Contract analysis

I. EXECUTIVE SUMMARY On April 28, 2023, Whitfield, Aarons & Greer LLP, acting through partner Elaine Prescott on behalf of Pinnacle Water Solutions, LLC ("Pinnacle"), transmitted a letter to this firm asserting that the environmental permitting delay caused by the Thurston County Department of Environmental Health constitutes a Force Majeure Event under Section 11.4 of the Amended and Restated Limited Liability Compa

II. FACTUAL BACKGROUND A. The Joint Venture and Its Structure On November 2, 2021, Cascadia State Infrastructure Authority ("CSIA"), a Washington state governmental authority created pursuant to Chapter 43.155A RCW for the purpose of financing and developing critical public infrastructure, and Pinnacle Water Solutions, LLC ("Pinnacle"), a Delaware limited liability company headquartered at 720 SW Quelston Street, Sui

III. RELEVANT CONTRACTUAL PROVISIONS This section sets forth the key contractual provisions of the JV Agreement that bear on Pinnacle's force majeure defense and its related arguments. The provisions are quoted in full (or in relevant part) and analyzed with respect to their application to the facts at hand. A. Section 11.4 — Force Majeure

Section 11.4 of the JV Agreement provides, in its entirety, as follows:

Section 11.4. Force Majeure. (a) Definition. As used herein, "Force Majeure Event" means any event or circumstance beyond the reasonable control of the affected party that directly prevents such party from performing its obligations under this Agreement, including without limitation: (i) acts of God, including earthquakes, floods, hurricanes, landslides, volcanic eruptions, or other natural disasters of extraordinary

Section 4.3 of the JV Agreement provides, in relevant part:

Section 4.3. Permits and Approvals. The Company shall be responsible for obtaining, at its own cost and expense, all environmental, construction, operating, and other governmental permits, licenses, approvals, and authorizations required for the design, construction, ownership, and operation of the Facility (collectively, "Project Permits"). The Manager shall take all actions necessary or appropriate, on behalf of th

Section 5.2 of the JV Agreement provides, in relevant part:

Section 5.2. Capital Contributions. (a) Initial Capital Contributions. Each Member shall make its Initial Capital Contribution in the amount set forth on Schedule 5.2(a) hereto on the date of this Agreement or such other date as may be agreed by the Members. (b) Additional Capital Contributions. Each Member shall fund its Additional Capital Contributions in the amount specified in the applicable Capital Call Notice,

Section 5.2(b) is remarkable for the breadth and clarity of its unconditional-obligation language. The provision specifies that the obligation to fund capital contributions upon a capital call is "absolute and unconditional" and "shall not be subject to any setoff, counterclaim, defense, or deduction of any kind." Moreover, the provision expressly states that the obligation "shall not be conditioned upon the achievem

Section 8.2 of the JV Agreement provides, in relevant part:

Section 8.2. Events of Default; Remedies. (a) Events of Default. Each of the following shall constitute an "Event of Default" with respect to a Member (the "Defaulting Member"): (i) the failure of such Member to fund any Capital Contribution within thirty (30) days after the date on which such Capital Contribution is due pursuant to Section 5.2; (ii) a material breach by such Member of any other obligation under this

IV. ANALYSIS A. The Contractual Exclusion of Governmental Approval Delays Is Dispositive The starting point — and, in our view, the ending point — of the analysis is the plain language of Section 11.4(a)(A) of the JV Agreement, which expressly provides that "delays in obtaining governmental approvals, permits, licenses, or authorizations" shall not constitute Force Majeure Events. The Thurston County Phase II Environ

V. RISK ASSESSMENT AND COUNTERARGUMENTS A. Potential Counterarguments by Pinnacle We have considered the counterarguments that Pinnacle may raise in response to the analysis set forth above. We address each potential counterargument and provide our assessment. Counterargument 1: The governmental-approval exclusion was intended to apply only to permits within the control of the parties. Pinnacle may argue that Section