PURCHASE OPTION AGREEMENT
dated as of
September 21, 2023
by and between
CBR SOLSTICE MANAGER, LLC
a Delaware limited liability company
("Optionee" or "CBR Manager")
and
RIDGELINE CAPITAL PARTNERS, LLC
a Delaware limited liability company
("Optionor" or "Tax-Equity Member" or "Ridgeline")
with respect to
SOLSTICE HOLDINGS, LLC
a Delaware limited liability company
(the "Partnership" or the "Company")
This Purchase Option Agreement is entered into in connection with and as a condition to the execution and delivery of the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC of even date herewith.
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RECITALS
WHEREAS, Solstice Holdings, LLC, a Delaware limited liability company (the "Partnership"), was duly formed under the Delaware Limited Liability Company Act on August 14, 2023, and is governed by that certain Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "LLCA"), entered into among CBR Solstice Manager, LLC, a Delaware limited liability company ("CBR Manager"), as Managing Member, and Ridgeline Capital Partners, LLC, a Delaware limited liability company ("Ridgeline"), as Tax-Equity Member;
WHEREAS, the Partnership holds, directly or indirectly, one hundred percent (100%) of the membership interests in seven (7) project companies, namely: (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"), which Project Companies own and operate utility-scale solar photovoltaic generation facilities totaling approximately four hundred and twenty megawatts direct current (420 MW(dc)) across the States of Texas and New Mexico (collectively, the "Solstice Portfolio");
WHEREAS, Ridgeline has committed, pursuant to the Capital Contribution Agreement dated as of September 21, 2023, between Ridgeline and the Partnership (the "Capital Contribution Agreement"), to make aggregate capital contributions of One Hundred Twenty Million Dollars ($120,000,000) to the Partnership in exchange for its membership interest in the Partnership (the "Tax-Equity Interest");
WHEREAS, CBR Manager has committed to make aggregate capital contributions of Two Million Four Hundred Thousand Dollars ($2,400,000) to the Partnership in exchange for its membership interest in the Partnership (the "Managing Member Interest");
WHEREAS, pursuant to the LLCA, during the period prior to the Flip Point (as defined in the LLCA), Ridgeline is allocated ninety-nine percent (99%) of all items of taxable income, gain, loss, deduction, and credit of the Partnership, and thirty percent (30%) of all cash distributions of the Partnership, and upon the achievement by Ridgeline of its target after-tax yield of seven and one-quarter percent (7.25%) on an internal rate of return basis on its capital contributions (the "Flip Point"), Ridgeline's allocations are reduced to five percent (5%) of all items of taxable income, gain, loss, deduction, credit, and cash distributions of the Partnership (the "Post-Flip Interest" or "Residual Interest");
WHEREAS, the parties desire to establish the terms and conditions upon which CBR Manager shall have the exclusive right and option to purchase all of Ridgeline's Post-Flip Interest at fair market value following the occurrence of the Flip Point, on the terms and subject to the conditions set forth herein;
WHEREAS, based on the financial model delivered to and accepted by the parties on or about September 15, 2023 (the "Base Case Model"), the Flip Point is projected to occur during the fourth calendar quarter of 2028, approximately five and zero-tenths (5.0) years after the weighted-average commercial operation date of October 25, 2023; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the execution and delivery by the parties of the LLCA, the Capital Contribution Agreement, and the other Transaction Documents (as defined in the LLCA), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties 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 but not otherwise defined in this Agreement shall have the meanings assigned to such terms in the LLCA.
"Agreed FMV Notice" has the meaning set forth in Section 4.2.
"Agreement" means this Purchase Option Agreement, dated as of September 21, 2023, by and between CBR Manager and Ridgeline, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Appraiser" means an independent, nationally recognized appraisal firm with experience in valuing renewable energy generating assets, mutually agreed upon by CBR Manager and Ridgeline, or appointed in accordance with the procedures set forth in Section 4.3 in the event that the parties are unable to agree. For the avoidance of doubt, any such firm must satisfy the qualifications set forth in Section 4.4.
"Assignment Agreement" means the assignment and assumption agreement to be executed at the Option Closing, substantially in the form attached hereto as Exhibit B.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in the City of New York, State of New York are authorized or required by law, executive order, or governmental decree to be closed.
"Capital Contribution Agreement" means the Capital Contribution Agreement, dated as of September 21, 2023, between Ridgeline and the Partnership, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"CBR" means Calloway-Briggs Renewables Inc., a Texas corporation (TX SOS File No. 803762114; EIN 84-3291076), with its principal office located at 2700 Post Oak Boulevard, Suite 1450, Houston, Texas 77056, and the sole member of CBR Manager.
"CBR Manager" means CBR Solstice Manager, LLC, a Delaware limited liability company (EIN 88-4071597), which is treated as a disregarded entity for U.S. federal income tax purposes. The sole member of CBR Manager is CBR.
"Closing Date" means the date on which the Option Closing occurs, as determined in accordance with Section 2.3 and Section 4.6.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations promulgated thereunder.
"Effective Date" means September 21, 2023.
