1023-00001 · Ironside Capital Management LP · Financing

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

MEMORANDUM

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

FROM: Pamela Cross, Responsible Partner Nicholas Stern, Billing Partner Theresa Kim, Lead Associate Calderwood & Harkness LLP

DATE: August 30, 2022

RE: Review of Debt Commitment Letter — Key Terms, Market Flex Provisions, and Implications for ICM Cascadia Co-Invest, LP

MATTER NO.: 1023-00001

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I. Executive Summary

This memorandum sets forth the results of our review, on behalf of Ironside Capital Management LP ("Ironside") and ICM Cascadia Co-Invest, LP (the "Vehicle" or "ICM Co-Invest"), of the debt commitment letter dated August 30, 2022 (the "Commitment Letter") executed by Atlas National Bank, N.A. ("Atlas"), as lead arranger and administrative agent, and Pinnacle Credit Partners LLC ("Pinnacle"), as co-lender and syndication participant, in connection with the proposed acquisition (the "Acquisition") of Cascadia Renewables Holdings, Inc. (the "Target" or "Cascadia") by Cascadia Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation.

AcquisitionCo is wholly owned by Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP. The Transaction contemplates a 100% equity acquisition of Cascadia at an aggregate enterprise value of $1,950,000,000 and an equity value of $1,050,000,000. The equity will be contributed by Fund IV in the amount of $750,000,000 (representing approximately 71.43% of total equity) and by ICM Co-Invest in the amount of $300,000,000 (representing approximately 28.57% of total equity). The debt financing consists of a $975,000,000 senior secured term loan facility and a $150,000,000 revolving credit facility, as further described herein.

The Commitment Letter was negotiated by Meridian's outside counsel, Breckenridge Sloane & Pratt LLP ("BSP"), with lead responsibility held by Charles A. Delacroix, a partner in BSP's finance practice. Meridian's financial advisor, Blackthorn Advisory Group LLC, also provided input during the negotiation process. Calderwood & Harkness LLP ("C&H") was not a party to the negotiation of the Commitment Letter; rather, C&H was engaged by Ironside to review the Commitment Letter from the perspective of ICM Co-Invest and to assess the co-invest-specific risks, protections, and implications arising from the proposed financing structure.

The Commitment Letter is governed by the laws of the State of New York. It contemplates that the definitive credit agreement and related loan documentation will also be governed by New York law, with exclusive jurisdiction in the Supreme Court of the State of New York, Borough of Manhattan, or the United States District Court for the Southern District of New York.

Overall Assessment. Based on our review, the Commitment Letter is broadly market-standard for infrastructure leveraged buyout financings of this magnitude. The commitment is structured on a "certain funds" basis incorporating the well-established SunGard framework, which limits the conditions precedent to funding to those expressly enumerated in the Commitment Letter. The market flex provisions are within customary parameters for syndicated financings in the current market environment. However, certain flex provisions, conditions precedent, and structural aspects of the financing require particular attention from the co-invest perspective, as detailed in the sections that follow. We have identified five principal areas of concern — regulatory timing risk, concession renegotiation risk, flex exercise risk, commitment expiration risk, and equity contribution interdependency — each of which is discussed at length below along with our recommended mitigants.

II. Overview of Financing Structure

A. Senior Secured Term Loan Facility

The Commitment Letter provides for a senior secured term loan facility in an aggregate principal amount of $975,000,000 (the "Term Loan"), committed as follows:

(i) Atlas National Bank, N.A. — $650,000,000 (lead arranger, sole bookrunner, and administrative agent). Atlas's principal office is located at 383 Madison Avenue, New York, New York 10179.

(ii) Pinnacle Credit Partners LLC — $325,000,000 (co-lender and syndication participant). Pinnacle's principal office is located at 600 Lexington Avenue, 20th Floor, New York, New York 10022.

The Term Loan has a stated maturity of seven (7) years from the closing date of the Acquisition (the "Closing Date"). Based on the parties' current projected timeline, with an expected closing in the first quarter of 2023, the maturity date would fall in the first quarter of 2030.

The interest rate on the Term Loan is based on the Term Secured Overnight Financing Rate ("Term SOFR") plus an applicable margin. The initial applicable margin will be determined in the definitive credit agreement based on the total net leverage ratio at closing, with step-downs tied to leverage reduction. The specific margin grid has not yet been finalized and will be set during the negotiation of the definitive credit agreement. We understand from BSP that preliminary discussions with Atlas contemplate an initial margin in the range of 325 to 375 basis points, though this remains subject to change based on market conditions and the exercise of any market flex (discussed in Section IV below).

The Term Loan is secured by a first-priority lien on substantially all assets of AcquisitionCo, Cascadia, and Cascadia's direct and indirect subsidiaries. The collateral package encompasses the following categories of assets, which reflect the Target's substantial infrastructure portfolio:

• Fourteen (14) hydroelectric power generation facilities located in Oregon and Washington;

• Six (6) wind farm installations located in Oregon, Washington, and Montana;

• Three (3) water-treatment concession arrangements, including the Bull Run Filtration Project concession with the Portland Metropolitan Water District;

• All associated real property interests (including fee interests, leaseholds, easements, and rights of way);

• All equipment, machinery, and fixtures located at or used in connection with the foregoing facilities;

• All governmental permits, licenses, authorizations, and approvals (including FERC hydroelectric licenses and state-level utility authorizations);

• All contract rights, including power purchase agreements, offtake agreements, concession agreements, interconnection agreements, and all revenue-generating commercial arrangements; and

• All other tangible and intangible assets of the borrower and its subsidiaries, subject to customary exclusions.

The Term Loan amortizes at a rate of 1.0% per annum of the original principal amount, payable in equal quarterly installments. This is a customary amortization rate for term loan B facilities in leveraged infrastructure financings and represents a minimal reduction in outstanding principal during the life of the facility (approximately $9.75 million per annum, or approximately $2.4375 million per quarter).

The Commitment Letter provides for customary mandatory prepayment provisions applicable to the Term Loan, including mandatory prepayments from:

(a) Net cash proceeds of asset sales (subject to customary reinvestment rights and threshold amounts);

(b) Excess cash flow (with the applicable percentage to be determined in the definitive credit agreement, typically with step-downs based on leverage reduction);

(d) Net cash proceeds of debt incurrences not otherwise permitted under the credit agreement.

Voluntary prepayments of the Term Loan are permitted at par at any time following the six-month anniversary of the Closing Date. During the first six months after closing, voluntary prepayments are subject to a call premium of 101% of the principal amount being prepaid (i.e., a 1.0% call protection premium). This is a standard feature in leveraged term loan facilities and is designed to provide lenders with a minimum return during the initial post-closing period.

B. Revolving Credit Facility

The Commitment Letter also provides for a revolving credit facility in an aggregate principal amount of $150,000,000 (the "Revolving Facility"), committed solely by Atlas National Bank, N.A. as the sole revolving lender.

The Revolving Facility has a stated maturity of five (5) years from the Closing Date, which is two years shorter than the maturity of the Term Loan. This difference in tenor is customary, as revolving credit facilities typically mature prior to the associated term loan facilities to allow the borrower to refinance the revolver at maturity without triggering cross-default issues.

The Revolving Facility will be undrawn at closing. It is intended to be available for working capital needs and general corporate purposes of the borrower and its subsidiaries following the closing of the Acquisition. Because the Revolving Facility will not be drawn at closing, it is not included as a source of funds in the closing sources and uses analysis (see Section II.C below).

The borrower will pay a commitment fee of 0.50% per annum on the daily average undrawn amount of the Revolving Facility during the commitment period. This fee is within the customary range for revolving credit facilities in infrastructure financings.

The Revolving Facility shares the same first-priority security package as the Term Loan, with the revolving lender and the term loan lenders sharing pari passu in the collateral pursuant to an intercreditor arrangement to be established in the definitive documentation.

C. Sources and Uses

The following table summarizes the anticipated sources and uses of funds at closing:

Sources of Funds:

Uses of Funds:

As noted above, the Revolving Facility is not included in the sources at closing because it will be undrawn at that time.

With respect to leverage metrics, the implied closing leverage is approximately 5.2x Cascadia's fiscal year 2021 adjusted EBITDA of $138,000,000. This figure takes into account that Cascadia's existing net debt of approximately $900,000,000 will be refinanced at closing using proceeds of the Term Loan and equity contributions. On a term-loan-only basis (i.e., looking solely at the $975,000,000 Term Loan divided by $138,000,000 EBITDA), the leverage ratio is approximately 7.1x. However, because the existing $900,000,000 in net debt will be repaid at closing, the effective incremental leverage attributable to the new financing is the Term Loan amount less cash on hand at the time of closing. The net leverage figure will be confirmed in the definitive credit agreement based on the financial model and closing balance sheet.

These leverage levels are consistent with recent precedent transactions in the renewable energy infrastructure sector, though they are on the higher end of the range and leave limited room for covenant cushion, particularly if the concession renegotiation with the Portland Metropolitan Water District results in revenue erosion.

III. Key Terms of the Commitment Letter

A. Commitment and Syndication

Atlas is designated in the Commitment Letter as the sole lead arranger, sole bookrunner, and administrative agent for both the Term Loan and the Revolving Facility. Pinnacle is designated as co-lender with a fixed hold amount of $325,000,000 under the Term Loan. Pinnacle does not participate in the Revolving Facility.

Atlas retains the right to syndicate its $650,000,000 hold amount to a broader bank group following execution of the Commitment Letter. Syndication is expected to occur prior to closing. However — and this is a point of critical importance for the equity sponsors and for ICM Co-Invest in particular — the Commitment Letter expressly provides that "successful syndication" is not a condition precedent to funding. This means that Atlas and Pinnacle are irrevocably committed to fund the full $975,000,000 Term Loan regardless of whether Atlas is able to sell down any portion of its hold to other lenders in the syndication process.

This "no syndication condition" is favorable to the equity sponsors and to ICM Co-Invest because it eliminates the risk that the financing would fail due to adverse syndication market conditions. If Atlas is unable to find willing participants in the syndication, Atlas remains obligated to hold (and fund) its full $650,000,000 commitment. In practice, Atlas will likely exercise its market flex provisions (discussed in Section IV below) to make the facility more attractive to potential syndication participants, but the obligation to fund exists independent of the syndication outcome.

We note that Pinnacle's $325,000,000 commitment is also a fixed hold, and Pinnacle does not have the right to syndicate its commitment. This provides additional certainty regarding the composition of the lending group at closing.

B. Conditions Precedent to Funding

The conditions precedent to the lenders' obligation to fund the Term Loan and make the Revolving Facility available are limited to the following enumerated conditions, consistent with the "SunGard" or "certain funds" framework discussed more fully in Section V below:

1. EPA Execution and Consistency. Execution and delivery of the Equity Purchase Agreement (the "EPA") in form and substance consistent with the draft EPA delivered to the lenders on or about August 25, 2022 (the "Specified EPA"). This condition is designed to ensure that the lenders are extending credit on the basis of the transaction terms they reviewed during the commitment process.

2. No Materially Adverse EPA Amendments. No amendment, modification, or waiver of the EPA that is materially adverse to the interests of the lenders shall have been effected without the prior written consent of the administrative agent (acting on behalf of the lenders). This provision gives the lenders a consent right over changes to the acquisition agreement that could negatively affect the credit, while permitting non-material amendments to proceed without lender approval.

3. Equity Contribution Condition. Consummation of the equity contribution by Fund IV and ICM Co-Invest in the aggregate amount of not less than $1,050,000,000, in accordance with the terms of the Co-Investment Allocation Agreement and the contribution mechanics set forth in the EPA. This condition is discussed in greater detail in Section VIII.A below.

4. Specified Representations. Accuracy of the "specified representations" made by the borrower (AcquisitionCo) in the definitive credit agreement. The specified representations are limited to customary borrower-side representations relating to: (a) due organization and good standing; (b) corporate authorization and enforceability; (c) no conflicts with applicable laws; (d) compliance with Federal Reserve Board margin regulations; (e) non-status as an "investment company" under the Investment Company Act of 1940; and (f) compliance with the USA PATRIOT Act and beneficial ownership regulations. The representations are intentionally narrow and do not encompass the full range of representations that will be included in the definitive credit agreement.

