PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
DUE DILIGENCE MEMORANDUM
CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004
Transaction: Proposed acquisition of 100% of the equity interests of Cascadia Renewables Holdings, Inc. ("Cascadia," "CRH," or the "Company") by Cascadia Acquisition Corp. ("AcquisitionCo"), a Delaware corporation to be owned by Meridian Infrastructure Partners Fund IV, LP (71.43% / $750,000,000) and ICM Cascadia Co-Invest, LP (28.57% / $300,000,000), at an aggregate enterprise value of $1,950,000,000 (the "Transaction").
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I. EXECUTIVE SUMMARY
This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") review of the intellectual property ("IP") assets owned, licensed, or used by Cascadia Renewables Holdings, Inc. and its operating subsidiaries in connection with the proposed Transaction. This review was undertaken at the request of Ironside Capital Management LP ("Ironside" or the "Client") as part of the broader legal due diligence workstream for the proposed acquisition of CRH. Cascadia's operations span three states in the Pacific Northwest — Oregon, Washington, and Idaho — and encompass a diversified portfolio of renewable energy generation and water infrastructure assets, including fourteen (14) hydroelectric facilities, six (6) wind farms, and three (3) water-treatment concessions.
Based on our review of the documents and information made available to us, our overall IP risk assessment for this Transaction is LOW. Cascadia's IP portfolio is primarily functional and operational in nature, serving to support the Company's core business of infrastructure asset ownership and operation. Unlike technology-driven enterprises where patents and proprietary software constitute the primary source of enterprise value, Cascadia's business value is overwhelmingly derived from its physical assets, long-term concession agreements, and contractual relationships with governmental counterparties and off-takers. The weighted-average remaining life of Cascadia's material contracts is approximately twenty-two (22) years, providing substantial long-term revenue visibility independent of IP considerations.
The key categories of IP assets reviewed in connection with this memorandum include:
(a) registered trademarks and service marks (federal and state);
(b) proprietary operational technology and trade secrets, including facility-specific operating procedures and proprietary algorithms;
(c) third-party software licenses, including supervisory control and data acquisition ("SCADA") systems, energy management systems, and enterprise resource planning platforms;
(d) domain names and digital assets; and
(e) data and monitoring systems intellectual property, including operational performance data sets and environmental compliance records.
Our principal observations arising from this review are as follows:
(i) Cascadia holds a limited patent portfolio consisting of only two (2) issued U.S. utility patents and one (1) pending provisional application, all relating to water-treatment technology; these patents are ancillary to the Company's competitive position, which is fundamentally grounded in its long-term concession agreements and municipal contracts;
(ii) Cascadia relies on third-party SCADA and energy-management software under multi-year license agreements, two of which contain change-of-control provisions that will require licensor consent prior to or at closing of the Transaction;
(iii) Cascadia maintains proprietary water-treatment process documentation that constitutes protectable trade secrets, though the Company has not implemented a formal trade secret inventory or classification system;
(iv) all federal and state trademark registrations are in good standing and in the name of the parent entity, with no pending oppositions, cancellation proceedings, or identified conflicts; and
(v) certain third-party software license agreements contain assignment or change-of-control provisions that will require pre-closing engagement with licensors to secure necessary consents.
We note that Halstead & Greer LLP, the Company's independent auditor and tax advisor (200 Market Street, Suite 1500, Portland, OR 97201), did not separately value Cascadia's IP assets in its audit of the Company's fiscal year 2021 financial statements, which reflected total revenue of approximately $487 million and EBITDA of approximately $138 million. IP assets are carried at nominal book value on the Company's balance sheet, consistent with the ancillary nature of these assets to Cascadia's infrastructure platform.
All documents reviewed in connection with this memorandum were accessed through the Cascadia virtual data room maintained by Ridgeway, Ashford & Malone PC, specifically Folders 8.1 through 8.7 (Intellectual Property). A complete index of documents reviewed is attached hereto as Exhibit E.
II. SCOPE OF REVIEW
A. Documents and Materials Reviewed
In preparing this memorandum, C&H reviewed the following documents and materials, which were made available through the virtual data room and supplemented by direct production from Cascadia's management team and counsel:
1. IP schedules and disclosure materials provided by Cascadia management, including materials prepared under the direction of Jonathan M. Weir, Chief Executive Officer, and Sandra K. Llewellyn, Chief Financial Officer;
2. United States Patent and Trademark Office ("USPTO") trademark registration records and state trademark registry searches conducted across the states of Oregon, Washington, and Idaho;
3. Third-party software license agreements, including master software license agreements, order forms, amendments, and statements of work for all material software platforms utilized in Cascadia's operations;
4. Patent filings and prosecution files maintained by Cascadia's patent counsel, including issued patent documentation, file histories, assignment records, and the pending provisional patent application;
5. Confidentiality agreements, invention assignment agreements, and intellectual property assignment agreements executed by Cascadia employees and contractors, with particular focus on approximately fifteen (15) key technical personnel whose sample agreements were produced in the data room;
6. Technical reports and memoranda prepared by Clearwater Environmental Consulting Inc. (4800 Meadows Road, Suite 300, Lake Oswego, OR 97035), referencing proprietary filtration and monitoring technology deployed at Cascadia's water-treatment concession facilities, including detailed process specifications for the Bull Run Filtration Project;
7. Domain name registration records and renewal documentation;
8. Open-source software usage policies and internal IT department records regarding open-source component usage;
9. Cascadia's employee handbook, including sections addressing confidentiality, intellectual property ownership, and restrictive covenant obligations;
10. Marketing materials, brand guidelines, and corporate communications referencing Company trademarks and service marks; and
11. Data room documents provided via Ridgeway, Ashford & Malone PC (lead partner Nina R. Castellano, 1000 SW Broadway, Suite 1600, Portland, OR 97205), Cascadia's outside legal counsel.
