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Carbon Credit SPV — Virridy Comments

East West Carbon × Virridy  |  Permanent Capital Vehicle  |  $20M First Close

Virridy review notes  |  Source: MAR 26 2026 deck

Thanks for putting this together — the overall structure is thoughtful and the phased approach makes a lot of sense. We’re excited about the partnership. Below are our notes and questions as we work toward a term sheet. Before getting into the term-level comments, we want to flag one threshold structural question that we think we need to work through first.

Threshold Question — Structural Compatibility with Virridy Carbon LLC

As you know, Virridy Carbon LLC is the entity that owns the projects, project development agreements, and offtake agreements with both sellers and buyers. Virridy Carbon is currently in the process of raising its own debt facility to fund these projects. We want to make sure we’re aligned on how a new SPV would sit alongside that existing structure, because as currently proposed there are several areas where the two vehicles would conflict.

Competing claims on the same revenue. Virridy Carbon’s debt lenders will expect project credit revenues to service that facility. The SPV also proposes buying credits at a $10 floor with a 70% platform share from the same projects. Both entities can’t have priority on the same cash flows — lenders doing diligence on Virridy Carbon’s facility will flag the SPV’s claim.

Negative pledge collision. The SPV proposal includes a negative pledge on Virridy’s offtake agreements. Virridy Carbon’s debt facility will almost certainly require its own negative pledge or security interest over those same offtake agreements — they’re the primary collateral backing the loan. These two pledges would be mutually exclusive.

Cross-default chain. The SPV intercompany loan includes a cross-default clause. Virridy Carbon’s debt facility will have its own cross-default provisions. This creates a daisy chain where a covenant issue on the SPV side could trigger default on Virridy Carbon’s debt facility (and vice versa), even if the underlying projects are performing well.

Security package overlap. The SPV proposes “security per facility” on the debt side. Virridy Carbon’s lenders will also want security over project assets. Two separate entities claiming security over the same underlying projects and agreements would create a priority conflict that lenders on both sides will need resolved.

Distress contingency rights. The SPV’s “contingency rights on Virridy distress” become especially sensitive in this context. If Virridy Carbon trips a covenant on its own debt facility (even temporarily), does the SPV step in and claim offtake agreements? That could itself constitute an event of default under Virridy Carbon’s facility.

Possible Paths Forward

We see a few ways this could work — would love to discuss which makes most sense for both sides:

  1. New projects only. The SPV funds genuinely new projects that are not in Virridy Carbon LLC’s existing pipeline or debt facility. Clean separation, no collateral conflicts.
  2. SPV as co-investor into Virridy Carbon. EW invests into or alongside Virridy Carbon’s existing facility via a participation agreement, rather than a parallel competing structure.
  3. Defined project allocation. Virridy Carbon’s lenders and the SPV agree upfront (via intercreditor agreement) on which projects or revenue tranches belong to each vehicle.
  4. Sequential priority. The SPV funds projects only after Virridy Carbon’s debt is fully serviced, essentially taking a mezzanine or equity position below Virridy Carbon’s senior debt.

We think resolving this structural question first will make the term-level details much easier to finalize. Happy to walk through our current facility structure in detail so we can find the right approach together.

Aligned — we’re good with this
Question — would like to discuss
Suggestion — proposed refinement
Slide 1 — Structure & Economics
Entity & Governance
SPV Entity
Delaware LLC, member-managed. Permanent capital vehicle (no fixed term).
AlignedDelaware LLC and member-managed structure work well for us.
Ownership
40% East West Carbon / 40% Virridy + 20% preferred equity holders
Aligned40/40 split reflects the partnership well.
EW Role
Capital raising, project sourcing, strategic dev., day-to-day governance. Casting vote on capital deployment.
Question — Casting Vote ScopeWe understand the rationale for a tiebreaker on capital deployment. Could we scope this to deployment decisions above a defined threshold (e.g., >$500K)? For day-to-day and operational matters, joint approval feels more natural for a 40/40 partnership. We’d also like to discuss whether Virridy should hold a reciprocal authority on credit/verification matters, since that’s our core domain.
Virridy Role
Carbon offtake agreements, project registration, credit sales, verification & auditing. Min credit generation KPIs (MSA-bound).
Question — Mutual Performance StandardsWe’re comfortable with credit generation KPIs — accountability is important and we want investors to see that. Could we also define parallel milestones for capital raising and project deployment so both sides are held to measurable standards? We think that symmetry would be a strong signal to investors.
Deadlock
Tiered: (1) Escalation to principals → (2) Independent mediator → (3) Shotgun buy-sell with independent FMV appraisal
AlignedTiered resolution with independent FMV appraisal is solid. No notes here.
Key Person
Departure of named principals triggers enhanced governance rights or exit options for other party.
AlignedGood protection for both sides.
Capital Structure (Target $20M)
~60% Debt ($12M)
Raised at SPV level; SPV repays. Standard protective covenants. Security per facility.
SuggestionDebt at the SPV level makes sense. Could we clarify what “security per facility” means in practice? We want to make sure Virridy’s existing assets (offtake agreements, equipment outside SPV-funded projects) aren’t pledged as collateral for SPV-level debt.
~20% Equity ($4M)
Distributions begin Yr 7+ once debt serviced & reserves met. 5–7 year periodic liquidity window + ROFR for transfers. Capital recycled.
Question — Distribution TimelineSeven years is a long horizon, especially given the operational commitment from Virridy during that period. Would you be open to exploring either a shorter initial distribution window (e.g., Year 5) or a modest preferred return to the operating partner to bridge the gap? Happy to model this together.
~20% Grants ($4M)
Funder-specific terms. Foundation capital accepted. No structural limitations anticipated. Deployed as grant-style funding.
AlignedFlexibility on grant capital is great for the vehicle.
Project & Credit Economics
Existing Projects
SPV loans @ 6% interest + proportional share of credit revenues at % capex funded. Covenants: info rights, CoC, cross-default, negative pledge.
Question — Negative Pledge ScopeCould we scope the negative pledge to SPV-funded projects specifically, rather than all Virridy offtake agreements? Virridy has existing and future projects outside the SPV, and we want to make sure we retain flexibility for those. The cross-default clause — could we discuss ring-fencing that as well so one project doesn’t cascade?
SPV-Originated
100% capex funded (grant-style). Buy credits @ ~$10 floor → sell @ $19+ target. 70% platform share. No unilateral renegotiation by Virridy.
Suggestion — Market Adjustment MechanismThe $10 floor and 70/30 split work at current market prices. Since this is a long-duration vehicle, could we build in a periodic market-adjustment mechanism (e.g., floor indexed to a recognized carbon price benchmark, reviewed every 2–3 years)? This protects both sides — it also prevents the SPV from overpaying if prices drop. On the “no unilateral renegotiation” language, we’d suggest making that mutual so neither party can unilaterally change terms.
Unit Economics
~1,124 credits per $65K system  |  ~107.9 credits per $ invested  |  ~$10.41 per person served
SuggestionThese are helpful illustrative numbers. We’d like to validate them together against our actual project data before they go into investor materials, since yields can vary by geography and project type.
Fees & Compensation
Years 1–3
1.25% management fee (split EW/Virridy) + Virridy verification costs (capped)
Aligned50/50 fee split is fair. Capped verification costs make sense.
Post-First Credit
Converts to 3% gross carbon revenue (1.5% EW / 1.5% Virridy). D&O + PI insurance required.
AlignedEqual revenue-based fees and insurance requirements work well.
Cash Flow Waterfall
Priority
1. OpEx (capped) → 2. Verification (benchmarked) → 3. Debt service → 4. Mgmt fees → 5. Retained (recycled to Yr 7) → 6. Distributions
SuggestionWaterfall priority is logical. Would be great to build a joint cash flow model to project when distributions realistically begin — this would also strengthen the investor pitch.
Slide 2 — Required Documents (22 Documents, 4 Phases)
Phase 0
Lock Partnership
~$10–20K
Phase 1
Form SPV
(triggered by IOIs)
Phase 2
Raise Capital
Phase 3
Deploy & Report
Phase 0 — Lock Partnership
Binding Term Sheet / LOI
40/40 ownership, roles, fees, exclusivity, capital raise trigger, 12-mo sunset + 6-mo extension, asymmetric breakup fee
Suggestion12-month sunset is reasonable. Could we confirm the 6-month extension requires mutual written consent?
Mutual NDA & Non-Circumvent
EW ↔ Virridy offtake/investor protection. 3-year tail survives termination.
AlignedMutual and symmetric. 3-year tail is standard.
Kill Switch Provisions
Auto-dissolve if IOIs < 50% by month 12. Performance exit (MSA KPIs). Voluntary withdrawal with FMV payout over 12–24 mo.
AlignedClean exit mechanics protect both parties. FMV payout is the right approach.
Data Rights & IP Clause
EW retains investor relationship data. IP assignment for pipeline data to SPV.
Question — IP StructureWe appreciate that EW retains its investor relationship data — that makes sense. Could we apply the same principle to Virridy’s IP? Our preference would be for Virridy to retain ownership of its technology and pipeline data, with an exclusive license to the SPV for the scope of the partnership. This keeps both parties’ core assets protected symmetrically and is cleaner on dissolution.
Phase 1 — SPV Formation
Operating Agreement
40/40/20 ownership, tiered deadlock, distributions Yr 7+, key person clause, pre-wired 3(c)(1) to 3(c)(7) conversion
SuggestionThe 3(c)(1) to 3(c)(7) pre-wire signals strong ambition for the vehicle — we like it. Let’s make sure the conversion mechanics are well documented upfront so it’s seamless when triggered.
MSA — Virridy × SPV
Offtake, verification, credit sales. Min credit KPIs. 90-day cure. Performance-based termination.
QuestionWe’re on board with the MSA structure and performance-based accountability. As noted above, could we build a parallel set of milestones into EW’s management agreement? Investors will likely appreciate seeing that both operating partners are held to defined standards.
Management Agmt — EW
Sourcing, underwriting, deployment, governance. EW casting vote on capital + investor relations.
SuggestionCould we include defined sourcing and deployment milestones in this agreement, similar to the credit KPIs in Virridy’s MSA? Having measurable commitments on both sides would present well to investors and ensure the capital gets deployed on pace.
Intercompany Loan Agmt
SPV → Virridy: 6% interest, pari passu, info rights, CoC, cross-default, negative pledge on offtake
Financial Controls
Priority waterfall. Ring-fenced accounts. OpEx capped. Verification benchmarked. Fee conversion trigger at first verified credit revenue.
AlignedRing-fenced accounts and capped OpEx are great financial discipline. Happy with this.
Phase 2 — Capital Raising
Carbon Credit Offtake Agmt
SPV access to Virridy offtake. Contingency rights on Virridy distress.
Question — Distress DefinitionCould we discuss what “distress” means in practice and what specific rights would transfer? We want to make sure this is narrowly defined so it functions as a genuine safety net for the SPV rather than a broad option. Happy to work through specific scenarios together.
PPM / Investor Materials
Distinguish proven vs projected yields. Illiquidity risk. Permanent capital disclosure.
AlignedProper risk disclosure is good practice and builds investor trust.
Subscription Agreement
Permanent capital. Transfer restrictions. 5–7 year liquidity window. ROFR. Side letter templates.
Loan / Credit Facility
Debt terms, tenor, covenants, security package. Pari passu across facilities.
Grant Agreements
Funder-specific terms. No structural limitations.
D&O / PI Insurance
Required as condition of SPV formation.
AlignedStandard and good for both parties.
Phase 3 — Project Execution
Credit Purchase Template
Per-project @ ~$10 floor. 70/30 platform split. No unilateral renegotiation.
Project Funding Template
Loan-style (existing) or grant-style (new SPV-originated). Standard deployment terms.
Revenue Sharing Agmt
70% platform share, capex-proportional. Project owner floor + upside. EW consent required.
Question — Revenue Sharing ApprovalCould this be a joint approval rather than EW consent alone? Since Virridy is the operating partner managing these project relationships, having both parties sign off feels more aligned with the 40/40 structure.
Reporting Framework
Quarterly + annual cycles. Credit issuance reporting. Investor communications.
AlignedStandard reporting cadence. Happy to co-develop the templates.
Slide 3 — Execution Roadmap
Phase 0 — Lock Partnership
Action
Execute binding term sheet with Virridy: non-circumvent, asymmetric breakup fee, exclusivity, 12-month sunset clause.
Gate
Term sheet signed.
Phase 1A — Test Appetite
Action
SPV-branded outreach — both EW and Virridy present. Target 5–10 investors. Use PACT for soft commitments. Zero relationship exposure.
Gate
Soft commitments via PACT.
AlignedWe like this a lot — low-risk market test with both teams presenting together. Smart way to validate the thesis before committing major resources.
Phase 1B — Joint Engagement
Action
Binding term sheet already executed. All relationships contractually protected. Full partnership, team, and thesis presented upfront.
Gate
IOIs ≥ 25–50% ($5–10M).
Phase 2 — Form SPV & Close
Trigger
IOIs ≥ 50–75% ($10–15M)
Legal Build
Full Operating Agreement, MSAs, PPM, Subscription Agreements — the complete doc stack.
Close
Execute subscriptions: Form D and Reg S docs to offshore sovereign investors.
Sunset
If IOIs below threshold by month 12, sunset clause provides clean exit for both parties.
AlignedGated approach is well designed — major legal costs only triggered by real investor interest. Sunset protects everyone.
Kill Switch & Exit Mechanics
Asymmetric Breakup Fee
Pre-Investor
Either party walks, no fee. NDA and non-circumvent survive.
Post-Investor
Walking party pays 2× documented legal + diligence costs + $50–$100K relationship fee.
Post-IOI Threshold
Walking party pays 3× costs + relationship fee + lost management fee equivalent for 12 mo.
SuggestionThe escalating structure makes sense. Worth discussing whether the fee levels should reflect each party’s replaceability — since the operating partner (technology, offtake, verification) is harder to substitute than the capital partner, a departure on the capital side may warrant a higher fee to compensate for disruption to project delivery.
Exit Mechanics
Capital Raise Fails
Auto-dissolve if IOIs < 50% by month 12. Both parties return to pre-engagement positions.
AlignedClean walk-away if the market doesn’t validate the thesis. Good for both sides.
Virridy Underperforms
MSA min credit KPIs. 90-day cure. EW has unilateral termination if not remedied.
Question — Reciprocal TerminationWe accept performance-based termination — accountability matters. Could we include a parallel provision where Virridy has termination rights if capital deployment or fundraising milestones aren’t met within defined timeframes? This gives both parties equivalent protections and looks balanced to investors.
EW Wants Out
Independent FMV appraisal. Structured payout over 12–24 months. No value destruction.
AlignedStructured exit with FMV appraisal is the right approach.
Slide 4 — Visual Structure
Debt (~60%)   Equity (~20%)   Grants (~20%) ↓ EW – VIRRIDY SPV
Permanent Capital Vehicle  |  Delaware LLC  |  40/40/20

EW Carbon LLC — 40%     Virridy LLC — 40% ↓ Water Projects
Credits @ $10 floor to $19+ target  |  6% interco. loans  |  70/30 revenue split
EW Contributes
Raises strategic capital; govt relationships across Africa; sources & originates projects; day-to-day SPV governance; casting vote on capital deployment; battery & solar supply chains
Virridy Contributes
Holds offtake agreements; verification & auditing; Lume water sensor technology; project registration; credit sales execution; min credit sale KPIs (MSA-bound)
SuggestionThe complementary roles are clear and compelling. As we finalize the structure, it would be worth ensuring that the governance rights, performance obligations, and IP protections reflect the nature of each party’s contribution. Symmetric protections will make for a stronger pitch to institutional investors.

Summary of Discussion Items

We’re aligned on the overall vehicle design, phased approach, fee structure, and exit mechanics. The items below are where we’d like to refine the details together:

  • Mutual performance milestones: Add capital raising and deployment KPIs to EW’s management agreement, mirroring Virridy’s credit generation KPIs
  • Casting vote scope: Threshold-based rather than blanket — with Virridy holding reciprocal authority on credit/operational matters
  • Credit pricing mechanism: Periodic market-adjustment review so the $10 floor stays relevant over the life of the vehicle
  • IP ownership: Both parties retain their core IP, with exclusive licenses to the SPV — same principle already applied to EW’s investor data
  • Negative pledge scope: Limited to SPV-funded projects, not all Virridy offtake agreements
  • Reciprocal termination rights: Virridy can exit if fundraising/deployment milestones aren’t met, just as EW can exit if credit KPIs aren’t met
  • Distress definition: Narrowly defined with specific scenarios documented
  • Distribution timeline: Explore earlier distribution window or preferred return to reflect operational commitment

Looking forward to working through these together. We think addressing these points will make the vehicle stronger for both of us and more attractive to investors.