CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004
MEMORANDUM PRIVILEGED & CONFIDENTIAL / ATTORNEY WORK PRODUCT
July 25, 2022
TO: Ironside Capital Management LP Internal Files
FROM: Theresa Kim, Lead Associate, Funds & Asset Management Group
REVIEWED BY: Pamela Cross, Responsible Partner
RE: ICM Cascadia Co-Invest, LP — Delaware Limited Partnership Formation and Governance Summary
MATTER NO.: 1023-00001
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for the sole use of Ironside Capital Management LP and its authorized representatives. This memorandum is protected by the attorney-client privilege and the work product doctrine. Any disclosure, copying, distribution, or use of this memorandum or the information contained herein by any person other than the intended recipient is strictly prohibited. If you have received this memorandum in error, please contact Theresa Kim at (212) 555-8100 immediately.
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I. Purpose and Scope
This memorandum has been prepared by Calderwood & Harkness LLP ("C&H" or the "Firm") for the internal files of Ironside Capital Management LP ("Ironside" or "ICM") to provide a comprehensive summary of the formation steps completed to date and the governance structure of ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Partnership"), a Delaware limited partnership formed for the purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the acquisition of 100% of the outstanding equity interests of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation.
The Vehicle has been organized as a single-purpose, single-limited-partner co-investment vehicle designed to facilitate Ironside's participation in the Cascadia acquisition on terms that are more favorable to Ironside than those applicable to Fund IV's general limited partner base. Specifically, the Vehicle was formed to commit Three Hundred Million Dollars ($300,000,000) to the acquisition, representing approximately 28.57% of the total equity commitment of One Billion Fifty Million Dollars ($1,050,000,000). Fund IV is committing the remaining Seven Hundred Fifty Million Dollars ($750,000,000), representing approximately 71.43% of the total equity commitment.
The acquisition target, Cascadia Renewables Holdings, Inc., is a Pacific Northwest renewable-energy and water-infrastructure platform with operations spanning the states of Oregon, Washington, and Idaho. The agreed-upon enterprise value of Cascadia is One Billion Nine Hundred Fifty Million Dollars ($1,950,000,000), which implies an EV/EBITDA multiple of approximately 14.1x, based on Cascadia's fiscal year 2021 adjusted EBITDA of approximately One Hundred Thirty-Eight Million Dollars ($138,000,000). The transaction is structured as a leveraged acquisition, with the equity component of $1,050,000,000 supplemented by acquisition financing to be arranged separately.
This memorandum covers the following topics in detail:
(A) formation steps completed and pending;
(B) partnership structure and capitalization, including the economic terms negotiated for the Vehicle;
(C) governance and decision-making authority of the General Partner and the Limited Partner;
(D) fiduciary duties owed by the General Partner, including modifications to default duties under Delaware law;
(E) voting rights of the Limited Partner;
(F) mechanics for the removal of the General Partner, including removal for cause and the consequences thereof;
(G) information rights of the Limited Partner under the LP Agreement and the Side Letter;
(H) material impediment event, dormancy, and wind-down provisions; and
(I) additional matters, including term and dissolution, distribution waterfall, transfer restrictions, and tax and regulatory considerations.
This memorandum is intended to serve as a comprehensive reference document for Ironside's internal records and should be read in conjunction with the separate memoranda prepared by C&H on tax structuring (dated July 20, 2022), ERISA analysis (dated July 27, 2022), and the placement agent agreement review (dated July 18, 2022).
II. Formation Steps Completed
A. Certificate of Limited Partnership
The Certificate of Limited Partnership of ICM Cascadia Co-Invest, LP was prepared by C&H and filed with the Delaware Secretary of State on July 22, 2022. The filing was accepted and processed on the same date, and the Partnership's legal existence commenced upon such filing in accordance with Section 17-201 of the Delaware Revised Uniform Limited Partnership Act ("DRULPA"), 6 Del. C. §§ 17-101 et seq.
The key details of the filing are as follows:
• Name of Partnership: ICM Cascadia Co-Invest, LP
• Delaware Secretary of State File Number: 7439218
• Date of Filing: July 22, 2022
• Employer Identification Number (EIN): 88-3921457 (obtained from the Internal Revenue Service on July 23, 2022)
• General Partner Named in Certificate: Meridian Infrastructure GP IV LLC, a Delaware limited liability company
• Registered Agent: Cascade Systems, 160 Greentree Drive, Suite 101, Dover, Delaware 19904
The Certificate of Limited Partnership is in the standard form prescribed by DRULPA Section 17-201 and contains the name of the Partnership, the address of the registered office in Delaware, the name and address of the registered agent, and the name and address of the general partner. A certified copy of the Certificate of Limited Partnership has been obtained from the Delaware Secretary of State and is retained in the Firm's deal files.
