AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
SOLSTICE HOLDINGS, LLC
a Delaware Limited Liability Company
Dated as of September 21, 2023
This Amended and Restated Limited Liability Company Agreement (this "Agreement") amends and restates in its entirety the original Limited Liability Company Agreement of Solstice Holdings, LLC dated as of August 14, 2023.
Parties:
CBR Solstice Manager, LLC, a Delaware limited liability company ("Managing Member" or "CBR Manager")
and
Ridgeline Capital Partners, LLC, a Delaware limited liability company ("Tax-Equity Member" or "Investor")
(each, a "Member" and collectively, the "Members")
CONFIDENTIAL TREATMENT REQUESTED — THIS AGREEMENT CONTAINS CONFIDENTIAL COMMERCIAL AND FINANCIAL INFORMATION AND SHALL NOT BE DISCLOSED TO ANY PERSON OTHER THAN IN ACCORDANCE WITH SECTION 15.3 HEREOF.
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ARTICLE I — DEFINITIONS AND CONSTRUCTION
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 in this Section 1.1 shall have the meanings ascribed to such terms elsewhere in this Agreement.
"Act" means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time.
"Adjusted Capital Account" means, with respect to any Member, such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) credit to such Capital Account any amounts that such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in Treasury Regulation §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"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" 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, and the terms "Controlled by" and "under common Control with" have correlative meanings.
"Agreement" means this Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, as it may be further amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Amistad" means Amistad Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 45 MW(dc) utility-scale solar photovoltaic project located in Val Verde County, Texas, with a target Commercial Operation Date of November 18, 2023.
"Applicable Law" means all applicable provisions of constitutions, statutes, ordinances, rules, regulations, permits, certificates, judgments, decisions, decrees, and orders of any Governmental Authority, including federal, state, and local law.
"Appraised Value" or "Fair Market Value" means, with respect to any asset or Membership Interest, the fair market value thereof as determined in accordance with the procedures set forth in Section 12.4 of this Agreement, which determination shall be made on an arm's-length basis between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts, without giving effect to any discount for lack of marketability, minority interest, or similar discount.
"Back-Leverage Facility" means the back-leverage term loan facility in the original principal amount of $68,000,000 provided by Osprey National Bank, N.A. to the Company, evidenced by that certain Term Loan Agreement dated as of September 21, 2023 (Osprey reference number ONB-PF-2023-0587), as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which banking institutions in New York, New York, or Houston, Texas, are authorized or required by law to close.
"Capital Account" means, with respect to each Member, the capital account established and maintained for such Member in accordance with Section 5.3 of this Agreement and the rules set forth in Treasury Regulation § 1.704-1(b)(2)(iv).
"Capital Contribution" means, with respect to any Member, the aggregate amount of cash and the Gross Asset Value of any property (other than cash) contributed to the Company by such Member pursuant to the terms of Article V of this Agreement.
"CBR" means Calloway-Briggs Renewables Inc., a Texas corporation (EIN 84-3291076), which is the sole member of CBR Solstice Manager, LLC.
"CBR Manager" or "Managing Member" means CBR Solstice Manager, LLC, a Delaware limited liability company (EIN 88-4071597), a disregarded entity for federal income tax purposes whose sole member is Calloway-Briggs Renewables Inc.
"Cimarron" means Cimarron Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 50 MW(dc) utility-scale solar photovoltaic project located in Lea County, New Mexico, with a target Commercial Operation Date of September 30, 2023.
"Closing Date" means December 8, 2023, or such other date as may be determined by mutual agreement of the Members pursuant to Section 5.2 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended. All references herein to sections of the Code shall include any corresponding provisions of any successor federal tax statute.
"COD" or "Commercial Operation Date" means, with respect to each Project Company, the date on which the applicable project achieves commercial operation as determined by satisfaction of the criteria set forth in the applicable EPC Contract and PPA, including (a) completion of all commissioning tests, (b) receipt of permission to operate from the applicable interconnection authority, (c) execution and delivery of the COD Certificate by the Independent Engineer, and (d) commencement of energy deliveries under the applicable PPA.