"Exercise Notice" means a written notice from CBR Manager to Ridgeline exercising the Purchase Option, substantially in the form attached hereto as Exhibit A, delivered in accordance with Section 2.3.
"Exercise Period" means the period commencing on the Flip Date and ending at 5:00 p.m. (New York City time) on the date that is one hundred eighty (180) calendar days after the Flip Date, subject to extension as provided in Section 2.2.
"Fair Market Value" or "FMV" means the fair market value of the Post-Flip Interest, determined in accordance with the standards and procedures set forth in Article IV.
"Flip Date" means the date on which the Flip Point occurs, as determined under Section 8.4 of the LLCA and as notified in accordance with Section 8.4 of this Agreement.
"Flip Point" has the meaning set forth in the LLCA. As of the Effective Date, the Flip Point is defined in the LLCA as the point at which Ridgeline has achieved its target after-tax yield of seven and one-quarter percent (7.25%) on an internal rate of return (IRR) basis on its aggregate capital contributions to the Partnership.
"Floor Price" means One Dollar ($1.00), the minimum purchase price for the Post-Flip Interest irrespective of the determination of Fair Market Value.
"Indemnified Parties" has the meaning set forth in Section 10.1.
"Indemnifying Party" has the meaning set forth in Section 10.1.
"LLCA" means the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023, by and among CBR Manager, as Managing Member, and Ridgeline, as Tax-Equity Member, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Neutral Appraiser" has the meaning set forth in Section 4.3(d).
"Option Closing" has the meaning set forth in Section 5.1.
"Option Purchase Price" means the greater of (a) the Fair Market Value of the Post-Flip Interest, as determined in accordance with Article IV, and (b) the Floor Price.
"Osprey Back-Leverage Facility" means the back-leverage term loan facility in the original principal amount of Sixty-Eight Million Dollars ($68,000,000) provided by Osprey National Bank, N.A. pursuant to that certain Credit Agreement, dated as of September 21, 2023, among CBR Manager, as borrower, Osprey National Bank, N.A., as administrative agent and lender, and the other parties thereto (agreement reference number ONB-PF-2023-0587).
"Outside Closing Date" has the meaning set forth in Section 9.2(a).
"Partnership" means Solstice Holdings, LLC, a Delaware limited liability company (EIN 88-4071523), classified as a partnership for U.S. federal income tax purposes. The registered agent of the Partnership is Cascade Systems, located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904.
"Post-Flip Interest" means Ridgeline's residual five percent (5%) membership interest in the Partnership following the occurrence of the Flip Point, representing five percent (5%) of all items of taxable income, gain, loss, deduction, credit, and cash distributions of the Partnership.
"Project Companies" means, collectively, the following Delaware limited liability companies, each of which is a wholly-owned subsidiary of the Partnership and treated as a disregarded entity for U.S. federal income tax purposes:
(a) Pecos Sun Solar, LLC (85 MW(dc), Reeves County, Texas);
(b) Red Mesa Solar, LLC (70 MW(dc), Pecos County, Texas);
(c) Coyote Flats Solar, LLC (65 MW(dc), Ward County, Texas);
(d) Llano Verde Solar, LLC (55 MW(dc), Hudspeth County, Texas);
(e) Cimarron Solar, LLC (50 MW(dc), Lea County, New Mexico);
(f) Sandoval Ridge Solar, LLC (50 MW(dc), Sandoval County, New Mexico); and
(g) Amistad Solar, LLC (45 MW(dc), Val Verde County, Texas).
"Purchase Option" means the option granted to CBR Manager pursuant to Article II of this Agreement.
"Ridgeline" means Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN 13-4827651), with its principal office located at 390 Park Avenue, 22nd Floor, New York, New York 10022.
"Solstice Portfolio" means the seven (7) utility-scale solar photovoltaic generation projects totaling approximately 420 MW(dc) owned and operated by the Project Companies, as more particularly described on Schedule 1 attached hereto.
"Tax-Equity Interest" means Ridgeline's membership interest in the Partnership prior to the Flip Point, representing ninety-nine percent (99%) of all items of taxable income, gain, loss, deduction, and credit of the Partnership and thirty percent (30%) of all cash distributions of the Partnership.
"Transaction Documents" has the meaning set forth in the LLCA and includes, without limitation, the LLCA, the Capital Contribution Agreement, the Tax Credit Purchase Agreement, the Tax Indemnity Agreement, the Escrow Agreement, the Intercreditor and Consent Agreement, the Pledge Agreement, and this Agreement.
Section 1.2 — Rules of Construction
(a) Unless the context otherwise requires, all references herein to the LLCA, the Capital Contribution Agreement, and any other agreement or instrument shall mean such agreement or instrument as amended, modified, restated, supplemented, or replaced from time to time in accordance with its terms.
(b) Unless the context otherwise requires, all references herein to "Sections," "Articles," "Exhibits," and "Schedules" are to the corresponding Sections, Articles, Exhibits, and Schedules of this Agreement.
