PLEDGE AGREEMENT
Dated as of December 8, 2023
by and between
CBR SOLSTICE MANAGER, LLC
a Delaware limited liability company
(Pledgor)
and
OSPREY NATIONAL BANK, N.A.
a national banking association organized under the laws of the United States
(Secured Party)
In connection with the Back-Leverage Term Loan Agreement dated December 8, 2023 Agreement No. ONB-PF-2023-0587 Principal Amount: $68,000,000
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PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is made and entered into as of December 8, 2023 (the "Closing Date"), by and between CBR Solstice Manager, LLC, a Delaware limited liability company, with its principal place of business at 2700 Post Oak Boulevard, Suite 1450, Houston, TX 77056 (the "Pledgor"), and Osprey National Bank, N.A., a national banking association organized under the laws of the United States, with its principal office at 300 Madison Avenue, New York, NY 10017 (the "Secured Party" or "Lender").
RECITALS
WHEREAS, the Pledgor is a Delaware limited liability company (EIN: 88-4071597), duly formed on August 14, 2023, pursuant to a Certificate of Formation filed with the Secretary of State of the State of Delaware, and is a disregarded entity for federal income tax purposes whose sole member is Calloway-Briggs Renewables Inc., a Texas corporation (EIN: 84-3291076; Texas Secretary of State File No. 803762114), with its principal headquarters located at 2700 Post Oak Boulevard, Suite 1450, Houston, TX 77056;
WHEREAS, the Pledgor is the managing member of Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523), formed on August 14, 2023, with its registered agent at Cascade Systems, 160 Greentree Drive, Suite 101, Dover, DE 19904 (the "Partnership"), pursuant to the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC dated September 21, 2023, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms (the "LLCA");
WHEREAS, the Partnership holds one hundred percent (100%) of the membership interests in seven (7) project company special purpose entities constituting the Solstice Portfolio of utility-scale solar photovoltaic projects totaling four hundred twenty megawatts of direct current capacity (420 MW(dc)) across the States of Texas and New Mexico, specifically: (i) Pecos Sun Solar, LLC (85 MW(dc), Reeves County, Texas); (ii) Red Mesa Solar, LLC (70 MW(dc), Pecos County, Texas); (iii) Coyote Flats Solar, LLC (65 MW(dc), Ward County, Texas); (iv) Llano Verde Solar, LLC (55 MW(dc), Hudspeth County, Texas); (v) Cimarron Solar, LLC (50 MW(dc), Lea County, New Mexico); (vi) Sandoval Ridge Solar, LLC (50 MW(dc), Sandoval County, New Mexico); and (vii) Amistad Solar, LLC (45 MW(dc), Val Verde County, Texas) (collectively, the "Project Companies," and the solar photovoltaic projects owned and operated by the Project Companies, collectively, the "Solstice Portfolio");
WHEREAS, Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), with its principal office at 390 Park Avenue, 22nd Floor, New York, NY 10022 ("Ridgeline" or the "Tax-Equity Member"), is the tax-equity member of the Partnership, having committed One Hundred Twenty Million Dollars ($120,000,000) in capital contributions pursuant to the Capital Contribution Agreement dated September 21, 2023, among Ridgeline, the Pledgor, and the Partnership (the "Capital Contribution Agreement");
WHEREAS, the Secured Party has agreed to extend to the Pledgor a back-leverage term loan in the principal amount of Sixty-Eight Million Dollars ($68,000,000) pursuant to the Back-Leverage Term Loan Agreement dated December 8, 2023, Agreement No. ONB-PF-2023-0587, among the Pledgor, Calloway-Briggs Renewables Inc., and the Secured Party (the "Loan Agreement"), the proceeds of which will be used by the Pledgor and its affiliates for general corporate purposes in connection with the Solstice Portfolio;
WHEREAS, the Secured Party previously provided a Two Hundred Forty-Five Million Dollar ($245,000,000) construction-to-term loan facility to the Project Companies pursuant to the Construction Facility Agreement, Agreement No. ONB-PF-2022-0341, dated as of March 15, 2022, among the Project Companies, Calloway-Briggs Renewables Inc., and the Secured Party (as amended, restated, supplemented, or otherwise modified from time to time, the "Construction Facility"), which facility financed the construction and commissioning of the Solstice Portfolio;
WHEREAS, as a condition precedent to the extension of credit under the Loan Agreement, the Secured Party has required the Pledgor to pledge its managing member interest in the Partnership as security for the Obligations (as defined herein) of the Pledgor arising under or in connection with the Loan Agreement;
WHEREAS, this Pledge Agreement is made and entered into subject to the terms and conditions of the Back-Leverage Intercreditor and Consent Agreement dated December 8, 2023 (the "Intercreditor Agreement"), among the Secured Party, Ridgeline Capital Partners, LLC, and Calloway-Briggs Renewables Inc., which sets forth the relative rights and priorities of the Secured Party and Ridgeline with respect to the Collateral and the Partnership; and
WHEREAS, the Pledgor has determined that the execution, delivery, and performance of this Pledge Agreement is in its best interests and will directly and indirectly benefit it, inasmuch as the extension of credit under the Loan Agreement will provide the Pledgor and its affiliates with financing necessary for the continued development, operation, and optimization of the Solstice Portfolio.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement.
