1023-00001 · Ironside Capital Management LP · Dormancy/Quarterly Reviews

gp-quarterly-report-review-q1-2023.docx DOCUMENT Funds

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL PROTECTED BY ATTORNEY-CLIENT PRIVILEGE AND ATTORNEY WORK PRODUCT DOCTRINE

TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP

FROM: Theresa Kim, Calderwood & Harkness LLP Owen Fischer, Calderwood & Harkness LLP

REVIEWED BY: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP

DATE: April 20, 2023

RE: Review of Meridian Infrastructure GP IV LLC Quarterly Status Report — Q1 2023 (January 1 – March 31, 2023) — ICM Cascadia Co-Invest, LP

MATTER NO.: 1023-00001

I. Executive Summary

This memorandum sets forth our review of the first quarterly status report (the "Q1 Report") delivered by Meridian Infrastructure GP IV LLC (the "GP") to Ironside Capital Management LP ("Ironside" or "ICM") in its capacity as the sole limited partner (holding a 99.99% limited partnership interest) of ICM Cascadia Co-Invest, LP (the "Vehicle" or "Co-Invest"), covering the fiscal quarter ended March 31, 2023 — the period from January 1, 2023 through March 31, 2023.

The Q1 Report is the first quarterly report delivered following the GP's formal declaration of a Material Impediment Event and the issuance of the Capital Call Suspension Notice on January 9, 2023 (the "Suspension Notice"), which initiated the dormancy period under the Vehicle's governing documents. As such, the Q1 Report represents the GP's inaugural obligation to comply with the enhanced dormancy-period reporting framework set forth in the Limited Partnership Agreement of ICM Cascadia Co-Invest, LP, dated July 29, 2022 (the "LP Agreement"), and the Side Letter between Ironside and the GP dated July 29, 2022 (the "Side Letter").

The Q1 Report was received by Ironside on April 12, 2023 and forwarded to Calderwood & Harkness LLP ("C&H") for legal review on April 13, 2023. Our review has been conducted in consultation with the infrastructure investment team at Ironside and with reference to the full transaction document suite maintained in C&H's matter file.

Overall Assessment: The Q1 Report is substantially compliant with the reporting requirements under LP Agreement §7.04(b) and the enhanced reporting obligations set forth in the Side Letter. The GP has addressed each of the core reporting categories mandated by the governing documents, and the report was delivered well within the applicable deadline. However, we note certain informational gaps — discussed in detail below — that we recommend raising with the GP's counsel, Breckenridge Sloane & Pratt LLP (the responsible partner being Charles A. Delacroix), in order to ensure that Ironside has full visibility into the current posture of the underlying transaction and the Vehicle's financial position during the dormancy period.

In particular, we flag three areas warranting supplemental disclosure: (1) the absence of detail regarding the specific terms under negotiation in the Bull Run Filtration Project concession renegotiation and any associated financial-impact analysis; (2) the lack of an itemized reconciliation of due-diligence costs and deposits; and (3) the omission of guidance regarding the allocation of any debt commitment extension fees between Meridian Infrastructure Fund IV, LP ("Fund IV") and the Co-Invest.

Our detailed analysis follows.

II. Reporting Requirement Framework

A. LP Agreement §7.04(b) Requirements

Section 7.04(b) of the LP Agreement establishes the dormancy-period reporting regime applicable whenever the GP has declared a Material Impediment Event pursuant to §7.04(a). Specifically, §7.04(b) provides that during any period in which a Material Impediment Event has been declared and remains in effect, the GP shall deliver quarterly written reports (each, a "Quarterly Status Report") to each limited partner within thirty (30) calendar days after the end of each fiscal quarter of the Vehicle.

The required content of each Quarterly Status Report is enumerated in §7.04(b)(i)–(v) as follows:

(i) a description of the current status of the Material Impediment Event and any reasonably foreseeable developments relating thereto;

(ii) a summary of the Vehicle's financial position as of the end of the applicable fiscal quarter, including cash balances, expenses incurred during the quarter, cumulative expenses since the declaration of the Material Impediment Event, and the amount of remaining unfunded capital commitments;

(iii) the status of any regulatory approvals required in connection with the underlying transaction, including identification of any approvals received, pending, or lapsed;

(iv) a description of any actions taken or proposed to be taken by the GP during the applicable fiscal quarter in connection with the Material Impediment Event, the underlying transaction, or the management of the Vehicle; and

(v) an update on the status of the underlying transaction, including the current status of the definitive transaction documentation, any amendments or modifications thereto, and any material communications with counterparties or their representatives.

For purposes of this review, the "underlying transaction" is the acquisition by Cascadia Acquisition Corp. (a wholly owned subsidiary of Meridian Infrastructure Fund IV, LP, with the Vehicle participating as a co-investor) of 100% of the equity interests in Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Target") from the Selling Shareholders, pursuant to the Equity Purchase Agreement dated September 15, 2022 (the "EPA").

B. Side Letter Enhanced Reporting Obligations

The Side Letter between Ironside and the GP, executed concurrently with the LP Agreement on July 29, 2022, supplements the LP Agreement's reporting requirements with additional disclosure obligations that reflect Ironside's position as the sole limited partner and the significant size of its capital commitment ($300 million). The Side Letter's enhanced reporting provisions were negotiated by C&H on Ironside's behalf and are intended to provide Ironside with granular visibility into key risk areas specific to the Cascadia transaction.

The Side Letter requires that each Quarterly Status Report delivered pursuant to LP Agreement §7.04(b) also include the following supplemental information:

(i) detailed reporting on any developments in the renegotiation of concession agreements to which Cascadia is a party, specifically referencing (but not limited to) the Portland Metropolitan Water District / Bull Run Filtration Project water-treatment concession, including the specific terms under discussion, the identity of counterparties and their negotiating representatives, and any preliminary or indicative assessments of the financial impact of proposed revised terms on the Target's revenue, EBITDA, or enterprise value;

(ii) updates on the status of the Equity Purchase Agreement, including any amendments, waivers, consents, or modifications executed or proposed during the applicable quarter, together with copies of any such documentation;

(iii) detail on the status of the financing commitments supporting the transaction, specifically the debt commitment letter executed by Atlas National Bank, N.A. (as lead arranger and administrative agent) and Pinnacle Credit Partners LLC (as co-lender), including the current expiration date, any extension discussions, the anticipated cost of any extension, and the allocation of such costs as between Fund IV and the Co-Invest; and

(iv) a summary of any material communications from or to the Target's counsel (Ridgeway, Ashford & Malone PC) or the Selling Shareholders' counsel (Garvey Lennox LLP), including any notices, demands, or expressions of intent relating to the EPA, any termination right, or the concession renegotiation.

The Side Letter further provides that Ironside may, by written notice to the GP, request additional information beyond the foregoing, and the GP shall use commercially reasonable efforts to provide such information within fifteen (15) business days of receipt of such request.

C. Timeliness Assessment

The Q1 2023 fiscal quarter ended on March 31, 2023. Pursuant to LP Agreement §7.04(b), the GP was required to deliver the Quarterly Status Report within thirty (30) calendar days after the end of the fiscal quarter — i.e., by no later than April 30, 2023.

The Q1 Report was delivered by the GP to Ironside on April 12, 2023, eighteen (18) days prior to the contractual deadline.

Assessment: Compliant. The Q1 Report was timely delivered.

III. Review of Q1 Report Content

We have reviewed each substantive section of the Q1 Report against the applicable reporting requirements. Our analysis is organized below according to the reporting categories set forth in LP Agreement §7.04(b) and the Side Letter.

A. Status of Material Impediment Event

The GP confirms in the Q1 Report that the Material Impediment Event declared on January 9, 2023 remains in effect as of March 31, 2023. The GP has not rescinded the declaration, and the conditions giving rise to the declaration have not been resolved.

The Q1 Report identifies the basis for the Material Impediment Event as follows: on October 28, 2022, the Portland Metropolitan Water District (the "Water District") delivered formal written notice to Cascadia Renewables Holdings, Inc. of its intent to renegotiate the 40-year Bull Run Filtration Project water-treatment concession agreement. The concession was originally executed in approximately 2018 and generates annual revenue of approximately $64 million for Cascadia, making it one of the Target's most significant revenue-generating assets. The Water District's renegotiation notice cited changed regulatory requirements under Oregon Senate Bill 1567 (enacted in 2022), which imposed new environmental and water-quality standards that, in the Water District's view, materially altered the economic and operational framework underlying the original concession terms.