(c) The headings and captions used in this Agreement are for convenience of reference only, do not constitute a part of this Agreement, and shall not be deemed to limit, characterize, or in any way affect any provision of this Agreement. All provisions of this Agreement shall be enforced and construed as if no heading or caption had been used herein.
(d) Capitalized terms defined in the LLCA and not otherwise defined in this Agreement shall have the meanings given to such terms in the LLCA.
(e) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(f) The use of the masculine, feminine, or neuter gender or the singular or plural form of words herein shall not limit any provision of this Agreement.
(g) References to any statute, rule, or regulation shall include any successor or amendatory statute, rule, or regulation.
(h) References to "$" or "Dollars" mean lawful money of the United States of America.
(i) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the word "to" means "to but excluding," and the words "through" and "until" each mean "to and including."
ARTICLE II — GRANT OF PURCHASE OPTION
Section 2.1 — Grant
Ridgeline hereby irrevocably grants to CBR Manager the exclusive right and option to purchase one hundred percent (100%) of Ridgeline's Post-Flip Interest in the Partnership, subject to and in accordance with the terms and conditions set forth in this Agreement (the "Purchase Option"). The Purchase Option is granted as a material inducement to CBR Manager's agreement to enter into the LLCA and the other Transaction Documents. The Purchase Option may be exercised only following the occurrence of the Flip Point and only during the Exercise Period. For the avoidance of doubt, unless and until the Purchase Option is duly exercised in accordance with this Article II, Ridgeline shall retain all rights and obligations with respect to the Post-Flip Interest as set forth in the LLCA, including the right to receive distributions attributable to the Post-Flip Interest.
Section 2.2 — Exercise Period
(a) The Exercise Period shall commence on the Flip Date (which, based on the Base Case Model as of the Effective Date, is projected to occur during the fourth calendar quarter of 2028) and shall expire at 5:00 p.m. (New York City time) on the date that is one hundred eighty (180) calendar days following the Flip Date.
(b) If the last day of the Exercise Period falls on a day that is not a Business Day, the Exercise Period shall be automatically extended to and shall expire at 5:00 p.m. (New York City time) on the next succeeding Business Day.
(c) If CBR Manager does not deliver a valid Exercise Notice to Ridgeline during the Exercise Period, the Purchase Option shall automatically expire and shall thereafter be of no further force or effect, without liability to either party on account of such expiration and without prejudice to any other rights or remedies that CBR Manager may have under the LLCA or any other Transaction Document.
Section 2.3 — Exercise Notice
(a) CBR Manager shall exercise the Purchase Option by delivering a written Exercise Notice to Ridgeline during the Exercise Period, in accordance with the notice provisions of Section 11.3 of this Agreement, substantially in the form attached hereto as Exhibit A.
(b) The Exercise Notice shall specify the proposed Closing Date, which shall be a Business Day occurring no earlier than thirty (30) Business Days and no later than ninety (90) Business Days after the date of the Exercise Notice; provided, however, that if the Fair Market Value determination process under Article IV has not been completed by the date that is five (5) Business Days prior to such proposed Closing Date, the Closing Date shall be extended automatically in accordance with Section 4.6.
(c) Once a valid Exercise Notice has been delivered to Ridgeline in accordance with this Section 2.3, the exercise of the Purchase Option shall be irrevocable, and CBR Manager shall be obligated to consummate the Option Closing in accordance with Article V, subject to the satisfaction or waiver of the conditions precedent set forth in Article VII.
Section 2.4 — Nature of the Option
(a) The Purchase Option is a call option. Ridgeline has no right to compel CBR Manager to exercise the Purchase Option at any time. Nothing in this Agreement shall be construed to obligate CBR Manager to exercise the Purchase Option.
(b) The Purchase Option is personal to CBR Manager and may not be assigned, transferred, pledged, encumbered, or otherwise disposed of by CBR Manager without the prior written consent of Ridgeline; provided, however, that CBR Manager may assign its rights under this Agreement (including the Purchase Option) without Ridgeline's consent to (i) any successor Managing Member of the Partnership under the LLCA, or (ii) any affiliate of CBR (as defined in the LLCA), in each case so long as such assignee assumes in writing all obligations of CBR Manager under this Agreement and CBR Manager provides Ridgeline with prior written notice of such assignment.
(c) The parties acknowledge and agree that, based on currently applicable tax guidance and the structure of the Partnership as set forth in the LLCA, the Purchase Option is intended to be exercisable at fair market value and not at a fixed or determinable price, such that the existence of the Purchase Option does not cause Ridgeline to be treated as other than a partner of the Partnership for U.S. federal income tax purposes.
ARTICLE III — OPTION PURCHASE PRICE
Section 3.1 — Determination of Option Purchase Price
The purchase price for the Post-Flip Interest (the "Option Purchase Price") shall be an amount equal to the greater of:
(a) the Fair Market Value of the Post-Flip Interest, as determined in accordance with Article IV of this Agreement; and
(b) the Floor Price.
The Option Purchase Price shall be paid in full in cash, in immediately available funds denominated in United States Dollars, at the Option Closing by wire transfer to an account or accounts designated by Ridgeline in writing not fewer than three (3) Business Days prior to the Closing Date.