5. Specified Acquisition Agreement Representations. Accuracy of the "Specified Acquisition Agreement Representations" — that is, representations made by the Target (Cascadia) in the EPA that are material to the interests of the lenders, but only to the extent that AcquisitionCo would have the right not to consummate the Acquisition as a result of a breach of such representations. This "double materiality" concept is discussed further in Section V.B below.

6. Customary Closing Documents. Delivery of customary closing deliverables, including: officer's certificates from AcquisitionCo, Cascadia, and each subsidiary guarantor; legal opinions from counsel to the borrower and guarantors; evidence of insurance meeting the requirements of the credit agreement; UCC-1 financing statements and other security interest perfection documents; and a solvency certificate from the Chief Financial Officer of AcquisitionCo (or a responsible officer).

7. Intercreditor / Subordination Arrangements. Receipt by the lenders of an acceptable intercreditor agreement or subordination arrangement in the event that any mezzanine, subordinated, or second-lien debt is introduced into the capital structure (whether as a result of structural flex or otherwise). As of the date of this memorandum, no such debt is contemplated in the base-case financing structure.

8. Payment of Fees and Expenses. Payment of all fees and expenses owing to the lenders (and their counsel) under the Commitment Letter, the fee letter, and the definitive credit agreement, to the extent invoiced at least three (3) business days prior to the Closing Date.

9. Regulatory Approvals. Receipt of specified regulatory approvals, consisting of: (a) approval by the Federal Energy Regulatory Commission ("FERC") under Section 203 of the Federal Power Act for the transfer of jurisdictional assets and hydroelectric licenses (Docket No. EC22-143-000); and (b) approval by the Oregon Public Utility Commission ("OPUC") for the transfer of utility assets (Docket No. UM-2287). Each such approval must be on terms "reasonably satisfactory" to the administrative agent. The regulatory approval condition is discussed further in Section VI below.

10. No Material Adverse Effect. No Material Adverse Effect (as defined in the EPA) shall have occurred with respect to the Target since the date of the EPA. The MAE condition is discussed in Section V.C below.

Key Observation for ICM Co-Invest. The equity contribution condition (item 3 above) requires the full $1,050,000,000 in equity to be funded by Fund IV and ICM Co-Invest as a condition to the lenders' obligation to advance the Term Loan. This creates a mutual dependency among three parties: Fund IV, ICM Co-Invest, and the lenders. If ICM Co-Invest does not fund its $300,000,000 contribution, the equity contribution condition is not satisfied, and the lenders are not obligated to fund the $975,000,000 Term Loan — which in turn means the Acquisition cannot close. The converse is equally true: if Fund IV does not fund its $750,000,000 contribution, the same result obtains. And if the lenders fail to fund (due to the occurrence of an enumerated condition failure), the equity sponsors are not required to fund their equity contributions into a transaction that cannot close for lack of financing. This tripartite interdependency is inherent in leveraged acquisition structures and is discussed more fully in Section VIII below.

C. Commitment Expiration and Extensions

The commitments under the Commitment Letter have an initial expiration date of April 30, 2023. If the Acquisition has not closed on or before that date, the lenders' obligation to fund the Term Loan and make the Revolving Facility available will terminate automatically, unless the commitment period is extended in accordance with the extension mechanics described below.

The Commitment Letter provides that the commitment period may be extended by mutual written agreement of Atlas, Pinnacle, and the borrower (AcquisitionCo) for successive six-month periods. Each extension is subject to the payment by the borrower of an extension fee equal to 0.25% of the aggregate Term Loan commitment amount per extension period. Based on the current $975,000,000 commitment, the extension fee per period is calculated as follows:

0.25% × $975,000,000 = $2,437,500 per extension period

Extension fees are the obligation of the borrower (AcquisitionCo). In practice, because AcquisitionCo is a newly formed acquisition vehicle with no independent assets prior to closing, extension fees would need to be funded by the equity sponsors. Under the Co-Investment Allocation Agreement dated July 29, 2022, we understand that transaction costs (including extension fees) are allocated pro rata between Fund IV and ICM Co-Invest in accordance with their respective equity percentages. However, we further understand from informal discussions with BSP that Fund IV may agree to bear extension fees in the first instance, with a true-up at closing. C&H will follow up with BSP to confirm the allocation mechanics and ensure they are clearly documented.

It is important to emphasize that the extension of the commitment period requires the mutual agreement of all three parties: Atlas, Pinnacle, and AcquisitionCo. Neither the equity sponsors nor any single lender can unilaterally extend the commitment. If the Acquisition does not close before the commitment expires (and the parties do not agree to an extension), the lenders' obligation to fund terminates. In such a scenario, the equity sponsors would need to source replacement financing from alternative lenders — a process that entails significant execution risk, potential repricing, and delay. This commitment expiration risk is particularly relevant for ICM Co-Invest, which has limited visibility into and control over the factors that may cause delays in closing (particularly regulatory approvals). This risk is discussed further in Section IX below.

D. Fees. The Commitment Letter contemplates the following fee arrangements in connection with the financing:

Arrangement Fee. An arrangement fee is payable to Atlas at closing in its capacity as sole lead arranger. The amount of the arrangement fee is set forth in a separate fee letter between Meridian (on behalf of the borrower) and Atlas, which was not provided to C&H for review. We understand that the fee letter is proprietary to the Meridian-Atlas relationship, which is standard practice in syndicated loan transactions. The arrangement fee, along with other fees under the separate fee letter, is reflected in the $50,000,000 estimated transaction costs included in the sources and uses analysis.

Commitment Fee. A commitment fee of 0.50% per annum is payable on the daily average undrawn amount of the Revolving Facility during the commitment period. This fee commences on the Closing Date and is payable quarterly in arrears. The commitment fee is a customary feature of revolving credit facilities and compensates the revolving lender for maintaining availability.

Extension Fee. As described in Section III.C above, an extension fee of 0.25% of the aggregate Term Loan commitment ($2,437,500 per extension period) is payable in connection with each extension of the commitment period.

Ticking Fee. A ticking fee of 0.25% per annum is payable on the unfunded Term Loan commitment beginning on the date that is ninety (90) days after the execution of the Commitment Letter. The ticking fee is payable quarterly in arrears and continues until the earlier of (i) the funding of the Term Loan on the Closing Date or (ii) the termination of the Commitment Letter. The ticking fee is designed to compensate the lenders for maintaining their commitments during the period between signing and closing. Based on the $975,000,000 commitment, the annualized ticking fee is $2,437,500, or approximately $609,375 per quarter. The ticking fee will begin to accrue on or about November 28, 2022 (ninety days after August 30, 2022).

Administrative Agent Fee. An annual administrative agent fee is payable to Atlas in its capacity as administrative agent under the credit agreement. The amount of this fee is set forth in the separate fee letter referenced above and was not reviewed by C&H.

C&H was not provided access to the separate fee letter between Meridian/AcquisitionCo and Atlas. All fees payable thereunder are obligations of the borrower and are encompassed within the $50,000,000 aggregate estimated transaction costs reflected in the sources and uses analysis. To the extent that fees under the separate fee letter exceed the estimates embedded in the financial model, the excess would need to be funded from additional equity contributions or other sources, which could affect the co-invest's economics.

E. Representations and Covenants in Definitive Documentation

The Commitment Letter contemplates that the definitive credit agreement will contain a comprehensive suite of representations, covenants, and events of default customary for senior secured infrastructure leveraged acquisition credit facilities. While the definitive credit agreement has not yet been drafted or circulated, the Commitment Letter includes a detailed term sheet outlining the following key provisions:

Affirmative Covenants. The borrower and its subsidiaries will be required to comply with customary affirmative covenants, including: (a) delivery of quarterly unaudited and annual audited financial statements; (b) delivery of compliance certificates certifying compliance with financial covenants; (c) maintenance of adequate insurance coverage consistent with industry standards for infrastructure assets; (d) prompt notice to the administrative agent of defaults, events of default, and material litigation; (e) maintenance of properties, permits, and licenses in good working order; and (f) compliance with ERISA requirements applicable to employee benefit plans.

Negative Covenants. The credit agreement will include customary negative covenants restricting the borrower's and its subsidiaries' ability to: (a) incur additional indebtedness above specified thresholds; (b) grant liens on their assets other than permitted liens; (c) engage in fundamental changes (mergers, consolidations, dissolutions); (d) make restricted payments (dividends, distributions, equity repurchases) above specified baskets; (e) make investments other than permitted investments; (f) dispose of assets outside the ordinary course of business; (g) enter into transactions with affiliates other than on arm's-length terms; and (h) enter into agreements that restrict the ability of subsidiaries to make distributions to the borrower.

Financial Covenants. The credit agreement will include a maintenance-based total net leverage ratio covenant, tested quarterly on a trailing four-quarter basis. The specific leverage levels (and any step-down schedule) will be set during the negotiation of the definitive credit agreement based on the financial model and the projected deleveraging trajectory. Maintenance financial covenants (as opposed to incurrence-only covenants) are customary in infrastructure leveraged financings and require the borrower to maintain compliance at all times, not merely upon the occurrence of specified events.

Events of Default. The credit agreement will include customary events of default, including: payment defaults, representation breaches, covenant defaults, cross-defaults to material indebtedness, bankruptcy events, judgment defaults, ERISA events, change of control, and invalidity of security interests or guarantees.

C&H will review the definitive credit agreement in detail when it is circulated and will provide separate commentary on each of these provisions at that time.

F. Governing Law and Dispute Resolution

The Commitment Letter is governed by the laws of the State of New York, without regard to principles of conflicts of law. The definitive credit agreement will likewise be governed by New York law.

The parties have agreed to submit to the exclusive jurisdiction of the Supreme Court of the State of New York, County of New York (Borough of Manhattan), or the United States District Court for the Southern District of New York, for the purpose of any litigation arising out of or relating to the Commitment Letter or the definitive credit agreement. The Commitment Letter includes a mutual waiver of jury trial, which is standard in commercial lending documentation.

IV. Market Flex Provisions

A. Overview. The Commitment Letter includes a customary "market flex" provision permitting Atlas, in its capacity as lead arranger and sole bookrunner, to modify certain terms of the financing to facilitate successful syndication of the Term Loan. Market flex provisions are standard features of commitment letters for syndicated loan transactions and are designed to give the lead arranger flexibility to adjust pricing and certain structural terms to reflect prevailing market conditions at the time of syndication.

The market flex provisions are set forth in a separate flex letter (the "Flex Letter") delivered concurrently with the Commitment Letter. The Flex Letter is a confidential document between Atlas and the borrower. C&H was provided access to the Flex Letter under a confidentiality undertaking executed by Ironside in favor of Atlas, which prohibits disclosure of the specific flex terms to any person other than Ironside's directors, officers, investment professionals, and outside advisors who have a need to know.

The following summary describes the key flex provisions and their potential impact on the co-investment.

B. Pricing Flex

The Flex Letter permits Atlas to adjust the pricing of the financing within the following parameters:

(i) Term Loan Margin Flex. Atlas may increase the applicable margin on the Term Loan by up to 50 basis points above the initial applicable margin as set forth in the definitive credit agreement term sheet.

(ii) Revolving Facility Margin Flex. Atlas may increase the applicable margin on the Revolving Facility by up to 25 basis points above the initial applicable margin.

(iii) Original Issue discount (OID) Flex. Atlas may increase any original issue discount on the Term Loan by up to 100 basis points. The initial OID is set at 99.0 (i.e., 1.0% discount to par), and the flex permits the OID to be increased to as low as 98.0 (i.e., 2.0% discount to par).