The GP states that negotiations between Cascadia — represented in the negotiations by its Chief Executive Officer, Jonathan M. Weir, and its Chief Financial Officer, Sandra K. Llewellyn — and the Portland Metropolitan Water District were ongoing throughout Q1 2023. However, the Q1 Report states that as of March 31, 2023, no tentative or definitive agreement has been reached between the parties on revised concession terms. The GP does not provide a timeline or probability assessment for the resolution of the renegotiation, characterizing the process as "active but uncertain."

The GP further characterizes the concession renegotiation as giving rise to a condition precedent failure risk under the EPA. Specifically, the GP identifies the "no Material Adverse Effect" closing condition set forth in Section 8.02(d) of the EPA as the provision most directly implicated by the renegotiation. Under the EPA, the obligation of Cascadia Acquisition Corp. (and, by extension, Fund IV and the Co-Invest) to consummate the acquisition is conditioned upon, among other things, the absence of any Material Adverse Effect with respect to the Target since the date of the EPA. The GP's position, as articulated in the Q1 Report, is that a materially adverse revision to the Bull Run Filtration Project concession — particularly one that results in a significant reduction in annual revenue or a shortening of the concession term — could constitute a Material Adverse Effect for purposes of the EPA, thereby providing the buyer group with the right to decline to close.

C&H Comment: While the Q1 Report adequately identifies the nature and status of the Material Impediment Event, it does not provide the level of detail contemplated by the Side Letter with respect to the concession renegotiation. Specifically, the Q1 Report does not disclose: (a) the specific terms under negotiation between Cascadia and the Water District (e.g., proposed adjustments to the annual concession fee, revised performance standards, potential changes to the concession term, capital expenditure requirements under the new regulatory framework, or pricing adjustment mechanisms); (b) the identity of the Water District's negotiating representatives or any third-party advisors retained by either side for the renegotiation; or (c) any preliminary valuation impact analysis or financial modeling scenarios prepared by Blackthorn Advisory Group LLC (retained by Meridian as its financial advisor on the Cascadia transaction) or by Cascadia management reflecting the potential impact of revised concession terms on the Target's revenue, EBITDA, and enterprise value.

We recommend that Ironside request supplemental detail on each of these points from the GP. The concession renegotiation is the core driver of the Material Impediment Event and the primary source of uncertainty in the transaction. Ironside's ability to evaluate its strategic options — including whether to support further extensions of the EPA outside date or to exercise its wind-down election right under §7.04(c) — depends on a clear understanding of the financial magnitude and likelihood of an adverse outcome in the renegotiation.

B. Equity Purchase Agreement Status

The GP confirms in the Q1 Report that the Equity Purchase Agreement, dated September 15, 2022, among the Selling Shareholders (Timberline Growth Equity Fund III, LP, the Weir Family Trust, and the Management Rollover Pool), Cascadia Renewables Holdings, Inc., and Cascadia Acquisition Corp. (the buyer entity), remains in full force and effect as of March 31, 2023.

The Q1 Report provides the following chronology of amendments to the EPA:

First Amendment. The First Amendment to the EPA was executed on November 22, 2022, by all parties thereto. The First Amendment extended the "outside date" (as defined in Section 10.01(b) of the EPA) from December 31, 2022 to March 31, 2023. The First Amendment was necessitated by the declaration of the Material Impediment Event and the resulting delay in the anticipated closing timeline. No other terms of the EPA were modified by the First Amendment.

Expiration of First Amendment Outside Date. The Q1 Report notes that the First Amendment outside date of March 31, 2023 expired during the reporting period without the closing of the transaction having occurred. The GP confirms that, upon the lapse of the March 31, 2023 deadline, each party to the EPA was entitled to exercise its termination right under Section 10.01(b) of the EPA. However, no party exercised such termination right.

Second Amendment. The GP reports that, in anticipation of the expiration of the First Amendment outside date, the parties negotiated and executed a Second Amendment to the EPA on March 15, 2023 — approximately two weeks prior to the March 31 expiration. The Second Amendment further extends the outside date to June 30, 2023. The GP confirms that all EPA parties consented to the extension. No other terms of the EPA were modified by the Second Amendment, and no waivers of any EPA provisions were granted in connection therewith.

C&H Comment: The Second Amendment to the EPA has been separately reviewed by C&H in a memorandum dated March 12, 2023, titled "Implications of Second Outside Date Extension for Co-Invest Vehicle" (the "Second Amendment Memo"), which was delivered to Marcus Calloway and Renata Obasi on March 14, 2023. The GP's description of the Second Amendment in the Q1 Report is consistent with and accurately reflects the amendment terms as analyzed in the Second Amendment Memo. No new waivers, modifications, or side agreements beyond the outside date extension were disclosed in the Q1 Report, and our review has not identified any discrepancies between the Q1 Report and the Second Amendment as executed.

We note that the Q1 Report does not address the Side Letter requirement to provide a summary of material communications from or to the Target's counsel (Ridgeway, Ashford & Malone PC) or the Selling Shareholders' counsel (Garvey Lennox LLP). While the report's silence on this point may indicate that no such communications occurred during Q1 2023 beyond those associated with the Second Amendment negotiation, we recommend that Ironside seek express confirmation from the GP that no other material communications with these parties took place during the quarter.

C. Regulatory Approvals Status

1. FERC §203 Approval

The GP confirms in the Q1 Report that the Federal Energy Regulatory Commission ("FERC") granted approval of the transaction under Section 203 of the Federal Power Act on December 15, 2022, in FERC Docket No. EC22-143-000. The approval is conditioned upon the filing of requisite license-transfer documentation upon consummation of the transaction.

The FERC approval order includes a standard 18-month lapse provision, pursuant to which the approval will automatically expire if the transaction is not consummated within 18 months of the date of the order. Based on the December 15, 2022 approval date, the calculated lapse date is approximately June 15, 2024.

The Q1 Report notes that no license-transfer filings have been made during Q1 2023, which is expected given the dormancy of the transaction and the fact that such filings are customarily made only at or immediately following closing.

C&H Comment: The FERC §203 approval remains valid as of the date of this memorandum. However, the lapse clock is running and is not subject to tolling. If the underlying transaction is not consummated by approximately June 15, 2024, the FERC approval will expire by its terms, and Cascadia Acquisition Corp. (or its successor) would be required to submit a new §203 application. A refiling would entail additional regulatory costs, a review period that typically ranges from 60 to 180 days depending on the complexity of the application and whether the Commission elects to issue a deficiency letter, and the risk that intervening regulatory or market developments could result in conditions or a denial not present in the original proceeding. We recommend that the FERC lapse date be added to Ironside's internal tracking calendar as a key milestone.

2. OPUC (Oregon Public Utility Commission)

The GP reports that the application filed with the Oregon Public Utility Commission ("OPUC") in Docket No. UM-2287, originally submitted on October 14, 2022, remains pending. However, the proceedings were administratively stayed in February 2023 at the joint request of the applicant parties, reflecting the dormancy of the transaction pending resolution of the Material Impediment Event.

No substantive proceedings, hearings, or staff reports occurred during Q1 2023 in connection with the OPUC application. The stay remains in effect as of the date of the Q1 Report.

The GP does not provide detail on the anticipated timeline for reactivation of the OPUC proceedings or the procedural steps that would be required to lift the stay. We note that OPUC review of change-of-control transactions involving regulated utilities in Oregon typically requires a public-interest determination and may involve intervenor participation, which could extend the review period once proceedings are reactivated.

3. CFIUS. The GP confirms that the voluntary notice filed with the Committee on Foreign Investment in the United States ("CFIUS") was acknowledged by CFIUS on September 20, 2022. CFIUS completed its review without requiring a formal investigation, and no conditions or mitigation measures were imposed. The GP characterizes the outcome as effective clearance of the transaction from a CFIUS perspective.

No updates relating to CFIUS occurred during Q1 2023, and no further CFIUS action is required in connection with the transaction.

C&H Comment: CFIUS clearance, once granted, is not subject to a time-limited lapse provision analogous to the FERC §203 approval. Accordingly, CFIUS clearance remains in place regardless of the duration of the dormancy period, and no refiling risk exists with respect to this regulatory workstream.

