Joanna and Greg,
Thank you for the detailed redline of the Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC, which we received on November 3. We appreciate the thoughtful and thorough markup. Our team has had the opportunity to review HQS's comments carefully with the Calloway-Briggs Renewables team, including Rebecca Whitfield and the broader CBR management group, against the initial draft we circulated on October 20 (C&H Matter No. 48172.001).
This email is intended to summarize the key open issues arising from your markup, organized by topic, so that we can facilitate an efficient and productive discussion among the parties. As you'll see, we've grouped these into four main categories. We think it would be most productive to schedule a call with the full deal team to work through these items in real time, but wanted to set out our client's positions in advance so that your team and Lumen Ridge can consider them beforehand.
For reference, Solstice Plateau Energy Holdings LLC is the Delaware limited liability company serving as the 50/50 joint venture vehicle between Calloway-Briggs Renewables Inc. ("CBR") and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge").
**1. Supermajority Voting Threshold on the Management Committee**
We note HQS's comments regarding the supermajority voting threshold applicable to the reserved matters set forth in Schedule A to the LLC Agreement. As drafted, the initial C&H draft requires approval of at least five (5) of the six (6) Management Committee members for specified reserved matters. The Management Committee, as you know, consists of six members — three appointed by CBR and three appointed by Lumen Ridge.
CBR's position is that the 5-of-6 supermajority threshold (≥83.3%) is intentionally designed to require cross-party consensus on critical decisions. This structure ensures that neither party can unilaterally approve material actions, while also preventing a single dissenting member from blocking action that otherwise has broad support. We believe this strikes the right balance for a 50/50 joint venture and is consistent with market practice.
For clarity, the reserved matters subject to supermajority approval under our draft include: (a) approval of the annual budget; (b) capital calls in excess of $25,000,000; (c) incurrence of indebtedness; (d) sale or disposition of any project; (e) admission of new members; (f) amendment of the LLC Agreement; and (g) dissolution of the Company.
We understand that HQS's redline proposed moving to a unanimous consent standard for certain of these items. CBR respectfully disagrees that unanimity is appropriate here — in our view, the 5-of-6 threshold already provides robust minority protection while maintaining the operational flexibility necessary to manage a portfolio of this size. That said, CBR is willing to discuss whether specific reserved matters (e.g., dissolution or amendment of the LLC Agreement) might warrant a heightened threshold on a case-by-case basis. However, CBR views 5 of 6 as the right baseline across the reserved matters generally.
**2. Deadlock Resolution Timeline**
We have reviewed HQS's proposed changes to the deadlock resolution mechanism in Article IX. As a reminder, the C&H draft sets out a three-step process: (i) a 60-day good-faith negotiation period between the members' respective senior executives; (ii) a 30-day mediation period; and (iii) binding arbitration under ICC rules, seated in Houston, Texas.
We understand that HQS's redline proposes compressing the initial negotiation period from 60 to 30 days, shortening mediation to 15 days, and relocating the arbitration seat to New York.
CBR's position is as follows:
- The 60-day negotiation period is important. It encourages the parties to resolve disputes collaboratively before incurring the cost and distraction of third-party intervention. In our experience, a compressed 30-day window is rarely sufficient to allow for meaningful executive-level engagement, particularly when the joint venture will be managing a geographically dispersed portfolio.
- The 30-day mediation window is a reasonable and proportionate intermediate step. We would be open to a modest adjustment (e.g., to 21 days) if that helps bridge the gap, but we think eliminating or materially shortening this step would undermine its utility.
- Houston as the arbitration seat is appropriate and, respectfully, should not be controversial. CBR is headquartered in Houston; the JV's principal business office will be located at 2300 Travis Street, Suite 4210, Houston, TX 77006; and the majority of the project portfolio is Texas-based (five of the eight projects, representing approximately 780 MW of the total 1,200 MW portfolio). We feel strongly about retaining Houston as the venue.
- ICC Rules should remain the governing procedural framework. These are widely recognized in international and domestic energy transactions and are well-suited to disputes of this nature.
We are open to minor timeline adjustments on the negotiation and mediation periods if both sides can agree, but the Houston venue and ICC rules are important to CBR.
**3. Additional Capital Call Mechanics**
HQS's redline includes several comments on the provisions governing additional capital calls beyond the initial $300,000,000 equity commitment ($150,000,000 from each member). Under the C&H draft:
- Additional capital calls are made on a 50/50 pro-rata basis, up to an additional $200,000,000 per member ($400,000,000 in aggregate additional equity), subject to the supermajority approval requirement (5 of 6 Management Committee votes) for any single call in excess of $25,000,000. - Total potential equity capitalization is therefore $700,000,000 ($300,000,000 initial + $400,000,000 additional).
We understand HQS's comments to raise three principal issues: (a) whether the $25,000,000 threshold triggering supermajority approval should be raised; (b) the consequences of a member's failure to fund a capital call, including dilution mechanics, default interest, and potential forced sale; and (c) timing and notice requirements for capital calls.