Impact Analysis. If Atlas exercises the full extent of the pricing flex, the economic consequences for AcquisitionCo and its equity sponsors would be as follows:

• Incremental Annual Interest Cost (Margin Flex): A 50 basis point increase on the $975,000,000 Term Loan equates to approximately $4,875,000 in additional annual interest expense ($975,000,000 × 0.0050). On the $150,000,000 Revolving Facility (assuming full utilization, which is not expected at closing), a 25 basis point increase would equate to $375,000 in additional annual interest. On a combined basis, the maximum incremental annual interest cost attributable to pricing flex is approximately $5,250,000.

• Incremental Upfront OID Cost: An increase in the OID from 99.0 to 98.0 on the $975,000,000 Term Loan equates to an additional upfront cost of $9,750,000 ($975,000,000 × 0.01). This incremental OID effectively reduces the net proceeds of the Term Loan available for the Acquisition, requiring either an increase in equity contributions or a reduction in available cash at closing.

• Total Maximum Incremental Cost: In the first year alone, the combined impact of full pricing flex could be approximately $15,000,000 ($5,250,000 in additional annual interest plus $9,750,000 in upfront OID), declining to approximately $5,250,000 per year in subsequent years (reflecting only the ongoing margin increase).

These incremental costs would affect AcquisitionCo's debt service capacity and free cash flow generation and, indirectly, the return profile of the equity sponsors' investment, including ICM Co-Invest.

C. Structural Flex

In addition to pricing adjustments, the Flex Letter permits Atlas to make certain structural modifications to the financing:

(i) Facility Reallocation. Atlas may reallocate amounts between the Term Loan and the Revolving Facility, up to a maximum shift of $50,000,000 from the Revolving Facility to the Term Loan. If this reallocation is exercised to its maximum extent, the Term Loan would increase to $1,025,000,000 and the Revolving Facility would decrease to $100,000,000. A reduction in the Revolving Facility could limit the borrower's post-closing liquidity and working capital flexibility.

(ii) Amortization Adjustment. Atlas may modify the amortization schedule within specified bands. The details of the permissible adjustments are set forth in the Flex Letter; we understand that the range is between 0.0% and 1.0% per annum, meaning Atlas could eliminate scheduled amortization entirely (a "bullet" maturity) if necessary to achieve syndication, or could maintain the current 1.0% schedule.

(iii) Covenant Modification. Atlas may adjust certain covenant levels within agreed ranges set forth in the Flex Letter. These adjustments could affect the maintenance leverage ratio thresholds, permitted basket sizes, and other covenant parameters in the definitive credit agreement.

Additionally, the Flex Letter permits Atlas to introduce a first-lien / second-lien structure or a senior / subordinated structure if market conditions so require, provided that the aggregate quantum of funded debt does not exceed $975,000,000. The introduction of a multi-tranche structure could have significant implications for the capital structure, including differing intercreditor rights, subordination mechanics, and potential impacts on remedies and recoveries in a distressed scenario.

D. Syndication Flex

The Flex Letter also addresses syndication-related flex:

(i) Additional Arrangers. Atlas may appoint additional co-lead arrangers, joint bookrunners, or other titled participants to facilitate the syndication process. Any such appointments would include corresponding title and fee adjustments, which would be funded from Atlas's arrangement fee or from additional fee allocations.

(ii) No Syndication Condition. As noted in Section III.A above, successful syndication is not a condition precedent to funding. Atlas's commitment to fund the full $650,000,000 (and Pinnacle's commitment to fund the full $325,000,000) is unconditional in this regard.

(iii) Clear Market Period. The Commitment Letter includes a "clear market" provision requiring the borrower to refrain from issuing, announcing, or marketing any other debt or equity offering for a period of thirty (30) business days following the execution of the EPA. This provision is designed to ensure that the syndication of the Term Loan is not disrupted by competing offerings in the market. The clear market period is a standard feature of syndicated loan commitment letters.

E. Co-Invest Implications of Flex Exercise

The exercise of market flex provisions by Atlas directly affects the economics of the financing and, by extension, the economics of the equity investment held by ICM Co-Invest. Because AcquisitionCo is the borrower and the co-invest holds its equity interest through AcquisitionCo, any increase in financing costs — whether through margin increases, OID adjustments, or structural changes — will reduce the free cash flow available for distributions to the equity sponsors and may impair the projected returns on the co-investment.

Under the Co-Investment Allocation Agreement dated July 29, 2022, all costs and returns are shared on a pro rata basis between Fund IV (71.43%) and ICM Co-Invest (28.57%). Accordingly, ICM Co-Invest would bear 28.57% of any incremental financing costs arising from the exercise of pricing flex. To illustrate:

• ICM Co-Invest's share of incremental annual interest cost (full margin flex): 28.57% × $4,875,000 = approximately $1,392,857 per year

• ICM Co-Invest's share of incremental OID cost (full OID flex): 28.57% × $9,750,000 = approximately $2,785,575 (one-time)

• ICM Co-Invest's total first-year incremental cost exposure (full flex): approximately $4,178,432

While these amounts are manageable in the context of a $300,000,000 equity investment, they are not immaterial and would affect the projected internal rate of return and cash-on-cash multiple for the co-investment.

Recommendation. C&H recommends that Ironside request from Meridian (through BSP) advance written notice of any exercise of market flex by Atlas, including a description of the specific flex provisions being exercised and the projected economic impact. In addition, C&H recommends that Ironside seek the right to consent to any exercise of structural flex that would materially alter the capital structure — in particular, the introduction of a mezzanine or subordinated debt tranche, or a significant reallocation between the Term Loan and the Revolving Facility. While we acknowledge that consent rights over flex exercise are not standard for co-invest participants and may face resistance from both Meridian and Atlas, the magnitude of the co-invest commitment ($300,000,000) supports a request for meaningful involvement in decisions that affect the financing economics.

V. SunGard Provisions

A. Limited Conditionality Framework

The Commitment Letter incorporates a "SunGard" or "certain funds" framework — so named after the landmark 2005 leveraged buyout of SunGard Data Systems, Inc., which established the market convention for limiting the conditions precedent in acquisition commitment letters. The SunGard framework is now the standard approach in leveraged acquisition financings and serves a critical purpose: it ensures that the committed financing is available on a "certain funds" basis, subject only to the enumerated conditions precedent expressly set forth in the commitment letter.

Under this framework, the lenders may not impose additional conditions to funding beyond those specified in the Commitment Letter. The definitive credit agreement will contain a broader set of representations, covenants, and conditions, but the lenders' obligation to fund at closing is governed exclusively by the limited list of conditions set forth in the Commitment Letter. This distinction between "commitment letter conditions" and "credit agreement conditions" is fundamental to the SunGard architecture and provides the equity sponsors with a high degree of certainty that the debt financing will be available when needed.

This certain-funds structure is particularly important for ICM Co-Invest because it reduces the risk that the lenders will refuse to fund the Term Loan on technical or pretextual grounds at a time when the equity sponsors have already committed substantial resources to the Acquisition. Without the SunGard framework, the lenders could potentially invoke broad conditions in the credit agreement to avoid funding in the event of adverse market conditions or deterioration in the Target's business — precisely the scenarios in which the equity sponsors are most vulnerable.

B. "Specified Acquisition Agreement Representations" Concept

As described in Section III.B above, one of the enumerated conditions to funding is the accuracy of the "Specified Acquisition Agreement Representations." This concept operates as follows:

(i) The EPA contains a comprehensive set of representations and warranties made by the Target (Cascadia) regarding its business, assets, financial condition, legal compliance, and related matters.

(ii) Only a subset of those representations — the "Specified Acquisition Agreement Representations" — must be accurate as a condition to lender funding. The Specified Acquisition Agreement Representations are defined as those Target representations in the EPA that are (a) material to the interests of the lenders in their capacity as creditors, and (b) whose breach would give AcquisitionCo the right to decline to consummate the Acquisition (i.e., whose breach would constitute a closing condition failure under the EPA).

(iii) This "double materiality" filter ensures that the lenders can only refuse to fund if a Target representation is both material to the credit decision and sufficiently significant that the buyer itself would be entitled to walk away from the Acquisition.

The double materiality concept is market standard in SunGard-style commitment letters and is designed to prevent lenders from using relatively minor Target representation breaches as a basis for refusing to fund. It also aligns the lenders' funding obligation with the buyer's closing obligation: if the buyer is required to close the Acquisition notwithstanding a particular representation breach (because the breach does not give rise to a closing condition failure under the EPA), the lenders are likewise required to fund.

From ICM Co-Invest's perspective, this framework is favorable because it ensures that the debt financing will be available in the same circumstances in which the equity sponsors are required to close. Conversely, if a Target representation breach is severe enough that AcquisitionCo has the right to walk away from the Acquisition, the lenders are also relieved of their funding obligation — which aligns the interests of all parties.

C. No MAE Condition

The no-Material Adverse Effect condition references the definition of "Material Adverse Effect" or "MAE" as set forth in the EPA. As of the date of this memorandum, the EPA has not yet been executed (execution is anticipated on September 15, 2022), but the draft EPA delivered to the lenders on or about August 25, 2022 contains an MAE definition that includes customary carve-outs for:

(a) Changes in general economic, financial, or market conditions;

(b) Changes affecting the renewable energy or water infrastructure industries generally (as opposed to changes specifically affecting the Target);

(c) Changes in applicable law or accounting standards (including changes in regulatory requirements applicable to the Target's operations);

(d) Acts of war, terrorism, pandemics, or natural disasters;

(e) The announcement or pendency of the Acquisition itself; and

(f) Actions taken by or at the direction of the buyer or its affiliates.

These carve-outs are designed to exclude from the MAE definition general or exogenous events that are not specific to the Target's business. The effect of the carve-outs is to narrow the universe of circumstances in which a Material Adverse Effect could be found to have occurred, thereby reducing the likelihood that the no-MAE condition to lender funding will be triggered.

Observation Regarding the Concession Renegotiation. One area of potential concern relates to the ongoing renegotiation of the water-treatment concession for the Bull Run Filtration Project with the Portland Metropolitan Water District. The Bull Run Filtration Project represents approximately $64,000,000 in annual revenue, which constitutes approximately 13.1% of Cascadia's total annual revenue of $487,000,000. If the concession renegotiation results in a material reduction in revenue or a termination of the concession, the question would arise whether such an event constitutes a Material Adverse Effect under the EPA definition.

The answer depends on whether the concession renegotiation falls within one of the MAE carve-outs. If the renegotiation is driven by a change in applicable law or regulatory requirements (e.g., new water treatment standards imposed by state or federal regulators), it may be excluded from the MAE definition under the "changes in law" carve-out. If, however, the renegotiation reflects the Portland Metropolitan Water District's independent decision to restructure the concession on more favorable terms for itself — unrelated to legal or regulatory changes — it is less likely to fall within a carve-out and could potentially constitute an MAE, depending on its magnitude and duration.

This is an area of potential lender-borrower dispute. If the concession renegotiation crystallizes into a material revenue impairment prior to closing, Atlas could potentially argue that a Material Adverse Effect has occurred and decline to fund the Term Loan. The equity sponsors would counter that the renegotiation falls within the carve-outs or does not rise to the level of an MAE (which, under Delaware and New York law, requires a showing of durationally significant impact on the overall business). C&H will continue to monitor the concession renegotiation and will provide further analysis if the situation develops.

D. Solvency Certificate

As one of the enumerated conditions precedent to funding, the borrower (AcquisitionCo) is required to deliver a solvency certificate at closing from the Chief Financial Officer of AcquisitionCo (or from a responsible officer designated by the borrower). The solvency certificate must confirm that AcquisitionCo and its subsidiaries, on a consolidated basis and after giving pro forma effect to the Acquisition and the incurrence of the financing, satisfy the following tests:

(a) Balance Sheet Solvency. The fair value of the assets of AcquisitionCo and its subsidiaries, on a consolidated basis, exceeds the sum of their liabilities (including contingent and unliquidated liabilities) on a consolidated basis.

(b) Adequate Capital. AcquisitionCo and its subsidiaries, on a consolidated basis, have adequate capital with which to conduct their business.