D. Financing Commitment Status

The GP reports in the Q1 Report that the debt commitment letter executed on August 30, 2022 by Atlas National Bank, N.A. (as lead arranger and administrative agent, with a $650 million share of the term loan facility) and Pinnacle Credit Partners LLC (as co-lender, with a $325 million share of the term loan facility) remains in effect as of March 31, 2023.

The debt commitment covers two facilities: (a) a $975 million senior secured term loan facility, and (b) a $150 million revolving credit facility, for a total aggregate commitment of $1.125 billion. The facilities are intended to finance a substantial portion of the $1.95 billion enterprise value acquisition of Cascadia, with the remainder funded through equity contributions from Fund IV, the Co-Invest, and management rollover.

The commitment letter's original expiration date was prior to Q1 2023, but the GP notes that the expiration was extended once — to April 30, 2023 — in a prior quarter. The Q1 Report does not provide the original expiration date or the date on which the first extension was executed, but these facts are consistent with our records.

Critically, the GP notes that the commitment letter will expire on April 30, 2023 — only ten days after the date of this memorandum — absent a further extension. The GP indicates that discussions with Atlas National Bank regarding a potential further extension are underway but have not yet concluded. The GP does not indicate whether Pinnacle Credit Partners has separately confirmed its willingness to extend, though in practice the co-lender's extension is typically contingent upon the lead arranger's extension.

C&H Comment: The approaching April 30, 2023 expiration of the debt commitment letter is a significant development that warrants close monitoring by Ironside. The loss of the committed debt financing would fundamentally impair the buyer group's ability to consummate the Cascadia acquisition and could itself constitute a basis for termination of the EPA by the Selling Shareholders.

Any extension of the commitment letter will likely require the payment of an extension fee to the lenders. The prior extension fee, as disclosed by the GP in connection with the first extension, was calculated at 0.25% of the $975 million term loan commitment, or $2,437,500. That fee was paid by Meridian Infrastructure Fund IV, LP. A second extension fee is likely to be at least equivalent in amount and could be higher, depending on the lenders' assessment of the risk profile of the transaction in light of the ongoing concession renegotiation.

We note that the Q1 Report does not address whether any commitment extension costs incurred going forward would be allocated in whole or in part to the Co-Invest, or whether such costs would be borne entirely by Fund IV. The LP Agreement provides in §4.02(a) that the Vehicle shall bear its pro rata share of transaction costs, but it is not clear whether commitment extension fees fall within the definition of "Transaction Costs" under the LP Agreement or whether the GP would treat such fees as a Fund IV-level expense. We recommend that Ironside seek express clarification from the GP on this cost-allocation question.

We further note that the debt commitment letter is governed by New York law and is subject to the exclusive jurisdiction of the courts of the State of New York, sitting in the Borough of Manhattan.

E. Vehicle Financial Position

1. Capital Status

The Q1 Report provides the following summary of the Vehicle's capital position as of March 31, 2023:

Capital calls remain suspended pursuant to the Capital Call Suspension Notice dated January 9, 2023, issued by the GP in connection with the declaration of the Material Impediment Event under LP Agreement §7.04. No additional capital calls were made during Q1 2023, and the GP does not anticipate issuing any capital calls during the dormancy period unless and until the Material Impediment Event is resolved or the GP otherwise determines that additional capital is required for the preservation of the Vehicle's interests.

2. Cash Balances and Expenditure Summary

The Q1 Report provides a summary of the Vehicle's cash position as of March 31, 2023. The original capital call proceeds of $22,500,000 were applied as follows at the time of the initial drawdown:

The Q1 Report further describes the Vehicle's operating expenses during the dormancy period. Specifically, the GP reports approximately $46,250 in operating expenses for Q1 2023, representing an annualized expense rate of approximately $185,000. The dormancy-period operating expenses are composed of the following categories:

• Fund administration services (provided by Kendrick Thorne & Associates LLP);

• Delaware registered agent services (provided by Cascade Systems);

• Delaware annual franchise tax accrual; and

• Audit and K-1 tax-return preparation costs.

These expenses are being deducted from the original $3,500,000 working-capital reserve. The Q1 Report should, but does not expressly, detail the cumulative expenses deducted from the working-capital reserve since formation through the end of Q1 2023. Based on the timeline — formation in approximately July 2022, with the dormancy commencing January 9, 2023 — we would expect cumulative operating expenses from formation through March 31, 2023 to have reduced the working-capital reserve by an amount greater than the Q1 figure alone, given that pre-dormancy operating expenses (covering approximately the period from August 2022 through December 2022) would also have been charged against the reserve.

3. GP Commitment

The GP (Meridian Infrastructure GP IV LLC) holds a 0.01% general partnership interest in the Vehicle, representing a capital commitment of $30,000. The GP's commitment has been funded and remains outstanding. No distributions have been made to the GP during Q1 2023.

4. R&W Insurance Status

The representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) was bound on September 1, 2022, with a coverage limit of $195 million, representing 10% of the $1.95 billion enterprise value of the Cascadia acquisition. The full premium deposit of $4,875,000 was paid by the Vehicle on September 2, 2022.

The GP reports that a Tolling Side Letter was executed between Cascadia Acquisition Corp. (as the named insured) and Northgate Specialty Insurance Co. on January 20, 2023. The Tolling Side Letter suspends the running of the coverage period during the dormancy period, such that the policy term will not begin to run until the transaction closes and the coverage period will not be eroded by the passage of time during dormancy. The policy remains in suspension as of March 31, 2023. No claims activity occurred during Q1 2023.

C&H Comment: The financial detail provided in the Q1 Report is adequate for purposes of LP Agreement §7.04(b), but we note an important gap: the Q1 Report does not include a detailed reconciliation or itemized breakdown of the $12,790,000 in due-diligence costs and deposits. This is a significant line item — representing over 56% of the total capital called — and may include components with differing risk profiles in a wind-down scenario. Specifically, certain deposits may be refundable (e.g., escrow deposits, regulatory filing fee deposits) while others may have been irrevocably applied (e.g., fees for completed professional services, commitment deposits that vest upon execution). In order to accurately assess the Vehicle's recovery position in the event of a transaction termination and wind-down, Ironside should have visibility into the composition of this line item.

We recommend requesting an itemized breakdown from the GP identifying each component of the $12,790,000, the payee, the nature of the expenditure, the amount, and whether the amount is refundable, partially refundable, or non-refundable.

F. GP Actions Taken or Proposed During Q1 2023

The GP reports the following specific actions taken during Q1 2023 in connection with the Material Impediment Event, the underlying transaction, and the management of the Vehicle:

1. R&W Insurance Tolling Side Letter. The GP, acting on behalf of Cascadia Acquisition Corp., negotiated and executed the Tolling Side Letter with Northgate Specialty Insurance Co. on January 20, 2023, preserving the R&W insurance coverage during the dormancy period without erosion of the policy term.

2. OPUC Stay Request. The GP coordinated with its counsel, Breckenridge Sloane & Pratt LLP, and with the Target's counsel, Ridgeway, Ashford & Malone PC, to prepare and file a joint request to the Oregon Public Utility Commission to stay proceedings in Docket No. UM-2287. The stay was granted in February 2023 and remains in effect.

3. Second Amendment to EPA. The GP led the negotiation and execution of the Second Amendment to the Equity Purchase Agreement on March 15, 2023, extending the outside date from March 31, 2023 to June 30, 2023. The Second Amendment was executed with the consent of all EPA parties, including the Selling Shareholders and the Target.

4. Debt Commitment Extension Discussions. The GP commenced discussions with Atlas National Bank, N.A. regarding a potential further extension of the debt commitment letter beyond its current April 30, 2023 expiration date. These discussions were ongoing as of the end of Q1 2023 and had not yet concluded.

The GP confirms that no investment activity occurred during Q1 2023. No distributions were made to the limited partner or the general partner. No additional capital calls were issued. The Vehicle remained in dormancy status throughout the quarter.

The GP does not identify any actions proposed to be taken in Q2 2023 beyond the continuation of the debt commitment extension discussions and the ongoing monitoring of the concession renegotiation. We note that the GP's description of proposed actions is somewhat less detailed than might be expected — for example, the GP does not address whether it is contemplating any independent engagement with the Portland Metropolitan Water District, whether it has retained or considered retaining Oregon regulatory counsel to monitor the implications of Oregon SB 1567, or whether it has developed contingency plans in the event the concession renegotiation results in a Material Adverse Effect determination under the EPA.

