attend all meetings of the Board of Directors, all meetings of the shareholders, and record all votes and the minutes of all proceedings in books to be kept for that purpose, and shall perform like duties for the standing committees when required. He shall give, or cause to be given, any notice required to be given of any meetings of the shareholders and of the Board of Directors. The Assistant Secretary or Assistant Secretaries shall, in the absence or disability of the Secretary, or at the Secretary's request, perform the duties and exercise the powers and authority granted to the Secretary.
 
Section 5.07. Treasurer. The Treasurer shall have charge and be responsible for all funds, securities, receipts, and disbursements of the Corporation; he shall render to the Chairman of the Board, the Chief Executive Officer, and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation, and in general, he shall perform all the duties incident to the office of a treasurer of a Corporation, and such other duties as may be assigned to him by the Chairman of the Board, or the Chief Executive Officer.
 
Section 5.08. Duties. Except as otherwise provided in this Article 5, the corporate officers of the Corporation elected to office by the Board of Directors shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to t hem by the Board of Directors.
 
 
 
6
 
 
 
6. CAPITAL STOCK
 
Section 6.01. Share Certificates. U nless the Certificate of Incorporation otherwise provides, or unless the Board of Directors provides by resolution or resolutions that some or all of the shares of any class or classes, or series thereof, of the Corporation’s capital stock shall be uncertificated, t he interest of each shareholder shall be evidenced by a certificate or certificates representing shares of stock of the Corporation in such form as the Board of Directors may from time to time adopt . The certificates shall be consecutively numbered, and the issuance of shares shall be duly recorded in the books of the Corporation as they are issued. Each certificate shall indicate the holder's name, the number of shares, the class of shares and series, if any, represented thereby, a statement that the Corporation is organized under the laws of the State of Delaware, and the par value of each share or a statement that the shares are without par value. Each certificate shall be signed by (i) the Chairman of the Board, the Chief Executive Officer, or the President (if any) and (ii) the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary, if such officer or officers have been elected or appointed by the Corporation, and shall be sealed with the seal of the Corporation; except that if such certificate is signed by a transfer agent, or by a transfer clerk acting on behalf of the Corporation, and a registrar, the signature of any Officer of the Corporation, whether because of death, resignation, or otherwise, prior to the delivery of such share certificate by the Corporation, such certificate may nevertheless be delivered as though the person who signed whose facsimile signatures shall have been used thereon had not ceased to be such Officer or Officers.
 
Section 6.02. Fractional Shares.   The Corporation may, but shall not be required to, issue fractional shares of its capital stock if necessary or appropriate to effect authorized transactions. If the Corporation does not issue fractional shares, it shall (i) arrange for the disposition of fractional interests on behalf of those that otherwise would be entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those who otherwise would be entitled to receive such fractions are determined, or (iii) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or in bearer form (represented by a certificate), which scrip or warrants shall entitle the holder to receive a full share upon surrender of such scrip or warrants aggregating a full share. Fractional shares shall, but scrip or warrants for fractional shares shall not (unless otherwise expressly provided therein), entitle the holder to exercise voting rights, to receive dividends thereon, to participate in the distribution of any assets in the event of liquidation, and otherwise to exercise rights as a holder of capital stock of the class or series to which such fractional shares belong.
 
Section 6.03. Shareholder Records.   The names and addresses of the holders of record of the shares of each class and series of the Corporation’s capital stock, together with the number of shares of each class and series held by each record holder, shall be entered on the books of the Corporation. Except as otherwise required by the DGCL or other applicable law, the Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares of capital stock of the Corporation as the person entitled to exercise the rights of a stockholder, including, without limitation, the right to receive any dividends or any other distributions and to vote in person or by proxy at any meeting of the stockholders of the Corporation. The Corporation shall not be bound to recognize any equitable or other claim to or interest in any such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly required by the DGCL or other applicable law.
 
 
7
 
 
Section 6.04. Determination of Shareholders.
 
(a)                   For the purpose of determining shareholders entitled to notice of or to vote at any meetings of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that stock transfer books shall be closed for a stated period not to exceed sixty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting.
 
(b)                   In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken.
 
Section 6.06. Transfer Agent. The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature or signatures of a transfer agent or a registrar or both.
 
Section 6.07. Replacement Certificates. Any person claiming a certificate of stock to be lost, stolen, or destroyed shall make an affidavit or affirmation of the fact in such manner as the Board of Directors may require and shall, if the Directors so require, give the Corporation a bond of indemnity. Such bond shall be in form and amount satisfactory to the Board of Directors, and shall be with one or more sureties, whereupon an appropriate new certificate may be issued in lieu of the one alleged to have been lost, stolen or destroyed.
 
7. MISCELLANEOUS
 
Section 7.01. Inspection of Books. The Board of Directors shall have power to determine which accounts and books of the Corporation, if any, shall be open to the inspection of the shareholders, except with respect to such accounts, books, and records as may by law be specifically open to inspection by the shareholders, and shall have power to fix reasonable rules and regulations not in conflict with the applicable law, if any, for the inspection of records, accounts, and books which by law or by determination of the Board of Directors shall be open to inspection, and the shareholders' rights to this respect are and shall be restricted and limited accordingly.
 
Section 7.02. Fiscal Year. The fiscal year of the Corporation shall be fixed from time to time by resolution of the Board of Directors.
 
Section 7.03. Seal. If required, the signature of the Corporation followed by the word "SEAL" or "CORPORATE SEAL" enclosed in parenthesis or scroll, shall be deemed to be the seal of the Corporation.
 
 
8
 
 
 
Section 7.04. Appointment of Agents. The Chairman of the Board, the Chief Executive Officer, or the Secretary shall be authorized and empowered in the name of and as the act and deed of the Corporation to name and appoint general and special agents, representatives, and attorneys to represent the Corporation in the United States or in any foreign country or countries; to name and appoint attorneys and proxies to vote any shares of stock in any other Corporation at any time owned or held of record by the Corporation; to prescribe, limit, and define the powers and duties of such agents, representatives, attorneys, and proxies; and to make substitution, revocation, or cancellation in whole or in part of any power or authority conferred on any such agent, representative, attorney, or proxy. All powers of attorney or other instruments under which such agents, representatives, attorneys, or proxies shall be so named and appointed shall be signed and executed by the Chairman of the Board, the Chief Executive Officer, or the Secretary, and the corporate seal shall be affixed thereto. Any substitution, revocation, or cancellation shall be signed in like manner, provided always that any agent, representative, attorney, or proxy, when so authorized by the instrument appointing him, may substitute or delegate his powers in whole or in part and revoke and cancel such substitutions or delegations. No special authorization by the Board of Directors shall be necessary in connection with the foregoing, but this Bylaw shall be deemed to constitute full and complete authority to the Officers above designated to do all the acts and things as they deem necessary or incidental thereto or in connection therewith.
 
7.05. Forum Selection. The Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any actual or purported derivative action or proceeding brought on behalf of the Corporation against directors or officers of the Corporation alleging breaches of fiduciary duty or other wrongdoing by such directors or officers, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director or officer of the Corporation arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these Bylaws, (iv) any action to interpret, apply, enforce, or determine the validity of the Certificate of Incorporation or these Bylaws, or (v) any action asserting a claim against the Corporation or any director or officer of the Corporation governed by the internal affairs doctrine .
 
8. AMENDMENTS
 
Section 8.01. Amendment. The Bylaws of the Corporation may be altered or amended and new Bylaws may be adopted by the shareholders at any annual or special meeting of the shareholders or by the Board of Directors at any regular or special meeting of the Board of Directors; except that, if such action is to be taken at a meeting of the shareholders, notice of the general nature of the proposed change in the Bylaws shall have been given in the notice of the meeting.
 
 
 9

 
  Exhibit 10.1
 
AGREEMENT OF
LIMITED PARTNERSHIP
OF
150 CCM BLACK OAK, LTD.
 
 
THIS AGREEMENT OF LIMITED PARTNERSHIP (the “Agreement”) is made and entered into effective the 20th day of March, 2014 by and between 150 Black Oak GP, Inc., a Texas corporation, whose address is 340 North Sam Houston Parkway East, Suite 140, Houston, Texas 77060, as general partner (“General Partner”), and each of the individuals or entities whose names are set forth on Exhibit “A” attached to this Agreement as limited partners (“Limited Partners”).
 
ARTICLE I
ORGANIZATION OF THE PARTNERSHIP
 
1.1            Formation of Limited Partnership. The parties hereby form, pursuant to the Texas Revised Limited Partnership Act, Article 6132a-1 of the Revised Civil Statutes of the State of Texas, (the “Act”), a Limited Partnership (the “Partnership”). The rights and liabilities of the Partners shall be as provided for in this Agreement and in the Act.
 
1.2            Certificate of Limited Partnership. The parties shall execute and file a Certificate of Limited Partnership (the “Certificate”), and other relevant documents ancillary to the Certificate, with the office of the Secretary of State of the State of Texas as required by the Act, and take all other appropriate action to comply with all legal requirements for the formation and operation of a limited partnership under the Act.
 
1.3            Partnership Name. The name of the Partnership shall be 150 CCM Black Oak, Ltd. If considered necessary in the opinion of counsel to the Partnership to preserve the limited liability of the Limited Partners, the business conducted by the Partnership shall be conducted under that name or under such other name or names as the General Partner may select and might be necessary to preserve such limited liability.
 
1.4            Location of Office. The principal business office of the Partnership shall be at 340 North Sam Houston Parkway East, Suite 140, Houston, Texas 77060.
 
1.5            Purpose of Partnership. The purpose of the Partnership shall be as to buy, develop, manage and sell, as appropriate, the real property acquired by the Partnership, including improvements and personal property located thereon, such real property to include the tracts or parcels of land more particularly described in Exhibit “B” attached to this Agreement (the “Project”).
 
             1.6             Term of Partnership. The Partnership shall become effective as of the date hereof and shall remain effective until December 31, 2030, or until such earlier date as the Partnership is dissolved pursuant to the Act or the provisions of this Agreement.
 
 
 
 
ARTICLE II
DEFINITIONS
 
The following terms used in this Agreement shall, unless otherwise expressly provided in this Agreement or unless the context otherwise requires, have the following respective meanings:
 
2.1     Agreement shall mean this Agreement of Limited Partnership.
 
2.2   Annual Budget shall mean a budget prepared by the General Partner and approved by a Majority Interest of Limited Partners in accordance with the provisions of Section 9.12 of this Agreement. The first Annual Budget shall include obtaining owner financing for the acquisition of the Property (hereinafter defined) by the Partnership, which financing shall include separate notes and deeds of trust covering the tracts or parcels comprising the Property.
 
2.3   Budget and Development Plan shall mean the budget and initial development plan for the development of the Property. The General Partner shall periodically update the Budget and Development Plan, as provided in Section 9.5 of this Agreement.
 
2.4     Budgets shall mean, jointly, the Annual Budget and the Budget and Development Plan.
 
2.5     Class A Limited Partner shall mean CCM Development USA Corporation. Duties charged in this Agreement to the Class A Limited Partner may be performed by its designee.
 
2.6     Consultants shall mean, collectively, CCM Development USA Corporation, a Delaware corporation, American Real Estate Investments, LLC, a Missouri limited liability company, and Arete Real Estate and Development Company, a Texas corporation.
 
2.7     Effective Date shall mean the date the Certificate is filed with the Secretary of State of Texas.
 
2.8     General Partner shall mean 150 Black Oak GP, Inc., a Texas corporation, or such substitute or different General Partner as may be subsequently named pursuant to the terms of this Agreement.
 
2.9     Initial Capital Contributions shall mean the amount contributed to the Partnership on or after the date hereof by any Partner.
 
2.10   Limited Partners shall mean those persons who execute this Agreement or any counterpart of this Agreement as Limited Partners and whose names and residence addresses appear on Exhibit “A”, which is attached to this Agreement and made a part of this Agreement for all purposes.
 
2.11   Major Decisions shall mean the actions as set forth in paragraph 9.12 of this Agreement.
 
 
2
 
 
2.12   Majority in Interest of Limited Partners shall mean those Limited Partners who at the time of any determination of a majority have 59.5% or more of the combined Partnership Interest of the Partnership.
 
2.13   Partner shall mean the reference to the General Partner or any one of the Limited Partners.
 
2.14   Partners shall mean the collective reference to the General Partner and the Limited Partners.
 
2.15   Partnership Interest shall mean, as to any Partner, all of the interests of that Partner in the Partnership, expressed as a percentage and set opposite his or her name in Exhibit “A.”
 
2.16   Person shall mean any individual, corporation, partnership, trust, or other entity.
 
2.17   Preferred Return shall mean with respect to the Class A Limited Partner (i) a sum that accrues and accumulates at the rate of five percent (5%) per annum on the unreturned Capital Contributions made by such Class A Limited Partner to the Partnership, less (ii) any distributions paid to such Class A Limited Partner under Section 5.1 hereof, as determined by the General Partner.
 
 
2.18   Property shall mean that certain tract(s) or parcel(s) of land described on Exhibit “B”, which is attached to this Agreement and made a part hereof for all purposes.
 
2.19   Winding Up shall mean the period following dissolution of the Partnership after which its business is not continued as set forth in Article XII.
 
ARTICLE III
CAPITAL CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
 
3.1     Initial Contributions. The capital to be contributed to the Partnership by the General Partner and all the Limited Partners shall be cash, property, goods or services as the General Partner shall agree. The initial capital to be contributed by each Partner, General and Limited, shall be the sum set opposite his or her name in the attached Exhibit "A." Each Partner shall be personally liable to the Partnership for the full amount of his or her initial capital contribution in the amounts set forth on Exhibit “A”.
 
3.2     Additional Contributions. If additional capital is needed for the purposes of the Partnership as determined by the General Partner, subject to any limitations as may be hereinafter provided, after contributions have been made by the Partners pursuant to Section 3.1 hereof, then the General Partner shall attempt to borrow such additional capital on behalf of the Partnership first from any one or more of the Partners and then from any third party. Any such loans shall be on commercially reasonably terms, and if from any one or more of the Partners, such loan or loans shall bear interest at the rate of fifteen percent (15%) per annum.
 
 
3
 
 
ARTICLE IV
PROFITS AND LOSSES
 
4.1            Allocations. Allocations of income, gains, deductions, losses and credits among the General Partner and the Limited Partners shall be determined by the percentage set opposite his or her name in Exhibit “A”.
 
4.2            Transfer - Transferee Allocations. If a Partnership Interest is transferred in accordance with Article X during any year, the income, gains, losses, and deductions allocable in respect to that Partnership Interest shall be prorated between the transferor and the transferee on the basis of the number of days in the year that each was the holder of that Interest, without regard to the results of the Partnership operations during the period before and after the transfer, unless the transferor and transferee agree to an allocation based on the result as of the record date of transfer and agree to reimburse the Partnership for the cost of making and reporting their agreed allocation.
 
4.3            Recapture. In the event that the Partnership recognizes income, gain, or addition to tax by virtue of the recapture of any previously deducted or credited item, such recaptured income or gain or addition to tax shall be allocated to the Partners in the same percentage as allocated at the time of its deduction.
 
ARTICLE V
CASH DISTRIBUTIONS
 
5.1            Cash Distributions. In accordance with the Budgets, or subject to the approval of the Consultants, the General Partner shall determine the amount of net cash flow and/or capital proceeds of the Partnership after payment of expenses and the establishment of appropriate and reasonable reserves determined by the General Partner in accordance with any Partnership loan (collectively, the “ Distributable Cash ”), such Distributable Cash to be distributed, subject to withholding required by federal, state, local, or foreign authority, to the Partners in amounts and at such times as provided in the Budgets, or determined to be appropriate by the General Partner and the Consultants to be no less frequently than quarterly in the following manner and order of priority:
 
(1)
First, any loans to the Partnership made by a mortgagee or any third party, whether or not secured by a mortgage on the Property shall be paid;
 
(2)
Second, any loans to the Partnership made by any Partner shall be paid;
 
(3)
Third, the Preferred Return to the Class A Limited Partner shall be paid to such Partner:
 
(4)
Fourth, the initial capital and any additional capital contributions of the Class A Limited Partner shall be repaid to such Class A Limited Partner: and
 
 
4
 
 
(5) 
Fifth, the remainder shall be distributed to the Partners in accordance with their respective Partnership Interest, pari passu, as they may exist from time to time.
 
ARTICLE VI
OWNERSHIP OF PARTNERSHIP PROPERTY
 
6.1            The Property and all other real property, including all improvements placed or located thereon, and all personal property acquired by the Partnership shall be owned by the Partnership, such ownership being subject to the other terms and provisions of this Agreement. Each Partner hereby expressly waives the right to require partition of any Partnership property or any part thereof.
 
ARTICLE VII
BOOKS AND RECORDS
 
7.1            Elections. The Partnership shall elect as a fiscal year the calendar year. The Partnership shall elect to be taxed on such method of accounting as a Majority in Interest of Limited Partners shall determine. The Partnership shall not elect to be taxed other than as a partnership.
 
7.2            Capital Accounts of Partners. The Partnership shall maintain a capital account for each Partner, the initial balance of each of which shall be zero. Each Partner's capital account shall be increased (1) by any income and gains allocated to that Partner for federal income tax purposes pursuant to Article IV of this Agreement, and (2) by the amount of cash contributed to the Partnership by that Partner. The Partner's capital account shall be decreased (1) by any deductions and losses allocated to that Partner for federal income tax purposes pursuant to Article 4 of this Agreement, and (2) by the amount of cash distributed by the Partnership to that Partner.
 
7.3            Financial Statements. The General Partner shall cause to be prepared on a timely basis quarterly and annual statements showing the financial condition of the Partnership, copies of which shall be transmitted to all Partners.
 
7.4            Tax Returns. The General Partner shall cause the Partnership to file all tax and information returns required of the Partnership and to furnish to the Limited Partners the tax information required by them for federal, state and local tax purposes in a timely fashion.
 
7.5            Maintenance and Inspection of Books. The Partnership shall maintain a complete and accurate set of books, records, and supporting documents. The books of account and all other financial records of the Partnership shall be kept at the Partnership's principal place of business, and may be inspected at any reasonable time by the Limited Partners or their representatives.
 
7.6            Bank Accounts, Funds and Assets. The funds of the Partnership shall be deposited in such bank or banks as the General Partner shall deem appropriate. Subject to the provisions of this Agreement, the funds may be withdrawn only by the General Partner or its duly authorized agents. The General Partner shall have a fiduciary responsibility for the safekeeping and use of all funds of the Partnership, whether or not in its immediate possession or control, and it shall not employ, or permit another to employ, the funds or assets in any manner, except for the exclusive benefit of the Partnership. The General Partner shall not commingle or permit the commingling of the funds of the Partnership with the funds of any other person.
 
 
5
 
 
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
 
8.1            Admission of Limited Partners. No additional Limited Partners shall be admitted to the Partnership except upon amendment of this Agreement, although substituted Limited Partners may be admitted pursuant to Section 10 below.
 
8.2            Participation in Management. Subject to the Major Decisions, no Limited Partner shall have the right, power, or authority to take any part in the control or management of, or to transact any business for, the Partnership, or to sign for or bind the Partnership in any manner.
 
8.3            Limited Liability. No Limited Partner shall be liable for losses, debts, or obligations of the Partnership in excess of his or her Initial Capital Contribution, plus his or her undistributed share of the Partnership profits.
 
8.4            Participation in Other Activities. No Limited Partner, or any officer, director, shareholder, or other person holding a legal or beneficial interest in any Limited Partner, shall, by virtue of the interest in the Partnership, be in any way prohibited or restricted from engaging in, investing in, or possessing an interest in any business activity of any nature or description, including those which may be equivalent to or in competition with the Partnership. Neither the Partnership nor any Partner shall have any right by virtue of this Agreement or any relationship created by this Agreement in or to such other ventures or activities or to the income or proceeds derived from them.
 
8.5            General Rights and Limitations of the Limited Partners. A Limited Partner shall not be:
 
(1)            Personally liable because of his or her Interest in the Partnership for any losses of any other Limited Partner:
 
(2)
Entitled to be paid any salary or to have a Partnership drawing account;
 
(3)
Entitled to any interest on his or her Initial Capital Account or balance in his or her capital account.
 
(4)            
Unless specifically provided herein, entitled to priority over any otherLimited Partners.
 
8.6            Voting. Each Limited Partner shall be entitled to a vote in all matters for which this Agreement gives Limited Partners the right to vote, consent, or agree. Each Limited Partner's vote shall be equal in percentage to the ratio that his or her Partnership Interest bears to one hundred percent (100%).
 
8.7            Limitations on Transferability. The ownership interest in the Partnership owned by a Limited Partner shall not be transferable except under the conditions set forth in Article X of this Agreement.
 
 
 
6
 
 
ARTICLE IX
MANAGEMENT BY THE GENERAL PARTNER
 
9.1            Management. The powers of the Partnership shall be exercised by or under the authority of, and the business and affairs of the Partnership shall be managed under the direction of the General Partner. The General Partner need not be a resident of the State of Texas. Any Person dealing with the Partnership, other than a Limited Partner, may rely on the authority of the General Partner and its officers in taking any action in the name of the Partnership without inquiry into the provisions hereof or compliance herewith, regardless of whether that action is actually taken in accordance with the provisions of this Partnership Agreement.
 
9.2            Powers and Duties of the General Partner . Subject to the other provisions of this Agreement, the General Partner shall have all the powers and duties necessary or incidental to the proper administration of the affairs of the Partnership and may, at the Partnership’s expense, do all such acts and things deemed by it to be necessary or appropriate in furtherance of the Partnership’s purpose. Except as otherwise provided in this Agreement, the General Partner shall have sole authority to cause the development of the Property and otherwise take actions on behalf of the Partnership. Notwithstanding anything to the contrary herein, the General Partner shall have complete authority to operate and manage the business of the Partnership so long as such operation and management is in accordance with the Budgets. Further, notwithstanding anything to the contrary herein, the General Partner is not guaranteeing the completion of the Property in accordance with the Budgets, and the General Partner shall not be liable if such becomes unfeasible due to causes not within its reasonable control or not caused by its negligence or greater fault, including, but not limited to, economic or market conditions.
 
9.3            Insurance . At the expense of the Partnership, the General Partner shall cause the Partnership to maintain adequate and reasonable insurance covering the injury or death of employees or others, as well as insurance against fire and other risks, and to adjust all losses and claims pertaining to or arising out of such insurance.
 
9.4            Employment of Others . The General Partner shall be authorized to appoint, employ, or contract with, at the expense of the Partnership, generally any Person it may deem necessary or desirable for the transaction of the business of the Partnership. Specifically, the General Partner shall appoint, employ or contract with a project manager (the “Project Manager”) to provide field supervision of the development and contraction of the Project. The Project Manager shall be compensated as provided in the Budgets.
 
9.5            Budget and Development Plan . The General Partner shall periodically update the Budget and Development Plan, as approved by a Majority in Interest of Limited Partners, and provide copies thereof to the other Limited Partners.
 
 
 
7
 
 
9.6            Annual Budget . The General Partner agrees to prepare and deliver to the Partners within forty-five (45) days after the execution of this Agreement with respect to the initial Fiscal Year, and at least forty-five (45) days prior to the beginning of each subsequent Fiscal Year, a proposed Annual Budget for such Fiscal Year for the management and operation of the Partnership and the acquisition, development, management, operation, financing and sale of the Property, setting forth (a) any proposed expenditures and reserves for the forthcoming Fiscal Year, (b) any discretionary expenditures which the General Partner determines to be necessary or advisable to maintain the Property or facilitate the development and sale of lots developed on the Property, and (c) a projected cash flow analysis for the forthcoming Fiscal Year setting forth the estimated receipts and expenditures of the Partnership. Each Partner shall have a period of twenty (20) days to review and approve the proposed Annual Budget for the forthcoming Fiscal Year. Once approved by a Majority in Interest of Limited Partners, such approved Annual Budget for the period of time covered thereby shall be binding upon the Partners unless otherwise mutually agreed. Notwithstanding the foregoing, (i) should any Partner fail to notify the General Partner of its disapproval of the proposed Annual Budget prior to the expiration of the twenty (20) day review period described above, the proposed Annual Budget shall be deemed to be approved by such Partner, and (ii) should any Partnership lender require that the Partnership make expenditures or establish reserves during any Fiscal Year, all such required expenditures and reserves shall be deemed Approved by a Majority in Interest of Limited Partners after such lender requirements are sent to the Partners. The General Partner may, from time to time, submit proposed revisions to the Annual Budget, and the Partners shall consider and review such proposed revisions in the manner and time frames set forth above in order to determine whether to approve same, or to make such revisions thereto as they may mutually agree, or to agree not to revise the Annual Budget.
 
9.7            Approval of Budget and Development Plan and Annual Budget. Notwithstanding anything to the contrary provided in this Agreement, the Budget and Development and each Annual Budget shall be submitted to the Consultants prior to submitting same to the Partners for approval. If approved by the Consultants as providing in the Consultant Agreement, then the General Partner shall submit same to the Partners for approval as provided in Sections 9.5 and 9.6 hereof.
 
9.8            Licenses . The General Partner shall, at its own expense, qualify to do business and obtain and maintain such licenses as may be required for the performance by the General Partner of its services hereunder.
 
9.9            Third Party Obligations . All debts and liabilities to any third Persons incurred by the General Partner in the authorized course of its operation and management of the Property shall be the debts and liabilities of the Partnership only and the General Partner shall not be liable for any such obligations by reason of its management, supervision and direction of the Property for the Partnership. The General Partner may so inform third parties with whom it deals on behalf of the Partnership and may take any other reasonable steps to carry out the intent of this Section 9.9.
 
 
 
8
 
 
9.10            Indemnification . The Partnership shall indemnify, save harmless and pay all judgments arising against the General Partner and its shareholders, directors, employees and agents from any cost, expense, claim, liability or damage incurred by reason of such Person’s relationship to the Partnership or any act performed or omitted to be performed by them in connection with this Article IX or the business of the Partnership, including attorney’s fees and costs incurred by them in connection with the defense of any action based on any such act or omission, which attorneys’ fees and costs may be paid as incurred, [including all such liabilities under any Federal or state securities act (including the Securities Act of 1933, as amended)] as permitted by law, except that the Partnership shall have no indemnification obligation hereunder with respect to any act or omission of any Person that constitutes willful misconduct, gross negligence, or was outside the scope of such Person’s authority under this Article VI. All judgments against the Partnership with respect to which any Person is entitled to indemnification may only be satisfied from the Partnership’s assets. Any Person entitled to be indemnified hereunder shall also be entitled to recover its attorney’s fees and costs of enforcing this indemnity from the Partnership’s assets.
 
9.11            Power of Attorney . By the execution of this Agreement, each Limited Partner and any assignee or transferee of a Limited Partner's Partnership Interest irrevocably constitutes and appoints the General Partner his or her true and lawful attorney-in-fact and agent to execute, acknowledge, verify, swear to, deliver, record, and file in that Partner's or assignee's name, place and stead, all documents which may from time to time be required by any federal or state law, including the execution, verification, acknowledgment, delivery, filing and recording of this Agreement, as well as all authorized amendments to any such document, all assumed name certificates, documents, bills of sale, assignments, and other instruments or conveyances, leases, contracts, loan documents and/or counterparts of any such document, and all other documents that may be required to effect a continuation of the Partnership and that the General Partner deems necessary or reasonably appropriate. The power of attorney granted in this paragraph shall be deemed to be coupled with an interest, shall be irrevocable and survive the death, bankruptcy, incompetency or legal disability of a Limited Partner, and shall extend to that Limited Partner's heirs successors and assigns. Each Limited Partner agrees to be bound by any representations made by the General Partner acting in good faith pursuant to the Power of Attorney, and each Limited Partner waives any and all defenses that may be available to contest, negate, or disaffirm any action of the General Partner taken in good faith under this Power of Attorney.
 
9.12            Limitations on Power and Authority of the General Partner . It is hereby understood and agreed by the General Partner that it shall not take any of the following actions on behalf of the Partnership, the Partners or the Property, which actions shall be deemed Major Decisions for purposes of this Agreement, unless such Major Decisions have been approved by a Majority in Interest of the Limited Partners:
 
(a)   Any act which would make it impossible to carry on the purpose and ordinary business of the Partnership;
 
(b)   Confession of a judgment against the Partnership;
 
 
9
 
 
(c)   Borrow or contract for or otherwise create any indebtedness for which any Limited Partner shall be personally liable;
 
(d)   Acquire any property other than the Property, except as provided in the Budget and Development Plan;
 
(e)   Settle any claim for insurance proceeds if the loss thereunder exceeds Twenty Thousand and No/100 Dollars ($20,000.00);
 
(f)   Settle any claims for payment of awards or damages arising out of the exercise of eminent domain by any public or governmental authority;
 
(g)   Lend funds belonging to the Partnership or another Partner to a Partner or to any third party, or extend to any person, firm or corporation credit on behalf of the Partnership except in accordance with the terms of this Agreement, or guarantee the debt or obligations of any Person;
 
(h)   Other than in connection with the development of the Property into lots to be sold individually or in groups, partition all or any portion of the Property or any other property of the Partnership, or file any complaint or institute any proceeding at law or in equity seeking such partition;
 
(i)   Do any act in contravention of this Agreement;
 
(j)   Do any act or take any action which is required herein to be approved by a Majority Interest of Limited Partners or by unanimous consent of the Limited Partners unless and until such act and/or action is approved by a Majority Interest of Limited Partners or by unanimous consent of the Limited Partners, as the case may be;
 
(k)   Possess the Property or any other Partnership assets or assign its rights in the Property or any other Partnership assets for other than a Partnership purpose, or use the Property or any other Partnership assets except for the account and benefit of the Partnership;
 
(l)   Settle, or cause the settlement of, any claims, suits, debts, demands or judgments against the Partnership in excess of $10,000;
 
(m)   Cause the sale by the Partnership of any portion of the Property, other than the sale of lots in the ordinary course of business;
 
(n)   Admit, or cause the admission, of any additional Limited Partners to the Partnership;
 
(o)   Incur any indebtedness on behalf of the Partnership in excess of amounts as provided in the Budget and Development Plan;
 
(p)   Revise the Budget and Development Plan if the resulting changes would cause the costs of any line item on the Budget and Development Plan to be increased by more than 10%;
 
 
10
 
 
(q)   Withhold, as reserves, more than 25% of the portion of the proceeds from the sale of any portion of the Property;
 
(r)   Incur any obligation or make any expenditure on behalf of the Partnership, which, when added to other expenditures, exceeds the amounts set forth therefore in the appropriate line item of the Budget and Development Plan by more than 10%;
 
(s)   Any revision to or deviation from the Budget and Development Plan which decreases by more than 10% the proposed selling price for any lot or shall otherwise cause the gross income of the Partnership projected in the Budget and Development Plan to decrease by more than 10% for any period;
 
(t)   The institution, or causing the institution of, any legal action by the Partnership, including without limitation, any lawsuit, arbitration proceeding, or bankruptcy or similar filing;
 
(u)   Making payments to or entering into any contracts with the General Partner or any affiliate of the General Partner other than as specified herein or the Budget and Development Plan;
 
(v)   Any act or transaction outside the ordinary course of the Partnership’s business;
 
(w)   Making any other decision or taking any other action which, by the provisions of this Agreement, is required to be approved by a Majority in Interest of Limited Partners; and
 
(x)   Modify or amend any agreement, contract or other action involving a Major Decision, as defined below (previously approved by a Majority in Interest of Limited Partners), without the prior written approval of the other Limited Partners.
 
9.13            Inquiries. In no event shall any person dealing with the General Partner or any of its representatives with respect to any business or property of the Partnership be obligated to ascertain that the provisions of this Agreement have been complied with or be obligated to inquire into the necessity or expedience of any act or action of such persons. Every contract, agreement, security agreement, promissory note, or other instrument or document executed by either the General Partner or its representatives with respect to any business or property of the Partnership shall be conclusive evidence in favor of any and every person relying on or claiming thereunder that (1) at the time of the execution and/or delivery of the instrument or document this Agreement was in full force and effect; (2) the instrument or document was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership and all of the Partners, and (3) the General Partner or its representatives were duly authorized and empowered to execute and deliver any such instrument or document for and on behalf of the Partnership.
 
 
 
11
 
 
9.14            Tax Matters Partner. The General Partner is hereby designated as a Tax Matters Partner as defined in Section 6231 of the Internal Revenue Code. In the event that an audit of the Partnership occurs, and the Tax Matters Partner does not reach a settlement agreement with the Internal Revenue Service, the Tax Matters Partner shall in its sole discretion choose whether to file a petition for readjustment of the Partnership items with either the Tax Court, the District Court of the United States for the district for which the Partnership's place of business is located, or the Court of Claims.
 
9.15            Obligations Not Exclusive. The General Partner shall be required to devote only such time as is reasonably necessary to manage the Partnership's business, it being understood that the General Partner has other business activities and therefore shall not devote their time exclusively to the Partnership. Neither the General Partner, or any officer, director, shareholder, or other person holding a legal or beneficial interest in the General Partner, shall, by virtue of the interest in the Partnership, be in any way prohibited or restricted from engaging in, investing in, or possessing an interest in any business activity of any nature or description, including those which may be equivalent to or in competition with the Partnership. Neither the Partnership nor any Partner shall have a right by virtue of this Agreement or any relationship created by this Agreement in or to such other ventures or activities or to the income or proceeds derived from them.
 
9.16            Liability of General Partner to Limited Partners. The General Partner, its representatives, employees, and agents shall not be liable to the Partnership or to the Limited Partners for losses sustained or liabilities incurred as a result of any error in judgment or mistake of law or fact, including simple negligence, or for any act done or omitted to be done in good faith in conducting the Partnership business, unless the error, mistake, act, or omission was performed or omitted fraudulently or constituted gross negligence or willful misconduct.
 
9.17            Consultants. The General Partner shall consult with and obtain the advice of the Consultants in the development and construction of the Project until such time as the Project is completed or as otherwise determined by the General Partner. Each Consultant shall be paid by the Partnership a monthly fee of $10,000 during the development and construction of the Project and as long as such as such person is actively participating in the oversight and supervision of the construction of the Project.
 
ARTICLE X
TRANSFERS OF PARTNERSHIP INTEREST
 
10.1            Transfer of General Partner’s Interest. The General Partner may not, without the approval of a Majority in Interest of Limited Partners, transfer its Partnership Interest or any part thereof.
 
10.2            Withdrawal or Removal of General Partner.
 
(1)           
The General Partner may:
 
(a) 
resign or withdraw from the Partnership as General Partner without the consent of the Limited Partners; or
 
 
12
 
 
(b) 
be removed at any time, for cause, by the affirmative vote of a Majority in Interest of Limited Partners. For the purposes of this provision, “cause” shall mean action or inaction by the General Partner amounting to gross negligence or wilful fraudulent misconduct.
 
(2) 
Immediately on withdrawal or removal of the General Partner, a successor General Partner shall be selected by an affirmative vote or written consent of a Majority in Interest of Limited Partners. The removed or withdrawing General Partner shall turn over all Partnership books and records to the new General Partner within ten (10) days of removal or departure.
 
(3) 
A General Partner departing voluntarily or having been removed shall become a Limited Partner upon the selection of a successor General Partner, as provided above, and shall continue to receive its share of any Partnership distributions arising out of its interest in the Partnership.
 
10.3            Substituted Limited Partner. Each Limited Partner hereby consents to the admission as a substituted Limited Partner of any person complying with Section 10.8. When compliance with this Agreement has been shown, the General Partner shall cause the necessary amendments to be filed as required by law.
 
10.4            Transfer On Death of a Limited Partner. On the death of a Limited Partner, his or her successor in interest shall succeed to the decedent's Partnership Interest, and shall be liable for the obligations of the decedent, but shall not become a substituted Limited Partner until compliance with Section 10.6 and 10.8.
 
10.5            Withholding of Distributions. From the date of the receipt of any instrument relating to the transfer of a Partnership Interest, or at any time the General Partner is in doubt as to the person entitled to receive distributions in respect of any such Partnership Interest, the General Partner may withhold any such distributions until the transfer is completed or abandoned or any dispute is resolved.
 
10.6            Prohibition Against Transfer by Limited Partners. Except as set forth below, no Limited Partner shall sell, assign, transfer, encumber, or otherwise dispose of any interest in the Partnership without the written consent of the General Partner and a Majority in Interest of Limited Partners. Notwithstanding the foregoing, and subject to Section 10.8 below, a Limited Partner may sell or otherwise transfer all or any portion of a Partnership Interest to the spouse or any direct ascendants or descendants of the Limited Partner or to a trust, corporation, partnership, or other entity in which all of the beneficial interest is held by or for the Limited Partner, spouse, ascendants, or descendants, provided the transfer would not result in a termination of the Partnership.
 
 
 
13
 
 
10.7             Permitted Sales
 
(1) 
In the event a Limited Partner receives a bona fide offer (the “Offer”) for the purchase of all or a part of his or her interest in the Partnership (the “Offered Interest”), the Limited Partner shall either refuse the Offer or give the General Partner written notice setting out full details of the Offer, which notice shall, among other things, specify the name of the offeror, specify the Offered Interest covered by the Offer, terms of payment, including whether the Offer is for cash or credit, and, if on credit, the time and interest rate, as well as any and all other consideration being received or paid in connection with the proposed transaction, as well as any and all other terms, conditions, and details of the Offer.
 
