Derek,
I spoke earlier today with Philip Thornton at Whitfield Stroval & Cade and Diane Roessler at Tralvendo regarding their initial review of the draft Lender Consent and Direct Agreement (the "Lender Consent Agreement") that we circulated last week, as well as the change of control provisions in the Seller's Revised Second Draft PPA dated August 11, 2025. I wanted to get you a summary of their comments and flag a few items that I think warrant an internal strategy discussion before we proceed further with Meridian. Given that the $108,000,000 senior secured construction-to-term facility has a target closing of October 1, 2025, timely resolution of these comments is important.
**1. Lender Consent Agreement — Summary of Comments**
*Overall,* Tralvendo and WJC are generally comfortable with the structure of the draft Lender Consent Agreement as a tri-party agreement among Saguaro Flats Solar LLC (Seller), Meridian DataCore Solutions Inc. (Buyer), and Tralvendo National Bank, N.A. (Administrative Agent). Their comments are focused on four areas:
*Step-In Cure Period.* The lenders are requesting that the cure period for the Administrative Agent to step into the Seller's position following a Seller event of default under the PPA be extended from 60 days (as currently drafted) to **90 days**. WJC's view is that 90 days is market standard for solar project finance transactions and is necessary to allow the lender group — which includes syndicate members Osprey Commercial Lending Corp., Grandview Savings Bank, FSB, and Blue Prairie Capital Markets LLC — sufficient time to coordinate and evaluate options. Those options could include potential foreclosure, appointment of a replacement operator, or negotiation of a replacement PPA. I think this is a reasonable ask and consistent with what we have seen in comparable deals, though we should discuss how Meridian is likely to react given their counsel's focus on tightening seller performance obligations.
*Notice Requirements.* The lenders want the PPA to require Buyer to deliver copies of any default notice, termination notice, or force majeure notice to the Administrative Agent **simultaneously** with delivery to Seller. The current PPA draft requires notice to the lender "promptly," which WJC views as insufficiently precise. They would accept either "simultaneously" or "concurrently." This is a straightforward change and I do not anticipate significant pushback from Meridian on this point.
*Replacement PPA Right.* WJC has requested clarification that if the lender group exercises its step-in right and cures the Seller default, or if the original PPA is terminated, the Buyer is obligated to enter into a replacement PPA on substantially the same terms with a lender-designated successor entity, provided that successor meets the creditworthiness standards set forth in the PPA. This is conceptually consistent with what we drafted, but WJC wants more prescriptive language around the "substantially the same terms" standard — specifically, they want to enumerate the material terms that must be carried over (price, tenor, delivery point, availability guarantees, termination provisions) rather than relying on the general "substantially the same" formulation. Brett and I can prepare a revised draft addressing this.
*No Modification Without Consent.* The lenders require that no material amendment, modification, or waiver of the PPA be effective without the Administrative Agent's prior written consent. This is a standard lender protection and is already addressed in the credit agreement term sheet, but WJC wants it memorialized in the Lender Consent Agreement as an independent covenant running to the benefit of the Administrative Agent. No objection from our side — this is belt-and-suspenders but appropriate.
**2. Change of Control — Lender Position and PPA Interaction**
This is the area where I want to flag a potential strategic issue.
Tralvendo's credit agreement requires that any change of control of Seller (Saguaro Flats Solar LLC) — defined as a transfer of more than 50% of direct or indirect equity interests to a non-affiliate — receive the Administrative Agent's prior written consent. This is in addition to whatever consent or notice mechanism is ultimately negotiated with Meridian in the PPA.
As you know, the positions on change of control in the PPA negotiation are currently apart. Meridian's counsel at Hargrove & Linden (Evelyn Crumveth) has proposed that any change of control of Seller require Buyer's prior written consent (not to be unreasonably withheld), plus a $1,500,000 consent fee, with a 60-day termination right if Buyer does not consent. Our position in the Second Draft PPA is a notice-plus-objective-creditworthiness-test approach: the successor must have tangible net worth of at least $100,000,000 or an investment-grade rating from a nationally recognized statistical rating organization, with no consent fee, and Buyer consent required only if the successor fails the credit threshold.
