termination-analysis-memo-2022-07-08.docx

1020-00003 · Tallgrass Capital Holdings · Advice

termination-analysis-memo-2022-07-08.docx DOCUMENT Capital Markets

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum has been prepared by Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP attorneys and authorized personnel working on Matter No. 1020-00003. This memorandum should not be disclosed to any third party without the prior written consent of the responsible partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege.

CALDERWOOD & HARKNESS LLP

INTERNAL MEMORANDUM

Date: July 8, 2022

To: Robert Adeyemi, Partner, Capital Markets

From: Claire Dempsey, Lead Associate, Capital Markets

Re: Greenfield Agricultural Partners LLC — Analysis of Termination of Rule 144A Offering Under Purchase Agreement §9(b); Surviving Obligations and Re-Launch Considerations

Matter No.: 1020-00003

Billing No.: 014723.00001

I. Executive Summary

The purpose of this memorandum is to analyze the validity and legal consequences of Ridgeline Securities LLC's ("Ridgeline") exercise of its termination right under Section 9(b) of the Purchase Agreement dated June 20, 2022 (the "Purchase Agreement"), by and between Greenfield Agricultural Partners LLC ("GAP" or the "Issuer") and Ridgeline, in connection with the proposed $30,000,000 Rule 144A private placement of senior unsecured notes due June 30, 2027 (the "Notes"). This memorandum also identifies GAP's surviving obligations under the Purchase Agreement following termination and addresses considerations relevant to a potential re-launch of the offering at a future date.

On July 1, 2022, Ridgeline delivered formal written termination notice to GAP, invoking the market-out clause contained in Section 9(b) of the Purchase Agreement. The termination notice was delivered by Thomas Reardon, Managing Director, Leveraged Finance, to Douglas Evanston, General Counsel and Corporate Secretary of GAP. The notice cited a material adverse change in financial market conditions rendering the marketing and sale of the Notes impracticable.

The factual record supports Ridgeline's determination. No Notes were sold in connection with the offering. The offering was pulled at launch on June 28, 2022, after Ridgeline's pricing desk was unable to build a sufficient book of orders at 10.250%, which represented the maximum coupon rate authorized by GAP's board of managers (the "Board"). In the eighteen-day period between the revised price talk on June 10, 2022, and the pricing call on June 28, 2022, the Corvalex Aldermere Securities US High Yield B-rated index option-adjusted spread widened by approximately 89 basis points, reflecting a significant deterioration in credit market conditions for issuers with a comparable credit profile. Comparable agricultural-sector bond issues also experienced meaningful price declines during this period.

Conclusion. Based on our review of the Purchase Agreement, the termination notice, and the relevant market data, Ridgeline's exercise of its Section 9(b) market-out termination right appears valid on its face. The factual predicate is well-supported by objective market data, and the procedural requirements of the Purchase Agreement were satisfied. We do not recommend that GAP challenge the termination. GAP has surviving expense reimbursement obligations under Section 7 and indemnification obligations under Section 8 of the Purchase Agreement, which are described in detail in Section IV of this memorandum. The placement fee under Section 4 was never earned and is not owed. GAP's estimated total transaction expenses in connection with the aborted offering are approximately $725,000.

This memorandum also addresses, in Section VI, considerations relevant to a potential re-launch of the offering at a future date, including market timing, the shelf life of existing due diligence and offering documents, rating agency re-engagement, the interaction with GAP's existing credit facility with Meridian Commercial Bank, N.A., and purchase agreement considerations for a new transaction.

II. Background and Transaction Summary

A. The Parties

The following is a summary of the principal parties involved in the proposed offering, their roles, and relevant identifying information.

Issuer. Greenfield Agricultural Partners LLC ("GAP") is an Iowa limited liability company headquartered at 1420 Prairie Ridge Boulevard, Suite 300, Des Moines, Iowa 50309 (Iowa Secretary of State File No. 723841; Employer Identification Number 47-3918206). GAP is a manufacturer and distributor of specialty crop-protection chemicals, adjuvants, and bio-stimulants serving the Midwest row-crop agriculture market. GAP's product portfolio includes herbicide adjuvants, foliar micronutrient formulations, and proprietary bio-stimulant blends marketed to corn, soybean, and wheat growers through a network of approximately 230 independent agricultural retailers across Iowa, Illinois, Indiana, Minnesota, Wisconsin, Nebraska, and Missouri. For the fiscal year ended December 31, 2021 ("FY 2021"), GAP reported revenue of approximately $189.4 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $27.6 million. GAP's senior management team consists of Marcus J. Reinhart, Chief Executive Officer; Linda Shao-Perkins, Chief Financial Officer; and Douglas Evanston, General Counsel and Corporate Secretary, among others.

Majority Owner. Tallgrass Capital Holdings LP ("Tallgrass"), a Delaware limited partnership, holds 68.2% of the membership interests of GAP. Tallgrass is a lower middle market private equity firm focused on agribusiness, food and beverage, and specialty chemicals investments. The remaining 31.8% of GAP's membership interests are held by members of management and legacy family interests affiliated with the Reinhart family, which founded GAP's predecessor entity in 1987.

Initial Purchaser. Ridgeline Securities LLC ("Ridgeline") is a Delaware limited liability company and a member firm of the Financial Industry Regulatory Authority ("FINRA"), with offices located at 399 Park Avenue South, 22nd Floor, New York, New York 10016. Ridgeline served as the sole initial purchaser for the Rule 144A offering of the Notes. Ridgeline's leveraged finance practice is led by Thomas Reardon, Managing Director, who served as the primary point of contact for the transaction. Other key Ridgeline personnel involved in the transaction included Sarah Dimitriou, Vice President, Investment Grade and High Yield Origination, and Kevin Wu, Associate, Capital Markets Execution.

Issuer's Counsel. Calderwood & Harkness LLP ("C&H"), acting as counsel to GAP in connection with the proposed offering. The engagement team consists of Robert Adeyemi, Responsible Partner; Jennifer Kwon, Billing Partner; Claire Dempsey, Lead Associate; and Audrey Zhou, Working Associate, all in the Capital Markets practice group.

Initial Purchaser's Counsel. Pryor, Glendenning & Haas LLP ("PGH"), 51 West 52nd Street, 40th Floor, New York, New York 10019. PGH served as counsel to Ridgeline in connection with the proposed offering. Key PGH personnel included David Glendenning, Partner, and Rachel Moriyama, Senior Associate.

Proposed Trustee / Paying Agent. Heartland Trust Company, National Association ("Heartland Trust"), 100 South Wacker Drive, Suite 2600, Chicago, Illinois 60606. Heartland Trust was to serve as trustee and paying agent under the proposed indenture governing the Notes. The primary contact at Heartland Trust was Gregory Arndt, Vice President, Corporate Trust. Heartland Trust's counsel in the transaction was Brantley & Whitford LLP (Eleanor Whitford, Partner). The trustee acceptance fee had been quoted at approximately $15,000, and the indenture had been negotiated through draft v.6 (circulated June 15, 2022), but neither the indenture nor the trustee acceptance agreement was executed prior to termination of the offering.

Independent Auditor. Clarendon Harris & Co. LLP ("Clarendon Harris"), 801 Grand Avenue, Suite 1200, Des Moines, Iowa 50309. Clarendon Harris is a regional accounting firm that has served as GAP's independent auditor since FY 2017. Martin Okafor, Engagement Partner, led the audit team. Clarendon Harris audited GAP's consolidated financial statements for fiscal years 2019, 2020, and 2021, and delivered unqualified audit opinions for each year. The FY 2021 audited financial statements were included in the Preliminary Offering Memorandum dated June 1, 2022.

Rating Agency. Pinnacle Ratings Group, Inc. ("Pinnacle"), a nationally recognized statistical rating organization. Pinnacle provided an indicative (non-public) credit assessment of B+ with a stable outlook, communicated to GAP and Ridgeline on March 30, 2022. The lead analyst was Josephine Tran, Agribusiness sector. The indicative rating was based on financial and business information available as of that date and was subject to the caveat that it was preliminary and non-public. A formal published rating was never issued, as the rating engagement was contingent upon the successful closing of the offering.

B. Transaction Structure

The proposed offering contemplated the issuance and sale of $30,000,000 in aggregate principal amount of senior unsecured notes (the "Notes"). The Notes were to bear a fixed-rate coupon with a five-year maturity, with a targeted issuance date of June 30, 2022, and a maturity date of June 30, 2027. Interest on the Notes was to be payable semi-annually in arrears on June 30 and December 30 of each year, commencing December 30, 2022.

The offering was structured as a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), with resale of the Notes to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act. A CUSIP number (39572L AA 3) and an ISIN (US39572LAA35) were reserved through CUSIP Global Services in connection with the anticipated issuance, but these identifiers were never activated and no Notes were issued, settled, or deposited with the Depository Trust Company ("DTC").

The intended use of proceeds was as follows:

(a) Approximately $18.0 million to refinance the outstanding drawn balance on GAP's existing $40.0 million senior secured revolving credit facility (the "Meridian Revolver") with Meridian Commercial Bank, N.A. ("Meridian"). As of March 31, 2022, the drawn balance on the Meridian Revolver was $18.0 million. The Meridian Revolver bears interest at a rate of the Secured Overnight Financing Rate ("SOFR") plus 325 basis points and matures on August 15, 2024.

(b) Approximately $9.25 million for capital expenditures related to the construction of a new adjuvant blending and formulation facility located at 3800 University Boulevard, Ames, Iowa 50010 (the "Ames Facility"). GAP had entered into a preliminary engineering and design contract for the Ames Facility but had not commenced construction.

(c) Approximately $2.0 million for general corporate purposes, including working capital and potential tuck-in acquisitions of complementary product lines.

(d) Approximately $0.75 million for estimated transaction fees and expenses.

On a pro forma basis following the consummation of the offering and the application of net proceeds as described above, GAP's net leverage ratio would have been approximately 1.09 times ($30.0 million in Notes outstanding, divided by $27.6 million of FY 2021 EBITDA, with the Meridian Revolver drawn balance reduced to zero). The Meridian Revolver would have remained in place as an undrawn committed credit facility available for working capital and general corporate purposes.

The transaction documentation also contemplated a Registration Rights Agreement between GAP and Ridgeline, pursuant to which GAP would have been obligated to file an exchange offer registration statement with the Securities and Exchange Commission (the "SEC") within 180 days of issuance and to consummate the registered exchange offer within 270 days of issuance. Failure to meet these deadlines would have resulted in the accrual of additional interest on the Notes. The Registration Rights Agreement was circulated in draft form on June 15, 2022, but was never executed.

All transaction documents — including the Purchase Agreement, the proposed Indenture, and the proposed Registration Rights Agreement — were governed by the laws of the State of New York, without regard to conflict of laws principles.

C. Timeline of Key Events

The following is a summary timeline of key events in the transaction from engagement through termination:

III. Analysis of Ridgeline's Exercise of the Section 9(b) Market-Out Termination

A. Text of Section 9(b)

Section 9(b) of the Purchase Agreement is the "market-out" provision, which is a standard feature of Rule 144A purchase agreements and analogous to the corresponding provisions found in registered underwriting agreements. The provision grants the initial purchaser the right to terminate its obligations under the Purchase Agreement prior to the Closing Date if certain conditions relating to market disruption or deterioration are satisfied.

Specifically, Section 9(b) provides, in relevant part, that the obligations of the Initial Purchaser to purchase the Notes may be terminated by the Initial Purchaser, in its reasonable judgment, at any time prior to the Closing Date, by notice to the Company, if:

(i) there has been, since the date of this Agreement or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in financial, political, or economic conditions, or in the financial markets of the United States, or any outbreak of hostilities or escalation thereof or other calamity or crisis, the effect of which on the financial markets of the United States is such as to make it, in the reasonable judgment of the Initial Purchaser, impracticable to market the Notes or to enforce contracts for the sale of the Notes;

(ii) trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market has been materially disrupted or materially limited by any governmental or regulatory action, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by either of said exchanges or by order of the Commission or any other governmental authority;

(iii) a banking moratorium has been declared by Federal or state authorities or any material disruption has occurred in commercial banking or securities settlement or clearance services in the United States.

