1023-00001 · Ironside Capital Management LP · Transaction Documents/EPA

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004

MEMORANDUM

Date: December 18, 2023

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 — Funds & Asset Management Practice Calderwood & Harkness LLP

Re: Expiration of Outside Date Under the Equity Purchase Agreement — Termination Rights, Consequences of Non-Exercise, and Standstill Options

Matter No.: 1023-00001

I. Executive Summary

The Outside Date under the Equity Purchase Agreement dated September 15, 2022 (as amended by the First Amendment dated November 22, 2022, the Second Amendment dated March 15, 2023, and the Third Amendment dated June 28, 2023) (collectively, the "EPA") is December 31, 2023. As of the date of this memorandum, the closing has not occurred, and the transaction to acquire one hundred percent (100%) of the equity interests in Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Company"), at an agreed enterprise value of $1.95 billion, remains stalled. Two principal impediments have prevented the transaction from proceeding to closing: (i) the unresolved concession renegotiation initiated by the Portland Metropolitan Water District with respect to the Bull Run Filtration Project concession, and (ii) the expiration of the debt commitment letter from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC on October 31, 2023, without further extension. No replacement financing has been arranged.

Upon the expiration of the Outside Date, each party to the EPA — the Selling Shareholders (Timberline Growth Equity Fund III, LP, Weir Family Trust, and Management Rollover Pool), the Company (Cascadia), and the Buyer (Cascadia Acquisition Corp., the joint acquisition vehicle of Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest")) — will have the right, but not the obligation, to terminate the EPA by written notice to the other parties. The EPA does not automatically terminate upon the passing of the Outside Date; affirmative action by at least one party is required.

This memorandum provides a comprehensive analysis of the following: (a) the termination mechanics available under the EPA upon the expiration of the Outside Date; (b) the consequences of the exercise or non-exercise of those termination rights on the transaction, the parties, and the ancillary agreements; (c) the specific impact on ICM Cascadia Co-Invest, LP and Ironside Capital Management LP's ("Ironside") $300 million commitment and $22.5 million in called capital; and (d) the strategic options available to Ironside at this juncture. Based on the analysis set forth herein, Calderwood & Harkness recommends that Ironside pursue the negotiation of a Mutual Standstill and Preservation Agreement among all EPA parties as an alternative to termination or passive non-exercise, in order to preserve optionality, manage risk, and protect Ironside's contractual rights during the interim period.

This memorandum should be read in conjunction with our prior analyses, including our memorandum dated November 14, 2022 concerning the Material Adverse Effect question and our memorandum dated February 3, 2023 concerning the dormancy provisions of the LP Agreement. We note that the factual predicates underlying this memorandum are based on information available to us as of the date hereof and are subject to change.

II. Background and Procedural History

A. Overview of the Transaction

Cascadia Renewables Holdings, Inc. is an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia is led by Jonathan M. Weir, Chief Executive Officer, and Sandra K. Llewellyn, Chief Financial Officer. The Company owns and operates a diversified portfolio of renewable energy and water infrastructure assets across the Pacific Northwest, consisting of fourteen (14) hydroelectric generation facilities, six (6) wind farm projects, and three (3) water-treatment concessions. These assets are located across the states of Oregon, Washington, and Idaho, and the portfolio benefits from a weighted-average remaining contract life of approximately twenty-two (22) years, providing long-duration, contracted cash flows consistent with core infrastructure investment characteristics.

For the fiscal year ended December 31, 2021 (audited by Halstead & Greer LLP), Cascadia reported revenue of approximately $487 million and EBITDA of approximately $138 million. The parties agreed to an enterprise value of $1.95 billion, implying an EV/EBITDA multiple of approximately 14.1x on FY 2021 EBITDA, which was broadly consistent with comparable transaction multiples observed in the North American renewable infrastructure sector at the time of execution.