(2) 
Upon receipt of the notice with respect to the Offer, the General Partner shall notify in writing the other members of the Limited Partnership regarding the terms of the Offer. The Partners shall have the option to match the Offer and purchase the Offered Interest as hereinafter provided. Should any individual Partner or group of Partners decide to exercise the option of purchase, notification of this decision shall be given in writing to the General Partner to be transmitted to the selling Limited Partner within ten (10) days of notification by the General Partner, and the sale and purchase of the Offered Interest shall be closed within thirty (30) days thereafter. The entire Offered Interest must be purchased and shall be purchased prorata among the willing Partners, except as otherwise agreed by the willing Partners. If none of the Partners decide to exercise this option of purchase, the selling Limited Partner shall be so notified in writing by the General Partner and shall be free to sell the Offered Interest. The sale, if permitted, shall be made strictly upon the terms and conditions of the Offer and to the person described in the required notice from the selling Limited Partner to the General Partner.
 
(3) 
Any assignment made to anyone not already a Partner shall be effective only to give the assignee the right to receive the share of profits to which the assignor would otherwise be entitled, shall not relieve the assignor from liability for additional contributions of capital, shall not relieve the assignor from liability under the provisions of this Agreement, and shall not give the assignee the right to become a substituted Limited Partner. Neither the General Partner nor the Partnership shall be required to state the tax consequences to a Limited Partner or to a Limited Partner or to a Limited Partner’s assignee arising from the assignment of a Limited Partners Interest.
 
10.8            Conditions of Effective Transfer. A purported transfer of a Partnership Interest by a Limited Partner shall be valid as to the Partnership and the General Partner on the first day of the month following the month in which (1) the General Partner has consented in writing to the transfer; and (2) the General Partner is satisfied that the following conditions, any of which may be waived by the General Partner, have been met:
 
 
14
 
 
(a) 
The transferor and transferee have agreed to provide the Partnership with the information in their possession required to permit the Partnership to make any basis adjustments required by the Internal Revenue Tax Code;
 
(b) 
The transferee has delivered an instrument satisfactory to the General Partner by which the transferee accepts and adopts the terms and provisions of this Agreement, including the assumption of any obligations of the transferor to the Partnership;
 
(c) 
The transferor has agreed to pay a reasonable fee to reimburse the Partnership for the costs incurred in connection with the admission of the transferee as a substitute limited partner, including any costs incurred or to be incurred by the Partnership in connection with the basis adjustments and additional accounting operations required;
 
(d) 
The transferor has delivered to the General Partner an opinion of counsel in form and substance satisfactory to the General Partner to the effect that neither the transfer nor any offering in connection with the transfer violates any provision of any federal or state securities or comparable law;
 
(e) 
The General Partner has determined that the transfer would not cause a termination of the Partnership, within the provisions of the Internal Revenue Code;
 
(f) 
The transfer is evidenced by an instrument in writing signed by the transferor and transferee stating, among other things, that the transferor has the right to transfer, and the transferee has the right to acquire, the transferor's Partnership Interest, and acknowledging that the transferee is bound by the terms of this Agreement; and
 
(g) 
The transferee has delivered a statement in form and substance reasonably satisfactory to the General Partner making appropriate representation and warranties with respect to the satisfaction of applicable federal and state securities laws.
 
10.9            Assignments by Operation of Law. If any Limited Partner shall die, with or without leaving a will, become non compos mentis, or become bankrupt or insolvent, or if a corporate or partnership Limited Partner dissolves during the Partnership term, the legal representatives, heirs, and legatees, and the spouse, if the Partnership Interest of the Limited Partner has been community property of the Partner and the Partner's spouse, bankruptcy assignees, or corporate or partnership distributees shall not become substitute Limited Partners but shall have, subject to the other terms and provisions thereof, such rights as are provided with respect to such persons under the Act; provided, however, such legal representatives, heirs and legatees, bankruptcy assignees and corporate or partnership distributees may become substitute Limited Partners with the consent of the General Partner.
 
 
 
15
 
 
10.10                       Expenses of Transfer. The person acquiring Partnership Interest pursuant to any of the provisions of this Article X shall bear all costs and expenses necessary to effect a transfer of that Partnership Interest including, without limitation, reasonable attorney's fees incurred in preparing amendments to this Agreement and Certificate of Limited Partnership to reflect the transfer or acquisition and the cost of filing the amendments with the appropriate governmental officials.
 
10.11                       Amendment of Certificate and Agreement of Limited Partnership. For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate to prepare and record an amendment of the Certificate and the Agreement of Limited Partnership. For this purpose, the General Partner may exercise the powers of attorney granted pursuant to Article 9.11. An amendment of this Agreement required to add a new Limited or General Partner need only be filed at the end of the month in which each new Limited or General Partner is to be added.
 
10.12                       Survival of Liabilities. No sale or assignment of a Partnership Interest, even if it results in substitution of the assignee or vendee as a Limited Partner, shall release the assignor or vendor from those liabilities to the Partnership that survive the assignment or sale as a matter of law.
 
ARTICLE XI
AMENDMENTS
 
11.1            Procedure. Amendments to this Agreement may be proposed by the General Partner or by a Majority in Interest of Limited Partners. The General Partner shall submit any such proposed amendment to all of the Partners, and, if within such reasonable period of time as may be specified in the proposal, a Majority in Interest of Limited Partners and the General Partner shall have given their written consent to the amendment, the proposed amendment shall become effective as of the date specified in the proposal. Each Limited Partner shall promptly execute or cause to be executed one or more amendments to this Agreement and such other documents as may be required under the laws of the jurisdictions in which the Partnership does business at the time.
 
11.2             Effect. Any amendment to this Agreement that increases the liability of any Partner, or changes the contributions required by any Partner or the rights of any Partner in interest in the profits, losses, deductions, credits, revenues, or distributions of the Partnership, rights upon dissolution, or any voting rights specifically set forth in this Agreement, shall become effective as to that Partner only on his or her written acceptance of the amendment.
 
ARTICLE XII
DISSOLUTION AND TERMINATION
 
12.1            Dissolution and Termination of the Partnership. The Partnership shall be dissolved upon the occurrence of any of the following:
 
 
 
16
 
 
(1) 
The bankruptcy or insolvency of the General Partner or the occurrence of any other event that would permit a trustee or receiver to acquire control of the affairs of General Partner and the failure of a Majority of Interest of limited Partners to elect another General Partner;
 
(2) 
The withdrawal from the Partnership, death, or insanity of the General Partner and failure of a Majority in Interest of Limited Partners to select a successor General Partner;
 
(3) 
Agreement of the General Partner and a Majority in Interest of Limited Partners to dissolve;
 
(4) 
Any disposition of all of the property of the Partnership;
 
(5) 
The termination of the Partnership pursuant to Section 1.6; or
 
(6) 
The occurrence of any other circumstances that by law would require the Partnership to be dissolved.
 
The dissolution shall be effective on the day on which the event causing dissolution occurs, but the Partnership shall not terminate until its assets have been distributed in accordance with the provisions of this Agreement.
 
12.2             Continuation of Business Enterprise.
 
(1) 
On dissolution of the Partnership pursuant to Section 12.1 (1) or (2), the Partners may elect to continue the Partnership by the vote of the Majority in Interest of the Limited Partners taken within ninety (90) days of any event of dissolution, with any election to continue being binding on all the Partners. If they elect to continue the Partnership, the Partners shall also by vote of the Majority in Interest of Limited Partners elect a new general partner.
 
(2) 
On dissolution of the Partnership after which the business enterprise of the Partnership is not continued, the liquidating trustee, which shall be a General Partner if the dissolution is one described in Section 12.1 (3), (4) or (5) and otherwise shall be a person selected by a Majority in Interest of Limited Partners or by a court having jurisdiction over the affairs of the Partnership, shall proceed diligently to wind up the affairs of the Partnership and distribute its assets. The liquidating trustee shall use its best efforts to sell the equipment and otherwise convert Partnership assets into cash as promptly as possible but in an orderly and businesslike manner so as not to involve undue sacrifice. No Partner shall have any right to demand or receive property other than cash during Winding Up.
 
 
 
17
 
 
12.3            Winding Up. The cash proceeds of the Partnership shall be applied or distributed on the winding up of the Partnership in the following order of priority:
 
(1) 
In payment of all liabilities of the Partnership to creditors other than Partners. If any liability is contingent or uncertain in amount, a reserve equal to the maximum amount for which the Partnership could be reasonably held liable shall be established. On the satisfaction or other discharge of that contingency, the amount of the reserve remaining, if any, will be treated as income to the extent previously treated as a deduction.
 
(2) 
In payment of any loans to the Partnership by the Partners.
 
(3) 
The priority detailed in Section 5.1.
 
ARTICLE XIII
MISCELLANEOUS
 
13.1            Meetings of Partners. Meetings of the Partners may be called by the General Partner or the Limited Partners holding more than fifty percent (50%) of the then outstanding Partnership Interest for any matters for which the Partners may vote as set forth in this Agreement, or for a report from the General Partner on matters pertaining to the Partnership business and activities. A list of the names and addresses and percentage interest of all Limited Partners shall be furnished each Limited Partner and shall be maintained as a part of the books and records of the Partnership. Within seven (7) days after receipt of a written request in compliance with the above terms, either in person or by registered or certified mail, stating the purpose of the meeting, the General Partner shall mail to all Partners written notice of the place and purpose of such meeting to be held on a date not less than fourteen (14) nor more than twenty-eight (28) days after receipt of the request. When a vote of the Limited Partners is called, the Limited Partners may vote at the meeting in person or by proxy.
 
13.2            Action without Meeting. Any matter as to which the Limited Partners are authorized to take action under this Agreement or by law may be taken by the Limited Partners without a meeting and shall be as valid and effective as action taken by the Limited Partners at a meeting assembled, if written consents to the action by the Limited Partners (1) approve the action and (2) are delivered to the General Partner.
 
13.3            Tax Returns. Each Partner hereby agrees to execute promptly, together with acknowledgment or affidavit, if requested by the General Partner, all such agreements, certificates, tax statements, tax returns, and other documents as may be required of the Partnership or its Partners by the laws of the United States of America, the State of Texas, or any other state in which the Partnership conducts or plans to conduct business, or any political subdivision or agency thereof.
 
 
 
18
 
 
13.4            Notices. All notices, offers, or other communications required or permitted to be given pursuant to this Agreement shall be in writing and either delivered by messenger, including overnight delivery services such as Federal Express, Airborne Express, etc., or deposited in the United States Mail, postage prepaid, addressed to the respective Partners at the addresses appearing in the records of the General Partner. Notice shall be deemed received on the earlier of actual receipt or three (3) days after deposit into the care and custody of the United States Mail. Any Limited Partner may change his or her address for notice by giving notice in writing to the General Partner stating the new address. The General Partner may change its address for notice by giving written notice of the change to the Limited Partners.
 
13.5            Effective Law. This Agreement and the rights of the Partners shall be governed by and interpreted in accordance with the laws of the State of Texas.
 
13.6            Assigns. This Agreement shall be binding on and shall inure to the benefit of the Partners and their spouses as well as their respective legal representatives, heirs, successors and assigns.
 
13.7            Counterpart Execution. This Agreement may be executed in multiple counterparts, each of which shall be considered an original, but all of which shall constitute one (1) instrument.
 
13.8            Gender and Number. Whenever the context requires, the singular shall include the plural and the masculine shall include the feminine and neuter, as the identification of the person, corporation, or other entity may require.
 
13.9           Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules, and regulations of the State of Texas. If any provision of this Agreement or its application to any person or circumstances shall, for any reason and to any extent, be held invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be effective and in force to the greatest extent permitted by law.
 
13.10         Confidentially. Except such disclosure as requires by the laws of the State of Texas, the Partners and their agents and employees shall keep confidential any and all business affairs of the Partnership. The Partnership shall be entitled to any remedy available at law should a Partner or his agent or employee violate the terms hereof, including injunctive relief by a court of competent jurisdiction.
 
IN WITNESS WHEREOF , the parties have executed this Agreement to be effective as of the date and year first above written.
 
 
 
 
19
 
 
 
GENERAL PARTNER:
 
150 BLACK OAK GP, INC.,
a Texas corporation
 
 
By: __ /s/ Jeffrey Busch ____________
       Jeffrey Busch, President and
      Chief Executive Officer
 
 
By: _ /s/ Joe Fogarty _______________
       Joe Fogarty, Vice President and
      Chief Operating Officer
 
 
 
 
LIMITED PARTNERS:
 
 
CCM DEVELOPMENT USA CORPORATION
a Delaware corporation
By: /s/ Jeffrey Busch 
Name: 
Title: 
 
Address:  
 
 
facsimile:  
e-mail:                
 
 
20
 
 
AMERICAN REAL ESTATE INVESTMENTS. LLC ,
a Missouri Limited Liability Company
By: /s/ Tracy Weaver 
Name: 
Title: 
 
Address:  
 
 
 
facsimile:  
e-mail:                
 
 
 
WOODROW A. HOLLAND, TRUSTEE FOR THE FOGARTY FAMILY TRUST II
 
 
____/s/Woodrow H. Holland__________________
 
Address:  
 
 
 
facsimile:  
e-mail:                
 
 
 
 
 
 
 
 
21
 
 
EXHIBIT “A”
TO
150 CCM BLACK OAK, LTD. PARTNERSHIP AGREEMENT
 
General Partner
 
Names and Address of
General Partner
  Partnership Interest
  Capital Contribution
 
 
 
150 Black Oak GP, Inc.          
340 North Sam Houston Parkway East
Suite 140
Houston, Texas 77060
  1%
  $100.00
 
 
 
 
  Limited Partners
 
Names and Addresses of
 
 
       Limited Partners
Partnership Interest
Capital Contribution
 
 
 
CCM DEVELOPMENT USA
 
 
CORPORATION
59.5%
$4,300,000.00
 
 
 
 
 
 
AMERICAN REAL ESTATE
contribution
13%
 
property
 
INVESTMENTS LLC
 
 
 
 
 
 
 
 
WOODROW A. HOLLAND, TRUSTEE
 
 
FOR THE FOGARTY FAMILY TRUST II
26.5%
contribution
property
 
 
 
 
22
 
 
EXHIBIT “B”
TO
150 CCM BLACK OAK, LTD. PARTNERSHIP AGREEMENT
 
Legal Description of Partnership Real Property
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 10.2
 
November 7, 2014
 
This Binding Term Sheet is between the Limited Partners of the 150 CCM Black Oak LP. The Limited Partners are Fogarty Family Trust II, CCM Development USA Corp, and American Real Estate Investments, LLC (“Partners”). Upon execution of this Binding Term Sheet, the Limited Partnership Agreement (“LPA”) between the Partners, dated March 20, 2014, will be amended to incorporate the changes addressed below. All Partners understand that this Binding Term Sheet is an amendment to the LPA in accordance with Article XI of the LPA. As the General Partner is comprised of two limited partners, the signatures of the applicable limited partners will signify consent of the General Partner.
 
CCM Funding and Bank Refinancing
 
CCM shall fund the immediate equity needs of Black Oak, defined as $7,440,697.29, as outlined below (the “Additional Contribution”). This is the total funding requirement. Under section 3.2 of the LPA, this Additional Contribution will accrue interest at a 15% annual rate. This Additional Contribution will be a loan with a standard 1 st lien note and deed of trust securing the repayment of the Additional Contribution. The Partners will continue to work towards refinancing the Additional Contribution with third party bank financing. If refinancing the Additional Contribution does not occur by January 1, 2015, CCM will receive an additional equity interest of  5%  (five percent) in the form of a contribution of 5% from Fogarty Family Trust II’s current ownership and no contribution from American Real Estate Investments, LLC. If necessary, CCM will guarantee repayment of any loan that refinances the Additional Contribution, but the refinancing must be on reasonable and competitive lending terms.
 
 
Repayment of the Additional Contribution will occur upon the earliest of: 1) refinancing with a third party bank loan; or 2) sale of Black Oak Section One lots (expected in the 2 nd Quarter of 2015). In the event the Additional Contribution is not repaid from third party bank refinancing or the sale of section one lots, and the partnership has Distributable Cash, the Additional Contributions shall be paid as provided in Section 5.1 (2) of the LPA.
 
Use of Proceeds of Additional Contribution
 
Current Liabilities
$76,887.26
Account Payable
$87,597.09
A/P F&R Professional Engineering
$70,443.90
N/P Gina Gatto
$452,439.00 (Due 10/22/14)*
N/P Ferrell & Holmes
$496,864.66 (Subject to extension)
N/P Doughtie/ Gipson
$477,707.05 (Subject to extension)
N/P Webb
$1,159,725.00 (Subject to extension)
N/P Revere
$2,219,033.33
Development Cost
$2,400,000.00 **
 
 
Total Funding
$7,440,697.29
Expected Builder Contribution
$1,300,000.00
Net Funding
$6,140,697.29
 
* Unless Extended.
 
** Development costs on the above list will be paid as expenses (which shall be approved by IAD), will be delivered directly to IAD, and will be paid (when due) directly from an IAD bank account.
 
 
 
Page 1 of 3
 
 
Partnership Contributions
As of November 7, 2014, the Partnership Contributions shall be adjusted to the following amounts:
 
CCM
 
63.5%
Fogarty Family Trust II
 
28.5%
AREI
 
7.0%
General Partner
 
1.0%
 
Partnership Distributions
Shall remain the same. Return of Initial Capital and Preferred Return are not affected.
 
Reimbursements
For partnership costs that are reimbursable, the reimbursed costs shall be distributed to the Partners per the above updated percentage partnership contributions. The Partners acknowledge that the attached September 12, 2014 pro-forma financial statements estimate a total of $13,581,115 of reimbursable costs to the partnership. [This number is comprised of the estimates of $11,776,115 from land sale to the improvement district (streets, drainage and parks) and $1,805,000 of Aqua Reimbursements (W & S)].
 
Development Costs to Consultants
ARETE will also receive 3% of development costs and IAD will receive 2% of development costs. Development costs are costs of the partnership, excluding the cost to purchase the land.
 
Oversight Fees
 
1)
The consulting and oversight fees in section 9.17 of the LPA prior to this Binding Term Sheet shall be waived.
2)
Beginning November 1, 2014:
a.
Consultants appointed by Fogarty Family Trust and CCM (currently ARETE and Inter-American Development, LLC respectively) will each begin receiving a $10,000 per month consulting and oversight fee; and
b.
Consultant appointed by AREI shall receive $2,000 per month consulting and oversight fee.
3)
Consulting and oversight fees shall only be payable after Outside Financing is achieved (Outside Financing is refinancing of at least 65% of the Additional Contribution and excludes financing from CCM, or Inter-American Development, or affiliates of either); all consulting and oversight fees shall be deferred until Outside Financing.
4)
Upon Outside Financing, the partnership shall pay AREI a one-time $40,000 fee to represent reimbursement of all AREI expenses incurred on behalf of partnership and acknowledgement that AREI will receive reduce consulting and oversight fees for the life of the LPA.
 
 
Page 2 of 3
 
 
 
AGREED:
 
 
 
/s/ Joe Fogarty ______________                                                       
/s/ Tracy Weaver ______________
Fogarty Family Trust II                                        
American Real Estate Investments, Inc.
 
 
 
 
/s/ Conn Flanigan ____________
CCM Development USA Corporation

 
 
 
 
 
(signature page for Binding Term Sheet, November 7, 2014)
 
Page 3 of 3
 
Exhibit 10.3
 
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
150 CCM BLACK OAK, LTD.
 
 
This Amendment No. 2 (this “Amendment No. 2”; the Binding Term Sheet of November 7, 2014 is Amendment No. 1)) to the Agreement of Limited Partnership of 150 CCM Black Oak, Ltd (the “Partnership Agreement”) is hereby adopted by 150 Black Oak GP, Inc., a Texas corporation, whose address is 340 North Sam Houston Parkway East, Suite 140, Houston, Texas 77060, as general partner (“General Partner”), and each of the individuals or entities whose names are set forth on the Amended Exhibit “A” attached to this Agreement as limited partners (“Limited Partners”). Capitalized terms used but not defined herein are used as defined in the Partnership Agreement.
 
Exhibit A to the LPA: Name Change
 
WHEREAS certain   versions of the Limited Partnership Agreement incorrectly referred to CCM Property USA PTE LTD as the limited partner instead of the accurate name of CCM Development USA Corp; and
 
WHEREAS, on November 18, 2014,   CCM Development USA Corp properly changed its name to SeD Development USA, Inc.; and
 
WHEREAS , neither name change is a change in ownership interest in violation of Section 10 of the Partnership Agreement; and
 
Exhibit A to the LPA: Capital Contribution
 
WHEREAS, under accounting rules, the capital contribution shall be a contribution to the partnership of cash and not contracts to purchase property; and
 
WHEREAS , the Capital Contribution table shall be adjusted to show “zero” for capital contribution from American Real Estate Investments, Inc. and Fogarty Family Trust II, but also noting their respective contributions of contracts to purchase real estate;
 
Exhibit A to the LPA: Ownership Percentages
 
WHEREAS , the Partners entered into that Binding Term Sheet on November 7, 2014 that among other things adjusted the percentage of partnership allocations as of November 7, 2014 to the following:
 
SeD
63.5%
Fogarty Family Trust II
28.5%
AREI
7.0%
General Partner
1.0%; and
 
 
 
 
 
WHEREAS , the Binding Term Sheet also provided for an adjustment in ownership percentage if the Partners could not refinance the Additional Contribution. If the Additional Contribution could not be refinanced by January 1, 2015, SeD will receive an additional equity interest of 5% (five percent) in the form of a contribution of 5% from Fogarty Family Trust II’s current ownership and no contribution from American Real Estate Investments, LLC. Since the refinancing did not take place, the equity ownership of the Partnership shall be adjusted to the following:
 
SeD
68.5%
Fogarty Family Trust II
23.5%
AREI
7.0%
General Partner
1.0%; and
 
  WHEREAS , the Partners desire to amend the Partnership Agreement with regards to the consulting and oversight fees and to make certain adjustments to the names of certain Partners and certain allocation provisions related thereto, which adjustments shall be effective as of November 7, 2014;
 
NOW THEREFORE , the Partners do hereby amend the Partnership Agreement as follows:
 
1.
Amendment Section 9.17 of the Operating Agreement shall be amended and replaced in its entirety as follows:
 
9.17 
Consultants.
1)
Beginning November 1, 2014:
(a)
Consultants appointed by Fogarty Family Trust and SeD (currently ARETE and Inter-American Development, LLC respectively) will each begin receiving a $10,000 per month consulting and oversight fee; and
(b)
Consultant appointed by AREI shall receive $2,000 per month consulting and oversight fee.
2)
Consulting and oversight fees shall only be payable after Outside Financing is achieved (Outside Financing is refinancing of at least 65% of the Additional Contribution and excludes financing from SeD, or Inter-American Development, or affiliates of either); all consulting and oversight fees shall be deferred until Outside Financing.
3)
Upon Outside Financing, the partnership shall pay AREI a one-time $40,000 fee to represent reimbursement of all AREI expenses incurred on behalf of partnership and acknowledgement that AREI will receive reduced consulting and oversight fees for the life of the LPA.
 
2.
Amendment Exhibit “A” to 150 CCM Black Oak, Ltd. Partnership Agreement is amended and replaced in its entirety as follows:
 
 
 
 
EXHIBIT “A”
TO
150 CCM BLACK OAK, LTD. PARTNERSHIP AGREEMENT
(Reflecting Changes as of January 1, 2015)
 
General Partner
 
Names and Address of
 
 
       General Partner
Partnership Interest
Capital Contribution
 
 
 
150 Black Oak GP, Inc.
1%
$100.00
340 North Sam Houston Parkway East
 
 
Suite 140
 
 
Houston, Texas 77060
 
 
 
Limited Partners
 
Names and Addresses of
 
 
       Limited Partners
Partnership Interest
 
Capital Contribution
 
 
 
SeD DEVELOPMENT USA, INC
 
 
(f/k/a) CCM DEVELOPMENT USA
 
 
CORPORATION
68.5%
$4,300,000.00
 
 
 
 
 
 
AMERICAN REAL ESTATE INVESTMENTS LLC
7%
Zero*
 
 
 
 
 
 
WOODROW A. HOLLAND, TRUSTEE
 
 
FOR THE FOGARTY FAMILY TRUST II
23.5%
Zero*
 
*Limited partner contributed contracts to purchase property
 
 
 
 
IN WITNESS WHEREOF , the parties have executed this Amendment No. 2 to be effective as of the date and year first above written.
 
 
GENERAL PARTNER:
 
150 BLACK OAK GP, INC.,  
a Texas corporation
 
 
By: __ /s/ Jeffrey Busch ____________
       Jeffrey Busch, President and
       Chief Executive Officer
 
 
By: ___ /s/ Joe Fogarty _____________
       Joe Fogarty, Vice President and
      Chief Operating Officer
 
LIMITED PARTNERS:
 
SED DEVELOPMENT USA, INC
a Delaware corporation
By: /s/ Jeffrey Busch 
Name: 
Title: 
 
 
AMERICAN REAL ESTATE INVESTMENTS. LLC ,
a Missouri Limited Liability Company
By: /s/ Tracey Weaver 
Name: 
Title: 
 
 
WOODROW A. HOLLAND, TRUSTEE FOR THE FOGARTY FAMILY TRUST II
 
/s/ Woodrow H. Holland _____________________
 
 
 
Exhibit 10.4
 
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
150 CCM BLACK OAK, LTD.
 
This Amendment (this “ Amendment ”) to the Agreement of Limited Partnership (the “ Partnership Agreement ”) of 150 CCM Black Oak, Ltd. (the “ Company ”), dated as of September 25, 2017, is hereby adopted by 150 Black Oak GP, Inc., a Texas corporation, whose address is 340 North Sam Houston Parkway East, Suite 140, Houston, Texas 77060, as general partner (“ General Partner ”), and each of the individuals or entities whose names are set forth on the Amended Exhibit A attached to this Amendment as limited partners (the “ Limited Partners ”). Capitalized terms used but not defined herein are used as defined in the Partnership Agreement.
 
  WHEREAS, the General Partner presently owns One Percent (1%) of the partnership interests of the Company;
 
WHEREAS, the Fogarty Family Trust II presently owns Fifty Percent (50%) of the issued and outstanding common stock of the General Partner;
 
WHEREAS, the Fogarty Family Trust II is presently the owner of limited partnership interests representing Twenty-Three and One Half Percent (23.5%) of the Company’s partnership interests; and
 
WHEREAS, Fogarty Family Trust II has agreed to tender for surrender any and all common stock or right to other equity interest it may have or be entitled to receive at time in the future in the General Partner in exchange for the increase of its ownership of the limited partnership interests of the Company from Twenty-Three and One Half Percent (23.5%) of the Company to Twenty-Four Percent (24%) of the Company’s partnership interests;
 
NOW, THEREFORE , on the basis of the mutual covenants and agreements made herein, which are expressly deemed to constitute adequate and sufficient consideration in all respects, the General Partner and the Limited Partners do hereby agree as follows:
 
1.
Cancellation of Shares of 150 Black Oak GP, Inc. The Fogarty Family Trust II hereby agrees to tender for cancellation any and all shares of the common stock of the General Partner that it presently owns and surrenders all of its right, title and interest in such common stock or any other equity interest in the General Partner that it may have or be entitled to receive at a future date. In connection therewith the Fogarty Family Trust II hereby agrees to execute and deliver the stock power attached hereto as Exhibit B , and shall execute any and all other instrument as shall be necessary and proper to effectuate the cancellation of any and all equity interest it may own in the General Partner or may have the right to receive.
 
2.
Cancellation of Certain Partnership Interests. The General Partner hereby agrees to the cancellation of One-Half (1/2) of its general partner interests in the Company.
 
 
 
AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
 
 
 
3.
Issuance of Certain Partnership Interests. The General Partner and the Limited Partners agree that the Fogarty Family Trust II shall be entitled to receive an additional One-Half of One Percent (.5%) of the partnership interests of the Company in consideration for the cancellation of its ownership interest in the General Partner.
 
4.
Amendment to Exhibit A of the Partnership Agreement. The General Partner and the Limited Partners do hereby amend the Partnership Agreement as follows, to reflect the adjustments described herein: Exhibit A to the Partnership Agreement is amended and replaced in its entirety as set forth on Exhibit A hereto.
 
5.
No Additional Modifications. Other than as set forth herein, all other terms and conditions of the Partnership Agreement shall remain unchanged and in full force and effect.
 
6.
Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns.
 
7.
No Third Party Beneficiaries. This Amendment is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
 
8.
Counterparts. This Amendment may be executed in any number of counterparts (including by fax or any other means of electronic transmission each of which shall be an original for all purposes), and all of which taken together shall constitute one and the same instrument.
 
[Signature Page Follows]
 
 
 AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
 
 
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written.
 
 
GENERAL PARTNER:
 
150 BLACK OAK GP, INC.
A Texas corporation
 
 
By:            /s/ Jeffrey Busch                                                       
Name:
Title:
 
 
LIMITED PARTNERS:
 
SED DEVELOPMENT USA, INC.
A Delaware corporation
 
 
                                            By:           /s/ Jeffrey Busch         
Name:
Title:
 
 
AMERICAN REAL ESTATE INVESTMENTS LLC
A Missouri Limited Liability Company
 
 
                                            By:            /s/ Tracy Weaver                                                      
Name:
Title:
 
 
WOODROW A. HOLLAND, TRUSTEE FOR
THE FOGARTY FAMILY TRUST II
 
 
                                            By:            /s/ Woodrow H. Holland                                                      
Name:
Title:
 
 
 
 AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
 
 
 
EXHIBIT “A”
TO
150 CCM BLACK OAK, LTD. PARTNERSHIP AGREEMENT
 
General Partner
 
Name and Address of
General Partner
Partnership Interest
 
Capital Contribution
 
150 Black Oak GP, Inc.
340 North Sam Houston Parkway East
Suite 140 Houston, Texas 77060
 
.5%
 
$100.00
 
Limited Partners
 
Names and Addresses of
Limited Partners
Partnership Interest
 
Capital Contribution
 
SeD DEVELOPMENT USA, INC. (f/k/a) CCM DEVELOPMENT USA CORPORATION
 
68.5%
 
$4,300,000.00
 
AMERICAN REAL ESTATE INVESTMENTS LLC
 
7%
 
Zero*
 
WOODROW A. HOLLAND, TRUSTEE FOR THE FOGARTY FAMILY TRUST II
 
24.0%
 
Zero*
 
*Limited partner contributed contracts to purchase property
 
 
 
 
 
 
 AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
 
 
 
EXHIBIT B
 
STOCK POWER
 
 
 
 
 
 
 
 
 
 
 
 
 AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
 
 
IRREVOCABLE STOCK POWER
 
 
 
 
 
FOR VALUE RECEIVED, The Fogarty Family Trust II does hereby transfer to:
 
150 Black Oak GP, Inc.
 
500 common shares of 150 Black Oak GP, Inc. (the “Company”) represented in the Company’s books and records as maintained by the Company.
 
These shares are tendered for cancellation pursuant to the Amendment to Agreement of Limited Partnership of 150 CCM Black Oak, Ltd, dated September 25, 2017 (the “Amendment”). The undersigned does hereby irrevocably constitute and appoint the Company as attorney to transfer the said stock on the books of the Company as provided in the Amendment.
 
 
The Fogarty Family Trust II
 
 
 
_______ /s/ Woodrow H. Holland ________
Name: Woodrow A. Holland
                                                                                        Title:    Trustee
 
Dated: September 26, 2017
 
 
 
 
Exhibit 10.5
 
LOT PURCHASE AGREEMENT
 
BALLENGER RUN
 
 
 
THIS LOT PURCHASE AGREEMENT (the "Agreement") is entered into as of __________, 2014 but effective as of the Effective Date (as hereinafter defined) by and between a SeD Maryland Development, LLC, a Delaware limited liability company (the "Seller") and NVR, INC., a Virginia corporation d/b/a RYAN HOMES (the "Purchaser").
 
RECITALS:
 
A.   Seller is the contract purchaser under that certain Real Estate Sales Contract dated May 28, 2014 between RBG Family, LLC, as seller ("Contract Seller") and Purchaser, as purchaser (the "Raw Land Contract") with regard to certain real property located in Frederick County, Maryland (the "County") which is more particularly described in the legal description set forth on Exhibit A-I (the "Project"). A copy of the proposed development plan for the Project is attached hereto as Exhibit A-2 (the "Development Plan"). The Project consists of a five-phase development which shall be improved by five home types: large single-family dwellings, small single-family dwellings, neo-traditional single-family dwellings, single-family attached villas, and two sizes of townhomes (the "Home Types"). This Agreement sets forth the parties' obligations with regard to the home type described on Exhibit B. Concurrently with the execution of this Agreement, Seller and Purchaser are executing four other Lot Purchase Agreements with regard to the other Home Types (the "Related LPAs").
 
B.   The Raw Land Contract was terminated pursuant to its terms. This Agreement is contingent upon Purchaser and Contract Seller entering into a Second Amendment to the Raw Land Contract which conforms to the terms and conditions of the Assignment Agreement (defined below) (the "Second Amendment") reinstating the Raw Land Contract (the "Contingency"). If the Contingency is not satisfied by December 12, 2014, this Agreement shall be null and void, unless otherwise agreed in writing by the parties to this Agreement.
 
C. Concurrently with the execution of this Agreement, Seller is acquiring the rights of the contract purchaser under the Raw Land Contract pursuant to that certain Assignment and Assumption Agreement between Purchaser, as assignor, and Seller, as assignee (the "Assignment Agreement"), a copy of which is attached hereto as Exhibit C.
 
D.   In the event that either party defaults under either this Agreement or the Assignment Agreement prior to Seller acquiring the Property (as hereinafter defined), the Assignment Agreement shall control the disposition of the Deposit.
 
E.   Seller desires to sell, and Purchaser desires to purchase, the lots which are described on Exhibit D and depicted on the Development Plan (collectively, the "Lots" or the "Property", individually, a "Lot") in accordance with the terms and conditions of this Agreement. The Lots constitute part of the Project. The terms "Lots", "Property" and "Lot" refer to the parcels of land that are the subject of this Agreement. The terms "lots" and "lot" refer to the subdivided lots that are contained within the entire Project.
 
 
 
 
NOW, THEREFORE, for and in consideration of the mutual covenants of the parties as set forth herein, Seller does hereby grant to Purchaser the right to purchase and Purchaser agrees to purchase in fee simple the Property pursuant and subject to the following covenants, conditions, terms and obligations.
 
1. EFFECTIVE DATE; STUDIES.
 
1(a) Effective Date. This Agreement and any modification hereto will only be effective if signed by the Area President of Purchaser, or its designee, Vice President of Operations, and at least two (2) other officers of Purchaser. In the event that Purchaser fails to deliver the entire Deposit as required hereunder, this Agreement automatically, without any action required by either party, shall become null and void. The "Effective Date" of this Agreement is the date on which the Second Amendment is signed by Purchaser and Contract Seller. If the Second Amendment is not signed by Purchaser and Seller by December 12, 2014, this Agreement shall automatically be null and void.
 
1b) Studies. Purchaser shall have a study period commencing upon the Effective Date and terminating on the date that is three (3) business days before the last day of the study period under the Raw Land Contract, (the "Study Period"), to undertake such engineering, development, marketing and other studies as Purchaser may desire. Seller does not have any plans or reports related to the Property that were not provided to Seller by Purchaser. Purchaser agrees and acknowledges that Purchaser has had the opportunity to investigate the Project during the due diligence period under the Raw Land Contract. Pursuant to the Assignment Agreement, Purchaser has provided Seller with copies of the results of Purchaser's investigation, including, but not limited to, a Phase I Environmental Assessment prepared by Geo-Technology Associates, Inc. dated June 26, 2014 (the "Environmental Study"). The parties acknowledge that there is an underground storage tank on the Property. Seller shall remove the underground storage tank, and request that the Maryland Department of the Environment issue a No Further Action letter with regard thereto. Issuance of such No Further Action letter shall be a condition precedent to Purchaser's first acquisition of a Lot hereunder. If Purchaser is not satisfied with the Property or the transaction for any reason, or no reason at all, Purchaser may as a matter of right, terminate this Agreement by delivering written notice to Seller at any time prior to the end of the Study Period. In such event, the Deposit shall be returned to Purchaser in accordance with the Assignment Agreement, and thereafter the parties shall be relieved of further liability from performing hereunder.
 
2. PURCHASE OF LOTS; DEVELOPMENT PHASING SCHEDULE.
 
2(a) The "Model Lot" is the Lot upon which Purchaser shall construct a model home (the "Model Home") to facilitate marketing of the Project. The Model Lot is denoted as such on the Development Plan. The parties agree and acknowledge that the County requires that less development be completed in order for the County to issue a building permit for the Model Home. Purchaser, at its sole cost, shall apply for and in good faith obtain a building permit for construction of the Model Home on the Model Lot as soon as Seller completes all development work necessary for the issuance of the Model Home building permit. Purchaser shall purchase the Model Lot within five (5) business days after the date that Purchaser may obtain, upon application and payment of required fees, a building permit for the Model Home. The date upon which Purchaser acquires the Model Lot shall be referred to herein as the "Model Lot Closing Date". The purchase of the Model Lot shall not be counted toward the minimum Lot purchase requirement hereunder.
 