B. Limited Partnership Agreement
The Agreement of Limited Partnership of ICM Cascadia Co-Invest, LP (the "LP Agreement") has been negotiated between C&H (on behalf of Ironside) and Breckenridge Sloane & Pratt LLP (on behalf of Meridian Infrastructure GP IV LLC, the "General Partner" or "GP"). The LP Agreement is in final, execution-ready form as of the date of this memorandum and is scheduled for execution by all parties on July 29, 2022, coinciding with the first close of the Vehicle.
The LP Agreement is governed by the laws of the State of Delaware, specifically the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. The parties to the LP Agreement are:
• General Partner: Meridian Infrastructure GP IV LLC, a Delaware limited liability company, serving as the sole general partner of the Partnership.
• Limited Partner: Ironside Capital Management LP, a Delaware limited partnership, serving as the sole limited partner of the Partnership.
The LP Agreement comprises approximately sixty-two (62) pages, exclusive of exhibits and schedules, and addresses the full range of partnership governance matters, including capitalization, capital calls and contributions, distributions, management authority, fiduciary duties, indemnification, information rights, transfer restrictions, term and dissolution, and winding up. The material provisions of the LP Agreement are summarized in the sections that follow.
C. Ancillary Formation Documents
In addition to the Certificate of Limited Partnership and the LP Agreement, the following ancillary formation and transaction documents have been prepared and are either executed or scheduled for execution:
1. Side Letter. A side letter agreement (the "Side Letter") between Ironside Capital Management LP, as the Limited Partner, and Meridian Infrastructure GP IV LLC, as the General Partner, has been negotiated and is in final form. The Side Letter is scheduled for execution concurrently with the LP Agreement on July 29, 2022. The Side Letter addresses the following key matters:
(a) confirmation that no management fee is payable on the co-investment vehicle;
(b) most-favored-nation ("MFN") provisions ensuring that Ironside receives terms no less favorable than those granted to any other co-investor in a parallel or successor vehicle;
(c) enhanced reporting obligations, including quarterly status reports during any dormancy period and access to the GP's books and records;
(d) wind-down election rights, including the LP's right to elect wind-down of the Partnership following an extended dormancy period; and
(e) certain other protective provisions as described more fully in the relevant sections of this memorandum.
2. Co-Investment Allocation Agreement. A co-investment allocation agreement (the "Co-Investment Allocation Agreement") between Meridian Infrastructure Partners Fund IV, LP (Fund IV) and ICM Cascadia Co-Invest, LP (the Vehicle) has been negotiated and is in final form. The Co-Investment Allocation Agreement governs the allocation of the co-investment between Fund IV and the Vehicle, establishing the 28.57% (Vehicle) / 71.43% (Fund IV) pro rata split and the parallel investment mechanics applicable to the Cascadia acquisition. The Co-Investment Allocation Agreement ensures that Fund IV and the Vehicle participate in the acquisition on a pari passu basis, with proportionate economics, voting rights, and information rights at the portfolio-company level.
3. Subscription Agreement. Ironside's subscription agreement for its limited partner interest in the Partnership (the "Subscription Agreement") has been prepared and is scheduled for execution on July 29, 2022. The Subscription Agreement contains customary representations and warranties of the subscriber, including representations regarding accredited investor and qualified purchaser status, investment intent, and compliance with applicable securities laws.
4. AML/KYC Certification. Anti-money-laundering and know-your-customer certification documentation has been prepared separately and is dated July 28, 2022. The AML/KYC package includes all required identification and verification materials for Ironside and its principals, as well as the applicable certifications under the USA PATRIOT Act and the Bank Secrecy Act.
5. Placement Agent Agreement. Rivermark Capital Markets Inc. ("Rivermark") has been engaged as the placement agent for the Vehicle pursuant to a placement agent agreement executed between Meridian Infrastructure GP IV LLC and Rivermark. The placement agent fee is 0.35% of committed capital, resulting in a fee of One Million Fifty Thousand Dollars ($1,050,000), payable at first close. C&H has reviewed the placement agent agreement and provided its analysis in a separate memorandum dated July 18, 2022.
D. Pending Formation Steps
As of the date of this memorandum, the following formation steps remain pending and are expected to be completed in the near term:
1. Execution of Transaction Documents. The LP Agreement, Side Letter, Subscription Agreement, and Co-Investment Allocation Agreement are anticipated to be executed by all parties on July 29, 2022, at first close.