B. Limitations. This memorandum is based solely on the documents and information provided to C&H through the virtual data room, direct productions from Cascadia management, and the results of publicly available registry searches. We have not conducted an independent IP audit, a freedom-to-operate analysis, or a prior art search with respect to any of Cascadia's patents or patent applications. C&H did not commission a separate IP valuation or engage any third-party IP valuation firm in connection with this review. Accordingly, the assessments and risk ratings contained herein are subject to the inherent limitations of a document-based legal review and should be read in conjunction with any technical or financial IP assessments that Ironside may separately undertake.
We have relied upon the representations of Cascadia management and counsel regarding the completeness and accuracy of the materials provided. To the extent any material IP assets, agreements, or disputes exist but were not disclosed or made available in the data room, the conclusions of this memorandum may require revision.
III. REGISTERED TRADEMARKS AND SERVICE MARKS
A. U.S. Trademark Registrations
Cascadia Renewables Holdings, Inc. is the registered owner of the following trademarks registered with the United States Patent and Trademark Office. Each registration is in the name of Cascadia Renewables Holdings, Inc., an Oregon corporation, with a principal address at 1100 SW Sixth Avenue, Suite 1800, Portland, OR 97204:
Based on our review of the USPTO records and the prosecution files provided in the data room, all of the foregoing registrations are in good standing. Maintenance filings required under Section 8 of the Lanham Act (affidavits of continued use) and Section 15 of the Lanham Act (affidavits of incontestability) appear to have been timely filed for each registration. We did not identify any pending oppositions, cancellation proceedings, or third-party challenges to any of Cascadia's trademark registrations. A complete schedule of registered trademarks, including registration numbers, filing dates, and registration dates, is attached hereto as Exhibit A.
Each mark is registered solely in the name of the parent holding company, Cascadia Renewables Holdings, Inc., rather than in the names of individual operating subsidiaries. This is consistent with best practices for centralized trademark portfolio management in a multi-subsidiary corporate structure and simplifies the change-of-control analysis in the context of the contemplated Transaction.
B. State Trademark Registrations
In addition to its federal registrations, Cascadia holds state trademark registrations in Oregon, Washington, and Idaho for the "CASCADIA RENEWABLES" and "CASCADIA WATER SOLUTIONS" word marks. These state registrations provide supplemental protection in each of the three states in which Cascadia maintains active operations and were obtained as a complement to the Company's federal registrations.
Our review of the applicable state trademark registries did not identify any conflicts, competing registrations, or pending applications by third parties for marks that would be confusingly similar to Cascadia's registered marks in these jurisdictions. All state registrations are currently in effect and have been timely renewed in accordance with the requirements of each state's trademark registration statutes.
C. Common Law Marks
In addition to its registered trademarks, Cascadia uses certain unregistered marks in its marketing materials and operational documentation. These include facility-specific names used for individual wind farms and hydroelectric projects (e.g., project-specific names used in community relations materials, environmental filings, and power purchase agreements). While these names function as identifiers of Cascadia's facilities, they have not been formally registered with the USPTO or any state trademark office.
Common law trademark rights arise through use in commerce and provide a degree of protection in the geographic areas where such marks are actively used. However, the scope of protection afforded by common law rights is more limited than that provided by federal or state registration. We recommend that following the closing of the Transaction, Ironside and Meridian evaluate whether any of these unregistered marks are sufficiently material to warrant formal registration. That said, the current unregistered status of these facility-specific names does not present a material risk to the Transaction, given that branding in the infrastructure sector is generally of secondary importance relative to contractual rights, regulatory licenses, and physical asset ownership.
D. Change-of-Control Considerations
Because all trademark registrations are held directly by Cascadia Renewables Holdings, Inc. (the parent corporation whose equity is being acquired in the Transaction), the contemplated stock acquisition structure does not require any assignment or transfer of trademark ownership. The same legal entity will continue to own the marks following the closing. No third-party consents are required under trademark law in connection with a change in the equity ownership of the trademark holder.
We note, however, that if the Transaction were restructured as an asset acquisition rather than a stock acquisition, formal trademark assignment agreements would be required to transfer ownership of the registered marks to the acquiring entity, along with the goodwill associated with each mark. As of the date of this memorandum, there is no indication that the parties contemplate restructuring the Transaction as an asset deal, and we understand that the stock acquisition structure has been agreed upon by the principals.
IV. PATENTS
A. Issued Patents
Cascadia holds two (2) issued United States utility patents, both of which relate to water-treatment technology deployed at the Company's three water-treatment concession facilities. The details of each issued patent are as follows:
1. U.S. Patent No. 10,457,281 — Adaptive Filtration Control System for Municipal Water Treatment
• Date of Issuance: March 12, 2019
• Expiration Date: March 12, 2039
• Assignee: Cascadia Renewables Holdings, Inc.
