DEVELOPMENT AND CONSTRUCTION MANAGEMENT AGREEMENT
EXECUTION VERSION
by and between
SOLSTICE PLATEAU ENERGY HOLDINGS LLC
a Delaware limited liability company
(the "Company")
and
CALLOWAY-BRIGGS RENEWABLES INC.
a Texas corporation
(the "Manager")
Dated as of December 4, 2023
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DEVELOPMENT AND CONSTRUCTION MANAGEMENT AGREEMENT
This Development and Construction Management Agreement (this "Agreement") is entered into as of December 4, 2023 (the "Execution Date"), by and between Solstice Plateau Energy Holdings LLC, a Delaware limited liability company (the "Company"), and Calloway-Briggs Renewables Inc., a Texas corporation (the "Manager"). The Company and the Manager are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Company is a Delaware limited liability company (EIN: 93-4158203) duly formed and organized under the laws of the State of Delaware for the purpose of developing, constructing, financing, owning, and operating a portfolio of utility-scale solar energy projects located in the States of Texas, New Mexico, and Arizona;
WHEREAS, the Company is jointly owned on a fifty percent (50%) / fifty percent (50%) basis by the Manager and Lumen Ridge Infrastructure Partners LLC, a Delaware limited liability company ("Lumen Ridge"), pursuant to the Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC dated as of December 4, 2023 (as may be amended, restated, supplemented, or otherwise modified from time to time, the "LLC Agreement");
WHEREAS, the Manager is a Texas corporation (EIN: 46-2837451) headquartered at 2300 Travis Street, Suite 4200, Houston, TX 77006, founded in 2011, and is one of the largest privately held independent solar developers in the southern United States, with approximately 3.8 gigawatts (GW) of solar projects in various stages of development and operation across the States of Texas, New Mexico, Arizona, and Nevada, and possesses significant expertise and experience in the development, construction, and management of utility-scale solar energy projects;
WHEREAS, the Manager has contributed to the Company pursuant to that certain Contribution Agreement dated as of December 4, 2023, by and between the Manager and the Company (the "Contribution Agreement"), a portfolio of eight (8) utility-scale solar development projects with aggregate nameplate direct current ("DC") capacity of approximately 1,200 megawatts ("MW") (the "Project Portfolio"), with an agreed valuation of Ninety Million Dollars ($90,000,000);
WHEREAS, the Company desires to appoint the Manager as the exclusive development manager and construction manager for all Projects (as defined herein) owned or to be owned by the Company, and the Manager desires to accept such appointment, subject to the terms and conditions set forth herein;
WHEREAS, the total aggregate equity commitment to the Company is Three Hundred Million Dollars ($300,000,000), consisting of One Hundred Fifty Million Dollars ($150,000,000) from the Manager and One Hundred Fifty Million Dollars ($150,000,000) from Lumen Ridge, with additional capital call authorization of up to Four Hundred Million Dollars ($400,000,000) in the aggregate (Two Hundred Million Dollars ($200,000,000) per Member), resulting in total potential equity capitalization of up to Seven Hundred Million Dollars ($700,000,000); and
WHEREAS, the Company has arranged a project-level credit facility of up to Four Hundred Eighty Million Dollars ($480,000,000) from Trident National Bank, N.A. (reference: TNB-EIF-2024-0193) (the "Credit Facility") to finance construction and development of the Projects, and the Manager's responsibilities hereunder shall include coordination with such Credit Facility.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the LLC Agreement.
"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Capital Deployed" means the total equity capital actually contributed and deployed by the Members to the Company as of the applicable measurement date, as reflected on the books and records of the Company and as certified by the Company's CFO. As of the Effective Date, the initial Aggregate Capital Deployed upon full funding of the initial equity commitments shall be Three Hundred Million Dollars ($300,000,000).
"Annual Budget" means the annual operating and capital budget approved by the Management Committee in accordance with Section 4.1 of this Agreement and the LLC Agreement, requiring supermajority approval of five (5) of six (6) votes of the Management Committee.
"Applicable Law" means any federal, state, or local statute, law, regulation, ordinance, rule, judgment, order, decree, permit, governmental approval, concession, franchise, license, agreement, directive, guideline, or policy, or any judicial or administrative interpretation of any of the foregoing, having the force and effect of law and applicable to the Parties, the Projects, or the Services.
"Brazos Point" means the solar development project located in Wharton County, Texas, with an approximate nameplate capacity of one hundred twenty (120) MW DC and situated on an approximately 1,440-acre lease, as more fully described in Exhibit A.
"Business Day" means any day other than a Saturday, Sunday, or any day on which commercial banks located in Houston, Texas or New York, New York are authorized or required by law to close.
"Cimarron Flats" means the solar development project located in Crockett County, Texas, with an approximate nameplate capacity of one hundred fifty (150) MW DC and situated on an approximately 1,800-acre lease, as more fully described in Exhibit A.