A full text excerpt of Section 9(b) is attached hereto as Appendix A.

It is important to note the scope of this provision. Section 9(b) is a "market-out" clause that does not require a material adverse change at the issuer level — that is, it does not require a deterioration in GAP's business, financial condition, or results of operations. Rather, it requires only a material adverse change in market conditions affecting the practicability of marketing or selling the Notes. This is a broader and more readily satisfied standard than the issuer-level "material adverse change" or "material adverse effect" concept found in other provisions of the Purchase Agreement (such as the closing conditions in Section 6). The market-out clause is designed to protect the initial purchaser from being locked into a firm commitment to purchase securities in a market environment that has deteriorated to the point where the initial purchaser cannot reasonably resell those securities to investors.

Additionally, Section 9(b) incorporates a "market flex" concept insofar as it provides the initial purchaser with the ability to withdraw from the transaction if market conditions render the sale of the Notes impracticable, even if the issuer's own creditworthiness remains unchanged. This allocation of market risk is standard in Rule 144A private placements and is generally not subject to negotiation.

B. Factual Basis for Ridgeline's Invocation

1. Deterioration in High Yield Credit Markets

The most significant factual basis for Ridgeline's termination decision is the documented deterioration in high yield credit market conditions during the period between the revised price talk on June 10, 2022, and the pricing call on June 28, 2022. During this eighteen-day period, credit spreads for B-rated high yield issuers widened meaningfully and rapidly.

Specifically, the Corvalex Aldermere Securities US High Yield B-rated Index option-adjusted spread ("OAS") — a widely followed benchmark for the credit risk premium demanded by investors in B-rated high yield bonds — widened from approximately 498 basis points on June 10, 2022, to approximately 587 basis points on June 28, 2022. This represents an increase of approximately 89 basis points over an eighteen-day trading period. Relevant index data is attached hereto as Appendix C.

An 89 basis point widening in the B-rated high yield OAS over such a compressed timeframe is significant by historical standards. To put this movement in context, the average daily change in the B-rated OAS over the preceding twelve months (July 2021 through June 2022) was approximately 2.3 basis points. An 89 basis point move over 18 calendar days (approximately 13 trading days) represents a rate of change approximately three times the normal daily volatility, sustained over a period of nearly three weeks. This level of spread widening is consistent with — and, in our view, constitutes — a material adverse change in credit market conditions for B-rated high yield issuers, including issuers such as GAP.

The broader macroeconomic environment during this period was characterized by rising inflation expectations, increasing Federal Reserve hawkishness (the Federal Open Market Committee raised the federal funds rate by 75 basis points on June 15, 2022, the largest single increase since 1994), and growing fears of an economic recession. These factors contributed to a general "risk-off" environment in which investors demanded significantly higher compensation for credit risk, particularly in the lower-rated segments of the high yield market.

2. Comparable Sector Performance

The deterioration in market conditions was not limited to the broad high yield market; it was particularly acute in the agricultural-chemical and agribusiness sectors. During the same June 10–28, 2022 period, comparable agricultural-sector bond issuances experienced significant price deterioration. Most notably, the Harvest Ridge Crop Sciences 8.500% Senior Notes due 2027 — a recently issued B-rated agricultural-chemical credit that is the most direct comparable to the proposed GAP Notes — traded down approximately 3.5 points (from approximately 97.25 to approximately 93.75 on a clean price basis) during this period. This decline indicates heightened investor aversion to agricultural-chemical credit risk specifically, beyond the general widening observed in the broader B-rated index.

More broadly, agricultural-sector issuers faced a distinctly negative credit backdrop in June 2022. Rising input costs for fertilizers, crop protection chemicals, and energy were compressing margins across the agribusiness value chain. Commodity price volatility — particularly in corn and soybean markets — introduced additional uncertainty regarding the revenue outlook for companies like GAP that are dependent on the planting decisions and purchasing power of Midwest row-crop farmers. The combination of these sector-specific headwinds with the broader macroeconomic deterioration created a particularly challenging environment for marketing new-issue high yield debt from agricultural-sector issuers.

3. Inability to Build a Book at the Maximum Authorized Coupon

The most direct evidence that market conditions rendered the sale of the Notes impracticable is Ridgeline's inability to assemble a sufficient book of orders at any coupon rate at or below 10.250%, which was the maximum coupon rate authorized by GAP's Board.

The pricing history of the proposed offering illustrates the progressive deterioration in market conditions:

• On March 15, 2022, Ridgeline communicated initial price talk at a coupon range of 8.750%–9.250%, reflecting the market environment prevailing at that time.

• On June 10, 2022, following a period of significant spread widening, Ridgeline revised its price talk to 9.500%–10.000%, representing a widening of approximately 75 basis points at the midpoint relative to the initial guidance.

• On June 28, 2022, during the pricing call, Ridgeline attempted to build a book at 10.250% — 100 basis points above the top end of the initial price talk range and 25 basis points above the top end of the revised range. Even at this elevated coupon, Ridgeline was unable to attract sufficient orders from QIB investors to support the $30,000,000 offering size.

GAP's Board had authorized a maximum coupon of 10.250% for the Notes. This ceiling reflected the Board's assessment — in consultation with Linda Shao-Perkins (CFO) and with input from Tallgrass Capital — that a coupon above 10.250% would render the all-in cost of the Notes prohibitive relative to GAP's existing Meridian Revolver (priced at SOFR + 325 basis points, or approximately 4.80%–5.20% on an all-in basis at the time) and would not represent an efficient use of GAP's debt capacity. When the bookbuilding effort failed at 10.250%, and with no authority from the Board to increase the coupon further, the offering was pulled.

4. Ridgeline's Termination Notice

On July 1, 2022, three days after the offering was pulled, Ridgeline delivered its formal written termination notice to GAP pursuant to Section 9(b) of the Purchase Agreement. The notice was addressed to Douglas Evanston, General Counsel and Corporate Secretary of GAP, and was signed by Thomas Reardon, Managing Director, Leveraged Finance, Ridgeline Securities LLC.

The termination notice specifically invoked Section 9(b)(i) of the Purchase Agreement, citing a material adverse change in financial markets of the United States that, in Ridgeline's reasonable judgment, made the marketing and sale of the Notes impracticable. The notice recited, as the factual basis for Ridgeline's determination, the significant widening of credit spreads in the U.S. high yield market, the decline in comparable agricultural-sector credits, and the demonstrated inability to build a sufficient book of orders at the maximum authorized coupon rate. The notice also referenced the June 15, 2022 Federal Reserve rate increase and the general deterioration in risk sentiment as contributing factors.

A copy of Ridgeline's termination notice is attached hereto as Appendix B.

C. Legal Analysis — Validity of Termination

1. "Reasonable Judgment" Standard

Section 9(b) of the Purchase Agreement conditions the initial purchaser's termination right on its "reasonable judgment" that one or more of the enumerated market disruption or deterioration events has occurred and that the effect of such event or events makes the marketing or sale of the Notes "impracticable." This formulation establishes a subjective standard with an objective reasonableness overlay — that is, the determination is made by Ridgeline, but Ridgeline's judgment must be reasonable under the circumstances.

Under New York law, which governs the Purchase Agreement, the "reasonable judgment" standard in market-out provisions is generally interpreted to afford the initial purchaser significant discretion. Courts have recognized that the determination of whether market conditions have deteriorated to the point of impracticability is inherently a judgment call that requires expertise in the relevant capital markets. See, e.g., Bear, Stearns & Co. Inc. v. Jardine Strategic Holdings Ltd., No. 98 Civ. 4758 (S.D.N.Y. 1999) (noting that courts are reluctant to second-guess an underwriter's professional assessment of market conditions in the context of a market-out provision). The standard does not require that the marketing or sale of the Notes be literally impossible — only that it be impracticable in the commercially reasonable judgment of the initial purchaser.

The factual record here provides substantial objective support for Ridgeline's determination:

(a) An 89 basis point widening in the Corvalex Aldermere Securities US High Yield B-rated Index OAS over an 18-day period — a rate of spread widening significantly in excess of normal market volatility — constitutes strong evidence of a material adverse change in financial market conditions.

(b) A 3.5 point price decline in the most directly comparable agricultural-chemical credit (Harvest Ridge Crop Sciences 2027 notes) during the same period provides sector-specific corroboration.

(c) The demonstrated inability to build a book of orders at 10.250% — despite two prior rounds of price revision — is the most compelling practical evidence that the sale of the Notes was, in fact, impracticable in the prevailing market environment.

Given the strength of this factual record, we believe that any challenge by GAP to the reasonableness of Ridgeline's judgment would be unlikely to succeed. The market data is objective and publicly available, and the failed bookbuilding effort is a matter of documented record. There is no indication that Ridgeline acted in bad faith, and the termination appears to reflect a genuine assessment of market conditions rather than a pretext for withdrawing from the transaction for other reasons.

2. Procedural Compliance

We have reviewed the termination notice and the procedural requirements of Section 9(b) and conclude that Ridgeline complied with all applicable procedural requirements.

Section 9(b) requires that the initial purchaser deliver written notice of termination to the Company. Ridgeline delivered its written termination notice on July 1, 2022, addressed to Douglas Evanston, General Counsel and Corporate Secretary of GAP, at GAP's principal office address. The notice was delivered by email (with a PDF attachment of the signed notice) and by overnight courier, in accordance with the notice provisions of Section 12 of the Purchase Agreement.

The termination notice was delivered prior to the Closing Date. The targeted Closing Date was June 30, 2022, but the closing did not occur on that date (or on any date) because the offering was pulled on June 28, 2022. Section 9(b) permits termination "at any time prior to the Closing Date." Because the closing never occurred, the termination window remained open, and Ridgeline's July 1, 2022 notice was timely.

The termination notice identified the specific provision of the Purchase Agreement being invoked — namely, Section 9(b)(i) — and recited the factual basis for Ridgeline's determination, including references to the widening of high yield credit spreads, the decline in comparable sector credits, and the failed bookbuilding. There is no requirement under Section 9(b) for Ridgeline to provide advance notice to GAP of its intention to exercise the termination right, nor is there a requirement that Ridgeline attempt further marketing efforts, seek a price revision beyond the authorized range, or take any other curative action before exercising the termination right. The market-out clause is, by design, a unilateral termination right exercisable by the initial purchaser without obligation to mitigate.

3. Conclusion on Validity

Based on our review of the Purchase Agreement, the termination notice, the relevant market data, and applicable New York law, we conclude that Ridgeline's exercise of the Section 9(b) market-out termination right appears valid. The factual predicate for the termination is well-supported by objective evidence, and the procedural requirements were satisfied in all material respects.

We do not recommend that GAP challenge the termination. A challenge would require GAP to demonstrate that Ridgeline's judgment was unreasonable — a burden that, given the documented market conditions, GAP is unlikely to meet. Moreover, any such challenge would be costly, would strain the commercial relationship between GAP and Ridgeline (which may be valuable in the context of a potential re-launch), and would in any event not result in the consummation of the offering, since a court would be unlikely to order specific performance requiring Ridgeline to purchase the Notes in a deteriorated market environment.

IV. Surviving Obligations Post-Termination

Although the Purchase Agreement has been terminated and the offering will not proceed, certain provisions of the Purchase Agreement survive termination by their express terms. This Section identifies and analyzes those surviving obligations.

A. Expense Reimbursement Under Section 7

Section 7 of the Purchase Agreement obligates GAP, as issuer, to reimburse the reasonable out-of-pocket expenses incurred by Ridgeline in connection with the offering. Critically, this obligation applies "whether or not the transactions contemplated hereby are consummated or this Agreement is terminated." This language is clear and unambiguous: the expense reimbursement obligation survives termination and is not conditioned on the closing of the offering.

The reimbursable expenses under Section 7 fall into two principal categories:

(a) Initial Purchaser's Counsel Fees. Section 7(a) requires GAP to reimburse Ridgeline for the fees and disbursements of PGH, counsel to the initial purchaser, incurred in connection with the offering. This reimbursement obligation is subject to a negotiated cap of $225,000. Based on our informal discussions with Rachel Moriyama at PGH, the estimated actual fees incurred by PGH through the date of termination are approximately $210,000. This amount is within the contractual cap. PGH's fees reflect work performed on the Purchase Agreement, the Indenture, the Registration Rights Agreement, due diligence review, and related transactional documentation over the period from approximately March 2022 through early July 2022.