• Inventors: Dr. Richard F. Caldwell, Emily S. Nakata
• Description: This patent covers an automated filtration control system that dynamically adjusts filter media cycling rates, backwash intervals, and chemical pre-treatment dosing based on real-time influent water-quality data. The system utilizes sensor arrays to continuously monitor turbidity, pH, dissolved organic carbon, and particulate concentrations, and applies machine-learning algorithms to optimize filtration performance and reduce chemical consumption.
2. U.S. Patent No. 10,892,704 — Real-Time Water Quality Monitoring Apparatus and Method
• Date of Issuance: January 14, 2020
• Expiration Date: January 14, 2040
• Assignee: Cascadia Renewables Holdings, Inc.
• Inventors: Dr. Richard F. Caldwell, James T. Horowitz, Emily S. Nakata
• Description: This patent covers a distributed monitoring apparatus and associated data processing methodology for real-time assessment of treated water quality at multiple points within a municipal water distribution network. The system enables continuous compliance monitoring and early detection of water-quality exceedances.
Both patents relate to technology actively deployed at Cascadia's three water-treatment concession facilities, most notably at the Bull Run Filtration Project, which is operated under a long-term concession agreement with the Portland Metropolitan Water District originally executed in approximately 2018. The Bull Run Filtration Project generates annual revenue of approximately $64 million and represents the most significant of Cascadia's three water-treatment operations.
Both patents were developed by Cascadia's in-house engineering team. Our review of the invention assignment agreements for the named inventors — Dr. Richard F. Caldwell (Vice President, Water Treatment Engineering), Emily S. Nakata (Senior Process Engineer), and James T. Horowitz (Principal Controls Engineer) — confirms that each inventor executed a valid invention assignment agreement assigning all rights in work-product intellectual property to the Company. We did not identify any deficiencies in the chain of title from the inventors to Cascadia. A complete schedule of patents and patent applications is attached hereto as Exhibit B.
B. Patent Applications
We identified one (1) pending provisional patent application, filed with the USPTO in early 2022, relating to an enhancement of the adaptive filtration control system covered by U.S. Patent No. 10,457,281. The provisional application describes improvements to the machine-learning algorithms utilized in the filtration control system, incorporating additional environmental variables and historical performance data to further optimize filter cycling rates and extend filter media lifespan.
As a provisional application, this filing establishes a priority date but does not mature into an issued patent unless a corresponding non-provisional application is filed within twelve (12) months of the provisional filing date. Based on our review of the filing records, the deadline for conversion to a non-provisional application is approaching. If the non-provisional application is not timely filed, the priority date established by the provisional application will be lost.
Recommendation: Ironside should confirm with Meridian Infrastructure Partners and Cascadia management (specifically David R. Hargreaves at Meridian and Dr. Richard F. Caldwell at Cascadia) whether the Company intends to file the non-provisional application before the expiration of the provisional filing period. While the pending application relates to incremental improvements rather than foundational technology, the loss of the priority date could affect the scope of any future patent protection for the enhanced system. This item should be tracked on the pre-closing action items list and coordinated with Cascadia's patent counsel.
C. Freedom-to-Operate. C&H has not conducted a freedom-to-operate analysis with respect to Cascadia's patented technology or any other technology utilized in the Company's operations. A freedom-to-operate analysis would involve a comprehensive search and review of third-party patents to determine whether any aspect of Cascadia's operations, products, or processes may infringe upon the patent rights of others.
Cascadia management has represented to us, through their counsel at Ridgeway, Ashford & Malone PC, that the Company is not aware of any third-party intellectual property rights that would restrict the use, manufacture, or deployment of its patented filtration control and water-quality monitoring technology. We have not independently verified this representation.
Our review of the litigation diligence materials did not reveal any patent infringement claims, demands, cease-and-desist letters, or threatened litigation directed at Cascadia or any of its subsidiaries. This is consistent with the findings of our separate due diligence memorandum addressing litigation matters (cross-reference: C&H Due Diligence Memorandum: Cascadia Litigation and Proceedings, dated August 19, 2022, Matter No. 1023-00001).
D. Materiality Assessment
The two issued patents and the pending provisional application are specifically related to Cascadia's water-treatment concession operations and have no direct application to the Company's hydroelectric or wind farm businesses. While the patented technology provides certain operational efficiencies and may offer a degree of competitive differentiation in the water-treatment services market, Cascadia's primary competitive advantage in the water-treatment sector derives from its long-term concession agreements with municipal water authorities, which provide exclusive operating rights for extended periods and are not dependent upon patent exclusivity.
The loss of patent protection — whether through expiration, invalidation, or design-around by competitors — would not materially affect Cascadia's revenue streams from its water-treatment operations, as the concession agreements and municipal contracts provide the contractual basis for the Company's revenue and are independent of the Company's patent portfolio. Accordingly, the patent risk for this Transaction is rated LOW.
V. PROPRIETARY TECHNOLOGY AND TRADE SECRETS
A. Operational Technology
Cascadia maintains a substantial body of proprietary operational knowledge, technical documentation, and process specifications that have been developed over the course of the Company's operating history. This proprietary operational technology spans all three of Cascadia's business segments:
Hydroelectric Facility Operations (14 facilities): Cascadia has developed proprietary turbine optimization protocols that are tailored to the specific hydrological characteristics of each facility. These protocols incorporate water-flow management algorithms that optimize power generation based on seasonal flow variations, reservoir levels, and real-time demand signals. The protocols are documented in facility-specific operating manuals that are maintained internally and are not publicly available.