"Closing Date" means February 20, 2024, or such other date as the Parties may agree in writing.
"Commercial Operation Date" or "COD" means, for each Project, the date on which the applicable Project achieves commercial operation as defined in the applicable interconnection agreement and power purchase agreement for such Project, and as certified by the Manager and confirmed by the independent engineer, if any, retained in connection with the Credit Facility.
"Company" means Solstice Plateau Energy Holdings LLC, a Delaware limited liability company.
"Construction Commencement Date" means, for each Project, the date on which physical construction activities commence at the applicable Project site, as certified in writing by the Manager and acknowledged by the Management Committee. For purposes of this definition, "physical construction activities" shall mean site clearing, grading, or foundation work, but shall not include surveys, environmental assessments, permitting activities, or procurement of materials not yet delivered to the Project site.
"Construction Management Fee" has the meaning set forth in Section 3.2 of this Agreement, and means the fee payable to the Manager for construction oversight services, equal to three percent (3.0%) of Total Hard Construction Costs for each Project.
"Construction Period" means, for each Project, the period commencing on the Construction Commencement Date for such Project and ending on the Commercial Operation Date for such Project.
"Contribution Agreement" means the Contribution Agreement dated as of December 4, 2023, by and between the Manager and the Company, pursuant to which the Manager contributed the Project Portfolio to the Company.
"Credit Facility" means the project-level credit facility of up to Four Hundred Eighty Million Dollars ($480,000,000) from Trident National Bank, N.A. (reference: TNB-EIF-2024-0193) to finance construction and development of the Projects.
"Development Management Fee" has the meaning set forth in Section 3.1 of this Agreement, and means the annual fee payable to the Manager for development management services, equal to one and one-half percent (1.5%) of Aggregate Capital Deployed per annum.
"Development Period" means, for each Project, the period commencing on the Effective Date and ending on the Construction Commencement Date for such Project.
"Effective Date" means December 4, 2023.
"Escrow Agreement" means the Escrow Agreement entered into by the Parties and the escrow agent in connection with the formation of the Company and the transactions contemplated by the LLC Agreement and the Contribution Agreement.
"Force Majeure" has the meaning set forth in Section 13.1 of this Agreement.
"Hard Construction Costs" or "Total Hard Construction Costs" means, for each Project, all direct costs of construction, including, without limitation, equipment procurement (including photovoltaic modules, inverters, racking systems, and transformers), engineering, site preparation and grading, civil works, installation and erection, commissioning, interconnection facilities construction, and related hard costs directly attributable to the physical construction of such Project. Hard Construction Costs shall expressly exclude soft costs, financing fees, legal fees, title and survey costs, insurance premiums (other than builder's risk insurance premiums directly allocable to construction), and the Development Management Fee. The estimated aggregate Hard Construction Costs for the entire Project Portfolio are approximately Seven Hundred Twenty Million Dollars ($720,000,000).
"Key Personnel" means the individuals designated pursuant to Section 2.6 and listed on Exhibit D, as may be updated from time to time in accordance with this Agreement.
"LLC Agreement" means the Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC dated as of December 4, 2023, as may be amended, restated, supplemented, or otherwise modified from time to time.
"Lone Star Prairie" means the solar development project located in Webb County, Texas, with an approximate nameplate capacity of one hundred thirty (130) MW DC and situated on an approximately 1,560-acre lease, as more fully described in Exhibit A.
"Lumen Ridge" means Lumen Ridge Infrastructure Partners LLC, a Delaware limited liability company, which is a fifty percent (50%) Member of the Company.
"Management Committee" means the six-member management committee of the Company established under Article IV of the LLC Agreement, consisting of three (3) members appointed by the Manager and three (3) members appointed by Lumen Ridge, which serves as the governing body of the Company.
"Manager" means Calloway-Briggs Renewables Inc., a Texas corporation.
"Member" or "Members" means the Manager and Lumen Ridge, each a fifty percent (50%) member of the Company as set forth in the LLC Agreement.
"Person" means an individual, a corporation, a limited liability company, a partnership, a joint venture, a trust, an unincorporated organization, a governmental authority, or any other legal entity.
"Project" or "Projects" means each of the eight (8) utility-scale solar development projects contributed to the Company as described in Exhibit A, and any additional projects developed, acquired, or otherwise undertaken by the Company during the term of this Agreement.
"Project Portfolio" means, collectively, the eight (8) solar projects: Red Mesa Solar I, Red Mesa Solar II, Cimarron Flats, Lone Star Prairie, Brazos Point, Sangre del Sol I, Sangre del Sol II, and Sonoran Ridge, totaling approximately 1,200 MW DC across approximately 14,340 acres, as more fully described in Exhibit A.