"Borrower" means CBR Solstice Manager, LLC, a Delaware limited liability company.
"Calloway-Briggs" or "CBR" means Calloway-Briggs Renewables Inc., a Texas corporation (EIN: 84-3291076; Texas Secretary of State File No. 803762114), the sole member of the Pledgor, with its principal headquarters at 2700 Post Oak Boulevard, Suite 1450, Houston, TX 77056.
"Closing Date" means December 8, 2023.
"Collateral" has the meaning set forth in Section 2.1 of this Agreement.
"Construction Facility" means the Two Hundred Forty-Five Million Dollar ($245,000,000) construction-to-term loan facility extended to the Project Companies pursuant to the Construction Facility Agreement, Agreement No. ONB-PF-2022-0341, dated as of March 15, 2022, among the Project Companies, Calloway-Briggs Renewables Inc., and the Secured Party, as amended, restated, supplemented, or otherwise modified from time to time.
"Default" means any event or condition that, with the giving of notice or lapse of time or both, would constitute an Event of Default under the Loan Agreement.
"Distributions" means all cash and non-cash distributions, dividends, payments, returns of capital, and other amounts payable or distributable to the Pledgor in respect of the Pledged Interest, whether arising under the LLCA distribution waterfall or otherwise. Without limiting the foregoing, the term "Distributions" includes, during the pre-flip period, seventy percent (70%) of all cash distributions payable to the Pledgor as managing member, and during the post-flip period, ninety-five percent (95%) of all items (including cash distributions, tax allocations, and all other economic benefits) payable or allocable to the Pledgor as managing member.
"Event of Default" has the meaning set forth in the Loan Agreement.
"Flip Date" means the date on which the allocations of the Tax-Equity Member under the LLCA change from pre-flip allocations (ninety-nine percent (99%) of tax items and thirty percent (30%) of cash distributions to Ridgeline) to post-flip allocations (five percent (5%) of all items to Ridgeline), such Flip Date being projected to occur in the fourth quarter of calendar year 2028 (Q4 2028), subject to adjustment in accordance with the terms of the LLCA.
"Intercreditor Agreement" means the Back-Leverage Intercreditor and Consent Agreement dated December 8, 2023, among the Secured Party, Ridgeline Capital Partners, LLC, and Calloway-Briggs Renewables Inc., as may be amended, restated, supplemented, or otherwise modified from time to time with the consent of all parties thereto.
"LLCA" means the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC dated September 21, 2023, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and subject to the restrictions set forth in this Agreement and the Intercreditor Agreement.
"Loan Agreement" means the Back-Leverage Term Loan Agreement dated December 8, 2023, Agreement No. ONB-PF-2023-0587, in the principal amount of Sixty-Eight Million Dollars ($68,000,000), among the Pledgor, Calloway-Briggs Renewables Inc., and the Secured Party, as may be amended, restated, supplemented, or otherwise modified from time to time.
"Obligations" means all present and future indebtedness, obligations, and liabilities of the Pledgor to the Secured Party, of every kind and nature, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, under or in connection with the Loan Agreement and all related loan documents, including, without limitation, all principal, interest (including interest accruing after the commencement of any insolvency proceeding, whether or not allowed as a claim in such proceeding), fees, costs, expenses, indemnification obligations, and other amounts payable under or in connection with the Loan Agreement and the loan documents.
"Partnership" means Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523), formed on August 14, 2023.
"Pledged Interest" means one hundred percent (100%) of the managing member interest of the Pledgor in the Partnership, constituting initially one percent (1%) of tax items and seventy percent (70%) of cash distributions during the pre-flip period, and ninety-five percent (95%) of all items during the post-flip period, including all economic rights, governance rights, voting rights, consent rights, and all other rights, privileges, and benefits arising from or in connection with such managing member interest under the LLCA.
"Purchase Option" means the Pledgor's right and option to purchase the Tax-Equity Member's post-flip interest in the Partnership at fair market value (subject to a floor price of One Dollar ($1.00)) during the one hundred eighty (180)-day window following the Flip Date, as set forth in and pursuant to the Purchase Option Agreement dated September 21, 2023, among the Pledgor, Ridgeline Capital Partners, LLC, and the Partnership (the "Purchase Option Agreement").
"Ridgeline" means Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), with its principal office at 390 Park Avenue, 22nd Floor, New York, NY 10022.
"Secured Party" means Osprey National Bank, N.A., a national banking association organized under the laws of the United States, with its principal office at 300 Madison Avenue, New York, NY 10017.
"Solstice Portfolio" means the seven (7) utility-scale solar photovoltaic projects totaling four hundred twenty megawatts of direct current capacity (420 MW(dc)) held by the Project Companies under the Partnership, as more particularly described in Exhibit B hereto.