(c) Ability to Pay Debts. AcquisitionCo and its subsidiaries, on a consolidated basis, have the ability to pay their debts (including contingent obligations) as they become due in the ordinary course of business.

The solvency certificate is a funding condition and should be achievable based on the current capitalization plan. With total equity contributions of $1,050,000,000 against the $975,000,000 Term Loan (and the refinancing of existing net debt of approximately $900,000,000), the pro forma capital structure provides for meaningful equity cushion. However, the solvency analysis is sensitive to the valuation assumptions used for the Target's assets and the treatment of contingent liabilities, including obligations under the water-treatment concessions and power purchase agreements. C&H will review the form of the solvency certificate when it is circulated with the definitive credit agreement.

VI. Regulatory Approval Conditions

As set forth in condition precedent item 9 of Section III.B above, lender funding is conditioned on the receipt of two specified regulatory approvals:

FERC Section 203 Approval. Section 203 of the Federal Power Act requires prior authorization from FERC for any transfer of jurisdictional facilities or any change in control of a public utility holding company. Because the Acquisition will result in a change of control of Cascadia and its subsidiaries, several of which hold FERC-jurisdictional hydroelectric licenses, an application for Section 203 approval has been prepared. As of the date of this memorandum, the application is expected to be filed under Docket No. EC22-143-000 on or about October 19, 2022. FERC's review period for Section 203 applications is typically 60 to 180 days from the date of filing, depending on the complexity of the transaction and whether FERC issues a request for additional information. In straightforward change-of-control transactions involving non-market-power-creating acquisitions, FERC has historically acted within 90 days.

OPUC Approval. The Oregon Public Utility Commission has jurisdiction over certain of Cascadia's utility assets in Oregon. An application for OPUC approval of the transfer of these assets is expected to be filed under Docket No. UM-2287 on or about October 14, 2022. OPUC proceedings typically involve a public comment period and may include an evidentiary hearing if interested parties (such as the Oregon Department of Justice or consumer advocacy organizations) intervene. The timeline for OPUC proceedings is variable and can range from 90 days to over one year, depending on the level of public interest and the complexity of the issues raised.

Each of the above regulatory approvals must be obtained on terms "reasonably satisfactory" to the administrative agent (Atlas). The "reasonably satisfactory" standard means that Atlas may not reject an approval that is issued on standard terms and without unusual conditions, but Atlas may decline to fund if an approval is issued with conditions that would materially impair the value of the collateral or the ability of the borrower to service the debt.

CFIUS. The Committee on Foreign Investment in the United States ("CFIUS") review is not a condition to lender funding under the Commitment Letter. We understand that a voluntary CFIUS notice was filed on behalf of AcquisitionCo and was acknowledged by CFIUS on September 20, 2022. Based on our understanding of the ownership structure — Fund IV and ICM Co-Invest are each organized in the United States and managed by U.S.-based persons, with no identified foreign ownership or control — we do not anticipate any CFIUS-related issues. No further action is required on CFIUS at this time.

Timeline Risk. The regulatory approval timelines represent the most significant risk to the closing timeline. If either the FERC or OPUC proceeding extends beyond the initial commitment letter expiration date of April 30, 2023, the parties would need to agree to one or more extensions of the Commitment Letter, with the associated extension fees and the risk that one or more lenders may decline to extend. The OPUC proceeding, in particular, presents timeline uncertainty due to the possibility of intervener participation and evidentiary proceedings. C&H recommends that Ironside closely monitor the regulatory proceedings and coordinate with BSP on extension planning well in advance of the April 30, 2023 expiration date.

VII. Interaction with Equity Purchase Agreement

A. EPA Consistency Requirement

The Commitment Letter requires that the EPA, as executed, be "in form and substance consistent with" the draft EPA delivered to the lenders on or about August 25, 2022 (the "Specified EPA"). This condition ensures that the lenders are extending credit on the basis of the transaction terms they reviewed during the commitment process and that the borrower has not materially altered the acquisition terms without lender knowledge.

The EPA is expected to be executed on September 15, 2022. C&H will confirm with BSP that the lenders (Atlas and Pinnacle) have acknowledged that the executed EPA is consistent with the Specified EPA. Any material departures from the Specified EPA could give the lenders a basis for asserting that the EPA consistency condition has not been satisfied, which would relieve them of their funding obligation.

In addition, the Commitment Letter provides that no amendment, modification, or waiver of the EPA that is "materially adverse to the interests of the lenders" may be effected without the prior written consent of the administrative agent (acting on behalf of the lenders). This consent requirement is relevant because the parties to the EPA may need to make adjustments to the acquisition terms over the course of the pre-closing period — for example, to extend the outside date, adjust the purchase price, modify the closing conditions, or address issues identified during regulatory review. Any such adjustment that is deemed materially adverse to the lenders would require lender consent, introducing an additional procedural step and potential source of delay.

B. EPA Outside Date and Commitment Letter Expiration

The EPA contains an outside date — the date by which the Acquisition must close, failing which either party may terminate the EPA. The current outside date in the draft EPA is December 31, 2022, subject to extension pursuant to the terms of the EPA.

The Commitment Letter expiration date is April 30, 2023, which extends approximately four months beyond the initial EPA outside date. This timing mismatch provides a useful cushion: even if the Acquisition does not close by the EPA outside date (and the EPA outside date is extended), the commitment letter financing remains available through April 30, 2023 without the need for a separate extension of the Commitment Letter.

However, if the EPA outside date is extended beyond April 30, 2023 (for example, due to delays in obtaining FERC or OPUC approval), the Commitment Letter would also need to be extended in order to maintain committed financing through the revised closing date. As discussed in Section III.C above, extension of the Commitment Letter requires mutual agreement and payment of extension fees. There is no automatic alignment between EPA extensions and Commitment Letter extensions.

Recommendation. C&H recommends that Ironside monitor this timing mismatch closely and that BSP be asked to ensure that any extension of the EPA outside date is coordinated with a corresponding extension of the Commitment Letter. Failure to maintain alignment between the EPA outside date and the commitment letter expiration could result in a gap period during which the Acquisition remains pending but the committed financing has lapsed.

C. Certain Funds Period

The lenders' "certain funds" obligation — that is, their obligation to fund the Term Loan subject only to the enumerated conditions precedent — runs from the date of execution of the Commitment Letter (August 30, 2022) through the earliest of:

(i) The closing of the Acquisition (at which point the commitment is drawn and replaced by the outstanding Term Loan);

(ii) The termination of the EPA, including by expiration of the outside date (at which point the underlying acquisition transaction no longer exists and there is no basis for funding); or

(iii) The expiration of the Commitment Letter, including as extended by mutual agreement of the parties (at which point the lenders' commitment lapses by its terms).

If the EPA is terminated or expires for any reason — whether due to a failure of closing conditions, a material breach by either party, or the passage of the outside date without extension — the lenders' commitment automatically terminates. In such a scenario, there would be no obligation for the lenders to fund, and the equity sponsors would retain their unfunded equity commitments (unless the Co-Investment Allocation Agreement or the LP Agreement provide otherwise).

VIII. Co-Investment Vehicle–Specific Considerations

A. Equity Contribution Mechanics

As described in Section III.B above, the Commitment Letter includes an equity contribution condition requiring that Fund IV and ICM Co-Invest collectively fund not less than $1,050,000,000 in equity at closing. This condition is a standard feature of leveraged acquisition commitment letters and ensures that the lenders' credit exposure is supported by the projected equity capitalization.

Under the Co-Investment Allocation Agreement dated July 29, 2022, the equity contribution is allocated as follows:

• Fund IV: $750,000,000 (71.43% of total equity)

• ICM Co-Invest: $300,000,000 (28.57% of total equity)

ICM Co-Invest's equity contribution is funded through capital calls made by the general partner (Meridian GP IV LLC) under the LP Agreement governing ICM Co-Invest. As of the date of this memorandum, only $22,500,000 has been called from the limited partners of ICM Co-Invest (Capital Call #1, dated August 15, 2022). The remaining $277,500,000 would be called at or shortly prior to the Closing Date in accordance with the capital call mechanics set forth in the LP Agreement.

The equity contribution condition creates a fundamental interdependency: if ICM Co-Invest fails to fund its $300,000,000 contribution (whether due to a default by one or more of its limited partners or for any other reason), the aggregate equity contribution would fall below the required $1,050,000,000 minimum, the equity contribution condition would not be satisfied, and the lenders would not be obligated to fund the $975,000,000 Term Loan. This in turn would mean that the Acquisition cannot close, exposing AcquisitionCo (and potentially the equity sponsors) to liability under the EPA for failure to consummate the transaction.

It is therefore essential that Ironside has confidence in the ability of ICM Co-Invest's limited partners to meet capital calls in the amounts and on the timeline required. C&H recommends that Ironside review the LP Agreement provisions regarding default remedies available against defaulting limited partners and assess whether the LP Agreement provides adequate mechanisms to cure a capital call shortfall (e.g., through overallotment to non-defaulting LPs, GP capital contributions, or bridge financing).

B. Co-Invest Protections in Credit Agreement

As noted above, the definitive credit agreement has not yet been drafted. However, C&H has proactively submitted a comment letter to Atlas National Bank, N.A. (through BSP) dated September 6, 2022, requesting the inclusion of certain co-invest-specific protections in the credit agreement. These requested protections are as follows:

(i) Information Rights. ICM Co-Invest (or Ironside, as its investment manager and sole limited partner in the general partner entity) would receive copies of all financial reports, compliance certificates, and material notices delivered by the borrower to the administrative agent under the credit agreement. This would ensure that Ironside has direct visibility into the financial performance and covenant compliance of AcquisitionCo and Cascadia post-closing, without relying solely on information provided by Meridian.

(ii) Equity Cure Rights. The equity sponsors, including ICM Co-Invest on a pro rata basis, would have the right to cure financial covenant defaults by injecting additional equity into the borrower. Equity cure mechanics are increasingly common in leveraged credit agreements and provide a valuable safety valve that allows the sponsors to avoid a default and potential acceleration by contributing additional capital. The proposed mechanics would permit a specified number of equity cures over the life of the facility (typically limited to two or three cures in any four consecutive quarter period and a maximum of five cures over the life of the facility).

(iii) Consent Rights Over Lender Remedies. The equity sponsors holding a majority of the equity in AcquisitionCo would have the right to consent before the administrative agent may exercise certain material remedies, including acceleration of the debt, enforcement of security interests, or initiation of foreclosure proceedings. This is a non-standard provision that provides the equity sponsors with a degree of control over the lenders' exercise of remedies in a distressed scenario. We acknowledge that this request may face significant resistance from Atlas and the lender group, as it effectively gives the equity sponsors a veto over actions that the lenders would ordinarily be entitled to take unilaterally following an event of default.

(iv) Transfer Restrictions on Lender Assignments. The credit agreement would include restrictions on the lenders' ability to assign or participate their commitments or loans to (a) competitors of the equity sponsors or the Target, (b) distressed-debt purchasers or "loan-to-own" investors, or (c) other persons whose involvement in the lending group could be adverse to the interests of the equity sponsors. These transfer restrictions would require the prior written consent of the borrower (or the equity sponsors) before any such assignment or participation may be effected, subject to customary exceptions (e.g., consent not required following an event of default and acceleration).

Status of Negotiations. BSP has reported that Atlas is willing to include standard equity cure mechanics and information-sharing provisions in the credit agreement. Atlas has, however, pushed back on the consent-to-remedies provision and the broader transfer restrictions, characterizing these provisions as inconsistent with market practice and potentially harmful to the syndication process (lenders in the secondary market expect standard transfer provisions and may be deterred by unusually restrictive assignment limitations). Negotiations are ongoing, and C&H will continue to advocate for these protections in coordination with BSP.