"Prudent Industry Practice" means those practices, methods, techniques, standards of care, and levels of diligence that would reasonably be expected from an experienced, qualified, and competent developer and manager of utility-scale solar energy projects in the United States, acting in good faith, and consistent with applicable industry codes, standards, and guidelines, including those promulgated by the Institute of Electrical and Electronics Engineers (IEEE), the National Electrical Code (NEC), and the Occupational Safety and Health Administration (OSHA).
"Red Mesa Solar I" means the solar development project located in Pecos County, Texas, with an approximate nameplate capacity of two hundred (200) MW DC and situated on an approximately 2,400-acre lease, as more fully described in Exhibit A.
"Red Mesa Solar II" means the solar development project located in Pecos County, Texas, with an approximate nameplate capacity of one hundred eighty (180) MW DC and situated on an approximately 2,100-acre lease, as more fully described in Exhibit A.
"Sangre del Sol I" means the solar development project located in Doña Ana County, New Mexico, with an approximate nameplate capacity of one hundred fifty (150) MW DC and situated on an approximately 1,800-acre lease administered by the Bureau of Land Management ("BLM"), as more fully described in Exhibit A.
"Sangre del Sol II" means the solar development project located in Doña Ana County, New Mexico, with an approximate nameplate capacity of one hundred ten (110) MW DC and situated on an approximately 1,320-acre lease administered by the BLM, as more fully described in Exhibit A.
"Services" means, collectively, the Development Management Services, the Construction Management Services, and the Operations Transition Services described in Article II of this Agreement.
"SOFR" means the Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (or any successor administrator), as of the applicable date of determination.
"Sonoran Ridge" means the solar development project located in Pinal County, Arizona, with an approximate nameplate capacity of one hundred sixty (160) MW DC and situated on an approximately 1,920-acre private lease, as more fully described in Exhibit A.
"Subcontractor" means any third-party contractor, vendor, consultant, or service provider engaged by the Manager in connection with the performance of the Services, including, without limitation, engineering, procurement, and construction ("EPC") contractors, environmental consultants, surveyors, and equipment suppliers.
"Tax Protection Agreement" means the Tax Protection Agreement entered into in connection with the formation of the Company and the transactions contemplated by the LLC Agreement and the Contribution Agreement.
Section 1.2 — Interpretation
In this Agreement, except to the extent that the context otherwise requires:
(a) When a reference is made in this Agreement to an Article, Section, Exhibit, or Schedule, such reference is to an Article, Section, Exhibit, or Schedule of this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
(c) Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."
(d) The words "herein," "hereof," "hereunder," "hereby," "hereto," and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement.
(e) The use of any gender herein shall be deemed to encompass references to the other genders, and the use of the singular shall be deemed to encompass the plural and vice versa.
(f) Any reference to any statute, rule, regulation, or agreement shall be to such statute, rule, regulation, or agreement as amended, supplemented, or otherwise modified from time to time (and, in the case of any statute, to any successor provision thereto).
(g) Any reference to a "day" or number of "days" (without the explicit qualification of "Business Days") shall refer to a calendar day or calendar days. If any action is required to be taken on a day that is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
(h) All dollar amounts referenced herein are in United States Dollars unless otherwise expressly stated.
(i) The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement, and the normal rule of construction that any ambiguity shall be construed against the drafting party shall not apply to the interpretation of this Agreement or any amendments, exhibits, or schedules hereto.
Section 1.3 — Exhibits and Schedules
The following Exhibits are attached to and incorporated by reference into this Agreement as if fully set forth herein:
• Exhibit A — Project Portfolio Description
• Exhibit B — Fee Schedule and Calculation Methodology
• Exhibit C — Form of Monthly Progress Report
• Exhibit D — Key Personnel
• Exhibit E — Form of Invoice
In the event of any conflict or inconsistency between the body of this Agreement and any Exhibit, the body of this Agreement shall control, unless the applicable Exhibit expressly states otherwise with the concurrence of both Parties.
ARTICLE II — APPOINTMENT AND SCOPE OF SERVICES
Section 2.1 — Appointment
(a) The Company hereby appoints the Manager as the exclusive development manager and construction manager for all Projects owned or to be owned by the Company during the term of this Agreement, and the Manager hereby accepts such appointment. The Manager agrees to perform the Services in accordance with the terms and conditions of this Agreement, the Annual Budget, the LLC Agreement, and all Applicable Law.
(b) The appointment granted herein is exclusive, and no other Person shall perform the Services or any portion thereof for the Company without the Manager's prior written consent or as otherwise expressly provided herein; provided, however, that the foregoing exclusivity shall not restrict the Company or the Management Committee from engaging independent engineers, independent auditors, or other third-party advisors for purposes of oversight, audit, or verification of the Manager's performance hereunder.
(c) The Manager shall devote such time, attention, and resources as are reasonably necessary to perform the Services in a diligent and professional manner consistent with the standards set forth in this Agreement. Nothing herein shall prevent the Manager from engaging in other business activities that do not materially interfere with the Manager's performance of the Services; provided that the Manager shall comply with any non-compete or conflict-of-interest provisions set forth in the LLC Agreement.