The transaction was structured as a 100% equity acquisition by Cascadia Acquisition Corp. ("Acquisition Corp."), a Delaware corporation formed as the joint acquisition vehicle of Meridian Infrastructure Partners Fund IV, LP ("Fund IV" or "Meridian Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest"). Ownership of Acquisition Corp. is allocated as follows: Fund IV holds a 71.43% interest, corresponding to a $750 million equity commitment, and ICM Co-Invest holds a 28.57% interest, corresponding to a $300 million equity commitment. The total equity contribution by the sponsors was $1.05 billion.

The sources and uses for the transaction were structured as follows:

Atlas National Bank, N.A. served as lead arranger and administrative agent for the senior secured credit facilities, committing $650 million of the $975 million term loan, with Pinnacle Credit Partners LLC committing the remaining $325 million. A $150 million revolving credit facility was included in the financing structure but was not expected to be drawn at closing. As discussed further in Section II.C below, the debt commitment letter expired on October 31, 2023 without further extension.

B. The Equity Purchase Agreement and Amendments

The EPA was executed on September 15, 2022 among the following parties: (i) the Selling Shareholders — Timberline Growth Equity Fund III, LP (holding approximately 62% of Cascadia's equity, represented by Garvey Lennox LLP, with Steven F. Yun as lead partner), Weir Family Trust (holding approximately 18% of Cascadia's equity, with Jonathan M. Weir serving as trustee), and Management Rollover Pool (holding approximately 20% of Cascadia's equity, with an expected 50% rollover into the post-acquisition capital structure, representing 10% of total equity post-closing); (ii) the Company (Cascadia Renewables Holdings, Inc., represented by Ridgeway, Ashford & Malone PC, with Nina R. Castellano as lead partner); and (iii) the Buyer (Cascadia Acquisition Corp., represented by Breckenridge Sloane & Pratt LLP ("BSP"), with Charles A. Delacroix as lead partner, acting as deal counsel to Meridian Infrastructure Partners). The EPA is governed by the laws of the State of Delaware, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction.

The EPA as originally executed established an Outside Date of December 31, 2022. Since execution, the EPA has been amended on three occasions, in each case principally to extend the Outside Date in response to the developing impediments to closing:

First Amendment (November 22, 2022): Following the Portland Metropolitan Water District's formal notice dated October 28, 2022 that it intended to renegotiate the terms of the Bull Run Filtration Project concession agreement — citing the passage of Oregon SB 1567 (2022), which granted certain municipal water authorities enhanced regulatory authority over privately operated water-treatment facilities — the parties agreed to extend the Outside Date from December 31, 2022 to March 31, 2023. The First Amendment was negotiated among all parties and their respective counsel on an expedited basis in order to avoid triggering termination rights while the concession renegotiation was in its preliminary stages.

Second Amendment (March 15, 2023): As the concession renegotiation continued without material progress, the parties agreed to a further extension of the Outside Date from March 31, 2023 to June 30, 2023. The Second Amendment included a mutual acknowledgment that the parties were operating in good faith to resolve the concession issue, but did not include any binding commitments regarding the substance of the renegotiation or the allocation of risk arising therefrom.

Third Amendment (June 28, 2023): The most recent amendment extended the Outside Date from June 30, 2023 to December 31, 2023 — the current Outside Date. Notably, this extension was for a six-month period, reflecting the parties' expectation that the concession renegotiation might be resolved in the second half of 2023. That expectation has not materialized. The Third Amendment also included certain updated representations by the Company regarding the status of the concession renegotiation and the Company's financial condition, but did not substantively modify the conditions to closing, the termination provisions, or the allocation of the financing risk. No fee or additional consideration was payable in connection with any of the three amendments.

As of the date of this memorandum, no fourth amendment has been proposed, and we are not aware of any ongoing discussions among the parties regarding a further extension of the Outside Date. The current Outside Date of December 31, 2023 is now thirteen (13) days away.