 
2
 
 
2(b) Attached hereto as Exhibit E is the schedule for development of the Project (as such may be modified by mutual agreement of the parties from time to time, the "Phasing Plan"). The Phasing Plan contemplates that Seller shall develop the Project in four phases. Each phase may contain lots for one or more Home Types. A phase may not contain any lots for a particular Home Type. The Lot purchase schedule set forth in Paragraph 2(c) below shall be subject to the availability of Lots in accordance with the Phasing Plan.
 
2(c) Seller shall deliver written notice to Purchaser (the "Completion Notice") to advise Purchaser that Lots are available for purchase (the "Available Lots") and the Conditions Precedent (defined below) for such Lots are fulfilled. The first Completion Notice delivered by Seller after the Model Lot Closing Date may be referred to herein as the "Initial Completion Notice" and shall be delivered on or before December 31, 2016. Each Completion Notice shall identify the location of the Available Lots and Purchaser may select which of the
 
Available Lots that it will purchase. The total number of Available Lots at any time under this Agreement and the Related LPAs shall be twenty-four (24) lots. Such total Available Lots under this Agreement and the Related LPAs may consist of lots for one or more of the Home Types. In the event that Seller does not meet the Available Lots requirement of twenty-four (24) lots, Purchaser shall deliver written notice to Seller and:
 
(i) So long as Seller is, and before the date of Purchaser's notice was, diligently pursuing the fulfillment of its obligations hereunder in order to create Available Lots, Seller shall be entitled additional time to prepare the Lots for purchase. In no event shall the additional time be more than six (6) months. Purchaser may elect to defer the Lot purchase schedule and any escalation of the Purchase Price by the same number of days until Seller meets the Available Lots requirement. The parties agree to document the commencement and termination of such additional time period and the effect upon the purchase schedule and Purchase Price escalation.
 
(ii) In the event that Seller is not, or before the date of Purchaser's notice was not, diligently pursuing the fulfillment of its obligations hereunder in order to create Available Lots, or in the event that Seller does not meet the Available Lots requirement within the six (6) months described in Subparagraph 2(c)(i) above, the terms and conditions of Paragraph 8, regarding Seller default, shall control.
 
2(d) After the Model Lot Closing Date, provided Seller has delivered a Completion Notice to Purchaser and the Conditions Precedent (defined below) are fulfilled with regard to the Lots to be purchased, Purchaser shall purchase the minimum number of Lots per quarter which is set forth on Exhibit D. Except for the first quarter, a "quarter" shall consist of three (3) full calendar months. The "first quarter" shall commence ninety (90) days after the Model Lot Closing Date and end on the last day of the third full calendar month thereafter. Purchaser shall have the right in any quarter to settle on more than the minimum number of Lots required to be purchased in such quarter at the Purchase Price then in effect and shall receive cumulative credits toward the minimum number of Lots required to be purchased in succeeding quarters. Purchaser shall be entitled to more than one (1) settlement per month. Purchaser may purchase more than one Lot at a settlement. Purchaser may purchase more than one single-family lot at a settlement. In the event that the Lots which are the subject of this Agreement and are described on Exhibit D are townhouse or attached villa lots, then Purchaser must purchase at one settlement the lots that will be improved by attached dwellings.
 
 
3
 
 
2(e) All settlements shall be held at the offices of NVR Settlement Services, 3701 Pender Drive, Suite 210, Fairfax, VA 22030, at such time or times as Purchaser shall designate.
 
2(f) Seller shall provide a location on the Property, at no cost to Purchaser, within one hundred feet (100') of the entrance to the Property, for the installation by Purchaser of a sales trailer. The location shall be selected by Purchaser, subject to Seller's reasonable approval. Purchaser shall maintain the trailer and the site on which it is located in good repair and free of debris. The trailer shall be locked at all times that it is vacant. Upon vacating the site, Purchaser shall remove the trailer and restore the Property to evenly graded, clean and good condition.
 
2(g) Purchaser's right to purchase Lots hereunder shall be in full force and effect so long as Purchaser fulfills its obligations hereunder. In the event that Purchaser fails to purchase the minimum number of Lots as required herein during any one quarter, then Seller may deliver a default notice to Purchaser and exercise remedies in accordance with Paragraph 8 below.
 
2(h) The purchase price for each Lot purchased hereunder shall be in the amount set forth on Exhibit B (as applicable, the "Purchase Price"). Commencing on the first (1st) day of the third (3rd) quarter hereunder (see subparagraph 2(d) above for determination of quarters) and continuing on the first day of each and every quarter thereafter the Purchase Price for each Lot shall increase by 0.75%. By way of example and not of limitation, in the event that the Model Lot Closing Date is July 15, 2015, then the following dates shall apply:
 
First quarter thereafter
October 16, 2015 — January 31, 2016
Second quarter thereafter
February 1, 2016 - April 30, 2016
Third quarter thereafter
May 1, 2016 - July 31, 2016
Purchase Price increases by 0.75% on May 1,
2016
 
 
On the first day of each quarter thereafter the Purchase Price shall increase by 0.75%.
 
2(i) With regard to this Agreement and the Related LPAs, the total sum of Five Million Six Hundred Thousand and No/ 100 Dollars ($5,600,000.00) as a good-faith deposit (the "Deposit") will be delivered by Purchaser in accordance with the terms of this Agreement, as follows:
 
  Purchaser previously delivered $200,000.00 to the Contract Seller under the Raw Land Contract; such $200,000.00 shall be applied as a portion of the Deposit hereunder;
 
  in accordance with the Assignment Agreement, Purchaser shall deliver $1,300,000.00 to Commonwealth Land Title Insurance Company ("Commonwealth") two (2) business days before the expiration of the study period under the Raw Land Contract, Commonwealth shall deliver such $1,300,000.00 to the Contract Seller under the Raw Contract prior to the expiration of the study period thereunder, and such $1,300,000.00 shall be applied as a portion of the Deposit hereunder; and
 
 
4
 
 
(iii) Purchaser shall deliver $4,100,000.00 to the closing agent which will handle Seller's acquisition of the Project no later than two business days before the closing under the Raw Land Contract, but in no event prior to Purchaser's receipt and approval of Seller's Certificate of Insurance in accordance with Subparagraph 3(p) below, and such $4,100,000.00 shall be applied as a portion of the Deposit hereunder.
 
The Deposit shall be returned to Purchaser in the form of a credit toward the Purchase Price payable for each Lot at the time of each settlement (the "Deposit Credit"). Exhibit B sets forth the allocation of the Deposit and Deposit Credits among all of the lots subject to this Agreement and the Related LPAs. Notwithstanding anything herein to the contrary, in the event of an uncured default by Purchaser beyond any applicable cure periods, it is the intent of the parties that, Seller shall only be entitled to the portion of the Deposit allocated to this particular Agreement as liquidated damages in accordance with Subparagraph 8(b) below.
 
2(j) At the closing under the Raw Land Contract, Seller shall execute and deliver an indemnity deed of trust to trustees for the benefit of Purchaser (the "Deed of Trust") which shall secure the return of the Deposit to Purchaser as provided in this Agreement. The form of Deed of Trust is attached hereto as Exhibit F. The Deed of Trust shall be subordinate only to the first priority position of Seller's institutional acquisition and development loan(s) and shall be recorded after the deed conveying title to the Project to Seller from the Contract Seller. References to the Deposit shall mean the amount paid to date or remaining after any credits as provided in this Agreement. The Deposit, or any portion thereof, shall be used by Seller solely for the acquisition and development of the Property and for no other purpose. Further, Seller hereby authorizes Purchaser to communicate directly with Seller's lender(s) about any and all matters relating to their respective loans, including, after an event of default under either such loan, communication between said lender(s) and Purchaser relating to any default remedies that may be pursued or possible loan restructurings or workout arrangements. Seller hereby authorizes such communications but requires that Purchaser deliver to Seller prior written notice of such communications. Any subordination agreement or other document Seller's lender desires for Purchaser to execute, join or consent to shall contain non-disturbance language as to this Agreement and allow Purchaser the right, in its sole discretion, to cure any default of Seller under the senior financing.
 
3. SELLER'S OBLIGATION TO PREPARE LOTS. Before Seller commences development of any phase set forth on the Phasing Plan, Purchaser shall deliver to Seller a plan which shall depict the location and grading of each Home Type on the lots located in such phase (the "House Location Plan"). Seller shall have the right to disapprove of the House Location Plan in its reasonable discretion, for reasons including but not limited to, the plan is detrimental to the remainder of the Project, requires a zoning variance, or is not in conformance with Seller's overall grading plan. In such event, Seller and Purchaser shall cooperate to generate a mutually acceptable House Location Plan. All references herein to the "House Location Plan" shall be the mutually acceptable plan. Seller shall, in accordance with local government requirements and as required herein, at its own cost and expense, promptly and diligently develop and improve the Property into fully improved and finished building lots by performing the following:
 
 
5
 
 
3(a) Grading. Seller shall perform over-lot clearing and rough grading of the Property in accordance with the House Location Plan. Subject to the provisions below regarding controlled fill house pads, Seller shall cut, fill and grade each Lot as necessary for the proper and lawful drainage of such Lot before erection of the Home Type designed for the Lot on the House Location Plan. It is intended that each group of contiguous Lots shall be as compatible as possible with the existing topography of such Lots, within the parameters of customary lot drainage and slope practices and/or regulations. Purchaser and Seller agree to cooperate to assure the accomplishment of the foregoing. Seller will notify Purchaser at such time as grading is completed on any section(s) or phase(s). A "walk through" inspection will be made by a representative of both Purchaser and Seller, and a list of discrepancies, if any, will be prepared. Seller will promptly correct any discrepancies. When part or all of the foundation, at the design elevation of a house sited on a given Lot, cannot be placed at natural grade capable of supporting such foundation, Seller will supply controlled fill house pads with the following dimensions: overall length and width of the building envelope, plus ten feet (10') on each side as measured from the minimum set-back line designated by the applicable governmental authority or as designated in the House Location Plan. Each such fill Lot must have a pad that is certified by a registered engineer who is approved by Purchaser to have adequate load bearing capacity to support a footing/foundation of either standard Purchaser house design and specifications or an engineered footing design approved for use by said engineer. Each such pad shall have clean fill, free of organic matter and other debris. In instances where intermediate or final grading plans require slopes, the pad design and installation shall take into account whether slopes need to benched or otherwise stabilized to ensure an adequate influence zone of foundation bearing in order to meet the above-described load bearing capacity. For eighteen (18) months after a Lot closing and provided the Purchaser or its grading contractor does not "over dig" or "over cut" the foundation for such fill Lot, Seller shall be responsible and liable for failure of the controlled fill house pad, notwithstanding the engineer's certification of same. Any claim that a controlled fill house pad has failed must be made within eighteen (18) months after the Lot settlement. Lots shall be delivered free of rubbish and debris.
 
3(b) Water and Sewer Mains. Seller shall install water and sewer mains in the street or in the rear of each Lot with laterals to Lot lines and shall clearly mark same. Seller shall use reasonable efforts to place the sanitary sewer lateral at a depth to allow Purchaser to construct gravity flow basement homes on each Lot. With regard to the five lots noted on the Development Plan, Seller shall be responsible for the installation of water and sewer on pipestem (or flag lots) from the main to the flare in the Lot (or to the building restriction line). Purchaser shall pay any allocation, tap or connection fees. Seller shall furnish written evidence of the paid fees, if any, and written evidence that such are transferable from Seller to Purchaser at no cost to Purchaser. Notwithstanding anything herein inconsistent or to the contrary, there shall be no covenants, declarations, easements, liens or encumbrances affecting any of the Lots which will have a priority over subsequent recorded purchase money mortgage liens, or any refinance of same, encumbering the Property until such lien has been legally perfected following default. In the event such a lien or encumbrance is found to exist, Seller will, at Seller's sole expense, promptly cause such lien or encumbrance to be subordinated to any purchase money lien or encumbrance or any refinancing of same.
 
3(c) Bonds. Seller shall post and maintain all forms of surety bonds as may be required by the applicable governmental authorities for development of the Lots and the drainage facilities contemplated by this Agreement, whether such facilities are on or off the Lots.
 
 
6
 
 
3(d) Dedication to Public/Acceptance by Homeowners Association. Seller shall cause all streets, roads, driveways, parking areas and other public and private improvements to be dedicated to public use and accepted for maintenance by the applicable governmental authorities or Homeowners Association, whichever applies, at the earliest practical date. Seller shall not top coat any surfaces prior to Purchaser's completion of home construction in a given section or phase of the Property.
 
3(e) Rock. In the event that rock is encountered on the Lots by Seller during its grading operation, Seller shall blast and/or excavate rock to cause the finished Lot to conform to the House Location Plan. This will not include any foundation or below finished Lot grading. However, only if contemporaneous with Seller's grading operations, Seller shall blast for foundations and utility trenches upon request by Purchaser. Purchaser shall reimburse Seller within thirty (30) days after receipt of Seller's written demand for the costs of such blasting, provided Purchaser pre-approves such work and costs.
 
3(f) Infrastructure. Seller shall (a) complete paving of common area streets and common driveways including alleys, (b) construct sidewalks within all common areas, but not on any Lots, (c) construct all curbs and gutters, (d) provide water and sewer distribution systems, (e) install street lighting; and (f) install street signs. Purchaser shall construct sidewalks on all Lots.
 
3(g) Quality of Work. Seller warrants that all work, materials and improvements performed or to be performed under this Agreement shall be of good and workmanlike quality, free of defects, and compliant with all applicable plans, specifications, specific conditions, and this Agreement, and shall be in accordance with and acceptable under the rules, regulations, laws and ordinances of the applicable governmental authorities. Seller shall use all due diligence and best faith efforts to promptly complete all work and improvements required by Seller under this Agreement. Seller further warrants and guarantees that all such work and material shall remain free from defects for a period of time ending two years after the date of the last settlement on the last Lot purchased by Purchaser pursuant to this Agreement (the "Warranty Period"). Seller agrees to repair any defect to improvements made by Seller pursuant to this Agreement, which manifests itself during the Warranty Period, at its cost and expense immediately after being notified of any such defect by Purchaser. Notification by Purchaser need not be given during the Warranty Period provided the defect involved is covered by the terms of this Subparagraph. Seller shall also repair or replace, at no cost to Purchaser, all work of third parties damaged or destroyed in the process of performing warranty service under the terms of this Subparagraph.
 
3(h) Green Space, Property Maintenance. In accordance with the County-approved landscaping plan, (i) Seller shall be responsible for landscaping and tree planting in all areas outside the boundaries of the individual Lots, and (ii) Purchaser shall be responsible for landscaping and tree planting in all areas inside the boundaries of the individual Lots. Seller shall use reasonable efforts to install a permanent entry sign including landscaping on or about the date on which Purchaser commences its marketing activities on the Property from either its sales trailer or Model Home, but in no event later than six (6) months following Model Lot purchase. Seller shall maintain the entry sign and surrounding landscaping. Seller shall also be responsible for meeting any state or local requirements for tree conservation or reforestation. Until the establishment of the Homeowners' Association and assumption of obligations by such Homeowners' Association, Seller shall maintain the common areas and all other areas of the Property, including, but not limited to, all areas not subdivided into Lots and all Lots that may be subdivided but not purchased by Purchaser; said maintenance shall include, but not be limited to, mowing the grass. Further, Seller shall be responsible for seeding or sodding, at Seller's election, all portions of the Property which are not subdivided into the Lots, including, but not limited to, grass within cul-de-sacs, traffic circles, boulevard entrances and boulevard medians.
 
 
7
 
 
3(i) Amenities. Seller shall be responsible for the construction and installation of all amenities required pursuant to the County-approved development plans for the Property (the "Amenities"). Seller shall deliver to Purchaser, as soon as available, a proposed plan and schedule for the construction of the Amenities (the "Amenity Plan"). Purchaser shall have the right to approve the Amenity Plan and any proposed changes to the Amenity Plan. Seller shall provide Purchaser with recorded and or unrecorded copies of the plans approved by the local jurisdiction with regard to the Amenities. Seller shall commence construction of the pool and clubhouse prior to Purchaser's acquisition of the 150th lot within the Project (under this Agreement and the Related LPAs). Seller shall complete construction of the Amenities located in the constructed phases of the Project within one hundred (100) days after Purchaser's acquisition of the three hundredth (300 th ) lot within the Project (under this Agreement and the Related LPAs).
 
3(j) Utilities. Seller shall provide underground telephone, electrical and gas utility lines and cable television adjacent to the Lot lines. Each utility line shall be stubbed to run to the Lot line rather than the street or alley.
 
3(k) Poor Soil Conditions. When expandable soils, poorly drained soils, soils containing organic materials or trash, or sink holes are encountered on a Lot, Seller shall remove any such material and replace such soils with proper soils suitable to the circumstances, including, and as applicable, for supporting a footing/foundation as described in Subparagraph 3(a) and backfill. Replacement soils must be certified by a registered engineer approved by Purchaser in its reasonable discretion. If any unsuitable soils are encountered on a Lot, Seller shall provide soil engineer's certifications on all building pads impacted by such soils. Seller shall be responsible and liable for failed control fill house pads for eighteen (18) months after a Lot closing as set forth in Subparagraph 3(a) above.
 
3(l) Hazardous Materials. For purposes of this Agreement, the following terms shall have the definitions set forth below:
 
"Environmental Requirement" means any law now existing or hereafter created, issued or enacted and all amendments thereto, modifications thereof and substitutions therefor, which in any way pertains to human health, safety or welfare, Hazardous Materials, Hazardous Materials Contamination or the environment (including but not limited to ground, air, water or noise pollution or contamination, and underground or above ground tanks) and shall include without limitation, the Resource Conservation and Recovery Act (the Solid Waste Disposal Act), 42 U.S.C. § 6901 et seq .; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq . ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq .; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. , the Clean Air Act, 42 U.S.C. § 7401 et se q.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et se q.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq .
 
"Hazardous Materials" means any and all hazardous or toxic substances, wastes or materials which, because of their quantity, concentration, or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard or nuisance to human health, safety or welfare or to the environment when used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled, including without limitation, any substance, waste or material which is or contains asbestos, radon, polychlorinated biphenyls, urea formaldehyde, explosives, radioactive materials or petroleum products.
 
 
8
 
 
"Hazardous Materials Contamination" means the contamination of the soil, ground water, air or other elements on, in or constituting a part of, the Property by Hazardous Materials.
 
Seller and Purchaser agree and acknowledge that the Environmental Study discloses the current environmental condition of the Property. In the event that, within thirty (30) days after Purchaser has completed the excavation of the footings and foundation, Purchaser discovers Hazardous Materials Contamination on such Lot and such Hazardous Materials Contamination was not caused by Purchaser, Purchaser shall deliver written notice to Seller (within such thirty-day period) together with reasonably sufficient supporting evidence. Within thirty (30) days after receipt of such notice, Seller shall elect to do one of the following: (i) use commercially reasonable efforts to remediate the Hazardous Materials Contamination in accordance with all applicable Environmental Requirements, or (ii) repurchase the Lot for the Purchase Price paid by Purchaser, plus the costs of such transaction, plus the costs of any improvements installed on such Lot by Purchaser.
 
3(m) Seller/Purchaser Responsibility Checklist. Attached hereto as Exhibit G is a list of obligations of Seller and Purchaser with regard to the Property (the "Checklist"). In the event of any discrepancy between the Checklist and this Agreement, the terms and conditions of this Agreement shall control.
 
3(n) Completion of Work. In the event Seller shall fail to make repairs or to otherwise complete any improvements to the Property (i) relative to storm water management or erosion and sediment control or (ii) which prevent Purchaser from obtaining permits for construction of a dwelling unit on the Lot or affect Purchaser's intended construction on the Lot(s), Purchaser shall have the right (but not the obligation) to make such repairs and to either (i) setoff its reasonable out-of-pocket costs incurred from the Purchase Price of any Lots remaining to be purchased, or (ii) receive reimbursement from Seller for its costs incurred within five (5) days of demand therefor.
 
3(p) Claims. Seller agrees to indemnify Purchaser from any actual liability, loss or damage to a third person's personal property or personal injury, including reasonable attorneys' fees and related costs and expenses arising out of, or resulting from Seller performing its obligations under this Agreement, except that this indemnification shall not cover the negligence or intentional misconduct of Purchaser or its subcontractors, employees and agents or apply to any violations issued by any governmental authority, which violations shall be governed by said authority. Seller shall maintain in full force and effect liability insurance covering damage to property and persons resulting from or connected with Seller's performance of its obligations under this Agreement.
 
In order to ensure the fulfillment of the foregoing, and throughout the term of this Agreement, Seller (and all permitted sub-contractors) shall obtain and maintain insurance policies which meet or exceed the following requirements: Seller's policy shall name Purchaser as an "additional insured" for both ongoing and completed operations and shall meet or exceed the following requirements: Commercial General Liability insurance in the minimum amount of One Million Dollars ($1,000,000.00) per occurrence, and Two Million Dollars ($2,000,000.00) in the aggregate, that is (1) written on an occurrence basis, (2) includes contractual liability coverage insuring the obligations assumed by Seller under this Agreement (including, without limitation, the indemnities set forth herein) and referring expressly to this Agreement, premises and operations coverage, broad form property damage coverage (including theft, vandalism and malicious mischief, written at replacement cost value, with replacement cost endorsement), Seller's protective liability coverage, independent contractors coverage, completed and ongoing operations coverage, (3) containing endorsement for personal injury, and (4) deleting the "underground exclusion". Seller's Certificate of Insurance shall be attached hereto as Exhibit H-1.
 
 
9
 
 
4.INSPECTION - BONDED IMPROVEMENTS.
 
4(a) Prior to settlement on any of the Lots pursuant to this Agreement other than the Model Lot, representatives of Seller and Purchaser shall inspect the improvements relating to this Agreement and establish a list of deficiencies in the "Lot Inspection Report" (Exhibit I).
 
Weather permitting, Seller shall repair all deficiencies (except final paving and any deficiencies resulting from any act or omission of Purchaser, its contractors, employees, sub-contractors and agents) within thirty (30) days of said Lot Inspection Report or complete said deficiencies upon conclusion of Purchaser's house construction in a timely manner to insure issuance of occupancy permits as agreed by and between Purchaser and Seller. Subsequent to settlement, Purchaser shall be responsible for damages to the improvements serving Lot(s) that were caused by Purchaser. Upon completion of home construction activity in each phase of the Project, Purchaser and Seller, upon notification of the other, shall meet to complete the "Lot Completion Report" (Exhibit J) to list all deficiencies for which Purchaser is responsible to repair. Purchaser shall repair all deficiencies listed on the Lot Completion Report within thirty (30) days after notification, weather permitting, at its expense, or at such other time as shall be agreed upon between Purchaser and Seller. In the event Purchaser shall fail to make repairs, then Seller shall make such repairs and receive reimbursement from the Damage Escrow (defined below). If the Damage Escrow is insufficient to pay the reasonable cost of the repairs, Purchaser shall pay such deficiencies to Seller within thirty (30) days after receipt of written demand by Seller. If Purchaser fails to pay any amounts due pursuant to this Paragraph 4, Seller may pursue collection against Purchaser. With regard to any damage, Purchaser's obligations under this Paragraph 4(a) shall cease upon the first to occur of completion of its repairs or reimbursement of Seller's costs, as provided above.
 
4(b) At the time of settlement on each Lot pursuant to this Agreement, Purchaser will deliver the sum of Five Hundred Dollars ($500.00) per Lot (the "Damage Escrow") to Shulman, Rogers, Gandal, Pordy & Ecker, P.A. 12505 Park Potomac Avenue, 6th Floor, Potomac,   20854, Attention: Sean P. Sherman, Esq. ("Damage Deposit Escrow Agent"), to be used solely for damages to Seller's improvements during Purchaser's construction activities on the Lots as further provided below. At Purchaser's option, the source for payment of the Damage Escrow may be the Deposit Credit allocable to such Lot.
 
4(c) Purchaser's responsibilities under this Paragraph 4 shall cease upon the first to occur of (i) Purchaser's repair of any and all damage to Seller's improvements caused by Purchaser, its employees, agents or subcontractors, to Seller's satisfaction in accordance with the terms of Paragraph 4(a) or (ii) payment by Purchaser of any amounts due and owing to Seller by Purchaser under this Paragraph 4. Damage Deposit Escrow Agent shall return the Damage Escrow, or any amounts remaining, to Purchaser within ten (10) days after receipt of joint written instructions from Seller and Purchaser, but in no event later than six (6) months after the purchase of the last Lot under this Agreement and all of the Related LPAs.
 
 
10
 
 
4(d) In the event of any dispute between Purchaser and Seller regarding the disbursement or disposition of the Damage Escrow, or in the event Damage Deposit Escrow Agent shall receive conflicting demands or instructions with respect thereto, Damage Deposit Escrow Agent shall withhold such disbursement or disposition until otherwise instructed by both of the patties or until directed by a court of competent jurisdiction. Purchaser and Seller hereby jointly and severally agree that, except as provided herein, Damage Deposit Escrow Agent shall incur no liability whatsoever in connection with its performance under this Agreement. Purchaser and Seller hereby jointly and severally release and waive any claims they may have against Damage Deposit Escrow Agent that may result from its performance of its functions under this Agreement. Damage Deposit Escrow Agent shall be liable only for gross negligence or loss or damage caused by any of its officers' or employees' acts of wanton or willful misconduct while performing as Damage Deposit Escrow Agent. Purchaser and Seller acknowledge and consent that Damage Deposit Escrow Agent is Purchaser's attorney and each waive all claims as to an apparent, perceived or actual conflict of interest. Seller and Purchaser each acknowledge and agree that Shulman, Rogers, Gandal, Pordy & Ecker, P.A. shall have the right to represent Purchaser and/or Damage Deposit Escrow Agent in connection with this Agreement, the transaction contemplated hereby, disputes and in any other matter. The parties hereby waive and shall not assert that there exists any conflict of interest arising out of such representation.
 
4(e) This Agreement will constitute escrow instructions to the Damage Deposit Escrow Agent in its capacity as escrow agent for the purposes of administering the Damage Escrow and as otherwise provided in this Agreement. The parties agree to execute for the benefit of the Escrow Agent such additional escrow instructions as the Damage Deposit Escrow Agent may require; provided, however, that such instructions will be construed as applying only to Escrow Agent's employment as escrow agent and will not alter the terms of this Agreement.
 
4(f) In the event that the parties shall be unable to agree upon the completion of the items described in Subparagraph 4(a), or upon the defects in such completions, Harris, Smariga, and Associates, Inc. (or its successor, the "Site Engineer") shall resolve any such disputes. If either Seller or Purchaser shall in good faith determine that the Site Engineer is not acting objectively, then such party may require that any disputes be resolved by a court of competent jurisdiction.
 
5.         
DRAINAGE.
 
5(a) Seller shall cause to be prepared and approved a plan or plans designed to manage (i) construction period erosion and sediment control ("E&S Plan") and (ii) post construction storm water management ("PCSWM Plan"), which approved plan(s) shall comply with all applicable federal, state and local laws and regulations relating to storm water management and control (the "SWM Plans"). Seller shall construct and complete all necessary storm drainage structures, pipes, facilities and sediment control devices related to its land development activities in accordance with the SWM Plans and shall obtain and comply with all federal, state and local permits that are required and regulations related thereto including any National Pollutant Discharge Elimination System Permit or state or local equivalent ("NPDES Permit", together with the SWM Plans, the Clean Water Act and all relevant EPA, state, federal and municipal storm water statutes and regulations with respect to the Property the "Storm Water Regulations"). Seller shall provide a complete set of signed and stamped copies of the SWM Plans and the NPDES Permit for the Property no later than ninety (90) days prior to the first Lot settlement in each phase shown on the Phasing Plan. Seller shall further obtain and record proper instruments establishing easements and rights-of-way needed for off-site storm drainage and other utilities, the same to be unencumbered if so required by the local municipal authority. Seller is responsible for the maintenance of all storm water structures, pipes and all sediment control devices and facilities per the approved, or to be approved, construction drawings. Seller is responsible for the removal of temporary sediment traps or storm water management facilities as required under the SWM Plans and NPDES Permit, whether such facilities are located on or off Lot. Additionally, the responsibility and liability for the retention facilities rests with Seller. Further, Seller shall keep any permits and applications required under the Storm Water Regulations in good standing and current during the term of this Agreement.
 
 
11
 
 
5(b) Seller shall grant any and all easements as may be required by Purchaser across, over and through the Property for control of on-site storm water relating to the Lot. Said easements shall be free from liens and shall allow for the construction, maintenance and use of drainage facilities and all uses incidental thereto, including silt ponds, swales and riprap. Purchaser shall have the right to dedicate any and all of said easements to public use and to have same accepted for maintenance by the applicable governmental agencies. Upon request, Seller (and all other parties having an interest in such easement) will join in the dedication and execute such instruments as may be reasonably required to affect same. Said easements may be used by Purchaser, its agents, customers, invitees, designees, successors and assigns. Said provisions shall be set forth in full in the deeds of easement and shall be deemed covenants running with the Lot. Title to said easements and Purchaser's rights therein shall be fully insurable under the same requirements with respect to title as are applicable to the Lots.
 
5(c) Upon Purchaser's acquisition of a Lot, Purchaser shall be responsible for the installation of on-lot erosion and sediment control facilities pertaining to Purchaser's house construction activities, proper maintenance of such facilities with respect to such Lot and for ensuring compliance with the NPDES Permit insofar as it pertains to such Lot. Purchaser's responsibility for such on lot controls shall continue until final or temporary stabilization of such Lot and Purchaser transfers the Lot to a homebuyer. Purchaser shall be responsible for the removal of on lot erosion and sediment control facilities (specifically excluding temporary traps and storm water management ponds) at the time of stabilization of such Lot.
 
5(d) Seller represents and warrants that it shall take such necessary actions to comply with the Storm Water Regulations. Seller covenants and agrees to do any and all further acts and to execute, acknowledge, seal and deliver any and all other and further instruments and documents (not otherwise inconsistent herewith) in order to ensure Seller's compliance with the Storm Water Regulations. The parties hereto shall cooperate with each other in every reasonable manner, other than peculiarity, in order to fulfill each party's obligations relative to the Storm Water Regulations.
 
6.             CONDITIONS PRECEDENT TO SETTLEMENT.
 
The obligation of Purchaser to purchase any Lot shall be conditioned upon the satisfaction of the following with regard to such Lot, any of which may be waived by Purchaser in its sole and absolute discretion (the "Conditions Precedent"):
 
6(a) Except for the Model Lot, Seller has completed the improvements described in Paragraph 3 above.
 
6(b) All conditions of title have been met pursuant to Subparagraph 7(b).
 
6(c) Seller is not in default of this Agreement.
 
6(d) The Homeowners Association shall be established and recorded in the land records of the County pursuant to Paragraph 10.
 
6(e) Seller is in compliance with and has provided Purchaser with copies of the NPDES Permit and SWM Plans pursuant to Subparagraph 5(a).
 
 
 
12
 
 
6(f) The representations and warranties by Seller set forth in this Agreement must be true and correct as of the date of each settlement.
 
6(g) Seller shall have provided Purchaser with all Conservation Easements (defined below) that have been recorded with regard to the phase in which the Lot is located. "Conservation Easement" means an easement, covenant, restriction, or condition on real property, including an amendment to an easement, covenant, restriction, or condition: (i) Owned by: l. The Maryland Environmental Trust; 2. The Maryland Historical Trust; 3. The Maryland Agricultural Land Preservation Foundation; 4. The Maryland Department of Natural Resources; 5. A county or municipal corporation and is funded by the Maryland Department of Natural Resources, the Rural Legacy Program, or a local agricultural preservation program; or 6. A land trust; or (ii) Required by a permit issued by the Department of the Environment. SEE MD. CODE. ANN., REAL PROP. § 10-705(a)(2).
 
6(h) To Seller's actual knowledge, the Lots shall be free from Hazardous Materials; provided that this condition shall be deemed to be waived in the event that the existence of Hazardous Materials on a Lot is caused solely by Purchaser.
 
7.SETTLEMENT, CONVEYANCE AND TITLE, DEPOSIT CREDITS.
 
7(a) At settlement, Purchaser shall deliver to Seller immediately available funds in the amount of the Purchase Price, less the Deposit Credit, for each Lot being purchased. The amount of the Deposit Credit for each House Type is set f01th on Exhibit B.
 
7(b) Indefeasible fee simple title to the Lots are to be conveyed hereunder, free of liens, encumbrances, judgments, tenancies, reservations, easements and rights-of-way, subject, however, to the Permitted Exceptions. The "Permitted Exceptions" shall be (i) those matters set forth on Exhibit K which is attached hereto and made a part hereof, (ii) easements, rights-of-way and restrictions required by public utilities and/or the local governmental authority, (iii) other matters requested by or consented to by Purchaser. Title is to be marketable and insurable at standard rates by a recognized title insurance company of Purchaser's choice, licensed to do business in the State of Maryland, without exceptions except as afore said subject only to the Permitted Exceptions. At each settlement, Seller shall deliver such lien waivers as may be reasonably required by Purchaser.
 
7(c) Examination of title, title insurance, title certificate, preparation of deeds and individual Lot surveys are to be at the sole cost of Purchaser, provided, however, that if, upon examination, title is found to be defective, Seller agrees to reimburse Purchaser for reasonable costs incurred not to exceed One Thousand Two Hundred and No/100 Dollars ($1,200.00) per Lot. Cost of Lot transfer taxes, recordation taxes, filing and recording fees are to be shared equally by Purchaser and Seller. Purchaser shall pay any closing fee imposed by the closing agent. Each party shall pay its own consultants' fees.
 
7(d) Real Estate Taxes are to be prorated to the date of settlement on a calendar year basis. Any and all other assessments, payments, impositions or other charges with respect to the Lots, including any charges made, or to be made, for any and all public improvements, agricultural roll-back tax and transfer taxes due in connection with the conveyance or deed, whether on-site or off-site, shall not be adjusted at the time of settlement, and shall be borne solely by Seller for work performed by Seller hereunder, including, but not limited to, capital facilities charges and inspection fees. Any sewer or water charges that are placed on a front-foot benefit charge basis and are deferrable to the ultimate purchaser shall not be adjusted at settlement, but shall be assumed by the Purchaser. The parties also shall prorate water and sewer usage invoices as of the settlement date.
 
 
13
 
 
7(e) At settlement(s), the Lots being acquired shall be conveyed by Seller to Purchaser or Purchaser's designee by Special Warranty Deed with covenants of further assurances in proper form for recording in the County. Possession of the Lots shall be given to Purchaser, or its agents and assigns, at the time of settlement, free from any parties in possession subject only to the Permitted Exceptions.
 
7(f) Seller shall pay any agricultural roll-back tax and transfer taxes due in connection with the conveyance or deed under any state, county, township, municipal or local law, regulation or ordinance (or any similar tax or assessment) to the date of conveyance. Purchaser shall be responsible for any roll-back attributed to the period of time after the date of conveyance.
 
7(g) Prior to any Lot settlements, Seller shall deliver to Purchaser a "Certification of Non-Foreign Status" which meets the requirements of Section 1445 of the Internal Revenue Code and Internal Revenue Regulations for the purpose of informing the transferee that withholding of Federal taxes is not required.
 
7(h) At each settlement, Seller and Purchaser shall apportion between them all fees allocable to each Lot being purchased as follows: Purchaser shall be responsible for school impact fees, library fees, and water and sewer tap and connection fees, and any other fees typically due at the time of building permit application. Seller shall be responsible for all other fees, including, but not limited to moderately priced dwelling unit fees in lieu, and school construction mitigation fees.
 
8.          
DEFAULT.
 
8(a) Default by Purchaser. In the event that Purchaser fails to acquire Lots in accordance with the terms and conditions of this Agreement and such failure continues for ten (10) days after the receipt of written notice from Seller, Purchaser shall be deemed to be in default hereunder and Seller may exercise the remedy described below. In the event that Purchaser fails to fulfill any other of its obligations hereunder, then Purchaser shall be deemed to be in default hereunder if such failure continues for fifteen (15) days after receipt of written notice from Seller, or if the failure cannot be cured within fifteen (15) days, then a reasonable period of time not to exceed an additional thirty (30) days provided Purchaser diligently and continuously pursues such cure. Either of the foregoing shall be referred to herein as a "Purchaser Default".
 
8(b) Seller's Remedy. In the event of a Purchaser Default, Seller's sole and exclusive right and remedy shall be to retain the Deposit as full, fixed and liquidated damages, not as a penalty, whereupon this Agreement shall terminate. Thereafter, Purchaser and Seller shall be relieved of further liability hereunder, at law or in equity, it being the agreement of the parties that Purchaser shall have no liability or obligation for default hereunder or otherwise arising out of the transaction contemplated herein except to the extent of the Deposit made herein, and in no event shall Purchaser’s liability or responsibility for any failure, breach or default hereunder or otherwise arising out of the transaction contemplated herein exceed the Deposit, and in no event shall Seller be entitled to specific performance of this Agreement, or any other equitable remedies. Notwithstanding the foregoing, Purchaser's indemnity obligations provided for in Subparagraph 10(b) (for construction related activities) shall not be subject to the limitations provided above, rather Seller shall have the right, after Purchaser's failure to cure as provided in above, as its sole and exclusive remedy, to enforce such indemnifications in the court of law permitted under this Agreement.
 
 
14
 
 
8(c) Default by Seller. In the event that Seller fails to fulfill any of its obligations hereunder, then Seller shall be deemed to be in default hereunder if such failure continues for fifteen (15) days after receipt of written notice from Purchaser, or if the failure cannot be cured within fifteen (15) days, then a reasonable period of time not to exceed an additional thirty (30) days provided Seller diligently and continuously pursues such cure. The foregoing shall be referred to herein as a "Seller Default".
 