2. First Capital Call. The first capital call under the LP Agreement is anticipated for mid-August 2022. Based on preliminary estimates, the first capital call is expected to be approximately 7.5% of committed capital, or approximately $22,500,000, to fund organizational expenses, the placement-agent fee, the representations and warranties insurance premium deposit, due-diligence costs and deposits, and the working-capital reserve.
3. Bank Account Opening. A bank account for the Partnership's fund operations is to be opened at Atlas National Bank, N.A. The account opening documentation is being prepared and is expected to be completed prior to first close.
4. Ongoing Compliance Filings. Annual Delaware franchise tax filings and annual report filings will be required going forward. The Firm will coordinate with the registered agent, Cascade Systems, and with the fund administrator, Kendrick Thorne & Associates LLP, to ensure timely compliance with all filing and payment obligations.
III. Partnership Structure and Capitalization
A. Partners and Interests
The Partnership has two partners: the General Partner and the Limited Partner. The Vehicle is structured as a single-LP co-investment vehicle with no additional limited partners anticipated.
1. General Partner: Meridian Infrastructure GP IV LLC
Meridian Infrastructure GP IV LLC serves as the sole general partner of the Partnership. The General Partner is a Delaware limited liability company organized for the purpose of serving as the general partner of Fund IV and its related co-investment vehicles, including the Vehicle. The key details of the General Partner are as follows:
• Entity Type: Delaware limited liability company
• Managers:
• David R. Hargreaves, Managing Partner
• Lillian Fong, Partner, Portfolio
• Graham Whitfield, Partner, Operations
• Partnership Interest: 0.01%
• Capital Commitment: Thirty Thousand Dollars ($30,000), representing 0.01% of the total committed capital of $300,000,000
• Legal Counsel: Breckenridge Sloane & Pratt LLP, represented by Charles A. Delacroix, lead partner, with offices at One Federal Street, Suite 3600, Boston, Massachusetts 02110
The General Partner acts through its three managers — Hargreaves, Fong, and Whitfield — or such authorized officers as the managers may designate from time to time in accordance with the GP's operating agreement.
2. Limited Partner: Ironside Capital Management LP
Ironside Capital Management LP serves as the sole limited partner of the Partnership. The key details of the Limited Partner are as follows:
• Entity Type: Delaware limited partnership
• Headquarters: 590 Madison Avenue, 38th Floor, New York, New York 10022
• Principals:
• Marcus J. Calloway, Founder & Chief Investment Officer
• Renata Obasi, Senior Managing Director, Infrastructure
• Partnership Interest: 99.99%
• Capital Commitment: Two Hundred Ninety-Nine Million Nine Hundred Seventy Thousand Dollars ($299,970,000), representing 99.99% of the total committed capital of $300,000,000
• Assets Under Management: Approximately $14.8 billion firm-wide; approximately $3.2 billion in infrastructure strategy across three investment vehicles
• Registration Status: SEC-registered investment adviser under the Investment Advisers Act of 1940
Ironside is a well-established institutional asset manager with a significant existing allocation to infrastructure investments. The Cascadia co-investment represents a strategic opportunity for Ironside to increase its exposure to the renewable-energy and water-infrastructure sectors in the Pacific Northwest at favorable co-investment economics.
B. Total Committed Capital
The total committed capital of the Partnership is Three Hundred Million Dollars ($300,000,000). As noted above, the General Partner has committed $30,000 (0.01%) and the Limited Partner has committed $299,970,000 (99.99%).
The Vehicle is structured as a single-LP co-investment vehicle. No additional limited partners are anticipated, and the admission of any additional limited partners would require the prior written consent of the existing Limited Partner (Ironside) pursuant to Section 5.01 of the LP Agreement.
C. Economics
The economic terms of the Vehicle have been negotiated to reflect the co-investment nature of the arrangement and are significantly more favorable to Ironside than the standard economic terms applicable to Fund IV's main limited partnership. The key economic terms are summarized below:
Management Fee. No management fee (0%) is charged on the Vehicle. The Side Letter expressly confirms that no management fee, monitoring fee, or similar ongoing fee is payable by the Partnership to the General Partner or any of its affiliates in connection with the Vehicle. This is a material economic benefit to Ironside, as Fund IV's main limited partnership is subject to a management fee of 2% per annum on committed capital during the investment period and 2% per annum on invested capital thereafter.
Carried Interest. The General Partner is entitled to a carried interest of 10% of net profits above the preferred return, as compared to the 20% carried interest applicable in Fund IV's main limited partnership. The reduced carried interest rate reflects the co-investment nature of the Vehicle and Ironside's significant capital commitment. The carried interest is subject to the distribution waterfall mechanics described in Section XI of this memorandum.
Preferred Return. The Limited Partner and the General Partner are entitled to a preferred return of 8% per annum, compounded quarterly, on their respective contributed capital. The preferred return must be satisfied in full before any carried interest is payable to the General Partner.
GP Commitment. The General Partner has committed $30,000 (0.01% of total committed capital) as its capital contribution to the Partnership. While the GP commitment is modest in absolute terms, it is typical for co-investment vehicles where the sponsor's primary capital commitment is made through the main fund.
D. Purpose
The sole purpose of the Partnership, as set forth in Section 2.01 of the LP Agreement, is to co-invest alongside Fund IV in the acquisition of 100% of the outstanding equity interests of Cascadia Renewables Holdings, Inc. through Cascadia Acquisition Corp., a Delaware corporation to be formed as the acquisition subsidiary. Cascadia Acquisition Corp. will be wholly owned, directly or indirectly, by Fund IV and the Vehicle in proportion to their respective equity commitments (71.43% Fund IV / 28.57% Vehicle).
The Vehicle's co-investment percentage of total equity is 28.57%, calculated as $300,000,000 divided by $1,050,000,000 in total equity commitments. The Co-Investment Allocation Agreement governs the allocation mechanics and ensures parallel treatment of Fund IV and the Vehicle throughout the life of the investment.
The Partnership is not authorized to engage in any business or activity other than the foregoing, and the General Partner is not authorized to cause the Partnership to make any investment other than the Cascadia co-investment without the prior written consent of the Limited Partner.
IV. Governance and Decision-Making Authority
A. General Partner Authority (§3.01 of LP Agreement)
Pursuant to Section 3.01 of the LP Agreement, the General Partner has exclusive authority to manage and control the business and affairs of the Partnership. This broad grant of authority is consistent with the default rules under DRULPA and with customary market practice for sponsor-led co-investment vehicles. Specifically, the General Partner's authority includes, without limitation, the following:
(a) making, monitoring, and disposing of the Partnership's investment in Cascadia, including all decisions relating to the acquisition, post-closing management, restructuring, refinancing, and ultimate disposition of the investment;
(b) issuing capital calls to the partners and managing capital contributions in accordance with the terms of the LP Agreement;
(c) making distributions to the partners in accordance with the distribution waterfall set forth in Section 6.01 of the LP Agreement;
(d) executing transaction documents on behalf of the Partnership, including the Equity Purchase Agreement, ancillary acquisition agreements, financing agreements, and all other instruments and documents necessary or desirable in connection with the Cascadia acquisition;
(e) engaging service providers on behalf of the Partnership, including fund administrators, independent auditors, tax preparers, legal counsel, valuation consultants, and any other advisors or consultants deemed necessary or appropriate by the General Partner;
(f) incurring and paying expenses on behalf of the Partnership, including organizational expenses, ongoing operating expenses, and transaction-related expenses;
(g) taking all actions necessary or desirable in connection with the Cascadia acquisition, including the negotiation and execution of the Equity Purchase Agreement, the stockholders' agreement, the management services agreement, and all related transaction documents; and
(h) generally taking all actions that the General Partner deems necessary or appropriate to carry out the purposes of the Partnership and to protect the Partnership's investment.
The General Partner acts through its managers — David R. Hargreaves (Managing Partner), Lillian Fong (Partner, Portfolio), and Graham Whitfield (Partner, Operations) — or such other authorized officers or representatives as the managers may designate from time to time in accordance with the GP's operating agreement. Decisions of the General Partner are made by majority vote of the managers, except as otherwise provided in the GP's operating agreement.
B. Limitations on GP Authority
Notwithstanding the broad grant of authority to the General Partner described above, the LP Agreement imposes certain limitations on the General Partner's authority. Specifically, the General Partner may not take any of the following actions without the prior written consent of the Limited Partner (Ironside):
(a) amend, modify, or waive any provision of the LP Agreement or the Side Letter;
(b) admit additional limited partners to the Partnership;
(c) increase the aggregate capital commitments of the Partnership beyond $300,000,000;
(d) merge, consolidate, or convert the Partnership into another entity or form of organization;
(e) voluntarily file for bankruptcy, make an assignment for the benefit of creditors, or consent to the appointment of a receiver or trustee for the Partnership or any substantial part of its assets;
(f) enter into any related-party transaction (including any transaction with the General Partner, its affiliates, Fund IV, or their respective principals, officers, or employees) that is not expressly contemplated by the LP Agreement or the Co-Investment Allocation Agreement; and
(g) extend the investment period or term of the Partnership beyond the limits set forth in the LP Agreement.
These consent requirements are designed to protect Ironside's interests as the sole limited partner and to ensure that the General Partner does not take any material action that could adversely affect Ironside's investment without Ironside's knowledge and approval. The consent requirements are consistent with market practice for single-LP co-investment vehicles and reflect the negotiated balance of authority between the General Partner and the Limited Partner.
C. LP Advisory Committee
No formal Limited Partner Advisory Committee ("LPAC") is established under the LP Agreement. The absence of a formal LPAC is appropriate given the single-LP structure of the Vehicle — there is no need for a committee to represent the interests of multiple limited partners, as Ironside is the sole limited partner and has direct consent rights on all material matters.
In lieu of a formal LPAC, the Side Letter provides for direct consultation between the General Partner and Ironside on material matters affecting the Partnership and its investment. The GP has agreed to consult with Ironside in good faith on matters that would customarily be brought before an LPAC in a multi-investor fund, including conflict-of-interest matters, related-party transactions, valuation issues, and material deviations from the investment thesis.
D. Investment Decisions
All investment decisions relating to the Partnership's investment in Cascadia are made by the General Partner in its sole discretion, subject to the limitations described in Section IV.B above. This includes decisions relating to the initial acquisition of Cascadia, any post-closing add-on investments or capital expenditures at the portfolio-company level, any restructuring, recapitalization, or refinancing of Cascadia, and any ultimate disposition or exit of the investment.
The Co-Investment Allocation Agreement governs the parallel investment mechanics between Fund IV and the Vehicle, ensuring that both entities participate in the acquisition and all subsequent investment decisions on a pro rata basis (28.57% Vehicle / 71.43% Fund IV). The Co-Investment Allocation Agreement provides for parallel economic treatment, meaning that Fund IV and the Vehicle receive the same terms with respect to the acquisition, any subsequent investments, and the ultimate disposition of the investment, subject to differences in their respective economic terms (e.g., the Vehicle's lower carried interest rate).
Any deviation from the pro rata allocation set forth in the Co-Investment Allocation Agreement requires the prior written consent of the Limited Partner (Ironside). This provision protects Ironside against dilution or adverse reallocation of investment economics as between Fund IV and the Vehicle.
V. Fiduciary Duties
A. Standard of Care
Under the LP Agreement, the General Partner owes fiduciary duties to the Partnership and its partners. These duties are, however, subject to the modifications and limitations permitted under the Delaware Revised Uniform Limited Partnership Act, which provides substantial flexibility to the parties to a limited partnership agreement to define and modify the fiduciary duties owed by the general partner.
The LP Agreement modifies the default fiduciary duties as follows:
Duty of Care. The duty of care owed by the General Partner is limited to a "gross negligence or willful misconduct" standard. Under this standard, the General Partner is not liable to the Partnership or any partner for errors in judgment, losses, or other adverse outcomes arising from its management of the Partnership's affairs, unless such errors, losses, or outcomes result from the General Partner's gross negligence, willful misconduct, fraud, or bad faith. This modification is consistent with the standard of care commonly adopted in Delaware limited partnership agreements for private equity and infrastructure funds and is permissible under DRULPA Section 17-1101(d).
Duty of Loyalty. The duty of loyalty owed by the General Partner is preserved but is qualified to account for the General Partner's role as the sponsor of Fund IV and other investment vehicles. Specifically, the LP Agreement provides that the General Partner and its affiliates (including Meridian and Fund IV) may engage in other business activities, including activities that compete with or are similar to the Partnership's business, without any obligation to account to the Partnership for any profits or benefits derived from such activities. This qualification is necessary to accommodate the General Partner's role as the general partner of Fund IV and its other investment activities, and the specific allocation as between Fund IV and the Vehicle is governed by the Co-Investment Allocation Agreement.
B. Exculpation
The LP Agreement includes a customary exculpation provision that limits the personal liability of the General Partner and certain related persons in connection with the Partnership's activities. Specifically, the General Partner and its affiliates, managers, members, officers, and employees (collectively, the "Covered Persons") are exculpated from liability to the Partnership or the Limited Partner for any act or omission taken or suffered in good faith and reasonably believed by the applicable Covered Person to be within the scope of the authority conferred by the LP Agreement, except to the extent that such act or omission constitutes gross negligence, willful misconduct, fraud, or bad faith.
The exculpation provision is drafted broadly to cover the full range of activities that the Covered Persons may undertake in connection with the Partnership's business, including investment decisions, operational decisions, service provider engagement, and all other actions taken in the course of managing the Partnership's affairs. The carve-outs for gross negligence, willful misconduct, fraud, and bad faith ensure that the Covered Persons remain accountable for egregious conduct while providing appropriate protection against liability for good-faith errors in judgment.
C. Indemnification
The LP Agreement provides for indemnification of the Covered Persons by the Partnership against losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and expenses) arising out of or in connection with the Partnership's activities. The indemnification obligation is subject to the same carve-outs applicable to the exculpation provision — indemnification is not available to the extent that the conduct giving rise to the claim constitutes gross negligence, willful misconduct, fraud, or bad faith.
Several important features of the indemnification provision merit emphasis:
• The indemnification obligations of the Partnership are payable solely from Partnership assets. The Limited Partner has no personal obligation to fund indemnification payments, and the General Partner may not issue capital calls specifically to fund indemnification obligations without the Limited Partner's consent.
• The LP Agreement permits advancement of expenses (including attorneys' fees) to Covered Persons in connection with pending or threatened proceedings, subject to an undertaking by the applicable Covered Person to repay such amounts if it is ultimately determined that indemnification is not available under the terms of the LP Agreement.
• The indemnification provision is not exclusive and does not preclude any Covered Person from seeking indemnification or contribution from any other source, including insurance policies maintained by the General Partner or its affiliates.
D. Delaware Law Considerations
The fiduciary duty, exculpation, and indemnification provisions of the LP Agreement have been drafted in accordance with the requirements and limitations of DRULPA. Several provisions of DRULPA are particularly relevant:
DRULPA § 17-1101(d). This section provides that a limited partnership agreement may modify, restrict, or expand the fiduciary duties owed by a partner or other person to the partnership or to another partner. The statute expressly permits the elimination of fiduciary duties, subject to the limitation that a partnership agreement may not eliminate the implied contractual covenant of good faith and fair dealing.
Implied Covenant of Good Faith and Fair Dealing. In accordance with DRULPA Section 17-1101(d), the LP Agreement expressly preserves the implied contractual covenant of good faith and fair dealing. This covenant provides a baseline level of protection for the Limited Partner against arbitrary or opportunistic conduct by the General Partner, even in areas where the LP Agreement has modified or limited the General Partner's fiduciary duties. Delaware courts have consistently held that the implied covenant serves as a gap-filling mechanism to address situations not expressly covered by the partnership agreement, and the preservation of this covenant in the LP Agreement is both appropriate and consistent with best practices.
The modifications to default fiduciary duties set forth in the LP Agreement are within the range of market practice for Delaware limited partnerships in the private equity and infrastructure asset classes and have been reviewed and approved by the Responsible Partner.
VI. Voting Rights
A. LP Voting Rights
The LP Agreement reserves certain matters for the vote or written consent of the Limited Partner (Ironside). Given the single-LP structure of the Vehicle, the Limited Partner's vote or consent is, as a practical matter, the sole determinative vote on reserved matters. The matters requiring the Limited Partner's consent are as follows:
(a) any amendment, modification, or waiver of any provision of the LP Agreement, including any exhibit or schedule thereto;
(b) the admission of any additional limited partner to the Partnership;
(c) any increase in the aggregate capital commitments of the Partnership;
(d) any merger, consolidation, or conversion of the Partnership into another entity or form of organization;
(e) voluntary dissolution of the Partnership (other than dissolution at the end of the term or upon completion of the investment);
(f) any related-party transaction not expressly contemplated by the LP Agreement or the Co-Investment Allocation Agreement; and
(g) any extension of the investment period or the term of the Partnership beyond the limits set forth in the LP Agreement.
These voting rights provide Ironside with meaningful control over the fundamental terms and structure of the Partnership and its investment, while leaving day-to-day management and investment decisions to the General Partner. The scope of the reserved matters is consistent with market practice for single-LP co-investment vehicles and reflects the negotiated allocation of authority between the parties.
B. GP Voting / Consent
The General Partner has sole voting authority on all matters not expressly reserved to the Limited Partner, including all investment decisions, operational decisions, and administrative matters. The General Partner's authority in these areas is exercised without the need for Limited Partner consent, except as otherwise specifically provided in the LP Agreement or the Side Letter.
C. Voting Mechanics
Given the two-party structure of the Vehicle, the LP Agreement adopts streamlined voting and consent mechanics. Votes and consents may be given in writing, which includes delivery by electronic mail, and are effective upon receipt by the General Partner or the Limited Partner, as applicable. No formal meeting procedures, quorum requirements, or record-date mechanics are required or contemplated by the LP Agreement, as such provisions are unnecessary in a two-party partnership.
All notices, requests for consent, and other communications between the partners are to be delivered in accordance with the notice provisions of the LP Agreement (Section 10.01), which provide for delivery by hand, by nationally recognized overnight courier, by registered or certified mail (return receipt requested), or by electronic mail, in each case to the addresses set forth in the LP Agreement or such other addresses as the parties may designate from time to time.
VII. GP Removal Mechanics
A. Removal for Cause
The LP Agreement provides the Limited Partner with the right to remove the General Partner "for cause" upon written notice to the General Partner. Removal for cause is effective immediately upon delivery of the written notice or upon such later date as may be specified in the notice. The LP Agreement defines "Cause" as any of the following events:
(a) fraud, willful misconduct, or gross negligence by the General Partner in the performance of its duties under the LP Agreement;
(b) a material breach by the General Partner of any provision of the LP Agreement that is not cured by the General Partner within thirty (30) days after written notice of such breach from the Limited Partner;
(c) the conviction of the General Partner or any of its managers of a felony, or the entry of a guilty plea or a plea of nolo contendere by the General Partner or any of its managers, in each case in connection with the business or affairs of the Partnership;
(d) the bankruptcy, insolvency, or dissolution of the General Partner (including the filing of a voluntary petition for bankruptcy or the entry of an order for relief against the General Partner in an involuntary bankruptcy proceeding); and
(e) the entry of a final, non-appealable judgment or order of a court of competent jurisdiction finding the General Partner liable for fraud in connection with the Partnership or its activities.
The definition of "Cause" is drafted broadly to capture the most significant categories of general-partner misconduct or incapacity that would warrant removal. The thirty-day cure period for material breaches (clause (b) above) provides the General Partner with a reasonable opportunity to remedy non-fraudulent breaches before the removal right becomes exercisable, which is consistent with market practice.
B. Removal Without Cause
The LP Agreement does not provide for the removal of the General Partner without cause. The absence of a no-fault removal right is a common feature in co-investment vehicles where the General Partner is the sponsor of the main fund (here, Fund IV). The rationale for this approach is that the General Partner's role in managing the co-investment is closely tied to its role in managing the main fund, and removal of the General Partner from the co-investment vehicle without cause could create governance and operational complexities for the broader investment program.
Ironside's primary remedy in circumstances falling short of "Cause" is the exercise of its wind-down election right under Section 7.04(c) of the LP Agreement (discussed in Section IX.D of this memorandum), which permits Ironside to elect to wind down the Partnership following an extended dormancy period without the need to establish cause for removal.
C. Consequences of GP Removal
Upon removal of the General Partner for cause, the following consequences apply under the LP Agreement:
(a) Appointment of Successor General Partner. The Limited Partner has the right to appoint a successor general partner in its sole discretion. The successor general partner may be an affiliate of Ironside, a third-party manager, or any other person designated by the Limited Partner. The successor general partner assumes all rights, duties, and obligations of the removed General Partner under the LP Agreement, subject to any modifications agreed to by the parties.
(b) Conversion of Removed GP's Interest. Upon removal, the removed General Partner's partnership interest (0.01%) is automatically converted to a limited partner interest. The converted interest retains economic rights (i.e., the right to receive distributions in respect of capital contributions), but the removed General Partner has no management authority, voting rights, or other governance rights with respect to the Partnership. Importantly, the removed General Partner has no entitlement to carried interest on distributions made after the date of removal. Carried interest accrued prior to the date of removal is subject to the clawback and settlement provisions of the LP Agreement, which require the removed General Partner to return any excess carried interest previously received.
(c) Continuation of Partnership. The Partnership continues without dissolution following the removal of the General Partner, unless the Limited Partner elects to dissolve and wind down the Partnership. The decision to continue or dissolve the Partnership following GP removal is within the sole discretion of the Limited Partner.
D. Practical Considerations
Given the single-purpose, single-LP nature of the Vehicle, removal of the General Partner would likely be exercised only in extreme circumstances involving fraud, willful misconduct, gross negligence, or material breach. In practice, the more typical remedy for disagreements between the General Partner and the Limited Partner — particularly during periods of dormancy or reduced investment activity — would be the exercise of the wind-down election right under Section 7.04(c) of the LP Agreement, as discussed in Section IX.D below.
C&H has reviewed the GP removal provisions of the LP Agreement and confirms that they are consistent with market practice for single-LP co-investment vehicles and with the requirements of Delaware law. The removal provisions have been negotiated with Breckenridge Sloane & Pratt LLP (counsel to the General Partner) and reflect a balanced approach that protects Ironside's interests while providing appropriate protections for the General Partner against arbitrary or pretextual removal.
VIII. Information Rights
A. LP Information Rights Under LP Agreement
The LP Agreement provides the Limited Partner (Ironside) with comprehensive information rights that are designed to ensure that Ironside has timely and complete access to information regarding the Partnership's financial condition, investment status, and material developments. The LP's information rights under the LP Agreement include the following:
Annual Financial Statements. The General Partner is required to deliver audited annual financial statements of the Partnership to the Limited Partner within one hundred twenty (120) days after the end of each fiscal year (the fiscal year of the Partnership ending December 31). The annual financial statements must be prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and must be audited by the Partnership's independent auditor.
Tax Information. The General Partner is required to deliver Internal Revenue Service Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.) and any other tax information reasonably necessary for the Limited Partner's federal, state, and local income tax filings within seventy-five (75) days after the end of each fiscal year. Tax preparation for the Partnership will be handled by Kendrick Thorne & Associates LLP, the Partnership's fund administrator and tax preparer, located at One Liberty Plaza, Suite 4100, New York, New York 10006.
Quarterly Reports. The General Partner is required to deliver unaudited quarterly reports to the Limited Partner within forty-five (45) days after the end of each fiscal quarter. The quarterly reports must include information on the Partnership's financial condition, investment status, and material developments, including a summary of the portfolio company's financial and operational performance and any significant events occurring during the quarter.
Capital Call Notices. The General Partner is required to provide at least ten (10) business days' prior written notice to the Limited Partner of any capital call. Each capital call notice must specify the amount of the capital call, the purpose for which the capital is being called (including a reasonably detailed description of the anticipated uses of the called capital), and the due date for payment.
Distribution Notices. The General Partner is required to provide reasonable prior written notice to the Limited Partner of any distribution, specifying the amount and nature (return of capital, preferred return, or profit share) of the distribution.
Ad Hoc Notices. The General Partner is required to provide prompt written notice to the Limited Partner of any material event affecting the Partnership or the underlying investment, including, without limitation, the occurrence of a Material Impediment Event (as defined in Section 7.04 of the LP Agreement), a Material Adverse Effect with respect to Cascadia, material regulatory developments, material litigation or regulatory proceedings, and any other event that could reasonably be expected to have a material impact on the Partnership's investment or operations.
B. Enhanced Reporting Under Side Letter
In addition to the information rights provided under the LP Agreement, the Side Letter provides Ironside with enhanced information and reporting rights that go beyond the standard provisions of the LP Agreement. These enhanced rights reflect Ironside's position as the sole limited partner and its significant capital commitment to the Vehicle. The enhanced reporting provisions include the following:
(a) Quarterly Dormancy Reports. During any period of dormancy (i.e., during the pendency of a Material Impediment Event and the associated suspension of capital calls and investment activity), the General Partner is required to deliver quarterly status reports to the Limited Partner, in addition to the standard quarterly reports required under the LP Agreement. These dormancy reports must include specific detail on the status of the underlying investment, the status of any concession renegotiations, regulatory approvals, financing commitments, and any other material developments relating to the Partnership or the Cascadia acquisition.
(b) Books and Records Access. The Limited Partner has the right to access and review the General Partner's books and records relating to the Partnership upon reasonable prior written notice to the General Partner. This right is in addition to the statutory right of inspection provided under DRULPA Section 17-305.
(c) Discussion Rights. The Limited Partner has the right to discuss the Partnership's affairs with the General Partner's managers and authorized representatives at reasonable times and upon reasonable notice. The GP has agreed to make its managers and key personnel available for such discussions on a quarterly basis or more frequently as reasonably requested by the Limited Partner.
(d) Most-Favored-Nation Provision. If the General Partner grants any other co-investor (in a parallel or successor co-investment vehicle) more favorable information, reporting, or governance rights than those provided to Ironside under the LP Agreement or the Side Letter, Ironside is entitled to receive the same or equivalent rights. The MFN provision ensures that Ironside is not disadvantaged relative to any other co-investor and provides a mechanism for the automatic enhancement of Ironside's rights in the event that more favorable terms are offered to other parties.
C. Books and Records