Wind Farm Operations (6 facilities): Cascadia has developed proprietary predictive maintenance schedules and performance analytics dashboards for its wind generation assets. These tools utilize historical performance data, weather forecasting inputs, and component degradation models to predict maintenance requirements and optimize turbine availability. The performance analytics dashboards were developed internally by Cascadia's IT team and are used by facility managers and corporate engineering staff.
Water-Treatment Operations (3 facilities): Cascadia maintains detailed filtration process specifications, chemical dosing algorithms, and compliance monitoring protocols for each of its water-treatment concession facilities. These materials are closely related to the patented technology described in Section IV above but extend beyond the scope of the issued patents to encompass a broader range of proprietary process knowledge, including facility-specific calibration parameters, vendor-specific equipment configurations, and compliance reporting methodologies developed in collaboration with Clearwater Environmental Consulting Inc.
B. Trade Secret Protection
Cascadia's employee handbook contains general confidentiality provisions that require employees to maintain the confidentiality of proprietary company information, including technical data, process specifications, customer information, and financial data. All employees are required to acknowledge these provisions as a condition of employment.
However, based on our review of the Company's internal policies and the materials provided in the data room, Cascadia does not maintain a formal trade secret inventory or classification system. The Company has not systematically identified, catalogued, or designated specific items of proprietary information as "trade secrets" within the meaning of applicable state trade secret statutes (including the Oregon Uniform Trade Secrets Act, ORS §§ 646.461–646.475, and corresponding legislation in Washington and Idaho). While the Company's operational technology and process documentation would likely qualify as protectable trade secrets under these statutes, the absence of a formal identification and classification program represents a gap in the Company's IP protection posture.
Observation: This gap is consistent with industry practice for infrastructure operators of Cascadia's size and type, where the primary competitive moat is typically provided by physical assets, regulatory licenses, and long-term contractual relationships rather than by proprietary technology. Infrastructure operating companies frequently possess substantial proprietary know-how that would qualify for trade secret protection but do not invest in formal trade secret management programs. Nevertheless, a more rigorous approach to trade secret identification and protection would strengthen the Company's IP position and provide additional legal remedies in the event of unauthorized disclosure or misappropriation.
Recommendation: Post-closing, Ironside and Meridian should consider implementing a formal trade secret identification and protection program, with particular emphasis on the water-treatment process documentation deployed at the Bull Run Filtration Project and the other two concession facilities. This program should include: (i) a comprehensive inventory of proprietary information qualifying as trade secrets; (ii) a tiered classification system designating the sensitivity level of each category of information; (iii) access controls limiting dissemination of trade secret materials to authorized personnel on a need-to-know basis; and (iv) appropriate marking and labeling of trade secret documents. The risk in this category is rated LOW-MEDIUM, reflecting the gap in formal protection offset by the low likelihood that proprietary operational know-how is at significant risk of misappropriation given the nature of Cascadia's business.
C. Proprietary Data
Cascadia maintains extensive operational performance data sets across all of its facilities, including historical generation data for hydroelectric and wind assets, water-quality measurements and environmental monitoring records for water-treatment facilities, and equipment performance and maintenance records. This data has been accumulated over many years of operations and has substantial value for facility optimization, regulatory compliance reporting, and capital planning.
While this proprietary data is not separately protected as trade secrets under any formal classification system, it is subject to the general confidentiality provisions contained in the employee handbook and in the Company's agreements with employees, contractors, and consultants. Certain operational data may also be subject to confidentiality obligations contained in Cascadia's concession agreements and power purchase agreements with governmental counterparties.
We did not identify any third-party claims to ownership of Cascadia's operational data or any contractual provisions that would restrict the Company's ability to use, retain, or transfer its proprietary data in connection with the Transaction.
VI. THIRD-PARTY SOFTWARE LICENSES
A. Material Software Agreements
Cascadia relies on several critical third-party software platforms to support its operations across all three business segments. These software systems are integral to the daily management, monitoring, and control of the Company's hydroelectric, wind, and water-treatment facilities, as well as to the Company's corporate functions. The following five (5) software license agreements have been identified as material to Cascadia's operations:
1. SCADA System License — Gridstone Technologies Inc.
Cascadia licenses its supervisory control and data acquisition ("SCADA") system from Gridstone Technologies Inc. ("Gridstone"), a leading provider of industrial control and automation software for the energy sector. The SCADA system is deployed across all fourteen (14) of Cascadia's hydroelectric facilities and all six (6) of its wind farms, providing centralized monitoring, control, and data collection capabilities for approximately 4,500 individual control points.
The SCADA license is structured as an enterprise license with a five (5)-year term expiring in 2025. The annual license fee is approximately $1,200,000, and the agreement includes provisions for maintenance, technical support, and periodic software updates. The license agreement contains a change-of-control provision that requires sixty (60) days' prior written notice to Gridstone in the event of a change of control of the licensee, with the licensor's consent required for the license to remain in effect following such change of control. The agreement specifies that consent shall not be unreasonably withheld, conditioned, or delayed.