(b) Other Out-of-Pocket Expenses. Section 7(b) requires GAP to reimburse Ridgeline for additional reasonable out-of-pocket expenses incurred by Ridgeline in connection with the offering, subject to a cap of $50,000. These expenses include, but are not limited to, travel expenses for due diligence sessions and management presentations, roadshow materials and logistics, Vireo Software charges for market surveillance and pricing analysis, CUSIP application fees, and telecommunications charges. We have not yet received an itemized invoice for these expenses and expect the actual amount to be less than $50,000.

A summary of the expense reimbursement provisions is attached hereto as Appendix D.

We have, on behalf of GAP, sent a letter to Ridgeline (attention: Thomas Reardon, Managing Director) acknowledging GAP's expense reimbursement obligation under Section 7 and requesting that Ridgeline submit itemized invoices for all reimbursable expenses within thirty (30) days. Upon receipt, we will review the invoices for compliance with the contractual caps and the reasonableness of the claimed expenses, and will advise GAP regarding payment.

B. Placement Fee

Section 4 of the Purchase Agreement provides for a placement fee payable to Ridgeline equal to 2.50% of the aggregate principal amount of Notes sold. Had the offering closed at the full $30,000,000 principal amount, the placement fee would have been $750,000.

However, the placement fee under Section 4 was expressly contingent on the closing and sale of the Notes. The relevant language provides that the placement fee is earned "upon the sale and delivery of the Notes on the Closing Date." Because no Notes were sold and the offering was terminated prior to closing, the conditions precedent to the earning of the placement fee were never satisfied. Accordingly, the placement fee was never earned, no portion of the placement fee is owed by GAP to Ridgeline, and Ridgeline has not asserted any claim to the placement fee.

C. Indemnification Provisions

Section 8 of the Purchase Agreement contains mutual indemnification provisions that expressly survive the termination of the Purchase Agreement. These provisions are designed to allocate liability for certain categories of losses that may arise in connection with the offering, and their survival is independent of whether the offering is consummated. A summary of the Section 8 indemnification provisions is attached hereto as Appendix E.

The key elements of the surviving indemnification provisions are as follows:

(a) GAP's Indemnification of Ridgeline. Under Section 8(a), GAP has agreed to indemnify and hold harmless Ridgeline and its affiliates, directors, officers, employees, and agents (the "Ridgeline Indemnified Parties") against any and all losses, claims, damages, or liabilities (including reasonable legal fees and expenses) arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the final Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent that such untrue statement or omission was based upon information furnished in writing by Ridgeline specifically for inclusion therein, or (ii) any breach by GAP of any representation, warranty, or covenant contained in the Purchase Agreement.

(b) Ridgeline's Indemnification of GAP. Under Section 8(b), Ridgeline has agreed to indemnify and hold harmless GAP and its members, managers, officers, employees, and agents against any and all losses, claims, damages, or liabilities arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the final Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact, to the extent, but only to the extent, that such untrue statement or omission was based upon information furnished in writing by Ridgeline specifically for inclusion therein.

(c) Contribution. Section 8(c) provides for contribution between GAP and Ridgeline in circumstances where indemnification is unavailable or insufficient, based upon the relative benefits received and the relative fault of the parties.

Although the offering was pulled and no Notes were sold to investors, the Preliminary Offering Memorandum dated June 1, 2022, was distributed to potential QIB investors during the marketing phase. The universe of recipients is believed to include approximately 35 to 40 institutional investors who received the Preliminary Offering Memorandum and/or attended the management presentation. Accordingly, there exists a theoretical risk — which we assess as low-probability — that a potential investor who received the Preliminary Offering Memorandum could assert a claim based on an alleged misstatement or omission in that document. For example, if a potential investor who reviewed the Preliminary Offering Memorandum and was allocated shares in another offering or made other investment decisions based on information contained therein were to allege losses arising from a material misstatement, the indemnification provisions of Section 8 would govern the allocation of any resulting liability between GAP and Ridgeline.

We emphasize that we view this risk as remote. No Notes were sold, and the recipients of the Preliminary Offering Memorandum are sophisticated QIB investors who are unlikely to assert claims in the absence of an actual purchase. Nevertheless, the survival of the indemnification provisions ensures that the contractual framework for allocating such liability remains in place. GAP should be aware of this theoretical exposure and should retain all records relating to the preparation and distribution of the Preliminary Offering Memorandum.

D. Confidentiality

The confidentiality provisions contained in the Purchase Agreement, as well as the separate confidentiality and non-disclosure agreements executed between GAP and potential QIB investors who received the Preliminary Offering Memorandum, survive the termination of the Purchase Agreement and the withdrawal of the offering.

These confidentiality obligations are particularly significant with respect to the Pinnacle Ratings Group indicative credit assessment of B+ (stable outlook), which was communicated on a non-public basis and was included in the Preliminary Offering Memorandum as a non-public indicative rating. GAP should ensure that all recipients of the Preliminary Offering Memorandum and all parties with access to the indicative rating continue to treat this information as confidential. Similarly, the financial projections, management presentations, and other proprietary business information of GAP that were disclosed during the marketing and due diligence process remain subject to the confidentiality obligations undertaken by the recipients.

We recommend that GAP's General Counsel, Douglas Evanston, circulate a reminder notice to the internal team regarding the continuing confidentiality obligations and coordinate with Ridgeline to confirm that all potential QIB investors who received confidential information have been reminded of their obligations.

V. Summary of GAP's Transaction Expenses

Although the offering did not close, GAP incurred substantial expenses in preparation for the proposed issuance. The following table summarizes GAP's estimated total transaction expenses as of the date of this memorandum:

Several notes regarding the foregoing expense summary:

(a) The $750,000 placement fee that would have been payable to Ridgeline under Section 4 of the Purchase Agreement was not incurred, as it was contingent on the closing and sale of the Notes, which did not occur. This fee is therefore excluded from the above summary.

(b) GAP's own legal fees (Calderwood & Harkness LLP) of approximately $385,000 will be billed directly to GAP through C&H's standard billing process. A final invoice is being prepared separately and will be submitted to GAP's finance department (attention: Linda Shao-Perkins, CFO) in the ordinary course.

(c) The reimbursement to Ridgeline for PGH's fees is capped at $225,000 under Section 7(a) of the Purchase Agreement. The estimated actual fees of approximately $210,000 are within that cap. The additional out-of-pocket expense reimbursement under Section 7(b) is capped at $50,000 and is expected to be less than that amount. GAP's maximum aggregate expense reimbursement exposure to Ridgeline is therefore $275,000 ($225,000 + $50,000).

(d) The Heartland Trust proposed acceptance fee of approximately $15,000 reflects costs incurred by Heartland Trust in reviewing and negotiating the Indenture drafts and preparing for the trustee engagement. Heartland Trust's standard engagement letter provides for payment of this fee upon execution of the Indenture, but Heartland Trust has indicated informally (through Gregory Arndt) that it may seek reimbursement of a portion of its internal costs even though the Indenture was not executed. We are reviewing the terms of the preliminary engagement with Heartland Trust and will advise GAP separately.

(e) The Pinnacle Ratings Group indicative rating fee of approximately $75,000 was invoiced and paid by GAP in April 2022, prior to the termination. This fee is non-refundable.

(f) Printing and EDGAR services costs of approximately $22,000 were incurred by Vintage Financial Printers, Inc. in connection with the preparation and formatting of the Preliminary Offering Memorandum and related transaction documents.

In total, GAP's estimated out-of-pocket expenditure in connection with the aborted offering is approximately $725,000. This amount does not include any internal costs borne by GAP (management time, employee resources, etc.), which are not quantified herein.

VI. Considerations for a Potential Re-Launch

GAP's management and board of managers have indicated preliminary interest in re-launching the proposed notes offering at a future date, if and when market conditions improve sufficiently to permit pricing within the Board's tolerance. The following subsections address the principal considerations relevant to a potential re-launch.

A. Market Timing

As of the date of this memorandum, market conditions remain unfavorable for B-rated agricultural-sector issuers. The Corvalex Aldermere Securities US High Yield B-rated Index OAS remains elevated relative to the levels prevailing in February and March 2022, when the transaction was initially structured and priced. The Federal Reserve's monetary tightening cycle is widely expected to continue through the second half of 2022, which is likely to sustain or increase pressure on high yield credit spreads. The macroeconomic outlook remains uncertain, with recession fears persisting and commodity markets exhibiting significant volatility.

Given these conditions, any re-launch of the offering should be deferred until there is meaningful spread compression in the high yield market, particularly for the agribusiness sector. GAP's Board has indicated that a coupon above 10.250% is prohibitive from an economic standpoint, given the relative cost of GAP's existing Meridian Revolver and the Board's assessment of the appropriate weighted average cost of debt for the company. If market conditions do not improve sufficiently to bring new-issue pricing for a B-rated agricultural-chemical credit within or near the 10.250% coupon threshold, a re-launch would face the same outcome as the June 2022 attempt.

We recommend that GAP and its financial advisor — whether Ridgeline or a successor placement agent — establish a regular monitoring framework to track the Corvalex Aldermere Securities US High Yield B-rated Index OAS, comparable agricultural-sector credit spreads, and new-issue activity in the B-rated high yield market. Key indicators that might support a re-launch decision include: (i) the B-rated OAS returning to or below the approximately 498 basis points level observed on June 10, 2022; (ii) successful new-issue pricing of comparable agricultural or specialty chemical credits at coupon rates within the Board's authorized range; and (iii) stabilization or improvement in broader macroeconomic indicators, including inflation expectations and Federal Reserve forward guidance.

B. Shelf Life of Due Diligence and Offering Documents

The due diligence conducted through May 20, 2022, and the Preliminary Offering Memorandum dated June 1, 2022, were prepared based on information available at that time, including GAP's FY 2021 audited financial statements and financial and operating data through early 2022. If a re-launch is delayed significantly, these materials will become stale and will need to be updated.

Specifically:

(a) If a re-launch occurs after September 30, 2022, GAP would need to prepare and include in the Offering Memorandum updated interim financial statements for the second quarter of 2022 (ended June 30, 2022), and potentially for the third quarter of 2022 (ended September 30, 2022), depending on the timing of the re-launch. These interim financial statements would need to be reviewed (but not audited) by Clarendon Harris & Co. LLP and would need to comply with the disclosure standards applicable to Rule 144A offerings.

(b) The Offering Memorandum would require a comprehensive update to reflect any material developments that have occurred since June 1, 2022, including but not limited to: new material contracts or loss of material customers; changes in litigation or regulatory matters; changes in senior management or the board of managers; acquisitions or divestitures; changes in GAP's debt structure or financial condition; and material developments in the agricultural-chemical industry or in the broader markets in which GAP operates.

(c) The FY 2021 audited financial statements prepared by Clarendon Harris will remain the most recent annual audited financials until the FY 2022 audit is completed, which is expected in early 2023 (typically February or March 2023). For a re-launch in calendar year 2023, FY 2022 audited financial statements and potentially FY 2023 interim (Q1 or Q2) financial statements would need to be included in the Offering Memorandum.

(d) The due diligence process would need to be refreshed, including updated management diligence sessions, updated legal, environmental, and regulatory diligence, and an updated bring-down of representations and warranties.

The Indenture (draft v.6, circulated June 15, 2022) and the Registration Rights Agreement draft circulated on the same date would require only modest updating if the structure and material economic terms of the offering remain substantially the same. However, if the pricing parameters, aggregate principal amount, maturity, covenants, or other material terms are revised in connection with a re-launch — which is likely if market conditions have changed significantly — more substantial revisions to the Indenture and related documentation will be required.

C. Rating Agency Re-Engagement

The Pinnacle Ratings Group indicative credit assessment of B+ (stable outlook) was communicated on March 30, 2022, and was based on the financial and business information available to Pinnacle's analytical team at that time, including GAP's FY 2021 financial statements, management projections, and a qualitative assessment of GAP's competitive position, management team, and industry outlook.