"Tax-Equity Documents" means, collectively, the LLCA, the Capital Contribution Agreement, the Purchase Option Agreement, the Tax Indemnity Agreement dated September 21, 2023, and all related ancillary documents, side letters, and agreements executed and delivered in connection therewith, in each case as may be amended, restated, supplemented, or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York or, where applicable for purposes of perfection and priority, the State of Delaware, or any other applicable jurisdiction.
Section 1.2 — Rules of Construction
(a) All references in this Agreement to Articles, Sections, Exhibits, and Schedules are to the Articles, Sections, Exhibits, and Schedules of this Agreement, unless the context otherwise requires.
(b) Terms defined in the UCC (as in effect in the State of New York) and not otherwise defined herein shall have the respective meanings given to such terms in the UCC.
(c) The headings and captions used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any provision of this Agreement.
(d) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(e) Unless the context otherwise requires, words importing the singular shall include the plural and vice versa, and words importing any gender shall include all genders.
(f) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-laws provision or rule that would cause the application of the laws of any other jurisdiction; provided, however, that matters relating to the perfection and priority of the security interest granted herein shall be governed by the law of the State of Delaware as the Pledgor's jurisdiction of organization, to the extent required by the applicable choice-of-law provisions of the UCC.
(g) All references to dollar amounts shall mean the lawful currency of the United States of America.
(h) References to any agreement, instrument, or document shall be deemed to include references to such agreement, instrument, or document as amended, restated, supplemented, or otherwise modified from time to time, unless expressly stated otherwise or unless such amendment, restatement, supplement, or modification is prohibited under this Agreement.
ARTICLE II — PLEDGE AND GRANT OF SECURITY INTEREST
Section 2.1 — Pledge and Grant
As security for the full and prompt payment, performance, and satisfaction of all Obligations, the Pledgor hereby pledges, assigns, and grants to the Secured Party a continuing first-priority security interest in and to all of the Pledgor's right, title, and interest in, to, and under the following property, whether now owned or hereafter acquired (collectively, the "Collateral"):
(a) The Pledged Interest. One hundred percent (100%) of the Pledgor's managing member interest in Solstice Holdings, LLC (EIN: 88-4071523), a Delaware limited liability company, including, without limitation, all economic rights (including the right to receive allocations and distributions), all governance rights (including the right to manage and control the affairs of the Partnership), all voting rights, all consent rights, and all other rights, privileges, powers, immunities, and benefits arising from or in connection with such managing member interest under the LLCA or otherwise, as more particularly described in Exhibit A attached hereto and incorporated herein by reference.
(b) All Distributions. All cash and non-cash distributions, dividends, payments, returns of capital, and other amounts of whatever kind now or hereafter payable or distributable to the Pledgor in respect of the Pledged Interest, whether arising under the LLCA distribution waterfall or otherwise, including, during the pre-flip period, seventy percent (70%) of all cash distributions payable to the Pledgor as managing member, and during the post-flip period, ninety-five percent (95%) of all items (including cash distributions, tax allocations, and all other economic benefits) payable or allocable to the Pledgor.
(c) The Purchase Option. All of the Pledgor's rights, interests, and entitlements under the Purchase Option Agreement dated September 21, 2023, including the right to purchase the Tax-Equity Member's post-flip interest in the Partnership at fair market value (subject to a floor price of One Dollar ($1.00)) during the one hundred eighty (180)-day window following the Flip Date, together with all proceeds arising from the exercise or disposition of such Purchase Option.
(d) Proceeds, Products, and Accessions. All proceeds (as defined in the UCC), products, rents, profits, income, benefits, substitutions, replacements, additions, and accessions of or to any and all of the foregoing Collateral.
(e) Books, Records, and General Intangibles. All books, records, ledgers, files, correspondence, documents, instruments, agreements, and general intangibles related to or arising out of any of the foregoing Collateral, including, without limitation, all rights to enforce or compel performance of any provision of the LLCA, the Purchase Option Agreement, or any other agreement or instrument relating to the Pledged Interest.
The pledge, assignment, and security interest granted herein is made and shall be held subject in all respects to the terms, conditions, restrictions, and limitations of the Intercreditor Agreement and the rights of Ridgeline Capital Partners, LLC as the tax-equity member of the Partnership under the LLCA and the Tax-Equity Documents.
Section 2.2 — Security for Obligations
The Collateral secures the full and prompt payment, performance, and satisfaction of all Obligations of the Pledgor to the Secured Party under the Loan Agreement (including the Sixty-Eight Million Dollar ($68,000,000) back-leverage term loan) and all related loan documents, including, without limitation, all principal, interest (including post-petition interest), fees, costs, expenses, indemnification obligations, and other amounts now or hereafter payable under or in connection with the Loan Agreement and the loan documents, in each case whether direct or indirect, absolute or contingent, due or to become due, and howsoever arising.
Section 2.3 — Delivery of Pledged Interest
(a) The parties acknowledge that the Pledged Interest is an uncertificated membership interest in a Delaware limited liability company and is not represented by any certificate or instrument. Accordingly, no delivery of any certificate or instrument is required or contemplated hereunder.
(b) On or before the Closing Date, the Pledgor shall cause the Partnership to register the security interest granted herein on its books and records, including an appropriate notation in the membership interest register or similar record maintained by the Partnership reflecting the existence of the Secured Party's security interest in the Pledged Interest.