CBR's position:
- The $25,000,000 threshold appropriately balances routine operational capital needs — which should be managed efficiently by the Management Committee without supermajority process — against the need for joint approval of significant capital commitments. CBR does not believe raising this threshold is warranted.
- On dilution remedies for non-funding, CBR agrees that any consequences should be proportionate and believes that a reasonable cure period should be included before dilution or other remedies take effect. We are prepared to discuss specific cure periods and step-down mechanics.
- CBR is open to discussing reasonable notice periods for capital calls and would welcome a concrete proposal from HQS on this point.
We would also note that the project-level debt facility — up to $480,000,000 from Trident National Bank, N.A., non-recourse to members — is specifically structured to reduce the frequency and magnitude of equity capital calls to the members. This should meaningfully mitigate concerns about the burden of the call mechanics on either party.
**4. Distribution Waterfall Tier Splits**
HQS's redline includes proposed modifications to the three-tier distribution waterfall set forth in Section 5.02. For reference, the C&H draft structures the waterfall as follows:
- **Tier 1:** Pari passu 50/50 distributions to members until each member has received an 8.0% IRR on contributed capital. - **Tier 2:** 60% to CBR / 40% to Lumen Ridge on all distributions above the 8.0% IRR threshold, until Lumen Ridge has achieved a 12.0% IRR on its contributed capital. - **Tier 3:** 50/50 on all distributions above the Tier 2 threshold.
We note that this structure does not include a separate promote or carried interest. CBR's enhanced economics above the 8.0% hurdle are captured through the Tier 2 split, together with the management fees specified in Section 7.04 (the 1.5% annual development management fee on capital deployed and the 3.0% construction management fee on hard construction costs).
We understand HQS has proposed narrowing the Tier 2 band by raising the Tier 1 hurdle to 9.0% and lowering the Tier 2 cap to 11.0%, and adjusting the Tier 2 split to 55/45.
CBR's position is that the 60/40 Tier 2 split is a fundamental deal term and reflects the substantial value CBR brings as development and construction manager, as well as the contributed project portfolio. That portfolio — eight projects totaling 1,200 MW — was valued at $90,000,000 based on the fairness analysis delivered by Ridgeline Barrow & Co. on November 15, 2023, which supported a valuation range of $87,000,000 to $96,000,000. The Tier 2 enhanced split is the mechanism through which CBR captures its promote-equivalent economics, and CBR views this as a core commercial term.
Moreover, the 60/40 Tier 2 split was expressly agreed upon in the non-binding term sheet signed on September 25, 2023, by Margaret Calloway (on behalf of CBR) and Nathaniel Forsythe (on behalf of Lumen Ridge). While we appreciate that the term sheet is non-binding, CBR considers this term to have been commercially settled at the LOI stage and would be reluctant to reopen it.
That said, CBR is willing to have a constructive conversation around minor adjustments to the IRR hurdle percentages if that would help resolve this issue. However, the 60/40 split ratio in Tier 2 is not an area where CBR has flexibility.
**Additional Observations**
For the avoidance of doubt, C&H has accepted a number of HQS's other comments that are not in dispute, including housekeeping edits, refinements to defined terms, and various conforming changes throughout the agreement.
We also note that the transfer restriction provisions — including the three-year lock-up from closing, the right of first offer with a 60-day exercise period, the buy-sell/shotgun provision with a 45-day response period, and the tag-along and drag-along rights (with the drag-along available only after Year 5) — appear to be largely agreed between the parties, with only minor drafting refinements outstanding. We will address those in the next turn of the document.
Similarly, the governance provisions regarding the initial officers — Daniel Estrada as CEO (appointed by CBR) and Victor Osei as CFO (appointed by Lumen Ridge) — and the rotating chairperson of the Management Committee (CBR holds the initial chair in Year 1) also appear settled. We will clean up the related drafting as needed.
**Proposed Next Steps**
We would like to suggest scheduling a call for the week of November 13 with the deal teams from both sides to walk through the four open items identified above. If we can reach alignment on the key commercial points on that call, our target would be to circulate a revised draft of the LLC Agreement reflecting the agreed positions by November 20–22, which should keep the transaction on track for a signing by early December.
On timing: as you are aware, HSR early termination was granted on November 8, which clears one significant closing condition. The Cascadia Growth Equity Fund III consent process is also proceeding, and CBR expects to have that approval in hand shortly. Given this momentum, we want to be sure the LLC Agreement negotiations keep pace.
Please let us know your availability for a call next week. We are happy to send around a calendar invitation once we have a time that works for both teams.
Thank you, and we look forward to working through these remaining items.
Best regards,
Megan Chu Calderwood & Harkness LLP 1000 Louisiana Street, Suite 5500 Houston, TX 77002 Direct: (713) 555-4218 Email: mchu@calderwoodharkness.com
Matter No. 48172.001