8(d) Purchaser's Remedies. In the event of a Seller Default, Purchaser may (i) terminate this Agreement and receive a refund of the remainder of the Deposit that has not been applied toward Lots acquired by Purchaser, or (ii) seek specific performance of Seller's obligations hereunder, provided that, if specific performance is not available to Purchaser because Seller has conveyed fee simple title to the Property or any portion thereof, Purchaser shall be entitled to all rights and remedies available at law or in equity. So long as Purchaser is not in default of this Agreement beyond any and all applicable cure periods, Purchaser shall be entitled to seek injunctive relief to prevent Seller from conveying or agreeing to convey fee simple title to the Property or any portion thereof. The parties agree that this provision shall not be effective in connection with Seller's dedication of any portion of the Property to governmental or quasi-governmental entities required as part of the development process.
 
9. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
 
Seller hereby represents, warrants and covenants to Purchaser that:
 
9(a) Seller's execution of this Agreement will not violate any other third party's contract entitlements and no other person or entity claims, has claimed and/or could justifiably claim any retained rights in the Property under an earlier-in-time purchase contract.
 
9(b) All contractors, subcontractors, laborers and materialmen performing work upon, or furnishing labor or materials to improve or benefit, the Lots at Seller's request will be paid in full by Seller before any applicable Lot settlement. Seller will execute the necessary affidavits and indemnification agreements required by the Purchaser's title insurance company or closing agent to eliminate from its owner's title policies any exceptions to unfiled mechanics' liens.
 
9(c) All necessary dedications to public use with respect to the Lots shown or implied from the subdivision plats or otherwise will be made to the applicable governmental authorities, and Purchaser will incur no legal liability or expense whatsoever with respect to any such dedications.
 
9(d) Seller will, during the term of this Agreement, keep any mortgage(s) against the Property current and not in default, and pay taxes, other public charges and/or any other assessments against the Property.
 
9(f) So long as Purchaser has paid all required fees and delivered all required materials, Seller has done nothing to prevent Purchaser from obtaining building, plumbing connection, and other permits required for the erection of residences on each Lot, and has done nothing to prevent Purchaser from obtaining use and occupancy permits for finished residences on previously settled Lots.
 
 
15
 
 
9(g) Seller represents and warrants to Purchaser that Seller is a limited liability company, duly organized and validly existing, licensed under the laws of the State of Maryland, and qualified to do business in the State of Maryland, in good standing, and that Seller has the authority to execute and perform this Agreement. Copies of resolutions shall be provided to Purchaser upon request.
 
9 (h) In addition to any other warranty made in connection with this Agreement, Seller represents and warrants as of the date of each Lot settlement that (i) Seller owns the Lot to be sold by it under this Agreement, in fee simple,; (ii) such Lot is subject only to the Permitted Exceptions; (iii) such Lot is stable, graded pursuant to this Agreement, and otherwise is suitable for the construction of a residential structure by customary means and without extraordinary site preparation measures; (iv) all of the streets, sewers, water lines and utility facilities installed by Seller or its subcontractors or agents are in compliance with the applicable requirements of law, of good quality and suitable for their intended purpose; (v) the Lot, as laid out by Seller, are in compliance with the applicable zoning and subdivision requirements; (vi) none of the development site preparation and construction work performed by Seller hereunder concentrates or diverts surface water or percolating water improperly onto any of the Lots or surrounding property; (vii) no person has any contract or other right to the use of any portion of the Lots or to the furnishing or use of any facility or amenity on, or relating to, the Lots; and (viii) it has done nothing to introduce any Hazardous Materials onto the Property and to the best of Seller's knowledge, no Hazardous Materials exist on the Property or affect the Property.
 
Notwithstanding that certain Seller's representations and warranties contained in this Paragraph 9 may be limited to the extent of Seller's knowledge of the facts stated therein, a condition precedent to Purchaser's obligation to close hereunder shall not be so limited, and the satisfaction of said condition shall depend upon the actual correctness as of the time of closing and post-closing of the facts stated in all such representations and warranties.
 
10.   PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
 
10(a) Purchaser hereby represents, warrants and covenants to Seller that Purchaser is a duly organized and validly existing corporation under the laws of the Commonwealth of Virginia, qualified to do business in the State of Maryland; that Purchaser has the power to execute and perform this Agreement; that all necessary consents and approvals from Purchaser have been obtained; and that the persons executing this Agreement on behalf of Purchaser are duly empowered to bind Purchaser to perform its obligations hereunder.
 
10(b) Purchaser agrees to indemnify Seller from any actual liability, loss or damage to a third person's personal property or personal injury, including reasonable attorneys’ fees and related costs and expenses arising out of, or resulting from Purchaser performing its construction activities under this Agreement, except that this indemnification shall not cover the negligence of the Seller or its subcontractors, employees and agents or apply to any violations issued by any governmental authority, which violations shall be governed by said authority.   Purchaser shall maintain in full force and effect liability insurance covering damage to property and persons resulting from or connected with such activity which meet or exceed the following requirements:
 
 
16
 
 
Commercial General Liability insurance in the minimum amount of One Million Dollars ($1,000,000.00) per occurrence, and Two Million Dollars ($2,000,000.00) in the aggregate, that is (1) written on an occurrence basis, (2) includes contractual liability coverage insuring the obligations assumed by Purchaser under this Agreement (including, without limitation, the indemnities set forth herein) and referring expressly to this Agreement, premises and operations coverage, broad form property damage coverage (including theft, vandalism and malicious mischief, written at replacement cost value, with replacement cost endorsement), Purchaser's protective liability coverage, independent contractors coverage, completed and ongoing operations coverage, (3) containing endorsement for personal injury, and (4) deleting the "underground" exclusion. A certificate evidencing such insurance is attached hereto as Exhibit H-2.
 
11.   HOMEOWNERS ASSOCIATION.
 
11(a) Seller shall prepare, at Seller's expense, such protective covenants and declarations as required by Purchaser and shall record the same in the Land Records of the County. Seller shall form a homeowners association (the "Homeowners Association") for the Property. Seller shall subject all of the Property to a declaration of covenants, conditions and restrictions (the "CC&Rs"), under which Seller shall serve as the "Declarant" and the architectural review committee, and shall deliver to Purchaser copies of the CC&Rs, bylaws, articles of incorporation, budget and any other documents required by law to establish the Homeowners' Association (collectively, the "Organizational Documents"). All Organizational Documents shall comply with applicable FHA/VA regulations. Purchaser shall have the opportunity to approve the Organizational Documents and upon request by Purchaser, Seller shall promptly make any reasonable changes thereto. The CC&Rs shall provide that Purchaser shall not pay any assessments and further that Seller shall solely fund any deficit of the Homeowners Association. In no event shall Purchaser be required to pay any capital contribution.
 
11(b) Seller shall, at Seller's sole expense, be responsible for the proper annexation of any Lots purchased pursuant to this Agreement into the Homeowners Association and to subject any Lots purchased hereunder to any protective covenants and declarations requested by Purchaser pursuant to this Agreement.
 
11(c) Seller, through its designees, shall administer the affairs of the Homeowners Association until such time as control is assumed by the individual members of the Homeowners Association who have purchased dwelling units from Purchaser. Seller shall employ a professional management company for budget, preparation and management of the Homeowners Association; said management company shall be reasonably acceptable to Purchaser. Seller shall be responsible for the maintenance of the cluster common area until such time as maintenance is assumed by the Homeowners Association.
 
11(d) Seller shall convey to the Homeowners Association the common areas, which are not subdivided into Lots, free from any Hazardous Materials or environmental contamination of any kind. The conveyance shall be subject to rights of ingress and egress and common usage of each Lot owner in the Homeowners Association's common area. Purchaser agrees that each Lot purchased will be required to become a member of the Homeowners Association. Seller shall bear the cost of preparing and recording the deed conveying the common area(s) to the Homeowners Association.
 
 
17
 
 
11(e) If required, Seller shall grant and convey, by special warranty deed to the Homeowners Association, the common areas set forth on the subdivision plat(s) to be recorded among the Land Records of the County, not later than one year after recordation of a subdivision plat which includes such common areas. Furthermore, at the time of the first conveyance to Purchaser, the common area(s) as shown on the subdivision plat(s) shall be free and clear of any mortgages, deeds of trust, judgment liens or similar liens or encumbrances.
 
11(f) Seller agrees to cooperate with Purchaser in the preparation of an FHA/VA Application. Seller further agrees to implement changes (to the extent that such changes do not affect the economics of the Seller's project) to subdivision plans and documents at the Seller's expense, if required, to gain FHA/VA approval; provided, however, that the plans or plats already approved by the local governmental authorities shall not be subject to redesign and resubmission of approval. The time required for obtaining said FHA/VA approval shall not defer the Lot purchase schedule contained herein.
 
11(g) Seller acknowledges that Purchaser is required to furnish to its new home purchasers of Lots certain information as required by the Maryland Homeowners Association Act in order to enter into binding contracts with such buyers. Seller agrees to furnish to Purchaser, prior to the date on which Purchaser opens sales within the project, with final, signed and complete copies of the Organizational Documents, Rules and Regulations and a set of recorded subdivision plats for the Property. In the event that final copies are not available, Seller agrees to furnish draft copies, which draft copies will be replaced by final, executed and recorded copies as soon as they are available. As well Seller shall provide copies of any amendments to the Organizational Documents concurrently with any such amendment. Seller shall also obtain Purchaser's consent in the event any modifications are contemplated to the amenities or other facilities within the Property or affect Purchaser's or Purchaser's homebuyers monetary obligations, such consent not to be unreasonably withheld. The parties acknowledge that Seller's performance of this obligation is important to Purchaser's ability to market and sell Lots. In the event that, at the time of the first settlement hereunder, such materials have not been furnished to Purchaser, the date of such settlement shall be delayed until Purchaser is in receipt of such materials.
 
12. MISCELLANEOUS.
 
12(a) Seller and Purchaser warrant that they have made no commitments of any kind regarding brokerage fees, finder's fees or commissions relative to this Agreement which could incur liability to either party hereto. Seller and Purchaser agree to indemnify and hold each other harmless from any and all liability, loss or damage, including reasonable attorneys' fees and related costs and expenses arising out of, or resulting from, any and all brokerage claims that may be made against Seller or Purchaser or their successors or assigns arising from this Agreement.
 
12(b) Purchaser shall be responsible for the removal within a reasonable time period of dirt, mud, and debris only from the streets fronting the Lots where dwellings are under construction by Purchaser or where Purchaser, its agents or contractors have deposited any such material. Seller shall be responsible for performing those tasks and snow removal on all streets until public dedication or acceptance by the applicable Homeowners Association thereof. The terms “streets" and "roads" shall mean all streets and roads shown on the Record Plat, as well as any access roads connecting those roads shown on the subdivision plats to any other road, highway or thoroughfare.
 
 
18
 
 
12(c) All notices hereunder shall be in writing, and be deemed to have been received (i) immediately upon personal delivery or confirmed fax receipt, (ii) one (1) business day after being sent by confirmed overnight mail, (iii) three (3) days after mailing, if mailed by certified mail, return receipt requested, postage prepaid, or (iv) immediately upon delivery by electronic mail with active confirmed receipt, provided that such active confirmed receipt is not required for Purchaser's notice of termination during the Study Period:
 
If to Purchaser:
NVR, Inc.
656 Quince Orchard Road, Suite 500
Gaithersburg, 20878
Attn: T. Kent LaMotta and Matt Beck
Fax: 240-912-3281
Email: klamotta@nvrinc.com and mbeck@nvrinc.com
with a copy to:
If to Seller:
MacKenzie Equity Partners
312 3rd Street
Suite 102
Annapolis, MD 21403
Attn: Charles W. S. MacKenzie
Fax: 410-832-2937
Email: cmackenzie@mackenzieequity.com
with a copy to:
 
NVR, Inc.
4991 New Design Road, Suite 105
Frederick, 21703
Attn: David J. Peterson Fax: 240-566-1038
Email: dpeterso@nvrinc.com
NVR, INC.
656 Quince Orchard Road, Suite 500
Gaithersburg, MD 20878
Attn: John McConnell and Jessica Falleroni
Facsimile No.: 240-912-3281
Email: jmcconne@nvrinc.com and jfalleron@nvrinc.com
and:
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
12505 Park Potomac, Sixth Floor
Potomac, MD 20854
Attn: Lawrence M. Kramer and Sean P.
Sherman
Fax: 301-230-2891
Email: nvr@shulmanrogers.com
MacKenzie Communities
2328 West Joppa Road
Suite 200
Lutherville, MD 21093
Attn: Robert J. Aumiller, Jr.
Fax: 401-427-0429
Email: RJAumiller@MacKenzieCommercial.com and
DLA Piper LLP (US)
6225 Smith Avenue
Baltimore, MD 21209
Attn: Pamela McDade Johnson, Esq.
Fax: 410-580-3819
Email: pam.johnson@dlapiper.com
 
 
19
 
 
The parties hereto shall be responsible for notifying each other of any change of address or facsimile number in accordance with this Subparagraph 11 (c).
 
12(d) Purchaser shall have the right to review and approve or disapprove (not to be unreasonably withheld, conditioned or delayed) any and all changes made to the proposed, submitted and/or approved development documents, including, but not limited to, plans, designs and drawings, including site plans, construction (all types), landscape improvements (trees, shrubs, fences and walls) and covenants, restrictions and easements of record. The parties agree that any revised Lot configuration and/or change in the Lot yield arising from any such revised development documents shall, if modifying the anticipated Record Plat, constitute the Lots that are the subject of this Agreement. Seller shall meet and confer with Purchaser on a regular basis to review the anticipated schedule and sequence of development of the Property.
 
12(e) If any term, covenant or condition of this Agreement, or the application thereof to any party or circumstance, shall be invalid or unenforceable, this Agreement shall not be affected thereby, and each term shall be valid and enforceable to the fullest extent permitted by law.
 
12(f) Any date specified in this Agreement which is a Saturday, Sunday or legal holiday shall be extended to the first regular business day after such date, which is not a Saturday, Sunday or legal holiday in the State of Maryland.
 
12(g) This Agreement and the Exhibits which are attached hereto contain the final and entire agreement between the parties hereto. The recitals set forth in the beginning of this Agreement are incorporated herein as if restated in full. No change or modification of this Agreement, or any waiver of the provisions hereof, shall be valid unless the same is in writing and signed by the parties hereto. Waiver from time to time of any provision hereunder will not be deemed to be a full waiver of such provision, or a waiver of any other provisions hereunder. The terms of this Agreement are mutually agreed to be clear and unambiguous, shall be considered the workmanship of all of the patties and shall not be construed against the drafting party.
 
12(h) This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Titles to Paragraphs and Subparagraphs are for convenience only, and are not intended to limit or expand the covenants and obligations expressed thereunder.
 
12(i) It is the intention of the parties hereto that all questions with respect to the construction of this Agreement, and the rights or liabilities of the parties hereunder, shall be determined in accordance with the laws of the jurisdiction in which the Property is located, without regard to conflict of law rules. Time is hereby declared to be of the essence in the performance of each of Seller's obligations hereunder. In the event of any dispute or controversy arising out of or relating to this Agreement or the patties' compliance therewith, it is agreed that the exclusive forum for determination of any and all such disputes or controversies shall be the appropriate trial court for the jurisdiction in which the Property is located. THE PARTIES WAIVE THEIR RESPECTIVE RIGHTS OF TRIAL BY JURY.
 
 
20
 
 
12(j) This Agreement shall be binding upon the parties hereto and each of their respective heirs, executors, administrators, successors and assigns. All of the provisions of this Agreement and the obligations of the parties shall survive each settlement and the execution and delivery of the deed(s) executed hereunder, and shall not be merged therein.
 
13.   ATTORNEYS' FEES. In addition to any other relief to which a party may be entitled under this Agreement, the prevailing party in any action shall be entitled to recover its attorneys' fees and costs incurred in regard to a dispute or controversy.
 
14.   ASSIGNMENT. Neither party may assign its rights or obligations under this Agreement. Seller may not sell a majority of its ownership interests without the Purchaser's prior written consent.
 
15.   RULE AGAINST PERPETUITIES. To avoid the rule against perpetuities, all of the obligations of the parties shall be fully performed no later than twenty-one (21) years from the Effective Date.
 
16.   FORCE MAJEURE. In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of labor difficulties, inability to procure materials, restrictive governmental laws or regulations, insurrection, war, acts of God, acts of terrorism, or other reason of like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Agreement then performance of such act shall be excused for the period of the delay, and thereafter the period for the performance of any such act shall be extended for the lesser of (i) a period equivalent to the period of such delay, or (ii) twenty four (24) months. Beginning with the expiration of the extension period, if the required performance remains unperformed, Purchaser may either waive said performance in writing, or Purchaser may at its option either continue to wait out Seller's performance or declare this Agreement null and void and in such event the Deposit shall be returned to Purchaser within ten (10) days and there shall be no further liability on the part of either party to the other except as to Lots already settled.
 
17.   NO CROSS DEFAULT. The parties affirm that a default by either party in this Agreement shall not constitute a default under the Related LPAs. 
 
18.   EXHIBITS. This Agreement governs the parties rights and obligations with regard to the Lots for the Home Type which is denoted under the title of this Agreement on page one. Many of the Exhibits to this Agreement include information with regard to all of the Home Types. The same exhibits are attached to the Related LPAs. For purposes of this Agreement, the information that relates to the Home Type specified on page one shall govern.
 
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
 
 
 
21
 
 
 
WITNESS, the following signatures and seals.
 
 
 
WITNESS:
 
SELLER:
 
 
SeD Maryland Development, LLC
 
 
_________________________
By: _____________________
 
Name: _________________
 
Title: __________________
 
Date: _________________
 
 
                     [SIGNATURES CONTINUED ON NEXT PAGE]
 
 
 
22
 
 
WITNESS:    
  PURCHESER:
 
NVR, INC
 
 
By: ____________________
Name: T. Kent LaMotta
Title: Vice President of Operations 
Date: __________________

 
  WITNESS:
 
  _____________________
By: ____________________
Name: Matt Beck  
Title: Vice President of Operations
Date: __________________
 
 
 
 
 
 
  WITNESS:
 
  _____________________
 
By: _____________________
Name: David Greminger                                                                                          
Title: Regional Manager
Date: ___________________
 
 
 

 
 
23
 
 
 
LIST OF EXHIBITS
 
A-1
Legal Description of the Project
 
A-2
Development Plan for the Project
 
B
Home Types, Purchase Prices, Deposits, Deposit Credits
 
C
Assignment Agreement
 
D
Description of Lots Subject to this Agreement
 
E
Phasing Plan
 
F
Form of Deed of Trust
 
G
Responsibility Checklist
 
H-1
Seller Certificate of Insurance
 
H-2
Purchaser Certificate of Insurance
 
I
Lot Inspection Report
 
J
Lot Completion Report
 
K
List of Title Exceptions
 
 
 
24
 
 
RESTATEMENT AND REINSTATEMENT OF AND FIRST AMENDMENT TO LOT PURCHASE AGREEMENT
 
BALLENGER RUN
 
THIS RESTATEMENT AND REINSTATEMENT OF AND FIRST AMENDMENT TO LOT PURCHASE AGREEMENT ("First Amendment") is made this day of
 
2015 by and between SeD Maryland Development, LLC ("Seller") and NVR, Inc. d/b/a Ryan Homes ("Purchaser").
 
WHEREAS, Seller and Purchaser entered into a Lot Purchase Agreement dated December 10, 2014 (the "Agreement") whereby Seller agreed to sell and Purchaser agreed to purchase eighty-five (85) single family Lots located in Frederick County, Maryland and as more   particularly described in the Agreement; and
 
WHEREAS, the parties now wish to restate and reinstate the Agreement and to otherwise amend certain terms and conditions, all as more fully set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
 
l.              Recitals and Controlling Terms. The foregoing Recitals are hereby incorporated   by reference as if fully restated. All capitalized terms used herein which are not specifically defined shall have the meanings provided in the Agreement. From and after the First Amendment Date (as hereinafter defined), references to the Agreement shall refer to the Agreement as amended by this First Amendment.
 
2.             Reinstatement. The Agreement, a copy of which is attached hereto as Exhibit
 
"A", and incorporated by reference as if fully restated, is reinstated. Accordingly, Subparagraph I (a) of the Agreement is hereby deleted in its entirety. The Effective Date of the Agreement   shall be this First Amendment Date.
 
3.              Contingency. Recital B of the Agreement is hereby amended to reflect that the Agreement and this First Amendment are contingent upon Purchaser and Contract Seller entering into a Second Amendment to the Raw Land Contract reinstating the Raw Land Contract and   thereby satisfying the Contingency contemporaneously with the execution of this First Amendment. The reference to a specific date for the Contingency to be satisfied is hereby deleted.
 
4. Deposit. Exhibit "B" of the Agreement is hereby deleted in its entirety and replaced with the attached Exhibit Subparagraph 2(i) of the Agreement is hereby deleted in its entirety and with the following:
 
 
1
 
 
"2(i) With regard to this Agreement and the Related LPAs, the total sum of Five Million Six Hundred Thousand and No/100 Dollars ($5,600,000.00) as a good-faith deposit (the "Deposit") will be delivered by Purchaser in accordance with the terms of this Agreement, as follows:
 
(i)
Seller is providing Purchaser with a Four Hundred Thirty Four Thousand One Hundred Fourteen Dollars ($434,114.00) credit, which shall be applied as a portion of the Deposit hereunder, as reimbursement for Purchaser's due diligence costs incurred to date.
 
(ii)
in accordance with the Assignment Agreement, Purchaser shall deliver One Million Five Hundred Thousand Dollars ($1,500,000.00) to  Commonwealth Land Title Insurance Company ("Commonwealth") by 5:00 P.M. Eastern Standard Time on January 12, 2015, Commonwealth  shall deliver such One Million Five Hundred Thousand Dollars ($1,500,000.00) to the Contract Seller under the Raw Contract thereunder,  and such One Million Five Hundred Thousand Dollars ($1,500,00.00) shall be applied as a portion of the Deposit hereunder; and
 
(iii)
Purchaser shall deliver Three Million Six Hundred Sixty Five Thousand Eight Hundred Eighty Six Dollars ($3,665,886.00) to the closing agent  which will handle Seller's acquisition of the Project no later than two business days before the closing under the Raw Land Contract, but in no event prior to Purchaser's receipt and approval of Seller's Certificate of Insurance in accordance with Subparagraph 3(p) below, and such Three Million Six Hundred Sixty Five Thousand Eight Hundred Eighty Six Dollars ($3,665,886.00) shall be applied as a portion of the Deposit  hereunder.
 
The Deposit shall be returned to Purchaser in the form of a credit toward the Purchase Price payable for each Lot at the time of each settlement (the "Deposit Credit"). Exhibit "B"   sets forth the allocation of the Deposit and Deposit Credits among all of the lots subject to this Agreement and the Related LPAs. Notwithstanding anything herein to the contrary, in the event of an uncured default by Purchaser beyond any applicable cure   periods, it is the intent of the parties that, Seller shall only be entitled to the portion of the   Deposit allocated to this particular Agreement as liquidated damages in accordance with Subparagraph 8(b)."
 
5. Phasing Plan. Exhibit "E" of the Agreement is hereby deleted and replaced with Phasing Plan attached hereto as Exhibit “E”.
 
6. Notices. Subparagraph 12(c) of the Agreement is hereby amended by deleting the notices to Seller in their entirety and replacing them with the following in lieu thereof:
 
 
2
 
 
Inter-American Development, LLC
312 3rd Street
Suite 102
Annapolis, MD 21403
Attn: Charles W. S. MacKenzie
Fax: 410-832-2937
Email: cmackenzie@mackenzieequity.com
 
Inter-American Management, LLC
Hampden Square, 4800 Montgomery Lane
Suite 450
Bethesda, MD 20814
Attn: Jeff Busch
Email: j eff@185hk.com
 
Singapore eDevelopment Limited
24/F, Wyndham Place,
40-44 Wyndham Street, Central Hong Kong
Attn: Chan Heng Fai
Email: fai@185hk.com
 
Singapore eDevelopment Limited
9 Temasek Boulevard #09-02A,
Suntec Tower 2, Singapore 038989
Attn: Chew Sien Lup
Email: sienlup@sed.com.sg
 
Inter-American Development, LLC
7 Temasek Boulevard #43-03A,
Suntec Tower l, Singapore 038987
Attn: Chan Tung Moe
Email: moe@185hk.com
 
DLA Piper LLP (US) 6225 Smith Avenue
Baltimore, MD 21209
Attn: Pamela McDade Johnson, Esq.
Fax: 410-580-3819
Email: pam.johnson@dlapiper.com"
 
 
3
 
 
7. Contingency. This First Amendment is contingent on the parties entering into the   Restatement and Reinstatement of and First Amendment to Assignment and Assumption Agreement and the Second Amendment to Assignable Real Estate Sales Contract by and between Assignor and RBG Family, LLC contemporaneously herewith (the "Current Contingency"), In the event the Current Contingency is not met, this First Amendment shall be null and void.
 
8. Counterpart Copies. This First Amendment may be executed in any number of   counterpart copies, all of which counterparts shall have the same force and effect as if all parties hereto had executed a single copy hereof.
 
9.              Entire Agreement, Ratification and Reconciliation. The Agreement (including the Exhibits) and this First Amendment contain the final and entire agreement between the parties with respect to the sale and purchase of the Lots, and are intended to be an integration of all prior negotiations and understandings. Except as modified in this First Amendment, the Agreement is   hereby ratified and remains in full force and effect. The terms and provisions of this First Amendment shall be reconciled with the terms and provisions of the Agreement to the fullest extent reasonably possible; provided, however, in the event of any irreconcilable conflict between any term or provision of this First Amendment and any term or provision of the Agreement, such term or provision of this First Amendment shall control.
 
10.              First Amendment Date. This First Amendment shall become effective on the date last signed (the "First Amendment Date"). In addition, this First Amendment and any waiver   or modification hereto will only be effective if signed by the Area President of Purchaser or its   designee, Vice President of Operations, and at least two (2) other officers of Purchaser.
 
 
 
4
 
 
IN WITNESS WHEREOF, the parties have set their hands and seals as of the date written below each signature.
 
  WITNESS:
  SELLER:
 
 
 
  SeD Maryland Development, LLC
 
 
 
By:  
Name:  
Title:  
Date:

 
 
 
[SIGNATURES CONTINUED ON NEXT PAGE]
 
 
 
 
 
 
 
 
5
 
 
  PURCHASER:
 
 
 
  WITNESS:
NVR, INC.
 
 
 
By: _________________________________
Name: T. Kent LaMotta  
Title: Vice President of Operations  
Date: _______________________________

  WITNESS:
 
 
 
 
By:__________________________________
Name: Matt Beck  
Title: Regional Vice President of Land  
Date:________________________________
  

  WITNESS:
 
 
 
 
By: _________________________________
Name: David J. Peterson  
Title: Vice President and Division  
Manager  
Date: _____________________________
 
 
 
6
 
 
SECOND AMENDMENT TO LOT PURCHASE AGREEMENT
 
BALLENGER RUN
 
 
THIS SECOND AMENDMENT TO LOT PURCHASE AGREEMENT ("Second Amendment") is made this ___ day of ________ 2017, by and between SeD Maryland Development, LLC ("Seller") and NVR, Inc. d/b/a Ryan Homes ("Purchaser").
 
WHEREAS, Seller and Purchaser entered into a Lot Purchase Agreement dated December 10, 2014, and that certain First Amendment to Lot Purchase Agreement dated January 9, 2015 (collectively, the "Agreement"), whereby Seller agreed to sell and Purchaser agreed to purchase eighty-five (85) single family Lots located in Frederick County, Maryland, all as more particularly described in the Agreement; and
 
WHEREAS, the parties have agreed to amend the Agreement by assigning the cost of mailbox installation, adding front foot benefit charge provisions, changing the Completion Notice deadline, substituting the phasing plan exhibit, and to otherwise amended certain terms   and conditions, all as more particularly set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and other good and valuable   consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as   follows:
 
1      Recitals and Controlling Terms . The foregoing Recitals are hereby incorporated by reference as if fully restated. All capitalized terms used herein which are not specifically defined shall have the meanings provided in the Agreement From and after the Second Amendment Date (as hereinafter defined), references to the Agreement shall refer to the Agreement as amended by this Second Amendment.
 
2.   Phasing Plan . Exhibit "E" of the Agreement is hereby deleted and replaced with Phasing Plan attached hereto as Exhibit
 
3.   Mailbox . The Agreement is hereby amended to reflect that the postmaster has required cluster mailboxes to be installed at the community. Purchaser and Seller hereby agree to share equally in the costs of the cluster mailboxes, including the costs of installation for same.
 
 
1
 
 
4.   Front Foot Benefit Charges . Purchaser acknowledges that Seller has the option to establish front foot benefits charges by encumbering the Lots with a Declaration of Water and Sewer Charges (the "Declaration") to be imposed on homeowners related for the development of the Property. Seller hereby agrees that any such front foot benefit charge shall not last for more than thirty (30) years and shall not exceed Four Hundred Fifty Dollars ($450) per year for each SFD Large Lot, Four Hundred Fifty Dollars ($450) per year for each SFD Small Lot, Four Hundred Twenty Five Dollars ($425) per year for each SFD Neo-traditional Lot, Three Hundred   Seventy Five Dollars ($375) per year for each SFA Villa Lot, and Three Hundred Twenty Five Dollars ($325) per year for each SFA Townhouse Lot (the "Water and Sewer Charges") In the event the front foot benefit is established, Seller agrees (i) to credit Purchaser with an amount equal to one year’s assessment at each Lot settlement, and (ii) that Subparagraph 2(h) shall be automatically amended to reflect that the escalation of the Purchase Price shall commence on the first (1 st ) day of the fourth (4 th ) quarter.
 
Concurrently upon recordation of the Declaration, Seller will provide Purchaser with a document entitled "Notice to Purchaser of Deferred Water and Sewer Charges" that discloses the Water and Sewer Charges to purchasers of Lots from Purchaser (the "Notice to Buyer"). The Notice to Buyer will be attached to and made part of this Agreement as Exhibit "L" . Purchaser agrees to incorporate the Notice to Buyer into each contract with a purchaser of a Lot from Purchaser (each, an "Initial Lot Purchaser") and to return an original Notice to Buyer executed by each Initial Lot Purchaser to Seller within 30 days after settlement on the Lot with the Initial Lot Purchaser.
 
The failure of Purchaser to obtain an executed Notice to Buyer and timely provide a copy of executed Notice to Buyer to the Seller in accordance with this Agreement from any person who purchases a Lot from Purchaser shall obligate Purchaser to at a maximum pay the Water and Sewer charges for such Lot. Seller agrees that the foregoing shall not be effective unless and until Seller timely provides Purchaser with the Notice to Buyer. Seller shall indemnify and hold harmless Purchaser for any claims arising from Seller's failure to provide the Notice to Buyer.
 
5. Completion Notice . Subparagraph 2(c) of the Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:
 
2(c) Seller shall deliver written notice to Purchaser (the "Completion Notice") to advise Purchaser that Lots are available for purchase (the "Available Lots") and the Conditions Precedent (defined below) for such Lots are fulfilled. The first Completion Notice delivered by Seller after the Model Lot Closing Date may be referred to herein as the "Initial Completion Notice" and shall be delivered on or before June 30, 2017. Each Completion Notice shall identify the location of the Available Lots and Purchaser may select which of the Available Lots that it will purchase. The total number of Available Lots at any time under this Agreement and the Related LPAs shall be twenty-four (24) lots and shall consist of Lots for one or more of the Home Types under this Agreement and the Related LPAs. Commencing on the first (1 st ) day of the second quarter and continuing thereafter, in the event that a particular Home Type is not an Available Lot, then Purchaser's purchase obligation for that particular Home Type shall be deferred the same number of days until that Home Type is an Available Lot, If the delay in providing that Home Type as an Available Lot exceeds sixty (60) days, then Purchaser's purchase obligation for that particular Home Type shall be deferred the same number of days until that Home Type is an Available Lot plus an additional forty-five (45) days. In the event that Seller does not meet the Available Lots requirement of twenty-four (24) lots, Purchaser shall deliver written notice to Seller and:
 
 
2
 
 
 
(i)   So long as Seller is, and before the date of Purchaser's notice was, diligently pursuing the fulfillment of its obligations hereunder in order to create Available Lots, Seller shall be entitled additional time to prepare the Lots for purchase. In no event shall the additional time be more than six (6) months. Purchaser may elect to defer the Lot purchase schedule and any escalation of the Purchase Price by the same number of days until Seller meets the Available Lots requirement. The parties agree to document the commencement and termination of such additional time period and the effect upon the purchase schedule and Purchase Price escalation. Notwithstanding the foregoing, in the event that Seller fails to complete the work necessary for the Initial Completion Notice to be issued on or before June 30, 2017, the terms and conditions of Paragraph 8, regarding Seller default, shall control and the six (6) month extension in this Subparagraph 2(c)(i) shall not apply.
 
( ii ) In the event that Seller is not, or before the date of Purchaser's notice was not, diligently pursuing the fulfillment of its obligations hereunder in order to create Available Lots, or in the event that Seller does not meet the Available Lots requirement within the six (6) months described in Subparagraph 2(c)(i) above, the terms and conditions of Paragraph 8, regarding Seller default, shall control.
 
6, Responsibility Checklist . Exhibit "G" of the Agreement is hereby deleted and replaced with the Responsibility Checklist attached hereto as Exhibit "G".
 
7. Notices . Subparagraph 20(b) of the Agreement is amended to reflect that the notices to Purchaser are deleted in their entirety replaced with the following in lieu thereof:
 
"If to Purchaser:
NVR, INC.
656 Quince Orchard Road, Suite 500
Gaithersburg, MD 20878
Attn: Matt Beck and John McConnell Facsimile: 240-912-3281
 
NVR, INC.
4991 New Design Road, Suite 105
Frederick, 21703
Attn: Ryan Borleis
Facsimile: 240-566-1038
 
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
12505 Park Potomac, Sixth Floor
Potomac, MD 20854
Attn: Lawrence M. Kramer and Sean P. Sherman
Facsimile: 301-230-2891
 
 
3
 
 
 
If to Seller:
 
SeD Maryland Development, LLC
C/O MacKenzie Equity Partners
312 3 rd Street
Suite 102                   
Annapolis, MD 21403
Attn: Charles W.S. MacKenzie
Fax: 410-832-2937
Email: cmackenzie@mackenzieequity.com
 
MacKenzie Communities, LLC
2328 W. Joppa Road, Ste. 200
Lutherville, MD 21093
Attn.: Robb Aumiller
Facsimile: 410-427-0429
Linowes & Blocher
31 West Patrick Street, Suite 130
Frederick, MD 21701 Attn: Bruce Dean Facsimile:301-694-2754
 
SeD Development Management, LLC c/o
SeD Maryland Development, LLC 4800
Montgomery Lane, Suite 210
Bethesda, MD 20814
Attn: Charles W.S. MacKenzie
Facsimile: 443-482-3993
 
SeD Ballenger, LLC c/o Singapore
eDevelop1nent Limited 9 Temasek
Boulevard #09-02A
Suntec Tower 2
Singapore 038989
Attn: Moe Chan
Facsimile: +65 6333 9164"
 
8.   Counterpart Copies . This Second Amendment may be executed in any number of counterpart copies, all of which counterparts shall have the same force and effect as if all parties hereto had executed a single copy hereof,
 
 
4
 
 
9.   Entire Agreement, Ratification and Reconciliation . The Agreement (including the Exhibits) and this Second Amendment contain the final and entire agreement between the parties with respect to the sale and purchase of the Lots, and are intended to be an integration of all prior negotiations and understandings. Except as modified in this Second Amendment, the Agreement is hereby ratified and remains in full force and effect. The terms and provisions of this Second Amendment shall be reconciled with the terms and provisions of the Agreement to the fullest extent reasonably possible; provided, however, in the event of any irreconcilable conflict between any term or provision of this Second Amendment and any term or provision of the Agreement, such term or provision of this Second Amendment shall control.
 
10.   Second Amendment Date . This Second Amendment shall become effective on the date last signed (the "Second Amendment Date"). In addition, this Second Amendment and any waiver or modification hereto will only be effective if signed by the Area President of Purchaser (Or Purchaser's designee Vice President of Operations), and at least two (2) other officers of Purchaser.
 
IN WITNESS WHEREOF, the parties have set their hands and seals as of the date   written below each signature.
 
  WITNESS:
SELLER:
 
 
 
SeD Maryland Development, LLC
 
By: SeD Development Management, LLC, Manager
 
By: ________________________________  
Name: Charley MacKenzie  
Title; Chief Development Officer  
Date: _______________________________
                                    

 
[SIGNATURES CONTINUED ON NEXT PAGE]
 
 
 
5
 
 
 
PURCHASER:
  WITNESS:
 
 
NVR, INC.
 
 
By: ________________________  
Name: T. Kent LaMotta  
Title: Vice President of Operations  
Date: ______________________
                                                                         
  WITNESS:
 
 
By: _______________________
 
Name: Matt Beck
Title: Senior Vice President of Land  
Date: _______________________
 
  WITNESS:
 
 
By: _______________________
 
Name: David Greminger
Title: Reginal Manager  
Date: _______________________
 
  WITNESS:
 
 
By: _______________________
 
Name: Ryan Borleis
Title: Vice President and Division Manager  
Date: _______________________
 

 
 
6
 
Exhibit 10.6
 
MANAGEMENT AGREEMENT
 
This MANAGEMENT AGREEMENT is made and entered into as of July 15, 2015 (this “ Agreement ”), by and between SeD MARYLAND DEVELOPMENT, LLC , a Maryland limited liability company (the “ Developer ”) and SeD DEVELOPMENT MANAGEMENT, LLC , a Delaware limited liability company (the “ Manager ”).
 