(c) On or before the Closing Date, the Pledgor shall cause the Partnership to execute and deliver to the Secured Party an acknowledgment of this Pledge Agreement in substantially the form attached hereto as Exhibit D (the "Partnership Acknowledgment"), pursuant to which the Partnership acknowledges the grant of the security interest, confirms the registration thereof on its books and records, and agrees to comply with the instructions of the Secured Party upon the occurrence and during the continuance of an Event of Default, in each case subject to the terms and conditions of the Intercreditor Agreement and the LLCA.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF PLEDGOR
The Pledgor hereby represents and warrants to the Secured Party as of the Closing Date and as of each date on which any representation or warranty is deemed to be repeated under the Loan Agreement, as follows:
Section 3.1 — Organization and Standing
The Pledgor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Pledgor was formed on August 14, 2023, pursuant to a Certificate of Formation filed with the Secretary of State of the State of Delaware. The Pledgor's Employer Identification Number is 88-4071597. The sole member of the Pledgor is Calloway-Briggs Renewables Inc., a Texas corporation (EIN: 84-3291076; Texas Secretary of State File No. 803762114). The Pledgor is a disregarded entity for federal income tax purposes. The Pledgor has all requisite power and authority to own and hold the Pledged Interest and to carry on its business as presently conducted, including serving as the managing member of the Partnership.
Section 3.2 — Authority and Enforceability
The execution, delivery, and performance of this Agreement by the Pledgor have been duly authorized by all necessary limited liability company action on the part of the Pledgor and by all necessary corporate action on the part of Calloway-Briggs Renewables Inc., as the sole member of the Pledgor. This Agreement has been duly executed and delivered by the Pledgor and constitutes the legal, valid, and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, fraudulent conveyance, or similar laws affecting the enforcement of creditors' rights generally, and (b) general principles of equity, whether applied in a proceeding at law or in equity (including concepts of materiality, reasonableness, good faith, and fair dealing).
Section 3.3 — No Conflicts
The execution, delivery, and performance of this Agreement by the Pledgor do not and will not:
(a) violate, conflict with, or result in a breach of, any provision of the Certificate of Formation or the Limited Liability Company Agreement of the Pledgor;
(b) violate, conflict with, or result in a breach of, or constitute a default (or an event that with notice or lapse of time or both would constitute a default) under, or result in the creation of any lien or encumbrance (other than the security interest granted herein and the permitted liens described herein) upon any of the properties or assets of the Pledgor under, any material agreement, indenture, mortgage, or other instrument to which the Pledgor is a party or by which the Pledgor or any of its properties is bound;
(c) violate, conflict with, or result in a breach of, the LLCA, subject to compliance with the Intercreditor Agreement and the receipt of any required consent of Ridgeline under the LLCA with respect to the pledge of the managing member interest;
(d) violate any applicable law, statute, rule, regulation, order, judgment, injunction, decree, or ruling of any court, governmental authority, or regulatory body applicable to the Pledgor or the Collateral; or
(e) require any consent, approval, authorization, permit, license, filing, or registration with any governmental authority, except such consents, approvals, authorizations, and filings as have been duly obtained or made on or before the Closing Date, including the UCC financing statements authorized to be filed pursuant to Article V hereof.
Section 3.4 — Title to Pledged Interest
The Pledgor is the sole managing member of the Partnership and holds the Pledged Interest free and clear of all liens, security interests, pledges, encumbrances, charges, claims, options, and restrictions of any kind, other than:
(i) the security interest granted to the Secured Party herein;
(ii) existing UCC-1 financing statements filed by Osprey National Bank, N.A. in connection with the Construction Facility (Agreement No. ONB-PF-2022-0341), which filings relate to the assets of the Project Companies and do not create a lien on the Pledged Interest; and
(iii) restrictions on transfer and other limitations set forth in the LLCA and the Intercreditor Agreement.
The Pledgor has good and marketable title to the Pledged Interest and has full right, power, and authority to pledge, assign, and grant a security interest in the Pledged Interest in accordance with the terms hereof.
Section 3.5 — No Prior Assignment
Except as disclosed in Section 3.4, the Pledgor has not previously pledged, assigned, hypothecated, or otherwise granted a security interest in or lien upon the Pledged Interest, or any portion thereof, to any other person or entity, and the Pledgor has not entered into any agreement or arrangement with any person or entity to do so. The only existing UCC financing statement filings referencing the Pledgor or the Partnership in connection with indebtedness to the Secured Party are those filings made in connection with the Construction Facility, and such filings do not create a prior or senior lien on the Pledged Interest as described herein.
Section 3.6 — Partnership Structure
The Partnership, Solstice Holdings, LLC (EIN: 88-4071523), is a Delaware limited liability company formed on August 14, 2023. The Partnership holds one hundred percent (100%) of the membership interests in the seven Project Companies constituting the Solstice Portfolio. The members of the Partnership are as follows:
(a) CBR Solstice Manager, LLC (Managing Member) — EIN: 88-4071597. As managing member, the Pledgor has responsibility for the day-to-day management and operation of the Partnership and the Solstice Portfolio, subject to the approval rights and consent requirements of Ridgeline under the LLCA.