Change-of-Control Risk Assessment: MEDIUM. The SCADA system is a mission-critical operational platform, and loss of the SCADA license would have a material adverse impact on Cascadia's ability to operate its hydroelectric and wind generation assets. While the consent-not-to-be-unreasonably-withheld standard provides a degree of comfort, the need to secure affirmative consent creates execution risk that must be actively managed in the pre-closing period.
2. Energy Management System (EMS) — Voltarc Software LLC
Cascadia licenses its energy management system from Voltarc Software LLC ("Voltarc"), which provides real-time energy trading, dispatch optimization, and grid compliance functionality. The EMS is used by Cascadia's central dispatch team to manage power generation scheduling, coordinate with grid operators, and ensure compliance with applicable NERC reliability standards and regional transmission organization requirements.
The EMS license has a three (3)-year term with automatic annual renewal and carries an annual license fee of approximately $800,000. The agreement contains an assignment clause that requires the licensor's consent upon any change of control of the licensee. Unlike the Gridstone SCADA license, the Voltarc EMS agreement does not include express language stating that consent shall not be unreasonably withheld, though we believe that a reasonableness standard would likely be implied under applicable law.
Change-of-Control Risk Assessment: MEDIUM. The EMS is integral to Cascadia's energy dispatch and trading operations and to the Company's compliance with grid reliability requirements. The absence of an express "not to be unreasonably withheld" standard in the consent provision increases the risk profile marginally relative to the Gridstone SCADA license.
3. Water Treatment Operations Software — AquaLogic Systems Corp.
Cascadia licenses water treatment operations software from AquaLogic Systems Corp. ("AquaLogic") for the monitoring and control of its three water-treatment concession facilities, including the Bull Run Filtration Project. The AquaLogic software integrates with the sensor arrays and control systems deployed at each facility and provides real-time process monitoring, chemical dosing control, and regulatory compliance reporting.
The AquaLogic license is a perpetual license, with annual maintenance and support fees of approximately $350,000 per year. The change-of-control provision in the AquaLogic agreement requires only that notice be provided to the licensor in the event of a change of control; no affirmative consent is required. This is a materially more favorable provision than those contained in the Gridstone and Voltarc agreements.
Change-of-Control Risk Assessment: LOW. The notice-only requirement eliminates consent risk; Cascadia must simply provide timely notice to AquaLogic following or in connection with the closing.
4. Enterprise Resource Planning (ERP) System — CedarPoint Enterprise Solutions Inc.
Cascadia licenses a cloud-based enterprise resource planning system from CedarPoint Enterprise Solutions Inc. ("CedarPoint") for finance, accounting, human resources, procurement, and general corporate management functions. The annual subscription fee is approximately $600,000. The agreement contains standard assignment restrictions and a change-of-control provision requiring thirty (30) days' prior written notice to the licensor. The agreement does not expressly require licensor consent for a change of control but reserves to CedarPoint the right to terminate the agreement if the change of control results in a licensee that is a direct competitor of CedarPoint, which would not be applicable in the context of the contemplated Transaction.
Change-of-Control Risk Assessment: LOW. The notice requirement is straightforward, and the competitive-use termination right is inapplicable given that neither Ironside, Meridian, nor AcquisitionCo is a competitor of CedarPoint.
5. Environmental Compliance and Reporting Platform
Cascadia subscribes to a cloud-based environmental compliance and reporting platform used for tracking, documenting, and reporting the Company's environmental compliance obligations across all facilities, including air quality, water discharge, and waste management reporting required under applicable federal, state, and local environmental regulations. The annual subscription cost is approximately $200,000. Our review of the license agreement did not identify any change-of-control restriction or consent requirement.
Change-of-Control Risk Assessment: LOW. No change-of-control issues identified.
A complete schedule of material third-party software licenses, including a summary of change-of-control provisions, is attached hereto as Exhibit C.
B. Change-of-Control Analysis
As summarized above, two (2) of the five (5) material software licenses — the Gridstone SCADA system license and the Voltarc EMS license — contain change-of-control provisions requiring affirmative consent from the licensor prior to or in connection with a change of control of the licensee. Under the contemplated transaction structure, in which AcquisitionCo will acquire 100% of the equity of Cascadia Renewables Holdings, Inc. from the Selling Shareholders, these change-of-control provisions would likely be triggered, as both agreements define "change of control" broadly to include any transaction resulting in a change in the ultimate controlling equity holders of the licensee.
Recommendation: C&H recommends that Ironside and Meridian initiate early engagement with Gridstone Technologies Inc. and Voltarc Software LLC to obtain pre-closing consents. This outreach should be coordinated with Cascadia management and counsel, as the Company has existing commercial relationships with both vendors. Failure to obtain the required consents could technically result in a licensor's right to terminate the applicable license agreement, which — particularly in the case of the SCADA system — would have a material operational impact on Cascadia's generation assets. We note, however, that in practice, software licensors in the industrial and energy sectors rarely withhold consent for change-of-control transactions involving creditworthy acquirers, particularly where the licensor has an ongoing commercial interest in maintaining the customer relationship.
The requirement to obtain these consents should be reflected in the equity purchase agreement as a closing condition or pre-closing covenant, and the status of consent solicitations should be tracked on the closing conditions checklist maintained by the deal team. Risk for the SCADA and EMS licenses is rated MEDIUM; risk for all remaining software licenses is rated LOW.