"Company" means Solstice Holdings, LLC, a Delaware limited liability company (EIN 88-4071523).
"Construction Facility" means the construction-to-term loan facility in the original principal amount of $245,000,000 provided by Osprey National Bank, N.A. to the Company and the Project Companies, evidenced by that certain Construction and Term Loan Agreement dated as of August 14, 2023 (Osprey reference number ONB-PF-2022-0341), as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Coyote Flats" means Coyote Flats Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 65 MW(dc) utility-scale solar photovoltaic project located in Ward County, Texas, with a target Commercial Operation Date of November 5, 2023.
"Deficit Restoration Obligation" or "DRO" means, with respect to any Member, any obligation of such Member to restore a deficit balance in such Member's Capital Account upon liquidation of such Member's Membership Interest or liquidation of the Company, as described in Section 6.5 of this Agreement.
"Depreciation" means the depreciation, amortization, or other cost recovery deduction allowable for federal income tax purposes with respect to the depreciable assets of the Company and the Project Companies, computed using the 5-year Modified Accelerated Cost Recovery System applicable to solar energy property under § 168 of the Code, applied to the Depreciable Basis.
"Depreciable Basis" means $307,680,000, computed as the aggregate EPC cost of $384,600,000 less fifty percent (50%) of the total Investment Tax Credits of $153,840,000 (i.e., $384,600,000 − $76,920,000 = $307,680,000), in accordance with § 50(c) of the Code.
"Distributable Cash" has the meaning set forth in Section 7.1 of this Agreement.
"Domestic Content Adder" means the 10% bonus investment tax credit adder available under IRA § 48(a)(12) of the Code for solar energy property that meets the applicable domestic content requirements, as set forth in Notice 2023-38 and subsequent guidance issued by the Internal Revenue Service and the Department of the Treasury.
"EPC Contractor" means Vasquez Brothers Construction, Inc., a Texas corporation (EIN 75-2648103), in its capacity as the general contractor under the Master EPC Agreement for all seven projects comprising the Solstice Portfolio.
"Escrow Agent" means Clearwater Escrow Services, Inc., in its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means that certain Escrow Agreement dated as of September 21, 2023, among the Company, the Managing Member, the Investor, and the Escrow Agent, governing the escrow of the First Tranche of the Investor's Capital Contribution, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Final COD" means November 18, 2023, which is the target Commercial Operation Date for Amistad Solar, LLC, the last of the seven Project Companies expected to achieve Commercial Operation.
"Fiscal Year" means the calendar year, or such portion thereof as may apply to the first and last taxable years of the Company.
"Flip Date" means the date on which the Investor achieves the Target Yield, as determined in accordance with Section 6.3 of this Agreement (projected to occur in Q4 2028).
"Flip Point" means the occurrence of the Flip Date.
"GAAP" means generally accepted accounting principles as in effect in the United States from time to time, consistently applied.
"Governmental Authority" means any federal, state, local, or foreign government or political subdivision thereof, or any agency, authority, bureau, commission, department, official, political subdivision, tribunal, or other instrumentality of any such government or political subdivision, or any entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government (including the Internal Revenue Service, the Federal Energy Regulatory Commission, the Public Utility Commission of Texas, the New Mexico Public Regulation Commission, and ERCOT).
"Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset on the date of contribution, as determined by the contributing Member and the other Members in accordance with the provisions of Treasury Regulation § 1.704-1(b)(2)(iv)(d); (b) the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values on any date of adjustment specified in Treasury Regulation § 1.704-1(b)(2)(iv)(f); and (c) if the Gross Asset Value of an asset has been determined or adjusted pursuant to clause (a) or (b), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Loss and other items allocated to the Members, rather than by the depreciation, amortization, or other cost recovery deduction allowable for tax purposes.
"Independent Appraiser" means Greystone Worthington, LLC, or such successor appraisal firm as may be mutually agreed upon by the Members, which firm shall be a nationally recognized independent appraisal or valuation firm with expertise in renewable energy project valuation.
"Independent Engineer" means Meridian Technical Advisors, LLC, in its capacity as the independent engineer for the Solstice Portfolio, or such successor firm as may be mutually agreed upon by the Members.