RECITALS
 
WHEREAS, the Developer is developing 197 acres of land located in Frederick County, Maryland, into 853 units, consisting of single family lots, townhomes, multi-family units, and assisted living units (the “ Project ”);
 
WHEREAS, the Developer wishes to engage the Manager to manage the Project including the assets, operations and affairs of the Developer; and
 
WHEREAS, the Manager desires to accept such engagement on the terms and conditions hereinafter set forth.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree as follows:
 
1.
Definitions.
 
(a)   The following terms shall have the meanings set forth in this Section 1(a):
 
 
 
“Affiliate” shall mean, with respect to any Person, any Person controlling, controlled by, or under common Control with, such Person.
 
“Agreement” has the meaning assigned in the first paragraph.
 
“Base Management Fee ” means 5% (five percent) of the gross revenue (including reimbursements) of the Project. The Base Management Fee shall be earned and paid in the following manner:
 
●
USD$38,650.00 (thirty eight thousand six hundred fifty United States dollars) monthly, beginning on the Commencement Date. The Base Management Fees accrued from the Commencement Date through the Closing Date shall be payable in arrears in cash on the first day of the month after the Closing Date, or on October 1, 2015, whichever date is sooner. Thereafter, until termination of this Agreement, the Base Management Fee shall be payable in cash in monthly installments on the first day of the month. If applicable, the initial and final installments of the Base Management Fee shall be pro-rated based on the number of days during the initial and final month, respectively, that this Agreement is in effect.
 
 
 
 
●
When the gross revenue of the Project shall be determined, the parties will make adjustments as necessary to ensure proper payment of the Base Management Fee. To the extent there was an underpayment of the Base Management Fee, the additional amounts shall be paid by Developer to Manager. To the extent there was an overpayment of the Base Management Fee, the additional amounts shall be returned by Manager to Developer. Reimbursements pursuant to this provision shall be made with 60 days of the revenue determination.
 
  “ Commencement Date ” means the effective date of this Agreement.
 
“Closing” means the acquisition by Developer (or its transferee) of the land underlying the Project and entitlements for the 853 units which make up the Project.
 
“Closing Date” means on or before August 31, 2015.
 
“Developer Indemnified Party” has the meaning assigned in Section 11(b).
 
“Confidential Information” means all non-public information, written or oral, obtained by the Manager in connection with the services rendered hereunder.
 
“Compliance Policies” means the compliance policies and procedures of the Manager, as in effect from time to time.
 
“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of another Person, whether by contract, voting equity, legal right or otherwise.
 
“Date of Termination” means the date in which this Agreement is terminated or expires without renewal.
 
“Dedicated Employees” has the meaning assigned in Section 3(a).
 
“Developer” has the meaning assigned in the first paragraph of this Agreement.
 
“Development Guidelines ” means the general criteria, parameters and policies relating to the Project as established by the Developer with the assistance of the Manager, as the same may be modified from time-to-time.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
“Final Quarter” means the last fiscal quarter ending prior to the effective date of any termination or non-renewal of this Agreement.
 
“GAAP” means generally accepted accounting principles in effect in the U.S. on the date such principles are applied consistently.
 
 
 
 
“Governing Instruments” means, with respect to any Person, the charter and bylaws in the case of a corporation, the certificate of limited partner (if applicable) and partnership agreement in the case of a general or limited partner, or the articles or certificate of formation and operating agreement in the case of a limited liability company, in each case, as amended, restated or supplemented from time to time.
 
“Incentive Compensation” means a performance incentive fee, payable to the Manager upon any profit distributions to the Developer, and calculated as 20% of all profit distributed to Developer above a 30% Internal Rate of Return on the Project. The Internal Rate of Return shall be calculated on a pre-tax basis.
 
 “Indemnification Obligations” has the meaning assigned in Section 11(b).
 
“Indemnitee” has the meaning assigned in Section 11(d).
 
“Indemnitor” has the meaning assigned in Section 11(d).
 
“Judicially Determined” has the meaning assigned in Section 11(a).
 
“Manager” has the meaning assigned in the first paragraph of this Agreement.
 
 “Operating Agreement” means an Operating Agreement adopted by the Developer, as amended from time to time.
 
“Person” means any individual, corporation, partner, joint venture, limited liability partner, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
 
“Principal Transaction” has the meaning assigned in Section 3(d).
 
“Records” has the meaning assigned in Section 6(a).
 
“Representatives” means collectively the Manager’s Affiliates, officers, directors, employees, agents and representatives.
 
“SEC” means the United States Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
 “Subsidiary” means any subsidiary of the Developer.
 
“Tax Preparer” has the meaning assigned in Section 7(c).
 
 
 
 
2.
Appointment and Duties of the Manager.
 
(a)   Appointment . The Developer hereby appoints the Manager to manage, operate and administer the Project, operations and affairs of the Developer and its Subsidiaries subject to the further terms and conditions set forth in this Agreement, and the Manager hereby agrees to use its commercially reasonable efforts to perform each of the duties set forth herein in accordance with the provisions of this Agreement.
 
(b)   Duties . The Manager shall manage, operate and administer the Developer’s day-to-day operations, business and affairs, subject to the supervision of the Developer, and shall have only such functions and authority as the Developer may delegate to it, including, without limitation, the authority identified and delegated to the Manager herein. Without limiting the foregoing, the Manager shall oversee and conduct all the Developer’s development activities for the Project, as amended from time to time, and other policies adopted and implemented by the Developer. Subject to the foregoing, the Manager will perform (or cause to be performed) such services and activities relating to the management, operation and administration of the Project and assets, liabilities and business of the Developer as is appropriate, including, without limitation:
 
(i)   serving as the Developer’s consultant with respect to the periodic review of the Project and other policies and criteria;
 
(ii)   with respect to the Project, any sale, exchange or other disposition of any asset by the Developer, conducting negotiations on the Developer’s behalf with sellers and purchasers and their respective agents, representatives and investment bankers, and owners of privately and publicly held real estate companies;
 
(iii)   engaging and supervising, on the Developer’s behalf and at the Developer’s sole cost and expense, third party service providers who provide legal, accounting, due diligence, transfer agent, registrar, property management and maintenance services, leasing services, master servicing, special servicing, banking, investment banking, mortgage brokerage, real estate brokerage, securities brokerage and other financial services and such other services as may be required relating development of the Project and to the Developer’s other business and operations as necessary;
 
(iv)   coordinating and supervising, on behalf of the Developer and at the Developer’s sole cost and expense, other third party service providers to the Developer;
 
(v)   providing executive and administrative personnel, office space and office services required in rendering services to the Developer;
 
(vi)   administering the Developer’s day-to-day operations and performing and supervising the performance of such other administrative functions necessary to the Developer’s management as may be agreed upon by the Manager and the Developer, including, without limitation, the collection of revenues and the payment of the Developer’s debts and obligations and maintenance of appropriate computer services to perform such administrative functions;
 
 
 
 
(vii)   communicating on the Developer’s behalf with the holders of any of the Developer’s equity or debt securities as required to satisfy the reporting and other requirements of any governmental bodies or agencies or trading markets and to maintain effective relations with such holders;
 
(viii)   counseling the Developer in connection with policy decisions to be made by the Developer;
 
(ix)   furnishing such reports to the Developer that the Manager reasonably determines to be responsive to reasonable requests for information from the Developer regarding the Developer’s activities and services performed for the Developer or any of its Subsidiaries by the Manager;
 
(x)   monitoring the operating performance of the Project and providing periodic reports with respect thereto to the Developer, including comparative information with respect to such operating performance and budgeted or projected operating results;
 
(xi)   causing the Developer to retain, at the sole cost and expense of the Developer, qualified independent accountants and legal counsel, as applicable, to assist in developing appropriate accounting procedures, compliance procedures and testing systems with respect to financial reporting obligations and compliance with the provisions of the Code and the Treasury Regulations, and to conduct quarterly compliance reviews with respect thereto;
 
(xii)   causing the Developer to qualify to do business in all applicable jurisdictions and to obtain and maintain all appropriate licenses;
 
(xiii)   assisting the Developer in complying with all regulatory requirements applicable to the Developer in respect of the Developer’s business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act and the Securities Act;
 
(xiv)   taking all necessary actions to enable the Developer to make required tax filings and reports and compliance with the provisions of the Code, and Treasury Regulations applicable to the Developer;
 
(xv)   handling and resolving all claims, disputes or controversies (including all litigation, arbitration, settlement or other proceedings or negotiations) in which the Developer may be involved or to which the Developer may be subject arising out of the Developer’s day-to-day operations, subject to such limitations or parameters as may be imposed from time to time by the Developer;
 
(xvi)   using commercially reasonable efforts to cause expenses incurred by or on behalf of the Developer to be commercially reasonable or commercially customary and within any budgeted parameters or expense guidelines set by the Developer from time to time;
 
 
 
 
(xvii)   advising on, and obtaining on behalf of the Developer, appropriate credit facilities or other financings for the Project consistent with the Development Guidelines;
 
(xviii)   advising the Developer with respect to and structuring long-term financing vehicles for the Developer’s portfolio of assets, and offering and selling securities, if any, publicly or privately in connection with any such structured financing;
 
(xix)   performing such other services as may be required from time to time for management and other activities relating to the Developer’s assets as the Developer shall reasonably request or the Manager shall deem appropriate under the particular circumstances; and
 
(xx)   using commercially reasonable efforts to cause the Developer to comply with all applicable laws.
 
(c)   Service Providers . The Manager may engage Persons who are non-Affiliates, for and on behalf, and at the sole cost and expense, of the Developer to provide to the Developer sourcing, acquisition, disposition, asset management, property management, leasing, financing, development, disposition of real estate and/or similar services customarily provided in connection with the management, operation and administration of a business similar to the business of the Developer, pursuant to agreement(s) that provide for market rates and contain standard market terms.
 
(d)   Reporting Requirements .
 
(i)   As frequently as the Manager may deem necessary or advisable, or at the direction of the Developer, the Manager shall prepare, or cause to be prepared, with respect to the Project (A) reports and information on the Developer’s operations and asset performance and (B) other information reasonably requested by the Developer.
 
(ii)   The Manager shall prepare, or cause to be prepared, at the sole cost and expense of the Developer, all reports, financial or otherwise, with respect to the Developer reasonably required in order for the Developer to comply with its Governing Instruments or any other materials required to be filed with any governmental entity or agency, and shall prepare, or cause to be prepared, at the sole cost and expense of the Developer, all materials and data necessary to complete such reports and other materials including, without limitation, an annual audit of the Developer’s books of account by a nationally recognized independent accounting firm.
 
(e)   Reliance by Manager.   In performing its duties under this Section 2(c), the Manager shall be entitled to rely on qualified experts and professionals (including, without limitation, accountants, legal counsel and other professional service providers) hired by the Manager at the Developer’s sole cost and expense.
 
 
 
 
(f)   Use of the Manager’s Funds.   The Manager shall not be required to expend money in connection with any expenses that are required to be paid for or reimbursed by the Developer pursuant to Section 9 of this Agreement in excess of that contained in any applicable Developer Account or otherwise made available by the Developer to be expended by the Manager hereunder.
 
(g)   Payment and Reimbursement of Expenses.   The Developer shall pay all expenses, and reimburse the Manager for the Manager’s expenses incurred on its behalf, in connection with any such services to the extent such expenses are payable or reimbursable by the Developer to the Manager pursuant to Section 9.
 
3.
Dedication; Other Activities.
 
(a)   Devotion of Time.   The Manager, directly or indirectly through its Affiliates, will in line with the needs of the progress of the project, provide a management team (including, without limitation, a chief executive officer and president, a chief financial officer, a chief Development officer, a controller and a secretary) along with appropriate support personnel, to deliver the management services to the Developer hereunder. The members of such management team shall devote such of their working time and efforts to the management of the Developer as the Manager deems reasonably necessary and appropriate for the proper performance of all of the Manager’s duties hereunder, commensurate with the level of activity of the Developer from time to time; provided, however , that the Manager shall have the right, but not the obligation, to provide a dedicated or partially dedicated chief financial officer, chief operating officer, controller, internal legal counsel, property managers and/or property management oversight professionals to the Developer. To the extent the Manager elects to provide the Developer with a dedicated or partially dedicated chief financial officer, controller, internal legal counsel, property managers and/or property management oversight professionals, each of whom will be an employee of the Manager or one of its Affiliates, such personnel are referred to herein as “Dedicated Employees.” The Developer shall have the benefit of the Manager’s reasonable judgment and effort in rendering services and, in furtherance of the foregoing, the Manager shall not undertake activities which, in its reasonable judgment, will materially adversely affect the performance of its obligations under this Agreement.
 
(b)   Other Activities. Except to the extent set forth in Section    3(a) above, and subject to the Developer’s conflicts of interest policy as it may exist from time to time, and the Developer’s Development Guidelines, nothing herein shall prevent the Manager or any of its Affiliates or any of the officers, directors or employees of any of the foregoing, from engaging in other businesses or from rendering services of any kind to any other Person, including, without limitation, investing in, or rendering advisory services to others investing in, any type of real estate, real estate related Development or non-real estate related Development or other mortgage loans (including, without limitation, Developments that meet the principal Development objectives of the Developer), whether or not the Development objectives or policies of any such other Person are similar to those of the Developer or in any way bind or restrict the Manager, or any of its Affiliates, officers, directors or employees from buying, selling or trading any securities or commodities for their own accounts or for the account of others for whom the Manager or any of its Affiliates, officers, directors or employees may be acting; provided, however, none of the Manager, or any of its Affiliates, for so long as this Agreement is in effect, will sponsor or manage any permanent capital vehicle that invests primarily in single-family residential properties as rental properties.
 
 
 
 
(c)   Cross Transactions . Cross transactions are transactions between the Developer or one of its subsidiaries, on the one hand, and an account (other than the Developer or one of its subsidiaries) that is managed or advised by the Manager, or one of the Managers’ or Affiliates, on the other hand (each a “Cross Transaction” ). The Manager is authorized to execute Cross Transactions for the Developer in accordance with applicable law and the Manager’s Compliance Policies. The Developer acknowledges that the Manager has a potentially conflicting division of loyalties and responsibilities regarding each party to a Cross Transaction. The Developer may at any time, upon written notice to the Manager, revoke its consent to the Manager to execute Cross Transactions.
 
(d)   Principal Transactions . Principal transactions are transactions between the Developer or one of its subsidiaries, on the one hand, and the Manager, or any of their Affiliates (or any of the related parties of the foregoing (each a “Principal Transaction” ). The Manager is only authorized to execute Principal Transactions with the prior approval of the Developer and in accordance with applicable law. Such prior approval shall include approval of the pricing methodology to be used, including with respect to assets for which there are no readily available market prices.
 
(e)   Officers, Employees, Etc. The Manager’s or its Affiliates’ members, partners, officers, employees and agents may serve as directors, officers, employees, agents, nominees or signatories for the Developer or any Subsidiary, to the extent permitted by their Governing Instruments, as may be amended from time to time, or by any resolutions duly adopted by the Developer pursuant to the Developer’s Governing Instruments. When executing documents or otherwise acting in such capacities for the Developer or such other Subsidiary, such Persons shall use their respective titles with respect to the Developer or such Subsidiary.
 
4.
Agency; Authority.
 
(a)   The Manager shall act as the agent of the Developer in originating, acquiring, structuring, financing, managing, renovating, disbursing and collecting the Developer’s funds, paying the debts and fulfilling the obligations of the Developer, supervising the performance of professionals engaged by or on behalf of the Developer and handling, prosecuting and settling any claims of or against the Developer, or the Developer’s representatives or assets.
 
(b)   In performing the services set forth in this Agreement, as an agent of the Developer, the Manager shall have the right to exercise all powers and authority which are reasonably necessary and customary to perform its obligations under this Agreement, including the following powers, subject in each case to the terms and conditions of this Agreement, including, without limitation, the Development Guidelines: to purchase, exchange or otherwise acquire and to sell, exchange or otherwise dispose of, the Project in a public or private sale; to execute Cross Transactions; to execute Principal Transactions; to borrow and, for the purpose of securing the repayment thereof, to pledge, mortgage or otherwise encumber the Project; to purchase, take and hold Project subject to mortgages, liens or other encumbrances; to extend the time of payment of any liens or encumbrances which may at any time be encumbrances upon the
 
 
 
 
Project, irrespective of by whom the same were made; to foreclose, to reduce the rate of interest on, and to consent to the modification and extension of the maturity of any Project, or to accept a deed in lieu of foreclosure; to join in a voluntary partition of the Project; to cause to be demolished any structures on the Project; to cause renovations and capital improvements to be made to the Project; to abandon any Project deemed to be worthless; to enter into joint ventures or otherwise participate in investment vehicles investing in Project; to cause the Project to be leased, operated, developed, constructed or exploited; to cause the Developer to indemnify third parties in connection with contractual arrangements between the Developer and such third parties; to obtain and maintain insurance in such amounts and against such risks as are prudent in accordance with customary and sound business practices in the appropriate geographic area; to cause any property to be maintained in good state of repair and upkeep; and to pay the taxes, upkeep, repairs, carrying charges, maintenance and premiums for insurance; to use the personnel and resources of its Affiliates in performing the services specified in this Agreement; to hire third party service providers subject to and in accordance with Section 2; to designate and engage all third party professionals and consultants to perform services (directly or indirectly) on behalf of the Developer or its Subsidiaries, including, without limitation, accountants, legal counsel and engineers; and to take any and all other actions as are necessary or appropriate in connection with the Developer’s Project.
 
(c)   The Manager shall be authorized to represent to third parties that it has the power to perform the actions which it is authorized to perform under this Agreement.
 
5.
Bank Accounts.
 
At the direction of the Developer, the Manager may establish and maintain as an agent on behalf of the Developer one or more bank accounts in the name of the Developer or any other Subsidiary (any such account, a “Developer Account” ), collect and deposit funds into any such Developer Account and disburse funds from any such Developer Account, under such terms and conditions as the Developer may approve. The Manager shall from time-to-time render appropriate accountings of such collections and payments to the Developer and, upon request, to the auditors of Developer.
 
6.
Books and Records; Confidentiality.
 
(a)   Books and Records. The Manager shall maintain appropriate books of account, records data and files (including without limitation, computerized material) (collectively, “Records” ) relating to the Developer and the Project generated or obtained by the Manager in performing its obligations under this Agreement, and such Records shall be accessible for inspection by representatives of the Developer or any Subsidiary at any time during normal business hours upon ten business days advance written notice. The Manager shall have full responsibility for the maintenance, care and safekeeping of all Records. The Manager agrees that the Records are the property of the Developer and the Manager agrees to deliver the Records to the Developer within 14 days after receipt of a written request of the Developer.
 
 
 
 
(b)   Confidentiality. The Manager shall keep confidential any and all non-public information, written or oral, obtained by it in connection with the services rendered hereunder and shall not disclose Confidential Information, in whole or in part, to any Person other than to its Affiliates, officers, directors, employees, agents or representatives who need to know such Confidential Information for the purpose of rendering services hereunder or with the consent of the Developer, except: (i) to Singapore eDevelopment Limited and its Affiliates; (ii) in accordance with any advisory agreement; (iii) to legal counsel, accountants and other professional advisors; (iv) to appraisers, creditors, financing sources, trading counterparties, other counterparties, third party service providers to the Developer, and others (in each case, both those actually doing business with the Developer and those with whom the Developer seeks to do business) in the ordinary course of the Developer’s business; (v) to governmental or regulatory officials having jurisdiction over the Developer; (vi) in connection with any governmental or regulatory filings of the Developer ; or (vii) to respond to requests from judicial or regulatory or self-regulatory organizations and as required by law or legal process to which the Manager or any Person to whom disclosure is permitted hereunder is a party. If, failing the entry of a protective order or the receipt of a waiver hereunder, the Manager is, in the opinion of counsel, required to disclose Confidential Information, the Manager may disclose only that portion of such information that its counsel advises is legally required without liability hereunder; provided, that the Manager agrees to exercise commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information. Notwithstanding anything herein to the contrary, each of the following shall be deemed to be excluded from provisions hereof: any Confidential Information that (A) is available to the public from a source other than the Manager not resulting from the Manager’s violation of this Section 6, (B) is released in writing by the Developer to the public or to persons who are not under similar obligation of confidentiality to the Developer, or (C) is obtained by the Manager from a third-party not known by the Manager to be in breach of an obligation of confidence with respect to the Confidential Information disclosed. The Manager agrees to inform each of its Representatives of the non-public nature of the Confidential Information and to direct such Persons to treat such Confidential Information in accordance with the terms hereof. The provisions of this Section 6 shall survive the expiration or earlier termination of this Agreement for a period of one year.
 
7.
Obligations of Manager; Restrictions.
 
(a)   Internal Control . The Manager shall (i) establish and maintain a system of internal accounting and financial controls designed to provide reasonable assurance of the reliability of financial reporting, the effectiveness and efficiency of operations and compliance with applicable laws, (ii) maintain records for the Project on a GAAP basis, (iii) develop accounting entries and reports required by the Developer to meet its reporting requirements under applicable laws, (iv) consult with the Developer with respect to proposed or new accounting/reporting rules identified by the Manager or the Developer and (v) prepare quarterly and annual financial statements as soon as practicable after the end of each such period as may be reasonably requested and general ledger journal entries and other information necessary for the Developer’s compliance with applicable laws and in accordance with GAAP and cooperate with the Developer’s independent accounting firm in connection with the auditing or review of such financial statements, the cost of any such audit or review to be paid by the Developer.
 
 
 
 
(b)   Insurance. At the cost of the Developer, the Manager shall obtain, as soon as reasonably practicable, and shall thereafter maintain insurance coverage which is customarily carried by managers performing functions similar to those of the Manager under this Agreement with respect to assets similar to the assets of the Developer, in an amount which is comparable to that customarily maintained by other managers or servicers of similar assets.
 
(c)   Tax Filings . The Manager shall (i) assemble, maintain and provide to the firm designated by the Developer to prepare tax returns on behalf of the Developer and its subsidiaries (the “Tax Preparer” ) information and data required for the preparation of federal, state, local and foreign tax returns, any audits, examinations or administrative or legal proceedings related thereto or any contractual tax indemnity rights or obligations of the Developer and its subsidiaries and supervise the preparation and filing of such tax returns, the conduct of such audits, examinations or proceedings and the prosecution or defense of such rights, (ii) provide factual data reasonably requested by the Tax Preparer or the Developer with respect to tax matters, (iii) assemble, record, organize and report to the Developer data and information with respect to the Project relative to taxes and tax returns in such form as may be reasonably requested by the Developer, (iv) supervise the Tax Preparer in connection with the preparation, filing or delivery to appropriate persons, of applicable tax information reporting forms with respect to the Project and the Common Shares (including, without limitation, information reporting forms, whether on Form 1099 or otherwise with respect to sales, interest received, interest paid, dividends paid and other relevant transactions); it being understood that, in the context of the foregoing, the Developer shall rely on its own tax advisers in the preparation of its tax returns and the conduct of any audits, examinations or administrative or legal proceedings related thereto and that, without limiting the Manager’s obligation to provide the information, data, reports and other supervision and assistance provided herein, the Manager will not be responsible for the preparation of such returns or the conduct of such audits, examinations or other proceedings.
 
8.
Compensation.
 
(a)     For the services rendered under this Agreement, the Developer shall pay the Base Management Fee and the Incentive Compensation to the Manager. The Manager will not receive any compensation for the period prior to the Commencement Date other than expenses incurred and reimbursed pursuant to Section 9 hereof.
 
(b) The Base Management Fees shall be payable in cash as provided in the definition of “Base Management Fee”.
 
(c) The Incentive Compensation shall be payable in cash as provided in the definition of “Incentive Compensation”.
 
 
 
9.
Expenses.
 
(a)   The Developer shall bear all of its operating expenses, except those specifically required to be borne by the Manager under this Agreement. The expenses required to be borne by the Developer include, but are not limited to:
 
(i)   issuance and transaction costs incident to the origination, acquisition, disposition and financing of the Project;
 
(ii)   legal, regulatory, compliance, tax, accounting, consulting, auditing, administrative fees and expenses and fees and expenses for other similar services rendered to the Developer by third-party service providers retained by the Manager;
 
(iii)   the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of the Developer (including commitment fees, accounting fees, legal fees, closing costs, etc.);
 
(iv)   expenses associated with securities offerings of the Developer;
 
(v)   expenses relating to the payment of distributions;
 
(vi)   expenses connected with communications and in complying with the continuous reporting and other requirements of the Exchange Act, the SEC and other governmental bodies;
 
(vii)   transfer agent, registrar and exchange listing fees, if applicable;
 
(viii)   the costs of printing and mailing reports and other materials to the Developer;
 
(ix)   costs associated with any computer software or hardware, electronic equipment, or purchased information technology services from third party vendors that is used solely for the Developer;
 
(x)   costs and out of pocket expenses incurred by directors, officers, employees or other agents of the Manager for travel on the Developer’s behalf;
 
(xi)   the portion of any costs and expenses incurred by the Manager or its Affiliates with respect to market information systems and publications, research publications and materials that are allocable to the Developer;
 
(xii)   settlement, clearing, and custodial fees and expenses;
 
(xiii)   all taxes and license fees;
 
 
 
 
 
(xiv)   all insurance costs incurred with respect to insurance policies obtained in connection with the operation of the Developer’s business, including but not limited to insurance covering activities of the Manager, its Affiliates and any of their employees relating to the performance of the Manager’s duties and obligations under this Agreement;
 
(xv)   costs and expenses incurred in contracting with third parties for the servicing, special servicing and property management of assets of the Developer;
 
(xvi)   all other actual out of pocket costs and expenses relating to the Developer’s business and operations, including, without limitation, the costs and expenses of originating, acquiring, owning, rehabilitating, protecting, maintaining, developing and disposing of Developer assets, including appraisal, reporting, audit and legal fees;
 
(xvii)   any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against the Developer or any Subsidiary, or against any trustee, director or officer of the Developer or of any Subsidiary in his capacity as such for which the Developer or any Subsidiary is required to indemnify such trustee, director or officer by any court or governmental agency, or settlement of pending or threatened proceedings;
 
(xviii)   the costs of maintaining compliance with all federal, state and local rules and regulations, including securities regulations, or any other regulatory agency, all taxes and license fees and all insurance costs incurred on the Developer’s behalf;
 
(xix)   expenses relating to any office or office facilities, including disaster backup recovery sites and facilities, maintained expressly for the Developer and separate from offices of the Manager;
 
(xx)   the costs of the wages, salaries and benefits incurred by the Manager with respect to any Dedicated Officers that the Manager elects to provide to the Developer pursuant to Section 3(a) above; provided that (A) if the Manager elects to provide a partially dedicated chief financial officer, chief operating officer, controller, internal legal counsel, property managers and/or property management oversight professionals to the Developer rather than a fully dedicated chief financial officer, chief operating officer, controller, internal legal counsel, property managers and/or property management oversight professionals, the Developer shall be required to bear only a pro rata portion of the costs of the wages, salaries and benefits incurred by the Manager with respect to such personnel based on the percentage of their working time and efforts spent on matters related to the Developer and (B) the amount of such wages, salaries and benefits paid or reimbursed with respect to the Dedicated Employees shall be subject to the approval of the Developer; and
 
(xxi)   all other costs and expenses approved by the Developer.
 
 
 
 
(b)   Other than as expressly provided above, the Developer will not be required to pay any portion of the rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Manager and its Affiliates. In particular, the Manager is not entitled to be reimbursed for wages, salaries and benefits of its officers and employees, other than as described in Section  9(a)(xx) above.
 
(c)   Subject to any required approval, the Manager may retain, for and on behalf, and at the sole cost and expense, of the Developer, such services of non-Affiliate third party accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, investment banks, financial advisors, banks and other lenders and others as the Manager deems necessary or advisable in connection with the management and operations of the Developer. The provisions of this Section 9 shall survive the expiration or earlier termination of this Agreement to the extent such expenses have previously been incurred or are incurred in connection with such expiration or termination.
 
10.
Expense Reports and Reimbursements.
 
The Manager shall prepare a statement documenting the operating expenses of the Developer incurred during each month, and deliver the same to the Developer within 30 days following the end of the applicable month. Such expenses incurred by the Manager on behalf of the Developer shall be reimbursed by the Developer within 30 days following delivery of the expense statement by the Manager; provided, however, that such reimbursements may be offset by the Manager against amounts due to the Developer from the Manager. The provisions of this Section 10 shall survive the expiration or earlier termination of this Agreement.
 
11.
Limits of Manager Responsibility; Indemnification.
 
(a)   Pursuant to this Agreement, the Manager will not assume any responsibility other than to render the services called for hereunder in good faith and will not be responsible for any action of the Developer in declining to follow its advice or recommendations. The Manager, its Affiliates and the officers, directors, members, shareholders, managers, committee members, employees, agents, successors and assigns of any of them (each, a “Manager Indemnified Party” ) shall not be liable to the Developer for any acts or omissions arising out of or in connection with the Developer, this Agreement or the performance of the Manager’s duties and obligations hereunder, except by reason of acts or omissions found by a court of competent jurisdiction upon entry of a final judgment rendered and unappealable or not timely appealed ( “Judicially Determined” ) to be due to the bad faith, gross negligence, willful misconduct or fraud of the Manager Indemnified Party. Notwithstanding any of the foregoing to the contrary, the provisions of this Section 11 shall not be construed so as to provide for the exculpation of any Manager Indemnified Party for any liability (including liability under Federal securities laws which, under certain circumstances, impose liability even on Persons that act in good faith), to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Section 11 to the fullest extent permitted by law.
 
 
 
 
(b)   To the fullest extent permitted by law, the Developer shall indemnify, defend and hold harmless each Manager Indemnified Party from and against any and all costs, losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines and settlements (collectively, “Indemnification Obligations” ) suffered or sustained by such Manager Indemnified Party by reason of (i) any acts, omissions or alleged acts or omissions arising out of or in connection with the Developer or this Agreement, or (ii) any and all claims, demands, actions, suits or proceedings (civil, criminal, administrative or investigative), actual or threatened, in which such Manager Indemnified Party may be involved, as a party or otherwise, arising out of or in connection with such Manager Indemnified Party’s service to or on behalf of, or management of the affairs or assets of, the Developer, or which relate to the Developer; except to the extent such Indemnification Obligations are Judicially Determined to be due to such Manager Indemnified Party’s bad faith, gross negligence, willful misconduct or fraud or to constitute a material breach or violation of the Manager’s duties and obligations under this Agreement. The termination of a proceeding by settlement or upon a plea of nolo contendere , or its equivalent, shall not, of itself, create a presumption that such Manager Indemnified Party’s conduct constituted bad faith, gross negligence, willful misconduct or fraud.
 
(c)   The Manager hereby agrees to indemnify the Developer, its Afilliates, and its Subsidiaries and each of their respective directors and officers (each a “Developer Indemnified Party” ) with respect to all costs, losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines and settlements (collectively, “Indemnification Obligations” ) suffered or sustained by such Developer Indemnified Party by reason of (i) acts or omissions or alleged acts or omissions of the Manager Judicially Determined to be due to the bad faith, willful misconduct or gross negligence of the Manager, its Affiliates or their respective officers or employees or the reckless disregard of the Manager’s duties under this Agreement or (ii) claims by the Manager’s or its Affiliates’ employees relating to the terms and conditions of their employment with the Manager or its Affiliates.
 
(d)   The party seeking indemnity ( “Indemnitee” ) will promptly notify the party against whom indemnity is claimed ( “Indemnitor” ) of any claim for which it seeks indemnification; provided, however , that the failure to so notify the Indemnitor will not relieve Indemnitor from any liability which it may have hereunder, except to the extent such failure actually prejudices the Indemnitor. The Indemnitor shall have the right to assume the defense and settlement of such claim; provided that, Indemnitor notifies Indemnitee of its election to assume such defense and settlement within (30) days after the Indemnitee gives the Indemnitor notice of the claim. In such case the Indemnitee will not settle or compromise such claim, and the Indemnitor will not be liable for any such settlement made without its prior written consent. If Indemnitor is entitled to, and does, assume such defense by delivering the aforementioned notice to Indemnitee, Indemnitee will (i) have the right to approve Indemnitor’s counsel (which approval will not be unreasonably withheld or delayed), (ii) be obligated to cooperate in furnishing evidence and testimony and in any other manner in which Indemnitor may reasonably request and (iii) be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense.
 
 
 
 
(e)   Reasonable expenses (including attorney’s fees) incurred by an Indemnitee in defense or settlement of a claim that may be subject to a right of indemnification hereunder may be advanced by the Developer to such Indemnitee as such expenses are incurred prior to the final disposition of such claim; provided that, Indemnitee undertakes to repay such amounts if it shall be Judicially Determined that Indemnitee was not entitled to be indemnified hereunder.
 
(f)   The Manager Indemnified Parties shall remain entitled to exculpation and indemnification from the Developer pursuant to this Section 11 (subject to the limitations set forth herein) with respect to any matter arising prior to the termination of this Agreement and shall have no liability to the Developer in respect of any matter arising after such termination unless such matter arose out of events or circumstances that occurred prior to such termination.
 
12.
No Joint Venture.
 
The Developer and the Manager are not partners or joint venturers with each other and nothing in this Agreement shall be construed to make the Developer and the Manager partners or joint venturers or impose any liability as such on either of them.
 
13.
Term; Termination.
 
(a)   Term. This Agreement shall remain in full force through December 31, 2021 unless (1) both parties agree in writing to terminate the Agreement sooner, or (2) the Agreement is terminated by the Developer or Manager as set forth below, and shall be renewed automatically for successive one year periods thereafter, unless this Agreement is sooner terminated in accordance with the terms hereof.
 
(b)   Non-Renewal. Either party may elect not to renew this Agreement at the expiration of the initial term or any renewal term for any or no reason by notice to the other party at least 180 days, but not more than 270 days, prior to the end of the term.
 
(c)   Termination by the Developer.
 
(i)   Termination by the Developer With Cause. At the option of the Developer and at any time during the term of this Agreement, this Agreement shall be and become terminated upon 30 days written notice of termination from the Developer to the Manager if any of the following events shall occur:
 
A. the Manager shall commit a material breach of any provision of this Agreement (including the failure of the Manager to use reasonable efforts to comply with the Developer’s Development Guidelines), which such material breach continues and a plan to cure has not been developed by Manager within a period of 30 days after written notice of such breach;
 
 
 
 
B. the Manager in its corporate capacity (as distinguished from the acts of any employees of the Manager which are taken without the complicity of the Developer or executive officers of the Manager) shall commit any act of fraud, misappropriation of funds, or embezzlement against the Developer;
 
(ii)              Termination by the Developer Without Cause. At the option of the Developer and at any time during the term of this Agreement, the Developer may terminate the Agreement without cause sixty (60) days after Developer provides written notice of termination to the Manager.
 
(d)   Termination by Manager. The Manager may terminate this Agreement effective upon 60 days’ prior written notice of termination to the Developer in the event that the Developer shall default in the performance or observance of any material term, condition or covenant in this Agreement and such default shall continue for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period.
 
(e)   Survival. If this Agreement is terminated pursuant to this Section 13, such termination shall be without any further liability or obligation of either party to the other, except as otherwise expressly provided herein.
 
14.
Action Upon Termination or Expiration of Term.
 
From and after the effective date of termination of this Agreement pursuant to Section 13 herein, the Manager shall not be entitled to compensation for further services under this Agreement but shall be paid all compensation accruing to the date of termination, reimbursement for all Expenses. For the avoidance of doubt, if the date of termination occurs other than at the end of a month, compensation to the Manager accruing to the date of termination shall also include: base management fees equal to the Base Management Fee for such final month, taking into account only the portion of such final month that this Agreement was in effect, and with appropriate adjustments to all relevant definitions. Upon such termination or expiration, the Manager shall reasonably promptly:
 
(a)   after deducting any accrued compensation and reimbursement for Expenses to which it is then entitled, pay over to the Developer all money collected and held for the account of the Developer pursuant to this Agreement;
 
(b)   deliver to the Developer a full accounting, including a statement showing all payments collected and all money held by it, covering the period following the date of the last accounting furnished to the Developer with respect to the Developer and through the termination date; and
 
 
 
 
(c)   deliver to the Developer all property and documents of and material to the Developer provided to or obtained by the Manager pursuant to or in connection with this Agreement, including all copies and extracts thereof in whatever form, then in the Manager’s possession or under its control.
 
15.
Assignment.
 
The Manager may not assign its duties under this Agreement unless such assignment is consented to in writing by Developer. However, the Manager may assign to one or more of its Affiliates performance of any of its responsibilities hereunder without the approval of the Developer so long as the Manager remains liable for any such Affiliate’s performance.
 