Here is the tension I want to flag: the lenders' position — requiring the Administrative Agent's prior written consent for any change of control — actually aligns more closely with Meridian's consent-based approach than with CBR's current notice-plus-credit-test proposal. If Tralvendo is going to require consent under the credit agreement regardless, CBR's ability to argue against a consent mechanism in the PPA is somewhat undercut as a practical matter. A change of control will require lender consent no matter what the PPA says. I think we need to discuss internally whether CBR's negotiating position on this point should be adjusted — for example, whether it makes sense to accept a consent requirement in the PPA (paired with a "not to be unreasonably withheld" standard and clear objective criteria for what constitutes reasonable grounds) while continuing to push back on the consent fee and the standalone termination right, which I view as the more commercially significant issues.
I also want to note that this has direct implications for Ridgepoint Capital Partners LP, which holds 68% of CBR common equity. Any future exit, recapitalization, or portfolio restructuring by Ridgepoint that results in a change of control of CBR — and, indirectly, of Saguaro Flats Solar LLC — would potentially require consent from both the Buyer (under the PPA, depending on how this is resolved) and the Administrative Agent (under the credit agreement). I would recommend that you and Rachel raise this with Alan Driscoll at Ridgepoint so the sponsor is fully aware of these layered consent requirements before we finalize positions in either agreement.
**3. DSCR and Bankability Observations**
Diane Roessler reiterated on today's call that the minimum DSCR covenant of 1.30x is a firm requirement. Tralvendo's independent engineer, Gresham Engineering Advisors Inc., is currently reviewing the PPA terms in conjunction with the P50 annual generation estimate of 350,000 MWh prepared by Heliograph Energy Consulting LLC to confirm projected debt service coverage at the initial contract price of $20.00/MWh and through the escalation period (1.50% annual compounding, years 6 through 20).
At P50 production and Year 1 pricing, annual PPA revenue of approximately $7,000,000 against estimated annual debt service of approximately $5,200,000 yields a projected DSCR of approximately 1.35x. That clears the 1.30x covenant but with limited cushion. The lenders want to ensure that the availability guarantee threshold and LD structure in the final PPA do not create scenarios where net revenue — after payment of availability LDs or as a result of reduced deemed generation — could fall below the DSCR floor. This reinforces the importance of the availability guarantee negotiation with Meridian and the need to coordinate our positions across the PPA and the credit agreement.
**4. Proposed Next Steps**
I recommend the following:
- **Internal Strategy Call:** We should schedule a call this week (week of August 12) with you, Rachel, Patricia, and Brett to discuss how to address the lender comments — particularly the 90-day step-in cure period and the change of control consent dynamic outlined above.
- **Revised Lender Consent Agreement:** Brett and I will turn around a revised draft of the Lender Consent Agreement reflecting the Tralvendo/WJC comments within a week so WJC can circulate to the syndicate lenders for review.
- **PPA Negotiation Coordination:** The change of control issue needs to be coordinated with our broader PPA negotiation strategy before the target resolution date of August 18, 2025 for the open availability and change of control issues with Meridian. Patricia and Brett are working on the counter-positions for the upcoming negotiation call with Hargrove & Linden.
- **Buyer-Side Discussion on Lender Consent Agreement:** I will also need to engage directly with Evelyn Crumveth and Ryan Matsuda at Hargrove & Linden on the Lender Consent Agreement, since Meridian is a party to that agreement and will need to agree to the step-in, cure, and notice provisions. I would like to hold off on that outreach until after our internal call so we have aligned positions.
Please let me know your availability this week. I am in the office through Friday and available by phone at any time. For reference, the documents under discussion are the draft Lender Consent Agreement previously circulated and the PPA Seller's Revised Second Draft dated August 11, 2025.
Best regards,
**Helen Nakamura** Of Counsel, Project Finance Calderwood & Harkness LLP 1100 Louisiana Street, Suite 4500 Houston, TX 77002 Tel: (713) 555-4182
---
*CONFIDENTIALITY NOTICE: This email and any attachments are attorney-client privileged and confidential. This communication is intended solely for the use of the individual(s) to whom it is addressed. If you are not the intended recipient, you are hereby notified that any review, disclosure, copying, distribution, or use of this communication or any of its contents is strictly prohibited. If you have received this communication in error, please notify the sender immediately by reply email and permanently delete all copies of this communication and any attachments.*