Contract analysis

ARTICLE I — DEFINITIONS AND CONSTRUCTION

Section 1.1 — Definitions As used in this Agreement, the following terms shall have the meanings set forth below: "Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled

Section 1.2 — Rules of Construction The following rules of construction shall apply to this Agreement: (a) The headings and captions used in this Agreement are inserted for convenience of reference only and shall not affect the interpretation or construction of this Agreement. (b) Whenever the context so requires, the singular shall include the plural and vice versa, and the masculine gender shall include the feminin

Section 1.3 — Exhibits and Schedules The following Exhibits and Schedules are attached hereto and incorporated herein by reference as if set forth in full: • Exhibit A — Members Schedule • Exhibit B — Initial Governing Board Members • Exhibit C — Description of Facility Site • Exhibit D — Description of the Facility • Schedule 4.2 — Capital Contribution Schedule • Schedule 6.3 — Management Fee Payment Schedule

ARTICLE II — FORMATION AND ORGANIZATION

Section 2.1 — Formation The Company was formed as a Washington limited liability company pursuant to the Washington LLC Act by the filing of its Certificate of Formation with the Office of the Washington Secretary of State on November 2, 2021. The Company has been assigned Washington Unified Business Identifier ("UBI") Number 604-892-315, and the Internal Revenue Service has assigned to the Company Employer Identific

Section 2.2 — Principal Office and Registered Office (a) The registered office of the Company in the State of Washington shall be located at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501, in the care of Cascadia State Infrastructure Authority, or at such other location as may be designated from time to time by the Governing Board. (b) The principal place of business of the Company shall be located at

Section 2.3 — Purpose The purpose of the Company is to: (a) Design, construct, own, operate, maintain, and manage the Thurston County Advanced Water Treatment Facility, a twelve (12) million gallon-per-day advanced water treatment plant at the Facility Site, serving Thurston County and adjacent municipal water systems; (b) Enter into and perform the Ground Lease with CSIA for the use of the Facility Site; (c) Obtain

Section 2.4 — Authority (a) CSIA is a Washington state governmental authority duly created and validly existing pursuant to Chapter 43.155A RCW. CSIA has the statutory authority and power under Chapter 43.155A RCW to enter into this Agreement, to make the Capital Contributions contemplated herein, to execute and deliver the Ground Lease, and to perform all of its obligations hereunder. The execution, delivery, and pe

Section 2.5 — Term (a) The term of the Company (the "Term") shall commence on the Effective Date and shall continue for a period of thirty (30) years from the Commercial Operation Date, unless earlier dissolved in accordance with Article XII. (b) The Term may be extended for two (2) successive ten (10)-year renewal periods upon Supermajority Vote of the Governing Board, which vote shall be taken not less than twelve

Section 2.6 — Title to Property All property of the Company, whether real, personal, or mixed, and whether tangible or intangible, shall be owned by the Company as an entity, and no Member, individually or collectively, shall have any ownership interest in such Company property. Each Member's Interest in the Company shall constitute personal property of such Member. The Company's interest in the Facility Site shall b

ARTICLE III — MEMBERS; MEMBERSHIP INTERESTS

Section 3.1 — Members The Members of the Company, together with their respective Percentage Interests, are as follows: The addresses and other information with respect to each Member are set forth on Exhibit A attached hereto.

Section 3.2 — Membership Interests Each Member's Membership Interest in the Company shall be expressed as a Percentage Interest, as set forth in Section 3.1 above and on Exhibit A. As of the Effective Date, CSIA holds a fifty-five percent (55%) Percentage Interest and Pinnacle holds a forty-five percent (45%) Percentage Interest. Each Member's Percentage Interest shall entitle such Member to receive allocations of th

Section 3.3 — Representations and Warranties of Members Each Member hereby represents and warrants to the other Member and to the Company as of the Effective Date as follows: (a) Due Organization. Such Member is duly organized, validly existing, and in good standing (or, in the case of CSIA, duly created and validly existing) under the laws of its state of formation or creation, and has the power and authority to own

Section 3.4 — Admission of Additional Members No additional Members shall be admitted to the Company without the prior approval of the Governing Board by Supermajority Vote. The admission of additional Members shall constitute a Major Decision under Section 5.4(c). Any additional Member admitted to the Company shall execute a joinder agreement in form and substance reasonably satisfactory to the existing Members, agr

Section 3.5 — No Withdrawal No Member may voluntarily withdraw from the Company except as expressly provided in this Agreement, including pursuant to the buy-sell provisions of Article IX or upon the dissolution and winding up of the Company under Article XII. Any Member that attempts to withdraw from the Company in violation of this Section 3.5 shall remain liable for all of its obligations under this Agreement and