Section 3.2 — Floor Price
The Floor Price is One Dollar ($1.00). The Floor Price represents the minimum consideration to be paid for the Post-Flip Interest in the event that the Fair Market Value of the Post-Flip Interest, as determined in accordance with Article IV, is less than One Dollar ($1.00) or is otherwise determined to be zero or a negative value. The parties acknowledge and agree that the Floor Price is not intended to be, and does not represent, a fixed or determinable purchase price, nor does the Floor Price represent the parties' estimate or expectation of the Fair Market Value of the Post-Flip Interest as of any date. The inclusion of the Floor Price is solely for the purpose of ensuring that the consideration payable for the Post-Flip Interest is not less than a nominal amount.
Section 3.3 — No Adjustments for Pre-Flip Amounts
The Option Purchase Price reflects only the value of the Post-Flip Interest (i.e., Ridgeline's residual five percent (5%) interest in all items of taxable income, gain, loss, deduction, credit, and cash distributions of the Partnership arising from and after the Flip Point) and does not include, and shall not be deemed to include, any amounts owed or payable to Ridgeline under the LLCA or any other Transaction Document with respect to the period prior to the Flip Point or to the period between the Flip Point and the Closing Date. Without limiting the generality of the foregoing, the Option Purchase Price does not include and is not intended to reflect:
(a) any unpaid or accrued cash distributions to which Ridgeline is entitled under the LLCA, whether relating to the pre-flip period or the post-flip period prior to the Closing Date;
(b) any indemnification obligations of the Partnership or CBR Manager to Ridgeline arising under the LLCA, the Tax Indemnity Agreement, or any other Transaction Document;
(c) any capital account adjustments, true-up payments, or reconciliation amounts payable to Ridgeline under the LLCA; or
(d) any amounts payable to Ridgeline as reimbursement for costs, expenses, or fees incurred in connection with the Transaction Documents.
All such amounts shall remain obligations of the Partnership or CBR Manager, as applicable, under the LLCA or the relevant Transaction Document, and shall be paid in accordance with the terms thereof, irrespective of the consummation of the Option Closing.
ARTICLE IV — FAIR MARKET VALUE DETERMINATION
Section 4.1 — FMV Standard
(a) For purposes of this Agreement, "Fair Market Value" means the price, expressed in United States Dollars, at which the Post-Flip Interest would change hands between a hypothetical willing buyer and a hypothetical willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of all relevant facts and circumstances. The Fair Market Value shall be determined in a manner consistent with the standards and definitions set forth in Revenue Ruling 59-60, 1959-1 C.B. 237, and its progeny, to the extent applicable to the valuation of an interest in a partnership holding renewable energy generating assets.
(b) The Fair Market Value shall be determined as of the Flip Date, or as close thereto as is practicable given the timing of the FMV determination process.
(c) In determining Fair Market Value, the Appraiser(s) and the parties shall take into account all relevant facts and circumstances, including, without limitation:
(i) the remaining useful life and economic life of each of the solar photovoltaic projects constituting the Solstice Portfolio, taking into account the degradation curve of the solar modules, the condition and remaining expected life of inverters, transformers, and other balance-of-system equipment, and any available independent engineering assessments;
(ii) the contracted revenue streams under the power purchase agreements ("PPAs") with Lone Star Grid Solutions, LLC (applicable to the five Texas Project Companies: Pecos Sun Solar, LLC; Red Mesa Solar, LLC; Coyote Flats Solar, LLC; Llano Verde Solar, LLC; and Amistad Solar, LLC, each with a fifteen (15)-year term and a weighted-average contract price of $32.50/MWh with a one and one-half percent (1.5%) annual escalator) and with Enchantment Power Cooperative (applicable to the two New Mexico Project Companies: Cimarron Solar, LLC and Sandoval Ridge Solar, LLC, each with a twenty (20)-year term and a weighted-average contract price of $29.75/MWh with a two percent (2.0%) annual escalator), including any merchant exposure following expiration of such PPAs;
(iii) projected operating and maintenance costs, administrative expenses, insurance costs, property taxes, and other recurring expenses, as well as projected capital expenditures (including inverter replacement reserves and panel repowering costs);
(iv) applicable discount rates, as determined by reference to then-current market conditions for comparable renewable energy assets, including weighted-average cost of capital, required equity returns for comparable investments, and prevailing interest rates;
(v) the five percent (5%) allocation percentage applicable to the Post-Flip Interest, and the economic attributes associated with a five percent (5%) minority interest in a limited liability company;
(vi) any applicable transfer restrictions, minority interest discounts, discounts for lack of marketability, or other discounts or premiums that a hypothetical willing buyer and a hypothetical willing seller would consider in an arm's-length transaction;
(vii) the status, terms, and remaining duration of underlying real property leases, easements, rights-of-way, interconnection agreements, and governmental permits, licenses, and approvals;
(viii) the then-current physical condition of the solar assets, based on available engineering reports, performance data, and any condition assessments performed within the twelve (12) months preceding the Flip Date; and
(ix) any other factors that a qualified appraiser would customarily consider in determining the fair market value of a minority interest in a partnership holding utility-scale solar photovoltaic generating assets.
