**PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION** **Matter No.: 1015-00002**
Rachel and Janet,
I am writing to follow up on the two client memoranda we circulated earlier this week — the analysis of Buyer's availability guarantee proposals (dated August 4) and the analysis of Buyer's change of control proposals (dated August 5). I want to recommend an integrated negotiation strategy for addressing these two key open issues with Meridian DataCore Solutions Inc. and its counsel at Hargrove & Linden LLP in advance of our August 18 target resolution date.
On the procedural side, Brett is coordinating with Ryan Matsuda at Hargrove & Linden to schedule a negotiation call for the week of August 18. Brett is also preparing the Seller's Revised Second Draft PPA for circulation to Hargrove & Linden on August 11, together with a cover letter to Evelyn Crumveth. Accordingly, I would like to have our positions finalized by end of day Monday, August 11, so the revised draft and cover letter reflect a unified approach on both issues.
**I. AVAILABILITY LD STRATEGY**
**A. Current Positions**
As a brief recap of where the parties stand:
*Seller's position (First Draft PPA, July 14):* - Availability guarantee ≥ 95.0% on a rolling 12-month basis - LD rate of 0.50% of trailing 12-month revenue per 1.0% shortfall - LD cap of 5.0% of trailing 12-month revenue - Termination trigger at 50% direct or indirect equity in Saguaro Flats Solar LLC to a non-affiliate. - Requires 30-day prior written notice to Buyer. - Buyer may terminate only if successor fails the Minimum Credit Threshold (tangible net worth ≥ $100M or investment-grade rating from Pinnacle Ratings Group or equivalent).
*Buyer's redline:* - Any change of control requires Buyer's prior written consent (not to be unreasonably withheld). - $1,500,000 consent fee per event. - Buyer may terminate within 60 days if it does not consent.
**B. Ridgepoint Exit Considerations**
This issue is, as you know, of particular commercial sensitivity. Ridgepoint Capital Partners LP holds 68% of CBR common equity. Any future Ridgepoint exit — whether through a sale of its stake, an IPO, or a secondary transaction — would almost certainly constitute a change of control at the CBR parent level that would flow through to an indirect change of control of Saguaro Flats Solar LLC.
A consent-right regime of the type Buyer has proposed would give Meridian effective veto power — or at minimum significant leverage to extract value via the $1,500,000 consent fee — over any Ridgepoint liquidity event. This is commercially unacceptable to CBR and, I understand, to Alan Driscoll personally. In context, the aggregate PPA value is approximately $140,000,000 over 20 years; a $1.5M consent fee is not trivial and would set a damaging precedent across CBR's broader portfolio.
**C. Lender Requirements**
Tralvendo's credit agreement will require lender prior written consent to any change of control of the Seller (Saguaro Flats Solar LLC) — this is standard project finance practice. The PPA's change of control provision must be consistent with the credit agreement and must not create a scenario where a Buyer consent right conflicts with or creates a cross-default under the loan documents.
The lenders also require that the PPA include step-in rights and cure periods (addressed in the Lender Consent Agreement at Exhibit F) and that the change of control provision not impair the lender group's ability to exercise remedies or transfer the project upon a Seller default.
**D. Recommended Compromise Position**
I recommend the following:
1. **Notice requirement:** 30-day prior written notice to Buyer, as in our draft. 2. **Objective credit test:** If the successor entity meets the Minimum Credit Threshold (TNW ≥ $100M or investment-grade rating), Buyer has no termination right and no consent right. The transfer proceeds upon notice. 3. **Below-threshold transfers:** If the successor fails the credit threshold, Buyer's consent is required (not to be unreasonably withheld), with a 45-day response period (splitting the difference between our 30-day and Buyer's 60-day proposals). If Buyer does not consent within 45 days, Buyer may terminate. 4. **No consent fee.** We should position firmly against this. The $1,500,000 fee is a penalty with no nexus to any actual cost or harm to Buyer, and it is commercially unusual in utility-scale solar PPAs. We should not concede this point. 5. **Reciprocal change of control:** Maintain our request that if Meridian undergoes a change of control and the successor's credit rating falls below BBB−, Seller may demand a letter of credit equal to 12 months' estimated payments (approximately $7,000,000) or terminate.
The core rationale we should present to Buyer is straightforward: Meridian's legitimate concern is counterparty credit quality, and our proposal addresses that concern directly through an objective creditworthiness test. What our proposal does not do — and should not do — is give Buyer a subjective veto that could be used to impede legitimate corporate transactions unrelated to the creditworthiness of the entity performing under the PPA.
**III. INTEGRATED NEGOTIATION APPROACH**
I recommend presenting the availability and change of control positions as a coordinated package in the August 18 negotiation session. Strategically, I believe we have more room to give on availability — moving from 95.0% to 96.0% is a meaningful concession that Buyer can characterize as a win internally — and we should use that flexibility to hold firmer on change of control, which has greater long-term commercial consequences for CBR and Ridgepoint.
If Buyer insists on some form of consent right for change of control, we should tie it narrowly to the credit quality framework described above and continue to resist any consent fee.
I also want to flag that the Buyer guaranty issue remains open. Buyer's redline removed the $14,000,000 payment guaranty entirely. We should keep this linked in the negotiations as part of the overall credit support package. Meridian's current Pinnacle rating is BBB, with 2024 EBITDA of approximately $740M and a market capitalization of approximately $8.2B. They are well-positioned to provide the guaranty; their resistance is likely a matter of internal precedent and policy rather than inability. This is a chip we can play if needed.
**IV. NEXT STEPS**
I would appreciate your input on the following before we finalize the Revised Second Draft:
1. **Availability threshold:** Are you comfortable moving to 96.0%, or does CBR prefer to hold at 95.0% and concede on rate or cap instead? 2. **Change of control:** Does Ridgepoint have specific parameters for acceptable change of control language? If so, I think a brief call with Alan Driscoll would be valuable — Brett or I are available Friday or Monday. 3. **Lender confirmation:** Can Derek Engstrom confirm with Diane Roessler at Tralvendo that the proposed availability LD cap (7.5%) and termination trigger (87.5% / two consecutive periods) are acceptable from a bankability standpoint? We need this before we commit to the position with Buyer.
As noted, Brett is targeting August 11 for circulation of the Revised Second Draft and cover letter. I would like to have final sign-off on our positions by end of day Monday so we can meet that timeline.
Please let me know if you would like to schedule a call tomorrow or over the weekend to discuss. I am available.
Best regards,
Patricia Dunmore Partner, Energy & Infrastructure Calderwood & Harkness LLP 1100 Louisiana Street, Suite 4500 Houston, TX 77002 (713) 555-4218 pdunmore@calderwoodharkness.com
---
*PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION: This email and any attachments are protected by the attorney-client privilege and/or attorney work product doctrine and are strictly confidential. This communication is intended solely for the use of the individual(s) to whom it is addressed. If you have received this communication in error, please notify the sender immediately by reply email and delete the original message and all copies. Any unauthorized review, use, disclosure, or distribution is prohibited.*