Section 2.2 — Development Management Services
During the Development Period for each Project, the Manager shall provide the following pre-construction development services (collectively, the "Development Management Services"):
(a) Permitting and Entitlements. Maintaining, advancing, and securing all governmental permits, approvals, authorizations, and entitlements necessary for the development and construction of each Project, including, without limitation, National Environmental Policy Act ("NEPA") categorical exclusions, state environmental permits, county conditional use permits or special use permits, building permits, grading permits, and any permits required by the Bureau of Land Management for the Sangre del Sol I and Sangre del Sol II projects.
(b) Interconnection Management. Managing interconnection agreements with applicable transmission operators, including Electric Reliability Council of Texas ("ERCOT") for Texas-sited Projects, the Western Electricity Coordinating Council ("WECC") and applicable transmission providers for Arizona- and New Mexico-sited Projects, and coordinating with such operators to advance interconnection studies, secure transmission capacity, and resolve any interconnection-related issues.
(c) Power Purchase Agreement Negotiations. Negotiating, executing, and administering power purchase agreements ("PPAs") on behalf of the Company for each Project, subject to Management Committee approval (requiring supermajority of five (5) of six (6) votes) prior to execution of any PPA. The Manager shall use commercially reasonable efforts to secure PPAs on terms that are commercially competitive and consistent with the Company's financial projections and the Annual Budget.
(d) Environmental Compliance. Overseeing all environmental compliance activities during the Development Period, including coordination with TerraNova Environmental Sciences Inc. (contact: Dr. Sharon Kessler, Principal Environmental Scientist) for any supplemental environmental assessments, Phase I and Phase II environmental site assessments, biological resource surveys, cultural resource surveys, wetland delineations, and all other environmental studies and reports required by Applicable Law or by any governmental authority with jurisdiction over any Project.
(e) Land Lease Management. Managing all land lease obligations across all eight (8) Project sites, encompassing an aggregate of approximately 14,340 acres across Pecos County, Crockett County, Webb County, and Wharton County in Texas; Doña Ana County in New Mexico; and Pinal County in Arizona. Such management shall include lease payment administration, compliance with lease terms and covenants, lease renewals or extensions as necessary, coordination with lessors and BLM field offices (for the New Mexico Projects), and resolution of any lease disputes or defaults.
(f) Title and Survey Coordination. Coordinating with Meridian Land Title Company on all title matters, boundary and ALTA surveys, title insurance procurement, and the identification and resolution of any title exceptions, encumbrances, liens, easements, or other matters affecting the Company's leasehold interests in the Project sites.
(g) Community Relations and Stakeholder Engagement. Managing community relations, stakeholder engagement, and local governmental relations for each Project, including conducting public meetings, responding to community inquiries and concerns, managing relationships with local elected officials and regulatory bodies, and complying with any public participation requirements under Applicable Law.
(h) Development Progress Reporting. Preparing and submitting development progress reports to the Management Committee in accordance with Article V of this Agreement, including status updates on permitting, interconnection, PPA negotiations, land lease matters, environmental compliance, and any material risks or issues.
(i) Financial and Tax Coordination. Coordinating with the Company's independent auditor, Pennington Clarke LLP (contact: Harold Yeung, CPA, Partner), and the Company's tax advisors regarding project-level financial statements, tax returns, and tax-related matters, including the provision of information and documentation necessary for the preparation of tax returns and financial statements.
(j) Tax Credit and Incentive Optimization. Supporting the Company's efforts to claim Investment Tax Credits under Section 48 of the Internal Revenue Code of 1986, as amended (the "Code"), at the base credit rate of thirty percent (30%) (or forty percent (40%) with the domestic-content bonus credit, if applicable), and bonus depreciation under Section 168(k) of the Code, including, without limitation, compliance with applicable domestic content requirements under the Inflation Reduction Act of 2022, maintaining records necessary to substantiate tax credit eligibility, coordinating with equipment suppliers regarding domestic content certifications, and supporting any Internal Revenue Service audits or inquiries relating to tax credit claims.
Section 2.3 — Construction Management Services
During the Construction Period for each Project, the Manager shall provide the following construction oversight and management services (collectively, the "Construction Management Services"):
(a) Budget and Schedule Preparation. Preparation of detailed construction budgets, construction schedules, and milestone plans for each Project, consistent with the approved Annual Budget and the applicable construction plan approved by the Management Committee pursuant to Section 4.2.
(b) Procurement. Procurement of equipment, materials, and construction services through competitive bidding processes, including solicitation of bids from qualified suppliers and contractors, evaluation of bids, and recommendation of selected vendors and contractors to the Management Committee for approval (to the extent required under Section 2.7).