IV. Compliance Assessment Summary

The following table summarizes our assessment of the Q1 Report's compliance with the applicable reporting requirements:

V. Recommendations

Based on our review of the Q1 Report, we make the following recommendations for Ironside's consideration.

A. Supplemental Information Requests

We recommend that Ironside, through C&H, submit a written request to the GP (via its counsel, Breckenridge Sloane & Pratt LLP, attention Charles A. Delacroix) for supplemental information on the following matters:

1. Concession Renegotiation Detail. A supplemental report detailing the specific terms under negotiation between Cascadia and the Portland Metropolitan Water District for the Bull Run Filtration Project concession renegotiation, including: (a) the key economic terms under discussion (annual concession fee adjustments, capital expenditure obligations, performance standards, rate-adjustment mechanisms, and any proposed changes to the concession term); (b) the identity of the Water District's negotiating representatives and any third-party advisors; (c) any preliminary financial-impact analysis prepared by Blackthorn Advisory Group LLC or Cascadia management; and (d) any assessment of the likelihood and anticipated timing of a resolution. This information is specifically contemplated by the Side Letter and is critical to Ironside's evaluation of the transaction.

2. Due-Diligence Cost and Deposit Reconciliation. An itemized breakdown of the $12,790,000 in due-diligence costs and deposits, identifying for each line item: (a) the payee or counterparty; (b) the nature of the expenditure; (c) the amount; and (d) whether the expenditure is refundable, partially refundable, or non-refundable, together with any conditions to refund. This information is necessary to evaluate the Vehicle's recovery position in a wind-down scenario.

3. Debt Commitment Extension Fee Allocation. Express clarification on the allocation of any debt commitment extension fees as between Fund IV and the Co-Invest, including: (a) whether the GP considers such fees to constitute "Transaction Costs" allocable pro rata to the Co-Invest under LP Agreement §4.02(a); (b) the anticipated amount of any extension fee; and (c) whether such fee would be funded from existing Vehicle reserves or would require an additional capital call.

We are prepared to draft and transmit the supplemental information request upon Ironside's instruction. Under the Side Letter, the GP is required to use commercially reasonable efforts to respond within fifteen (15) business days.

B. Monitoring Items for Q2 2023

We recommend that Ironside and C&H actively monitor the following items during Q2 2023:

1. Debt Commitment Expiration. The Atlas National Bank / Pinnacle Credit Partners debt commitment letter is scheduled to expire on April 30, 2023. Any extension — or failure to extend — will have material implications for the viability of the transaction. We recommend that Ironside seek immediate notification from the GP regarding the outcome of extension discussions.

2. Second Amendment Outside Date. The Second Amendment to the EPA extends the outside date to June 30, 2023. If the concession renegotiation is not resolved by that date, a further extension will be required. Ironside should consider, in advance of the June 30 deadline, whether it wishes to support a Third Amendment or whether it would prefer to evaluate alternative courses of action, including the exercise of its wind-down election right.

3. FERC §203 Approval Lapse Timeline. The FERC §203 approval will lapse approximately June 15, 2024, if the transaction has not closed. While this deadline is over a year away, it represents an outer boundary on the transaction timeline and should be tracked as a key milestone.

4. OPUC Proceedings. The OPUC stay in Docket No. UM-2287 remains in effect. Any developments or reactivation of proceedings should be promptly communicated by the GP.

5. Concession Renegotiation Progress. The Bull Run Filtration Project concession renegotiation remains the central driver of the Material Impediment Event. Resolution — or deterioration — of the renegotiation will be the primary determinant of the transaction's path forward.

6. Vehicle Operating Expenses. The Vehicle's dormancy-period operating expenses are running at an annualized rate of approximately $185,000. Ironside should ensure that the remaining working-capital reserve is sufficient to cover ongoing dormancy costs through the anticipated resolution timeline. Based on the reported $3,500,000 initial reserve and cumulative expenses to date, the reserve should be adequate for an extended dormancy period, but we recommend that the GP provide an updated reserve balance and a forward-looking expense projection.

C. Wind-Down Election Right

We bring to Ironside's attention, for strategic planning purposes, the wind-down election right set forth in LP Agreement §7.04(c). Under that provision, if the Material Impediment Event remains in effect for a continuous period of eighteen (18) months, Ironside — as the sole limited partner holding more than 50% of the outstanding limited partnership interests — shall have the right, upon thirty (30) days' written notice to the GP, to elect the orderly wind-down and dissolution of the Vehicle.

The dormancy period commenced on January 9, 2023 (the date of the Capital Call Suspension Notice). The eighteen-month trigger date is therefore approximately July 9, 2024.

No action is required at this time. The wind-down election right will not become exercisable until July 2024, and the exercise of such right is a discretionary strategic decision for Ironside. However, we recommend that this right be monitored and evaluated as part of Ironside's ongoing strategic assessment of the Cascadia transaction. In particular, if the concession renegotiation remains unresolved and the EPA outside date is further extended into mid-2024, the wind-down election right may become a meaningful negotiating lever or exit mechanism.

We are prepared to advise Ironside on the procedural requirements and economic consequences of a wind-down election, including the treatment of unfunded commitments, the recovery of funded capital (net of expenses), the termination of the R&W insurance policy and potential premium recovery, and the allocation of wind-down costs, at such time as Ironside determines it is appropriate to evaluate this option in detail.

VI. Document Retention Note

The Q1 Report has been filed in the C&H matter file under Matter No. 1023-00001. A copy of the Q1 Report has been retained by Ironside's infrastructure investment team in accordance with its internal document-retention policies.

All supplemental information received from the GP or its counsel in response to the recommendations set forth in Section V.A above will be reviewed by C&H upon receipt and filed in the matter file accordingly. Any such supplemental information that raises material legal issues or alters our compliance assessment will be the subject of a follow-up memorandum to Ironside.

We will continue to review each quarterly report delivered by the GP during the dormancy period and will provide Ironside with a comparable review memorandum following receipt of each such report.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Theresa Kim Associate, Fund Formation & Advisory

By: ________

Owen Fischer Associate, Fund Formation & Advisory

Reviewed by: ________ Pamela Cross Partner, Fund Formation & Advisory (Responsible Partner)

Distribution:

Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP Pamela Cross, Calderwood & Harkness LLP (file copy) Nicholas Stern, Calderwood & Harkness LLP (file copy)

This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP for the exclusive use of Ironside Capital Management LP. It is protected by the attorney-client privilege and the attorney work product doctrine. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure may result in a waiver of applicable privileges.

Item	Amount
Total committed capital	$300,000,000
Capital called to date (single call, August 15, 2022; 7.5% of commitment)	$22,500,000
Unfunded commitment	$277,500,000
Expenditure Category	Amount
Organizational expenses (formation, legal, and structuring costs)	$285,000
Placement-agent fee (Rivermark Capital Markets Inc., 0.35% × $300M commitment)	$1,050,000
R&W insurance premium deposit (Northgate Specialty Insurance Co., Policy No. NSW-RI-2022-09814, 2.5% × $195M coverage limit)	$4,875,000
Due-diligence costs and deposits	$12,790,000
Working-capital reserve	$3,500,000
Total	$22,500,000
Requirement	Status	Notes
Timeliness of report delivery	Compliant	Delivered April 12, 2023; contractual deadline April 30, 2023
Material Impediment Event status update (§7.04(b)(i))	Compliant	Concession renegotiation update provided; detail gaps noted regarding specific terms and financial-impact analysis
EPA status update (§7.04(b)(v))	Compliant	First Amendment outside date expiration and Second Amendment execution fully covered
Regulatory status update (§7.04(b)(iii))	Compliant	FERC, OPUC, and CFIUS status adequately addressed
Financing status update (Side Letter)	Substantially Compliant	Debt commitment status and approaching expiration addressed; cost-allocation detail for potential extension fees lacking
Financial position / cash summary (§7.04(b)(ii))	Substantially Compliant	Summary-level data provided; itemized due-diligence deposit breakdown missing
Actions taken / proposed (§7.04(b)(iv))	Compliant	Four specific actions described with adequate detail
Side Letter enhanced reporting — concession renegotiation detail	Partially Compliant	Q1 Report lacks detailed concession negotiation terms, identity of Water District negotiators, and financial-impact scenarios as required by the Side Letter
Side Letter enhanced reporting — counterparty communications	Partially Compliant	No summary of communications with Target's counsel or Selling Shareholders' counsel provided (may reflect absence of such communications, but express confirmation recommended)