For any re-launch of the offering, GAP would need to re-engage Pinnacle to refresh the indicative rating. Josephine Tran, the Lead Analyst covering GAP at Pinnacle, would likely serve as the primary contact for a refreshed assessment. Pinnacle will require updated financial data — including interim financial statements for any periods subsequent to December 31, 2021 — and may request updated management presentations, updated financial projections, and information regarding any material developments in GAP's business or the broader agricultural-chemical market since March 2022.

There is no assurance that the B+ (stable outlook) indicative rating would be reaffirmed in a refreshed assessment. Pinnacle's methodology considers, among other factors, the issuer's financial performance, leverage metrics, industry conditions, and management quality. If GAP's financial performance has deteriorated, if leverage metrics have moved adversely, or if industry conditions have worsened since March 2022, Pinnacle may revise the indicative rating downward or change the outlook to negative. A downgrade or negative outlook revision could materially affect investor demand and pricing for the Notes and could render a re-launch more difficult or impractical.

Additional rating agency fees will likely be incurred for a refreshed or formal published assessment. These fees are typically in the range of $50,000 to $100,000 for a refreshed indicative rating and $100,000 to $150,000 for a formal published rating, depending on the scope of the analysis and Pinnacle's fee schedule.

D. Existing Credit Facility Considerations

GAP's $40.0 million senior secured revolving credit facility with Meridian Commercial Bank, N.A. (SOFR + 325 bps) matures on August 15, 2024. As of March 31, 2022, the drawn balance on the Meridian Revolver was $18.0 million. One of the primary purposes of the proposed notes offering was to refinance the $18.0 million drawn balance on the Meridian Revolver and to reduce GAP's reliance on the revolving credit facility.

With the notes offering terminated and no immediate alternative financing in place, GAP will need to address the Meridian Revolver maturity as a standalone matter. As of the date of this memorandum, the maturity is approximately 25 months away (August 15, 2024). While this provides some runway, the following considerations are relevant:

(a) As the maturity date approaches, the outstanding drawn balance on the Meridian Revolver will become a current liability for financial reporting purposes (within 12 months prior to the maturity date). This reclassification could affect GAP's balance sheet presentation, working capital metrics, and compliance with financial covenants under the Meridian Revolver itself (if any reclassification triggers exist).

(b) Refinancing risk may increase as the maturity approaches, particularly if credit market conditions remain unfavorable. Rating agencies, including Pinnacle, routinely consider approaching debt maturities as a factor in credit assessments. An unaddressed near-term maturity could weigh negatively on any future credit rating.

(c) GAP should proactively consult with Meridian Commercial Bank regarding a potential amendment, extension, or refinancing of the revolving facility, independent of the notes offering. An extension of the Meridian Revolver maturity date — even by one or two years — would reduce near-term refinancing risk and provide greater flexibility for the timing of any capital markets transaction.

We recommend that GAP's management team (Linda Shao-Perkins, CFO) initiate discussions with Meridian in the near term regarding the revolver maturity, and that Calderwood & Harkness be engaged to assist with any amendment or extension if needed.

E. Purchase Agreement Considerations for Re-Launch

The executed Purchase Agreement dated June 20, 2022, between GAP and Ridgeline has been terminated pursuant to the Section 9(b) termination notice. The Purchase Agreement has no continuing force or effect, except with respect to the surviving provisions identified in Section IV of this memorandum (expense reimbursement, indemnification, confidentiality, and contribution). A new purchase agreement would need to be negotiated and executed with any initial purchaser in connection with a re-launch.

If GAP elects to re-engage Ridgeline as initial purchaser for a re-launch, the parties would negotiate a new purchase agreement. While the June 20, 2022 Purchase Agreement would serve as a useful starting point, certain key terms may be subject to renegotiation, including:

(a) Pricing Parameters. The pricing supplement to the new purchase agreement would reflect then-current market conditions, which may differ materially from those prevailing in June 2022.

(b) Placement Fee Rate. The 2.50% placement fee rate negotiated for the original offering may be subject to revision, depending on market practice, the competitive landscape among potential placement agents, and the complexity of the re-launched offering.

(c) Expense Reimbursement Caps. The $225,000 cap on initial purchaser's counsel fees and the $50,000 cap on out-of-pocket expenses may be renegotiated for a new engagement.

(d) Market-Out Thresholds. While market-out provisions are generally standardized, the specific formulation and any bespoke carve-outs may be revisited.

(e) Closing Conditions. Customary closing conditions, including bring-down of representations and warranties, delivery of officer's certificates, comfort letters from Clarendon Harris, and legal opinions from issuer's and trustee's counsel, would need to be updated and re-specified.

If GAP elects to engage a different broker-dealer as placement agent for a re-launch — whether due to a desire for fresh market perspective, competitive considerations, or other reasons — new engagement terms and documentation would be required. The prior Purchase Agreement with Ridgeline would have no continuing effect on the relationship with a successor placement agent (other than the surviving indemnification and confidentiality provisions described in Section IV, which run between GAP and Ridgeline specifically).

F. CUSIP / ISIN

CUSIP 39572L AA 3 and ISIN US39572LAA35 were reserved through CUSIP Global Services in connection with the anticipated issuance of the Notes. These identifiers were never activated and no securities were issued or settled under these numbers.

If GAP does not intend to re-launch the offering imminently, these reservations should be cancelled with CUSIP Global Services to avoid administrative confusion and any ongoing reservation fees. New CUSIP and ISIN identifiers can be reserved at the appropriate time in connection with any future offering. The process for reserving new identifiers is straightforward and typically takes two to three business days.

VII. Recommendations

Based on the foregoing analysis, we make the following recommendations to GAP:

1. Do not challenge the Section 9(b) termination. The factual and procedural basis for Ridgeline's exercise of the market-out clause is sound. The objective market data — including the 89 basis point widening in the B-rated high yield index OAS, the 3.5 point decline in comparable agricultural-sector credits, and the failed bookbuilding at 10.250% — provides substantial support for Ridgeline's reasonable judgment that market conditions rendered the sale of the Notes impracticable. A challenge would be costly, unlikely to succeed, and potentially damaging to GAP's relationship with Ridgeline and its reputation in the capital markets.

2. Process expense reimbursement. GAP should promptly pay Ridgeline's reimbursable expenses upon receipt and review of itemized invoices, subject to the contractual caps set forth in Section 7 of the Purchase Agreement ($225,000 for PGH counsel fees; $50,000 for out-of-pocket expenses). We have requested that Ridgeline submit invoices within thirty days. Upon receipt, we will review the invoices for reasonableness and compliance with the caps and advise GAP regarding payment.

3. Preserve documents. GAP should retain all transaction documents — including all drafts of the Indenture, the Offering Memorandum (all versions), the Purchase Agreement, the Registration Rights Agreement, the due diligence request list and responses, management presentations, financial models, correspondence with all parties, and all internal and external communications — for potential future use in a re-launch and to comply with any surviving contractual obligations (including indemnification and confidentiality). Documents should be preserved in accordance with GAP's document retention policies and should not be destroyed without prior consultation with counsel.

4. Cancel CUSIP / ISIN reservations unless a near-term re-launch is contemplated. If the re-launch timeline extends beyond the next 90 days, we recommend that GAP instruct C&H or its transfer agent to cancel the reserved CUSIP (39572L AA 3) and ISIN (US39572LAA35) with CUSIP Global Services. New identifiers can be reserved promptly in connection with any future offering.

5. Monitor market conditions and maintain relationships with Ridgeline (or identify and evaluate alternative placement agents) for a potential re-launch when pricing conditions improve to levels consistent with the Board's authorized coupon parameters. We recommend establishing a regular monitoring framework, with periodic check-ins between GAP's management, Tallgrass Capital, and the placement agent regarding market conditions, comparable new-issue activity, and re-launch timing.

6. Address Meridian revolver maturity (August 15, 2024) as a standalone matter if the notes offering is not re-launched in the near term. We recommend that GAP initiate discussions with Meridian Commercial Bank, N.A. regarding a potential amendment, extension, or refinancing of the revolving credit facility to mitigate refinancing risk.

7. Engage Clarendon Harris & Co. LLP early on updated financial statement preparation if a re-launch is targeted for late 2022 or 2023. Interim financial statements (reviewed, not audited) for Q2 2022 and potentially Q3 2022 may be required, and the FY 2022 audit timeline should be coordinated with any re-launch schedule.

8. Re-engage Pinnacle Ratings Group, Inc. to refresh the indicative credit assessment well in advance of any re-launch. GAP should provide Pinnacle with updated financial data and be prepared for the possibility that the B+ (stable) indicative rating may not be reaffirmed.

VIII. Document Retention and File Status

C&H Matter No. 1020-00003 / Billing No. 014723.00001 will be administratively closed as a terminated engagement. The matter will be reclassified in C&H's matter management system from "active" to "inactive — terminated transaction," with a re-activation flag to facilitate reopening if GAP elects to pursue a re-launch.

All work product, correspondence, and transaction documents generated or received by C&H in connection with this matter will be retained in accordance with C&H's document retention policy (currently a minimum retention period of seven years for closed transactional matters, subject to extension for matters involving potential ongoing liability exposure). Given the surviving indemnification provisions under Section 8 of the Purchase Agreement — and the theoretical risk, however remote, of claims arising from the distribution of the Preliminary Offering Memorandum — we recommend that document retention for this matter be flagged for extended preservation beyond the standard seven-year period, subject to periodic review.

The engagement team for this matter consists of the following C&H attorneys, each of whom will remain available for follow-up inquiries, re-launch efforts, or any other matter arising in connection with the Greenfield Agricultural Partners engagement:

• Robert Adeyemi — Responsible Partner, Capital Markets

• Jennifer Kwon — Billing Partner, Capital Markets

• Claire Dempsey — Lead Associate, Capital Markets

• Audrey Zhou — Working Associate, Capital Markets

A final invoice for C&H's legal fees in connection with this matter (estimated at approximately $385,000) is being prepared separately and will be submitted to GAP's finance department (attention: Linda Shao-Perkins, Chief Financial Officer) under separate cover.

We are available to discuss this memorandum and its recommendations at your convenience.

Respectfully submitted,

Claire Dempsey Lead Associate, Capital Markets Calderwood & Harkness LLP

cc: Jennifer Kwon, Partner, Capital Markets (Billing Partner)

Audrey Zhou, Associate, Capital Markets

Appendices (Referenced)

The following appendices are referenced in this memorandum and are maintained in the C&H matter file for Matter No. 1020-00003:

Appendix A: Copy of Purchase Agreement Section 9(b) (Market-Out Provision) — Full Text Excerpt

Appendix B: Copy of Ridgeline Securities LLC Termination Notice dated July 1, 2022 (Thomas Reardon, Managing Director, to Douglas Evanston, General Counsel & Corporate Secretary, Greenfield Agricultural Partners LLC)

Appendix C: Corvalex Aldermere Securities US High Yield B-Rated Index Option-Adjusted Spread (OAS) Data, June 10–28, 2022 (Source: Crowne Albany Systems)

Appendix D: Summary of Purchase Agreement Section 7 Expense Reimbursement Provisions

Appendix E: Summary of Purchase Agreement Section 8 Indemnification and Contribution Provisions