ARTICLE IV — CAPITAL CONTRIBUTIONS

Section 4.1 — Total Equity Commitment The total equity capital to be contributed to the Company by the Members (the "Total Equity Commitment") shall be Eighteen Million Dollars ($18,000,000), allocated between the Members in proportion to their respective Percentage Interests as follows: The remainder of the Forty-Five Million Dollar ($45,000,000) Project Cost, equal to Twenty-Seven Million Dollars ($27,000,000), sha

Section 4.2 — Capital Calls; Tranches

Section 4.2(a) — First Tranche Each Member shall contribute fifty percent (50%) of its Total Equity Commitment to the Company as its initial Capital Contribution (the "First Tranche") within fifteen (15) calendar days following the Effective Date. Accordingly, the First Tranche contributions shall be due on or before November 15, 2021, as follows: (i) CSIA First Tranche: 50% × $9,900,000 = $4,950,000 (ii) Pinnacle Fi

Section 4.2(b) — Second Tranche and Subsequent Capital Calls The remaining fifty percent (50%) of each Member's Total Equity Commitment (the "Second Tranche") shall be contributed to the Company upon a Capital Call issued by the Governing Board, as follows: (i) CSIA Second Tranche: $4,950,000 (ii) Pinnacle Second Tranche: $4,050,000 (iii) Total Second Tranche: $9,000,000 Each Member shall fund its Second Tranche Capi

Section 4.3 — Permitting and Development Responsibilities (a) The Company (and not any individual Member acting in its individual capacity) shall be responsible for obtaining all governmental permits, licenses, approvals, environmental determinations, and other authorizations necessary for the development, construction, commissioning, and operation of the Facility, including without limitation all permits required un

Section 4.4 — Capital Accounts A Capital Account shall be established and maintained for each Member in accordance with Treasury Regulation § 1.704-1(b)(2)(iv). Each Member's Capital Account shall have an initial balance equal to such Member's initial Capital Contribution. Thereafter, each Member's Capital Account shall be: (a) increased by (i) any additional Capital Contributions made by such Member, and (ii) such M

Section 4.5 — No Interest on Capital Contributions No Member shall be entitled to receive interest on its Capital Contributions or on the balance of its Capital Account. The obligation of the Company to make distributions to the Members shall be governed solely by Article VII and Article XII of this Agreement.

Section 4.6 — Project Finance Facility (a) The Company is authorized to obtain a senior secured project finance credit facility in an aggregate principal amount not to exceed Twenty-Seven Million Dollars ($27,000,000) (the "Project Finance Facility") to fund the design, construction, and commissioning of the Facility. The incurrence of the Project Finance Facility shall constitute a Major Decision under Section 5.4(b

Section 4.7 — No Right to Return of Capital Except as provided in Article VII (Allocations and Distributions), Article X (Transfers of Interests), and Article XII (Dissolution and Winding Up) of this Agreement, no Member shall have the right to demand or receive the return of all or any portion of its Capital Contribution. No Member shall be personally liable for the return of any Capital Contribution of any other Me

ARTICLE V — GOVERNANCE; GOVERNING BOARD

Section 5.1 — Governing Board The Company shall be governed by a Governing Board consisting of five (5) members (each, a "Board Member" and collectively, the "Board Members"). The Board Members shall be appointed by the Members as follows: (a) CSIA shall have the right to appoint three (3) Board Members. (b) Pinnacle shall have the right to appoint two (2) Board Members. The Governing Board shall have the authority t

Section 5.2 — Initial Board Members The initial Board Members of the Company, as of the Effective Date, are set forth on Exhibit B attached hereto and are as follows: CSIA-Appointed Board Members: (a) Margaret Ellsworth, Executive Director of CSIA (b) David Tanaka, General Counsel of CSIA (c) Patricia Huang, Deputy Director, Capital Projects of CSIA Pinnacle-Appointed Board Members: (a) Richard Prumvane, CEO and Mana

Section 5.3 — Meetings; Quorum; Voting (a) Regular Meetings. The Governing Board shall hold regular meetings at least quarterly, at such times and places as may be determined by the Board. The Board shall adopt a schedule of regular quarterly meetings at its first organizational meeting and may amend such schedule from time to time by majority vote. (b) Special Meetings. Special meetings of the Governing Board may be

Section 5.4 — Major Decisions; Supermajority Vote Notwithstanding any other provision of this Agreement, the following actions shall require a Supermajority Vote of at least four (4) of five (5) Board Members (each, a "Major Decision"): (a) Commencement of construction of the Facility, including the authorization to issue a notice to proceed to the general contractor or construction manager; (b) Incurrence by the Com

Section 5.5 — Removal and Replacement of Board Members (a) Each Member shall have the right, at any time and in its sole discretion, to remove any or all of its appointed Board Members by delivering written notice of such removal to the other Member and to the Company. Such removal shall be effective immediately upon delivery of the notice. (b) Each Member shall have the right, at any time, to appoint replacement Boa