C. Status of Closing Conditions as of December 18, 2023

We have reviewed the status of the principal conditions to closing under the EPA and summarize the current position as follows:

Federal Energy Regulatory Commission — Section 203 Approval (Docket EC22-143-000). The application for FERC approval under Section 203 of the Federal Power Act was filed in September 2022 and was approved by order dated December 15, 2022. The approval is conditioned on the completion of license-transfer filings within a specified period following closing. Critically, the FERC approval is subject to an eighteen (18)-month lapse provision — that is, if the transaction has not closed within eighteen months of the date of the approval order, the approval will lapse unless FERC grants a further extension. Based on the December 15, 2022 approval date, the lapse date is approximately June 15, 2024. We understand that no request for an extension of the FERC approval has been filed to date. The implications of the FERC lapse timeline are discussed further in Section VIII.B below.

Oregon Public Utility Commission (Docket UM-2287). An application for OPUC approval was filed on October 14, 2022. Following the commencement of the concession renegotiation and the resulting uncertainty regarding the transaction timeline, the parties filed a joint motion in February 2023 requesting that the OPUC stay proceedings in Docket UM-2287 pending further developments. The stay was granted, and no substantive action has been taken by the OPUC since that time. The OPUC application remains pending but is functionally dormant.

Committee on Foreign Investment in the United States (CFIUS). A voluntary notice was submitted to CFIUS in September 2022 and was acknowledged on September 20, 2022. No further action has been required by CFIUS, and clearance has been effectively obtained. We note, however, that CFIUS clearance is transaction-specific, and any materially different transaction structure (including a revised capital structure or change in the identity of the acquiring parties) may require a new filing.

Debt Commitment Letter. The original committed financing letter from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC was executed on August 30, 2022, committing $975 million in senior secured term loan financing and $150 million in revolving credit facility capacity. The commitment was extended once, with a revised expiration date of October 31, 2023. The extension fee was $2,437,500 (calculated as 0.25% of the $975 million term loan commitment), which was paid by Fund IV. The debt commitment letter expired on October 31, 2023 without further extension. As of the date of this memorandum, no replacement financing has been arranged, and we are not aware of any active discussions between the sponsors and the lenders (or any alternative lenders) regarding a new commitment. The absence of committed financing is a significant practical impediment to any near-term closing, even if the concession renegotiation were to be resolved.

No Material Adverse Effect Condition. The EPA includes, as a condition to the Buyer's obligation to close, a bring-down of the Company's representations and warranties, including the representation that no Material Adverse Effect (as defined in the EPA) has occurred since the date of the EPA. As discussed in our prior memorandum dated November 14, 2022, the question of whether the Portland Metropolitan Water District's concession renegotiation constitutes a Material Adverse Effect within the meaning of the EPA is complex and depends on the ultimate outcome of the renegotiation. That question remains open as of the date hereof, and we continue to monitor developments. We note that the MAE analysis may become moot if the EPA is terminated; however, it would be relevant to any reactivation analysis and may bear on the "fault" carve-out discussed in Section III.A below.

Bull Run Concession Renegotiation. The renegotiation of the Bull Run Filtration Project concession agreement between Cascadia and the Portland Metropolitan Water District has been ongoing since November 2022. The Bull Run concession generates approximately $64 million in annual revenue, representing approximately 13% of Cascadia's total revenue of $487 million. The renegotiation was triggered by the passage of Oregon SB 1567 (2022), which enhanced the regulatory authority of certain municipal water authorities over privately operated water-treatment facilities. We understand that multiple negotiation sessions have occurred, but no definitive agreement has been reached. The range of potential outcomes includes: (a) continuation of the concession on substantially similar terms, (b) modification of the concession terms with a reduction in the annual concession payment, and (c) termination of the concession with a buyout payment. The outcome of the renegotiation will have a material impact on Cascadia's revenue profile, cash flow, and, consequently, on the transaction economics. No timeline for resolution has been established by the parties to the renegotiation.

D. Status of ICM Cascadia Co-Invest, LP

ICM Cascadia Co-Invest, LP is a Delaware limited partnership (EIN: 88-3921457; Delaware Secretary of State File No. 7439218) formed on July 22, 2022 for the purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP in the acquisition of Cascadia. The vehicle conducted its first close on July 29, 2022, at which time the limited partnership agreement (the "LP Agreement") and related side letters were executed.

The partnership structure of ICM Co-Invest is as follows:

A single capital call was made on August 15, 2022, in the aggregate amount of $22,500,000, representing 7.5% of total commitments. The proceeds of the capital call were allocated as follows:

The unfunded commitment attributable to Ironside and the GP as of the date of this memorandum is $277,500,000.

On January 9, 2023, the General Partner (Meridian Infrastructure GP IV LLC) declared a Material Impediment Event under Section 7.04 of the LP Agreement, citing the unresolved concession renegotiation and the resulting inability to proceed toward closing on a reasonable timeline. Upon the declaration of a Material Impediment Event, the LP Agreement provides for a period of dormancy during which: (i) no further capital calls may be made (subject to limited exceptions for ordinary-course operating expenses and legal costs), (ii) the General Partner shall use commercially reasonable efforts to assess the feasibility of reactivating the investment purpose, and (iii) the General Partner shall deliver quarterly reports to the limited partners regarding the status of the Material Impediment Event and the dormancy.

The co-invest vehicle has been in continuous dormancy since January 9, 2023 — a period of approximately eleven (11) months as of the date of this memorandum. Annual operating expenses during the dormancy period are estimated at approximately $185,000, principally comprising partnership accounting, tax preparation, registered agent and Delaware franchise tax fees, and minimal legal costs.

In connection with the dormancy, Ironside and Northgate Specialty Insurance Co. entered into a Side Letter dated January 20, 2023, pursuant to which the representations and warranties insurance policy (Policy No. NSW-RI-2022-09814, providing $195 million in coverage with a $4,875,000 premium deposit) was tolled — i.e., the policy period was suspended and will resume upon reactivation of the transaction or be terminated in accordance with its terms. The tolling arrangement was negotiated to avoid the running of the policy period during a period in which no closing could occur.

Under Section 7.04(c) of the LP Agreement, the limited partner (Ironside) has the right to elect to wind down the co-invest vehicle if the Material Impediment Event has continued for a period of eighteen (18) consecutive months without resolution. Given that the Material Impediment Event was declared on January 9, 2023, the eighteen-month trigger date is July 9, 2024. This wind-down election right is a significant contractual protection for Ironside and operates independently of the EPA's termination provisions, as discussed further in Section VII below.

III. Termination Rights Under the EPA

A. Section 9.01(b) — Termination Upon Expiration of Outside Date

Article IX of the EPA sets forth the circumstances under which the EPA may be terminated prior to the consummation of the transactions contemplated thereby. Section 9.01(b) provides the principal termination mechanism relevant to the current analysis: the right to terminate the EPA upon the expiration of the Outside Date.

Specifically, Section 9.01(b) provides that if the closing of the transactions contemplated by the EPA shall not have occurred on or before the Outside Date (as such date may be extended from time to time by amendment), then each of the Buyer, the Company, and the Sellers' Representative (acting on behalf of the Selling Shareholders) may terminate the EPA by delivering written notice of termination to the other parties. The following features of this termination right warrant specific attention:

Permissive, Not Automatic. The right to terminate under Section 9.01(b) is permissive rather than self-executing. The EPA does not automatically terminate upon the expiration of the Outside Date. Unless and until a party affirmatively delivers a written notice of termination in accordance with the EPA's notice provisions, the EPA remains in full force and effect. This is a critical distinction, as it means that the passage of December 31, 2023 without a termination notice does not, by itself, end the parties' obligations under the EPA. The implications of non-exercise are discussed in detail in Section V below.

Multi-Party Right. Each of the three categories of parties — the Buyer (Acquisition Corp.), the Company (Cascadia), and the Sellers' Representative (acting on behalf of Timberline III, Weir Family Trust, and Management Rollover Pool) — independently holds the termination right. Any one of these parties may terminate the EPA unilaterally by delivering the required written notice; unanimity is not required. However, none is obligated to do so.

"Fault" Carve-Out. Section 9.01(b) contains an important qualification: a party whose material breach of any representation, warranty, covenant, or agreement contained in the EPA has been the principal cause of, or principally resulted in, the failure of the closing to occur on or before the Outside Date shall not be entitled to exercise the termination right under Section 9.01(b). This "fault" carve-out operates as an equitable limitation, preventing a party from benefiting from its own breach by using the resulting delay as a basis for termination.

As applied to the current facts, we have undertaken a preliminary assessment of whether any party appears to be in material breach of its obligations under the EPA such that the "fault" carve-out would preclude that party from exercising the termination right. Based on the information available to us, we do not believe that any party is in material breach. The failure to close appears to be attributable primarily to two external factors: (i) the Portland Metropolitan Water District's initiation of the concession renegotiation, which was prompted by legislative action (Oregon SB 1567) beyond the control of any EPA party, and (ii) the resulting inability to satisfy the conditions precedent to the lenders' obligations under the debt commitment letter, which in turn led to the expiration of the financing commitment. Neither Cascadia (which has cooperated in the renegotiation process), nor the Selling Shareholders (who have consented to three extensions of the Outside Date), nor the Buyer (which has continued to participate in the renegotiation and extension discussions) appears to have taken any action — or failed to take any action — that would constitute a material breach principally causing the failure to close.

We note, however, that this analysis could evolve if additional facts emerge. For example, if it were determined that the Company failed to disclose material information regarding the concession renegotiation or failed to use commercially reasonable efforts to resolve the renegotiation (as may be required by certain interim operating covenants), a breach-based argument might be available. We do not have sufficient factual basis to reach such a conclusion at this time, but we recommend that Ironside continue to monitor the Company's conduct in the renegotiation process.

B. Section 9.01(a) — Mutual Consent Termination

Section 9.01(a) of the EPA provides that the EPA may be terminated at any time prior to the closing by the mutual written agreement of the Buyer, the Company, and the Sellers' Representative. This provision offers a consensual mechanism for termination that is distinct from the unilateral Outside Date termination right under Section 9.01(b). A mutual consent termination could be utilized if all parties agree that the transaction should be abandoned, and it could be coupled with a negotiated settlement of any outstanding claims or obligations (e.g., allocation of sunk costs, treatment of deposits, and release of continuing obligations). In practice, this mechanism may be relevant if the parties determine, after the Outside Date has passed, that reactivation of the transaction is not feasible and that a consensual unwinding is preferable to unilateral termination.

C. Section 9.01(c)–(d) — Other Termination Triggers

For completeness, we note that the EPA contains two additional termination triggers under Sections 9.01(c) and 9.01(d), neither of which is currently implicated:

Section 9.01(c) — Governmental Order. Either the Buyer or the Sellers' Representative may terminate the EPA if a governmental authority of competent jurisdiction has issued a final, non-appealable order, decree, or ruling, or has taken any other action, that permanently restrains, enjoins, or otherwise prohibits the consummation of the transactions contemplated by the EPA. No such order, decree, or ruling has been issued. While the OPUC proceedings remain pending, those proceedings have been stayed and do not constitute a prohibition on the transaction.

Section 9.01(d) — Material Breach. Either the Buyer or the Sellers' Representative may terminate the EPA if the other party has breached any representation, warranty, covenant, or agreement in the EPA in a manner that would give rise to the failure of a condition to closing, and such breach has not been cured within thirty (30) days following written notice of the breach. As discussed above, we do not believe any party is in material breach as of the date hereof, and no notice of breach has been delivered by any party. Accordingly, Section 9.01(d) is not currently available as a termination basis.

D. Notice Mechanics

Termination under Section 9.01(b) requires the delivery of written notice to all other parties in accordance with the EPA's general notice provision (Section 11.01). The notice provision specifies that all notices, requests, and other communications under the EPA shall be in writing and shall be deemed duly given or made: (a) upon delivery if delivered personally; (b) on the date of confirmed receipt if sent by a nationally recognized overnight courier service; or (c) on the date of confirmed receipt if sent by email (with a copy sent by overnight courier). The EPA specifies designated notice addresses for each party. We have confirmed that the current notice addresses on file remain valid.