"Insurance Broker" means Sentinel Underwriters, Inc., in its capacity as the insurance broker for the Company and the Project Companies.
"Intercreditor Agreement" means that certain Back-Leverage Intercreditor and Consent Agreement dated as of September 21, 2023, among Osprey National Bank, N.A., Ridgeline Capital Partners, LLC, and CBR Solstice Manager, LLC, governing the relative rights and priorities of the Lender and the Investor with respect to the Company and the Project Companies, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Investment Tax Credit" or "ITC" means the energy investment tax credit available under § 48 of the Code with respect to qualified solar energy property placed in service by the Project Companies. The total ITCs generated by the Solstice Portfolio are $153,840,000, computed as $384,600,000 in eligible basis multiplied by a 40% ITC rate (30% base rate plus 10% domestic content adder).
"ITC Rate" means 40%, comprising the 30% base investment tax credit rate under § 48(a) of the Code and the 10% domestic content bonus credit adder under § 48(a)(12) of the Code (as added by IRA § 13102).
"Investor" or "Tax-Equity Member" means Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN 13-4827651).
"IRA" means the Inflation Reduction Act of 2022 (Pub. L. No. 117-169, 136 Stat. 1818), as amended from time to time.
"Lender" means Osprey National Bank, N.A., a national banking association, in its capacity as lender under the Construction Facility and the Back-Leverage Facility.
"Llano Verde" means Llano Verde Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 55 MW(dc) utility-scale solar photovoltaic project located in Hudspeth County, Texas, with a target Commercial Operation Date of November 12, 2023.
"MACRS" means the Modified Accelerated Cost Recovery System under § 168 of the Code.
"Managing Member" means CBR Solstice Manager, LLC, a Delaware limited liability company, or any successor managing member appointed in accordance with this Agreement.
"Material Adverse Effect" means any event, condition, change, occurrence, or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on (a) the business, assets, liabilities, condition (financial or otherwise), results of operations, or prospects of the Company or any Project Company, (b) the ability of the Managing Member to perform its obligations under this Agreement or any other Transaction Document, (c) the validity or enforceability of this Agreement or any other Transaction Document, or (d) the rights and remedies of the Investor under this Agreement or any other Transaction Document; provided, however, that changes in general economic or market conditions, changes in law (other than changes specifically applicable to renewable energy tax credits or partnerships), and changes in the credit markets shall not in and of themselves constitute a Material Adverse Effect unless such changes disproportionately affect the Company or the Project Companies relative to similarly situated companies in the utility-scale solar energy industry.
"Member" means each of the Managing Member and the Investor, and, following admission in accordance with this Agreement, any additional or substitute member of the Company.
"Minimum Gain" has the meaning set forth in Treasury Regulation § 1.704-2(b)(2) and § 1.704-2(d) and shall be computed separately for each Member in accordance with Treasury Regulation § 1.704-2(g)(1).
"NM Offtaker" means Enchantment Power Cooperative, a New Mexico cooperative corporation, in its capacity as the purchaser under the PPAs for the Cimarron and Sandoval Ridge projects. The PPAs with the NM Offtaker provide for a weighted-average price of $29.75/MWh with a 2.0% annual escalator over 20-year terms.
"Osprey" means Osprey National Bank, N.A., a national banking association.
"Partnership Representative" means the Person designated pursuant to Section 9.4 of this Agreement as the partnership representative under § 6223 of the Code, initially CBR Solstice Manager, LLC (acting through Theo Vasquez as designated individual).
"Pecos Sun" means Pecos Sun Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates an 85 MW(dc) utility-scale solar photovoltaic project located in Reeves County, Texas, with a target Commercial Operation Date of October 15, 2023.
"Percentage Interest" means, with respect to each Member, such Member's percentage interest in allocations of Tax Items and distributions of Distributable Cash as set forth in Schedule A attached hereto and as further described in Section 3.3 of this Agreement, which percentages are subject to change at the Flip Point.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or any other entity.