(b) Ridgeline Capital Partners, LLC (Tax-Equity Member) — EIN: 13-4827651. As tax-equity member, Ridgeline has committed One Hundred Twenty Million Dollars ($120,000,000) in capital contributions and is entitled to receive tax allocations and cash distributions in accordance with the LLCA.
The allocation and distribution arrangements under the LLCA are as follows:
(c) Pre-Flip Allocations. During the pre-flip period (from the closing of the tax-equity investment through the Flip Date): Ridgeline receives ninety-nine percent (99%) of all tax items (including investment tax credits, depreciation, and other tax benefits) and thirty percent (30%) of all cash distributions. The Pledgor (as CBR Manager) receives one percent (1%) of all tax items and seventy percent (70%) of all cash distributions.
(d) Post-Flip Allocations. Following the Flip Date: Ridgeline receives five percent (5%) of all items (including tax items and cash distributions). The Pledgor (as CBR Manager) receives ninety-five percent (95%) of all items.
(e) Projected Flip Date. The Flip Date is projected to occur in the fourth quarter of calendar year 2028 (Q4 2028), based on current projections of investment tax credit utilization and Ridgeline's target after-tax internal rate of return of seven and one-quarter percent (7.25%).
Section 3.7 — Consents
All necessary consents, approvals, authorizations, and waivers required for the execution, delivery, and performance of this Agreement have been duly obtained, including, without limitation:
(a) the consent of Ridgeline Capital Partners, LLC under the LLCA, to the extent required for the pledge of the managing member interest by the Pledgor in favor of the Secured Party;
(b) the consent of all parties to the Intercreditor Agreement, including any consent required under the Intercreditor Agreement for the granting of the security interest herein;
(c) board resolutions of Calloway-Briggs Renewables Inc., as the sole member of the Pledgor, duly authorizing the execution, delivery, and performance of this Agreement; and
(d) all other consents, approvals, and authorizations required by applicable law, the organizational documents of the Pledgor, the LLCA, or any other material agreement to which the Pledgor is a party.
Section 3.8 — Location of Pledgor
The Pledgor's principal place of business and chief executive office is located at 2700 Post Oak Boulevard, Suite 1450, Houston, TX 77056. The Pledgor has no other places of business. The Pledgor is organized under the laws of the State of Delaware and, for purposes of UCC filing and perfection, the Pledgor's jurisdiction of organization is the State of Delaware.
Section 3.9 — No Litigation
There is no action, suit, proceeding, investigation, or claim pending or, to the Pledgor's knowledge, threatened against the Pledgor or the Partnership before any court, governmental authority, or arbitral tribunal that (a) would, if adversely determined, materially and adversely affect the Collateral, the validity or enforceability of this Agreement, or the Pledgor's ability to perform its obligations hereunder, or (b) challenges or seeks to prevent, enjoin, alter, or materially delay the transactions contemplated by this Agreement or the Loan Agreement.
Section 3.10 — Accuracy of Information
All information, reports, financial statements, certificates, and other data furnished by the Pledgor to the Secured Party in connection with this Agreement, the Loan Agreement, and the transactions contemplated hereby and thereby are true, complete, and correct in all material respects as of the date such information was furnished, and no such information contains any material misstatement of fact or omits to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances under which such statements were made.
ARTICLE IV — COVENANTS OF PLEDGOR
The Pledgor hereby covenants and agrees with the Secured Party that, from and after the date hereof and until the termination of this Agreement in accordance with Article X:
Section 4.1 — Maintenance of Pledged Interest
(a) The Pledgor shall maintain its managing member interest in the Partnership and shall not sell, transfer, assign, convey, exchange, or otherwise dispose of, or create or suffer to exist any option, warrant, or other right of any person to acquire, the Pledged Interest, or any part thereof, or any interest therein, without the prior written consent of the Secured Party, which consent may be withheld in the Secured Party's sole and absolute discretion; provided, however, that any such sale, transfer, or assignment shall also be subject to the terms of the Intercreditor Agreement and the consent requirements of Ridgeline under the LLCA.
(b) The Pledgor shall not permit or consent to any amendment, modification, supplement, restatement, or waiver of the LLCA that would materially and adversely affect the Collateral, the Secured Party's security interest therein, or the Secured Party's rights under this Agreement, without the Secured Party's prior written consent.
(c) The Pledgor shall not voluntarily withdraw, resign, or retire as the managing member of the Partnership, except as permitted under the Loan Agreement and with the prior written consent of the Secured Party.
Section 4.2 — No Additional Liens
The Pledgor shall not create, incur, assume, or permit to exist any lien, security interest, pledge, charge, encumbrance, or other restriction on the Collateral, other than (a) the security interest granted to the Secured Party herein, and (b) permitted liens as expressly set forth in the Loan Agreement. The Pledgor shall defend the Collateral against the claims and demands of all persons other than the Secured Party and the holders of permitted liens.