16.
Release of Money or other Property Upon Written Request.
 
The Manager agrees that any money or other property of the Developer or any Subsidiary held by the Manager under this Agreement shall be held by the Manager as custodian for the Developer or any Subsidiary, and the Manager’s records shall be clearly and appropriately marked to reflect the ownership of such money or other property by the Developer. Upon the receipt by the Manager of a written request signed by a duly authorized officer of the Developer requesting the Manager to release to the Developer any money or other property then held by the Manager for the account of the Developer under this Agreement, the Manager shall release such money or other property to the Developer within a reasonable period of time, but in no event later than thirty (30) days following such request. The Manager and its Affiliates, directors, officers, managers and employees will not be liable to the Developer, any Subsidiary, the Manager or any of their directors, officers, shareholders, managers, employees, owners or partners for any acts or omissions by the Developer in connection with the money or other property released to the Developer in accordance with the terms hereof. The Developer shall indemnify the Manager and its Affiliates, officers, directors, Development and Risk Management Committee members, employees, agents and successors and assigns against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever which arise in connection with the Manager’s release of such money or other property to the Developer in accordance with the terms of this Section 16. Indemnification pursuant to this Section 16 shall be in addition to any right of the Manager to indemnification under Section 16.
 
17.
Notices.
 
Unless expressly provided otherwise in this Agreement, all notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt or upon actual receipt of (a) personal delivery, (b) delivery by a reputable overnight courier, (c) delivery by facsimile transmission but only if such transmission is confirmed, (d) delivery by email but only if receipt of such transmission is confirmed, or (e) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:
 
 
 
 
The Developer:
 
 
SeD Maryland Development, LLC
9 Temasek Boulevard #09-02A,
Suntec Tower 2
Singapore 038989
Attn: Chew Sien Lup, Singapore eDevelopment, Limited
Email: sienlup@sed.com.sg
 
9 Temasek Boulevard #09-02A,
Suntec Tower 2
Singapore 038989
Attn: Moe Chan
Email: moe@sed.com.sg
 
The Manager:
 
 
SeD Development Management, LLC
312 3rd Street
Suite 102
Annapolis, MD 21403
Attn:  Charles W. S. MacKenzie
Fax:  410-832-2937
Email:  cmackenzie@mackenzieequity.com
 
Hampden Square, 4800 Montgomery Lane
Suite 450
Bethesda, MD 20814
Attn: Jeff Busch   
Email: jeff@185hk.com
with a copy to:
Conn Flanigan, Esq.
1601 Blake Street, Suite 310
Denver, CO 80202
Conn@185hk.com
303-953-4245
 
 
 
 
 
Any party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 17 for the giving of notice.
 
18.
Binding Nature of Agreement; Successors and Assigns.
 
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns as provided in this Agreement.
 
19.
Entire Agreement; Amendments.
 
This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement. The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement. This Agreement may not be modified or amended other than by an agreement in writing signed by the parties hereto.
 
20.
Governing Law; Jurisdiction.
 
This Agreement and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Delaware without giving effect to such state’s laws and principles regarding the conflict of interest laws. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware and the United States District Court in Delaware for the purpose of any action or judgment relating to or arising out of this Agreement or any of the transactions contemplated hereby and to the lay of venue in such court.
 
21.
Waiver of Jury Trial.
 
EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
 
 
 
 
22.
Indulgences, Not Waivers.
 
Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
 
23.
Titles Not to Affect Interpretation.
 
The titles of sections, paragraphs and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement.
 
24.
Execution in Counterparts.
 
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
 
25.
Severability.
 
The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
 
26.
Principles of Construction.
 
Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. All references to recitals, sections, paragraphs and schedules are to the recitals, sections, paragraphs and schedules in or to this Agreement unless otherwise specified.
 
[SIGNATURE PAGE FOLLOWS]
 
 
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
 
 
THE DEVELOPER:
 
SeD MARYLAND DEVELOPMENT, LLC
 
 
By: /s/ Chew Sien Lup        
Name:
Title: CFO
 
 
 
THE MANAGER:
 
SeD DEVELOPMENT MANAGEMENT, LLC.
 
 
 
By: /s/ Jeffrey Busch                                                                  
Name:
Title: President
 

 
 
EXHIBIT 10.7
 
AMENDED AND RESTATED
 
LIMITED LIABILITY COMPANY AGREEMENT
 
OF
 
SeD MARYLAND DEVELOPMENT, LLC
 
This Amended and Restated   Limited Liability Company Agreement (together with the schedules attached hereto, this “ Agreement ”) of SeD MARYLAND DEVELOPMENT, LLC, a Delaware limited liability company (the “ Company ”), is entered into on September 16, 2015, by the parties identified on Schedule B attached hereto (the “ Members ” and each a “ Member ”). Capitalized terms used and not otherwise defined herein have the meanings set forth on Schedule  A attached hereto.
 
RECITALS
 
WHEREAS, the Company was formed as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. § 18-101 et seq .), as amended from time to time (the “ Act ”), pursuant to that certain Certificate of Formation of the Company filed with the Delaware Secretary of State on October 16, 2014 (the “ Certificate of Formation ”).
 
WHEREAS, SeD Ballenger, LLC (“ SeD Ballenger ”) was the original member of the Company.
 
WHEREAS, SeD Ballenger entered into that certain Limited Liability Company Agreement dated January 8, 2015 (the “ Original LLC Agreemen t”).
 
WHEREAS, as of September 25, 2015, SeD Ballenger shall have contributed $12,697,568 to the capital of the Company.
 
WHEREAS, pursuant to the terms and conditions of that certain Membership Interest Purchase Agreement, dated as of the date hereof (the “ Purchase Agreement ”), by and among the Company, SeD Ballenger and CNQC Maryland Development LLC, a Delaware limited liability company (“ CNQC ”), CNQC has purchased from the Company a newly issued Interest in the Company (the “ Purchased Interest ”) representing 16.45% of the outstanding Interests in the Company, in exchange for the payment by CNQC to the Company of US$2,500,000 in cash on September 25, 2015.
 
WHEREAS, the Members wish to enter into this Agreement to amend and restate the Original LLC Agreement in its entirety and to set forth the terms and conditions that will govern their relationship with respect to the Company and operation of the Company’s business.
 
 
 
 
NOW, THEREFORE, in consideration of the mutual promises herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the Company and undersigned Members hereby agree that the Original LLC Agreement is amended and restated in its entirety as follows:
 
AGREEMENT
 
1.   Name . The name of the limited liability company is “ SeD Maryland Development, LLC .”
 
2.   Principal Business Office . The principal office of the Company in the United States shall be at such place as the Company may designate, which need not be in the State of Delaware, and the Company shall maintain records there as required by the Delaware Act and shall keep the street address of such principal office at the registered office of the Company in the State of Delaware. The Company may have such other offices as the Board of Managers may designate from time to time, upon approval of at least a majority of the Managers.
 
3.   Registered Office . The address of the registered office of the Company in the State of Delaware is 16182 Coastal Highway, Lewes, DE 19958.
 
4.   Registered Agent . The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is Harvard Business Service, 16182 Coastal Highway, Lewes, DE 19958.
 
5.   Members .
 
(a)   The mailing address of each Member is set forth on Schedule  B attached hereto.
 
(b)   The Members may act by unanimous written consent in lieu of a meeting.
 
6.   Certificates . The Certificate of Formation of the Company, and each other certificate of or relating to the Company, filed on or prior the date hereof with the Secretary of State of the State of Delaware, have been executed, delivered and filed by an “authorized person” of the Company within the meaning of the Act. The execution, delivery and filing of the Certificate of Formation of the Company and each other certificate of or relating to the Company filed on or prior the date hereof with the Secretary of State of the State of Delaware are hereby expressly approved, ratified and confirmed in all respects. Upon the execution of this Agreement, each of Charles Mackenzie, Tung Moe Chan and Jeffrey Busch shall be designated as an “authorized person” and shall continue as a designated “authorized person” within the meaning of the Act, unless the Board of Managers authorize, upon approval of at least a majority of the Managers, a change in the authorized persons. An “authorized person” shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in any other jurisdiction in which the Company may wish to conduct business.
 
 
 
 
The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.
 
7.   Purposes .
 
(a)   The business of the Company shall be to acquire, own, develop, hold, operate, maintain, manage, sell, mortgage, finance, pledge, convey, lease and otherwise encumber and in any manner deal with that certain land consisting of approximately 197 acres known as Parcels 53, 54 and 243 on Tax Map 86 in Frederick County, Maryland, together with the buildings, structures, and improvements thereon erected and/or to be erected thereon and all appurtenances thereof and interests therein, and any personal property located thereon or used in connection therewith, known as Ballenger Run, and being more particularly described in Exhibit A attached hereto and made a part hereof (collectively, the “ Property ”), and to carry on all such other business incidental to and not inconsistent with the general purposes herein set forth.
 
(b)   Subject to the approval rights of the SeD Ballenger set forth herein and the Board of Managers set forth in Section 10(f) below, the Management Company or any authorized person designated or appointed pursuant to a resolution adopted by the Board of Managers, upon approval of at least a majority of the Managers, (individually an “Authorized Signatory”), may enter into, execute and perform (i) the Basic Documents and all documents, agreements, certificates, or financing statements contemplated thereby or related thereto and any resolution relating to the Basic Documents, and (ii) any and all agreements, documents, instruments and any additions to, deletions from, changes in, or amendments thereto and do or cause to be done any and all acts and things, as such Authorized Signatory shall deem necessary, appropriate or desirable, in the best interests of the Company. Any Authorized Signatory executing documents on behalf of the Company may execute such documents using such person’s title, or in lieu of any title, the designation “ Authorized Signatory .” The foregoing shall not be deemed a restriction on the power and authority of the Board of Managers to execute documents or take other actions on behalf of the Company so long as duly approved by at least a majority of the Managers.
 
8.   Development of Project .
 
(a)   Development of the Project . The Board of Managers shall take such actions as shall be required to cause either the Company or the Management Company (as defined in Section 9(b) below) to perform and complete the construction and other development work as contemplated and/or required under the NVR Purchase and Sale Agreements, or any other construction company selected by the Board of Managers (the “ Development Work ”), substantially in accordance with the Project Plan, at a cost to the Company not exceeding the total cost set forth in the Budget, in a manner consistent with this Agreement and all applicable laws, ordinances, rules, regulations or requirements (including, without limitation, those with respect to discrimination) of governmental authorities, and in compliance with any covenants, conditions or restrictions affecting all or any portion of the Property.
 
 
 
 
(b)   Project Plan and Budget . The Board of Managers shall take such actions as shall be required to cause either the Company or the Management Company to prepare (i) a project plan for the acquisition and development of the Property and the timely performance and completion of the Development Work in accordance with the Budget (the “ Project Plan ”), and (ii) a budget of the hard and soft costs of the Development Work and the other costs to complete the development of the Property (the “ Budget ”), which Budget shall be prepared not later than thirty (30) days prior to the commencement of each Fiscal Year . The Board of Managers shall use commercially reasonable efforts to operate in all material respects in accordance with the Budget , and shall review the Budget periodically and make any recommendations with respect to the Project Plan and the Budget. The Project Plan and Budget, and any amendments, revisions or modifications thereto, shall be approved by the Board of Managers pursuant to Section 10(f) below.
 
(c)   Project Financing . It is anticipated by the Members that funding for Development Work and other capital needs of the Company (“ Project Financing ”) will be provided by a third party institutional lender (“ Institutional Lender ”). Subject to the terms hereof, the Board of Managers shall oversee and make all final determinations with respect to obtaining all Project Financing for the Project and the Company’s business, including, without limitation (i) the final selection of the Institutional Lender or other final financing source that will provide the Project Financing; (ii) the final approval of all terms and conditions of the Project Financing; and (iii) the negotiation of all final terms and conditions contained in the loan documents evidencing and securing all Project Financing. As soon as reasonably practicable, the Board of Managers shall: (A) arrange for Project Financing which is sufficient to permit the Company to develop, construct, complete, market and sell the Development Work on terms acceptable to the Board of Managers; (B) cause such Project Financing to close and be available to the Company for the purposes described herein; and (C) provide the Institutional Lender or other lending source providing the Project Financing (the “ Project Financing Lender ”) with, or causing the Project Financing Lender to be provided with, such guaranties of payment and performance with respect to the Project Financing as may be reasonably required by the Project Financing Lender. Notwithstanding anything to the contrary in this Agreement, none of the Members, nor any of the principals or equity holders of any of the Members, shall have any obligation or duty of any kind to provide any guaranty or other credit support with respect to any Project Financing.
 
9.   Management .
 
(a)   Board of Managers. Subject to any limitations specifically imposed by the Act or this Agreement, the Board of Managers shall have the sole right to make all decisions relating to the business, affairs and properties of the Company, and any and all other acts or activities customary or incident to the management of the Company’s business and objectives. The Board of Managers may delegate any of its rights or responsibilities to (i) an Authorized Signatory pursuant to Section 7(b) above, (ii) the Management Company, pursuant to Section 9(b) below, or (iii) any officer of the Company pursuant to Section 10 below. Any delegation pursuant to this Section 9(a) may be revoked at any time by the Board of Managers in its sole discretion.
 
 
 
 
(b)   Management Company . Pursuant and subject to the terms and conditions of that certain Management Agreement, dated as of July 15, 2015, by and between the Company and SeD Development Management, LLC, a Delaware limited liability company (the “ Management Company ”) attached hereto as Exhibit B (the “ Management Agreement ”), and subject to the approval rights of the Board of Managers set forth in Section 10(f) below, the daily business and affairs of the Company shall be managed by the Management Company. The Management Company shall be entitled to be paid the fees and shall have the other rights, benefits and obligations as are set forth in the Management Agreement. The Management Company shall be a “manager” within the meaning of and for purposes of the Act. The Board of Managers shall act on behalf of the Company with respect to the Management Company, the terms and provisions of the Management Agreement, including, without limitation, the right to remove the Management Company . Subject to the foregoing, the Management Company has the authority to bind the Company.
 
10.   Board of Managers; Officers . A Board of Managers of the Company shall be established pursuant to this Section 10 . Notwithstanding the last sentence of Section 18-402 of the Act, no Manager, acting individually in its capacity as such, nor each of the Members, acting individually in its capacity as such, shall have any right or authority to act for, bind or otherwise assume any obligation or responsibility on behalf of, the Company, except as specifically authorized in accordance with this Agreement. Except as otherwise specifically provided herein, the Company may only act and bind itself through (i) the collective action of the Managers in accordance with this Agreement or (ii) the action of the Officers of the Company, if and to the extent authorized by this Agreement or by the Board of Managers in accordance with this Agreement. The Board of Managers may, from time to time as it deems advisable, appoint officers of the Company (the “ Officers ”) and assign in writing titles (including, without limitation, President, Vice President, Secretary, Treasurer or attorney-in-fact) to any such individual. The Board of Managers may remove any Officer at any time with or without cause. No Officer shall be paid any compensation or other remuneration solely for serving as an Officer of the Company. Unless the Board of Managers decides otherwise, if the title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office.
 
(a)   Number and Initial Managers. The number of Managers constituting the Board of Managers shall be as determined by the Members in accordance with this Agreement, but in no instance shall there be less than one Manager. The initial number of Managers constituting the Board of Managers shall be three. The Members , by unanimous vote,   may from time to time change the number of Managers constituting the Board of Managers by adopting resolutions to that effect. The Board of Managers shall be comprised as follows:
 
(i)   Two individuals designated by SeD Ballenger, who shall initially be Chan Heng Fai and Chan Tung Moe, one of which will be the Chairman of the Board of Managers; and
 
 
 
 
(ii)   one individual designated by CNQC, who shall initially be Li Gen Zhong.
 
(b)   Duties of the Manager . Each Manager shall be obliged to devote only as much of their time to the Company’s business as shall be reasonably required in light of the Company’s business and objectives. Each Manager shall perform his or her duties as a Manager in good faith, in a manner he or she reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent Person in a like position would use under similar circumstances.
 
(c)   Election of Managers; Vacancies; Term. Managers shall be appointed from time to time by the Members. In the event of a vacancy in the Board of Managers, including vacancies created by an increase in the number of Managers pursuant to Section  10(a) , the Member(s) who are entitled to appoint the initial managers pursuant to Section  10(a) above shall have the right to fill such vacancy (by way of example only, if there is a vacancy by one of the Managers appointed by SeD Ballenger, then SeD Ballenger shall have the right to appoint the successor manager). Each member of the Board of Managers, including each Manager appointed to fill a vacancy on the Board of Managers, shall hold office until the earlier of his or her resignation, removal, retirement or death or the appointment and qualification of his or her successor.
 
(d)   Resignation and Removal of Managers.  A Manager may resign upon delivery of written notice thereof to the Chairman of the Board of Managers or, in case of the Chairman’s resignation, to an Authorized Signatory, provided that any Manager who receives written notice of the resignation from the Chairman shall promptly forward such written notice to the other members of the Board of Managers. A Manager may be removed from office with or without cause by unanimous consent of the Members.
 
(e)   Meetings of the Board of Managers .
 
(i)   Location . The Board of Managers may hold meetings, both regular and special, either within or without the State of Delaware.
 
(ii)   Regular Meetings . Regular meetings of the Board of Managers may be held without notice at such time and at such place as shall, from time to time, be determined by the Board of Managers.
 
(iii)   Special Meetings . Special meetings of the Board of Managers may be called by any Manager.
 
 
 
 
(iv)   Notice of Meetings . Regular meetings of the Board of Managers may be held without notice. The person(s) calling a special meeting of the Board of Managers shall, at least two days (or, in the case of notice given by mail, not less than three days) before such meeting, give or cause to be given notice thereof to each Manager by any usual means of communication. Such notice need not specify the purpose for which the meeting is called. Any duly convened regular or special meeting may be adjourned by the Board of Managers to a later time without further notice. Any Manager may waive notice of any meeting either before or after such meeting. The waiver must be signed in writing by the Manager entitled to notice and delivered to the Company for inclusion in the Company’s records. A Manager’s attendance at or participation in a meeting shall constitute a waiver of notice of such meeting, except when such Manager attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Managers need be specified in any written waiver of notice.
 
(v)   Quorum , Adjournments and Acts of the Board of Managers . At all meetings of the Board of Managers, the presence of at least one member nominated by SeD Ballenger and one member nominated by CNQC, if applicable, shall constitute a quorum for the transaction of business. Each member of the Board of Managers may appoint an Officer or any other Person to act on his behalf in case such Manager is unavailable to attend the meeting. Each member of the Board of Managers, or its representative, as applicable, shall be entitled to one vote, and the affirmative vote of a majority of the members of the Board of Managers present at any meeting at which there is a quorum shall be the act of the Board of Managers, except as may be otherwise specifically provided by the Act. If a quorum is not present at a meeting of the Board of Managers, the Managers present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting. After two adjourned meetings at which a quorum was not present or represented, the presence of any members of the Board of Managers, or their representatives, at the third adjourned meeting shall be sufficient to constitute a quorum for the transaction of business. At any adjourned meetings, any business may be transacted which might have been transacted at the meeting as originally notified.
 
(vi)   Action Without Meeting. Unless otherwise restricted by the Act, any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting, if a written consent thereto is signed by all members of the Board of Managers before or after such action, describing the action to be taken or previously taken, and included in the minutes of the Board of Managers or filed with the Company’s records.
 
 
 
 
(vii)   Organization . There may be a Chairman of the Board of Managers elected by the Managers from their number at any meeting of the Board of Managers. The Chairman shall preside at all meetings of the Board of Managers and perform such other duties as may be directed by the Board of Managers, and shall serve as Chairman at the pleasure of the Board of Managers. Until a Chairman of the Board of Managers is elected, the President of the Company shall preside at the meetings of the Board of Managers. The Secretary or an Assistant Secretary of the Company, if any, shall act as Secretary of any meeting of the Board of Managers, but if neither has been appointed or in their absence, the Chairman may appoint any person to act as Secretary of the meeting.
 
(viii)   Meeting by Conference Telephone . Any member of the Board of Managers may participate in any meeting of the Board of Managers by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear, and be heard by, each other, and such participation shall constitute presence in person at such meeting.
 
(f)   Greater Than Fifty Percent Majority Approval . Certain major decisions involving the Company shall require approval of a majority of the Managers. Without limiting the generality of the preceding sentence, the following actions shall require approval of at least a majority percent of the Managers:
 
(i)   to borrow money (other than trade payables) in excess of $500,000 (in one or a related series of transactions) and/or grant security interests in Company property to secure such loans;
 
(ii)   to make all decisions and determinations with respect to the Project Financing in accordance with the terms of Section 8(c) above;
 
(iii)   to guarantee the debts of any Person, or to provide any credit or to grant any loan or advance to (A) any employee or similar person of the Company, or (B) any third party in an amount in excess of $50,000;
 
(iv)   to enter into any new line of business;
 
(v)   to amend, modify, waive or terminate the Management Agreement;
 
(vi)   to approve the Project Plan and Budget, and any revisions or changes thereto;
 
(vii)   to require the Members to make any Member Loans;
 
(viii)   to exercise the right of first refusal pursuant to Section 22(c) below or to make the rights under Section 22(g) below;
 
 
 
 
(ix)   to designate a Tax Matters Partner (as defined herein);
 
(x)   to delegate any of the powers, authority rights or obligations of the Board of Managers to (i) an Authorized Signatory pursuant to Section 7(b) , (ii) the Management Company, pursuant to Section 9(b) , or (3) any officer of the Company pursuant to Section 10 ;
 
(xi)   to appoint or remove any Officer;
 
(xii)   removal and replacement of a Manager from office;
 
(xiii)   to appoint a new Management Company, in accordance with the terms of the Management Agreement;
 
(xiv)   to amend, modify or terminate the NVR Purchase Agreements (or any of them);
 
(xv)   to sell, transfer, assign or otherwise dispose of, or encumber, any major asset of the Company;
 
(xvi)   to organize or acquire any subsidiary or to subscribe for or acquire shares in, or other securities of, or interest in, any other corporate body or Person;
 
(xvii)   to register or qualify any securities of the Company under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable laws;
 
(xviii)   to determine the maximum and minimum working capital requirements of the Company ;
 
(xix)   any merger of the Company with or into another Person;
 
(xx)   any acquisition of another Person, whether by merger, consolidation, purchase of stock or assets, or otherwise;
 
(xxi)   to borrow money from a Member or Members;
 
(xxii)   to implement any plan or arrangement for the issuance of, or to issue, membership interests or other security convertible into membership interests;
 
(xxiii)   to issue or sell any new membership interests to any Person or admit any new Member;
 
(xxiv)   to register or qualify any securities of the Company under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable laws;
 
 
 
 
(xxv)   to pay any distributions to the Members, whether in cash or in kind; and
 
(xxvi)   to acquire any major asset or make any major expenditure with any Company funds, except in accordance with the Budget.
 
Subject to the power and authority provided above in Section 10 (f)(x), unless authorized by at more than fifty percent of the Managers, no attorney-in-fact, employee, or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit, or to render it liable pecuniarily for any purpose.
 
(g)   Unanimous Approval . Certain major decisions involving the Company shall require unanimous approval of the Managers. Without limiting the generality of the preceding sentence, the following actions shall require unanimous approval of the Managers:
 
(i)   amending the Certificate of Formation of the Company;
 
(iii)   amending the terms of this Agreement;
 
(iii)   increasing of the number of Managers beyond three (3);
 
(iv)   instituting any proceedings under bankruptcy laws or other law of general application to debtors seeking relief from claims of creditors, or having a receiver or trustee appointed for the benefit of the Company, the undertaking of any action that would render the Company insolvent or unable to pay its debts as they become due, making a general assignment for the benefit of creditors, or causing a dissolution, liquidation or winding-up of the Company.
 
(h)   No Exclusive Duty to Company; Compensation. Members of the Board of Managers shall not be required to manage the Company as their sole and exclusive function, and they may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor the Members shall have any right, by virtue of this Agreement, to share or participate in such other investments or activities of members of the Board of Managers acting in a capacity other than as a member of the Board of Managers or to the income or proceeds derived therefrom. No member of the Board of Managers shall be compensated for serving as a Manager, unless compensation shall be duly authorized by SeD Ballenger. Notwithstanding the foregoing, the Board of Managers shall provide for the payment or reimbursement of any or all reasonable expenses incurred by any Manager in connection with the authorized services performed by such Manager on behalf of the Company.
 
 
 
 
 
(i)   Conflicts of Interest.  No contract or transaction between the Company and one or more of its Managers, or between the Company and an Affiliate of any Manager, shall be void or voidable: (a) solely for that reason; (b) solely because such Manager is present at or participates in the meeting of the Board of Managers or committee thereof which authorizes, approves or ratifies the contract or transaction; (c) solely because the votes of such Manager are counted for such purpose; or (d) if the transaction is fair as to the Company as of the time it is authorized, approved or ratified by the Board of Managers or the Members. Common or interested Managers may be counted in determining the presence of a quorum at a meeting of the Board of Managers.
 
11.   Deadlock .
 
(a)   Subject to the terms and provisions hereof, if the Members or the Managers are unable to agree on any of the matters described in this Agreement, including, but not limited to Section 10(f) and Section 10(g) hereof and such disagreement continues for [thirty (30)] days despite good faith deliberations by the Members or the Managers, as applicable (“ Deadlock ”), then either Member shall be entitled to exercise the buy-sell rights set forth in this Section  11(a) by delivering a Buy-Sell Offer Notice (as defined herein). The provisions of this Section  11(a) shall not apply with respect to any disagreement regarding the CNQC Option.
 
(b)   If a Member wishes to exercise the buy-sell right provided in this Agreement, such Member (the “ Initiating Member ”) shall deliver to the other Member (the “ Responding Member ”) written notice (the “ Buy-Sell Offer Notice ”) of such election, which notice shall include (i) a description of the circumstances that triggered the buy-sell right, and (ii) the purchase price (which shall be payable exclusively in cash (unless otherwise agreed)) at which the Initiating Member shall purchase all of the Interests owned by the Responding Member (the “ Buy-out Price ”) or sell all of its Interests to the Responding Member (the “ Sell-out Price ”), with any difference between the Buy-out Price and the Sell-out Price based solely on each Member’s Interest in the Company, without regard to any market discount or premium from differences in such proportionate interests. The Member who first delivers the Buy-Sell Offer Notice to the other Member shall be the Initiating Member.
 
(c)   Within [thirty (30)] days after the Buy-Sell Offer Notice is received (the “ Buy-Sell Election Date ”), the Responding Member shall deliver to the Initiating Member a written notice (the “ Response Notice ”) stating whether it elects to sell all of its Interests to the Initiating Member for the Buy-out Price or buy all of the Interests owned by the Initiating Member for the Sell-out Price. The failure of the Responding Member to deliver the Response Notice by the Buy-Sell Election Date shall be deemed to be an election to sell all of its Interests to the Initiating Member at the Buy-out Price.
 
 
 
 
(d)   The closing of any purchase and sale of Interests pursuant to this Section  11 shall take place [fifteen (15)] days after the Response Notice is delivered or deemed to have been delivered or some other date mutually agreed upon by the parties. The Buy-out Price or the Sell-out Price, as the case may be, shall be paid at closing by wire transfer of immediately available funds to an account designated in writing by the selling Member (the “ Selling Member ”). At the closing, the Selling Member shall deliver to the purchasing Member (the “ Purchasing Member ”) good and marketable title to its Interests, free and clear of all liens and encumbrances. Each Member agrees to cooperate and take all actions and execute all documents reasonably necessary or appropriate to reflect the purchase of the Selling Member’s Interest by the Purchasing Member.
 
(e)   If the Purchasing Member defaults in any of its material closing obligations, then the Selling Member shall have the option to purchase the Purchasing Member’s entire Interest at a price that is equal to [85]% of the purchase price of the Purchasing Member’s Interest determined in accordance with Section 11(b) above.
 
12.   Limited Liability . Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and no Member, Manager, authorized person or Authorized Signatory shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, Management Company, Manager, authorized person or Authorized Signatory of the Company.
 
13.   Initial Capital Contributions . Each Member has contributed to the capital of the Company cash in the amount set forth next to such Member’s name on Schedule  B hereto (an “ Initial Capital Contribution ”). Each Member’s Interest in the Company is expressed as a percentage and is set forth next to such Member’s name on Schedule B hereto. Each Member acknowledges that its percentage Interest in the Company may change over the life of the Company and, in the event of any such change in its percentage Interest in the Company, the Management Company shall revise Schedule B hereto to reflect any such change. A separate capital account (“ Capital Account ”) has been or will be established and maintained for each member in accordance with Section 1.704-1(b)(2)(iv) of the Treasury Regulations.
 
14.   Capital Contributions; Member Loans .
 
(a)   Voluntary Capital Contributions. Except for the Members’ obligation to make its respective Initial Capital Contribution , the Members shall not be required to make any additional capital contribution to the Company. To the extent that any operating revenue and the proceeds of any loans to the Company are insufficient to fully fund the development costs set forth in the Budget, any additional capital requirements shall be fulfilled by one or more member loans (“ Member Loans ”) in accordance with this Section 14 .
 
 
 
 
(b)   Member Loans . Subject to the terms hereof, Member Loans shall be made by the Members in an amount equal to their pro rata portion of the Member Loan amount based on their respective percentage Interests in the Company at that time. In the event the Board of Managers determines to require Member Loans, the Board of Managers shall provide written notice to the Members of such election at least fifteen (15) Business Days prior to the date such loans will be made to the Company, together with the amount of the Member Loans required and terms of repayment of such Member Loans (“ Member Loan Notice ”). Each Member shall have ten (10) Business Days after receipt of the Member Loan Notice to either agree or decline to make its respective Member Loan; provided that if a Member fails or otherwise elects to decline to make the Member Loan, then the other Member shall have the option to make 100% of the Member Loan amount on the terms set forth in the Member Loan Notice. Such Member Loans shall have a two-year term and will be made in exchange for a 15% interest rate per annum to be paid annually, or any other terms approved by at least a majority of the Board of Managers.
 
(c)   Member Loan Cap . If a any time the Board of Managers determined to require additional capital contribution to the Company in an aggregate amount greater than $5.0 million (USD), CNQC shall have the option to sell its entire Interest to SeD Ballenger (the “ CNQC Option ”), at a purchase price equal to the lesse r of (i) the fair market value of the CNQC Interest as determined pursuant to Section 22(d)(ii) , and (ii) CNQC’s Initial Capital Contribution minus any distributions made to CNQC; which shall be paid in up to 90 Business Days from the receipt of the Election Notice (as defined below) by SeD Ballenger. CNQC shall have ten (10) Business Days from receipt of the Member Loan Notice to elect in writing to exercise the CNQC Option (the “ Election Notice ”); provided that if a CNQC fails or otherwise elects to decline to make such option, then it shall be understood that CNQC waives its right to exercise the CNQC Option and the terms of Section 14(b) above shall apply.
 
(d)   Revaluing Capital Accounts . If (i) a new or existing Member acquires additional Interests in the Company in exchange for more than a de minimis contribution of property or services, (ii) the Company distributes to a Member more than a de minimis amount of Company property as consideration for such Interests, or (iii) the Company is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, the Board of Managers shall revalue the property of the Company to its fair market value (as determined by the Board of Managers, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations; provided, however, that the adjustments pursuant to clauses (i) and (ii) above shall be made only if the Manager determines, it is reasonable discretion, that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members of the Company. When the Company’s property is revalued by the Manager, the Capital Accounts of the Company shall be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Members pursuant to Sections  15 and 16 if there were a taxable disposition of such property for its fair market value (as determined by the Managers, in their sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.
 
 
 
 
15.   Allocation of Profits and Losses ; Tax Characterization .
 
(a)   Profit and loss of the Company for each 12-month period ending December 31 of each year or such other taxable year as may be required by Section 706(b) of the Code (“ Fiscal Year ” or “ Taxable Year ”) shall be allocated to the Members in accordance with their respective Interests.
 
(b)     Notwithstanding any provision to the contrary, (i) any expense of the Company that is a “nonrecourse deduction” within the meaning of Treasury Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Members’ respective Interests, (ii) any expense of the Company that is a “partner nonrecourse deduction” within the meaning of Treasury Regulations Section 1.704-2(i)(2) shall be allocated in accordance with Treasury Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any Taxable Year, items of gain and income shall be allocated among the Members in accordance with Treasury Regulations Section 1.704-2(f) and the ordering rules contained in Treasury Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Treasury Regulations Section 1.704-2(i)(4) for any Taxable Year, items of gain and income shall be allocated among the Members in accordance with Treasury Regulations Section 1.704-2(i)(4) and the ordering rules contained in Treasury Regulations Section 1.704-2(j). A Member’s “interest in partnership profits” for purposes of determining its share of the nonrecourse liabilities of the Company within the meaning of Treasury Regulations Section 1.752-3(a)(3) shall be the percentage of all outstanding Membership Units held by such Member.
 
(c)   If a Member receives in any Taxable Year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a negative balance in such Member’s Capital Account that exceeds the sum of such Member’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Treasury Regulations Sections 1.704-2(g) and 1.704-2(i), such Member shall be allocated specially for such Taxable Year (and, if necessary, later Taxable Years) items of income and gain in an amount and manner sufficient to eliminate such negative Capital Account balance as quickly as possible as provided in Treasury Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a Member in accordance with this Section  15(c) , to the extent permitted by Regulations Section 1.704-1(b) and Section  15(c) hereof, items of expense or loss shall be allocated to such Member in an amount necessary to offset the income or gain previously allocated to such Member under this Section  15(c) .
 
 
 
 
(d)   Loss shall not be allocated to a Member to the extent that such allocation would cause a deficit in such Member’s Capital Account (after reduction to reflect the items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Member’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any loss in excess of that limitation shall be allocated to all the other Members in accordance with their respective Interests. After the occurrence of an allocation of loss to a Member in accordance with this Section  15(c) , to the extent permitted by Treasury Regulations Section 1.704-1(b), profit shall be allocated to such Member in an amount necessary to offset the loss previously allocated to such Member under this Section  15(c) .
 
(e)   If a Member transfers any part or all of its Interests and the transferee is admitted as provided herein (a “ New Member ”), the distributive shares of the various items of profit and loss allocable among the Members during such Fiscal Year shall be allocated between the transferor and the New Member (at the election of the Board) either (i) as if the Fiscal Year had ended on the date of the transfer or (ii) based on the number of days of such Fiscal Year that each was a Member without regard to the results of Company activities in the respective portions of such Fiscal Year in which the transferor and New Member were Members.
 
(f)    “Profit” and “loss” and any items of income, gain, expense or loss referred to in this Section 15 shall be determined in accordance with federal income tax accounting principles as modified by Treasury Regulations Section 1.704-1(b)(2)(iv), except that profits and losses shall not include items of income, gain, and expense that are specially allocated pursuant to Section  15(b) , 15(c) or 15(d) hereof. All allocations of income, profits, gains, expenses, and losses (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section  15 , except as otherwise required by Section 704(c) of the Code and Section 1.704-1(b)(4) of the Treasury Regulations.
 
(g)   The parties hereby agree to treat the purchase by CNQC of the Purchased Interest as a contribution of cash to the Company in exchange for the Purchased Interest on a basis consistent with Revenue Ruling 99-5, 1999-1 C.B. 434 (Situation 2). Each of the Members shall file all tax returns and tax informational statements on a basis consistent with such characterization.
 
16.   Distributions .
 
(a)   Distributions shall be made to the Members at the times and in the aggregate amounts approved by the Board of Managers, but always (i) after any Member Loan is repaid in its totality and there are no Member Loans outstanding, and (ii) in amounts proportional to their then-current respective Interests in the Company.
 
Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to the Members on account of their Interests in the Company if such distribution would violate Section 18-607 of the Act or any other applicable law or any Basic Document. Distributions shall be calculated and paid subject to the rights of the Management Company under the Management Agreement.
 
 
 
 
 
(b)   Notwithstanding anything to the contrary herein, the Company shall withhold all amounts required to be withheld pursuant to Section 1446 of the Code or any other provision of federal, state, or local tax law, and any such withholdings shall be treated as amounts actually distributed to the affected Members for all purposes under this Agreement.
 
17.   Books and Records . The Board of Managers shall keep or cause to be kept complete and accurate books of account and records with respect to the Company’s business. The books of the Company shall at all times be maintained by the Board of Managers. The Company, and the Board of Managers on behalf of the Company, shall not have the right to keep confidential from the Members any information that the Board of Managers would otherwise be permitted to keep confidential from the Members pursuant to Section 18-305(c) of the Act. The Company’s independent auditor, if any, shall be an independent public accounting firm selected by the Board of Managers.
 
18.   Reports . At the Company’s expense, the Board of Managers shall prepare and deliver, or cause to be prepared and delivered, to the Company, and the Company shall approve and deliver to the Members no later than 75 days after the close of each Fiscal Year, a Schedule K-1, a copy of the Company’s informational tax return (IRS Form 1065), and such other reports (collectively, the “ Annual Tax Reports ”) setting forth in sufficient detail all such information and data with respect to the transactions effected by or involving the Company during such Fiscal Year as shall enable the Company, each Member to prepare its federal, state, and local income tax returns in accordance with the laws, rules, and regulations then prevailing. No later than 90 days after the end of a Fiscal Year or 45 days after the end of each quarter in a Fiscal Year, the Board of Managers shall prepare or cause the preparation of, and shall deliver or cause to be delivered to the Members, statements of the Company’s (i) assets, liabilities and capital as of the end of the year or quarter, as applicable, and (ii) revenues and expenses for the year or the quarter and year-to-date, as applicable.
 