C. Guaranty and Pledge Implications for Co-Invest

The financing is secured by the assets of AcquisitionCo, Cascadia, and Cascadia's direct and indirect subsidiaries. Importantly, ICM Co-Invest is not a guarantor unde

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
FROM: Pamela Cross, Responsible Partner Nicholas Stern, Billing Partner Theresa Kim, Lead Associate Calderwood & Harkness LLP
DATE: August 30, 2022
RE: Review of Debt Commitment Letter — Key Terms, Market Flex Provisions, and Implications for ICM Cascadia Co-Invest, LP
MATTER NO.: 1023-00001
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I. Executive Summary
This memorandum sets forth the results of our review, on behalf of Ironside Capital Management LP ("Ironside") and ICM Cascadia Co-Invest, LP (the "Vehicle" or "ICM Co-Invest"), of the debt commitment letter dated August 30, 2022 (the "Commitment Letter") executed by Atlas National Bank, N.A. ("Atlas"), as lead arranger and administrative agent, and Pinnacle Credit Partners LLC ("Pinnacle"), as co-lender and syndication participant, in connection with the proposed acquisition (the "Acquisition") of Cascadia Renewables Holdings, Inc. (the "Target" or "Cascadia") by Cascadia Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation.
AcquisitionCo is wholly owned by Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP. The Transaction contemplates a 100% equity acquisition of Cascadia at an aggregate enterprise value of $1,950,000,000 and an equity value of $1,050,000,000. The equity will be contributed by Fund IV in the amount of $750,000,000 (representing approximately 71.43% of total equity) and by ICM Co-Invest in the amount of $300,000,000 (representing approximately 28.57% of total equity). The debt financing consists of a $975,000,000 senior secured term loan facility and a $150,000,000 revolving credit facility, as further described herein.
The Commitment Letter was negotiated by Meridian's outside counsel, Breckenridge Sloane & Pratt LLP ("BSP"), with lead responsibility held by Charles A. Delacroix, a partner in BSP's finance practice. Meridian's financial advisor, Blackthorn Advisory Group LLC, also provided input during the negotiation process. Calderwood & Harkness LLP ("C&H") was not a party to the negotiation of the Commitment Letter; rather, C&H was engaged by Ironside to review the Commitment Letter from the perspective of ICM Co-Invest and to assess the co-invest-specific risks, protections, and implications arising from the proposed financing structure.
The Commitment Letter is governed by the laws of the State of New York. It contemplates that the definitive credit agreement and related loan documentation will also be governed by New York law, with exclusive jurisdiction in the Supreme Court of the State of New York, Borough of Manhattan, or the United States District Court for the Southern District of New York.
Overall Assessment. Based on our review, the Commitment Letter is broadly market-standard for infrastructure leveraged buyout financings of this magnitude. The commitment is structured on a "certain funds" basis incorporating the well-established SunGard framework, which limits the conditions precedent to funding to those expressly enumerated in the Commitment Letter. The market flex provisions are within customary parameters for syndicated financings in the current market environment. However, certain flex provisions, conditions precedent, and structural aspects of the financing require particular attention from the co-invest perspective, as detailed in the sections that follow. We have identified five principal areas of concern — regulatory timing risk, concession renegotiation risk, flex exercise risk, commitment expiration risk, and equity contribution interdependency — each of which is discussed at length below along with our recommended mitigants.
II. Overview of Financing Structure
A. Senior Secured Term Loan Facility
The Commitment Letter provides for a senior secured term loan facility in an aggregate principal amount of $975,000,000 (the "Term Loan"), committed as follows:
(i) Atlas National Bank, N.A. — $650,000,000 (lead arranger, sole bookrunner, and administrative agent). Atlas's principal office is located at 383 Madison Avenue, New York, New York 10179.
(ii) Pinnacle Credit Partners LLC — $325,000,000 (co-lender and syndication participant). Pinnacle's principal office is located at 600 Lexington Avenue, 20th Floor, New York, New York 10022.
The Term Loan has a stated maturity of seven (7) years from the closing date of the Acquisition (the "Closing Date"). Based on the parties' current projected timeline, with an expected closing in the first quarter of 2023, the maturity date would fall in the first quarter of 2030.
The interest rate on the Term Loan is based on the Term Secured Overnight Financing Rate ("Term SOFR") plus an applicable margin. The initial applicable margin will be determined in the definitive credit agreement based on the total net leverage ratio at closing, with step-downs tied to leverage reduction. The specific margin grid has not yet been finalized and will be set during the negotiation of the definitive credit agreement. We understand from BSP that preliminary discussions with Atlas contemplate an initial margin in the range of 325 to 375 basis points, though this remains subject to change based on market conditions and the exercise of any market flex (discussed in Section IV below).
The Term Loan is secured by a first-priority lien on substantially all assets of AcquisitionCo, Cascadia, and Cascadia's direct and indirect subsidiaries. The collateral package encompasses the following categories of assets, which reflect the Target's substantial infrastructure portfolio:
• Fourteen (14) hydroelectric power generation facilities located in Oregon and Washington;
• Six (6) wind farm installations located in Oregon, Washington, and Montana;
• Three (3) water-treatment concession arrangements, including the Bull Run Filtration Project concession with the Portland Metropolitan Water District;
• All associated real property interests (including fee interests, leaseholds, easements, and rights of way);
• All equipment, machinery, and fixtures located at or used in connection with the foregoing facilities;
• All governmental permits, licenses, authorizations, and approvals (including FERC hydroelectric licenses and state-level utility authorizations);
• All contract rights, including power purchase agreements, offtake agreements, concession agreements, interconnection agreements, and all revenue-generating commercial arrangements; and
• All other tangible and intangible assets of the borrower and its subsidiaries, subject to customary exclusions.
The Term Loan amortizes at a rate of 1.0% per annum of the original principal amount, payable in equal quarterly installments. This is a customary amortization rate for term loan B facilities in leveraged infrastructure financings and represents a minimal reduction in outstanding principal during the life of the facility (approximately $9.75 million per annum, or approximately $2.4375 million per quarter).
The Commitment Letter provides for customary mandatory prepayment provisions applicable to the Term Loan, including mandatory prepayments from:
(a) Net cash proceeds of asset sales (subject to customary reinvestment rights and threshold amounts);
(b) Excess cash flow (with the applicable percentage to be determined in the definitive credit agreement, typically with step-downs based on leverage reduction);
(c) Net cash proceeds of insurance and condemnation events (subject to customary reinvestment rights); and
(d) Net cash proceeds of debt incurrences not otherwise permitted under the credit agreement.
Voluntary prepayments of the Term Loan are permitted at par at any time following the six-month anniversary of the Closing Date. During the first six months after closing, voluntary prepayments are subject to a call premium of 101% of the principal amount being prepaid (i.e., a 1.0% call protection premium). This is a standard feature in leveraged term loan facilities and is designed to provide lenders with a minimum return during the initial post-closing period.
B. Revolving Credit Facility
The Commitment Letter also provides for a revolving credit facility in an aggregate principal amount of $150,000,000 (the "Revolving Facility"), committed solely by Atlas National Bank, N.A. as the sole revolving lender.
The Revolving Facility has a stated maturity of five (5) years from the Closing Date, which is two years shorter than the maturity of the Term Loan. This difference in tenor is customary, as revolving credit facilities typically mature prior to the associated term loan facilities to allow the borrower to refinance the revolver at maturity without triggering cross-default issues.
The Revolving Facility will be undrawn at closing. It is intended to be available for working capital needs and general corporate purposes of the borrower and its subsidiaries following the closing of the Acquisition. Because the Revolving Facility will not be drawn at closing, it is not included as a source of funds in the closing sources and uses analysis (see Section II.C below).
The borrower will pay a commitment fee of 0.50% per annum on the daily average undrawn amount of the Revolving Facility during the commitment period. This fee is within the customary range for revolving credit facilities in infrastructure financings.
The Revolving Facility shares the same first-priority security package as the Term Loan, with the revolving lender and the term loan lenders sharing pari passu in the collateral pursuant to an intercreditor arrangement to be established in the definitive documentation.
C. Sources and Uses
The following table summarizes the anticipated sources and uses of funds at closing:
Sources of Funds:
Uses of Funds:
As noted above, the Revolving Facility is not included in the sources at closing because it will be undrawn at that time.
With respect to leverage metrics, the implied closing leverage is approximately 5.2x Cascadia's fiscal year 2021 adjusted EBITDA of $138,000,000. This figure takes into account that Cascadia's existing net debt of approximately $900,000,000 will be refinanced at closing using proceeds of the Term Loan and equity contributions. On a term-loan-only basis (i.e., looking solely at the $975,000,000 Term Loan divided by $138,000,000 EBITDA), the leverage ratio is approximately 7.1x. However, because the existing $900,000,000 in net debt will be repaid at closing, the effective incremental leverage attributable to the new financing is the Term Loan amount less cash on hand at the time of closing. The net leverage figure will be confirmed in the definitive credit agreement based on the financial model and closing balance sheet.
These leverage levels are consistent with recent precedent transactions in the renewable energy infrastructure sector, though they are on the higher end of the range and leave limited room for covenant cushion, particularly if the concession renegotiation with the Portland Metropolitan Water District results in revenue erosion.
III. Key Terms of the Commitment Letter
A. Commitment and Syndication
Atlas is designated in the Commitment Letter as the sole lead arranger, sole bookrunner, and administrative agent for both the Term Loan and the Revolving Facility. Pinnacle is designated as co-lender with a fixed hold amount of $325,000,000 under the Term Loan. Pinnacle does not participate in the Revolving Facility.
Atlas retains the right to syndicate its $650,000,000 hold amount to a broader bank group following execution of the Commitment Letter. Syndication is expected to occur prior to closing. However — and this is a point of critical importance for the equity sponsors and for ICM Co-Invest in particular — the Commitment Letter expressly provides that "successful syndication" is not a condition precedent to funding. This means that Atlas and Pinnacle are irrevocably committed to fund the full $975,000,000 Term Loan regardless of whether Atlas is able to sell down any portion of its hold to other lenders in the syndication process.
This "no syndication condition" is favorable to the equity sponsors and to ICM Co-Invest because it eliminates the risk that the financing would fail due to adverse syndication market conditions. If Atlas is unable to find willing participants in the syndication, Atlas remains obligated to hold (and fund) its full $650,000,000 commitment. In practice, Atlas will likely exercise its market flex provisions (discussed in Section IV below) to make the facility more attractive to potential syndication participants, but the obligation to fund exists independent of the syndication outcome.
We note that Pinnacle's $325,000,000 commitment is also a fixed hold, and Pinnacle does not have the right to syndicate its commitment. This provides additional certainty regarding the composition of the lending group at closing.
B. Conditions Precedent to Funding
The conditions precedent to the lenders' obligation to fund the Term Loan and make the Revolving Facility available are limited to the following enumerated conditions, consistent with the "SunGard" or "certain funds" framework discussed more fully in Section V below:
1. EPA Execution and Consistency. Execution and delivery of the Equity Purchase Agreement (the "EPA") in form and substance consistent with the draft EPA delivered to the lenders on or about August 25, 2022 (the "Specified EPA"). This condition is designed to ensure that the lenders are extending credit on the basis of the transaction terms they reviewed during the commitment process.
2. No Materially Adverse EPA Amendments. No amendment, modification, or waiver of the EPA that is materially adverse to the interests of the lenders shall have been effected without the prior written consent of the administrative agent (acting on behalf of the lenders). This provision gives the lenders a consent right over changes to the acquisition agreement that could negatively affect the credit, while permitting non-material amendments to proceed without lender approval.
3. Equity Contribution Condition. Consummation of the equity contribution by Fund IV and ICM Co-Invest in the aggregate amount of not less than $1,050,000,000, in accordance with the terms of the Co-Investment Allocation Agreement and the contribution mechanics set forth in the EPA. This condition is discussed in greater detail in Section VIII.A below.
4. Specified Representations. Accuracy of the "specified representations" made by the borrower (AcquisitionCo) in the definitive credit agreement. The specified representations are limited to customary borrower-side representations relating to: (a) due organization and good standing; (b) corporate authorization and enforceability; (c) no conflicts with applicable laws; (d) compliance with Federal Reserve Board margin regulations; (e) non-status as an "investment company" under the Investment Company Act of 1940; and (f) compliance with the USA PATRIOT Act and beneficial ownership regulations. The representations are intentionally narrow and do not encompass the full range of representations that will be included in the definitive credit agreement.