"Placed in Service" means, with respect to any item of solar energy property, the date on which such property is placed in service for purposes of § 48 of the Code, as determined in accordance with Treasury Regulation § 1.46-3(d) and applicable guidance.
"Post-Flip Period" means the period commencing on the day immediately following the Flip Date and continuing through the remaining term of the Company.
"PPA" means a power purchase agreement between a Project Company and either the TX Offtaker or the NM Offtaker, as applicable, for the sale of electrical energy and associated renewable energy certificates generated by the applicable project.
"Pre-Flip Period" means the period commencing on the Closing Date and ending on the Flip Date (inclusive).
"Prevailing Wage Requirements" means the prevailing wage and apprenticeship requirements set forth in § 48(a)(10) of the Code (as added by IRA § 13102), including the requirements that laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the construction, alteration, or repair of qualified solar energy property be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor under subchapter IV of chapter 31 of title 40, United States Code, and the applicable apprenticeship requirements set forth therein.
"Primary Insurer" means Fortis Indemnity Company, in its capacity as the primary property and casualty insurer for the Company and the Project Companies.
"Project Companies" means, collectively, Pecos Sun Solar, LLC; Red Mesa Solar, LLC; Coyote Flats Solar, LLC; Llano Verde Solar, LLC; Cimarron Solar, LLC; Sandoval Ridge Solar, LLC; and Amistad Solar, LLC, each a Delaware limited liability company and a disregarded entity for federal income tax purposes wholly owned by the Company. Each Project Company may be referred to individually as a "Project Company."
"Purchase Option" means the option granted to the Managing Member (or its designee) to purchase all of the Investor's Membership Interest following the Flip Date, as described in Article XII of this Agreement.
"Purchase Option Agreement" means that certain Purchase Option Agreement dated as of September 21, 2023, between the Managing Member (and CBR, as guarantor) and the Investor, setting forth the detailed terms and conditions of the Purchase Option, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Recapture Event" means any event that triggers recapture of all or any portion of the Investment Tax Credits under § 50(a) of the Code, including any disposition of qualified solar energy property, any cessation of use of such property as qualified solar energy property, or any change in the ownership of such property that would cause such property to cease to be energy property with respect to the Company or the applicable Project Company, in each case during the 5-year recapture period applicable to such property.
"Red Mesa" means Red Mesa Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 70 MW(dc) utility-scale solar photovoltaic project located in Pecos County, Texas, with a target Commercial Operation Date of October 28, 2023.
"Regulatory Allocations" has the meaning set forth in Section 6.4 of this Agreement.
"Sandoval Ridge" means Sandoval Ridge Solar, LLC, a Delaware limited liability company that is a disregarded entity for federal income tax purposes and a wholly owned subsidiary of the Company, which owns and operates a 50 MW(dc) utility-scale solar photovoltaic project located in Sandoval County, New Mexico, with a target Commercial Operation Date of October 20, 2023.
"Schedule K-1" means IRS Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., or any successor form.
"Signing Date" means September 21, 2023, the date on which this Agreement is executed and delivered by the Members.
"Solstice Portfolio" means the seven utility-scale solar photovoltaic projects owned and operated by the Project Companies, totaling 420 MW(dc) of installed capacity, located across Texas and New Mexico.
"Sponsor" means Calloway-Briggs Renewables Inc., a Texas corporation (EIN 84-3291076), the sole member of the Managing Member.
"Surety" means Ironclad Surety Corp., in its capacity as the surety providing performance and payment bonds in connection with the EPC Contract.
"Target Yield" means a 7.25% after-tax internal rate of return for the Investor, computed on a cumulative basis from the Closing Date through the applicable determination date, on the Investor's Capital Contributions, taking into account all cash distributions received, all Tax Items allocated (including Investment Tax Credits, MACRS depreciation, and taxable income or loss), and using the assumed combined federal and state tax rate specified in the Yield Model.