19.   Other Business . Notwithstanding any duty otherwise existing at law or in equity, any Member and any Affiliate of any Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
 
20.   Option to Purchase Lots . SeD Ballenger, or any of its Affiliates (including, but not limited to, Mr. Heng Fai Chan and any companies controlled by, or affiliated with, Mr. Heng Fai Chan), shall, at any time during the duration of the Development Work, have the sole and absolute option to purchase (i) the CCRC Multifamily Parcel at the appraised price of $2.8 million and/or (ii) the MF Multifamily Parcel at the appraised price of $5.25 million; as described in the development plan attached as Exhibit C .
 
 
 
 
21.   Exculpation and Indemnification .
 
(a)   The Managers, any Member, any employee, representative, authorized person, Authorized Signatory, or agent of the Company, the Manager or any Member, any officer, manager, employee, representative, agent or Affiliate of the Manager or any Member (or any officer, employee, representative or agent of any such Affiliate) (collectively, the “ Covered Persons ”), to the fullest extent permitted by law, shall not be liable to the Company or any other Person that is a party to or is otherwise bound by this Agreement for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person’s gross negligence or willful misconduct.
 
(b)   To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person’s gross negligence or willful misconduct with respect to such acts or omissions; provided , however , that any indemnity under this Section  21 by the Company shall be provided out of and to the extent of Company assets only, and the Members shall not have personal liability on account thereof.
 
(c)   To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section  21 .
 
(d)   A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, advice, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including, without limitation, information, opinions, advice and reports of legal counsel, accountants and other professional advisors, and statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Members might properly be paid.
 
 
 
 
(e)   To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.
 
(f)   The foregoing provisions of this Section  21 shall survive any termination of this Agreement.
 
22.   Assignments .
 
(a)   Restrictions on Assignment of Interests . No Member shall make or effect an Assignment of all, or any part of, such Member’s Interest, except as provided in this Section  22 . Notwithstanding anything contained in this Section 22 to the contrary, but subject to compliance with the provisions of Section 22(g) below, the Right of First Refusal contained in Section  22(c) below shall not apply to an assignment of CNQC Member Interest (i) to an Affiliate of CNQC, or (ii) pursuant to the exercise of the CNQC Option under Section   14(c) .
 
(b)   Assignment in a Permitted Transfer . Subject to Section  22(c) , a Member may at any time Assign any part of such Member’s Interest in a Permitted Transfer and the assignee of such Member’s Interest shall be deemed to be admitted as a Member of the Company without any further action or consent by the Members if such Permitted Transferee has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the assigned Interest.
 
(c)   Right of First Refusal . A Member who wishes to make an Assignment of such Member’s Interest to any Person, may make such an Assignment only after complying with the provisions of this Section  22(c) .
 
(i)   Any such Member shall promptly send a notice (the “ Offer Notice ”) to the Company and each other Member and be deemed to have offered to sell his or her Interest (the “ Offered Interest ”) otherwise subject to the proposed Assignment to the Company and to the other Members at the price and on the terms determined in accordance with this Section  22 . The Offer Notice shall include a statement of the type of proposed Assignment, the name, address (both home and business address in the case of a natural person), and business or occupation of the person to whom such Interest would be transferred, the consideration for the proposed Assignment, the payment terms and any other facts that are or would reasonably be deemed material to the proposed Assignment.
 
 
 
 
(ii)   Upon notice of a proposed Assignment, the Company shall have the first right and the other Members shall have the second right to purchase all, but not less than all, of the Offered Interest for the purchase price determined pursuant to Section  22(d) and upon the payment terms set forth in Section  22(e) . The Company shall exercise its right to purchase, if at all, by irrevocable notice to the Members and the selling Member within thirty (30) days of the date of the Offer Notice, and the remaining Members shall exercise their right to purchase, if at all, by irrevocable notice to the Company and the selling Member within forty five (45) days of the date of the Offer Notice. The Members may purchase in such proportion as they may agree or, absent agreement, in accordance with their respective percentage Interests (where the percentage Interests of all Members other than the proposed assignee equals 100%). The Company shall promptly give the remaining Members notice of the exercise by any other Members of their right to purchase.
 
(iii)   If the Company and the other Members do not agree to buy in the aggregate all of the Offered Interest within the applicable exercise periods, such Assignment may be completed on terms no more favorable to the transferee than those set forth in the Offer Notice. If an Assignment is not consummated within sixty (60) days after the expiration of the applicable exercise periods, the provisions of this Agreement will again apply to such Offered Interest as if no such Assignment had been contemplated and no notice had been given. An Assignment is consummated when the Company has been given notice by the parties involved that they have transferred the Interest subject to the Assignment to their satisfaction, subject to recordation by the Company on its books.
 
(d)   Determination of Purchase Price.
 
(i)   The price to be paid for the Interest of a selling Member shall be the price set forth in the Offer Notice. If the proposed Assignment is a pledge or gift then the price to be paid for the Interest shall be the fair market value as determined pursuant to Section 22(d)(ii) .
 
(ii)   If the non-assigning Member and the Member cannot agree on the price to be paid for an Interest within thirty (30) days of the date of the Offer Notice, then the independent certified public accountants then employed by the Company (the “ Accountants ”) shall determine the fair market value of the assigning Member’s Interest, taking into account minority or controlling interests discounts. If the Accountants are unable or unwilling to perform such an appraisal, the Accountants shall appoint an independent third party with not less than five (5) years’ experience appraising similar businesses to conduct the appraisal. The appraiser shall have thirty (30) days from the date of appointment to report the fair market value of the assigning Member’s Interest, and such appraisal shall be binding. The costs of appraisal shall be evenly divided between the Company and the assigning Member.
 
 
 
 
(e)   Payment Terms . The purchase price to be paid upon the purchase of all or a part a Member’s Interest under the provisions of Section  22(c) shall be paid in cash or by wire transfer of immediately available funds upon closing, together with any instruments of transfer and Assignment reasonably requested by the purchaser.
 
(f)   Closing; Payment of Purchase Price . Whenever a right of first refusal under Section  22(c) of this Agreement is exercised, the purchase of the Offered Interest will take place at a closing, to be held at 10 a.m. thirty (30) days after the date on which the last option to buy is exercised or lapses, or after the date on which the last buyer becomes obligated to buy, at the Company’s office or at any other time, date and place to which the parties agree. At the closing, the selling Member or his or her legal representative shall execute such documents of Assignment and transfer as the purchasers may reasonably request. Each Member appoints the Company as such Member’s agent and attorney-in-fact to execute and deliver all documents needed to convey such Member’s Interest, if the selling Member is not present at the closing. This power of attorney does not terminate on the Member’s disability, and continues for so long as this Agreement is in effect except as otherwise required by law.
 
(g)   Manner of Assignment .
 
(i)   No Assignment shall be effective unless all of the following conditions shall have been satisfied or waived by the Company:
 
(1)   the assignee shall have furnished to the Board of Managers an executed and delivered Assignment of the assignor’s Interest in form and substance satisfactory to the Board of Managers;
 
(2)   the assignee shall have executed and delivered to the Board of Managers an undertaking of the assignee to be bound by all the terms and provisions of this Agreement, in form and substance satisfactory to the Board of Managers, and such other instruments as may be required by law;
 
(3)   the Assignment shall not result in the termination of the Company for federal income tax purposes;
 
(4)   the Assignment shall comply with applicable federal and state securities laws;
 
(5)   the assignee shall have paid to the Company the amount determined by the Board of Managers to be equal to the costs and expenses incurred in connection with such Assignment;
 
 
 
 
(6)   the assignee shall acknowledge that the Interest has not been registered under the Securities Act of 1933, or any applicable state securities laws, in reliance upon exemptions therefrom, and shall covenant, represent, and warrant that the assignee is acquiring the Interest for investment only and not with a view to the resale or distribution thereof; and
 
(7)   the assignee shall furnish the Board of Managers with such other similar information or documentation as the Board of Managers may reasonably request.
 
(ii)   No purported Assignment or other act of a Member in contravention of the provisions of this Section  22(g) shall be or constitute an effective Assignment of an Interest, or otherwise be binding upon or recognized by the Company unless the assignor and the assignee shall have complied with the requirements of this Section  22(g) .
 
(iii)   Each Member hereby agrees to indemnify and hold harmless the Company, and the other Members, from and against all loss, damage or expense, including, without limitation, tax liabilities or loss of tax benefits, arising directly or indirectly as a result of any Assignment or purported Assignment in contravention of the provisions of this Section  22(g) .
 
(iv)   Involuntary Assignment by a Member . In the event a Member’s Interest, or any portion thereof, is taken by levy, foreclosure, charging order, execution or other similar involuntary proceeding, the Company shall not dissolve, but the statutory or other involuntary assignee of said Interest, or any portion thereof, shall be entitled only to the right to participate in allocations of profits and losses of the Company and the right to receive distributions from the Company.
 
(v)   Admission of New Members . Except as provided in Section  22(b) , no Person shall be admitted as a Member of the Company after the date of this Agreement without approval of at least a majority of the Managers.
 
(vi)   Members’ Representative and Successors . If a Member who is a natural person dies or a court of competent jurisdiction adjudges the Member to be incompetent to manage his or her person or property, the Member’s executor, administrator, guardian, conservator or other legal representative may exercise all the Member’s rights for the purpose of settling the Member’s estate or administering the Member’s property.
 
(vii)   Withdrawal of Members . No Member shall have the right to withdraw from the Company without the consent of a Majority in Interest (excluding the withdrawing Member).
 
 
 
 
23.   Resignation . A Member may not resign from the Company except with the prior written consent of the other Members. If a Member is permitted to resign pursuant to this Section  23 , and an additional member of the Company is to be admitted as a substitute member of the Company, such admission shall be subject to Section  22 hereof. Such admission shall be deemed effective immediately prior to the resignation and, immediately following such admission, the resigning Member shall cease to be a member of the Company.
 
24.   Forfeiture of Interests . Any Member who commits an act of fraud against the Company or materially breaches its fiduciary duties to the Company, as determined by a court of competent jurisdiction, shall forfeit its Interest in the Company, and such Interest shall immediately become null and void and shall no longer be outstanding without any further action on the part of the Company or any other Member.
 
25.   Dissolution .
 
(a)   The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the termination of the legal existence of the last remaining member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining member of the Company in the Company unless the Company is continued without dissolution in a manner permitted by this Agreement or the Act, (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act or (iii) the approval by at least a majority of the Managers. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company (other than (a) upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections  22 and 24 , or (b) the resignation of the current Members and the admission of one or more additional members of the Company pursuant to Sections 23 and  24 ) to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (A) to continue the Company and (B) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company.
 
(b)   Notwithstanding any other provision of this Agreement to the contrary, the Bankruptcy of a Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.
 
 
 
 
(c)   Notwithstanding any other provision of this Agreement, each Member waives any right it might have to agree in writing to dissolve the Company upon its Bankruptcy, or the occurrence of an event that causes such Member to cease to be a member of the Company.
 
(d)   In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act.
 
(e)   The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company shall have been distributed to the Members in the manner provided for in this Agreement, and (ii) the Certificate of Formation shall have been canceled in the manner required by the Act.
 
26.   Tax Matters Partner . SeD Ballenger, LLC, or such other Member as the Board of Managers may designate from time to time, shall be the Tax Matters Partner for the Company within the meaning of Section 6231(a)(7) of the Code (the “ Tax Matters Partner ”). The Tax Matters Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner. The Tax Matters Partner shall have the right to retain professional assistance in respect of any audit or controversy proceeding initiated with respect to the Company by the IRS or any state or local taxing authority, and all expenses and fees incurred by the Tax Matters Partner on behalf of the Company shall constitute expenses of the Company. In the event the Tax Matters Partner receives notice of a final partnership adjustment under Section 6223(a)(2) of the Code, the Tax Matters Partner shall either (i) file a court petition for judicial review of such adjustment within the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all other Members on the date such petition is filed, or (ii) mail a written notice to all other Members, within such period, that describes the Tax Matters Partner’s reasons for determining not to file such a petition.
 
27.   Tax Elections .
 
(a)   Except as otherwise provided in this Section  27 , the Board of Managers shall, in its sole discretion, decide whether to make any available elections under the Code or any applicable state or local tax law on behalf of the Company.
 
(b)   The Tax Matters Partner may, upon receiving the written consent of each other Member, make or revoke, on behalf of the Company, an election in accordance with Section 754 of the Code, so as to adjust the basis of Company property in the case of a distribution of property within the meaning of Section 734 of the Code, and in the case of a transfer of an Interest within the meaning of Section 743 of the Code. Each Member shall, upon request of the Tax Matters Partner, supply the information necessary to give effect to such an election.
 
 
 
 
(c)    No election shall be made by the Company or any Member for the Company to be treated as a corporation, or an association taxable as a corporation, under the Code or any provisions of any state or local tax laws. The Company shall be treated as a partnership for U.S. federal income tax purposes.
 
28.   Waiver of Partition; Nature of Interest . Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each Member hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company. No Member shall have any interest in any specific assets of the Company, and no Member shall have the status of a creditor with respect to any distribution pursuant to Section  16 hereof. The interest of each Member in the Company is personal property.
 
29.   Benefits of Agreement; No Third-Party Rights . None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of any Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than as a Covered Person) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
 
30.   Severability of Provisions . Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.
 
31.   Entire Agreement . This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.
 
32.   Binding Agreement . Notwithstanding any other provision of this Agreement, each Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Members and is enforceable against the Members in accordance with its terms.
 
33.   Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.
 
34.   Amendments . This Agreement may be modified, altered, supplemented or amended pursuant to a written document executed and delivered by the Members.
 
 
 
 
35.   Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument notwithstanding the fact that not all signatures appear on the same page.
 
36.   Notices . Any notices required to be delivered hereunder shall be in writing and personally delivered, mailed or sent by telecopy, electronic mail or other similar form of rapid transmission, and shall be deemed to have been duly given upon receipt (a) in the case of the Company, to the Company at its address in Section  2 , (b) in the case of the Members, to each Member at its address as listed on Schedule  B attached hereto and (c) in the case of either of the foregoing, at such other address as may be designated by written notice to the other party.
 
37.   Effectiveness . Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of the date hereof. Other than this Agreement, any other limited liability company agreement, operating agreement, or any other form of ownership agreement of the Company, of any nature whatsoever, shall be null and void with no force and effect.
 
38.   Definitions and Rules of Construction . Capitalized terms used and not otherwise defined herein have the meanings set forth on Schedule  A hereto, the terms and provisions of which are incorporated herein. The rules of construction to be applied herein are as set forth on Schedule  A hereto.
 
39.   No Recourse . Notwithstanding anything to the contrary contained in this Agreement, to the fullest extent permitted by law, none of the direct or indirect partners, shareholders, members, Managers, officers, managers, trustees, agents or employees in or of any Member shall be personally liable in any manner or to any extent under or in connection with this Agreement and the Company shall not have any recourse to any assets of any such parties.
 
 
 
IN WITNESS WHEREOF , the undersigned, intending to be legally bound hereby, has duly executed this Agreement as of the date first written above.
 
 
MEMBERS:
 
 
SeD Ballenger, LLC
 
 
 
 
By: /s/ Charles Mackenzie                                                                    
Name:
Title:  Chief Development Officer, SeD Development Management, LLC, Manager
 
 
 
 
 
 
CNQC Maryland Development LLC
 
 
 
 
By:  /s/ Genzhong Li                                                                    
Name:
Title:  Vice President
 
 
 
 
[Signature Page to Limited Liability Company Agreement]
 
 
 
SCHEDULE A
 
 
DEFINITIONS AND RULES OF CONSTRUCTION
 
A.            
Definitions .
 
When used in this Agreement, the following terms not otherwise defined herein have the following meanings:
 
“Act” has the meaning set forth in the second paragraph of this Agreement.
 
“Additional Required Capital” has the meaning set forth in Section  14(a) hereof.
 
“Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person (including, without limitation, any Person holding a direct or indirect equity interest in such Person).
 
“Agreement” means this Limited Liability Company Agreement of the Company, together with all schedules attached hereto, as amended, restated, supplemented or otherwise modified from time to time.
 
“Annual Tax Reports” has the meaning set forth in Section  18 hereof.
 
“Applicable Law” means all existing and future federal, state and local laws, orders, ordinances, governmental rules and regulations and court orders and is expressly deemed to include all zoning laws and environmental laws.
 
“Assign” means to effect an Assignment, by whatever means.
 
“Assignment” means any sale, inter vivos transfer or gift, assignment, pledge, grant of security interest, or transfer by will or trust, by operation of law or otherwise, in or of all or any part of an Interest.
 
“Authorized Signatory” shall have the meaning set forth in Section  7(b) hereof.
 
“Bankruptcy” means, with respect to any Person, if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (vii) 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Act.
 
 
 
 
“Basic Documents” means this Agreement, the Certificate of Formation, and all documents and certificates contemplated thereby or delivered in connection therewith.
 
“Board of Managers” shall mean a board consisting of the Managers of the Company appointed by the Members, which Board of Managers shall manage the business and affairs of the Company in accordance with the provisions of this Agreement.
 
“Budget” has the meaning set forth in Section  8(b) hereof.
 
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required to close.
 
“Buy-out Price” has the meaning set forth in Section  11(b) hereof.
 
“Buy-Sell Election Date” has the meaning set forth in Section  11(c) hereof.
 
“Buy-Sell Offer Notice” has the meaning set forth in Section  11(b) hereof.
 
“Capital Account” has the meaning set forth in Section  13 hereof.
 
“CCRC Multifamily Parcel” shall mean the “Land Bay D,” described in the development plan attached as Exhibit C , consisting of approximately six acres of land for 200 multifamily senior units and associated parking, located in Ballenger Run, Frederick County, MD.
 
“Certificate of Formation” means the Certificate of Formation of the Company filed with the Secretary of State of Delaware on October 16, 2014 as amended or amended and restated from time to time.
 
“CNQC Option” has the meaning set forth in Section  14(c) hereof.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law).
 
“Company” shall mean SeD Maryland Development, LLC, a Delaware limited liability company.
 
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person (although the same may be subject to the approval of other partners, members or other Persons), whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. “Controlling” and “Controlled” shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.
 
 
 
 
 
 
“Covered Persons” has the meaning set forth in Section  21(a) hereof.
 
“Deadlock” has the meaning set forth in Section  11(a) hereof.
 
“Development Work” has the meaning set forth in Section  8(a) hereof.
 
“Election Notice” has the meaning set forth in Section  14(c) hereof.
 
“Fiscal Year” has the meaning set forth in Section  15   hereof.
 
“Initiating Member” has the meaning set forth in Section  11(b) hereof.
 
“Institutional Lender” has the meaning set forth in Section 8(c) hereof.
 
“Interest” means the entire ownership interest of a Member in the Company.
 
“IRS” means the Internal Revenue Service.
 
“Majority in Interests” means Members holding fifty-one percent (51%) or more of the Interests.
 
“Management Agreement” has the meaning set forth in Section  9(a) hereof.
 
“Management Company” has the meaning set forth in Section  9(a) hereof.
 
“Manager” shall mean a Person or Persons selected from time to time to manage the affairs of the Company under Section  10 hereof as a member of the Board of Managers. Each Manager is hereby designated as a “manager” within the meaning of the Act. References to the Manager in the singular or as him, her, it, itself or other like references, shall also be deemed, where the context so requires, to include the plural or the masculine or feminine reference, as the case may be.
 
“Member Loan” has the meaning set forth in Section  14(a) hereof.
 
“Member Loan Notice” has the meaning set forth in Section  14(b) hereof.
 
“MF Multifamily Parcel” shall mean the “Land Bay B,” described in the development plan attached as Exhibit C , consisting of approximately 15 acres of land for 210 all-age multifamily units and associated parking, located in Ballenger Run, Frederick County, MD.
 
“New Member” has the meaning set forth in Section  15(e) hereof.
 
“NVR Purchase and Sale Agreements” means collectively:
 
 
 
 
 
 
(i)   That certain Assignment and Assumption Agreement – Ballenger Run between NVR, Inc., as assignor (“ NVR ”), and the Company, dated December 10, 2014, and amended by that certain Restatement and Reinstatement of and First Amendment to Assignment and Assumption Agreement, dated January 9, 2015;
 
(ii)   That certain Lot Purchase Agreement – Ballenger Run – Single Family Attached Villa between the Company, as seller, and NVR, as purchaser, dated December 10, 2014, as amended by that certain Restatement and Reinstatement of and First Amendment to Lot Purchase Agreement – Ballenger Run – Single Family Attached Villa, dated January 9, 2015;
 
(iii)   That certain Lot Purchase Agreement – Ballenger Run –Townhouse between the Company, as seller, and NVR, as purchaser, dated December 10, 2014, as amended by that certain Restatement and Reinstatement of and First Amendment to Lot Purchase Agreement – Ballenger Run – Townhouse, dated January 9, 2015;
 
(iv)   That certain Lot Purchase Agreement – Ballenger Run – Large Single Family Dwelling between the Company, as seller, and NVR, as purchaser, dated December 10, 2014, as amended by that certain Restatement and Reinstatement of and First Amendment to Lot Purchase Agreement – Ballenger Run – Large Single Family Dwelling, dated January 9, 2015;
 
(v)   That certain Lot Purchase Agreement – Ballenger Run –Neo-Traditional Single Family Dwelling between the Company, as seller, and NVR, as purchaser, dated December 10, 2014, as amended by that certain Restatement and Reinstatement of and First Amendment to Lot Purchase Agreement – Ballenger Run – Neo-Traditional Single Family Dwelling, dated January 9, 2015; and
 
(vi)   That certain Lot Purchase Agreement – Ballenger Run –Small Single Family Dwelling between the Company, as seller, and NVR, as purchaser, dated December 10, 2014, as amended by that certain Restatement and Reinstatement of and First Amendment to Lot Purchase Agreement – Ballenger Run – Small Single Family Dwelling, dated January 9, 2015.
 
“Officer” has the meaning set forth in Section  10 hereof.
 
“Partnership Minimum Gain” shall have the meaning set forth in Treasury Regulations Section 1.704-2(d) and any corresponding provision or provisions of succeeding Regulations. In accordance with Treasury Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each nonrecourse liability of the Company, any gain the Company would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Member’s share of Partnership Minimum Gain shall be determined in accordance with Treasury Regulations Section 1.704-2(g)(1).
 
 
 
 
 
 
“Partner Nonrecourse Debt Minimum Gain” shall have the meaning set forth in Treasury Regulations Section 1.704-2(i). A Member’s share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5).
 
“Permitted Transfer” means (1) a gift, bequest, sale or other transfer of an Interest or a part thereof to a member of the immediate family of a Member (defined for purposes of this Agreement as a Member’s spouse, descendants (either by birth or adoption prior to age twelve (12) and ancestors) or to an express trust for the benefit of one or more members of the immediate family of a Member or to the beneficiaries of any trust that is a Member; or (2) a gift, sale, or transfer of an Interest (or a part thereof) to an Affiliate.
 
“Permitted Transferee” means any Person who acquires an Interest in the Company in a Permitted Transfer as set forth in Section  22 hereof.
 
“Person” means any individual, corporation, partnership, joint venture, limited liability company, partnership, limited partnership, limited liability partnership, association, joint stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority.
 
“Project Financing” has the meaning set forth in Section 8(c) hereof.
 
“Project Financing Lender” has the meaning set forth in Section 8(c) hereof.
 
“Project Plan” has the meaning set forth in Section  8(a) hereof.
 
“Property” has the meaning set forth in Section  7(a) hereof.
 
“Purchase Agreement” has the meaning set forth in the Recitals hereof.
 
“Purchasing Member” has the meaning set forth in Section  11(d) hereof.
 
“Responding Member” has the meaning set forth in Section  11(b) hereof.
 
“Response Notice” has the meaning set forth in Section  11(c) hereof.
 
“Selling Member” has the meaning set forth in Section  11(d) hereof.
 
“Sell-out Price” has the meaning set forth in Section  11(b) hereof.
 
“Tax Matters Partner” has the meaning set forth in Section  26 hereof.
 
“Taxable Year” has the meaning set forth in Section  15 hereof.
 
 
 
 
 
 
“Treasury Regulations” means the Treasury regulations issued under the Code, as amended and as hereafter amended from time to time. Reference to any particular provision of the Treasury Regulations shall mean that provision of the Treasury regulations on the date hereof and any successor provision of the Treasury Regulations.
 
B.            
Rules of Construction .
 
Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms. The words “include” and “including” shall be deemed to be followed by the phrase “without limitation.” The terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement
 
.
 
 
 
 
 
 
SCHEDULE B
 
 
 
MEMBERS
 
Name
 
Mailing Address
 
Amount of Cash or Agreed Value of Property Contributed
 
Percentage
Interest
 
 
 
 
 
SeD Ballenger, LLC
 
4800 Montgomery Lane, Suite 210, Bethesda MD, 20814
 
$12,697,568
 
83.55%
 
 
 
CNQC Maryland Development LLC
 
4800 Montgomery Lane Suite 210, Bethesda, MD 20814
 
$2,500,000
 
16.45%
 
 
 
 
 
 
 EXHIBIT A
PROPERTY DESCRIPTION
 
 
 
 
 
 
 
 
 
 
 EXHIBIT B
MANAGEMENT AGREEMENT
 
 
 
 
 
 
 
 
 
 
 
EXHIBIT C
 
DEVELOPMENT PLAN
 
 
 
 
 
 
 
 
  EXHIBIT 10.8
 
 
 
 
 
 
  Exhibit 21
 
Subsidiaries
 
Name of Subsidiary
State or Other Jurisdiction of Incorporation or Organization
SeD USA, LLC
Delaware
150 Black Oak GP, Inc.
Texas
SeD Development USA, Inc.
Delaware
150 CCM Black Oak Ltd.
Texas
SeD Ballenger, LLC
Delaware
SeD Maryland Development, LLC
Delaware
SeD Development Management, LLC
Delaware
SeD Builder, LLC
Delaware
SeD Texas Home, LLC
Delaware
 
 
 
 
 
 
  Exhibit 99.1
 
 
 
SeD Home Inc. and Subsidiaries
 
Financial Statements
 
December 31, 2016 and 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SeD Home Inc. and Subsidiaries
 
Table of Contents
 
For The Years Ended December 31, 2016 and 2015
 
Independent Auditor’s Report
1
 
 
Consolidated Balance Sheets
2
 
 
Consolidated Statements of Operations
3
 
 
Consolidated Statements of Cash Flows
4
 
 
Notes to Consolidated Financial Statements
5-11
 
 
 
 
 
 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT
 
 
 
To the Board of Directors of SeD Home Inc. and Subsidiaries
 
 
We have audited the accompanying consolidated balance sheets of SeD Home Inc. and Subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations and cash flows for each of the years in the two-year period ended December 31, 2016. SeD Home Inc. and Subsidiaries management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SeD Home Inc. and Subsidiaries as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
 
 
 
Rosenberg Rich Baker Berman & Co.
Somerset, New Jersey
August 30, 2017
 
 
 
 
SeD Home Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2016 and 2015
 
 
 
 2016
 
 
 2015
 
Assets:
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
Construction in Progress
  $ 26,146,557  
  $ 9,996,671  
Land Held for Development
    25,449,641  
    25,997,185  
Real Estate Held For Sale
    1,319,368  
    1,285,185  
 
    52,915,566  
    37,279,041  
 
       
       
Cash
    392,172  
    2,291,529  
Restricted Cash
    2,631,761  
    2,600,000  
Rent Receivable
    18,260  
    28,857  
Prepaid Expenses
    85,449  
    66,666  
Fixed Assets, Net
    34,623  
    41,508  
Deposits
    23,603  
    21,491  
 
       
       
Total Assets
  $ 56,101,434  
  $ 42,329,092  
 
       
       
 
       
       
Liabilities and Shareholders' Equity
       
       
 
       
       
Liabilities
       
       
Accounts Payable and Accrued Expenses
  $ 1,452,878  
  $ 1,314,818  
Accrued Interest - Related Parties
    6,284,302  
    3,622,113  
Tenant Security Deposits
    5,175  
    10,900  
Builder Deposits
    5,900,000  
    5,900,000  
Notes Payable, Net of Debt Discount
    12,864,712  
    2,423,930  
Notes Payable - Related Parties, Net of Debt Discount
    500,000  
    26,783,428  
Total Liabilities
    27,007,067  
    40,055,189  
 
       
       
Shareholders' Equity
       
       
Common Stock, at par $0.0001, 500,000,000 shares authorized, issued, and outstanding
       
       
Common Stock, at par $0.0001, 500,000,000 shares authorized, issued, and outstanding
    50,000  
    50,000  
Subscription Receivable - 500,000,000 shares
    (50,000 )
    (50,000 )
Additional Paid In Capital
    28,499,637  
    622,431  
Accumulated Deficit
    (1,683,152 )
    (774,601 )
Total Shareholders' Equity (Deficit) - SeD Home Inc. and Subsidiaries
    26,816,485  
    (152,170 )
Non-controlling Interest
    2,277,882  
    2,426,073  
Total Shareholders' Equity
    29,094,367  
    2,273,903  
 
       
       
Total Liabilities and Shareholders' Equity
  $ 56,101,434  
  $ 42,329,092  
 
 
 
 
SeD Home Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2016 and 2015
 
 
 
 2016
 
 
 2015
 
Revenue
 
 
 
 
 
 
Rental Income
  $ 230,059  
  $ 190,361  
Property Sales
    800,000  
    2,965,400  
 
    1,030,059  
    3,155,761  
Operating Expenses
       
       
Cost of Sales
    970,397  
    2,612,646  
General and Administrative Expenses
    1,158,149  
    1,327,715  
 
    2,128,546  
    3,940,361  
 
       
       
Loss From Operations
    (1,098,487 )
    (784,600 )
 
       
       
Other Income (Expense)
       
       
Interest Income
    31,761  
    1,899  
Other Income
    9,984  
    1,700  
 
    41,745  
    3,599  
 
       
       
Net Loss Before Income Taxes
    (1,056,742 )
    (781,001 )
 
       
       
Provision for Income Taxes
    -  
    -  
 
       
       
Net Loss
    (1,056,742 )
    (781,001 )
 
       
       
Net Loss Attributable to Non-controlling Interest
    (148,191 )
    (73,927 )
 
       
       
Net Loss Attributable to SeD Home Inc. and Subsidiaries
  $ (908,551 )
  $ (707,074 )
 
 
 
 
SeD Home Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2016 and 2015
 
 
 
 2016
 
 
 2015
 
 
 
 
 
 
 
 
Cash Flows From Operating Activities
 
 
 
 
 
 
Net Loss
  $ (1,056,742 )
  $ (781,001 )
Adjustments to reconcile net loss to net cash provided by operating activities:
       
       
Depreciation
    15,959  
    4,516  
Impairment of Real Estate
    29,281  
    -  
Changes in Operating Assets and Liabilities
       
       
Rent Receivable
    10,597  
    (28,857 )
Prepaid Expenses
    (18,783 )
    (666 )
Accounts Payable and Accrued Expenses
    138,060  
    835,139  
Accrued Interest - Related Parties
    2,662,189  
    2,721,459  
Tenant Security Deposits
    (5,725 )
    10,900  
Builder Deposits
    -  
    5,900,000  
Net Cash Provided By Operating Activities
    1,774,836  
    8,661,490  
 
       
       
Cash Flows From Investing Activities
       
       
Cash Paid for Deposits
    (2,112 )
    (21,491 )
Change in Restricted Cash
    (31,761 )
    (2,600,000 )
Real Estate Purchases and Development Costs
    (13,782,784 )
    (25,060,313 )
Purchase of Fixed Assets
    (9,074 )
    (46,024 )
Net Cash Used In Investing Activities
    (13,825,731 )
    (27,727,828 )
 
       
       
Cash Flows From Financing Activities
       
       
Capital Contribution - Non-controlling Interest
    -  
    2,500,000  
Proceeds from Notes Payable
    9,941,942  
    3,278,005  
Financing Fees Paid
    (109,285 )
    (1,005,170 )
Net Proceeds from Notes Payable - Related Parties
    318,881  
    16,243,983  
Net Cash Provided By Financing Activities
    10,151,538  
    21,016,818  
 
       
       
Net Increase (Decrease) in Cash
    (1,899,357 )
    1,950,480  
Cash - Beginning of Year
    2,291,529  
    341,049  
Cash - End of Year
  $ 392,172  
  $ 2,291,529  
 
       
       
Supplementary Cash Flow Information
       
       
Cash Paid For Interest
  $ -  
  $ -  
Cash Paid For Taxes
  $ -  
  $ -  
 
       
       
Supplemental Disclosure of Non-Cash Investing and Financing Activities
       
       
Debt Discount From Related Party Imputed Interest
  $ 963,681  
  $ 622,431  
Forgiveness of Notes Payable - Related Parties
  $ 26,913,525  
  $ -  
Amortization of Debt Discount - Related Party Capitalized
  $ 933,647  
  $ 311,215  
Amortization of Debt Discount Capitalized
  $ 608,125  
  $ 151,095  
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Nature of Operations
 
SeD Home Inc. (the Company), a Delaware corporation, was formed on February 24, 2015 is principally engaged in developing, selling, managing, and leasing commercial properties in the United States. SeD Home Inc. is wholly-owned by SeD Home International, Inc., which is wholly – owned by Singapore eDevelopment Limited, a multinational public company, listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”).
 
Principles of Consolidation
 
The consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
 
Name of consolidated subsidiary
State or other jurisdiction of incorporation or organization
Date of incorporation or formation
Attributable interest
 
 
 
 
SeD USA, LLC
The State of Delaware, U.S.A.
August 20, 2014
100%
150 Black Oak GP, Inc.
The State of Texas, U.S.A.
January 23, 2014
50%
SeD Development USA, Inc.
The State of Delaware, U.S.A.
March 13, 2014
100%
150 CCM Black Oak Ltd.
The State of Texas, U.S.A.
March 17, 2014
68.50%
SeD Ballenger, LLC
The State of Delaware, U.S.A.
July 7, 2015
100%
SeD Maryland Development, LLC
The State of Delaware, U.S.A.
October 16, 2014
83.55%
SeD Development Management, LLC
The State of Delaware, U.S.A.
June 18, 2015
85%
SeD Builder, LLC
The State of Delaware, U.S.A.
October 21, 2015
100%
SeD Texas Home, LLC
The State of Delaware, U.S.A.
June 16, 2015
100%
 
All intercompany balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.
 
As of December 31, 2016 and 2015, the aggregate non-controlling interest in SeD Home Inc. group, was $2,277,882 and $2,426,073, respectively, and is separately disclosed on the Consolidated Balance Sheet.
 
Use of Estimates
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. There were no cash equivalents as of December 31, 2016 and December 31, 2015.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
1.       
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
 
Restricted Cash
 
As a condition to the loan agreement with The Bank of Hampton Roads, the Company is required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The funds will remain as collateral for the loans until the loans are paid off in full.
 
Rent Receivable
 
Rent receivables are the result of outstanding rent due from tenants. Management reviews each receivable individually for collectability to determine if an allowance for doubtful accounts is needed. The allowance for doubtful accounts at December 31, 2016 and 2015 was $0.
 
Property and Equipment
 
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives, which are 3 years.
 
Real Estate Assets
 
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805, “Business Combinations,” which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold.
 
The Company capitalized interest from related party borrowings of $2,662,189 and $2,721,459 for the years ended December 31, 2016 and December 31, 2015. The Company capitalized interest from the third party borrowings of $911,764 and $196,296 for the years ended December 31,2016 and December 31, 2015.
 
A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met:
 
(1) management, having the authority to approve the action, commits to a plan to sell the property. (2) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary. (3) an active program to locate a buyer and other actions required to complete the plan to sell, have been initiated. (4) the sale of the property is probable and is expected to be completed within one year or the property is under a contract to be sold. (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value. and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as “held for sale”. “Real estate held for sale” only includes El Tesoro project and D street project.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
1.       
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
 
Revenue Recognition
 
Rental revenue is accounted for on a straight-line basis over the applicable lease term when the real estate project is substantially completed and held available for occupancy, and carrying costs are expensed as incurred. Future minimum rental income for 2017 will be $36,545. The net book value of properties generating rental income is $642,850 and $1,285,185 at December 31, 2016 and 2015, respectively.
 
The Company recognizes sales of lots only upon closing under the full accrual method, unless further development would be required, in which case the percentage-of-completion method or the installment/deposit method would be used. Profit is recognized on estimates of average gross profit per lot within a project or a division of a project. Land and land development costs are allocated to land sold based on relative sales values. Payments received from customers prior to the recording of a sale are recorded as deposits.
 
Income Taxes
 
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry-forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The differences relate primarily to net operating loss carryforward from date of acquisition and to the use of the cash basis of accounting for income tax purposes. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized.
 
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recorded any unrecognized tax benefits.
 
The Company’s tax returns for 2016, 2015 and 2014 remain open to examination.
 
2.
CONCENTRATION OF CREDIT RISK
 
The group maintains cash balances at various financial institutions. These balances are secured by the Federal Deposit Insurance Corporation. At times, these balances may exceed the federal insurance limits. At December 31, 2016 and 2015, uninsured cash balances were $2,406,597 and $3,739,370, respectively.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
3.
PROPERTY AND EQUIPMENT
 
Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:
 
 
 
2016
 
 
2015
 
Computer Equipment
  $ 34,755  
  $ 31,002  
Furniture and Fixtures
    20,343  
    15,022  
 
    55,098  
    46,024  
Accumulated Depreciation
    (20,475 )
    (4,516 )
 
  $ 34,623  
  $ 41,508  
 
Depreciation expense was $15,959 and $4,516 for the years ended December 31, 2016 and 2015, respectively.
 