Appendix F: Transaction Timeline and Closing Checklist (Status as of Termination Date, July 1, 2022)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT Calderwood & Harkness LLP	Matter No. 1020-00003	Billing No. 014723.00001
Date	Event
February 21, 2022	C&H Matter No. 1020-00003 opened; C&H engagement letter executed by GAP (Douglas Evanston, on behalf of GAP).
March 1, 2022	Kickoff call among C&H, Ridgeline, PGH, and GAP management. Due diligence request list circulated by Ridgeline and PGH to GAP management (Marcus J. Reinhart, Linda Shao-Perkins, Douglas Evanston) and Clarendon Harris (Martin Okafor).
March 15, 2022	Initial price talk communicated by Ridgeline at 8.750%–9.250% indicative coupon range, reflecting market conditions prevailing at that time.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum has been prepared by Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP attorneys and authorized personnel working on Matter No. 1020-00003. This memorandum should not be disclosed to any third party without the prior written consent of the responsible partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege.
CALDERWOOD & HARKNESS LLP
INTERNAL MEMORANDUM
Date: July 8, 2022
To: Robert Adeyemi, Partner, Capital Markets
From: Claire Dempsey, Lead Associate, Capital Markets
Re: Greenfield Agricultural Partners LLC — Analysis of Termination of Rule 144A Offering Under Purchase Agreement §9(b); Surviving Obligations and Re-Launch Considerations
Matter No.: 1020-00003
Billing No.: 014723.00001
I. Executive Summary
The purpose of this memorandum is to analyze the validity and legal consequences of Ridgeline Securities LLC's ("Ridgeline") exercise of its termination right under Section 9(b) of the Purchase Agreement dated June 20, 2022 (the "Purchase Agreement"), by and between Greenfield Agricultural Partners LLC ("GAP" or the "Issuer") and Ridgeline, in connection with the proposed $30,000,000 Rule 144A private placement of senior unsecured notes due June 30, 2027 (the "Notes"). This memorandum also identifies GAP's surviving obligations under the Purchase Agreement following termination and addresses considerations relevant to a potential re-launch of the offering at a future date.
On July 1, 2022, Ridgeline delivered formal written termination notice to GAP, invoking the market-out clause contained in Section 9(b) of the Purchase Agreement. The termination notice was delivered by Thomas Reardon, Managing Director, Leveraged Finance, to Douglas Evanston, General Counsel and Corporate Secretary of GAP. The notice cited a material adverse change in financial market conditions rendering the marketing and sale of the Notes impracticable.
The factual record supports Ridgeline's determination. No Notes were sold in connection with the offering. The offering was pulled at launch on June 28, 2022, after Ridgeline's pricing desk was unable to build a sufficient book of orders at 10.250%, which represented the maximum coupon rate authorized by GAP's board of managers (the "Board"). In the eighteen-day period between the revised price talk on June 10, 2022, and the pricing call on June 28, 2022, the Corvalex Aldermere Securities US High Yield B-rated index option-adjusted spread widened by approximately 89 basis points, reflecting a significant deterioration in credit market conditions for issuers with a comparable credit profile. Comparable agricultural-sector bond issues also experienced meaningful price declines during this period.
Conclusion. Based on our review of the Purchase Agreement, the termination notice, and the relevant market data, Ridgeline's exercise of its Section 9(b) market-out termination right appears valid on its face. The factual predicate is well-supported by objective market data, and the procedural requirements of the Purchase Agreement were satisfied. We do not recommend that GAP challenge the termination. GAP has surviving expense reimbursement obligations under Section 7 and indemnification obligations under Section 8 of the Purchase Agreement, which are described in detail in Section IV of this memorandum. The placement fee under Section 4 was never earned and is not owed. GAP's estimated total transaction expenses in connection with the aborted offering are approximately $725,000.
This memorandum also addresses, in Section VI, considerations relevant to a potential re-launch of the offering at a future date, including market timing, the shelf life of existing due diligence and offering documents, rating agency re-engagement, the interaction with GAP's existing credit facility with Meridian Commercial Bank, N.A., and purchase agreement considerations for a new transaction.
II. Background and Transaction Summary
A. The Parties
The following is a summary of the principal parties involved in the proposed offering, their roles, and relevant identifying information.
Issuer. Greenfield Agricultural Partners LLC ("GAP") is an Iowa limited liability company headquartered at 1420 Prairie Ridge Boulevard, Suite 300, Des Moines, Iowa 50309 (Iowa Secretary of State File No. 723841; Employer Identification Number 47-3918206). GAP is a manufacturer and distributor of specialty crop-protection chemicals, adjuvants, and bio-stimulants serving the Midwest row-crop agriculture market. GAP's product portfolio includes herbicide adjuvants, foliar micronutrient formulations, and proprietary bio-stimulant blends marketed to corn, soybean, and wheat growers through a network of approximately 230 independent agricultural retailers across Iowa, Illinois, Indiana, Minnesota, Wisconsin, Nebraska, and Missouri. For the fiscal year ended December 31, 2021 ("FY 2021"), GAP reported revenue of approximately $189.4 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $27.6 million. GAP's senior management team consists of Marcus J. Reinhart, Chief Executive Officer; Linda Shao-Perkins, Chief Financial Officer; and Douglas Evanston, General Counsel and Corporate Secretary, among others.
Majority Owner. Tallgrass Capital Holdings LP ("Tallgrass"), a Delaware limited partnership, holds 68.2% of the membership interests of GAP. Tallgrass is a lower middle market private equity firm focused on agribusiness, food and beverage, and specialty chemicals investments. The remaining 31.8% of GAP's membership interests are held by members of management and legacy family interests affiliated with the Reinhart family, which founded GAP's predecessor entity in 1987.
Initial Purchaser. Ridgeline Securities LLC ("Ridgeline") is a Delaware limited liability company and a member firm of the Financial Industry Regulatory Authority ("FINRA"), with offices located at 399 Park Avenue South, 22nd Floor, New York, New York 10016. Ridgeline served as the sole initial purchaser for the Rule 144A offering of the Notes. Ridgeline's leveraged finance practice is led by Thomas Reardon, Managing Director, who served as the primary point of contact for the transaction. Other key Ridgeline personnel involved in the transaction included Sarah Dimitriou, Vice President, Investment Grade and High Yield Origination, and Kevin Wu, Associate, Capital Markets Execution.
Issuer's Counsel. Calderwood & Harkness LLP ("C&H"), acting as counsel to GAP in connection with the proposed offering. The engagement team consists of Robert Adeyemi, Responsible Partner; Jennifer Kwon, Billing Partner; Claire Dempsey, Lead Associate; and Audrey Zhou, Working Associate, all in the Capital Markets practice group.
Initial Purchaser's Counsel. Pryor, Glendenning & Haas LLP ("PGH"), 51 West 52nd Street, 40th Floor, New York, New York 10019. PGH served as counsel to Ridgeline in connection with the proposed offering. Key PGH personnel included David Glendenning, Partner, and Rachel Moriyama, Senior Associate.
Proposed Trustee / Paying Agent. Heartland Trust Company, National Association ("Heartland Trust"), 100 South Wacker Drive, Suite 2600, Chicago, Illinois 60606. Heartland Trust was to serve as trustee and paying agent under the proposed indenture governing the Notes. The primary contact at Heartland Trust was Gregory Arndt, Vice President, Corporate Trust. Heartland Trust's counsel in the transaction was Brantley & Whitford LLP (Eleanor Whitford, Partner). The trustee acceptance fee had been quoted at approximately $15,000, and the indenture had been negotiated through draft v.6 (circulated June 15, 2022), but neither the indenture nor the trustee acceptance agreement was executed prior to termination of the offering.
Independent Auditor. Clarendon Harris & Co. LLP ("Clarendon Harris"), 801 Grand Avenue, Suite 1200, Des Moines, Iowa 50309. Clarendon Harris is a regional accounting firm that has served as GAP's independent auditor since FY 2017. Martin Okafor, Engagement Partner, led the audit team. Clarendon Harris audited GAP's consolidated financial statements for fiscal years 2019, 2020, and 2021, and delivered unqualified audit opinions for each year. The FY 2021 audited financial statements were included in the Preliminary Offering Memorandum dated June 1, 2022.
Rating Agency. Pinnacle Ratings Group, Inc. ("Pinnacle"), a nationally recognized statistical rating organization. Pinnacle provided an indicative (non-public) credit assessment of B+ with a stable outlook, communicated to GAP and Ridgeline on March 30, 2022. The lead analyst was Josephine Tran, Agribusiness sector. The indicative rating was based on financial and business information available as of that date and was subject to the caveat that it was preliminary and non-public. A formal published rating was never issued, as the rating engagement was contingent upon the successful closing of the offering.
B. Transaction Structure
The proposed offering contemplated the issuance and sale of $30,000,000 in aggregate principal amount of senior unsecured notes (the "Notes"). The Notes were to bear a fixed-rate coupon with a five-year maturity, with a targeted issuance date of June 30, 2022, and a maturity date of June 30, 2027. Interest on the Notes was to be payable semi-annually in arrears on June 30 and December 30 of each year, commencing December 30, 2022.
The offering was structured as a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), with resale of the Notes to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act. A CUSIP number (39572L AA 3) and an ISIN (US39572LAA35) were reserved through CUSIP Global Services in connection with the anticipated issuance, but these identifiers were never activated and no Notes were issued, settled, or deposited with the Depository Trust Company ("DTC").
The intended use of proceeds was as follows:
(a) Approximately $18.0 million to refinance the outstanding drawn balance on GAP's existing $40.0 million senior secured revolving credit facility (the "Meridian Revolver") with Meridian Commercial Bank, N.A. ("Meridian"). As of March 31, 2022, the drawn balance on the Meridian Revolver was $18.0 million. The Meridian Revolver bears interest at a rate of the Secured Overnight Financing Rate ("SOFR") plus 325 basis points and matures on August 15, 2024.
(b) Approximately $9.25 million for capital expenditures related to the construction of a new adjuvant blending and formulation facility located at 3800 University Boulevard, Ames, Iowa 50010 (the "Ames Facility"). GAP had entered into a preliminary engineering and design contract for the Ames Facility but had not commenced construction.
(c) Approximately $2.0 million for general corporate purposes, including working capital and potential tuck-in acquisitions of complementary product lines.
(d) Approximately $0.75 million for estimated transaction fees and expenses.
On a pro forma basis following the consummation of the offering and the application of net proceeds as described above, GAP's net leverage ratio would have been approximately 1.09 times ($30.0 million in Notes outstanding, divided by $27.6 million of FY 2021 EBITDA, with the Meridian Revolver drawn balance reduced to zero). The Meridian Revolver would have remained in place as an undrawn committed credit facility available for working capital and general corporate purposes.
The transaction documentation also contemplated a Registration Rights Agreement between GAP and Ridgeline, pursuant to which GAP would have been obligated to file an exchange offer registration statement with the Securities and Exchange Commission (the "SEC") within 180 days of issuance and to consummate the registered exchange offer within 270 days of issuance. Failure to meet these deadlines would have resulted in the accrual of additional interest on the Notes. The Registration Rights Agreement was circulated in draft form on June 15, 2022, but was never executed.
All transaction documents — including the Purchase Agreement, the proposed Indenture, and the proposed Registration Rights Agreement — were governed by the laws of the State of New York, without regard to conflict of laws principles.
C. Timeline of Key Events
The following is a summary timeline of key events in the transaction from engagement through termination:
III. Analysis of Ridgeline's Exercise of the Section 9(b) Market-Out Termination
A. Text of Section 9(b)
Section 9(b) of the Purchase Agreement is the "market-out" provision, which is a standard feature of Rule 144A purchase agreements and analogous to the corresponding provisions found in registered underwriting agreements. The provision grants the initial purchaser the right to terminate its obligations under the Purchase Agreement prior to the Closing Date if certain conditions relating to market disruption or deterioration are satisfied.
Specifically, Section 9(b) provides, in relevant part, that the obligations of the Initial Purchaser to purchase the Notes may be terminated by the Initial Purchaser, in its reasonable judgment, at any time prior to the Closing Date, by notice to the Company, if:
(i) there has been, since the date of this Agreement or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in financial, political, or economic conditions, or in the financial markets of the United States, or any outbreak of hostilities or escalation thereof or other calamity or crisis, the effect of which on the financial markets of the United States is such as to make it, in the reasonable judgment of the Initial Purchaser, impracticable to market the Notes or to enforce contracts for the sale of the Notes;
(ii) trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market has been materially disrupted or materially limited by any governmental or regulatory action, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by either of said exchanges or by order of the Commission or any other governmental authority;
(iii) a banking moratorium has been declared by Federal or state authorities or any material disruption has occurred in commercial banking or securities settlement or clearance services in the United States.