"Tax Credit Purchase Agreement" or "TCPA" means that certain Tax Credit Purchase Agreement dated as of September 21, 2023, between CBR (acting through the applicable Project Companies) and Pinehurst Insurance Group, Inc. (EIN 06-1938274), for the sale of $60,000,000 in face-value Investment Tax Credits at a purchase price of $0.92 per $1.00 of credit, yielding aggregate proceeds of $55,200,000, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Tax Indemnity Agreement" means that certain Tax Indemnity Agreement dated as of September 21, 2023, from CBR in favor of Pinehurst Insurance Group, Inc., providing indemnification against recapture, disallowance, or reduction of transferred Investment Tax Credits, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Tax Items" means items of income, gain, loss, deduction, and credit (including Investment Tax Credits) as determined for federal income tax purposes.
"Tax Matters" has the meaning set forth in Article IX of this Agreement.
"Transaction Documents" means, collectively, this Agreement, the Capital Contribution Agreement, the Escrow Agreement, the Purchase Option Agreement, the Intercreditor Agreement, the Pledge Agreement, the Tax Credit Purchase Agreement, the Tax Indemnity Agreement, the Partnership Representative Designation and Tax Matters Agreement, the Intercompany Contribution Agreement, the Administrative Services Agreement, and all other ancillary agreements, certificates, instruments, and documents executed and delivered in connection with the transactions contemplated hereby.
"Transfer" has the meaning set forth in Section 11.1 of this Agreement.
"Transferable Credit" means any Investment Tax Credit that is eligible for transfer under § 6418 of the Code (as added by IRA § 13801).
"Treasury Regulation" means the regulations promulgated by the United States Department of the Treasury under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
"TX Offtaker" means Lone Star Grid Solutions, LLC, a Texas limited liability company, in its capacity as the purchaser under the PPAs for the five Texas projects (Pecos Sun, Red Mesa, Coyote Flats, Llano Verde, and Amistad). The PPAs with the TX Offtaker provide for a weighted-average price of $32.50/MWh with a 1.5% annual escalator over 15-year terms.
"Weighted-Average COD" means October 25, 2023, which is the capacity-weighted average Commercial Operation Date of the seven projects comprising the Solstice Portfolio.
"Yield Model" means the base-case financial model attached hereto as Exhibit B, which projects the Investor's cumulative after-tax internal rate of return over the life of the Solstice Portfolio based on agreed-upon assumptions regarding energy production, PPA pricing, tax rates, ITC amounts, MACRS depreciation, and other relevant factors.
Section 1.2 — Rules of Construction
Unless the context otherwise requires, the following rules of construction shall apply to the interpretation of this Agreement:
(a) The headings and captions used in this Agreement are inserted for convenience of reference only and shall not be used in the interpretation or construction of this Agreement.
(b) Words importing the singular number shall include the plural and vice versa, and words importing the masculine gender shall include the feminine and neuter genders and vice versa.
(c) References to "herein," "hereof," "hereunder," "hereby," and words of similar import shall be deemed to refer to this Agreement as a whole and not to any particular Article, Section, or other provision hereof.
(d) References to any Article, Section, Exhibit, or Schedule shall be deemed to refer to the applicable Article, Section, Exhibit, or Schedule of or to this Agreement unless otherwise specified.
(e) The word "including" (and with correlative meaning "include" and "includes") means including without limitation.
(f) References to any statute, rule, or regulation shall include any amendments, modifications, or successor provisions thereto, and any rules or regulations promulgated thereunder, in each case as in effect from time to time.
(g) References to any agreement or instrument shall mean such agreement or instrument as from time to time amended, modified, supplemented, restated, or replaced.
(h) References to "days" shall mean calendar days unless expressly stated as "Business Days."
(i) The parties hereto have participated jointly in the negotiation and drafting of this Agreement, and, in the event of any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
(j) All references to dollar amounts in this Agreement are references to United States Dollars.
(k) Accounting terms not specifically defined herein shall be construed in accordance with GAAP.