4.
BUILDER DEPOSITS
 
SeD Maryland Development, LLC (“Maryland”) is obligated under the terms of 5 separate Lot Purchase Agreements with NVR, Inc. (NVR) relating to the sale of single-family home and townhome lots to NVR. In exchange, NVR provided a good faith deposit in the amount of $5,600,000. The deposits will be returned to NVR in the form of a credit toward the purchase price payable for each lot at the time of each settlement. In the event of default, Maryland is entitled to the portion of the deposit allocable to the particular Lot Purchase Agreement as liquidated damages.
 
Black Oak LP currently received a deposit of $300,000 from Lexington 26 LP (Colina), a building company located in Texas.
 
5.
NOTES PAYABLE
 
On October 7, 2015, the Company entered into a note for $6,000,000, bearing interest at 13%, with a maturity date of October 7, 2016 with Revere Bank. In connection with the loan, the Company incurred origination and closing fees of $524,223, which were recorded as debt discount and are amortized over the life of the loan. The loan is secured by a deed of trust on the property and a Limited Guarantee Agreement with an owner of the Company. As of December 31, 2015, there was $1,807,416 of principal outstanding and $393,167 of unamortized debt discount remaining. On October 1, 2016, the loan was extended to April 1, 2017 for fees of $109,285. These fees were recorded as a debt discount under debt modification accounting are amortized over the extension period. As of December 31, 2016, there was $6,000,000 of principal outstanding and $54,643 of unamortized debt discount remaining. On April 1, 2017, the loan was again extended until October 1, 2017 for a fee of $110,000. The Company has the option to extend an additional six months until April 1, 2018.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
5.       
NOTES PAYABLE (cont’d)
 
On November 23, 2015, Maryland Development LLC entered into a Revolving Credit Note with The Bank of Hampton Roads in the original principal amount of $8,000,000. During the term of the loan, cumulative loan advances may not exceed $26,000,000. The line of credit bears interest at LIBOR plus 3.8% with a floor rate of 4.5%. The interest rate at December 31, 2016 was 4.5%. Beginning December 1, 2015, interest-only payments are due on the outstanding principal balance. The entire unpaid principal and interest sum is due and payable on November 22, 2018, with the option of one twelve-month extension period. The loan secured by a deed of trust on the property, $2,600,000 of collateral cash, a Limited Guaranty Agreement with the Company and a letter of credit of $800,000. The letter of credit is due on November 22, 2018 and bears interest at 15%. As of December 31, 2016 and 2015, the principal balance is $7,219,947 and $1,470,589, respectively. As part of the transaction, the Company incurred loan origination fees and closing fees, totaling $480,947, which were recorded as debt discount and are amortized over the life of the loan. The unamortized debt discount was $300,592 and $460,908 at December 31, 2016 and 2015, respectively.
 
6.
RELATED PARTY TRANSACTIONS
 
Notes Payable
 
The Company receives advances from Singapore eDevelopment Ltd (100% owner of the Company) to fund development costs and operation costs. The advances are unsecured, bear interest at 18% per annum and are payable on demand. As of December 31, 2015, the Company had outstanding principal due of $12,293,715 and accrued interest of $2,161,055 due to this related party.
 
The Company receives advances from SCDPL (owned 100% by Singapore eDevelopment) to fund development costs and operation costs. The advances are unsecured, bear interest at 18% per annum and are payable on demand. As of December 31, 2015, the Company had outstanding principal due of $4,300,930 and accrued interest of $1,461,058 due to this related party.
 
On September 30, 2015, the Company received $10,500,000 interest free loan, with a maturity date of March 31, 2016, from Hengfai Business Development Pte, Ltd, owned by the Chief Executive Officer of Singapore eDevelopment Ltd and is also the majority shareholder of Singapore eDevelopment Ltd, specifically for Ballenger Run project. The Company imputed interest at 13%, which is the interest rate on the Revere Loan noted in Note 5. The imputed interest resulted in a debt discount of $622,431 which is amortized over the life of the note. At December 31, 2015, the Company had $10,500,000 outstanding on the note and unamortized debt discount of $311,216. On April 1, 2016, the Company extended the note on the same terms through December 31, 2016. This resulted in an additional $933,647 of new imputed interest which was amortized during 2016.
 
At December 31, 2016, the Company restructured the loans from these affiliates. The restructuring process was done to transfer the principal of the loans to Singapore eDevelopment Ltd. (100% owner of the Company), which was then forgiven and recorded into additional paid in capital. The principal forgiven was $26,913,525. The Company still maintained the accrued interest of $6,282,329. The remaining accrued interest does not bear interest.
 
In 2016, the Company received advances from SeD Home Limited (an affiliate of Singapore eDevelopment), to fund development costs and operation costs. The loan bears interest at 10% and is payable on demand. As of December 31, 2016, the Company had outstanding principal due of $500,000 and accrued interest of $1,095.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
6.       
RELATED PARTY TRANSACTIONS (cont’d)
 
Management Fees
 
Black Oak LP is obligated under the Limited Partnership Agreement (as amended) to pay $6,500 per month management fee to Arete Real Estate and Development Company, a related party through common ownership and $2,000 per month to American Real Estate Investments LLC, a related party through common ownership. The Company incurred fees of $108,500 and $203,195 for the years ended December 31, 2016 and 2015, respectively. These fees were capitalized as part of Real Estate on the consolidated balance sheet.
 
7.
SHAREHOLDERS’ EQUITY
 
The Company has 500,000,000 authorized shares of common stock with a par value of $0.0001 per share. As of December 31, 2016 and 2015, there were 500,000,000 shares outstanding, respectively. The Company has a subscription receivable due of $50,000 at December 31, 2016 and 2015, respectively, for the par value of these shares.
 
On September 25, 2015, the Company sold 16.45% of its interest in SeD Maryland Development, LLC for $2,500,000. This amount is included in non-controlling interest on the consolidated balance sheets.
 
Effective September 30, 2015, the Company entered into a non-interest bearing note with a related party (see Note 6), for which interest was imputed. Imputed interest recorded to additional paid in capital for the years ended December 31, 2016 and 2015 was $622,431 and $963,681, respectively.
 
As discussed in Note 6, on December 31, 2016, $26,913,525 of related party notes payable was forgiven and recorded as additional paid in capital.
 
8.
COMMITMENTS AND CONTINGENCIES
 
Management Fees
 
SeD Maryland Development LLC is obligated under the terms of a Project Development and Management Agreement with MacKenzie Development Company LLC (MacKenzie) and Cavalier Development Group LLC (Cavalier) (together, the Developers) to provide various services for the development, construction and sale of the Project. The agreement is for an estimated initial term of seventy-eight (78) months based on the completion time for the Project and may be extended if necessary. The developers are entitled to certain fees based on time and performance related milestones. The Company incurred fees of $186,095 and $210,684 for the years ended December 31, 2016 and 2015, respectively. These fees were capitalized as part of Real Estate on the consolidated balance sheet.
 
Leases
 
The Company leases office space in Texas and Maryland. The leases expire in 2018 and 2020, respectively and have monthly rental payments ranging between $2,050 and $8,205. Rent expense was $89,382 and $36,379 for the years ended December 31, 2016 and 2015, respectively. The below table summarizes future payments due under these leases as of December 31, 2016.
 
 
 
 
SeD Home Inc. And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
 
8.       
COMMITMENTS AND CONTINGENCIES
 
Leases (cont’d)
 
For the Years Ended December 31,
2017
  $ 114,067  
2018
    112,919  
2019
    94,325  
2020
    96,924  
Total
  $ 418,235  
 
9.
INCOME TAXES
 
Deferred tax assets and (liabilities) consist of the following at December 31,:
 
 
 
2016
 
 
2015
 
Interest income
    (5,394,964 )
    -  
Interest expense
    6,903,509  
    76  
Depreciation and amortization
    (3,489 )
    -  
Management fees
    924,011  
    382,211  
Other
    609,342  
    188,642  
Net operating losses
    1,398,402  
    567,961  
 
    4,436,811  
    1,138,890  
Valuation allowance
    (4,436,811 )
    (1,138,890 )
Net deferred tax asset
    -  
    -  
 
At December 31, 2016, the Company has federal net operating loss carry-forwards of approximately $1.4 million, which will begin to expire in 2035. The Maryland net operating loss carry-forwards of approximately $1.04 million will begin to expire in 2035. The full utilization of the deferred tax assets in the future is dependent upon the Company’s ability to generate taxable income; accordingly, a valuation allowance of an equal amount has been established. During the years ended December 31, 2016 and 2015, the valuation allowance increased by $3,297,921 and $1,138,890, respectively.
 
10.
SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to the consolidated balance sheet date for potential recognition or disclosure through August 30, 2017, the date the consolidated financial statements were available to be issued. The following event required recognition or disclosure in the consolidated financial statements:
 
On May 31, 2017, SeD Maryland Development LLC sold 13 model lots for $1,473,236.
 
 
  Exhibit 99.2
 
 
SeD Home Inc. and Subsidiaries
 
Condensed Consolidated Financial Statements
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
SeD Home Inc. and Subsidiaries
 
Table of Contents
 
For The Nine Months Ended September 30, 2017
 
Independent Accountant’s Review Report
1
 
 
Condensed Consolidated Balance Sheets
2
 
 
Condensed Consolidated Statements of Operations (unaudited)
3
 
 
Condensed Consolidated Statements of Cash Flows (unaudited)
4
 
 
Notes to Condensed Consolidated Financial Statements (unaudited)
5-11
 
 
 
 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
To the Board of Directors of SeD Home Inc. and Subsidiaries
 
 
We have reviewed the condensed consolidated balance sheet of SeD Home Inc. and Subsidiaries as of September 30, 2017, and the related condensed consolidated statements of operations for the nine-month periods ended September 30, 2017 and 2016, and condensed consolidated statements of cash flows for the nine-month periods then ended. These condensed consolidated financial statements are the responsibility of the Company’s management.
 
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
 
We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of SeD Home Inc. and Subsidiaries as of December 31, 2016, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein); and in our report dated August 30, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
 
 
 
Rosenberg Rich Baker Berman & Co.
Somerset, New Jersey
November 3, 2017
 
 
 
 
SeD Home Inc. and Subsidiaries
Consolidated Balance Sheets
 
 
 
 September 30,
 
 
December 31,
 
 
 
2017
 
 
2016
 
 
 
(Unaudited)
 
 
 
 
Assets:
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
Construction in Progress
  $ 31,262,668  
  $ 26,146,557  
Land Held for Development
    25,206,357  
    25,449,641  
Real Estate Held For Sale
    119,738  
    1,319,368  
 
    56,588,763  
    52,915,566  
 
       
       
Cash
    595,457  
    392,172  
Restricted Cash
    2,650,718  
    2,631,761  
Rent Receivable
    1,600  
    18,260  
Prepaid Expenses
    35,099  
    85,449  
Fixed Assets, Net
    27,311  
    34,623  
Deposits
    23,603  
    23,603  
 
       
       
Total Assets
  $ 59,922,551  
  $ 56,101,434  
 
       
       
 
       
       
Liabilities and Shareholders' Equity
       
       
 
       
       
Liabilities
       
       
Accounts Payable and Accrued Expenses
  $ 980,175  
  $ 1,452,878  
Accrued Interest - Related Parties
    1,800,339  
    6,284,302  
Tenant Security Deposits
    2,625  
    5,175  
Builder Deposits
    5,754,295  
    5,900,000  
Notes Payable, Net of Debt Discount
    9,771,821  
    12,864,712  
Notes Payable - Related Parties, Net of Debt Discount
    8,319,408  
    500,000  
Total Liabilities
    26,628,663  
    27,007,067  
 
       
       
Shareholders' Equity
       
       
Common Stock, at par $0.0001, 500,000,000 shares authorized, issued, and outstanding
    50,000  
    50,000  
Subscription Receivable - 500,000,000 shares
    (50,000 )
    (50,000 )
Additional Paid In Capital
    33,238,322  
    28,499,637  
Accumulated Deficit
    (2,163,517 )
    (1,683,152 )
Total Shareholders' Equity - SeD Home Inc. and Subsidiaries
    31,074,805  
    26,816,485  
Non-controlling Interest
    2,219,083  
    2,277,882  
Total Shareholders' Equity
    33,293,888  
    29,094,367  
 
       
       
Total Liabilities and Shareholders' Equity
  $ 59,922,551  
  $ 56,101,434  
 
See accompanying notes to the financial statements.
 
 
 
SeD Home, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Nine Months Ended September 30
(Unaudited)
 
 
 
 2017
 
 
2016
 
Revenue
 
 
 
 
 
 
Rental Income
  $ 88,438  
  $ 176,887  
Property Sales
    2,703,736  
    664,100  
 
    2,792,174  
    840,987  
Operating Expenses
       
       
Cost of Sales
    2,570,182  
    702,952  
 
       
       
General and Administrative Expenses
    814,568  
    1,070,543  
 
    3,384,750  
    1,773,495  
 
       
       
Loss From Operations
    (592,576 )
    (932,508 )
 
       
       
Other Income
       
       
Interest Income
    18,957  
    20,890  
Other Income
    34,455  
    4,985  
 
    53,412  
    25,875  
 
       
       
Net Loss Before Income Taxes
    (539,164 )
    (906,633 )
 
       
       
Provision for Income Taxes
    -  
    -  
 
       
       
Net Loss
    (539,164 )
    (906,633 )
 
       
       
Net Loss Attributable to Non-controlling Interest
    (58,799 )
    (35,780 )
 
       
       
Net Loss Attributable to SeD Home Inc. and Subsidiaries
  $ (480,365 )
  $ (870,853 )
 
See accompanying notes to the financial statements.
 
 
 
SeD Home, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30
(Unaudited)
 
 
 
 2017
 
 
 2016
 
 
 
 
 
 
 
 
Cash Flows From Operating Activities
 
 
 
 
 
 
Net Loss
  $ (539,164 )
  $ (906,633 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
       
       
Depreciation
    15,203  
    11,606  
Changes in Operating Assets and Liabilities
       
       
Rent Receivable
    16,660  
    8,675  
Prepaid Expenses
    50,350  
    7,458  
Accounts Payable and Accrued Expenses
    (472,703 )
    (476,566 )
Accrued Interest - Related Parties
    76,122  
    1,370,006  
Tenant Security Deposits
    (2,550 )
    (3,725 )
Builder Deposits
    (145,705 )
    -  
Net Cash (Used In) Provided By Operating Activities
    (1,001,787 )
    10,821  
 
       
       
Cash Flows From Investing Activities
       
       
Change in Restricted Cash
    (18,957 )
    (20,890 )
Real Estate Purchases and Development Costs
    (3,388,317 )
    (8,188,668 )
Purchase of Fixed Assets
    (7,891 )
    (1,800 )
Net Cash Used In Investing Activities
    (3,415,165 )
    (8,211,358 )
 
       
       
Cash Flows From Financing Activities
       
       
Capital Contribution - Related Party
    178,600  
    -  
Proceeds from Notes Payable
    2,732,229  
    6,021,640  
Repayments to Note Payable
    (6,000,000 )
       
Financing Fees Paid
    (110,000 )
    -  
Net Proceeds (Repayments) from Notes Payable - Related Parties
    7,819,408  
    392,255  
Net Cash Provided By Financing Activities
    4,620,237  
    6,413,895  
 
       
       
Net Increase (Decrease) in Cash
    203,285  
    (1,786,642 )
Cash - Beginning of Year
    392,172  
    2,291,529  
Cash - End of Year
  $ 595,457  
  $ 504,887  
 
       
       
Supplementary Cash Flow Information
       
       
Cash Paid For Interest
  $ 905,376  
  $ 943,446  
Cash Paid For Taxes
  $ -  
  $ -  
 
       
       
Supplemental Disclosure of Non-Cash Investing and Financing Activities
       
       
Debt Discount From Related Party Imputed Interest
  $ -  
  $ 622,431  
Forgiveness of Notes Payable - Related Parties
  $ 4,560,085  
  $ -  
Amortization of Debt Discount Capitalized
  $ 284,880  
  $ 342,269  
 
See accompanying notes to the financial statements.
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Nature of Operations
 
SeD Home Inc. (the Company), a Delaware corporation, was formed on February 24, 2015 is principally engaged in developing, selling, managing, and leasing commercial properties in the United States. SeD Home Inc. is wholly-owned by SeD Home International, Inc., which is wholly – owned by Singapore eDevelopment Limited, a multinational public company, listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”).
 
Principles of Consolidation
 
The consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
 
Name of consolidated subsidiary
State or other jurisdiction of incorporation or organization
Date of incorporation or formation
Attributable interest
 
 
 
 
SeD USA, LLC
The State of Delaware, U.S.A.
August 20, 2014
100%
150 Black Oak GP, Inc.
The State of Texas, U.S.A.
January 23, 2014
50%
SeD Development USA, Inc.
The State of Delaware, U.S.A.
March 13, 2014
100%
150 CCM Black Oak Ltd.
The State of Texas, U.S.A.
March 17, 2014
69%
SeD Ballenger, LLC
The State of Delaware, U.S.A.
July 7, 2015
100%
SeD Maryland Development, LLC
The State of Delaware, U.S.A.
October 16, 2014
83.55%
SeD Development Management, LLC
The State of Delaware, U.S.A.
June 18, 2015
85%
SeD Builder, LLC
The State of Delaware, U.S.A.
October 21, 2015
100%
SeD Texas Home, LLC
The State of Delaware, U.S.A.
June 16, 2015
100%
 
All intercompany balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.
 
As of September 30, 2017 and December 31, 2016, the aggregate non-controlling interest in SeD Home, Inc. was $2,219,083 and $2,277,882, respectively, which is separately disclosed on the Consolidated Balance Sheet.
 
Use of Estimates
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. There were no cash equivalents as of September 30, 2017 and December 31, 2016.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
1.       
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
 
Restricted Cash
 
As a condition to the loan agreement with The Bank of Hampton Roads, the Company is required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The funds will remain as collateral for the loans until the loans are paid off in full.
 
Rent Receivable
 
Rent receivables are the result of outstanding rent due from tenants. Management reviews each receivable individually for collectability to determine if an allowance for doubtful accounts is needed. The allowance for doubtful accounts at September 30, 2017 and December 31, 2016 was $0.
 
Property and Equipment
 
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives, which are 3 years.
 
Real Estate Assets
 
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805, “Business Combinations,” which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold.
 
The Company capitalized interest from related party borrowings of $107,150 and $1,690,515 for the nine months ended September 30, 2017 and 2016, respectively. The Company capitalized interest from the third party borrowings of $874,348 and $622,937 for the nine months ended September 30, 2017 and 2016, respectively.
 
A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met:
 
(1) management, having the authority to approve the action, commits to a plan to sell the property. (2) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary. (3) an active program to locate a buyer and other actions required to complete the plan to sell, have been initiated. (4) the sale of the property is probable and is expected to be completed within one year or the property is under a contract to be sold. (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value. and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as “held for sale”. “Real estate held for sale” only includes El Tesoro project and D street project.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
1.       
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
 
Revenue Recognition
 
Rental revenue is accounted for on a straight-line basis over the applicable lease term when the real estate project is substantially completed and held available for occupancy, and carrying costs are expensed as incurred. Future minimum rental income for remainder of 2017 and for the year ended December 31, 2018 is expected to be $4,800 and $9,600, respectively. The net book value of properties generating rental income is $388,540 and $642,850 at September 30, 2017 and December 31, 2016, respectively.
 
The Company recognizes sales of lots only upon closing under the full accrual method, unless further development would be required, in which case the percentage-of-completion method or the installment/deposit method would be used. Profit is recognized on estimates of average gross profit per lot within a project or a division of a project. Land and land development costs are allocated to land sold based on relative sales values. Payments received from customers prior to the recording of a sale are recorded as deposits.
 
Income Taxes
 
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry-forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The differences relate primarily to net operating loss carryforward from date of acquisition and to the use of the cash basis of accounting for income tax purposes. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized.
 
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recorded any unrecognized tax benefits.
 
The Company’s tax returns for 2016, 2015 and 2014 remain open to examination.
 
2.
CONCENTRATION OF CREDIT RISK
 
The group maintains cash balances at various financial institutions. These balances are secured by the Federal Deposit Insurance Corporation. At times, these balances may exceed the federal insurance limits. At September 30, 2017 and December 31, 2016, uninsured cash balances were $2,746,175 and $2,406,597, respectively.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
3.
PROPERTY AND EQUIPMENT
 
Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:
 
 
 
September 30, 2017
 
 
December 31, 2016
 
Computer Equipment
  $ 40,545  
  $ 34,755  
Furniture and Fixtures
    21,393  
    20,343  
 
    61,938  
    55,098  
Accumulated Depreciation
    (34,627 )
    (20,475 )
 
  $ 27,311  
  $ 34,623  
 
Depreciation expense was $15,203 and $11,606 for the nine months ended September 30, 2017 and 2016, respectively.
 
4.
BUILDER DEPOSITS
 
SeD Maryland Development, LLC (“Maryland”) is obligated under the terms of 5 separate Lot Purchase Agreements with NVR, Inc. (NVR) relating to the sale of single-family home and townhome lots to NVR. In exchange, NVR provided a good faith deposit in the amount of $5,600,000. The deposits will be returned to NVR in the form of a credit toward the purchase price payable for each lot at the time of each settlement. In the event of default, Maryland is entitled to the portion of the deposit allocable to the particular Lot Purchase Agreement as liquidated damages. At September 30, 2017 and December 31, 2016, there was $5,454,295 and $5,600,000 outstanding.
 
Black Oak LP received a deposit of $300,000 from Lexington 26 LP (Colina), a building company located in Texas. At September 30, 2017 and December 31, 2016, there was $300,000 outstanding.
 
5.
NOTES PAYABLE
 
On October 7, 2015, the Company entered into a note for $6,000,000, bearing interest at 13%, with a maturity date of October 7, 2016 with Revere Bank. In connection with the loan, the Company incurred origination and closing fees of $524,223, which were recorded as debt discount and are amortized over the life of the loan. The loan is secured by a deed of trust on the property and a Limited Guarantee Agreement with an owner of the Company. As of December 31, 2015, there was $1,807,416 of principal outstanding and $393,167 of unamortized debt discount remaining. On October 1, 2016, the loan was extended to April 1, 2017 for fees of $109,285. These fees were recorded as a debt discount under debt modification accounting are amortized over the extension period. As of December 31, 2016, there was $6,000,000 of principal outstanding and $54,643 of unamortized debt discount remaining. On April 1, 2017, the loan was again extended until October 1, 2017 for a fee of $110,000. These fees were recorded as a debt discount under debt modification accounting are amortized over the extension period. As of September 30, 2017, the loan was fully repaid and there is no outstanding principal or unamortized debt discount.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
5.       
NOTES PAYABLE (cont’d)
 
On November 23, 2015, SeD Maryland Development LLC entered into a Revolving Credit Note with The Bank of Hampton Roads in the original principal amount of $8,000,000. During the term of the loan, cumulative loan advances may not exceed $26,000,000. The line of credit bears interest at LIBOR plus 3.8% with a floor rate of 4.5%. The interest rate at September 30, 2017 was 5.0625%. Beginning December 1, 2015, interest-only payments are due on the outstanding principal balance. The entire unpaid principal and interest sum is due and payable on November 22, 2018, with the option of one twelve-month extension period. The loan secured by a deed of trust on the property, $2,600,000 of collateral cash, a Limited Guaranty Agreement with the Company and a letter of credit of $800,000. The letter of credit is due on November 22, 2018 and bears interest at 15%. In September 2017, Maryland Development LLC and the Bank of Hampton Roads modified the Revolving Credit Note, which increased the original principal amount from $8,000,000 to $11,000,000 and extended the maturity date of the loan and letter of credit to December 31, 2019.
 
As of September 30, 2017 and December 31, 2016, the principal balance is $9,952,176 and $7,219,947, respectively. As part of the transaction, the Company incurred loan origination fees and closing fees, totaling $480,947, which were recorded as debt discount and are amortized over the life of the loan. The unamortized debt discount was $180,355 and $300,592 at September 30, 2017 and December 31, 2016, respectively.
 
6.
RELATED PARTY TRANSACTIONS
 
Notes Payable
 
The Company receives advances from Singapore eDevelopment Ltd (100% owner of the Company) to fund development costs and operation costs. The advances are unsecured, bear interest at 18% per annum and are payable on demand. As of December 31, 2015, the Company had outstanding principal due of $12,293,715 and accrued interest of $2,161,055 due to this related party.
 
The Company receives advances from SCDPL (owned 100% by Singapore eDevelopment) to fund development costs and operation costs. The advances are unsecured, bear interest at 18% per annum and are payable on demand. As of December 31, 2015, the Company had outstanding principal due of $4,300,930 and accrued interest of $1,461,058 due to this related party.
 
On September 30, 2015, the Company received $10,500,000 interest free loan, with a maturity date of March 31, 2016, from Hengfai Business Development Pte, Ltd, owned by the Chief Executive Officer of Singapore eDevelopment Ltd and is also the majority shareholder of Singapore eDevelopment Ltd, specifically for Ballenger Run project. The Company imputed interest at 13%, which is the interest rate on the Revere Loan noted in Note 5. The imputed interest resulted in a debt discount of $622,431 which is amortized over the life of the note. At December 31, 2015, the Company had $10,500,000 outstanding on the note and unamortized debt discount of $311,216. On April 1, 2016, the Company extended the note on the same terms through December 31, 2016. This resulted in an additional $933,647 of new imputed interest which was amortized during 2016.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
6.       
RELATED PARTY TRANSACTIONS (cont’d)
 
Notes Payable (cont’d)
 
At December 31, 2016, the Company restructured the loans from these affiliates. The restructuring process was done to transfer the principal of the loans to Singapore eDevelopment Ltd. (100% owner of the Company), which was then forgiven and recorded into additional paid in capital. The principal forgiven was $26,913,525. The Company still maintained the accrued interest of $6,282,329. The remaining accrued interest does not bear interest. On August 30, 2017, an additional $4,560,085 of this interest was forgiven and recorded into additional paid in capital. At September 30, 2017 and December 31, 2016, $1,800,339 and $6,284,302 of accrued interest is outstanding relating to this transaction.
 
In 2016, the Company received advances from SeD Home Limited (an affiliate of Singapore eDevelopment), to fund development costs and operation costs. The loan bears interest at 10% and is payable on demand. As of September 30, 2017 and December 31, 2016, the Company had outstanding principal due of $1,050,000 and $500,000 and accrued interest of $58,959 and $1,095.
 
In 2017, the Company received advances from SeD International, Inc. (an affiliate through common ownership). The advances bore interest at 18% until August 30, 2017 when the interest rate was adjusted to 5% and have no set repayment terms. At September 30, 2017, there was $7,269,408 of principal and $1,740,380 of accrued interest outstanding.
 
Management Fees
 
Black Oak LP is obligated under the Limited Partnership Agreement (as amended) to pay $6,500 per month management fee to Arete Real Estate and Development Company, a related party through common ownership and $2,000 per month to American Real Estate Investments LLC, a related party through common ownership. The Company incurred fees of $76,500 and $76,500 for the nine months ended September 30, 2017 and 2016, respectively. These fees were capitalized as part of Real Estate on the consolidated balance sheet.
 
7.
SHAREHOLDERS’ EQUITY
 
The Company has 500,000,000 authorized shares of common stock with a par value of $0.0001 per share. As of December 31, 2016 and 2015, there were 500,000,000 shares outstanding, respectively. The Company has a subscription receivable due of $50,000 at June 30, 2017 and December 31, 2016, respectively, for the par value of these shares.
 
On September 25, 2015, the Company sold 16.45% of its interest in SeD Maryland Development, LLC for $2,500,000. This amount is included in non-controlling interest on the consolidated balance sheets.
 
In 2017, SeD International, a related party through common ownership, contributed $178,600 into the Company. The related party also forgave $4,560,085 of accrued interest as of August 30, 2017.
 
 
 
 
SeD Home, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2017 (Unaudited)
 
8.
COMMITMENTS AND CONTINGENCIES
 
Management Fees
 
SeD Maryland Development LLC is obligated under the terms of a Project Development and Management Agreement with MacKenzie Development Company LLC (MacKenzie) and Cavalier Development Group LLC (Cavalier) (together, the Developers) to provide various services for the development, construction and sale of the Project. The agreement is for an estimated initial term of seventy-eight (78) months based on the completion time for the Project and may be extended if necessary. The developers are entitled to certain fees based on time and performance related milestones. The Company incurred fees of $132,000 and $132,000 for the nine months ended September 30, 2017 and 2016, respectively. These fees were capitalized as part of Real Estate on the consolidated balance sheet.
 
Leases
 
The Company leases office space in Texas and Maryland. The leases expire in 2018 and 2020, respectively and have monthly rental payments ranging between $2,050 and $8,205. Rent expense was $85,103 and $64,867 for the nine months ended September 30, 2017 and 2016, respectively. The below table summarizes future payments due under these leases as of September 30, 2017.
 
For the Years Ended December 31:
2017 (remainder)
  $ 28,964  
2018
    112,919  
2019
    94,325  
2020
    96,924  
Total
  $ 333,132  
 
9.
SUBSEQUENT EVENTS
 
Management has evaluated events and transactions subsequent to the consolidated balance sheet date for potential recognition or disclosure through November 3, 2017, the date the consolidated financial statements were available to be issued.
 
 
  Exhibit 99.3
 
SeD Intelligent Home Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheets
September 30, 2017
(Unaudited)
 
 
 
  As Reported  
 
 
  Pro Forma  
 
 
 
 SeD Home Inc.
 
 
SeD Intelligent Home Inc.
 
 
 
 
 
 
 
 
 
09/30/2017
 
 
09/30/2017
 
 
Adjustments
 
 
Combined
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
    0  
 
 
 
Construction in Progress
  $ 31,262,668  
  $ -  
       
  $ 31,262,668  
Land Held for Development
    25,206,357  
    -  
       
    25,206,357  
Real Estate Held For Sale
    119,738  
    -  
       
    119,738  
 
    56,588,763  
    -  
       
    56,588,763  
 
       
       
       
    -  
Cash
    595,457  
    13,178  
       
    608,635  
Restricted Cash
    2,650,718  
    -  
       
    2,650,718  
Rent Receivable
    1,600  
    -  
       
    1,600  
Prepaid Expenses
    35,099  
    -  
       
    35,099  
Fixed Assets, Net
    27,311  
    -  
       
    27,311  
Deposits
    23,603  
    -  
       
    23,603  
 
       
       
       
    -  
Total Assets
  $ 59,922,551  
  $ 13,178  
       
  $ 59,935,729  
 
       
       
       
       
 
       
       
       
       
Liabilities and Shareholders' Equity
       
       
       
       
 
       
       
       
       
Liabilities
       
       
       
       
Accounts Payable and Accrued Expenses
  $ 980,175  
  $ 29,616  
       
  $ 1,009,791  
Accrued Interest - Related Parties
    1,800,339  
    -  
       
    1,800,339  
Tenant Security Deposits
    2,625  
    -  
       
    2,625  
Builder Deposits
    5,754,295  
    -  
       
    5,754,295  
Notes Payable, Net of Debt Discount
    9,771,821  
    -  
       
    9,771,821  
Notes Payable - Related Parties, Net of Debt Discount
    8,319,408  
    20,000  
       
    8,339,408  
Total Liabilities
    26,628,663  
    49,616  
       
    26,678,279  
 
       
       
       
       
Shareholders' Equity
       
       
       
       
Common Stock, at par $0.0001, 500,000,000 shares authorized, issued, and outstanding
    50,000  
    74,043  
       
    124,043  
Subscription Receivable - 500,000,000 shares
    (50,000 )
       
       
    (50,000 )
Additional Paid In Capital
    33,238,322  
    100,694  
       
    33,339,016  
Accumulated Deficit
    (2,163,517 )
    (211,176 )
       
    (2,374,693 )
Total Shareholders' Equity
    31,074,805  
    (36,438 )
       
    31,038,367  
Non-controlling Interest
    2,219,083  
    -  
       
    2,219,083  
Total Shareholders' Equity
    33,293,888  
    (36,438 )
       
    33,257,450  
 
       
       
       
    -  
Total Liabilities and Shareholders' Equity
  $ 59,922,551  
  $ 13,178  
       
  $ 59,935,729  
 
 
 
 
SeD Intelligent Home Inc. and Subsidiaries
Pro Forma Consolidated Statements of Operations
For the Nine Months Ended September 30
(Unaudited)
 
 
 
  As Reported  
 
 
  Pro Forma  
 
 
 
 SeD Home Inc.
 
 
SeD Intelligent Home Inc.
 
 
 
 
 
 
 
 
 
2017
 
 
2017
 
 
Adjustments
 
 
Combined
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Rental Income
  $ 88,438  
  $ -  
        
  $ 88,438  
Property Sales
    2,703,736  
    -  
       
    2,703,736  
 
    2,792,174  
    -  
       
    2,792,174  
Operating Expenses
       
       
       
    -  
Cost of Sales
    2,570,182  
    -  
       
    2,570,182  
 
       
       
       
    -  
General and Administrative Expenses
    814,568  
    10,152.00  
       
    824,720.00  
 
    3,384,750  
    10,152.00  
       
    3,394,902.00  
 
       
       
       
    -  
Loss From Operations
    (592,576 )
    (10,152.00 )
       
    (602,728.00 )
 
       
       
       
    -  
Other Income
       
       
       
    -  
Interest Income
    18,957  
    -  
       
    18,957  
Other Income
    34,455  
    -  
       
    34,455  
 
    53,412  
    -  
       
    53,412  
 
       
       
       
    -  
Net Loss Before Income Taxes
    (539,164 )
    (10,152.00 )
       
    (549,316.00 )
 
       
       
       
    -  
Provision for Income Taxes
    -  
    -  
       
    -  
 
       
       
       
    -  
Net Loss
    (539,164 )
    (10,152.00 )
       
    (549,316.00 )
 
       
       
       
    -  
Net Loss Attributable to Non-controlling Interest
    (58,799 )
    -  
       
    (58,799 )
 
       
       
       
    -  
Net Loss Attributable to SeD Home Inc. and Subsidiaries
  $ (480,365 )
  $ (10,152 )
       
  $ (490,517 )
 
 
 
 
SeD Intelligent Home Inc. and Subsidiaries
Pro Forma Consolidated Statements of Cash Flows
For the Nine Months Ended September 30
(Unaudited)
 
 
 
  As Reported  
 
 
  Pro Forma  
 
 
 
 SeD Home Inc.
 
 
SeD Intelligent Home Inc.
 
 
 
 
 
 
 
 
 
2017
 
 
2017
 
 
Adjustments
 
 
Combined
 
Cash Flows From Operating Activities
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
  $ (539,164 )
  $ (28,469 )
        
  $ (567,633 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
       
       
       
    -  
Depreciation
    15,203  
    -  
       
    15,203  
Changes in Operating Assets and Liabilities
       
       
       
    -  
Rent Receivable
    16,660  
    -  
       
    16,660  
Prepaid Expenses
    50,350  
    -  
       
    50,350  
Accounts Payable and Accrued Expenses
    (472,703 )
    (10,729 )
       
    (483,432 )
Accrued Interest - Related Parties
    76,122  
    -  
       
    76,122  
Tenant Security Deposits
    (2,550 )
    -  
       
    (2,550 )
Builder Deposits
    (145,705 )
    -  
       
    (145,705 )
Net Cash (Used In) Provided By Operating Activities
    (1,001,787 )
    (39,198 )
       
    (1,040,985 )
 
       
       
       
    -  
Cash Flows From Investing Activities
       
       
       
    -  
Change in Restricted Cash
    (18,957 )
    -  
       
    (18,957 )
Real Estate Purchases and Development Costs
    (3,388,317 )
    -  
       
    (3,388,317 )
Purchase of Fixed Assets
    (7,891 )
    -  
       
    (7,891 )
Net Cash Used In Investing Activities
    (3,415,165 )
    -  
       
    (3,415,165 )
 
       
       
       
    -  
Cash Flows From Financing Activities
       
       
       
    -  
Capital Contribution - Related Party
    178,600  
    20,000  
       
    198,600  
Proceeds from Notes Payable
    2,732,229  
    -  
       
    2,732,229  
Repayments to Note Payable
    (6,000,000 )
       
       
    (6,000,000 )
Financing Fees Paid
    (110,000 )
    -  
       
    (110,000 )
Net Proceeds (Repayments) from Notes Payable - Related Parties
    7,819,408  
    -  
       
    7,819,408  
Net Cash Provided By Financing Activities
    4,620,237  
    20,000  
       
    4,640,237  
 
       
       
       
    -  
Net Increase (Decrease) in Cash
    203,285  
    (19,198 )
       
    184,087  
Cash - Beginning of Year
    392,172  
    32,376  
       
    424,548  
Cash - End of Year
  $ 595,457  
  $ 13,178  
       
  $ 608,635  
 
       
       
       
       
Supplementary Cash Flow Information
       
       
       
       
Cash Paid For Interest
  $ 905,376
  $ -  
       
  $ 905,376
Cash Paid For Taxes
  $ -  
  $ -  
       
  $ -  
 
       
       
       
    -  
Supplemental Disclosure of Non-Cash Investing and Financing Activities
       
       
       
    -  
Debt Discount From Related Party Imputed Interest
  $ -  
  $ -  
       
  $ -  
Forgiveness of Notes Payable - Related Parties
  $ 4,560,085  
  $ -  
       
  $ 4,560,085  
Amortization of Debt Discount Capitalized
  $ 284,880  
  $ -  
       
  $ 284,880