(c) Subcontractor Management. Selection, contracting with, and oversight of Subcontractors (including EPC contractors) for the construction of each Project. The Manager shall ensure that all Subcontracts include provisions for performance warranties, liquidated damages for delay, indemnification in favor of the Company, insurance requirements, and lien waiver obligations consistent with the requirements of this Agreement and the Credit Facility.
(d) Day-to-Day Construction Supervision. Day-to-day supervision and management of construction activities at each Project site, including maintaining a construction management team with appropriate qualifications and staffing levels to oversee construction progress, coordinate among Subcontractors, and ensure adherence to the construction schedule and budget.
(e) Quality Assurance and Quality Control. Implementation and maintenance of a comprehensive quality assurance and quality control ("QA/QC") program during construction of each Project, including inspection of materials, verification of installation practices, review of commissioning test results, and compliance with applicable engineering standards and manufacturer specifications.
(f) Construction Financing Coordination. Coordination of construction financing draws under the Credit Facility from Trident National Bank, N.A. (reference: TNB-EIF-2024-0193), including preparation and submission of draw requests, supporting documentation (including lien waivers, progress certifications, and independent engineer reports), and compliance with all covenants and conditions of the Credit Facility.
(g) Insurance Coordination. Coordination with Blackthorn Risk Advisors LLC (contact: Garrett Yoon, Senior Vice President) regarding builder's risk insurance claims, coverage verification, and policy compliance under the Ironclad Mutual Insurance Co. builder's risk insurance policy (Policy No. BRX-2024-SP-00412), and ensuring that all construction activities are conducted in a manner consistent with the terms of such policy.
(h) Environmental Compliance During Construction. Managing environmental compliance during construction, including coordination with TerraNova Environmental Sciences Inc. (contact: Dr. Sharon Kessler, Principal Environmental Scientist) for ongoing environmental monitoring, stormwater pollution prevention plan ("SWPPP") compliance, dust control, habitat mitigation, and adherence to all environmental permits and conditions applicable to each Project.
(i) Commissioning and Testing. Commissioning, testing, and startup of each completed Project to achieve COD, including coordination of performance testing, interconnection testing, and compliance verification with the applicable transmission operator, and preparation and submission of all documentation required to declare commercial operation under the applicable interconnection agreement and PPA.
(j) Construction Progress Reporting. Preparation and submission of construction progress reports and cost reports to the Management Committee and the Company's CFO in accordance with Article V of this Agreement.
Section 2.4 — Operations Transition Services
Upon COD for each Project, the Manager shall oversee the transition from construction to commercial operations (collectively, the "Operations Transition Services"), including:
(a) Punch-List Completion. Management and oversight of the completion of all remaining punch-list items identified during the commissioning and testing process or by the independent engineer, if any, within the timeframes specified in the applicable EPC contract and the Credit Facility documents.
(b) Warranty Documentation and Handoff. Compilation, organization, and delivery to the Company of all warranty documentation from equipment manufacturers, EPC contractors, and other Subcontractors, including, without limitation, module warranties, inverter warranties, tracker system warranties (if applicable), and balance-of-system warranties, and coordination of any warranty claims arising during the initial warranty period.
(c) Initial Operations Staffing and Training. Assistance with the initial staffing of operations and maintenance personnel for each Project, including identification and recruitment of qualified operations staff, coordination of training programs (including equipment-specific training by manufacturers), and development of standard operating procedures for routine operations and maintenance activities.
(d) Transition to Long-Term O&M Framework. Facilitation of the transition from the construction phase to the Company's long-term operations and maintenance framework, whether managed internally by the Company, by the Manager under a separate operations and maintenance agreement (if entered into), or by a third-party O&M provider selected by the Company.
Section 2.5 — Standard of Care
The Manager shall perform the Services in accordance with the following standards (collectively, the "Performance Standards"):
(i) Prudent Industry Practice, as defined in Section 1.1;
(ii) all Applicable Laws and regulations, including, without limitation, federal, state, and local environmental laws, workplace safety regulations (including OSHA standards), building codes, and electrical codes;
(iii) the terms and conditions of all permits, interconnection agreements, power purchase agreements, land leases, and other material agreements applicable to each Project; and
(iv) the Annual Budget as approved by the Management Committee, subject to the change order and variance provisions set forth in Sections 4.3 and 6.3 of this Agreement.
The Manager shall not be deemed in breach of the Performance Standards to the extent that any failure to meet such standards is directly caused by a Force Majeure event, a Company-caused delay, or a direction of the Management Committee that is inconsistent with such standards (in which case the Manager shall promptly notify the Management Committee of such inconsistency).
Section 2.6 — Key Personnel
(a) The Manager hereby designates Daniel Estrada, Senior Vice President — Corporate Development, Calloway-Briggs Renewables Inc., and Initial JV Chief Executive Officer of the Company, as the primary point of contact and authorized representative for the Services. Mr. Estrada shall have day-to-day responsibility for overseeing the Manager's performance of the Services and shall serve as the principal liaison between the Manager and the Management Committee.