Section 4.2 — Negotiated FMV
Within fifteen (15) Business Days following delivery of the Exercise Notice by CBR Manager to Ridgeline, CBR Manager and Ridgeline shall negotiate in good faith to agree upon the Fair Market Value of the Post-Flip Interest. During such period, the parties shall exchange relevant financial data, operating information, and other materials as may be reasonably necessary to facilitate an informed determination of Fair Market Value. If CBR Manager and Ridgeline reach agreement on the Fair Market Value within such fifteen (15)-Business Day period, they shall promptly memorialize the agreed-upon Fair Market Value in a written instrument signed by authorized representatives of both parties (the "Agreed FMV Notice"), which Agreed FMV Notice shall be conclusive and binding upon the parties for all purposes under this Agreement.
Section 4.3 — Appointment of Appraiser
If CBR Manager and Ridgeline are unable to agree on the Fair Market Value of the Post-Flip Interest within the fifteen (15)-Business Day negotiation period set forth in Section 4.2, the Fair Market Value shall be determined by independent appraisal in accordance with the following procedures:
(a) Appointment of Party-Selected Appraisers. Within ten (10) Business Days following the expiration of the negotiation period, each party shall select and engage, at its own cost and expense, one independent Appraiser meeting the qualifications set forth in Section 4.4. Each party shall promptly notify the other party in writing of the identity of its selected Appraiser.
(b) Party-Selected Appraiser Reports. Each Appraiser so selected shall independently determine the Fair Market Value of the Post-Flip Interest and shall deliver a written appraisal report setting forth its determination, together with a detailed description of the methodologies, assumptions, and data relied upon, within forty-five (45) calendar days following the date of its engagement. Each party shall deliver a copy of its Appraiser's report to the other party within five (5) Business Days following receipt thereof.
(c) Convergent Valuations. If the two appraised values are within ten percent (10%) of each other (measuring the lower appraised value against the higher appraised value, i.e., the lower value is equal to or greater than ninety percent (90%) of the higher value), the Fair Market Value shall be deemed to be the arithmetic mean (simple average) of the two appraised values, and such determination shall be final and binding upon the parties.
(d) Divergent Valuations; Neutral Appraiser. If the two appraised values differ by more than ten percent (10%) (as calculated in clause (c) above), the two party-selected Appraisers shall, within ten (10) Business Days following the delivery of the later of the two appraisal reports, jointly select a third independent Appraiser meeting the qualifications set forth in Section 4.4 (the "Neutral Appraiser"). If the two party-selected Appraisers are unable to agree upon the identity of the Neutral Appraiser within such ten (10)-Business Day period, either party may petition the New York City office of the American Arbitration Association to appoint the Neutral Appraiser in accordance with its then-applicable rules for the appointment of neutral appraisers or arbitrators. The selection of the Neutral Appraiser by the American Arbitration Association shall be final and binding.
(e) Neutral Appraiser Determination. The Neutral Appraiser shall independently determine the Fair Market Value of the Post-Flip Interest and shall deliver a written appraisal report within thirty (30) calendar days of its engagement. The Neutral Appraiser may, but shall not be required to, review and consider the two prior appraisal reports. The Neutral Appraiser's determination of Fair Market Value shall be final and binding upon the parties, absent manifest error or fraud. The Neutral Appraiser's determination shall not be less than the lower of the two party-selected appraised values and not greater than the higher of such values.
(f) Cost of Neutral Appraiser. The fees, costs, and expenses of the Neutral Appraiser shall be borne equally by CBR Manager, on the one hand, and Ridgeline, on the other hand (each paying fifty percent (50%) of such fees, costs, and expenses).
Section 4.4 — Appraiser Qualifications
Each Appraiser engaged pursuant to this Article IV (including any Neutral Appraiser) must satisfy each of the following qualifications:
(a) the Appraiser must be an independent, nationally recognized appraisal firm with demonstrable experience in the valuation of renewable energy generating assets, including solar photovoltaic projects;
(b) the Appraiser must have at least ten (10) years of experience in the valuation of energy assets, infrastructure assets, or similar assets;
(c) the Appraiser must have no material business relationship with either CBR Manager (or CBR or any of their respective affiliates) or Ridgeline (or any of its affiliates), other than having served as an appraiser or consultant in prior transactions that do not create a conflict of interest or an appearance of partiality; and
(d) neither Greystone Worthington, LLC, the independent tax advisor and appraiser that prepared the investment tax credit ("ITC") basis appraisal for the Solstice Portfolio in connection with the Transaction Documents, nor any affiliate of Greystone Worthington, LLC, shall be eligible to serve as an Appraiser under this Article IV, in order to preserve the independence and objectivity of the FMV determination process.