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL PROTECTED BY ATTORNEY-CLIENT PRIVILEGE AND ATTORNEY WORK PRODUCT DOCTRINE
TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
FROM: Theresa Kim, Calderwood & Harkness LLP Owen Fischer, Calderwood & Harkness LLP
REVIEWED BY: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP
DATE: April 20, 2023
RE: Review of Meridian Infrastructure GP IV LLC Quarterly Status Report — Q1 2023 (January 1 – March 31, 2023) — ICM Cascadia Co-Invest, LP
MATTER NO.: 1023-00001
I. Executive Summary
This memorandum sets forth our review of the first quarterly status report (the "Q1 Report") delivered by Meridian Infrastructure GP IV LLC (the "GP") to Ironside Capital Management LP ("Ironside" or "ICM") in its capacity as the sole limited partner (holding a 99.99% limited partnership interest) of ICM Cascadia Co-Invest, LP (the "Vehicle" or "Co-Invest"), covering the fiscal quarter ended March 31, 2023 — the period from January 1, 2023 through March 31, 2023.
The Q1 Report is the first quarterly report delivered following the GP's formal declaration of a Material Impediment Event and the issuance of the Capital Call Suspension Notice on January 9, 2023 (the "Suspension Notice"), which initiated the dormancy period under the Vehicle's governing documents. As such, the Q1 Report represents the GP's inaugural obligation to comply with the enhanced dormancy-period reporting framework set forth in the Limited Partnership Agreement of ICM Cascadia Co-Invest, LP, dated July 29, 2022 (the "LP Agreement"), and the Side Letter between Ironside and the GP dated July 29, 2022 (the "Side Letter").
The Q1 Report was received by Ironside on April 12, 2023 and forwarded to Calderwood & Harkness LLP ("C&H") for legal review on April 13, 2023. Our review has been conducted in consultation with the infrastructure investment team at Ironside and with reference to the full transaction document suite maintained in C&H's matter file.
Overall Assessment: The Q1 Report is substantially compliant with the reporting requirements under LP Agreement §7.04(b) and the enhanced reporting obligations set forth in the Side Letter. The GP has addressed each of the core reporting categories mandated by the governing documents, and the report was delivered well within the applicable deadline. However, we note certain informational gaps — discussed in detail below — that we recommend raising with the GP's counsel, Breckenridge Sloane & Pratt LLP (the responsible partner being Charles A. Delacroix), in order to ensure that Ironside has full visibility into the current posture of the underlying transaction and the Vehicle's financial position during the dormancy period.
In particular, we flag three areas warranting supplemental disclosure: (1) the absence of detail regarding the specific terms under negotiation in the Bull Run Filtration Project concession renegotiation and any associated financial-impact analysis; (2) the lack of an itemized reconciliation of due-diligence costs and deposits; and (3) the omission of guidance regarding the allocation of any debt commitment extension fees between Meridian Infrastructure Fund IV, LP ("Fund IV") and the Co-Invest.
Our detailed analysis follows.
II. Reporting Requirement Framework
A. LP Agreement §7.04(b) Requirements
Section 7.04(b) of the LP Agreement establishes the dormancy-period reporting regime applicable whenever the GP has declared a Material Impediment Event pursuant to §7.04(a). Specifically, §7.04(b) provides that during any period in which a Material Impediment Event has been declared and remains in effect, the GP shall deliver quarterly written reports (each, a "Quarterly Status Report") to each limited partner within thirty (30) calendar days after the end of each fiscal quarter of the Vehicle.
The required content of each Quarterly Status Report is enumerated in §7.04(b)(i)–(v) as follows:
(i) a description of the current status of the Material Impediment Event and any reasonably foreseeable developments relating thereto;
(ii) a summary of the Vehicle's financial position as of the end of the applicable fiscal quarter, including cash balances, expenses incurred during the quarter, cumulative expenses since the declaration of the Material Impediment Event, and the amount of remaining unfunded capital commitments;
(iii) the status of any regulatory approvals required in connection with the underlying transaction, including identification of any approvals received, pending, or lapsed;
(iv) a description of any actions taken or proposed to be taken by the GP during the applicable fiscal quarter in connection with the Material Impediment Event, the underlying transaction, or the management of the Vehicle; and
(v) an update on the status of the underlying transaction, including the current status of the definitive transaction documentation, any amendments or modifications thereto, and any material communications with counterparties or their representatives.
For purposes of this review, the "underlying transaction" is the acquisition by Cascadia Acquisition Corp. (a wholly owned subsidiary of Meridian Infrastructure Fund IV, LP, with the Vehicle participating as a co-investor) of 100% of the equity interests in Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Target") from the Selling Shareholders, pursuant to the Equity Purchase Agreement dated September 15, 2022 (the "EPA").
B. Side Letter Enhanced Reporting Obligations
The Side Letter between Ironside and the GP, executed concurrently with the LP Agreement on July 29, 2022, supplements the LP Agreement's reporting requirements with additional disclosure obligations that reflect Ironside's position as the sole limited partner and the significant size of its capital commitment ($300 million). The Side Letter's enhanced reporting provisions were negotiated by C&H on Ironside's behalf and are intended to provide Ironside with granular visibility into key risk areas specific to the Cascadia transaction.
The Side Letter requires that each Quarterly Status Report delivered pursuant to LP Agreement §7.04(b) also include the following supplemental information:
(i) detailed reporting on any developments in the renegotiation of concession agreements to which Cascadia is a party, specifically referencing (but not limited to) the Portland Metropolitan Water District / Bull Run Filtration Project water-treatment concession, including the specific terms under discussion, the identity of counterparties and their negotiating representatives, and any preliminary or indicative assessments of the financial impact of proposed revised terms on the Target's revenue, EBITDA, or enterprise value;
(ii) updates on the status of the Equity Purchase Agreement, including any amendments, waivers, consents, or modifications executed or proposed during the applicable quarter, together with copies of any such documentation;
(iii) detail on the status of the financing commitments supporting the transaction, specifically the debt commitment letter executed by Atlas National Bank, N.A. (as lead arranger and administrative agent) and Pinnacle Credit Partners LLC (as co-lender), including the current expiration date, any extension discussions, the anticipated cost of any extension, and the allocation of such costs as between Fund IV and the Co-Invest; and
(iv) a summary of any material communications from or to the Target's counsel (Ridgeway, Ashford & Malone PC) or the Selling Shareholders' counsel (Garvey Lennox LLP), including any notices, demands, or expressions of intent relating to the EPA, any termination right, or the concession renegotiation.
The Side Letter further provides that Ironside may, by written notice to the GP, request additional information beyond the foregoing, and the GP shall use commercially reasonable efforts to provide such information within fifteen (15) business days of receipt of such request.
C. Timeliness Assessment
The Q1 2023 fiscal quarter ended on March 31, 2023. Pursuant to LP Agreement §7.04(b), the GP was required to deliver the Quarterly Status Report within thirty (30) calendar days after the end of the fiscal quarter — i.e., by no later than April 30, 2023.
The Q1 Report was delivered by the GP to Ironside on April 12, 2023, eighteen (18) days prior to the contractual deadline.
Assessment: Compliant. The Q1 Report was timely delivered.
III. Review of Q1 Report Content
We have reviewed each substantive section of the Q1 Report against the applicable reporting requirements. Our analysis is organized below according to the reporting categories set forth in LP Agreement §7.04(b) and the Side Letter.
A. Status of Material Impediment Event
The GP confirms in the Q1 Report that the Material Impediment Event declared on January 9, 2023 remains in effect as of March 31, 2023. The GP has not rescinded the declaration, and the conditions giving rise to the declaration have not been resolved.
The Q1 Report identifies the basis for the Material Impediment Event as follows: on October 28, 2022, the Portland Metropolitan Water District (the "Water District") delivered formal written notice to Cascadia Renewables Holdings, Inc. of its intent to renegotiate the 40-year Bull Run Filtration Project water-treatment concession agreement. The concession was originally executed in approximately 2018 and generates annual revenue of approximately $64 million for Cascadia, making it one of the Target's most significant revenue-generating assets. The Water District's renegotiation notice cited changed regulatory requirements under Oregon Senate Bill 1567 (enacted in 2022), which imposed new environmental and water-quality standards that, in the Water District's view, materially altered the economic and operational framework underlying the original concession terms.