5. Specified Acquisition Agreement Representations. Accuracy of the "Specified Acquisition Agreement Representations" — that is, representations made by the Target (Cascadia) in the EPA that are material to the interests of the lenders, but only to the extent that AcquisitionCo would have the right not to consummate the Acquisition as a result of a breach of such representations. This "double materiality" concept is discussed further in Section V.B below.
6. Customary Closing Documents. Delivery of customary closing deliverables, including: officer's certificates from AcquisitionCo, Cascadia, and each subsidiary guarantor; legal opinions from counsel to the borrower and guarantors; evidence of insurance meeting the requirements of the credit agreement; UCC-1 financing statements and other security interest perfection documents; and a solvency certificate from the Chief Financial Officer of AcquisitionCo (or a responsible officer).
7. Intercreditor / Subordination Arrangements. Receipt by the lenders of an acceptable intercreditor agreement or subordination arrangement in the event that any mezzanine, subordinated, or second-lien debt is introduced into the capital structure (whether as a result of structural flex or otherwise). As of the date of this memorandum, no such debt is contemplated in the base-case financing structure.
8. Payment of Fees and Expenses. Payment of all fees and expenses owing to the lenders (and their counsel) under the Commitment Letter, the fee letter, and the definitive credit agreement, to the extent invoiced at least three (3) business days prior to the Closing Date.
9. Regulatory Approvals. Receipt of specified regulatory approvals, consisting of: (a) approval by the Federal Energy Regulatory Commission ("FERC") under Section 203 of the Federal Power Act for the transfer of jurisdictional assets and hydroelectric licenses (Docket No. EC22-143-000); and (b) approval by the Oregon Public Utility Commission ("OPUC") for the transfer of utility assets (Docket No. UM-2287). Each such approval must be on terms "reasonably satisfactory" to the administrative agent. The regulatory approval condition is discussed further in Section VI below.
10. No Material Adverse Effect. No Material Adverse Effect (as defined in the EPA) shall have occurred with respect to the Target since the date of the EPA. The MAE condition is discussed in Section V.C below.
Key Observation for ICM Co-Invest. The equity contribution condition (item 3 above) requires the full $1,050,000,000 in equity to be funded by Fund IV and ICM Co-Invest as a condition to the lenders' obligation to advance the Term Loan. This creates a mutual dependency among three parties: Fund IV, ICM Co-Invest, and the lenders. If ICM Co-Invest does not fund its $300,000,000 contribution, the equity contribution condition is not satisfied, and the lenders are not obligated to fund the $975,000,000 Term Loan — which in turn means the Acquisition cannot close. The converse is equally true: if Fund IV does not fund its $750,000,000 contribution, the same result obtains. And if the lenders fail to fund (due to the occurrence of an enumerated condition failure), the equity sponsors are not required to fund their equity contributions into a transaction that cannot close for lack of financing. This tripartite interdependency is inherent in leveraged acquisition structures and is discussed more fully in Section VIII below.
C. Commitment Expiration and Extensions
The commitments under the Commitment Letter have an initial expiration date of April 30, 2023. If the Acquisition has not closed on or before that date, the lenders' obligation to fund the Term Loan and make the Revolving Facility available will terminate automatically, unless the commitment period is extended in accordance with the extension mechanics described below.
The Commitment Letter provides that the commitment period may be extended by mutual written agreement of Atlas, Pinnacle, and the borrower (AcquisitionCo) for successive six-month periods. Each extension is subject to the payment by the borrower of an extension fee equal to 0.25% of the aggregate Term Loan commitment amount per extension period. Based on the current $975,000,000 commitment, the extension fee per period is calculated as follows:
0.25% × $975,000,000 = $2,437,500 per extension period
Extension fees are the obligation of the borrower (AcquisitionCo). In practice, because AcquisitionCo is a newly formed acquisition vehicle with no independent assets prior to closing, extension fees would need to be funded by the equity sponsors. Under the Co-Investment Allocation Agreement dated July 29, 2022, we understand that transaction costs (including extension fees) are allocated pro rata between Fund IV and ICM Co-Invest in accordance with their respective equity percentages. However, we further understand from informal discussions with BSP that Fund IV may agree to bear extension fees in the first instance, with a true-up at closing. C&H will follow up with BSP to confirm the allocation mechanics and ensure they are clearly documented.
It is important to emphasize that the extension of the commitment period requires the mutual agreement of all three parties: Atlas, Pinnacle, and AcquisitionCo. Neither the equity sponsors nor any single lender can unilaterally extend the commitment. If the Acquisition does not close before the commitment expires (and the parties do not agree to an extension), the lenders' obligation to fund terminates. In such a scenario, the equity sponsors would need to source replacement financing from alternative lenders — a process that entails significant execution risk, potential repricing, and delay. This commitment expiration risk is particularly relevant for ICM Co-Invest, which has limited visibility into and control over the factors that may cause delays in closing (particularly regulatory approvals). This risk is discussed further in Section IX below.
D. Fees. The Commitment Letter contemplates the following fee arrangements in connection with the financing:
Arrangement Fee. An arrangement fee is payable to Atlas at closing in its capacity as sole lead arranger. The amount of the arrangement fee is set forth in a separate fee letter between Meridian (on behalf of the borrower) and Atlas, which was not provided to C&H for review. We understand that the fee letter is proprietary to the Meridian-Atlas relationship, which is standard practice in syndicated loan transactions. The arrangement fee, along with other fees under the separate fee letter, is reflected in the $50,000,000 estimated transaction costs included in the sources and uses analysis.
Commitment Fee. A commitment fee of 0.50% per annum is payable on the daily average undrawn amount of the Revolving Facility during the commitment period. This fee commences on the Closing Date and is payable quarterly in arrears. The commitment fee is a customary feature of revolving credit facilities and compensates the revolving lender for maintaining availability.
Extension Fee. As described in Section III.C above, an extension fee of 0.25% of the aggregate Term Loan commitment ($2,437,500 per extension period) is payable in connection with each extension of the commitment period.
Ticking Fee. A ticking fee of 0.25% per annum is payable on the unfunded Term Loan commitment beginning on the date that is ninety (90) days after the execution of the Commitment Letter. The ticking fee is payable quarterly in arrears and continues until the earlier of (i) the funding of the Term Loan on the Closing Date or (ii) the termination of the Commitment Letter. The ticking fee is designed to compensate the lenders for maintaining their commitments during the period between signing and closing. Based on the $975,000,000 commitment, the annualized ticking fee is $2,437,500, or approximately $609,375 per quarter. The ticking fee will begin to accrue on or about November 28, 2022 (ninety days after August 30, 2022).
Administrative Agent Fee. An annual administrative agent fee is payable to Atlas in its capacity as administrative agent under the credit agreement. The amount of this fee is set forth in the separate fee letter referenced above and was not reviewed by C&H.
C&H was not provided access to the separate fee letter between Meridian/AcquisitionCo and Atlas. All fees payable thereunder are obligations of the borrower and are encompassed within the $50,000,000 aggregate estimated transaction costs reflected in the sources and uses analysis. To the extent that fees under the separate fee letter exceed the estimates embedded in the financial model, the excess would need to be funded from additional equity contributions or other sources, which could affect the co-invest's economics.
E. Representations and Covenants in Definitive Documentation
The Commitment Letter contemplates that the definitive credit agreement will contain a comprehensive suite of representations, covenants, and events of default customary for senior secured infrastructure leveraged acquisition credit facilities. While the definitive credit agreement has not yet been drafted or circulated, the Commitment Letter includes a detailed term sheet outlining the following key provisions:
Affirmative Covenants. The borrower and its subsidiaries will be required to comply with customary affirmative covenants, including: (a) delivery of quarterly unaudited and annual audited financial statements; (b) delivery of compliance certificates certifying compliance with financial covenants; (c) maintenance of adequate insurance coverage consistent with industry standards for infrastructure assets; (d) prompt notice to the administrative agent of defaults, events of default, and material litigation; (e) maintenance of properties, permits, and licenses in good working order; and (f) compliance with ERISA requirements applicable to employee benefit plans.
Negative Covenants. The credit agreement will include customary negative covenants restricting the borrower's and its subsidiaries' ability to: (a) incur additional indebtedness above specified thresholds; (b) grant liens on their assets other than permitted liens; (c) engage in fundamental changes (mergers, consolidations, dissolutions); (d) make restricted payments (dividends, distributions, equity repurchases) above specified baskets; (e) make investments other than permitted investments; (f) dispose of assets outside the ordinary course of business; (g) enter into transactions with affiliates other than on arm's-length terms; and (h) enter into agreements that restrict the ability of subsidiaries to make distributions to the borrower.
Financial Covenants. The credit agreement will include a maintenance-based total net leverage ratio covenant, tested quarterly on a trailing four-quarter basis. The specific leverage levels (and any step-down schedule) will be set during the negotiation of the definitive credit agreement based on the financial model and the projected deleveraging trajectory. Maintenance financial covenants (as opposed to incurrence-only covenants) are customary in infrastructure leveraged financings and require the borrower to maintain compliance at all times, not merely upon the occurrence of specified events.
Events of Default. The credit agreement will include customary events of default, including: payment defaults, representation breaches, covenant defaults, cross-defaults to material indebtedness, bankruptcy events, judgment defaults, ERISA events, change of control, and invalidity of security interests or guarantees.
C&H will review the definitive credit agreement in detail when it is circulated and will provide separate commentary on each of these provisions at that time.
F. Governing Law and Dispute Resolution
The Commitment Letter is governed by the laws of the State of New York, without regard to principles of conflicts of law. The definitive credit agreement will likewise be governed by New York law.
The parties have agreed to submit to the exclusive jurisdiction of the Supreme Court of the State of New York, County of New York (Borough of Manhattan), or the United States District Court for the Southern District of New York, for the purpose of any litigation arising out of or relating to the Commitment Letter or the definitive credit agreement. The Commitment Letter includes a mutual waiver of jury trial, which is standard in commercial lending documentation.
IV. Market Flex Provisions
A. Overview. The Commitment Letter includes a customary "market flex" provision permitting Atlas, in its capacity as lead arranger and sole bookrunner, to modify certain terms of the financing to facilitate successful syndication of the Term Loan. Market flex provisions are standard features of commitment letters for syndicated loan transactions and are designed to give the lead arranger flexibility to adjust pricing and certain structural terms to reflect prevailing market conditions at the time of syndication.
The market flex provisions are set forth in a separate flex letter (the "Flex Letter") delivered concurrently with the Commitment Letter. The Flex Letter is a confidential document between Atlas and the borrower. C&H was provided access to the Flex Letter under a confidentiality undertaking executed by Ironside in favor of Atlas, which prohibits disclosure of the specific flex terms to any person other than Ironside's directors, officers, investment professionals, and outside advisors who have a need to know.
The following summary describes the key flex provisions and their potential impact on the co-investment.
B. Pricing Flex
The Flex Letter permits Atlas to adjust the pricing of the financing within the following parameters:
(i) Term Loan Margin Flex. Atlas may increase the applicable margin on the Term Loan by up to 50 basis points above the initial applicable margin as set forth in the definitive credit agreement term sheet.
(ii) Revolving Facility Margin Flex. Atlas may increase the applicable margin on the Revolving Facility by up to 25 basis points above the initial applicable margin.
(iii) Original Issue discount (OID) Flex. Atlas may increase any original issue discount on the Term Loan by up to 100 basis points. The initial OID is set at 99.0 (i.e., 1.0% discount to par), and the flex permits the OID to be increased to as low as 98.0 (i.e., 2.0% discount to par).
Impact Analysis. If Atlas exercises the full extent of the pricing flex, the economic consequences for AcquisitionCo and its equity sponsors would be as follows:
• Incremental Annual Interest Cost (Margin Flex): A 50 basis point increase on the $975,000,000 Term Loan equates to approximately $4,875,000 in additional annual interest expense ($975,000,000 × 0.0050). On the $150,000,000 Revolving Facility (assuming full utilization, which is not expected at closing), a 25 basis point increase would equate to $375,000 in additional annual interest. On a combined basis, the maximum incremental annual interest cost attributable to pricing flex is approximately $5,250,000.
• Incremental Upfront OID Cost: An increase in the OID from 99.0 to 98.0 on the $975,000,000 Term Loan equates to an additional upfront cost of $9,750,000 ($975,000,000 × 0.01). This incremental OID effectively reduces the net proceeds of the Term Loan available for the Acquisition, requiring either an increase in equity contributions or a reduction in available cash at closing.
• Total Maximum Incremental Cost: In the first year alone, the combined impact of full pricing flex could be approximately $15,000,000 ($5,250,000 in additional annual interest plus $9,750,000 in upfront OID), declining to approximately $5,250,000 per year in subsequent years (reflecting only the ongoing margin increase).
These incremental costs would affect AcquisitionCo's debt service capacity and free cash flow generation and, indirectly, the return profile of the equity sponsors' investment, including ICM Co-Invest.
C. Structural Flex
In addition to pricing adjustments, the Flex Letter permits Atlas to make certain structural modifications to the financing:
(i) Facility Reallocation. Atlas may reallocate amounts between the Term Loan and the Revolving Facility, up to a maximum shift of $50,000,000 from the Revolving Facility to the Term Loan. If this reallocation is exercised to its maximum extent, the Term Loan would increase to $1,025,000,000 and the Revolving Facility would decrease to $100,000,000. A reduction in the Revolving Facility could limit the borrower's post-closing liquidity and working capital flexibility.
(ii) Amortization Adjustment. Atlas may modify the amortization schedule within specified bands. The details of the permissible adjustments are set forth in the Flex Letter; we understand that the range is between 0.0% and 1.0% per annum, meaning Atlas could eliminate scheduled amortization entirely (a "bullet" maturity) if necessary to achieve syndication, or could maintain the current 1.0% schedule.
(iii) Covenant Modification. Atlas may adjust certain covenant levels within agreed ranges set forth in the Flex Letter. These adjustments could affect the maintenance leverage ratio thresholds, permitted basket sizes, and other covenant parameters in the definitive credit agreement.
Additionally, the Flex Letter permits Atlas to introduce a first-lien / second-lien structure or a senior / subordinated structure if market conditions so require, provided that the aggregate quantum of funded debt does not exceed $975,000,000. The introduction of a multi-tranche structure could have significant implications for the capital structure, including differing intercreditor rights, subordination mechanics, and potential impacts on remedies and recoveries in a distressed scenario.
D. Syndication Flex
The Flex Letter also addresses syndication-related flex:
(i) Additional Arrangers. Atlas may appoint additional co-lead arrangers, joint bookrunners, or other titled participants to facilitate the syndication process. Any such appointments would include corresponding title and fee adjustments, which would be funded from Atlas's arrangement fee or from additional fee allocations.
(ii) No Syndication Condition. As noted in Section III.A above, successful syndication is not a condition precedent to funding. Atlas's commitment to fund the full $650,000,000 (and Pinnacle's commitment to fund the full $325,000,000) is unconditional in this regard.
(iii) Clear Market Period. The Commitment Letter includes a "clear market" provision requiring the borrower to refrain from issuing, announcing, or marketing any other debt or equity offering for a period of thirty (30) business days following the execution of the EPA. This provision is designed to ensure that the syndication of the Term Loan is not disrupted by competing offerings in the market. The clear market period is a standard feature of syndicated loan commitment letters.
E. Co-Invest Implications of Flex Exercise
The exercise of market flex provisions by Atlas directly affects the economics of the financing and, by extension, the economics of the equity investment held by ICM Co-Invest. Because AcquisitionCo is the borrower and the co-invest holds its equity interest through AcquisitionCo, any increase in financing costs — whether through margin increases, OID adjustments, or structural changes — will reduce the free cash flow available for distributions to the equity sponsors and may impair the projected returns on the co-investment.
Under the Co-Investment Allocation Agreement dated July 29, 2022, all costs and returns are shared on a pro rata basis between Fund IV (71.43%) and ICM Co-Invest (28.57%). Accordingly, ICM Co-Invest would bear 28.57% of any incremental financing costs arising from the exercise of pricing flex. To illustrate:
• ICM Co-Invest's share of incremental annual interest cost (full margin flex): 28.57% × $4,875,000 = approximately $1,392,857 per year
• ICM Co-Invest's share of incremental OID cost (full OID flex): 28.57% × $9,750,000 = approximately $2,785,575 (one-time)
• ICM Co-Invest's total first-year incremental cost exposure (full flex): approximately $4,178,432
While these amounts are manageable in the context of a $300,000,000 equity investment, they are not immaterial and would affect the projected internal rate of return and cash-on-cash multiple for the co-investment.
Recommendation. C&H recommends that Ironside request from Meridian (through BSP) advance written notice of any exercise of market flex by Atlas, including a description of the specific flex provisions being exercised and the projected economic impact. In addition, C&H recommends that Ironside seek the right to consent to any exercise of structural flex that would materially alter the capital structure — in particular, the introduction of a mezzanine or subordinated debt tranche, or a significant reallocation between the Term Loan and the Revolving Facility. While we acknowledge that consent rights over flex exercise are not standard for co-invest participants and may face resistance from both Meridian and Atlas, the magnitude of the co-invest commitment ($300,000,000) supports a request for meaningful involvement in decisions that affect the financing economics.
V. SunGard Provisions
A. Limited Conditionality Framework
The Commitment Letter incorporates a "SunGard" or "certain funds" framework — so named after the landmark 2005 leveraged buyout of SunGard Data Systems, Inc., which established the market convention for limiting the conditions precedent in acquisition commitment letters. The SunGard framework is now the standard approach in leveraged acquisition financings and serves a critical purpose: it ensures that the committed financing is available on a "certain funds" basis, subject only to the enumerated conditions precedent expressly set forth in the commitment letter.
Under this framework, the lenders may not impose additional conditions to funding beyond those specified in the Commitment Letter. The definitive credit agreement will contain a broader set of representations, covenants, and conditions, but the lenders' obligation to fund at closing is governed exclusively by the limited list of conditions set forth in the Commitment Letter. This distinction between "commitment letter conditions" and "credit agreement conditions" is fundamental to the SunGard architecture and provides the equity sponsors with a high degree of certainty that the debt financing will be available when needed.
This certain-funds structure is particularly important for ICM Co-Invest because it reduces the risk that the lenders will refuse to fund the Term Loan on technical or pretextual grounds at a time when the equity sponsors have already committed substantial resources to the Acquisition. Without the SunGard framework, the lenders could potentially invoke broad conditions in the credit agreement to avoid funding in the event of adverse market conditions or deterioration in the Target's business — precisely the scenarios in which the equity sponsors are most vulnerable.
B. "Specified Acquisition Agreement Representations" Concept
As described in Section III.B above, one of the enumerated conditions to funding is the accuracy of the "Specified Acquisition Agreement Representations." This concept operates as follows:
(i) The EPA contains a comprehensive set of representations and warranties made by the Target (Cascadia) regarding its business, assets, financial condition, legal compliance, and related matters.
(ii) Only a subset of those representations — the "Specified Acquisition Agreement Representations" — must be accurate as a condition to lender funding. The Specified Acquisition Agreement Representations are defined as those Target representations in the EPA that are (a) material to the interests of the lenders in their capacity as creditors, and (b) whose breach would give AcquisitionCo the right to decline to consummate the Acquisition (i.e., whose breach would constitute a closing condition failure under the EPA).
(iii) This "double materiality" filter ensures that the lenders can only refuse to fund if a Target representation is both material to the credit decision and sufficiently significant that the buyer itself would be entitled to walk away from the Acquisition.
The double materiality concept is market standard in SunGard-style commitment letters and is designed to prevent lenders from using relatively minor Target representation breaches as a basis for refusing to fund. It also aligns the lenders' funding obligation with the buyer's closing obligation: if the buyer is required to close the Acquisition notwithstanding a particular representation breach (because the breach does not give rise to a closing condition failure under the EPA), the lenders are likewise required to fund.
From ICM Co-Invest's perspective, this framework is favorable because it ensures that the debt financing will be available in the same circumstances in which the equity sponsors are required to close. Conversely, if a Target representation breach is severe enough that AcquisitionCo has the right to walk away from the Acquisition, the lenders are also relieved of their funding obligation — which aligns the interests of all parties.
C. No MAE Condition
The no-Material Adverse Effect condition references the definition of "Material Adverse Effect" or "MAE" as set forth in the EPA. As of the date of this memorandum, the EPA has not yet been executed (execution is anticipated on September 15, 2022), but the draft EPA delivered to the lenders on or about August 25, 2022 contains an MAE definition that includes customary carve-outs for:
(a) Changes in general economic, financial, or market conditions;
(b) Changes affecting the renewable energy or water infrastructure industries generally (as opposed to changes specifically affecting the Target);
(c) Changes in applicable law or accounting standards (including changes in regulatory requirements applicable to the Target's operations);
(d) Acts of war, terrorism, pandemics, or natural disasters;
(e) The announcement or pendency of the Acquisition itself; and
(f) Actions taken by or at the direction of the buyer or its affiliates.
These carve-outs are designed to exclude from the MAE definition general or exogenous events that are not specific to the Target's business. The effect of the carve-outs is to narrow the universe of circumstances in which a Material Adverse Effect could be found to have occurred, thereby reducing the likelihood that the no-MAE condition to lender funding will be triggered.
Observation Regarding the Concession Renegotiation. One area of potential concern relates to the ongoing renegotiation of the water-treatment concession for the Bull Run Filtration Project with the Portland Metropolitan Water District. The Bull Run Filtration Project represents approximately $64,000,000 in annual revenue, which constitutes approximately 13.1% of Cascadia's total annual revenue of $487,000,000. If the concession renegotiation results in a material reduction in revenue or a termination of the concession, the question would arise whether such an event constitutes a Material Adverse Effect under the EPA definition.
The answer depends on whether the concession renegotiation falls within one of the MAE carve-outs. If the renegotiation is driven by a change in applicable law or regulatory requirements (e.g., new water treatment standards imposed by state or federal regulators), it may be excluded from the MAE definition under the "changes in law" carve-out. If, however, the renegotiation reflects the Portland Metropolitan Water District's independent decision to restructure the concession on more favorable terms for itself — unrelated to legal or regulatory changes — it is less likely to fall within a carve-out and could potentially constitute an MAE, depending on its magnitude and duration.
This is an area of potential lender-borrower dispute. If the concession renegotiation crystallizes into a material revenue impairment prior to closing, Atlas could potentially argue that a Material Adverse Effect has occurred and decline to fund the Term Loan. The equity sponsors would counter that the renegotiation falls within the carve-outs or does not rise to the level of an MAE (which, under Delaware and New York law, requires a showing of durationally significant impact on the overall business). C&H will continue to monitor the concession renegotiation and will provide further analysis if the situation develops.
D. Solvency Certificate
As one of the enumerated conditions precedent to funding, the borrower (AcquisitionCo) is required to deliver a solvency certificate at closing from the Chief Financial Officer of AcquisitionCo (or from a responsible officer designated by the borrower). The solvency certificate must confirm that AcquisitionCo and its subsidiaries, on a consolidated basis and after giving pro forma effect to the Acquisition and the incurrence of the financing, satisfy the following tests:
(a) Balance Sheet Solvency. The fair value of the assets of AcquisitionCo and its subsidiaries, on a consolidated basis, exceeds the sum of their liabilities (including contingent and unliquidated liabilities) on a consolidated basis.
(b) Adequate Capital. AcquisitionCo and its subsidiaries, on a consolidated basis, have adequate capital with which to conduct their business.
(c) Ability to Pay Debts. AcquisitionCo and its subsidiaries, on a consolidated basis, have the ability to pay their debts (including contingent obligations) as they become due in the ordinary course of business.