C. Open-Source Software
Cascadia's internal IT team utilizes certain open-source software components in the development and maintenance of internally built monitoring dashboards and data analytics tools. Based on our review of the Company's open-source usage policies and discussions with IT management reflected in the data room, Cascadia's use of open-source software is limited to components distributed under permissive licenses, specifically the MIT License and the Apache License, Version 2.0.
We did not identify any use of open-source components distributed under copyleft licenses (including the GNU General Public License ("GPL") or the GNU Lesser General Public License ("LGPL")) in any of Cascadia's production systems. Copyleft licenses can impose obligations to disclose and license proprietary source code if open-source components are incorporated into proprietary software in certain ways, which could raise concerns regarding the protection of Cascadia's proprietary code. The absence of copyleft-licensed components in Cascadia's production systems mitigates this risk.
The risk associated with Cascadia's open-source software usage is rated LOW.
VII. EMPLOYEE INTELLECTUAL PROPERTY AGREEMENTS
A. Invention Assignment and Confidentiality Agreements
Cascadia requires all new employees to execute confidentiality and invention assignment agreements as a condition of employment. These agreements assign to the Company all rights, title, and interest in inventions, works of authorship, and other intellectual property conceived, developed, or reduced to practice by the employee during the course of their employment and within the scope of their duties. The agreements also contain confidentiality provisions that survive termination of employment.
C&H reviewed sample invention assignment and confidentiality agreements for approximately fifteen (15) key technical personnel identified by Cascadia management as individuals whose roles involve the creation or development of proprietary technology and intellectual property. These individuals include engineering directors, senior process engineers, controls engineers, and IT personnel across Cascadia's three operating segments. Based on our review, the sample agreements contain standard and commercially reasonable provisions for invention assignment and confidentiality that are enforceable under applicable Oregon, Washington, and Idaho law.
We note that approximately twenty-five (25) members of Cascadia's management team participate in the management rollover pool, which currently holds twenty percent (20%) of Cascadia's equity interests. Under the terms of the contemplated Transaction, these management participants are expected to roll over approximately fifty percent (50%) of their equity, resulting in the management rollover pool holding approximately ten percent (10%) of the total post-closing equity of AcquisitionCo. All twenty-five (25) individuals participating in the management rollover pool are subject to invention assignment agreements with the Company, and we did not identify any gaps or exceptions in coverage for this group.
B. Non-Compete and Non-Solicitation Agreements
Key technical employees at Cascadia's hydroelectric and water-treatment facilities, including engineering directors and senior technical managers, have entered into non-compete agreements with the Company containing twelve (12)-month post-termination restrictive periods. These non-compete covenants are geographically limited to the states of Oregon, Washington, and Idaho — the three states in which Cascadia maintains active operations. In addition, these employees are subject to non-solicitation provisions that restrict the solicitation of Cascadia's employees and key municipal clients for a specified period following termination of employment.
The enforceability of non-compete agreements varies by state, and both Oregon and Washington have enacted legislation that imposes specific limitations on the enforceability of such agreements:
Oregon: Under Oregon Revised Statutes § 653.295, non-compete agreements are enforceable only if: (i) the employer informs the employee in a written employment offer received at least two weeks before the first day of employment, or the non-compete is entered into upon a subsequent bona fide advancement; (ii) the employee is engaged in administrative, professional, or executive work and earns above a specified income threshold (adjusted annually); (iii) the employer has a protectable interest; and (iv) the restriction does not exceed twelve (12) months (effective for agreements entered into on or after January 1, 2022; previously eighteen months). Cascadia's non-compete agreements appear to comply with the twelve-month maximum period, but compliance with the notice and income-threshold requirements should be confirmed for each individual agreement.
Washington: Washington's non-compete statute (RCW § 49.62) similarly restricts the enforceability of non-compete agreements for employees earning below an annually adjusted income threshold (approximately $107,301.04 for employees in 2022). Non-compete agreements that do not satisfy the statutory requirements are void and unenforceable as a matter of law. As with Oregon, compliance with Washington's income-threshold requirement should be confirmed for each affected employee.
Idaho: Idaho does not impose the same statutory limitations as Oregon and Washington, though Idaho courts apply general reasonableness standards to non-compete agreements, considering factors such as the duration of the restraint, the geographic scope, and the employer's legitimate protectable interests.
Risk Assessment: While potential enforceability issues exist with respect to certain non-compete agreements — particularly for employees in Oregon and Washington who may fall below the applicable income thresholds — these issues are not material to the Transaction. The value of Cascadia's business is driven by physical assets, regulatory licenses (including FERC hydroelectric licenses and OPUC utility permits), and long-term contractual relationships with governmental and municipal counterparties, not by the continued employment of specific individual technical personnel. The departure of any single engineer or technical manager, while operationally inconvenient, would not constitute a material adverse effect on the Company's business or financial condition. This risk is rated LOW.
VIII. DOMAIN NAMES AND DIGITAL ASSETS
A. Domain Name Portfolio
Cascadia owns the following primary domain names, all of which are registered through a major commercial domain registrar and are currently in good standing with auto-renewal enabled:
All domain name registrations are in the name of the parent corporation, Cascadia Renewables Holdings, Inc. We did not identify any pending or threatened domain name disputes, Uniform Domain-Name Dispute-Resolution Policy ("UDRP") proceedings, or cybersquatting activity involving any of Cascadia's domain names. A complete schedule of domain names is attached hereto as Exhibit D.