Section 4.3 — Preservation of Partnership
(a) The Pledgor shall take all actions necessary or appropriate to maintain the Partnership in good standing under the laws of the State of Delaware and in all other jurisdictions where the Partnership is qualified to do business or where the failure to maintain such qualification would have a material adverse effect on the Collateral, the Partnership, or the Solstice Portfolio.
(b) The Pledgor shall cause the Partnership to maintain each of the Project Companies in good standing under the laws of their respective jurisdictions of organization and in all other jurisdictions where they are required to be qualified to do business.
(c) The Pledgor shall cause the Partnership to maintain the Solstice Portfolio assets, including all solar photovoltaic generation equipment, balance-of-system components, interconnection facilities, and real property interests, in good condition and repair, consistent with prudent industry practice and the requirements of the LLCA, the applicable power purchase agreements, and the applicable interconnection agreements.
Section 4.4 — Compliance with LLCA and Tax-Equity Documents
(a) The Pledgor shall comply with all of its obligations and duties as managing member under the LLCA, including, without limitation, all reporting obligations, capital call obligations, management obligations, and fiduciary duties.
(b) The Pledgor shall not take any action, or fail to take any action, that would cause a default or event of default under the LLCA or any other Tax-Equity Document.
(c) The Pledgor shall not exercise, or fail to exercise, any right, power, or privilege under the LLCA or any Tax-Equity Document in a manner that would materially impair or diminish the value of the Collateral or the Secured Party's security interest therein.
(d) The Pledgor shall deliver to the Secured Party, promptly upon receipt thereof, copies of all material notices, reports, financial statements, and other communications received by the Pledgor from Ridgeline or any other party under the LLCA or any Tax-Equity Document.
Section 4.5 — Notice of Events
The Pledgor shall promptly (and in any event within five (5) Business Days) notify the Secured Party in writing of the occurrence of any of the following events:
(a) any Event of Default, or any Default, under the Loan Agreement;
(b) any default or event of default (howsoever described) under the LLCA or any Tax-Equity Document, or any notice of default received from Ridgeline or any other party under the LLCA or any Tax-Equity Document;
(c) any claim, demand, action, suit, litigation, investigation, or proceeding commenced or threatened against the Pledgor, the Partnership, or any Project Company by any person or governmental authority that, if adversely determined, would materially and adversely affect the Collateral or the Pledgor's ability to perform its obligations under this Agreement or the Loan Agreement;
(d) the occurrence of the Flip Date, together with a certificate of the Pledgor confirming the effective date of the flip and the post-flip allocation percentages;
(e) any exercise or proposed exercise of the Purchase Option by the Pledgor, including the proposed purchase price, the identity of the appraiser (if applicable), and the proposed closing date for the purchase of Ridgeline's post-flip interest;
(f) any investment tax credit ("ITC") recapture event or claim, or any event or condition that could reasonably be expected to result in ITC recapture, disqualification, or reduction with respect to any Project Company or any project in the Solstice Portfolio, including any claim made by or against Pinehurst Insurance Group under the Tax Indemnity Agreement dated September 21, 2023, noting that the indemnity cap under the Tax Indemnity Agreement is Sixty-Nine Million Dollars ($69,000,000);
(g) any material casualty event or condemnation proceeding affecting any project in the Solstice Portfolio;
(h) any change in the Pledgor's name, organizational structure, jurisdiction of organization, or chief executive office; and
(i) any event or condition that has had or could reasonably be expected to have a material adverse effect on the Collateral, the Partnership, the Solstice Portfolio, or the Pledgor's ability to perform its obligations under this Agreement.
Section 4.6 — Distributions
(a) Prior to Event of Default. So long as no Event of Default has occurred and is continuing, the Pledgor shall be entitled to receive and retain all Distributions on the Pledged Interest in accordance with the terms of the LLCA, subject to the distribution waterfall set forth therein and the intercreditor provisions of the Intercreditor Agreement. The Pledgor shall apply such Distributions first to the payment of amounts due and owing under the Loan Agreement in accordance with the terms thereof.
(b) Upon Event of Default. Upon the occurrence and during the continuance of an Event of Default, the Pledgor's right to receive Distributions shall be suspended, and all Distributions payable to the Pledgor in respect of the Pledged Interest shall be paid directly to the Secured Party (or to such account or depository as the Secured Party may designate in writing) and shall be applied to the Obligations in the order of priority set forth in the Loan Agreement; provided, however, that the Secured Party's right to receive and apply such Distributions shall be subject to the standstill provisions and distribution priority provisions of the Intercreditor Agreement. The Pledgor hereby irrevocably authorizes and directs the Partnership to make such payments directly to the Secured Party upon receipt of notice from the Secured Party that an Event of Default has occurred and is continuing.
Section 4.7 — Further Assurances
The Pledgor shall, at its own cost and expense, promptly execute and deliver to the Secured Party all such further instruments, documents, financing statements, amendments, continuations, and agreements, and shall take all such further actions, as the Secured Party may from time to time reasonably request, in order to:
(a) perfect, protect, maintain, and continue the perfection and priority of the security interest granted herein in the Collateral;
(b) enable the Secured Party to exercise and enforce its rights and remedies under this Agreement with respect to the Collateral; and
(c) otherwise carry out the purposes and intent of this Agreement.