Section 4.5 — Cooperation
Each party shall, and shall cause the Partnership and the Project Companies to, provide the Appraiser(s) engaged pursuant to this Article IV with reasonable access to the books, records, financial statements, tax returns, engineering reports, PPA documents, land lease agreements, interconnection agreements, operating reports, insurance policies, environmental assessments, and other information and documentation reasonably necessary to perform the appraisal. CBR Manager, acting in its capacity as Managing Member of the Partnership, shall facilitate such access and shall use commercially reasonable efforts to cause the officers, employees, and agents of the Partnership and the Project Companies to cooperate with the Appraiser(s) and to respond to reasonable requests for information in a timely manner. Neither party shall unreasonably withhold, delay, or condition its cooperation under this Section 4.5.
Section 4.6 — Adjustment of Closing Date
If the Fair Market Value determination process set forth in this Article IV has not been completed at least five (5) Business Days prior to the Closing Date specified in the Exercise Notice (or, if applicable, any previously adjusted Closing Date), the Closing Date shall be automatically extended, without any further action by either party, to the date that is ten (10) Business Days following the date on which the final determination of Fair Market Value is made (whether pursuant to Section 4.2 or Section 4.3). CBR Manager shall promptly notify Ridgeline in writing of any such adjusted Closing Date.
ARTICLE V — OPTION CLOSING
Section 5.1 — Time and Place
The closing of the purchase and sale of the Post-Flip Interest contemplated by this Agreement (the "Option Closing") shall take place at the offices of Calderwood & Harkness LLP, located at 600 Lexington Avenue, New York, New York 10022 (or at such other location as the parties may mutually agree), commencing at 10:00 a.m. (New York City time) on the Closing Date, or by electronic exchange of executed signature pages and closing documents in PDF or other electronic format as the parties may agree. The Option Closing may occur remotely by the exchange of documents and signatures delivered by electronic mail, overnight courier, or other means acceptable to both parties.
Section 5.2 — CBR Manager's Deliverables at Option Closing
At the Option Closing, CBR Manager shall deliver, or cause to be delivered, to Ridgeline the following:
(a) Payment of Option Purchase Price. Payment of the Option Purchase Price, in full, by wire transfer of immediately available funds in United States Dollars to a bank account or accounts designated by Ridgeline in writing not fewer than three (3) Business Days prior to the Closing Date.
(b) Officer's Certificate. A certificate of an authorized officer of CBR (as the sole member of CBR Manager) certifying that each of CBR Manager's representations and warranties contained in Section 6.1 of this Agreement is true and correct in all material respects as of the Closing Date (or, if any such representation or warranty is qualified by materiality, in all respects), and that CBR Manager has performed and complied in all material respects with all covenants, agreements, and obligations required to be performed or complied with by CBR Manager on or prior to the Closing Date.
(c) Evidence of Required Consents. Evidence, in form and substance reasonably satisfactory to Ridgeline, that all consents required to be obtained by CBR Manager in connection with the Option Closing have been duly obtained, including, without limitation, the consent of Osprey National Bank, N.A. under the Intercreditor and Consent Agreement and the Pledge Agreement relating to the Osprey Back-Leverage Facility, to the extent that such consent is required under the terms of such agreements for the consummation of the transactions contemplated hereby.
(d) Assignment Agreement. The Assignment Agreement, duly executed by CBR Manager, in the form attached hereto as Exhibit B (or in such other form as is reasonably satisfactory to Ridgeline), reflecting CBR Manager's acquisition of the Post-Flip Interest and its assumption of obligations with respect thereto arising from and after the Closing Date.
(e) LLCA Amendment. An amendment to the LLCA, duly executed by CBR Manager, reflecting the withdrawal of Ridgeline as a member of the Partnership and the adjustment of membership interests such that CBR Manager becomes the sole member and one hundred percent (100%) owner of the Partnership.
(f) Other Documents. Such other certificates, instruments, documents, and agreements as may be reasonably required by Ridgeline or its counsel to effectuate the transactions contemplated by this Agreement and to evidence the satisfaction of the conditions set forth in Article VII.
Section 5.3 — Ridgeline's Deliverables at Option Closing
At the Option Closing, Ridgeline shall deliver, or cause to be delivered, to CBR Manager the following:
(a) Assignment Agreement. The Assignment Agreement, duly executed by Ridgeline, conveying the Post-Flip Interest to CBR Manager free and clear of all liens, claims, encumbrances, pledges, security interests, options, charges, restrictions, and adverse claims of any kind or nature whatsoever, other than restrictions arising under the LLCA, this Agreement, and applicable federal and state securities laws.
(b) Officer's Certificate. A certificate of an authorized officer or representative of Ridgeline certifying that each of Ridgeline's representations and warranties contained in Section 6.2 of this Agreement is true and correct in all material respects as of the Closing Date (or, if any such representation or warranty is qualified by materiality, in all respects), and that Ridgeline has performed and complied in all material respects with all covenants, agreements, and obligations required to be performed or complied with by Ridgeline on or prior to the Closing Date.
(c) UCC Filings. Such UCC-3 termination statements, UCC-3 amendments, or other Uniform Commercial Code filings as may be necessary to release and discharge any security interests, pledges, or other liens in or on the Post-Flip Interest in favor of any secured party.