As with the trademark registrations discussed in Section III, the domain name registrations will remain in the name of the same legal entity following the closing of the equity acquisition and do not require transfer or assignment.
B. Website and Digital Presence
Cascadia operates corporate websites accessible at the domain names listed above, which provide information regarding the Company's operations, facilities, environmental initiatives, and career opportunities. The Company also maintains an investor and stakeholder portal accessible through its primary corporate website. We did not identify any material digital assets beyond the Company's standard corporate web presence, and the websites do not appear to incorporate any third-party content or technology that would raise licensing or IP ownership concerns.
Cascadia maintains social media accounts on Westmark Health IT and relevant industry platforms under the Company's name. These accounts are used for corporate communications, recruitment, and industry engagement purposes. Control of these accounts resides with Cascadia's corporate communications department, and no third parties have been identified as having ownership rights or administrative control over these accounts.
IX. IP-RELATED LITIGATION AND DISPUTES
Based on our comprehensive review of the litigation disclosure schedules, data room materials, and representations provided by Cascadia management and counsel, we report the following:
• No pending IP-related litigation of any kind has been identified against Cascadia or any of its subsidiaries, whether involving patent infringement, trademark infringement, trade secret misappropriation, copyright infringement, or any other claim arising from the ownership, use, or licensing of intellectual property.
• No threatened IP litigation has been identified. Cascadia management has represented that the Company has not received any demand letters, cease-and-desist letters, or other communications from third parties asserting IP claims or threatening IP-related legal action.
• No licensing disputes or contractual claims arising under any of Cascadia's third-party software license agreements have been identified. The Company represents that it is in compliance with the material terms of all software licenses and has not received any notices of breach or default from any software licensor.
• No indemnification claims have been asserted by or against Cascadia under any software license agreement or other IP-related contract.
These findings are consistent with the results of our broader litigation diligence review, as documented in the C&H Due Diligence Memorandum: Cascadia Litigation and Proceedings, dated August 19, 2022 (Matter No. 1023-00001), which did not identify any IP-related matters among the Company's pending or threatened proceedings.
The risk in this category is rated LOW.
X. IP REPRESENTATIONS IN THE EQUITY PURCHASE AGREEMENT
The draft Equity Purchase Agreement (the "EPA") currently under negotiation between the parties was circulated by C&H in a marked draft dated August 20, 2022, to Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian Infrastructure Partners Fund IV, LP. The EPA is being prepared on a customary basis for a negotiated private equity acquisition of this type, with representations and warranties to be provided by the Selling Shareholders, who consist of:
• Timberline Growth Equity Fund III, LP (62% of Cascadia equity);
• Weir Family Trust (18% of Cascadia equity); and
• Management Rollover Pool (20% of Cascadia equity, of which approximately 50% is expected to roll over into the post-closing equity structure, resulting in approximately 10% of total post-closing equity).
The following IP-related representations and warranties are being sought from the Selling Shareholders in the EPA:
(a) Cascadia and its subsidiaries own or have valid licenses to use all material intellectual property necessary for the conduct of the business as currently conducted, free and clear of all liens, encumbrances, and adverse claims;
(b) To the knowledge of the Selling Shareholders, the conduct of the business as currently conducted does not infringe, misappropriate, or otherwise violate any intellectual property rights of any third party;
(c) All patents, trademark registrations, and other registered intellectual property owned by Cascadia and its subsidiaries are valid, enforceable, subsisting, and in good standing, and all required maintenance fees, renewal filings, and other actions necessary to maintain such registrations have been timely made;
(d) There are no pending or, to the knowledge of the Selling Shareholders, threatened claims, actions, proceedings, or investigations relating to the intellectual property of Cascadia or its subsidiaries, including claims of infringement, misappropriation, or unauthorized use;
(e) Cascadia and its subsidiaries are in compliance in all material respects with the terms and conditions of all material software license agreements and other IP-related contracts to which they are a party; and
(f) The intellectual property owned, licensed, or otherwise used by Cascadia and its subsidiaries is sufficient for the conduct of the business as currently conducted and as currently proposed to be conducted.
These representations will be subject to customary knowledge qualifiers, materiality thresholds, and disclosure schedule exceptions, the specifics of which are currently being negotiated between C&H (on behalf of Ironside) and BSP (on behalf of Meridian), with input from Ridgeway, Ashford & Malone PC (Cascadia's counsel) and Garvey Lennox LLP (additional counsel to the Selling Shareholders).
Representations and Warranties Insurance: We note that a representations and warranties insurance policy has been arranged with Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814), providing a coverage limit of $195,000,000 and expected to be bound on or about September 1, 2022. The R&W policy will backstop the IP representations and warranties contained in the EPA, subject to the policy's exclusions, retention amount, and other terms and conditions. A separate coverage analysis and review of the R&W insurance policy terms is being prepared by C&H and will be provided under separate cover (cross-reference: C&H Memorandum: R&W Insurance Policy Review and Coverage Analysis, anticipated date August 31, 2022, Matter No. 1023-00001).