Without limiting the foregoing, the Pledgor shall execute and deliver such UCC financing statement amendments (UCC-3 forms), continuation statements (UCC-3 forms), or new financing statements (UCC-1 forms) as the Secured Party may reasonably request from time to time to maintain the perfection and priority of the security interest granted herein.
Section 4.8 — Tax Matters
(a) The Pledgor shall not take any action, or fail to take any action, that would result in (i) the recapture, disqualification, or reduction of any investment tax credits claimed by Ridgeline or any Project Company with respect to any project in the Solstice Portfolio, (ii) the violation of any prevailing wage or apprenticeship requirements applicable to the Solstice Portfolio under Sections 48(a)(10) and 45(b)(7) of the Internal Revenue Code, or (iii) any other adverse tax consequence to the Solstice Portfolio, in each case without the prior written consent of the Secured Party.
(b) The Pledgor shall maintain compliance with all prevailing wage and apprenticeship requirements through Vasquez Brothers Construction, Inc. (as the primary engineering, procurement, and construction contractor) and all applicable subcontractors, and shall deliver to the Secured Party, promptly upon request, such documentation and certifications as may be necessary to evidence such compliance.
(c) The Pledgor shall cause the Partnership and the Project Companies to timely prepare and file all required tax returns and reports, and shall provide the Secured Party with copies of all partnership tax returns (IRS Form 1065) and Schedules K-1 promptly upon filing.
Section 4.9 — Insurance
(a) The Pledgor shall cause the Partnership and each of the Project Companies to maintain at all times insurance coverage of the types, in the amounts, and with the insurers required by the LLCA, including, without limitation:
(i) all-risk property insurance covering the physical assets of the Solstice Portfolio, including solar photovoltaic modules, inverters, transformers, balance-of-system equipment, and related facilities;
(ii) commercial general liability insurance;
(iii) business interruption insurance;
(iv) builder's risk insurance (to the extent applicable during any ongoing construction or remediation activities); and
(v) such other insurance as may be required by the LLCA, the power purchase agreements, or applicable law.
(b) All insurance policies shall be placed by Sentinel Underwriters, Inc. (or such other insurance broker as may be approved by the Secured Party) and underwritten by Fortis Indemnity Company (or such other insurer as may be approved by the Secured Party). All performance bonds required under the engineering, procurement, and construction contracts shall be issued by Ironclad Surety Corp. (or such other surety as may be approved by the Secured Party).
(c) The Secured Party shall be named as an additional insured and/or loss payee, as applicable, on all insurance policies maintained by the Partnership and the Project Companies, in accordance with the requirements of the Loan Agreement and the LLCA.
Section 4.10 — Intercreditor Agreement Compliance
(a) The Pledgor acknowledges and agrees that this Pledge Agreement and the security interest granted herein are subject to, and are governed in certain respects by, the terms and conditions of the Intercreditor Agreement.
(b) The Pledgor shall comply with all of its obligations under the Intercreditor Agreement and shall not take any action, or fail to take any action, that would cause a breach of or default under the Intercreditor Agreement.
(c) In the event of any conflict or inconsistency between any provision of this Agreement and any provision of the Intercreditor Agreement, as between the Secured Party and Ridgeline, the Intercreditor Agreement shall control with respect to the relative rights, remedies, priorities, and obligations of the Secured Party and Ridgeline; provided, however, that as between the Pledgor and the Secured Party, the provisions of this Agreement shall remain in full force and effect.
ARTICLE V — UCC FILINGS AND PERFECTION
Section 5.1 — Authorization to File UCC-1 Financing Statements
The Pledgor hereby irrevocably authorizes the Secured Party to prepare, execute (to the extent execution by the Secured Party is required), and file one or more UCC-1 financing statements, and any amendments, continuations, or termination statements relating thereto, in such filing offices as the Secured Party may determine to be necessary or appropriate to perfect the security interest granted herein. The Pledgor acknowledges that, pursuant to Section 9-509 of the UCC, the Secured Party is authorized to file financing statements covering the Collateral without the Pledgor's signature. The primary filing jurisdiction shall be the Delaware Secretary of State, as the Pledgor's jurisdiction of organization, and such other jurisdictions as the Secured Party may determine necessary or advisable from time to time.
Section 5.2 — Financing Statement Description
The UCC-1 financing statement to be filed in connection with this Agreement shall describe the Collateral substantially as follows:
All of Debtor's right, title, and interest in and to its membership interest in Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523), including, without limitation, all economic rights, distribution rights, allocation rights, governance rights, voting rights, consent rights, the Purchase Option (as defined in that certain Pledge Agreement dated December 8, 2023), and all proceeds, products, and accessions thereof.