(d) Tax Documentation. A duly executed IRS Form W-9 (or applicable successor form) for Ridgeline, certifying Ridgeline's taxpayer identification number and certifying that Ridgeline is not subject to backup withholding, together with such other tax documentation as may be reasonably requested by CBR Manager.
(e) Other Documents. Such other certificates, instruments, documents, and agreements as may be reasonably required by CBR Manager or its counsel to effectuate the transactions contemplated by this Agreement and to evidence the satisfaction of the conditions set forth in Article VII.
Section 5.4 — Simultaneous Deliveries
All deliveries to be made at the Option Closing are mutually interdependent and shall be deemed to occur simultaneously, and no delivery shall be deemed to have been made or shall be effective until all required deliveries have been made by both parties. The Option Closing shall not be deemed to have occurred, and neither party shall have any obligation to consummate any of the transactions contemplated by this Article V, unless and until all conditions precedent set forth in Article VII have been satisfied or waived and all deliveries required by Sections 5.2 and 5.3 have been tendered.
ARTICLE VI — REPRESENTATIONS AND WARRANTIES
Section 6.1 — Representations and Warranties of CBR Manager
CBR Manager hereby represents and warrants to Ridgeline as of the Effective Date and, if the Purchase Option is exercised, as of the Closing Date, as follows:
(a) Organization and Good Standing. CBR Manager is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all limited liability company power and authority necessary to own its properties, conduct its business, and perform its obligations under this Agreement. Its sole member, Calloway-Briggs Renewables Inc. ("CBR"), is a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas (TX Secretary of State File No. 803762114), and has all corporate power and authority necessary to authorize and approve the execution, delivery, and performance of this Agreement by CBR Manager.
(b) Authority. CBR Manager has full limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement by CBR Manager have been duly authorized by all necessary limited liability company action on the part of CBR Manager and CBR (as its sole member), and no other action on the part of CBR Manager or CBR is necessary to authorize the execution, delivery, and performance of this Agreement.
(c) No Conflicts. The execution, delivery, and performance by CBR Manager of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not (i) violate, conflict with, or result in any breach of any provision of the certificate of formation, limited liability company agreement, or other organizational documents of CBR Manager or CBR, (ii) violate or conflict with any applicable law, statute, rule, regulation, judgment, order, writ, injunction, or decree of any governmental authority applicable to CBR Manager or CBR, or (iii) conflict with, result in any breach of, constitute a default (or an event that, with the giving of notice or lapse of time, or both, would constitute a default) under, result in the acceleration of obligations under, or result in the creation of any lien upon any property of CBR Manager or CBR pursuant to, any material contract, agreement, instrument, or arrangement to which CBR Manager or CBR is a party or by which any of their respective properties or assets is bound.
(d) Enforceability. This Agreement has been duly executed and delivered by CBR Manager and constitutes the legal, valid, and binding obligation of CBR Manager, enforceable against CBR Manager in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership, and similar laws affecting the enforcement of creditors' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith, and fair dealing), regardless of whether considered in a proceeding in equity or at law.
(e) Financing. At the time of exercise of the Purchase Option, CBR Manager will have, or will have obtained binding commitments for, sufficient cash funds or financing to pay the Option Purchase Price in full and to consummate the transactions contemplated by this Agreement.
(f) No Brokers. No broker, finder, investment banker, or other person or entity is entitled to any brokerage fee, finder's fee, commission, or other similar payment in connection with this Agreement or the transactions contemplated hereby based upon any arrangement or agreement made by or on behalf of CBR Manager or CBR.
Section 6.2 — Representations and Warranties of Ridgeline
Ridgeline hereby represents and warrants to CBR Manager as of the Effective Date and, if the Purchase Option is exercised, as of the Closing Date, as follows:
(a) Organization and Good Standing. Ridgeline is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all limited liability company power and authority necessary to own its properties, conduct its business, and perform its obligations under this Agreement.
(b) Authority. Ridgeline has full limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement by Ridgeline have been duly authorized by all necessary limited liability company action on the part of Ridgeline, and no other action on the part of Ridgeline or any of its members is necessary to authorize the execution, delivery, and performance of this Agreement.
(c) No Conflicts. The execution, delivery, and performance by Ridgeline of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not (i) violate, conflict with, or result in any breach of any provision of the certificate of formation, limited liability company agreement, or other organizational documents of Ridgeline, (ii) violate or conflict with any applicable law, statute, rule, regulation, judgment, order, writ, injunction, or decree of any governmental authority applicable to Ridgeline, or (iii) conflict with, result in any breach of, constitute a default (or an event that, with the giving of notice or lapse of time, or both, would constitute a default) under, result in the acceleration of obligations under, or result in the creation of any lien upon any property of Ridgeline pursuant to, any material contract, agreement, instrument, or arrangement to which Ridgeline is a party or by which any of its properties or assets is bound.
(d) Enforceability. This Agreement has been duly executed and delivered by Ridgeline and constitutes the legal, valid, and binding obligation of Ridgeline, enforceable against Ridgeline in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership, and similar laws affecting the enforcement of creditors' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith, and fair dealing), regardless of whether considered in a proceeding in equity or at law.