XI. KEY FINDINGS AND RISK ASSESSMENT SUMMARY
A. Summary Risk Matrix
The following table summarizes the key IP categories reviewed and the associated risk levels identified through this due diligence process:
B. Overall Assessment
Based on the review conducted and summarized in this memorandum, Cascadia's intellectual property portfolio is consistent with what we would expect for a renewable energy and water infrastructure platform of this size and nature, where enterprise value is fundamentally driven by physical assets, regulatory licenses (including FERC hydroelectric licenses and Oregon Public Utility Commission permits), and long-term contractual relationships with creditworthy governmental and municipal counterparties. The weighted-average remaining life of Cascadia's material contracts is approximately twenty-two (22) years, providing a durable revenue base that is independent of the Company's IP position.
We did not identify any IP-related issues that would constitute a Material Adverse Effect (as that term is expected to be defined in the EPA) or that would otherwise impede the consummation of the proposed acquisition at the agreed enterprise value of $1,950,000,000, representing an implied EV/EBITDA multiple of approximately 14.1x based on the Company's fiscal year 2021 EBITDA of approximately $138,000,000.
The issues requiring pre-closing attention — specifically, the software license consent solicitations and the pending provisional patent application — are manageable and do not, in our assessment, present obstacles to the successful completion of the Transaction on the contemplated terms and timeline.
XII. RECOMMENDATIONS
Based on the findings and analysis set forth in this memorandum, C&H makes the following recommendations for Ironside's consideration:
1. Software License Consents. Initiate early outreach to Gridstone Technologies Inc. (SCADA system license) and Voltarc Software LLC (energy management system license) to secure the required change-of-control consents prior to the closing of the Transaction. This outreach should be coordinated with Cascadia management, which has existing commercial relationships with both vendors and is best positioned to facilitate productive engagement. The status of these consent solicitations should be added to the EPA closing conditions checklist and monitored on a regular basis by the deal team. In the event that consent is not obtained from either licensor, C&H should work with the deal team to evaluate alternative remedies, including replacement vendor options, escrow arrangements, or transition services agreements.
2. Pending Patent Application. Confirm with Cascadia management and Meridian Infrastructure Partners (David R. Hargreaves, Managing Director, and Lillian Fong, Principal) whether the Company intends to convert the pending provisional patent application to a non-provisional application before the expiration of the provisional filing period. If the decision is made to proceed with the non-provisional filing, the associated costs and timeline should be incorporated into the pre-closing workplan. If the decision is made not to proceed, this should be documented and the rationale preserved for the record.
3. Trade Secret Program. Post-closing, implement a formal trade secret identification, classification, and protection program encompassing all three of Cascadia's operating segments, with particular priority given to the water-treatment process technology deployed at the Bull Run Filtration Project and the Company's other concession facilities. The program should include a comprehensive inventory of proprietary information, a tiered classification system, access controls, document marking protocols, and employee training. Estimated implementation cost and timeline should be discussed with the post-closing integration team.
4. Non-Compete Enforceability. Continue to monitor legislative and judicial developments in Oregon and Washington regarding the enforceability of non-compete agreements. Post-closing, consider restructuring the restrictive covenant arrangements for key technical personnel to ensure compliance with applicable state law requirements, including income-threshold requirements and advance notice provisions. If existing non-compete agreements are determined to be unenforceable for certain individuals, consider implementing alternative retention mechanisms, such as enhanced non-solicitation provisions, garden leave arrangements, or equity-based retention incentives tied to the post-closing management equity program.
5. EPA Disclosure Schedules. Review the IP-related disclosure schedules to be provided by the Selling Shareholders in connection with the execution of the EPA, coordinating with Ridgeway, Ashford & Malone PC (Cascadia's counsel) and Garvey Lennox LLP (counsel to the Selling Shareholders), to confirm completeness and accuracy against the data room materials reviewed in connection with this memorandum. Any discrepancies or omissions should be flagged and resolved prior to execution of the EPA and the binding of the R&W insurance policy.
XIII. APPENDICES AND EXHIBITS
The following exhibits are attached hereto and incorporated by reference into this memorandum:
Exhibit A: Schedule of Registered Trademarks and Service Marks (Federal and State)
Exhibit B: Schedule of Patents and Patent Applications
Exhibit C: Schedule of Material Third-Party Software Licenses (including summary of change-of-control provisions and consent requirements)
Exhibit D: Schedule of Domain Names
Exhibit E: Data Room Index — Documents Reviewed (Folders 8.1 through 8.7, Cascadia Virtual Data Room)
XIV. DISCLAIMER AND PRIVILEGE NOTICE
This memorandum has been prepared by Calderwood & Harkness LLP and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice to the Client. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees and the individuals identified in the distribution list set forth on the first page of this memorandum.
This memorandum may not be disclosed, distributed, or made available to any third party without the prior written consent of both Calderwood & Harkness LLP and Ironside Capital Management LP. Disclosure to third parties — including to Meridian Infrastructure Partners Fund IV, LP, Breckenridge Sloane & Pratt LLP, or any other transaction party or advisor — requires express authorization and may result in a waiver of applicable privileges if not properly managed.
The opinions and assessments expressed herein are based on the documents and information available to C&H as of the date of this memorandum and are subject to the limitations described in Section II above. C&H does not express any opinion as to the financial value of any intellectual property asset or as to any matter beyond the scope of this legal due diligence review.
Prepared By:
CALDERWOOD & HARKNESS LLP
By: ________
Name: Owen Fischer
Title: Associate
Date: August 23, 2022
Reviewed By:
CALDERWOOD & HARKNESS LLP
By: ________