Section 1.3 — Exhibits and Schedules
The following Exhibits and Schedules are attached hereto and incorporated herein by reference as if fully set forth in this Agreement:
Exhibits:
• Exhibit A — Members and Percentage Interests (Schedule A)
• Exhibit B — Yield Model
• Exhibit C — Form of Capital Account Maintenance
• Exhibit D — Insurance Requirements
• Exhibit E — List of Project Companies
• Exhibit F — Form of Compliance Certificate (Prevailing Wage/Apprenticeship/Domestic Content)
• Exhibit G — Form of COD Certificate
• Exhibit H — Approved Annual Budget (Year 1)
Schedules:
• Schedule 1 — Transaction Documents
• Schedule 2 — Existing Liens and Encumbrances
• Schedule 3 — Required Consents and Approvals
• Schedule 4 — Key Contracts
• Schedule 5 — ITC Calculation
• Schedule 6 — Wire Instructions
ARTICLE II — FORMATION AND ORGANIZATION
Section 2.1 — Formation
The Company was formed as a limited liability company under and pursuant to the Act by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware on August 14, 2023. The Members hereby agree that the rights, duties, and liabilities of the Members shall be as provided in the Act, except as otherwise provided herein. The Company's Employer Identification Number is 88-4071523.
Section 2.2 — Name
The name of the Company is "Solstice Holdings, LLC." The Company may conduct its business under such name or under any other assumed or trade name as the Managing Member may determine from time to time; provided, that the Managing Member shall comply with all applicable filing and registration requirements in connection with the use of any such assumed or trade name.
Section 2.3 — Registered Office and Agent
The registered agent of the Company for service of process in the State of Delaware is Cascade Systems The address of the registered office of the Company in the State of Delaware is 160 Greentree Drive, Suite 101, Dover, Delaware 19904. The Managing Member may change the registered agent or the registered office of the Company from time to time in compliance with the Act by filing the appropriate amendment or statement with the Secretary of State of the State of Delaware and providing prompt written notice thereof to the Investor.
Section 2.4 — Principal Office
The principal office of the Company shall initially be located at 2700 Post Oak Boulevard, Suite 1450, Houston, Texas 77056, which is the principal office of CBR. The Managing Member may change the location of the principal office from time to time upon not less than thirty (30) days' prior written notice to the Investor.
Section 2.5 — Term
The term of the Company shall be perpetual, unless and until the Company is dissolved in accordance with the provisions of Article XIV of this Agreement. The existence of the Company as a separate legal entity shall continue until the filing of a Certificate of Cancellation with the Secretary of State of the State of Delaware in accordance with Section 14.4.
Section 2.6 — Purpose
The purpose of the Company is, and the Company is authorized, to engage in the following activities:
(a) to own, directly or indirectly, one hundred percent (100%) of the membership interests in each of the seven Project Companies;
(b) to develop, construct, own, operate, maintain, and finance the Solstice Portfolio, consisting of 420 MW(dc) of utility-scale solar photovoltaic projects located across Texas and New Mexico;
(c) to enter into, perform, and exercise the Company's rights and obligations under the Transaction Documents and all other agreements and instruments contemplated thereby or related thereto;
(d) to sell, transfer, or otherwise dispose of electrical energy, capacity, and renewable energy certificates generated by the Solstice Portfolio pursuant to the PPAs and otherwise; and
(e) to engage in any and all activities that are necessary, advisable, convenient, or incidental to the foregoing purposes.
Notwithstanding the foregoing, the Company shall not engage in any business or activity other than as set forth in this Section 2.6 without the prior written consent of the Investor.
Section 2.7 — Tax Classification
The Company shall be classified as a partnership for federal income tax purposes and for applicable state and local income tax purposes. Each Member agrees that it will not take any action, make any election, or file any form or document with any Governmental Authority that is inconsistent with the treatment of the Company as a partnership for federal income tax purposes. Without limiting the generality of the foregoing, the Company shall not elect to be classified as a corporation under Treasury Regulation § 301.7701-3, nor shall any Member take any action that would cause the Company to be treated as a disregarded entity for federal income tax purposes.
Section 2.8 — Title to Property
All real and personal property owned by the Company shall be owned by the Company as an entity, and no Member, individually, shall have any ownership interest in any Company property. Each Member's Membership Interest in the Company shall be personal property for all purposes. Except as otherwise provided in this Agreement, neither the Company nor any Member shall have any interest in the property of the other.