A full text excerpt of Section 9(b) is attached hereto as Appendix A.
It is important to note the scope of this provision. Section 9(b) is a "market-out" clause that does not require a material adverse change at the issuer level — that is, it does not require a deterioration in GAP's business, financial condition, or results of operations. Rather, it requires only a material adverse change in market conditions affecting the practicability of marketing or selling the Notes. This is a broader and more readily satisfied standard than the issuer-level "material adverse change" or "material adverse effect" concept found in other provisions of the Purchase Agreement (such as the closing conditions in Section 6). The market-out clause is designed to protect the initial purchaser from being locked into a firm commitment to purchase securities in a market environment that has deteriorated to the point where the initial purchaser cannot reasonably resell those securities to investors.
Additionally, Section 9(b) incorporates a "market flex" concept insofar as it provides the initial purchaser with the ability to withdraw from the transaction if market conditions render the sale of the Notes impracticable, even if the issuer's own creditworthiness remains unchanged. This allocation of market risk is standard in Rule 144A private placements and is generally not subject to negotiation.
B. Factual Basis for Ridgeline's Invocation
1. Deterioration in High Yield Credit Markets
The most significant factual basis for Ridgeline's termination decision is the documented deterioration in high yield credit market conditions during the period between the revised price talk on June 10, 2022, and the pricing call on June 28, 2022. During this eighteen-day period, credit spreads for B-rated high yield issuers widened meaningfully and rapidly.
Specifically, the Corvalex Aldermere Securities US High Yield B-rated Index option-adjusted spread ("OAS") — a widely followed benchmark for the credit risk premium demanded by investors in B-rated high yield bonds — widened from approximately 498 basis points on June 10, 2022, to approximately 587 basis points on June 28, 2022. This represents an increase of approximately 89 basis points over an eighteen-day trading period. Relevant index data is attached hereto as Appendix C.
An 89 basis point widening in the B-rated high yield OAS over such a compressed timeframe is significant by historical standards. To put this movement in context, the average daily change in the B-rated OAS over the preceding twelve months (July 2021 through June 2022) was approximately 2.3 basis points. An 89 basis point move over 18 calendar days (approximately 13 trading days) represents a rate of change approximately three times the normal daily volatility, sustained over a period of nearly three weeks. This level of spread widening is consistent with — and, in our view, constitutes — a material adverse change in credit market conditions for B-rated high yield issuers, including issuers such as GAP.
The broader macroeconomic environment during this period was characterized by rising inflation expectations, increasing Federal Reserve hawkishness (the Federal Open Market Committee raised the federal funds rate by 75 basis points on June 15, 2022, the largest single increase since 1994), and growing fears of an economic recession. These factors contributed to a general "risk-off" environment in which investors demanded significantly higher compensation for credit risk, particularly in the lower-rated segments of the high yield market.
2. Comparable Sector Performance
The deterioration in market conditions was not limited to the broad high yield market; it was particularly acute in the agricultural-chemical and agribusiness sectors. During the same June 10–28, 2022 period, comparable agricultural-sector bond issuances experienced significant price deterioration. Most notably, the Harvest Ridge Crop Sciences 8.500% Senior Notes due 2027 — a recently issued B-rated agricultural-chemical credit that is the most direct comparable to the proposed GAP Notes — traded down approximately 3.5 points (from approximately 97.25 to approximately 93.75 on a clean price basis) during this period. This decline indicates heightened investor aversion to agricultural-chemical credit risk specifically, beyond the general widening observed in the broader B-rated index.
More broadly, agricultural-sector issuers faced a distinctly negative credit backdrop in June 2022. Rising input costs for fertilizers, crop protection chemicals, and energy were compressing margins across the agribusiness value chain. Commodity price volatility — particularly in corn and soybean markets — introduced additional uncertainty regarding the revenue outlook for companies like GAP that are dependent on the planting decisions and purchasing power of Midwest row-crop farmers. The combination of these sector-specific headwinds with the broader macroeconomic deterioration created a particularly challenging environment for marketing new-issue high yield debt from agricultural-sector issuers.
3. Inability to Build a Book at the Maximum Authorized Coupon
The most direct evidence that market conditions rendered the sale of the Notes impracticable is Ridgeline's inability to assemble a sufficient book of orders at any coupon rate at or below 10.250%, which was the maximum coupon rate authorized by GAP's Board.
The pricing history of the proposed offering illustrates the progressive deterioration in market conditions:
•  On March 15, 2022, Ridgeline communicated initial price talk at a coupon range of 8.750%–9.250%, reflecting the market environment prevailing at that time.
•  On June 10, 2022, following a period of significant spread widening, Ridgeline revised its price talk to 9.500%–10.000%, representing a widening of approximately 75 basis points at the midpoint relative to the initial guidance.
•  On June 28, 2022, during the pricing call, Ridgeline attempted to build a book at 10.250% — 100 basis points above the top end of the initial price talk range and 25 basis points above the top end of the revised range. Even at this elevated coupon, Ridgeline was unable to attract sufficient orders from QIB investors to support the $30,000,000 offering size.
GAP's Board had authorized a maximum coupon of 10.250% for the Notes. This ceiling reflected the Board's assessment — in consultation with Linda Shao-Perkins (CFO) and with input from Tallgrass Capital — that a coupon above 10.250% would render the all-in cost of the Notes prohibitive relative to GAP's existing Meridian Revolver (priced at SOFR + 325 basis points, or approximately 4.80%–5.20% on an all-in basis at the time) and would not represent an efficient use of GAP's debt capacity. When the bookbuilding effort failed at 10.250%, and with no authority from the Board to increase the coupon further, the offering was pulled.
4. Ridgeline's Termination Notice
On July 1, 2022, three days after the offering was pulled, Ridgeline delivered its formal written termination notice to GAP pursuant to Section 9(b) of the Purchase Agreement. The notice was addressed to Douglas Evanston, General Counsel and Corporate Secretary of GAP, and was signed by Thomas Reardon, Managing Director, Leveraged Finance, Ridgeline Securities LLC.
The termination notice specifically invoked Section 9(b)(i) of the Purchase Agreement, citing a material adverse change in financial markets of the United States that, in Ridgeline's reasonable judgment, made the marketing and sale of the Notes impracticable. The notice recited, as the factual basis for Ridgeline's determination, the significant widening of credit spreads in the U.S. high yield market, the decline in comparable agricultural-sector credits, and the demonstrated inability to build a sufficient book of orders at the maximum authorized coupon rate. The notice also referenced the June 15, 2022 Federal Reserve rate increase and the general deterioration in risk sentiment as contributing factors.
A copy of Ridgeline's termination notice is attached hereto as Appendix B.
C. Legal Analysis — Validity of Termination
1. "Reasonable Judgment" Standard
Section 9(b) of the Purchase Agreement conditions the initial purchaser's termination right on its "reasonable judgment" that one or more of the enumerated market disruption or deterioration events has occurred and that the effect of such event or events makes the marketing or sale of the Notes "impracticable." This formulation establishes a subjective standard with an objective reasonableness overlay — that is, the determination is made by Ridgeline, but Ridgeline's judgment must be reasonable under the circumstances.
Under New York law, which governs the Purchase Agreement, the "reasonable judgment" standard in market-out provisions is generally interpreted to afford the initial purchaser significant discretion. Courts have recognized that the determination of whether market conditions have deteriorated to the point of impracticability is inherently a judgment call that requires expertise in the relevant capital markets. See, e.g., Bear, Stearns & Co. Inc. v. Jardine Strategic Holdings Ltd., No. 98 Civ. 4758 (S.D.N.Y. 1999) (noting that courts are reluctant to second-guess an underwriter's professional assessment of market conditions in the context of a market-out provision). The standard does not require that the marketing or sale of the Notes be literally impossible — only that it be impracticable in the commercially reasonable judgment of the initial purchaser.
The factual record here provides substantial objective support for Ridgeline's determination:
(a) An 89 basis point widening in the Corvalex Aldermere Securities US High Yield B-rated Index OAS over an 18-day period — a rate of spread widening significantly in excess of normal market volatility — constitutes strong evidence of a material adverse change in financial market conditions.
(b) A 3.5 point price decline in the most directly comparable agricultural-chemical credit (Harvest Ridge Crop Sciences 2027 notes) during the same period provides sector-specific corroboration.
(c) The demonstrated inability to build a book of orders at 10.250% — despite two prior rounds of price revision — is the most compelling practical evidence that the sale of the Notes was, in fact, impracticable in the prevailing market environment.
Given the strength of this factual record, we believe that any challenge by GAP to the reasonableness of Ridgeline's judgment would be unlikely to succeed. The market data is objective and publicly available, and the failed bookbuilding effort is a matter of documented record. There is no indication that Ridgeline acted in bad faith, and the termination appears to reflect a genuine assessment of market conditions rather than a pretext for withdrawing from the transaction for other reasons.
2. Procedural Compliance
We have reviewed the termination notice and the procedural requirements of Section 9(b) and conclude that Ridgeline complied with all applicable procedural requirements.
Section 9(b) requires that the initial purchaser deliver written notice of termination to the Company. Ridgeline delivered its written termination notice on July 1, 2022, addressed to Douglas Evanston, General Counsel and Corporate Secretary of GAP, at GAP's principal office address. The notice was delivered by email (with a PDF attachment of the signed notice) and by overnight courier, in accordance with the notice provisions of Section 12 of the Purchase Agreement.
The termination notice was delivered prior to the Closing Date. The targeted Closing Date was June 30, 2022, but the closing did not occur on that date (or on any date) because the offering was pulled on June 28, 2022. Section 9(b) permits termination "at any time prior to the Closing Date." Because the closing never occurred, the termination window remained open, and Ridgeline's July 1, 2022 notice was timely.
The termination notice identified the specific provision of the Purchase Agreement being invoked — namely, Section 9(b)(i) — and recited the factual basis for Ridgeline's determination, including references to the widening of high yield credit spreads, the decline in comparable sector credits, and the failed bookbuilding. There is no requirement under Section 9(b) for Ridgeline to provide advance notice to GAP of its intention to exercise the termination right, nor is there a requirement that Ridgeline attempt further marketing efforts, seek a price revision beyond the authorized range, or take any other curative action before exercising the termination right. The market-out clause is, by design, a unilateral termination right exercisable by the initial purchaser without obligation to mitigate.
3. Conclusion on Validity
Based on our review of the Purchase Agreement, the termination notice, the relevant market data, and applicable New York law, we conclude that Ridgeline's exercise of the Section 9(b) market-out termination right appears valid. The factual predicate for the termination is well-supported by objective evidence, and the procedural requirements were satisfied in all material respects.
We do not recommend that GAP challenge the termination. A challenge would require GAP to demonstrate that Ridgeline's judgment was unreasonable — a burden that, given the documented market conditions, GAP is unlikely to meet. Moreover, any such challenge would be costly, would strain the commercial relationship between GAP and Ridgeline (which may be valuable in the context of a potential re-launch), and would in any event not result in the consummation of the offering, since a court would be unlikely to order specific performance requiring Ridgeline to purchase the Notes in a deteriorated market environment.
IV. Surviving Obligations Post-Termination
Although the Purchase Agreement has been terminated and the offering will not proceed, certain provisions of the Purchase Agreement survive termination by their express terms. This Section identifies and analyzes those surviving obligations.
A. Expense Reimbursement Under Section 7
Section 7 of the Purchase Agreement obligates GAP, as issuer, to reimburse the reasonable out-of-pocket expenses incurred by Ridgeline in connection with the offering. Critically, this obligation applies "whether or not the transactions contemplated hereby are consummated or this Agreement is terminated." This language is clear and unambiguous: the expense reimbursement obligation survives termination and is not conditioned on the closing of the offering.
The reimbursable expenses under Section 7 fall into two principal categories:
(a) Initial Purchaser's Counsel Fees. Section 7(a) requires GAP to reimburse Ridgeline for the fees and disbursements of PGH, counsel to the initial purchaser, incurred in connection with the offering. This reimbursement obligation is subject to a negotiated cap of $225,000. Based on our informal discussions with Rachel Moriyama at PGH, the estimated actual fees incurred by PGH through the date of termination are approximately $210,000. This amount is within the contractual cap. PGH's fees reflect work performed on the Purchase Agreement, the Indenture, the Registration Rights Agreement, due diligence review, and related transactional documentation over the period from approximately March 2022 through early July 2022.
(b) Other Out-of-Pocket Expenses. Section 7(b) requires GAP to reimburse Ridgeline for additional reasonable out-of-pocket expenses incurred by Ridgeline in connection with the offering, subject to a cap of $50,000. These expenses include, but are not limited to, travel expenses for due diligence sessions and management presentations, roadshow materials and logistics, Vireo Software charges for market surveillance and pricing analysis, CUSIP application fees, and telecommunications charges. We have not yet received an itemized invoice for these expenses and expect the actual amount to be less than $50,000.
A summary of the expense reimbursement provisions is attached hereto as Appendix D.
We have, on behalf of GAP, sent a letter to Ridgeline (attention: Thomas Reardon, Managing Director) acknowledging GAP's expense reimbursement obligation under Section 7 and requesting that Ridgeline submit itemized invoices for all reimbursable expenses within thirty (30) days. Upon receipt, we will review the invoices for compliance with the contractual caps and the reasonableness of the claimed expenses, and will advise GAP regarding payment.
B. Placement Fee
Section 4 of the Purchase Agreement provides for a placement fee payable to Ridgeline equal to 2.50% of the aggregate principal amount of Notes sold. Had the offering closed at the full $30,000,000 principal amount, the placement fee would have been $750,000.
However, the placement fee under Section 4 was expressly contingent on the closing and sale of the Notes. The relevant language provides that the placement fee is earned "upon the sale and delivery of the Notes on the Closing Date." Because no Notes were sold and the offering was terminated prior to closing, the conditions precedent to the earning of the placement fee were never satisfied. Accordingly, the placement fee was never earned, no portion of the placement fee is owed by GAP to Ridgeline, and Ridgeline has not asserted any claim to the placement fee.
C. Indemnification Provisions
Section 8 of the Purchase Agreement contains mutual indemnification provisions that expressly survive the termination of the Purchase Agreement. These provisions are designed to allocate liability for certain categories of losses that may arise in connection with the offering, and their survival is independent of whether the offering is consummated. A summary of the Section 8 indemnification provisions is attached hereto as Appendix E.
The key elements of the surviving indemnification provisions are as follows:
(a) GAP's Indemnification of Ridgeline. Under Section 8(a), GAP has agreed to indemnify and hold harmless Ridgeline and its affiliates, directors, officers, employees, and agents (the "Ridgeline Indemnified Parties") against any and all losses, claims, damages, or liabilities (including reasonable legal fees and expenses) arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the final Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent that such untrue statement or omission was based upon information furnished in writing by Ridgeline specifically for inclusion therein, or (ii) any breach by GAP of any representation, warranty, or covenant contained in the Purchase Agreement.
(b) Ridgeline's Indemnification of GAP. Under Section 8(b), Ridgeline has agreed to indemnify and hold harmless GAP and its members, managers, officers, employees, and agents against any and all losses, claims, damages, or liabilities arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the final Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact, to the extent, but only to the extent, that such untrue statement or omission was based upon information furnished in writing by Ridgeline specifically for inclusion therein.
(c) Contribution. Section 8(c) provides for contribution between GAP and Ridgeline in circumstances where indemnification is unavailable or insufficient, based upon the relative benefits received and the relative fault of the parties.
Although the offering was pulled and no Notes were sold to investors, the Preliminary Offering Memorandum dated June 1, 2022, was distributed to potential QIB investors during the marketing phase. The universe of recipients is believed to include approximately 35 to 40 institutional investors who received the Preliminary Offering Memorandum and/or attended the management presentation. Accordingly, there exists a theoretical risk — which we assess as low-probability — that a potential investor who received the Preliminary Offering Memorandum could assert a claim based on an alleged misstatement or omission in that document. For example, if a potential investor who reviewed the Preliminary Offering Memorandum and was allocated shares in another offering or made other investment decisions based on information contained therein were to allege losses arising from a material misstatement, the indemnification provisions of Section 8 would govern the allocation of any resulting liability between GAP and Ridgeline.
We emphasize that we view this risk as remote. No Notes were sold, and the recipients of the Preliminary Offering Memorandum are sophisticated QIB investors who are unlikely to assert claims in the absence of an actual purchase. Nevertheless, the survival of the indemnification provisions ensures that the contractual framework for allocating such liability remains in place. GAP should be aware of this theoretical exposure and should retain all records relating to the preparation and distribution of the Preliminary Offering Memorandum.
D. Confidentiality
The confidentiality provisions contained in the Purchase Agreement, as well as the separate confidentiality and non-disclosure agreements executed between GAP and potential QIB investors who received the Preliminary Offering Memorandum, survive the termination of the Purchase Agreement and the withdrawal of the offering.
These confidentiality obligations are particularly significant with respect to the Pinnacle Ratings Group indicative credit assessment of B+ (stable outlook), which was communicated on a non-public basis and was included in the Preliminary Offering Memorandum as a non-public indicative rating. GAP should ensure that all recipients of the Preliminary Offering Memorandum and all parties with access to the indicative rating continue to treat this information as confidential. Similarly, the financial projections, management presentations, and other proprietary business information of GAP that were disclosed during the marketing and due diligence process remain subject to the confidentiality obligations undertaken by the recipients.
We recommend that GAP's General Counsel, Douglas Evanston, circulate a reminder notice to the internal team regarding the continuing confidentiality obligations and coordinate with Ridgeline to confirm that all potential QIB investors who received confidential information have been reminded of their obligations.
V. Summary of GAP's Transaction Expenses
Although the offering did not close, GAP incurred substantial expenses in preparation for the proposed issuance. The following table summarizes GAP's estimated total transaction expenses as of the date of this memorandum:
Several notes regarding the foregoing expense summary:
(a) The $750,000 placement fee that would have been payable to Ridgeline under Section 4 of the Purchase Agreement was not incurred, as it was contingent on the closing and sale of the Notes, which did not occur. This fee is therefore excluded from the above summary.
(b) GAP's own legal fees (Calderwood & Harkness LLP) of approximately $385,000 will be billed directly to GAP through C&H's standard billing process. A final invoice is being prepared separately and will be submitted to GAP's finance department (attention: Linda Shao-Perkins, CFO) in the ordinary course.
(c) The reimbursement to Ridgeline for PGH's fees is capped at $225,000 under Section 7(a) of the Purchase Agreement. The estimated actual fees of approximately $210,000 are within that cap. The additional out-of-pocket expense reimbursement under Section 7(b) is capped at $50,000 and is expected to be less than that amount. GAP's maximum aggregate expense reimbursement exposure to Ridgeline is therefore $275,000 ($225,000 + $50,000).
(d) The Heartland Trust proposed acceptance fee of approximately $15,000 reflects costs incurred by Heartland Trust in reviewing and negotiating the Indenture drafts and preparing for the trustee engagement. Heartland Trust's standard engagement letter provides for payment of this fee upon execution of the Indenture, but Heartland Trust has indicated informally (through Gregory Arndt) that it may seek reimbursement of a portion of its internal costs even though the Indenture was not executed. We are reviewing the terms of the preliminary engagement with Heartland Trust and will advise GAP separately.
(e) The Pinnacle Ratings Group indicative rating fee of approximately $75,000 was invoiced and paid by GAP in April 2022, prior to the termination. This fee is non-refundable.
(f) Printing and EDGAR services costs of approximately $22,000 were incurred by Vintage Financial Printers, Inc. in connection with the preparation and formatting of the Preliminary Offering Memorandum and related transaction documents.
In total, GAP's estimated out-of-pocket expenditure in connection with the aborted offering is approximately $725,000. This amount does not include any internal costs borne by GAP (management time, employee resources, etc.), which are not quantified herein.
VI. Considerations for a Potential Re-Launch
GAP's management and board of managers have indicated preliminary interest in re-launching the proposed notes offering at a future date, if and when market conditions improve sufficiently to permit pricing within the Board's tolerance. The following subsections address the principal considerations relevant to a potential re-launch.
A. Market Timing
As of the date of this memorandum, market conditions remain unfavorable for B-rated agricultural-sector issuers. The Corvalex Aldermere Securities US High Yield B-rated Index OAS remains elevated relative to the levels prevailing in February and March 2022, when the transaction was initially structured and priced. The Federal Reserve's monetary tightening cycle is widely expected to continue through the second half of 2022, which is likely to sustain or increase pressure on high yield credit spreads. The macroeconomic outlook remains uncertain, with recession fears persisting and commodity markets exhibiting significant volatility.
Given these conditions, any re-launch of the offering should be deferred until there is meaningful spread compression in the high yield market, particularly for the agribusiness sector. GAP's Board has indicated that a coupon above 10.250% is prohibitive from an economic standpoint, given the relative cost of GAP's existing Meridian Revolver and the Board's assessment of the appropriate weighted average cost of debt for the company. If market conditions do not improve sufficiently to bring new-issue pricing for a B-rated agricultural-chemical credit within or near the 10.250% coupon threshold, a re-launch would face the same outcome as the June 2022 attempt.
We recommend that GAP and its financial advisor — whether Ridgeline or a successor placement agent — establish a regular monitoring framework to track the Corvalex Aldermere Securities US High Yield B-rated Index OAS, comparable agricultural-sector credit spreads, and new-issue activity in the B-rated high yield market. Key indicators that might support a re-launch decision include: (i) the B-rated OAS returning to or below the approximately 498 basis points level observed on June 10, 2022; (ii) successful new-issue pricing of comparable agricultural or specialty chemical credits at coupon rates within the Board's authorized range; and (iii) stabilization or improvement in broader macroeconomic indicators, including inflation expectations and Federal Reserve forward guidance.
B. Shelf Life of Due Diligence and Offering Documents
The due diligence conducted through May 20, 2022, and the Preliminary Offering Memorandum dated June 1, 2022, were prepared based on information available at that time, including GAP's FY 2021 audited financial statements and financial and operating data through early 2022. If a re-launch is delayed significantly, these materials will become stale and will need to be updated.
Specifically:
(a) If a re-launch occurs after September 30, 2022, GAP would need to prepare and include in the Offering Memorandum updated interim financial statements for the second quarter of 2022 (ended June 30, 2022), and potentially for the third quarter of 2022 (ended September 30, 2022), depending on the timing of the re-launch. These interim financial statements would need to be reviewed (but not audited) by Clarendon Harris & Co. LLP and would need to comply with the disclosure standards applicable to Rule 144A offerings.
(b) The Offering Memorandum would require a comprehensive update to reflect any material developments that have occurred since June 1, 2022, including but not limited to: new material contracts or loss of material customers; changes in litigation or regulatory matters; changes in senior management or the board of managers; acquisitions or divestitures; changes in GAP's debt structure or financial condition; and material developments in the agricultural-chemical industry or in the broader markets in which GAP operates.
(c) The FY 2021 audited financial statements prepared by Clarendon Harris will remain the most recent annual audited financials until the FY 2022 audit is completed, which is expected in early 2023 (typically February or March 2023). For a re-launch in calendar year 2023, FY 2022 audited financial statements and potentially FY 2023 interim (Q1 or Q2) financial statements would need to be included in the Offering Memorandum.
(d) The due diligence process would need to be refreshed, including updated management diligence sessions, updated legal, environmental, and regulatory diligence, and an updated bring-down of representations and warranties.
The Indenture (draft v.6, circulated June 15, 2022) and the Registration Rights Agreement draft circulated on the same date would require only modest updating if the structure and material economic terms of the offering remain substantially the same. However, if the pricing parameters, aggregate principal amount, maturity, covenants, or other material terms are revised in connection with a re-launch — which is likely if market conditions have changed significantly — more substantial revisions to the Indenture and related documentation will be required.