(b) The Manager shall designate additional Key Personnel, including project-level managers for each Project site, as set forth on Exhibit D attached hereto. Such project-level managers shall have on-the-ground responsibility for development and construction activities at their respective Project sites.
(c) The Manager shall not remove, reassign, or replace any Key Personnel designated pursuant to this Section 2.6 without providing at least thirty (30) days' prior written notice to, and consulting in good faith with, the Management Committee regarding the proposed replacement. Any replacement Key Personnel shall have qualifications and experience reasonably comparable to or exceeding those of the individual being replaced. The Management Committee shall have the right to object to any proposed replacement in good faith, and the Manager shall consider such objections in making its final determination.
Section 2.7 — Subcontracting
(a) The Manager may engage Subcontractors to perform portions of the Services, and shall have discretion in the selection and management of such Subcontractors; provided, however, that the Manager shall remain fully responsible and liable for all work performed by Subcontractors as if such work had been performed directly by the Manager.
(b) The execution of any Subcontract with a contract value in excess of Five Million Dollars ($5,000,000) shall require the prior approval of the Management Committee by supermajority vote of five (5) of six (6) members. The Manager shall present to the Management Committee a summary of the proposed Subcontract, including the identity and qualifications of the proposed Subcontractor, the scope of work, the contract price, key commercial terms, and the results of any competitive bidding process conducted.
(c) The Manager shall use commercially reasonable efforts to ensure competitive pricing in the procurement of Subcontractor services and shall conduct competitive bidding processes for material Subcontracts (with a minimum of three (3) qualified bids for any Subcontract with a value in excess of Two Million Five Hundred Thousand Dollars ($2,500,000)), unless the Management Committee approves a sole-source procurement.
(d) All Subcontracts shall contain provisions requiring the Subcontractor to (i) comply with all Applicable Laws, (ii) maintain insurance coverage in amounts reasonably satisfactory to the Company, naming the Company, the Manager, and Lumen Ridge as additional insureds, (iii) indemnify the Company and the Manager against losses arising from the Subcontractor's negligence or breach, and (iv) include assignment provisions permitting the Manager to assign the Subcontract to the Company or its designee upon termination of this Agreement.
ARTICLE III — COMPENSATION
Section 3.1 — Development Management Fee
(a) The Company shall pay to the Manager an annual development management fee equal to one and one-half percent (1.5%) of Aggregate Capital Deployed per annum (the "Development Management Fee"), in consideration for the Manager's performance of the Development Management Services.
(b) At full initial deployment of Three Hundred Million Dollars ($300,000,000) in aggregate equity, the annual Development Management Fee shall equal Four Million Five Hundred Thousand Dollars ($4,500,000) per year (calculated as 1.5% × $300,000,000). As additional capital is deployed by the Members, the Development Management Fee shall increase proportionally, based on the then-current level of Aggregate Capital Deployed.
(c) The Development Management Fee shall be calculated on a quarterly basis, based on the arithmetic average of the Aggregate Capital Deployed as of the first day and the last day of such calendar quarter. The Development Management Fee shall be payable in arrears within thirty (30) days after the end of each calendar quarter, upon receipt of the Manager's invoice therefor, calculated in the manner set forth in Exhibit B.
(d) The Development Management Fee shall be pro-rated for any partial quarter during the term of this Agreement, including the initial quarter following the Effective Date and the final quarter upon termination or expiration of this Agreement.
(e) The Development Management Fee shall accrue from the Effective Date and shall continue to be payable through the earlier of (i) the date on which all Projects have achieved COD and completed all Operations Transition Services, and (ii) the effective date of termination of this Agreement in accordance with Article X.
Section 3.2 — Construction Management Fee
(a) The Company shall pay to the Manager a construction oversight fee equal to three percent (3.0%) of Total Hard Construction Costs for each Project (the "Construction Management Fee"), in consideration for the Manager's performance of the Construction Management Services.
(b) The estimated aggregate Total Hard Construction Costs for the entire Project Portfolio are approximately Seven Hundred Twenty Million Dollars ($720,000,000). Accordingly, the estimated potential aggregate Construction Management Fee for the entire Project Portfolio is approximately Twenty-One Million Six Hundred Thousand Dollars ($21,600,000) (calculated as 3.0% × $720,000,000). The Parties acknowledge that this estimate is provided for illustrative purposes only and that the actual Construction Management Fee for each Project will be based on actual Hard Construction Costs incurred.
(c) The Construction Management Fee shall be payable on a monthly basis, in arrears, based on the actual Hard Construction Costs incurred and documented during the applicable calendar month. Payment shall be due within thirty (30) days after the Company's receipt of the Manager's monthly cost report and invoice therefor, calculated in the manner set forth in Exhibit B.