Section 2.9 — No State-Law Partnership
The Company is formed under the Act as a limited liability company and not as a general partnership, limited partnership, joint venture, or any other type of entity or association. Neither the execution of this Agreement nor the formation of the Company shall be construed to create a general partnership, limited partnership, joint venture, or any other relationship between the Members other than as members of a limited liability company organized under the Act. The relationship between the Members shall be governed solely and exclusively by the terms of this Agreement and the Act.
ARTICLE III — MEMBERS; INTERESTS
Section 3.1 — Members
The Members of the Company and their respective addresses are as follows:
(a) Managing Member: CBR Solstice Manager, LLC, a Delaware limited liability company (disregarded entity for federal income tax purposes; sole member: Calloway-Briggs Renewables Inc., a Texas corporation), EIN: 88-4071597. Address: 2700 Post Oak Boulevard, Suite 1450, Houston, Texas 77056.
(b) Tax-Equity Member / Investor: Ridgeline Capital Partners, LLC, a Delaware limited liability company, EIN: 13-4827651. Address: 390 Park Avenue, 22nd Floor, New York, New York 10022.
The foregoing constitutes the complete list of all Members of the Company as of the Signing Date.
Section 3.2 — Membership Interests
Each Member's interest in the Company (such Member's "Membership Interest") shall consist of such Member's rights to allocations of income, gain, loss, deduction, and credits (including Investment Tax Credits), distributions of Distributable Cash and other amounts, and all governance and voting rights (including consent rights) set forth in this Agreement. The Membership Interests issued to the Members pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, or under any state securities laws. Each Member acknowledges that its Membership Interest has been acquired for investment purposes only and not with a view toward resale or distribution in violation of applicable securities laws.
Section 3.3 — Percentage Interests
The Percentage Interests of the Members are set forth in Schedule A (Exhibit A) attached hereto and are summarized below:
Pre-Flip Period (Closing Date through Flip Date):
Post-Flip Period (day after Flip Date and thereafter):
The Percentage Interests set forth above shall be subject to adjustment only as expressly provided in this Agreement. For the avoidance of doubt, the allocation of Tax Items (including Investment Tax Credits and MACRS depreciation) and the allocation of Cash Distributions are governed by separate percentage splits during the Pre-Flip Period, whereas during the Post-Flip Period, a single percentage split applies to both Tax Items and Cash Distributions.
Section 3.4 — Representations and Warranties of the Members
(a) Mutual Representations and Warranties. Each Member hereby represents and warrants to the other Member as of the Signing Date and as of the Closing Date as follows:
(i) Due Organization. Such Member is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(ii) Authorization. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary action on the part of such Member, and this Agreement constitutes the legal, valid, and binding obligation of such Member, enforceable against such Member in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
(iii) No Conflicts. The execution, delivery, and performance of this Agreement by such Member do not and will not (A) conflict with or violate any provision of such Member's organizational documents, (B) conflict with, violate, or result in a breach or default under any Applicable Law or any material agreement, instrument, judgment, order, or decree to which such Member is a party or by which such Member or its property is bound, or (C) require the consent or approval of, or the making of any filing with, any Governmental Authority or other Person, except for such consents, approvals, or filings as have been obtained or made.
(iv) Investment Intent. Such Member is acquiring its Membership Interest for investment for its own account and not with a view toward or in connection with any resale or distribution thereof in violation of the Securities Act of 1933, as amended, or any applicable state securities laws.
(v) Sophistication. Such Member is an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended, is experienced in evaluating and investing in companies and projects similar to the Company and the Solstice Portfolio, is capable of evaluating the merits and risks of its investment, and is able to bear the economic risk of such investment for an indefinite period.
(vi) No Broker Fees. Such Member has not engaged any broker, finder, or investment banker in connection with the transactions contemplated by this Agreement, and no broker, finder, or investment banker is entitled to any fee or commission from the Company or the other Member in connection therewith.