The solvency certificate is a funding condition and should be achievable based on the current capitalization plan. With total equity contributions of $1,050,000,000 against the $975,000,000 Term Loan (and the refinancing of existing net debt of approximately $900,000,000), the pro forma capital structure provides for meaningful equity cushion. However, the solvency analysis is sensitive to the valuation assumptions used for the Target's assets and the treatment of contingent liabilities, including obligations under the water-treatment concessions and power purchase agreements. C&H will review the form of the solvency certificate when it is circulated with the definitive credit agreement.
VI. Regulatory Approval Conditions
As set forth in condition precedent item 9 of Section III.B above, lender funding is conditioned on the receipt of two specified regulatory approvals:
FERC Section 203 Approval. Section 203 of the Federal Power Act requires prior authorization from FERC for any transfer of jurisdictional facilities or any change in control of a public utility holding company. Because the Acquisition will result in a change of control of Cascadia and its subsidiaries, several of which hold FERC-jurisdictional hydroelectric licenses, an application for Section 203 approval has been prepared. As of the date of this memorandum, the application is expected to be filed under Docket No. EC22-143-000 on or about October 19, 2022. FERC's review period for Section 203 applications is typically 60 to 180 days from the date of filing, depending on the complexity of the transaction and whether FERC issues a request for additional information. In straightforward change-of-control transactions involving non-market-power-creating acquisitions, FERC has historically acted within 90 days.
OPUC Approval. The Oregon Public Utility Commission has jurisdiction over certain of Cascadia's utility assets in Oregon. An application for OPUC approval of the transfer of these assets is expected to be filed under Docket No. UM-2287 on or about October 14, 2022. OPUC proceedings typically involve a public comment period and may include an evidentiary hearing if interested parties (such as the Oregon Department of Justice or consumer advocacy organizations) intervene. The timeline for OPUC proceedings is variable and can range from 90 days to over one year, depending on the level of public interest and the complexity of the issues raised.
Each of the above regulatory approvals must be obtained on terms "reasonably satisfactory" to the administrative agent (Atlas). The "reasonably satisfactory" standard means that Atlas may not reject an approval that is issued on standard terms and without unusual conditions, but Atlas may decline to fund if an approval is issued with conditions that would materially impair the value of the collateral or the ability of the borrower to service the debt.
CFIUS. The Committee on Foreign Investment in the United States ("CFIUS") review is not a condition to lender funding under the Commitment Letter. We understand that a voluntary CFIUS notice was filed on behalf of AcquisitionCo and was acknowledged by CFIUS on September 20, 2022. Based on our understanding of the ownership structure — Fund IV and ICM Co-Invest are each organized in the United States and managed by U.S.-based persons, with no identified foreign ownership or control — we do not anticipate any CFIUS-related issues. No further action is required on CFIUS at this time.
Timeline Risk. The regulatory approval timelines represent the most significant risk to the closing timeline. If either the FERC or OPUC proceeding extends beyond the initial commitment letter expiration date of April 30, 2023, the parties would need to agree to one or more extensions of the Commitment Letter, with the associated extension fees and the risk that one or more lenders may decline to extend. The OPUC proceeding, in particular, presents timeline uncertainty due to the possibility of intervener participation and evidentiary proceedings. C&H recommends that Ironside closely monitor the regulatory proceedings and coordinate with BSP on extension planning well in advance of the April 30, 2023 expiration date.
VII. Interaction with Equity Purchase Agreement
A. EPA Consistency Requirement
The Commitment Letter requires that the EPA, as executed, be "in form and substance consistent with" the draft EPA delivered to the lenders on or about August 25, 2022 (the "Specified EPA"). This condition ensures that the lenders are extending credit on the basis of the transaction terms they reviewed during the commitment process and that the borrower has not materially altered the acquisition terms without lender knowledge.
The EPA is expected to be executed on September 15, 2022. C&H will confirm with BSP that the lenders (Atlas and Pinnacle) have acknowledged that the executed EPA is consistent with the Specified EPA. Any material departures from the Specified EPA could give the lenders a basis for asserting that the EPA consistency condition has not been satisfied, which would relieve them of their funding obligation.
In addition, the Commitment Letter provides that no amendment, modification, or waiver of the EPA that is "materially adverse to the interests of the lenders" may be effected without the prior written consent of the administrative agent (acting on behalf of the lenders). This consent requirement is relevant because the parties to the EPA may need to make adjustments to the acquisition terms over the course of the pre-closing period — for example, to extend the outside date, adjust the purchase price, modify the closing conditions, or address issues identified during regulatory review. Any such adjustment that is deemed materially adverse to the lenders would require lender consent, introducing an additional procedural step and potential source of delay.
B. EPA Outside Date and Commitment Letter Expiration
The EPA contains an outside date — the date by which the Acquisition must close, failing which either party may terminate the EPA. The current outside date in the draft EPA is December 31, 2022, subject to extension pursuant to the terms of the EPA.
The Commitment Letter expiration date is April 30, 2023, which extends approximately four months beyond the initial EPA outside date. This timing mismatch provides a useful cushion: even if the Acquisition does not close by the EPA outside date (and the EPA outside date is extended), the commitment letter financing remains available through April 30, 2023 without the need for a separate extension of the Commitment Letter.
However, if the EPA outside date is extended beyond April 30, 2023 (for example, due to delays in obtaining FERC or OPUC approval), the Commitment Letter would also need to be extended in order to maintain committed financing through the revised closing date. As discussed in Section III.C above, extension of the Commitment Letter requires mutual agreement and payment of extension fees. There is no automatic alignment between EPA extensions and Commitment Letter extensions.
Recommendation. C&H recommends that Ironside monitor this timing mismatch closely and that BSP be asked to ensure that any extension of the EPA outside date is coordinated with a corresponding extension of the Commitment Letter. Failure to maintain alignment between the EPA outside date and the commitment letter expiration could result in a gap period during which the Acquisition remains pending but the committed financing has lapsed.
C. Certain Funds Period
The lenders' "certain funds" obligation — that is, their obligation to fund the Term Loan subject only to the enumerated conditions precedent — runs from the date of execution of the Commitment Letter (August 30, 2022) through the earliest of:
(i) The closing of the Acquisition (at which point the commitment is drawn and replaced by the outstanding Term Loan);
(ii) The termination of the EPA, including by expiration of the outside date (at which point the underlying acquisition transaction no longer exists and there is no basis for funding); or
(iii) The expiration of the Commitment Letter, including as extended by mutual agreement of the parties (at which point the lenders' commitment lapses by its terms).
If the EPA is terminated or expires for any reason — whether due to a failure of closing conditions, a material breach by either party, or the passage of the outside date without extension — the lenders' commitment automatically terminates. In such a scenario, there would be no obligation for the lenders to fund, and the equity sponsors would retain their unfunded equity commitments (unless the Co-Investment Allocation Agreement or the LP Agreement provide otherwise).
VIII. Co-Investment Vehicle–Specific Considerations
A. Equity Contribution Mechanics
As described in Section III.B above, the Commitment Letter includes an equity contribution condition requiring that Fund IV and ICM Co-Invest collectively fund not less than $1,050,000,000 in equity at closing. This condition is a standard feature of leveraged acquisition commitment letters and ensures that the lenders' credit exposure is supported by the projected equity capitalization.
Under the Co-Investment Allocation Agreement dated July 29, 2022, the equity contribution is allocated as follows:
• Fund IV: $750,000,000 (71.43% of total equity)
• ICM Co-Invest: $300,000,000 (28.57% of total equity)
ICM Co-Invest's equity contribution is funded through capital calls made by the general partner (Meridian GP IV LLC) under the LP Agreement governing ICM Co-Invest. As of the date of this memorandum, only $22,500,000 has been called from the limited partners of ICM Co-Invest (Capital Call #1, dated August 15, 2022). The remaining $277,500,000 would be called at or shortly prior to the Closing Date in accordance with the capital call mechanics set forth in the LP Agreement.
The equity contribution condition creates a fundamental interdependency: if ICM Co-Invest fails to fund its $300,000,000 contribution (whether due to a default by one or more of its limited partners or for any other reason), the aggregate equity contribution would fall below the required $1,050,000,000 minimum, the equity contribution condition would not be satisfied, and the lenders would not be obligated to fund the $975,000,000 Term Loan. This in turn would mean that the Acquisition cannot close, exposing AcquisitionCo (and potentially the equity sponsors) to liability under the EPA for failure to consummate the transaction.
It is therefore essential that Ironside has confidence in the ability of ICM Co-Invest's limited partners to meet capital calls in the amounts and on the timeline required. C&H recommends that Ironside review the LP Agreement provisions regarding default remedies available against defaulting limited partners and assess whether the LP Agreement provides adequate mechanisms to cure a capital call shortfall (e.g., through overallotment to non-defaulting LPs, GP capital contributions, or bridge financing).
B. Co-Invest Protections in Credit Agreement
As noted above, the definitive credit agreement has not yet been drafted. However, C&H has proactively submitted a comment letter to Atlas National Bank, N.A. (through BSP) dated September 6, 2022, requesting the inclusion of certain co-invest-specific protections in the credit agreement. These requested protections are as follows:
(i) Information Rights. ICM Co-Invest (or Ironside, as its investment manager and sole limited partner in the general partner entity) would receive copies of all financial reports, compliance certificates, and material notices delivered by the borrower to the administrative agent under the credit agreement. This would ensure that Ironside has direct visibility into the financial performance and covenant compliance of AcquisitionCo and Cascadia post-closing, without relying solely on information provided by Meridian.
(ii) Equity Cure Rights. The equity sponsors, including ICM Co-Invest on a pro rata basis, would have the right to cure financial covenant defaults by injecting additional equity into the borrower. Equity cure mechanics are increasingly common in leveraged credit agreements and provide a valuable safety valve that allows the sponsors to avoid a default and potential acceleration by contributing additional capital. The proposed mechanics would permit a specified number of equity cures over the life of the facility (typically limited to two or three cures in any four consecutive quarter period and a maximum of five cures over the life of the facility).
(iii) Consent Rights Over Lender Remedies. The equity sponsors holding a majority of the equity in AcquisitionCo would have the right to consent before the administrative agent may exercise certain material remedies, including acceleration of the debt, enforcement of security interests, or initiation of foreclosure proceedings. This is a non-standard provision that provides the equity sponsors with a degree of control over the lenders' exercise of remedies in a distressed scenario. We acknowledge that this request may face significant resistance from Atlas and the lender group, as it effectively gives the equity sponsors a veto over actions that the lenders would ordinarily be entitled to take unilaterally following an event of default.
(iv) Transfer Restrictions on Lender Assignments. The credit agreement would include restrictions on the lenders' ability to assign or participate their commitments or loans to (a) competitors of the equity sponsors or the Target, (b) distressed-debt purchasers or "loan-to-own" investors, or (c) other persons whose involvement in the lending group could be adverse to the interests of the equity sponsors. These transfer restrictions would require the prior written consent of the borrower (or the equity sponsors) before any such assignment or participation may be effected, subject to customary exceptions (e.g., consent not required following an event of default and acceleration).
Status of Negotiations. BSP has reported that Atlas is willing to include standard equity cure mechanics and information-sharing provisions in the credit agreement. Atlas has, however, pushed back on the consent-to-remedies provision and the broader transfer restrictions, characterizing these provisions as inconsistent with market practice and potentially harmful to the syndication process (lenders in the secondary market expect standard transfer provisions and may be deterred by unusually restrictive assignment limitations). Negotiations are ongoing, and C&H will continue to advocate for these protections in coordination with BSP.
C. Guaranty and Pledge Implications for Co-Invest
The financing is secured by the assets of AcquisitionCo, Cascadia, and Cascadia's direct and indirect subsidiaries. Importantly, ICM Co-Invest is not a guarantor unde

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

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