The GP states that negotiations between Cascadia — represented in the negotiations by its Chief Executive Officer, Jonathan M. Weir, and its Chief Financial Officer, Sandra K. Llewellyn — and the Portland Metropolitan Water District were ongoing throughout Q1 2023. However, the Q1 Report states that as of March 31, 2023, no tentative or definitive agreement has been reached between the parties on revised concession terms. The GP does not provide a timeline or probability assessment for the resolution of the renegotiation, characterizing the process as "active but uncertain."
The GP further characterizes the concession renegotiation as giving rise to a condition precedent failure risk under the EPA. Specifically, the GP identifies the "no Material Adverse Effect" closing condition set forth in Section 8.02(d) of the EPA as the provision most directly implicated by the renegotiation. Under the EPA, the obligation of Cascadia Acquisition Corp. (and, by extension, Fund IV and the Co-Invest) to consummate the acquisition is conditioned upon, among other things, the absence of any Material Adverse Effect with respect to the Target since the date of the EPA. The GP's position, as articulated in the Q1 Report, is that a materially adverse revision to the Bull Run Filtration Project concession — particularly one that results in a significant reduction in annual revenue or a shortening of the concession term — could constitute a Material Adverse Effect for purposes of the EPA, thereby providing the buyer group with the right to decline to close.
C&H Comment: While the Q1 Report adequately identifies the nature and status of the Material Impediment Event, it does not provide the level of detail contemplated by the Side Letter with respect to the concession renegotiation. Specifically, the Q1 Report does not disclose: (a) the specific terms under negotiation between Cascadia and the Water District (e.g., proposed adjustments to the annual concession fee, revised performance standards, potential changes to the concession term, capital expenditure requirements under the new regulatory framework, or pricing adjustment mechanisms); (b) the identity of the Water District's negotiating representatives or any third-party advisors retained by either side for the renegotiation; or (c) any preliminary valuation impact analysis or financial modeling scenarios prepared by Blackthorn Advisory Group LLC (retained by Meridian as its financial advisor on the Cascadia transaction) or by Cascadia management reflecting the potential impact of revised concession terms on the Target's revenue, EBITDA, and enterprise value.
We recommend that Ironside request supplemental detail on each of these points from the GP. The concession renegotiation is the core driver of the Material Impediment Event and the primary source of uncertainty in the transaction. Ironside's ability to evaluate its strategic options — including whether to support further extensions of the EPA outside date or to exercise its wind-down election right under §7.04(c) — depends on a clear understanding of the financial magnitude and likelihood of an adverse outcome in the renegotiation.
B. Equity Purchase Agreement Status
The GP confirms in the Q1 Report that the Equity Purchase Agreement, dated September 15, 2022, among the Selling Shareholders (Timberline Growth Equity Fund III, LP, the Weir Family Trust, and the Management Rollover Pool), Cascadia Renewables Holdings, Inc., and Cascadia Acquisition Corp. (the buyer entity), remains in full force and effect as of March 31, 2023.
The Q1 Report provides the following chronology of amendments to the EPA:
First Amendment. The First Amendment to the EPA was executed on November 22, 2022, by all parties thereto. The First Amendment extended the "outside date" (as defined in Section 10.01(b) of the EPA) from December 31, 2022 to March 31, 2023. The First Amendment was necessitated by the declaration of the Material Impediment Event and the resulting delay in the anticipated closing timeline. No other terms of the EPA were modified by the First Amendment.
Expiration of First Amendment Outside Date. The Q1 Report notes that the First Amendment outside date of March 31, 2023 expired during the reporting period without the closing of the transaction having occurred. The GP confirms that, upon the lapse of the March 31, 2023 deadline, each party to the EPA was entitled to exercise its termination right under Section 10.01(b) of the EPA. However, no party exercised such termination right.
Second Amendment. The GP reports that, in anticipation of the expiration of the First Amendment outside date, the parties negotiated and executed a Second Amendment to the EPA on March 15, 2023 — approximately two weeks prior to the March 31 expiration. The Second Amendment further extends the outside date to June 30, 2023. The GP confirms that all EPA parties consented to the extension. No other terms of the EPA were modified by the Second Amendment, and no waivers of any EPA provisions were granted in connection therewith.
C&H Comment: The Second Amendment to the EPA has been separately reviewed by C&H in a memorandum dated March 12, 2023, titled "Implications of Second Outside Date Extension for Co-Invest Vehicle" (the "Second Amendment Memo"), which was delivered to Marcus Calloway and Renata Obasi on March 14, 2023. The GP's description of the Second Amendment in the Q1 Report is consistent with and accurately reflects the amendment terms as analyzed in the Second Amendment Memo. No new waivers, modifications, or side agreements beyond the outside date extension were disclosed in the Q1 Report, and our review has not identified any discrepancies between the Q1 Report and the Second Amendment as executed.
We note that the Q1 Report does not address the Side Letter requirement to provide a summary of material communications from or to the Target's counsel (Ridgeway, Ashford & Malone PC) or the Selling Shareholders' counsel (Garvey Lennox LLP). While the report's silence on this point may indicate that no such communications occurred during Q1 2023 beyond those associated with the Second Amendment negotiation, we recommend that Ironside seek express confirmation from the GP that no other material communications with these parties took place during the quarter.
C. Regulatory Approvals Status
1. FERC §203 Approval
The GP confirms in the Q1 Report that the Federal Energy Regulatory Commission ("FERC") granted approval of the transaction under Section 203 of the Federal Power Act on December 15, 2022, in FERC Docket No. EC22-143-000. The approval is conditioned upon the filing of requisite license-transfer documentation upon consummation of the transaction.
The FERC approval order includes a standard 18-month lapse provision, pursuant to which the approval will automatically expire if the transaction is not consummated within 18 months of the date of the order. Based on the December 15, 2022 approval date, the calculated lapse date is approximately June 15, 2024.
The Q1 Report notes that no license-transfer filings have been made during Q1 2023, which is expected given the dormancy of the transaction and the fact that such filings are customarily made only at or immediately following closing.
C&H Comment: The FERC §203 approval remains valid as of the date of this memorandum. However, the lapse clock is running and is not subject to tolling. If the underlying transaction is not consummated by approximately June 15, 2024, the FERC approval will expire by its terms, and Cascadia Acquisition Corp. (or its successor) would be required to submit a new §203 application. A refiling would entail additional regulatory costs, a review period that typically ranges from 60 to 180 days depending on the complexity of the application and whether the Commission elects to issue a deficiency letter, and the risk that intervening regulatory or market developments could result in conditions or a denial not present in the original proceeding. We recommend that the FERC lapse date be added to Ironside's internal tracking calendar as a key milestone.
2. OPUC (Oregon Public Utility Commission)
The GP reports that the application filed with the Oregon Public Utility Commission ("OPUC") in Docket No. UM-2287, originally submitted on October 14, 2022, remains pending. However, the proceedings were administratively stayed in February 2023 at the joint request of the applicant parties, reflecting the dormancy of the transaction pending resolution of the Material Impediment Event.
No substantive proceedings, hearings, or staff reports occurred during Q1 2023 in connection with the OPUC application. The stay remains in effect as of the date of the Q1 Report.
The GP does not provide detail on the anticipated timeline for reactivation of the OPUC proceedings or the procedural steps that would be required to lift the stay. We note that OPUC review of change-of-control transactions involving regulated utilities in Oregon typically requires a public-interest determination and may involve intervenor participation, which could extend the review period once proceedings are reactivated.
3. CFIUS. The GP confirms that the voluntary notice filed with the Committee on Foreign Investment in the United States ("CFIUS") was acknowledged by CFIUS on September 20, 2022. CFIUS completed its review without requiring a formal investigation, and no conditions or mitigation measures were imposed. The GP characterizes the outcome as effective clearance of the transaction from a CFIUS perspective.
No updates relating to CFIUS occurred during Q1 2023, and no further CFIUS action is required in connection with the transaction.
C&H Comment: CFIUS clearance, once granted, is not subject to a time-limited lapse provision analogous to the FERC §203 approval. Accordingly, CFIUS clearance remains in place regardless of the duration of the dormancy period, and no refiling risk exists with respect to this regulatory workstream.
D. Financing Commitment Status
The GP reports in the Q1 Report that the debt commitment letter executed on August 30, 2022 by Atlas National Bank, N.A. (as lead arranger and administrative agent, with a $650 million share of the term loan facility) and Pinnacle Credit Partners LLC (as co-lender, with a $325 million share of the term loan facility) remains in effect as of March 31, 2023.
The debt commitment covers two facilities: (a) a $975 million senior secured term loan facility, and (b) a $150 million revolving credit facility, for a total aggregate commitment of $1.125 billion. The facilities are intended to finance a substantial portion of the $1.95 billion enterprise value acquisition of Cascadia, with the remainder funded through equity contributions from Fund IV, the Co-Invest, and management rollover.
The commitment letter's original expiration date was prior to Q1 2023, but the GP notes that the expiration was extended once — to April 30, 2023 — in a prior quarter. The Q1 Report does not provide the original expiration date or the date on which the first extension was executed, but these facts are consistent with our records.
Critically, the GP notes that the commitment letter will expire on April 30, 2023 — only ten days after the date of this memorandum — absent a further extension. The GP indicates that discussions with Atlas National Bank regarding a potential further extension are underway but have not yet concluded. The GP does not indicate whether Pinnacle Credit Partners has separately confirmed its willingness to extend, though in practice the co-lender's extension is typically contingent upon the lead arranger's extension.
C&H Comment: The approaching April 30, 2023 expiration of the debt commitment letter is a significant development that warrants close monitoring by Ironside. The loss of the committed debt financing would fundamentally impair the buyer group's ability to consummate the Cascadia acquisition and could itself constitute a basis for termination of the EPA by the Selling Shareholders.
Any extension of the commitment letter will likely require the payment of an extension fee to the lenders. The prior extension fee, as disclosed by the GP in connection with the first extension, was calculated at 0.25% of the $975 million term loan commitment, or $2,437,500. That fee was paid by Meridian Infrastructure Fund IV, LP. A second extension fee is likely to be at least equivalent in amount and could be higher, depending on the lenders' assessment of the risk profile of the transaction in light of the ongoing concession renegotiation.
We note that the Q1 Report does not address whether any commitment extension costs incurred going forward would be allocated in whole or in part to the Co-Invest, or whether such costs would be borne entirely by Fund IV. The LP Agreement provides in §4.02(a) that the Vehicle shall bear its pro rata share of transaction costs, but it is not clear whether commitment extension fees fall within the definition of "Transaction Costs" under the LP Agreement or whether the GP would treat such fees as a Fund IV-level expense. We recommend that Ironside seek express clarification from the GP on this cost-allocation question.
We further note that the debt commitment letter is governed by New York law and is subject to the exclusive jurisdiction of the courts of the State of New York, sitting in the Borough of Manhattan.
E. Vehicle Financial Position
1. Capital Status
The Q1 Report provides the following summary of the Vehicle's capital position as of March 31, 2023:
Capital calls remain suspended pursuant to the Capital Call Suspension Notice dated January 9, 2023, issued by the GP in connection with the declaration of the Material Impediment Event under LP Agreement §7.04. No additional capital calls were made during Q1 2023, and the GP does not anticipate issuing any capital calls during the dormancy period unless and until the Material Impediment Event is resolved or the GP otherwise determines that additional capital is required for the preservation of the Vehicle's interests.
2. Cash Balances and Expenditure Summary
The Q1 Report provides a summary of the Vehicle's cash position as of March 31, 2023. The original capital call proceeds of $22,500,000 were applied as follows at the time of the initial drawdown:
The Q1 Report further describes the Vehicle's operating expenses during the dormancy period. Specifically, the GP reports approximately $46,250 in operating expenses for Q1 2023, representing an annualized expense rate of approximately $185,000. The dormancy-period operating expenses are composed of the following categories:
• Fund administration services (provided by Kendrick Thorne & Associates LLP);
• Delaware registered agent services (provided by Cascade Systems);
• Delaware annual franchise tax accrual; and
• Audit and K-1 tax-return preparation costs.
These expenses are being deducted from the original $3,500,000 working-capital reserve. The Q1 Report should, but does not expressly, detail the cumulative expenses deducted from the working-capital reserve since formation through the end of Q1 2023. Based on the timeline — formation in approximately July 2022, with the dormancy commencing January 9, 2023 — we would expect cumulative operating expenses from formation through March 31, 2023 to have reduced the working-capital reserve by an amount greater than the Q1 figure alone, given that pre-dormancy operating expenses (covering approximately the period from August 2022 through December 2022) would also have been charged against the reserve.
3. GP Commitment
The GP (Meridian Infrastructure GP IV LLC) holds a 0.01% general partnership interest in the Vehicle, representing a capital commitment of $30,000. The GP's commitment has been funded and remains outstanding. No distributions have been made to the GP during Q1 2023.
4. R&W Insurance Status
The representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) was bound on September 1, 2022, with a coverage limit of $195 million, representing 10% of the $1.95 billion enterprise value of the Cascadia acquisition. The full premium deposit of $4,875,000 was paid by the Vehicle on September 2, 2022.
The GP reports that a Tolling Side Letter was executed between Cascadia Acquisition Corp. (as the named insured) and Northgate Specialty Insurance Co. on January 20, 2023. The Tolling Side Letter suspends the running of the coverage period during the dormancy period, such that the policy term will not begin to run until the transaction closes and the coverage period will not be eroded by the passage of time during dormancy. The policy remains in suspension as of March 31, 2023. No claims activity occurred during Q1 2023.
C&H Comment: The financial detail provided in the Q1 Report is adequate for purposes of LP Agreement §7.04(b), but we note an important gap: the Q1 Report does not include a detailed reconciliation or itemized breakdown of the $12,790,000 in due-diligence costs and deposits. This is a significant line item — representing over 56% of the total capital called — and may include components with differing risk profiles in a wind-down scenario. Specifically, certain deposits may be refundable (e.g., escrow deposits, regulatory filing fee deposits) while others may have been irrevocably applied (e.g., fees for completed professional services, commitment deposits that vest upon execution). In order to accurately assess the Vehicle's recovery position in the event of a transaction termination and wind-down, Ironside should have visibility into the composition of this line item.
We recommend requesting an itemized breakdown from the GP identifying each component of the $12,790,000, the payee, the nature of the expenditure, the amount, and whether the amount is refundable, partially refundable, or non-refundable.
F. GP Actions Taken or Proposed During Q1 2023
The GP reports the following specific actions taken during Q1 2023 in connection with the Material Impediment Event, the underlying transaction, and the management of the Vehicle:
1. R&W Insurance Tolling Side Letter. The GP, acting on behalf of Cascadia Acquisition Corp., negotiated and executed the Tolling Side Letter with Northgate Specialty Insurance Co. on January 20, 2023, preserving the R&W insurance coverage during the dormancy period without erosion of the policy term.
2. OPUC Stay Request. The GP coordinated with its counsel, Breckenridge Sloane & Pratt LLP, and with the Target's counsel, Ridgeway, Ashford & Malone PC, to prepare and file a joint request to the Oregon Public Utility Commission to stay proceedings in Docket No. UM-2287. The stay was granted in February 2023 and remains in effect.
3. Second Amendment to EPA. The GP led the negotiation and execution of the Second Amendment to the Equity Purchase Agreement on March 15, 2023, extending the outside date from March 31, 2023 to June 30, 2023. The Second Amendment was executed with the consent of all EPA parties, including the Selling Shareholders and the Target.
4. Debt Commitment Extension Discussions. The GP commenced discussions with Atlas National Bank, N.A. regarding a potential further extension of the debt commitment letter beyond its current April 30, 2023 expiration date. These discussions were ongoing as of the end of Q1 2023 and had not yet concluded.
The GP confirms that no investment activity occurred during Q1 2023. No distributions were made to the limited partner or the general partner. No additional capital calls were issued. The Vehicle remained in dormancy status throughout the quarter.
The GP does not identify any actions proposed to be taken in Q2 2023 beyond the continuation of the debt commitment extension discussions and the ongoing monitoring of the concession renegotiation. We note that the GP's description of proposed actions is somewhat less detailed than might be expected — for example, the GP does not address whether it is contemplating any independent engagement with the Portland Metropolitan Water District, whether it has retained or considered retaining Oregon regulatory counsel to monitor the implications of Oregon SB 1567, or whether it has developed contingency plans in the event the concession renegotiation results in a Material Adverse Effect determination under the EPA.
IV. Compliance Assessment Summary
The following table summarizes our assessment of the Q1 Report's compliance with the applicable reporting requirements:
V. Recommendations
Based on our review of the Q1 Report, we make the following recommendations for Ironside's consideration.
A. Supplemental Information Requests
We recommend that Ironside, through C&H, submit a written request to the GP (via its counsel, Breckenridge Sloane & Pratt LLP, attention Charles A. Delacroix) for supplemental information on the following matters:
1. Concession Renegotiation Detail. A supplemental report detailing the specific terms under negotiation between Cascadia and the Portland Metropolitan Water District for the Bull Run Filtration Project concession renegotiation, including: (a) the key economic terms under discussion (annual concession fee adjustments, capital expenditure obligations, performance standards, rate-adjustment mechanisms, and any proposed changes to the concession term); (b) the identity of the Water District's negotiating representatives and any third-party advisors; (c) any preliminary financial-impact analysis prepared by Blackthorn Advisory Group LLC or Cascadia management; and (d) any assessment of the likelihood and anticipated timing of a resolution. This information is specifically contemplated by the Side Letter and is critical to Ironside's evaluation of the transaction.
2. Due-Diligence Cost and Deposit Reconciliation. An itemized breakdown of the $12,790,000 in due-diligence costs and deposits, identifying for each line item: (a) the payee or counterparty; (b) the nature of the expenditure; (c) the amount; and (d) whether the expenditure is refundable, partially refundable, or non-refundable, together with any conditions to refund. This information is necessary to evaluate the Vehicle's recovery position in a wind-down scenario.
3. Debt Commitment Extension Fee Allocation. Express clarification on the allocation of any debt commitment extension fees as between Fund IV and the Co-Invest, including: (a) whether the GP considers such fees to constitute "Transaction Costs" allocable pro rata to the Co-Invest under LP Agreement §4.02(a); (b) the anticipated amount of any extension fee; and (c) whether such fee would be funded from existing Vehicle reserves or would require an additional capital call.
We are prepared to draft and transmit the supplemental information request upon Ironside's instruction. Under the Side Letter, the GP is required to use commercially reasonable efforts to respond within fifteen (15) business days.
B. Monitoring Items for Q2 2023
We recommend that Ironside and C&H actively monitor the following items during Q2 2023:
1. Debt Commitment Expiration. The Atlas National Bank / Pinnacle Credit Partners debt commitment letter is scheduled to expire on April 30, 2023. Any extension — or failure to extend — will have material implications for the viability of the transaction. We recommend that Ironside seek immediate notification from the GP regarding the outcome of extension discussions.
2. Second Amendment Outside Date. The Second Amendment to the EPA extends the outside date to June 30, 2023. If the concession renegotiation is not resolved by that date, a further extension will be required. Ironside should consider, in advance of the June 30 deadline, whether it wishes to support a Third Amendment or whether it would prefer to evaluate alternative courses of action, including the exercise of its wind-down election right.
3. FERC §203 Approval Lapse Timeline. The FERC §203 approval will lapse approximately June 15, 2024, if the transaction has not closed. While this deadline is over a year away, it represents an outer boundary on the transaction timeline and should be tracked as a key milestone.
4. OPUC Proceedings. The OPUC stay in Docket No. UM-2287 remains in effect. Any developments or reactivation of proceedings should be promptly communicated by the GP.
5. Concession Renegotiation Progress. The Bull Run Filtration Project concession renegotiation remains the central driver of the Material Impediment Event. Resolution — or deterioration — of the renegotiation will be the primary determinant of the transaction's path forward.
6. Vehicle Operating Expenses. The Vehicle's dormancy-period operating expenses are running at an annualized rate of approximately $185,000. Ironside should ensure that the remaining working-capital reserve is sufficient to cover ongoing dormancy costs through the anticipated resolution timeline. Based on the reported $3,500,000 initial reserve and cumulative expenses to date, the reserve should be adequate for an extended dormancy period, but we recommend that the GP provide an updated reserve balance and a forward-looking expense projection.
C. Wind-Down Election Right
We bring to Ironside's attention, for strategic planning purposes, the wind-down election right set forth in LP Agreement §7.04(c). Under that provision, if the Material Impediment Event remains in effect for a continuous period of eighteen (18) months, Ironside — as the sole limited partner holding more than 50% of the outstanding limited partnership interests — shall have the right, upon thirty (30) days' written notice to the GP, to elect the orderly wind-down and dissolution of the Vehicle.
The dormancy period commenced on January 9, 2023 (the date of the Capital Call Suspension Notice). The eighteen-month trigger date is therefore approximately July 9, 2024.
No action is required at this time. The wind-down election right will not become exercisable until July 2024, and the exercise of such right is a discretionary strategic decision for Ironside. However, we recommend that this right be monitored and evaluated as part of Ironside's ongoing strategic assessment of the Cascadia transaction. In particular, if the concession renegotiation remains unresolved and the EPA outside date is further extended into mid-2024, the wind-down election right may become a meaningful negotiating lever or exit mechanism.
We are prepared to advise Ironside on the procedural requirements and economic consequences of a wind-down election, including the treatment of unfunded commitments, the recovery of funded capital (net of expenses), the termination of the R&W insurance policy and potential premium recovery, and the allocation of wind-down costs, at such time as Ironside determines it is appropriate to evaluate this option in detail.
VI. Document Retention Note
The Q1 Report has been filed in the C&H matter file under Matter No. 1023-00001. A copy of the Q1 Report has been retained by Ironside's infrastructure investment team in accordance with its internal document-retention policies.
All supplemental information received from the GP or its counsel in response to the recommendations set forth in Section V.A above will be reviewed by C&H upon receipt and filed in the matter file accordingly. Any such supplemental information that raises material legal issues or alters our compliance assessment will be the subject of a follow-up memorandum to Ironside.
We will continue to review each quarterly report delivered by the GP during the dormancy period and will provide Ironside with a comparable review memorandum following receipt of each such report.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Theresa Kim Associate, Fund Formation & Advisory
By: ________
Owen Fischer Associate, Fund Formation & Advisory
Reviewed by: ________ Pamela Cross Partner, Fund Formation & Advisory (Responsible Partner)
Distribution:
Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP Pamela Cross, Calderwood & Harkness LLP (file copy) Nicholas Stern, Calderwood & Harkness LLP (file copy)
This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP for the exclusive use of Ironside Capital Management LP. It is protected by the attorney-client privilege and the attorney work product doctrine. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure may result in a waiver of applicable privileges.
Item | Amount
Total committed capital | $300,000,000
Capital called to date (single call, August 15, 2022; 7.5% of commitment) | $22,500,000
Unfunded commitment | $277,500,000
Expenditure Category | Amount
Organizational expenses (formation, legal, and structuring costs) | $285,000
Placement-agent fee (Rivermark Capital Markets Inc., 0.35% × $300M commitment) | $1,050,000
R&W insurance premium deposit (Northgate Specialty Insurance Co., Policy No. NSW-RI-2022-09814, 2.5% × $195M coverage limit) | $4,875,000
Due-diligence costs and deposits | $12,790,000
Working-capital reserve | $3,500,000
Total | $22,500,000
Requirement | Status | Notes
Timeliness of report delivery | Compliant | Delivered April 12, 2023; contractual deadline April 30, 2023
Material Impediment Event status update (§7.04(b)(i)) | Compliant | Concession renegotiation update provided; detail gaps noted regarding specific terms and financial-impact analysis
EPA status update (§7.04(b)(v)) | Compliant | First Amendment outside date expiration and Second Amendment execution fully covered
Regulatory status update (§7.04(b)(iii)) | Compliant | FERC, OPUC, and CFIUS status adequately addressed
Financing status update (Side Letter) | Substantially Compliant | Debt commitment status and approaching expiration addressed; cost-allocation detail for potential extension fees lacking
Financial position / cash summary (§7.04(b)(ii)) | Substantially Compliant | Summary-level data provided; itemized due-diligence deposit breakdown missing
Actions taken / proposed (§7.04(b)(iv)) | Compliant | Four specific actions described with adequate detail
Side Letter enhanced reporting — concession renegotiation detail | Partially Compliant | Q1 Report lacks detailed concession negotiation terms, identity of Water District negotiators, and financial-impact scenarios as required by the Side Letter
Side Letter enhanced reporting — counterparty communications | Partially Compliant | No summary of communications with Target's counsel or Selling Shareholders' counsel provided (may reflect absence of such communications, but express confirmation recommended)

MEMORANDUM

MATTER NO.: 1023-00001

CALDERWOOD & HARKNESS LLP

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