(b) Additional Representations of Investor. The Investor additionally represents and warrants to the Managing Member as of the Signing Date and as of the Closing Date that the Investor has the tax capacity to utilize the Investment Tax Credits and MACRS depreciation deductions allocable to the Investor under this Agreement, and that the Investor reasonably expects to have sufficient federal income tax liability in each applicable taxable year to utilize such credits and deductions.
(c) Additional Representations of Managing Member. The Managing Member additionally represents and warrants to the Investor as of the Signing Date and as of the Closing Date as follows:
(i) CBR, as the sole member of the Managing Member, has duly authorized the Managing Member to execute and deliver this Agreement and to perform the Managing Member's obligations hereunder and has guaranteed the Managing Member's performance obligations in accordance with the terms of the Transaction Documents.
(ii) The Managing Member has validly contributed, or caused to be contributed, one hundred percent (100%) of the membership interests in each of the seven Project Companies to the Company, free and clear of all liens, claims, and encumbrances other than liens permitted under the Construction Facility and the Back-Leverage Facility.
(iii) Each Project Company is a duly organized and validly existing Delaware limited liability company that is properly classified as a disregarded entity for federal income tax purposes.
Section 3.5 — No Personal Liability
No Member shall be personally liable for any debts, obligations, or liabilities of the Company, whether arising in contract, tort, or otherwise, solely by reason of being a Member of the Company. The Members shall have only such liability as is expressly provided in this Agreement or under the Act to the extent such liability cannot be waived or eliminated by this Agreement.
ARTICLE IV — PROJECT COMPANIES AND PORTFOLIO
Section 4.1 — Project Companies
The Company directly owns one hundred percent (100%) of the membership interests in each of the following seven Project Companies, each of which is a Delaware limited liability company classified as a disregarded entity for federal income tax purposes:
Each Project Company owns the solar energy property, site leases, interconnection rights, PPAs, permits, and other assets associated with its respective project. Because each Project Company is a disregarded entity, all items of income, gain, loss, deduction, and credit of each Project Company are treated as items of the Company for federal income tax purposes. A detailed listing of the Project Companies, including additional information regarding each project, is set forth in Exhibit E attached hereto.
Section 4.2 — EPC Contract
The Company and the Project Companies have entered into a Master Engineering, Procurement, and Construction Agreement (the "EPC Contract") with Vasquez Brothers Construction, Inc. (EIN 75-2648103), covering the design, engineering, procurement, construction, commissioning, and testing of all seven projects comprising the Solstice Portfolio. The aggregate contract price under the EPC Contract is $384,600,000, allocated among the individual projects as follows:
The EPC Contractor has provided performance and payment bonds issued by Ironclad Surety Corp. in favor of the Company and the Project Companies, securing the EPC Contractor's obligations under the EPC Contract in accordance with the terms and conditions set forth therein. The Managing Member shall administer the EPC Contract and supervise the EPC Contractor's performance in accordance with the terms of the EPC Contract and this Agreement.
Section 4.3 — Power Purchase Agreements
The Project Companies have entered into PPAs with the following offtakers for the sale of electrical energy and associated renewable energy certificates generated by the projects:
(a) Texas Projects (Pecos Sun, Red Mesa, Coyote Flats, Llano Verde, and Amistad): Each of the five Texas Project Companies has entered into a PPA with Lone Star Grid Solutions, LLC (the "TX Offtaker") for a term of fifteen (15) years commencing on the applicable Commercial Operation Date. The PPAs with the TX Offtaker provide for a weighted-average price of $32.50 per MWh with an annual escalator of 1.5%.
(b) New Mexico Projects (Cimarron and Sandoval Ridge): Each of the two New Mexico Project Companies has entered into a PPA with Enchantment Power Cooperative (the "NM Offtaker") for a term of twenty (20) years commencing on the applicable Commercial Operation Date. The PPAs with the NM Offtaker provide for a weighted-average price of $29.75 per MWh with an annual escalator of 2.0%.
The PPAs constitute material contracts of the Project Companies and are subject to the covenants and restrictions set forth in Section 4.5 and Article X of this Agreement.
Section 4.4 — Interconnection
The interconnection arrangements for the projects comprising the Solstice Portfolio are as follows: