# Analysis for the Members of Lattice Harbor LLC

## 1. Which document controls where specific and general terms conflict

The operating agreement itself answers this question. Its incorporation clause states that "[f]or any matter **expressly covered** by an incorporated side agreement, that agreement controls over a conflicting general provision of this Operating Agreement." Rule 3 reinforces this: a specific allocation controls over a general joint-approval rule, "but only within the specific allocation's text and duration."

Three limits therefore frame the entire dispute:

- **Subject-matter limit.** The side letter controls only as to matters it *expressly* covers. Anything outside its text is governed by the operating agreement's ordinary joint-approval regime.
- **Duration limit.** The grants of final authority expire 24 months after formation. At month 18 they are live, but this is a wasting asset for both members.
- **Express carve-back.** The side letter's own final sentence returns equity issuance, debt, and CEO removal to the operating agreement's joint-approval provisions. Where a side letter withdraws a topic from its own grant of authority, there is no conflict to resolve — the operating agreement governs directly.

So the correct sequence is: (a) does the side letter expressly cover this matter? (b) if yes, does the carve-back pull it back out? (c) if the matter is covered and not carved back, the side letter's specific allocation prevails over the general joint-approval clause.

## 2. Was the side letter validly incorporated?

Yes, on the present record, and neither member appears to contest this.

Rule 2 requires that the instrument be (i) signed by both members and (ii) either labeled an amendment or listed in Schedule 4. The Founder Authority Side Letter is signed by both Mara and Julian, and Schedule 4 lists "Founder Authority Side Letter dated the same date as this Agreement." The facts state the side letter bears the same date as the agreement. Both prongs are satisfied.

Two consequences follow. First, the side letter has genuine **governance** force — it is not merely a contract between the members. Under rule 4, a non-incorporated agreement could generate damages but could not alter voting authority; because this side letter satisfies rule 2, it actually reallocates authority. Second, under rule 3 it is read *together with* the operating agreement as a single instrument, not as a competing document. The interpretive goal is harmonization, with the side letter prevailing only inside its own express scope.

A residual verification point worth confirming with the closing binder: that the executed side letter's date matches the operating agreement's date, and that no later unsigned or unlisted amendment is being relied on by either side.

## 3. The Rhea Sol appointment: strongest argument on each side

**Mara's strongest argument.** The side letter gives her "final authority over product strategy and hiring for product leadership," expressly "[n]otwithstanding any contrary general provision of the Operating Agreement." The $250,000 officer-approval threshold is precisely such a general provision: it applies to *any* officer appointment regardless of function. The side letter's carve-back sentence is instructive — the members demonstrated that they knew how to return a topic to joint approval, and they returned only equity, debt, and CEO removal. Officer compensation thresholds were **not** carved back. If the $250,000 rule silently survived as to product hires, Mara's "final authority over hiring for product leadership" would be largely hollow, since senior product officers predictably command more than $250,000. On the merits of this role, product strategy and product-team leadership are the dominant component (65 percent), and pricing analytics (10 percent) is arguably adjacent to product strategy — pushing the product-side share toward 75 percent. Under a predominant-purpose reading, this is a product leadership hire.

**Julian's strongest argument.** Rule 3 confines the side letter to "the specific allocation's text," and the text says "product leadership." The proposed title is "Chief Product **and Revenue** Officer," and 25 percent of duties are sales coordination — a function squarely within neither product strategy nor product hiring, and closer to Julian's own domain of finance operations. Mara cannot expand her authority by bundling covered and uncovered functions into one role; if she could, the side letter's boundaries would be defeated by job-description drafting. Julian can also argue that the compensation threshold is a distinct *financial* control rather than a hiring-scope control: the side letter allocated *who decides which product leaders to hire*, not *who commits the company to above-threshold compensation*, which is a budget and finance matter within his sphere. Finally, the title itself confers company-wide revenue authority, which is a structural change to the officer suite that exceeds "hiring for product leadership."

**Neutral assessment.** Both arguments are serious. Julian's is stronger on the role *as currently drafted*, because the title and the 25 percent revenue allocation create genuine subject-matter overlap outside Mara's grant. Mara's is stronger on the *pure* legal question of whether the $250,000 threshold displaces her product-hiring authority — the carve-back's silence on compensation thresholds is meaningful evidence that it does not. The likely outcome is that a narrowly redrawn, product-only role at $285,000 falls within Mara's unilateral authority, while the hybrid revenue role does not.

## 4. May either member appoint Rhea unilaterally on the present record?

**No — not as the role is presently constituted.** The mixed portfolio and the "Revenue" title place a material portion of the position outside "product strategy and hiring for product leadership." Because the side letter controls only within its express text, the uncovered revenue component reverts to the operating agreement's general rule, which requires both members for any officer above $250,000. Mara therefore cannot unilaterally appoint a Chief Product and Revenue Officer.

Julian plainly cannot appoint Rhea unilaterally either; nothing gives him hiring authority over product leadership, and a general officer appointment requires joint approval.

Two routes exist for Mara without Julian's consent:

- **Narrow the role.** A "Chief Product Officer" whose duties are confined to product strategy, product-team leadership, and product pricing — with sales coordination removed and assigned elsewhere — presents a materially stronger case for unilateral appointment at $285,000, subject to the compensation-threshold argument in section 3.
- **Hire below threshold, or in a non-officer capacity.** A senior product leadership hire below $250,000 fits comfortably within Mara's authority and within the established pattern of unobjected-to conduct.

Neither route should be pursued as a pretext. If the revenue duties are simply reassigned on paper but performed in substance, Julian will have a strong argument that the narrowing was cosmetic and that the appointment exceeded Mara's authority.

## 5. May Julian sign the $1.2 million bridge loan unilaterally?

**No. This is the clearest issue in the dispute.**

The operating agreement requires both members to approve debt above $500,000. The side letter's final sentence expressly provides that "[a]ny issuance of equity or debt … remains subject to the express joint-approval provisions of the Operating Agreement." Julian's authority over "finance operations and fundraising preparation" therefore cannot reach the loan itself.

The word "preparation" is doing decisive work. Julian may build the data room, model scenarios, select and instruct the investment bank, negotiate and circulate term sheets, run diligence, and prepare board and lender materials. He may not **execute** a binding debt instrument above $500,000, and a $1.2 million secured bridge loan is such an instrument. Reading "fundraising preparation" to include signing the financing would nullify the very sentence the members wrote to preserve joint approval — an interpretation that violates both the harmonization principle in rule 3 and ordinary contract construction.

The security interest compounds the problem: a secured loan encumbers company assets, a step further removed from "preparation" than an unsecured note would be.

## 6. Apparent authority as to the informed lender

Rule 5 is directly on point and forecloses the lender's position. Apparent authority "cannot arise from one manager's private assertion when the counterparty knows the operating documents require joint approval." Here the lender has received *both* the operating agreement and the side letter, and knows that Mara objects. The lender therefore has actual knowledge of (i) the $500,000 joint-approval threshold, (ii) the side letter's express debt carve-back, and (iii) the absence of the second member's consent.

A lender who closes on these facts cannot claim reliance on Julian's representations. Practically, no competent lender will fund on this record, and counsel for the lender should be told in writing that Julian lacks authority. Mara's protective step is a short, factual notice to the lender — not an accusation, simply a statement that the company has not authorized the loan and that the documents require joint approval.

Note the asymmetry: even if the loan is unenforceable against the company, Julian's signature could expose **Julian personally** to the lender and to the company, and could expose the company to claims arising from his conduct. This is a reason for Julian not to sign, independent of the enforceability question.

## 7. Did prior conduct waive any approval requirement?

**No, as to either member.**

Rule 6 requires "clear, knowing conduct concerning the **same type** of transaction," and specifies that failure to object to unrelated unilateral decisions is insufficient.

- Mara's two product-director hires were **below** the $250,000 threshold. They were within her authority and required no waiver; acquiescence in authorized conduct waives nothing. They also involved a different category — sub-threshold hires — from an above-threshold officer appointment.
- Julian's selection of an accounting platform and an investment bank falls within "finance operations" and "fundraising preparation." Again, these were authorized, and neither is a debt instrument.
- The facts state flatly that **no** prior officer above $250,000 and **no** prior debt above $500,000 was ever approved unilaterally. There is no same-type conduct on either side.

Each member's acquiescence therefore establishes a working culture of respecting the other's sphere — useful context, and evidence that the side letter's allocations were honored in practice — but it does not modify voting thresholds. Neither member should invest in this argument.

## 8. Required deadlock process and available narrow remedies

**Mandatory sequence (rule 7).** Before either member may seek judicial dissolution:

1. **Written notice** of deadlock, identifying the specific deadlocked matters (the appointment and the loan).
2. **Executive meeting within five business days** of notice.
3. **Mediation.**

A dissolution petition filed before these steps are exhausted is premature and should be dismissed or stayed. Both members should treat the sequence as a genuine settlement opportunity rather than a box-checking exercise, particularly because the side letter expires in six months — the underlying allocation problem will resolve itself on its own timetable, which materially reduces the value of litigating now.

**Available narrow remedies.** Rule 7 directs courts to prefer a contractual tie-break or narrow declaration where the business remains viable. With eight months of cash and solvency, Lattice Harbor is plainly viable. Dissolution is therefore very unlikely to be granted, and a member who pursues it aggressively risks appearing to manufacture deadlock — which rule 8 prohibits and which would prejudice that member's position on valuation.

Realistic outcomes include:

- **Declaratory relief** on two discrete questions: whether a role with 25 percent revenue duties is "product leadership," and whether "fundraising preparation" authorizes execution of a secured bridge loan. Both are narrow, briefable, and would unlock the impasse.
- **Injunctive protection of records access**, if either threatened lockout is carried out.
- **A negotiated tie-break**: an agreed neutral third participant for above-threshold officer hires, a standing finance committee, or an expert determination on scope questions. Any such mechanism, to bind governance, must itself satisfy rule 2 — signed by both members and either labeled an amendment or added to Schedule 4.
- **Specific performance or damages** under rule 4 for breach of the members' contractual obligations, distinct from voting authority.

## 9. Immediate governance steps

Both threatened self-help measures are unlawful and should be withdrawn in writing.

- **Julian's threat to block Mara's access to financial dashboards** would violate rule 8's prohibition on locking a member out of records, and would independently obstruct Mara's ability to discharge her CEO duties.
- **Mara's threat to direct the bank not to honor Julian's expense approvals** would improperly strip Julian of authority the side letter grants him over finance operations, and would disrupt ordinary operations.

Each threat also weakens the threatening member's own position, because a court weighing narrow remedies and any eventual buyout valuation will scrutinize good-faith conduct.

Recommended steps:

1. **Mutual standstill letter**, signed by both members: no lockouts, no unilateral above-threshold commitments, no changes to bank mandates or system permissions, no external representations of unilateral authority — for a defined period, e.g., 45 days.
2. **Preserve records and access.** Confirm both members retain read access to financial systems, the general ledger, bank portals, and the cap table. Institute a document-preservation hold covering the drafting history of the side letter and Schedule 4, the Rhea job description and its revisions, and all bridge-loan correspondence.
3. **Notify the lender in writing**, jointly if possible: the loan is not authorized; joint approval is required; no member may bind the company alone. This protects the company and Julian.
4. **Do not sign anything above threshold.** Julian holds the loan documents unsigned. Mara does not extend an offer to Rhea for the hybrid role.
5. **Preserve the financing option.** Julian continues permitted preparation work — data room, term-sheet negotiation, lender diligence — so that if the loan is later jointly approved, the option remains live. Preparation is expressly his; only execution is not. With eight months of runway, there is time.
6. **Preserve the candidate.** Communicate honestly with Rhea about an internal authority question and a short timeline. Consider a written offer contingent on required approvals, which is not itself an above-threshold commitment.
7. **Serve the deadlock notice** and calendar the five-business-day meeting; select a mediator with LLC governance experience.
8. **Retain separate counsel** for each member and, if useful, joint neutral counsel or an expert on the two scope questions. Do not use company funds to litigate one member's position without joint approval.

## 10. Concrete decision path

**The appointment**

1. Determine whether Mara will pursue the hybrid role or narrow it.
2. **If joint approval is sought:** present the role, compensation, and reporting lines; Julian's objection appears to be about scope and process, not the candidate, so negotiate on structure. A plausible landing zone: appoint Rhea as **Chief Product Officer** at $285,000 with product strategy, product-team leadership, and product pricing; assign sales coordination to a separate revenue lead or retain it with Mara as CEO; add an agreed 12-month review. Document the approval as a written joint consent.
3. **If joint approval is refused:** Mara's options, in ascending order of risk — (a) hire a senior product leader below $250,000; (b) appoint a genuinely product-only officer at $285,000, accepting that Julian may still contest the compensation threshold; (c) seek a declaratory ruling on the scope of "product leadership" and the interaction with the $250,000 threshold. Option (b) should be taken only with a clean written record showing the revenue duties were actually removed, not relabeled.
4. Mara should **not** appoint the hybrid Chief Product and Revenue Officer unilaterally. That is the weakest available position and would expose her to a breach claim and to the same manufactured-deadlock criticism she may otherwise level at Julian.

**The loan**

1. Julian does not sign. Full stop — the express carve-back is decisive.
2. Continue authorized preparation and keep the term sheet alive.
3. Seek joint approval on the merits: is $1.2 million secured bridge debt the right instrument with eight months of runway? Mara's objection may be substantive (dilution risk, covenants, security package, cost of capital) rather than positional. Explore alternatives — a smaller facility below the $500,000 threshold, an unsecured or revenue-based instrument, a revolver, or deferring to an equity round.
4. If Mara still refuses, that refusal is within her rights under the operating agreement. Julian's remedies are the deadlock process and, if he believes the refusal is bad-faith harm to the company, a good-faith claim under rule 8 — not unilateral execution.
5. If Julian believes his interpretation is correct, the proper route is a declaratory judgment on whether "fundraising preparation" reaches execution. Given the side letter's explicit debt carve-back, he should expect to lose that question.

**Sequencing note.** The two matters need not be traded against each other, but in practice they will be. A package resolution — a narrowed product officer role approved jointly, in exchange for a smaller or restructured facility approved jointly — is the most likely negotiated outcome and the one most consistent with rule 7's preference for contractual resolution. Any governance change embedded in such a package must satisfy rule 2 to be effective as to authority; otherwise it binds only as a contract between the members.

**Time-limited nature of the problem.** In six months the side letter's allocations expire and all above-threshold decisions revert to joint approval. Both members should weigh whether the present dispute is worth litigating on that horizon.