C. Rating Agency Re-Engagement
The Pinnacle Ratings Group indicative credit assessment of B+ (stable outlook) was communicated on March 30, 2022, and was based on the financial and business information available to Pinnacle's analytical team at that time, including GAP's FY 2021 financial statements, management projections, and a qualitative assessment of GAP's competitive position, management team, and industry outlook.
For any re-launch of the offering, GAP would need to re-engage Pinnacle to refresh the indicative rating. Josephine Tran, the Lead Analyst covering GAP at Pinnacle, would likely serve as the primary contact for a refreshed assessment. Pinnacle will require updated financial data — including interim financial statements for any periods subsequent to December 31, 2021 — and may request updated management presentations, updated financial projections, and information regarding any material developments in GAP's business or the broader agricultural-chemical market since March 2022.
There is no assurance that the B+ (stable outlook) indicative rating would be reaffirmed in a refreshed assessment. Pinnacle's methodology considers, among other factors, the issuer's financial performance, leverage metrics, industry conditions, and management quality. If GAP's financial performance has deteriorated, if leverage metrics have moved adversely, or if industry conditions have worsened since March 2022, Pinnacle may revise the indicative rating downward or change the outlook to negative. A downgrade or negative outlook revision could materially affect investor demand and pricing for the Notes and could render a re-launch more difficult or impractical.
Additional rating agency fees will likely be incurred for a refreshed or formal published assessment. These fees are typically in the range of $50,000 to $100,000 for a refreshed indicative rating and $100,000 to $150,000 for a formal published rating, depending on the scope of the analysis and Pinnacle's fee schedule.
D. Existing Credit Facility Considerations
GAP's $40.0 million senior secured revolving credit facility with Meridian Commercial Bank, N.A. (SOFR + 325 bps) matures on August 15, 2024. As of March 31, 2022, the drawn balance on the Meridian Revolver was $18.0 million. One of the primary purposes of the proposed notes offering was to refinance the $18.0 million drawn balance on the Meridian Revolver and to reduce GAP's reliance on the revolving credit facility.
With the notes offering terminated and no immediate alternative financing in place, GAP will need to address the Meridian Revolver maturity as a standalone matter. As of the date of this memorandum, the maturity is approximately 25 months away (August 15, 2024). While this provides some runway, the following considerations are relevant:
(a) As the maturity date approaches, the outstanding drawn balance on the Meridian Revolver will become a current liability for financial reporting purposes (within 12 months prior to the maturity date). This reclassification could affect GAP's balance sheet presentation, working capital metrics, and compliance with financial covenants under the Meridian Revolver itself (if any reclassification triggers exist).
(b) Refinancing risk may increase as the maturity approaches, particularly if credit market conditions remain unfavorable. Rating agencies, including Pinnacle, routinely consider approaching debt maturities as a factor in credit assessments. An unaddressed near-term maturity could weigh negatively on any future credit rating.
(c) GAP should proactively consult with Meridian Commercial Bank regarding a potential amendment, extension, or refinancing of the revolving facility, independent of the notes offering. An extension of the Meridian Revolver maturity date — even by one or two years — would reduce near-term refinancing risk and provide greater flexibility for the timing of any capital markets transaction.
We recommend that GAP's management team (Linda Shao-Perkins, CFO) initiate discussions with Meridian in the near term regarding the revolver maturity, and that Calderwood & Harkness be engaged to assist with any amendment or extension if needed.
E. Purchase Agreement Considerations for Re-Launch
The executed Purchase Agreement dated June 20, 2022, between GAP and Ridgeline has been terminated pursuant to the Section 9(b) termination notice. The Purchase Agreement has no continuing force or effect, except with respect to the surviving provisions identified in Section IV of this memorandum (expense reimbursement, indemnification, confidentiality, and contribution). A new purchase agreement would need to be negotiated and executed with any initial purchaser in connection with a re-launch.
If GAP elects to re-engage Ridgeline as initial purchaser for a re-launch, the parties would negotiate a new purchase agreement. While the June 20, 2022 Purchase Agreement would serve as a useful starting point, certain key terms may be subject to renegotiation, including:
(a) Pricing Parameters. The pricing supplement to the new purchase agreement would reflect then-current market conditions, which may differ materially from those prevailing in June 2022.
(b) Placement Fee Rate. The 2.50% placement fee rate negotiated for the original offering may be subject to revision, depending on market practice, the competitive landscape among potential placement agents, and the complexity of the re-launched offering.
(c) Expense Reimbursement Caps. The $225,000 cap on initial purchaser's counsel fees and the $50,000 cap on out-of-pocket expenses may be renegotiated for a new engagement.
(d) Market-Out Thresholds. While market-out provisions are generally standardized, the specific formulation and any bespoke carve-outs may be revisited.
(e) Closing Conditions. Customary closing conditions, including bring-down of representations and warranties, delivery of officer's certificates, comfort letters from Clarendon Harris, and legal opinions from issuer's and trustee's counsel, would need to be updated and re-specified.
If GAP elects to engage a different broker-dealer as placement agent for a re-launch — whether due to a desire for fresh market perspective, competitive considerations, or other reasons — new engagement terms and documentation would be required. The prior Purchase Agreement with Ridgeline would have no continuing effect on the relationship with a successor placement agent (other than the surviving indemnification and confidentiality provisions described in Section IV, which run between GAP and Ridgeline specifically).
F. CUSIP / ISIN
CUSIP 39572L AA 3 and ISIN US39572LAA35 were reserved through CUSIP Global Services in connection with the anticipated issuance of the Notes. These identifiers were never activated and no securities were issued or settled under these numbers.
If GAP does not intend to re-launch the offering imminently, these reservations should be cancelled with CUSIP Global Services to avoid administrative confusion and any ongoing reservation fees. New CUSIP and ISIN identifiers can be reserved at the appropriate time in connection with any future offering. The process for reserving new identifiers is straightforward and typically takes two to three business days.
VII. Recommendations
Based on the foregoing analysis, we make the following recommendations to GAP:
1.  Do not challenge the Section 9(b) termination. The factual and procedural basis for Ridgeline's exercise of the market-out clause is sound. The objective market data — including the 89 basis point widening in the B-rated high yield index OAS, the 3.5 point decline in comparable agricultural-sector credits, and the failed bookbuilding at 10.250% — provides substantial support for Ridgeline's reasonable judgment that market conditions rendered the sale of the Notes impracticable. A challenge would be costly, unlikely to succeed, and potentially damaging to GAP's relationship with Ridgeline and its reputation in the capital markets.
2.  Process expense reimbursement. GAP should promptly pay Ridgeline's reimbursable expenses upon receipt and review of itemized invoices, subject to the contractual caps set forth in Section 7 of the Purchase Agreement ($225,000 for PGH counsel fees; $50,000 for out-of-pocket expenses). We have requested that Ridgeline submit invoices within thirty days. Upon receipt, we will review the invoices for reasonableness and compliance with the caps and advise GAP regarding payment.
3.  Preserve documents. GAP should retain all transaction documents — including all drafts of the Indenture, the Offering Memorandum (all versions), the Purchase Agreement, the Registration Rights Agreement, the due diligence request list and responses, management presentations, financial models, correspondence with all parties, and all internal and external communications — for potential future use in a re-launch and to comply with any surviving contractual obligations (including indemnification and confidentiality). Documents should be preserved in accordance with GAP's document retention policies and should not be destroyed without prior consultation with counsel.
4.  Cancel CUSIP / ISIN reservations unless a near-term re-launch is contemplated. If the re-launch timeline extends beyond the next 90 days, we recommend that GAP instruct C&H or its transfer agent to cancel the reserved CUSIP (39572L AA 3) and ISIN (US39572LAA35) with CUSIP Global Services. New identifiers can be reserved promptly in connection with any future offering.
5.  Monitor market conditions and maintain relationships with Ridgeline (or identify and evaluate alternative placement agents) for a potential re-launch when pricing conditions improve to levels consistent with the Board's authorized coupon parameters. We recommend establishing a regular monitoring framework, with periodic check-ins between GAP's management, Tallgrass Capital, and the placement agent regarding market conditions, comparable new-issue activity, and re-launch timing.
6.  Address Meridian revolver maturity (August 15, 2024) as a standalone matter if the notes offering is not re-launched in the near term. We recommend that GAP initiate discussions with Meridian Commercial Bank, N.A. regarding a potential amendment, extension, or refinancing of the revolving credit facility to mitigate refinancing risk.
7.  Engage Clarendon Harris & Co. LLP early on updated financial statement preparation if a re-launch is targeted for late 2022 or 2023. Interim financial statements (reviewed, not audited) for Q2 2022 and potentially Q3 2022 may be required, and the FY 2022 audit timeline should be coordinated with any re-launch schedule.
8.  Re-engage Pinnacle Ratings Group, Inc. to refresh the indicative credit assessment well in advance of any re-launch. GAP should provide Pinnacle with updated financial data and be prepared for the possibility that the B+ (stable) indicative rating may not be reaffirmed.
VIII. Document Retention and File Status
C&H Matter No. 1020-00003 / Billing No. 014723.00001 will be administratively closed as a terminated engagement. The matter will be reclassified in C&H's matter management system from "active" to "inactive — terminated transaction," with a re-activation flag to facilitate reopening if GAP elects to pursue a re-launch.
All work product, correspondence, and transaction documents generated or received by C&H in connection with this matter will be retained in accordance with C&H's document retention policy (currently a minimum retention period of seven years for closed transactional matters, subject to extension for matters involving potential ongoing liability exposure). Given the surviving indemnification provisions under Section 8 of the Purchase Agreement — and the theoretical risk, however remote, of claims arising from the distribution of the Preliminary Offering Memorandum — we recommend that document retention for this matter be flagged for extended preservation beyond the standard seven-year period, subject to periodic review.
The engagement team for this matter consists of the following C&H attorneys, each of whom will remain available for follow-up inquiries, re-launch efforts, or any other matter arising in connection with the Greenfield Agricultural Partners engagement:
•  Robert Adeyemi — Responsible Partner, Capital Markets
•  Jennifer Kwon — Billing Partner, Capital Markets
•  Claire Dempsey — Lead Associate, Capital Markets
•  Audrey Zhou — Working Associate, Capital Markets
A final invoice for C&H's legal fees in connection with this matter (estimated at approximately $385,000) is being prepared separately and will be submitted to GAP's finance department (attention: Linda Shao-Perkins, Chief Financial Officer) under separate cover.
We are available to discuss this memorandum and its recommendations at your convenience.
Respectfully submitted,
Claire Dempsey Lead Associate, Capital Markets Calderwood & Harkness LLP
cc: Jennifer Kwon, Partner, Capital Markets (Billing Partner)
Audrey Zhou, Associate, Capital Markets
Appendices (Referenced)
The following appendices are referenced in this memorandum and are maintained in the C&H matter file for Matter No. 1020-00003:
Appendix A: Copy of Purchase Agreement Section 9(b) (Market-Out Provision) — Full Text Excerpt
Appendix B: Copy of Ridgeline Securities LLC Termination Notice dated July 1, 2022 (Thomas Reardon, Managing Director, to Douglas Evanston, General Counsel & Corporate Secretary, Greenfield Agricultural Partners LLC)
Appendix C: Corvalex Aldermere Securities US High Yield B-Rated Index Option-Adjusted Spread (OAS) Data, June 10–28, 2022 (Source: Crowne Albany Systems)
Appendix D: Summary of Purchase Agreement Section 7 Expense Reimbursement Provisions
Appendix E: Summary of Purchase Agreement Section 8 Indemnification and Contribution Provisions
Appendix F: Transaction Timeline and Closing Checklist (Status as of Termination Date, July 1, 2022)
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT Calderwood & Harkness LLP | Matter No. 1020-00003 | Billing No. 014723.00001
Date | Event
February 21, 2022 | C&H Matter No. 1020-00003 opened; C&H engagement letter executed by GAP (Douglas Evanston, on behalf of GAP).
March 1, 2022 | Kickoff call among C&H, Ridgeline, PGH, and GAP management. Due diligence request list circulated by Ridgeline and PGH to GAP management (Marcus J. Reinhart, Linda Shao-Perkins, Douglas Evanston) and Clarendon Harris (Martin Okafor).
March 15, 2022 | Initial price talk communicated by Ridgeline at 8.750%–9.250% indicative coupon range, reflecting market conditions prevailing at that time.

CALDERWOOD & HARKNESS LLP

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