(e) Title to Post-Flip Interest. As of the Flip Date and as of the Closing Date, Ridgeline will hold good and valid title to the Post-Flip Interest, free and clear of all liens, claims, encumbrances, pledges, security interests, options, charges, restrictions, and adverse claims of any kind or nature whatsoever, other than restrictions arising under the LLCA, this Agreement, the Pledge Agreement, and applicable federal and state securities laws. Ridgeline has not granted any option, right of first refusal, or other right to purchase, acquire, or otherwise obtain the Post-Flip Interest to any person or entity other than CBR Manager pursuant to this Agreement.
(f) No Brokers. No broker, finder, investment banker, or other person or entity is entitled to any brokerage fee, finder's fee, commission, or other similar payment in connection with this Agreement or the transactions contemplated hereby based upon any arrangement or agreement made by or on behalf of Ridgeline.
Section 6.3 — Survival
The representations and warranties of each party contained in this Article VI shall survive the Option Closing for a period of twelve (12) months following the Closing Date, after which such representations and warranties shall expire and be of no further force or effect. No claim for indemnification under Article X based on a breach of any representation or warranty may be asserted after the expiration of such twelve (12)-month period, except with respect to claims that have been timely asserted in writing prior to such expiration and that remain unresolved.
ARTICLE VII — CONDITIONS PRECEDENT TO OPTION CLOSING
Section 7.1 — Conditions to Ridgeline's Obligations
The obligation of Ridgeline to consummate the Option Closing and to sell, transfer, and assign the Post-Flip Interest to CBR Manager is subject to the satisfaction (or, to the extent permitted by applicable law, waiver by Ridgeline) of each of the following conditions at or prior to the Closing Date:
(a) Accuracy of Representations and Warranties. Each of CBR Manager's representations and warranties contained in Section 6.1 shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of a specific date shall be true and correct in all material respects as of such specific date).
(b) Performance of Covenants. CBR Manager shall have performed and complied in all material respects with all covenants, agreements, and obligations required to be performed or complied with by CBR Manager under this Agreement on or prior to the Closing Date.
(c) CBR Manager's Deliverables. CBR Manager shall have delivered, or caused to be delivered, to Ridgeline all items required to be delivered by CBR Manager at the Option Closing pursuant to Section 5.2, including, without limitation, the full payment of the Option Purchase Price by wire transfer of immediately available funds.
(d) No Legal Impediment. No order, judgment, injunction, decree, stipulation, determination, award, or other legal restraint or prohibition issued by any court of competent jurisdiction or any governmental authority shall be in effect that prevents, prohibits, or makes unlawful the consummation of the Option Closing or the transactions contemplated by this Agreement.
(e) Required Third-Party Consents. All required third-party consents necessary for the consummation of the Option Closing shall have been obtained in form and substance reasonably satisfactory to Ridgeline, including, without limitation, the consent of Osprey National Bank, N.A. (as administrative agent and lender under the Osprey Back-Leverage Facility) under the Back-Leverage Intercreditor and Consent Agreement (reference no. ONB-PF-2023-0587) and the Pledge Agreement, to the extent that such consent is required under the terms of such agreements for the transfer of the Post-Flip Interest and the consummation of the transactions contemplated hereby.
Section 7.2 — Conditions to CBR Manager's Obligations
The obligation of CBR Manager to consummate the Option Closing and to purchase and acquire the Post-Flip Interest from Ridgeline is subject to the satisfaction (or, to the extent permitted by applicable law, waiver by CBR Manager) of each of the following conditions at or prior to the Closing Date:
(a) Accuracy of Representations and Warranties. Each of Ridgeline's representations and warranties contained in Section 6.2 shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of a specific date shall be true and correct in all material respects as of such specific date).
(b) Performance of Covenants. Ridgeline shall have performed and complied in all material respects with all covenants, agreements, and obligations required to be performed or complied with by Ridgeline under this Agreement on or prior to the Closing Date.
(c) Ridgeline's Deliverables. Ridgeline shall have delivered, or caused to be delivered, to CBR Manager all items required to be delivered by Ridgeline at the Option Closing pursuant to Section 5.3.
(d) No Legal Impediment. No order, judgment, injunction, decree, stipulation, determination, award, or other legal restraint or prohibition issued by any court of competent jurisdiction or any governmental authority shall be in effect that prevents, prohibits, or makes unlawful the consummation of the Option Closing or the transactions contemplated by this Agreement.
(e) Completion of FMV Determination. The Fair Market Value determination shall have been completed in accordance with Article IV, and the Option Purchase Price shall have been finally determined in accordance with Article III.
(f) Title to Post-Flip Interest. Ridgeline shall convey the Post-Flip Interest to CBR Manager free and clear of all liens, claims, encumbrances, pledges, security interests, and adverse claims of any kind or nature whatsoever, other than restrictions arising under the LLCA, this Agreement, and applicable federal and state securities laws (collectively, "Permitted Exceptions").
ARTICLE VIII — COVENANTS
Section 8.1 — Ridgeline Pre-Closing Covenants