The debtor information for the UCC-1 financing statement shall be as follows:
Debtor: CBR Solstice Manager, LLC Organization Type: Delaware Limited Liability Company Organization ID: [Delaware Secretary of State Filing Number] EIN: 88-4071597
Mailing Address: 2700 Post Oak Boulevard, Suite 1450, Houston, TX 77056
The secured party information for the UCC-1 financing statement shall be as follows:
Secured Party: Osprey National Bank, N.A. 300 Madison Avenue New York, NY 10017
A form of the UCC-1 financing statement is attached hereto as Exhibit C.
Section 5.3 — Continuation Statements
The Pledgor hereby authorizes the Secured Party to file continuation statements (UCC-3 forms) as and when required under the applicable provisions of the UCC to maintain the effectiveness and perfection of the financing statements filed pursuant to this Article V. Without limiting the foregoing, the Pledgor shall cooperate with the Secured Party and shall execute and deliver any documents, certificates, or instruments reasonably requested by the Secured Party in connection with any such continuation filing. The Pledgor shall not file, and shall not authorize or permit any third party to file, any termination statement, amendment, or other document with respect to any financing statement filed by or on behalf of the Secured Party without the prior written consent of the Secured Party.
Section 5.4 — Acknowledgment of Existing UCC Filings
The parties acknowledge that existing UCC-1 financing statements have been filed by Osprey National Bank, N.A. in connection with the Construction Facility (Agreement No. ONB-PF-2022-0341). Such existing filings relate to the assets of the Project Companies at the project company level and do not constitute liens on the Pledged Interest at the managing member interest level. At or prior to the Closing Date, appropriate UCC-3 amendment statements shall be filed in the Delaware Secretary of State's office and such other filing offices as the Secured Party may determine necessary to reflect the additional back-leverage security interest granted herein. The Secured Party has conducted lien searches in the States of Delaware, Texas, and New Mexico and has confirmed that no unexpected liens, financing statements, or encumbrances exist against the Pledgor, the Partnership, or the Pledged Interest, other than the existing Construction Facility filings and the permitted liens described herein.
ARTICLE VI — VOTING RIGHTS AND MANAGEMENT
Section 6.1 — Voting and Management Rights Prior to Event of Default
So long as no Event of Default has occurred and is continuing, the Pledgor shall retain and shall be entitled to exercise all voting, consent, management, and governance rights pertaining to the Pledged Interest as managing member of the Partnership under the LLCA, including, without limitation, the right to manage and direct the business and affairs of the Partnership and the Project Companies, the right to vote or consent on all matters submitted to the members of the Partnership, and the right to exercise all other powers and privileges of the managing member under the LLCA; provided, however, that the Pledgor shall exercise such rights in a manner consistent with its obligations under the covenants set forth in Article IV of this Agreement and shall not exercise such rights in a manner that would materially impair or diminish the value of the Collateral or the Secured Party's security interest therein.
Section 6.2 — Voting and Management Rights Upon Event of Default
(a) Upon the occurrence and during the continuance of an Event of Default, at the election of the Secured Party (exercised by written notice delivered to the Pledgor in accordance with Section 11.4), the Secured Party shall have the exclusive right to exercise all voting, consent, management, and governance rights with respect to the Pledged Interest, including, without limitation, the right to vote or consent on all matters submitted to the members of the Partnership, the right to direct the management and operations of the Partnership and the Project Companies, and the right to exercise all other powers and privileges of the managing member under the LLCA.
(b) The exercise by the Secured Party of the voting, consent, management, and governance rights described in this Section 6.2 shall be subject to:
(i) the terms and conditions of the Intercreditor Agreement, including, without limitation, any standstill periods during which the Secured Party may not exercise certain remedies, any step-in rights of Ridgeline, and any cure rights of Ridgeline;
(ii) the applicable provisions of the LLCA regarding the change of managing member, including any consent requirements of Ridgeline as tax-equity member with respect to the appointment or substitution of a successor managing member; and
(iii) applicable law, including the Delaware Limited Liability Company Act.
(c) The Pledgor shall cooperate with the Secured Party in connection with the exercise of the rights described in this Section 6.2, including by executing and delivering such documents, instruments, and certificates as the Secured Party may reasonably request.
Section 6.3 — Irrevocable Proxy
Upon the occurrence and during the continuance of an Event of Default, the Pledgor hereby grants to the Secured Party an irrevocable proxy, coupled with an interest, to exercise all voting, consent, management, and governance rights with respect to the Pledged Interest, in each case subject to the terms and conditions of the Intercreditor Agreement. This proxy is irrevocable and shall not be terminated by any act of the Pledgor, by operation of law, or otherwise, and is coupled with an interest by virtue of the security interest granted herein. The Pledgor acknowledges that this irrevocable proxy is given as an inducement to the Secured Party to extend credit under the Loan Agreement and is a condition to the Loan Agreement.
ARTICLE VII — REMEDIES UPON EVENT OF DEFAULT
Section 7.1 — Rights and Remedies
Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have, in addition to any other rights and remedies available to the Secured Party under the Loan Agreement, the other loan documents, or applicable law, the following rights and remedies:
(a) UCC Remedies. All rights and remedies of a secured party under the UCC as in effect in the State of New York and the State of Delaware, including, without limitation, the right to take possession of the Collateral, the right to dispose of the Collateral, and the right to collect on and enforce the Collateral.