(d) Within sixty (60) days after COD for each Project, the Manager shall prepare and submit a final true-up calculation of the Construction Management Fee for such Project, based on final, audited Hard Construction Costs as verified by the Company's independent auditor, Pennington Clarke LLP. If the aggregate monthly Construction Management Fee payments for such Project exceed the amount due based on audited final Hard Construction Costs, the Manager shall refund the excess to the Company within thirty (30) days of such determination. If the aggregate monthly payments are less than the amount due, the Company shall pay the shortfall to the Manager within thirty (30) days of such determination.
(e) All Hard Construction Costs forming the basis for the Construction Management Fee shall be subject to audit by the Company's independent auditor, Pennington Clarke LLP, in accordance with Section 5.5 of this Agreement.
Section 3.3 — Reimbursable Expenses
(a) In addition to the fees set forth in Sections 3.1 and 3.2, the Company shall reimburse the Manager for all reasonable, documented, out-of-pocket third-party expenses actually incurred by the Manager in connection with the performance of the Services ("Reimbursable Expenses"), including, without limitation:
(i) Travel expenses (airfare, lodging, ground transportation, and per diem) for on-site Project visits and meetings with governmental authorities, counterparties, and other third parties in connection with the Services;
(ii) Permit and application fees, including fees payable to governmental authorities in connection with development permits, building permits, environmental permits, and BLM right-of-way applications;
(iii) Third-party consulting fees, including fees payable to environmental consultants (such as TerraNova Environmental Sciences Inc.), engineering consultants, surveyors, independent engineers, and legal consultants retained specifically for a Project and approved as part of the Annual Budget or otherwise approved by the Management Committee; and
(iv) Equipment and materials testing costs, including costs of independent testing laboratories and quality assurance testing of major equipment components.
(b) All Reimbursable Expenses must be consistent with the approved Annual Budget. Reimbursable Expenses that exceed the applicable line-item amounts in the Annual Budget by more than ten percent (10%) shall require the prior written approval of the Management Committee before such expenses are incurred, unless such expenses are of an emergency nature requiring immediate action to prevent imminent harm to a Project or to comply with Applicable Law, in which case the Manager shall notify the Management Committee as soon as practicable.
(c) The Manager shall not be entitled to reimbursement for its own general overhead, internal personnel costs, office rent, utilities, or other internal costs, all of which are deemed fully covered by the Development Management Fee and the Construction Management Fee payable under this Agreement.
Section 3.4 — Payment Mechanics
(a) The Manager shall submit invoices to the Company on a monthly basis, in the form set forth in Exhibit E. Each invoice shall set forth in reasonable detail the calculation of the Development Management Fee (if applicable), the Construction Management Fee (if applicable), and any Reimbursable Expenses for the applicable billing period, together with supporting documentation. Invoices shall be submitted to the Company's Chief Financial Officer (initially Victor Osei, appointed by Lumen Ridge) at the Company's address set forth in Section 15.2.
(b) The Company shall pay each properly submitted and undisputed invoice within thirty (30) days of receipt thereof. If the Company disputes any portion of an invoice in good faith, it shall pay the undisputed portion within the thirty (30)-day payment period and shall deliver written notice to the Manager specifying the disputed amount and the basis for the dispute within such period. The Parties shall use commercially reasonable efforts to resolve any billing dispute within thirty (30) days after delivery of such notice.
(c) Any undisputed amounts not paid when due shall bear interest from the due date until paid at a rate per annum equal to the lesser of (i) SOFR plus three hundred (300) basis points and (ii) the maximum rate permitted by Applicable Law, compounding monthly.
(d) The Company shall have the right to offset against fees otherwise payable to the Manager hereunder any undisputed amounts owed by the Manager to the Company under this Agreement, including, without limitation, liquidated damages under Section 6.2, refunds arising from cost overrun adjustments under Section 6.3, and audit-related refunds under Section 5.5.
Section 3.5 — No Promote or Carried Interest
For the avoidance of doubt, the fees payable under this Article III constitute the entirety of the Manager's compensation for the performance of the Services. The Manager is not entitled to any promote, carried interest, performance fee, incentive fee, or other success-based compensation under this Agreement. The Manager's economic interests in respect of distributions from the Company are governed exclusively by the distribution waterfall set forth in Article VII of the LLC Agreement, which provides for the following distribution tiers:
Tier 1: Distributions split fifty percent (50%) to the Manager and fifty percent (50%) to Lumen Ridge until Lumen Ridge has achieved an internal rate of return ("IRR") of eight percent (8.0%) on its capital contributions;
Tier 2: Thereafter, distributions split sixty percent (60%) to the Manager and forty percent (40%) to Lumen Ridge until Lumen Ridge has achieved an IRR of twelve percent (12.0%) on its capital contributions; and
Tier 3: Thereafter, distributions split fifty percent (50%) to the Manager and fifty percent (50%) to Lumen Ridge.
Nothing in this Agreement shall be construed to modify, amend, or supersede the distribution provisions of the LLC Agreement.