Section 5.6 — Compensation of Board Members Board Members shall not receive compensation from the Company for their service on the Governing Board. Board Members shall be entitled to reimbursement by the Company for reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the Governing Board and the performance of their duties as Board Members, including travel, lodging, and meal

Section 5.7 — Committees The Governing Board may, by majority vote, establish one or more committees of the Board and delegate to such committees such authority and responsibilities as the Board deems appropriate; provided, however, that no committee shall have the authority to act on any Major Decision, which authority shall be retained exclusively by the full Governing Board. Each committee shall consist of at leas

Section 6.1 — Designation of Manager Pinnacle Water Solutions, LLC is hereby designated as the Manager of the Company. The Manager shall manage the day-to-day operations and affairs of the Company, subject at all times to the oversight and authority of the Governing Board and the limitations set forth in this Agreement. The designation of Pinnacle as Manager reflects the Members' recognition of Pinnacle's expertise a

Section 6.2 — Powers and Duties of the Manager The Manager shall have the following powers and duties: (a) Design, Engineering, and Construction. The Manager shall direct the design, engineering, procurement, construction, and commissioning of the Facility, including the selection and engagement (subject to Governing Board approval where required) of architects, engineers, contractors, subcontractors, equipment vendo

Section 6.3 — Management Fee (a) In consideration for its services as Manager, the Company shall pay the Manager a management fee (the "Management Fee") equal to three percent (3%) of the total construction costs of the Facility. Based on the Total Project Cost of Forty-Five Million Dollars ($45,000,000), the Management Fee shall be One Million Three Hundred Fifty Thousand Dollars ($1,350,000). (b) The Management Fee

Section 6.4 — Removal of Manager (a) The Manager may be removed for Cause by Supermajority Vote of the Governing Board. Upon such removal, the Governing Board shall promptly appoint a replacement Manager to manage the day-to-day operations and affairs of the Company. (b) For purposes of this Section 6.4, "Cause" means any of the following: (i) a material breach by the Manager of this Agreement or of the Manager's dut

Section 6.5 — Officers The Manager may appoint officers of the Company as reasonably necessary for the conduct of the Company's business, including a project director, chief financial officer, and secretary. Such officers shall serve at the pleasure of the Manager and shall have such powers and duties as the Manager may delegate to them, subject to the oversight and authority of the Governing Board. The salaries and

Section 6.6 — Standard of Care; Exculpation (a) The Manager shall perform its duties in good faith, with the care that an ordinarily prudent person in a similar position would exercise under similar circumstances, and in a manner it reasonably believes to be in the best interests of the Company. (b) The Manager shall not be liable to the Company or to any Member for any act or omission performed or omitted by the Man

ARTICLE VII — ALLOCATIONS AND DISTRIBUTIONS

Section 7.1 — Allocation of Profits and Losses (a) Except as otherwise provided in this Article VII, the net profits and net losses of the Company for each Fiscal Year (or portion thereof) shall be allocated among the Members in proportion to their respective Percentage Interests. Accordingly, as of the Effective Date, fifty-five percent (55%) of net profits and net losses shall be allocated to CSIA and forty-five pe

Section 7.2 — Tax Allocations (a) Except as otherwise provided in this Section 7.2, for federal, state, and local income tax purposes, each item of income, gain, loss, deduction, and credit shall be allocated among the Members in the same manner as its correlative item of "book" income, gain, loss, deduction, or credit is allocated pursuant to Section 7.1. (b) In accordance with Section 704(c) of the Code and the Tre

Section 7.3 — Distributions (a) Subject to the provisions of this Agreement and applicable law, the Governing Board shall determine, in its discretion, the amount and timing of distributions to the Members. Distributions shall be made only to the extent of available cash of the Company, after setting aside reasonable reserves for operations, debt service (including all amounts due under the Project Finance Facility),

Section 7.4 — Tax Distributions Notwithstanding Section 7.3, the Governing Board shall cause the Company to make quarterly tax distributions to each Member in an amount not less than such Member's estimated federal, state, and local income tax liability attributable to such Member's allocable share of the Company's taxable income for the applicable quarter, calculated at the highest combined marginal rate applicable

Section 7.5 — Withholding The Company is authorized to withhold from distributions to any Member, and to pay to any federal, state, or local governmental authority, any amounts required to be withheld pursuant to any applicable tax law. Any amounts so withheld shall be treated as distributions to such Member for all purposes of this Agreement. If the Company is required to withhold or pay any amount with respect to t

ARTICLE VIII — DEFAULT; REMEDIES

Section 8.1 — Events of Default The occurrence of any of the following events or circumstances shall constitute a "Default" under this Agreement: (a) Failure to Fund Capital Contributions. The failure of a Member to fund any Capital Contribution within thirty (30) calendar days after delivery of written notice of a Capital Call in accordance with Section 4.2; (b) Material Breach. A material breach by a Member of any