ARTICLE IV — BUDGETS, PLANS, AND APPROVALS
Section 4.1 — Annual Development and Construction Budget
(a) No later than sixty (60) days prior to the start of each fiscal year of the Company (or, with respect to the first fiscal year, within sixty (60) days after the Effective Date), the Manager shall prepare and submit to the Management Committee a proposed Annual Budget covering both development and construction activities for all Projects during the applicable fiscal year.
(b) The proposed Annual Budget shall include, at a minimum, the following:
(i) Line-item detail for each Project, including projected Hard Construction Costs, development costs (soft costs), estimated Development Management Fee, estimated Construction Management Fee, and estimated Reimbursable Expenses;
(ii) A summary of aggregate projected costs and fees for the Project Portfolio;
(iii) A projected timeline for key milestones (including anticipated Construction Commencement Dates and CODs) for each Project;
(iv) An analysis of anticipated capital requirements and the proposed timing and amounts of capital calls, if any; and
(v) A risk assessment identifying material risks to the budget and recommended contingency reserves.
(c) The Annual Budget shall require supermajority approval of five (5) of six (6) votes of the Management Committee, consistent with the governance provisions of the LLC Agreement. If the Management Committee does not approve the proposed Annual Budget prior to the start of the applicable fiscal year, the Manager shall continue to operate under the most recently approved Annual Budget (with adjustments for inflation and committed contractual obligations) until a new Annual Budget is approved.
(d) The Manager shall promptly notify the Management Committee of any material deviations from the approved Annual Budget and shall seek Management Committee approval for any amendments to the Annual Budget in accordance with the procedures set forth in the LLC Agreement.
Section 4.2 — Project-Level Construction Plans
(a) For each Project, the Manager shall prepare and submit to the Management Committee a detailed construction plan and timeline (each, a "Construction Plan") prior to the proposed Construction Commencement Date for such Project. Each Construction Plan shall include:
(i) Engineering and procurement milestones, including the schedule for completion of detailed engineering, procurement of major equipment (modules, inverters, racking, transformers), and delivery timelines;
(ii) A comprehensive construction schedule with the anticipated Construction Commencement Date, key intermediate milestones (including site preparation, foundation installation, module installation, electrical work, and interconnection), and the projected COD;
(iii) A detailed cost estimate, broken down into Hard Construction Costs (by category) and soft costs, with a reconciliation to the applicable line items in the Annual Budget;
(iv) A risk assessment and mitigation plan identifying key construction risks (including weather, supply chain, labor availability, permitting, and interconnection) and proposed mitigation strategies; and
(v) A staffing plan identifying the Key Personnel and project-level management team for the applicable Project.
(b) Each Construction Plan shall require the approval of the Management Committee prior to the commencement of construction activities for the applicable Project. The Manager shall not commence construction on any Project without such approval.
Section 4.3 — Change Orders
(a) The Manager may approve change orders for each Project that do not exceed the lesser of (i) One Million Dollars ($1,000,000) per individual change order and (ii) five percent (5%) of the applicable Project's approved construction budget, in each case without requiring Management Committee approval; provided that the aggregate amount of all change orders approved by the Manager for any single Project without Management Committee approval shall not exceed three percent (3%) of such Project's approved construction budget.
(b) Any change order that exceeds the thresholds set forth in Section 4.3(a), or that would cause the aggregate change orders for a Project to exceed the aggregate threshold, shall require the prior written approval of the Management Committee by supermajority vote.
(c) All change orders, whether approved by the Manager or by the Management Committee, shall be documented in writing and reported to the Company's CFO and the Management Committee within ten (10) Business Days after approval, including a description of the change, the cost impact, the schedule impact, and the reason for the change.
Section 4.4 — Capital Call Coordination
(a) In the event that additional capital is required beyond the initial Three Hundred Million Dollars ($300,000,000) aggregate equity commitment to fund development and construction activities, the Manager shall coordinate with the Management Committee to initiate capital calls pursuant to the procedures set forth in the LLC Agreement.
(b) Additional capital calls shall be made on a fifty/fifty (50/50) pro-rata basis between the Members, in amounts of up to Two Hundred Million Dollars ($200,000,000) per Member (Four Hundred Million Dollars ($400,000,000) in the aggregate), subject to the following conditions:
(i) Each additional capital call shall require the approval of the Management Committee by a supermajority vote of at least seventy-five percent (75%) of the Management Committee members;
(ii) The Manager shall provide the Management Committee with a detailed justification for each proposed capital call, including the specific Projects and expenditures for which the additional capital is required, the projected uses of funds, and the anticipated return on such additional investment; and
(iii) Each Member shall have at least thirty (30) days' notice prior to the date on which the capital contribution is due.
(c) The Manager shall use commercially reasonable efforts to optimize the timing and sequencing of capital calls to minimize the cost of capital to the Company and to coordinate with draws under the Credit Facility.