Importantly, no cure period applies to a termination notice delivered under Section 9.01(b). Unlike the breach-based termination right under Section 9.01(d), which affords the non-breaching party a thirty (30)-day cure period following notice, the Outside Date termination right is immediately effective upon delivery of proper notice. This means that once a valid termination notice is delivered after December 31, 2023, the termination takes effect and is not subject to withdrawal or cure.

IV. Consequences of Termination

A. Effect on EPA and Transaction Documents

Section 9.02 of the EPA governs the effect of termination. Upon valid termination of the EPA in accordance with Section 9.01, the EPA shall become void and of no further force or effect, and there shall be no liability on the part of any party or their respective affiliates, officers, directors, employees, or representatives, except as follows:

(i) Certain provisions of the EPA are expressly designated as surviving termination, including: the confidentiality obligations set forth in Section 5.05, the expense allocation provisions set forth in Section 11.03, the termination fee and reverse termination fee provisions set forth in Section 9.03, the governing law and jurisdiction provisions set forth in Section 11.08, the dispute resolution provisions set forth in Section 11.09, and the provisions of Section 9.02 itself.

(ii) Termination does not release any party from liability for any willful and material breach of the EPA prior to termination. This carve-out preserves the non-breaching party's right to seek damages for pre-termination breaches, notwithstanding the general release of future obligations.

Upon termination, the disclosure schedules delivered by the Company and the Selling Shareholders in connection with the EPA remain subject to the confidentiality obligations under Section 5.05, which survive termination for a period of two (2) years. This means that non-public business information about Cascadia obtained by the sponsors through the due-diligence process and reflected in the disclosure schedules cannot be freely used or disclosed following termination.

All representations and warranties made by the parties under the EPA cease to have any force or effect upon termination. Neither the Buyer nor the Sellers would be able to rely on such representations post-termination, and any bring-down or indemnification obligations tied to those representations would be extinguished.

The effect of EPA termination on ancillary agreements — including the equity commitment letters from Fund IV and ICM Co-Invest to Acquisition Corp. — would also need to be assessed. Generally, the equity commitment letters are conditioned on the closing of the transaction under the EPA, and EPA termination would release the sponsors from their funding obligations under those letters.

B. Termination Fee / Reverse Termination Fee Analysis

Section 9.03 of the EPA addresses the payment of termination fees and reverse termination fees. This provision is relevant to the economic consequences of termination and merits careful analysis.

Reverse Termination Fee. Under Section 9.03(b), the Buyer is obligated to pay a reverse termination fee to the Sellers' Representative if and only if the following conditions are satisfied: (i) the EPA is terminated by the Sellers' Representative pursuant to Section 9.01(b) (Outside Date termination) or Section 9.01(d) (material breach by the Buyer), (ii) at the time of such termination, the financing condition set forth in Section 7.03(d) is the only condition to the Buyer's obligation to close that has not been satisfied or waived (i.e., all other conditions precedent, including regulatory approvals, no-MAE bring-down, and other customary conditions, have been satisfied), and (iii) the Buyer's failure to obtain financing has been the principal cause of the failure to close.

As applied to the current circumstances, the reverse termination fee is likely not triggered for the following reasons:

First, while it is true that the debt commitment letter has expired and financing is not currently available, the financing condition is not the only unsatisfied condition to closing. The OPUC approval (a regulatory condition) has not been obtained; the proceedings are stayed and no substantive action has been taken. Additionally, the No-MAE condition remains uncertain given the unresolved Bull Run concession renegotiation. Multiple conditions to closing remain unsatisfied, not merely the financing condition.

Second, the reverse termination fee is drafted as a mechanism to address Buyer-side financing failure in circumstances where the transaction would otherwise be ready to close. That is not the case here. The failure to close is attributable to a combination of external factors (the concession renegotiation) and the cascading consequences of those factors (the expiration of the financing commitment and the stay of regulatory proceedings).

Accordingly, even if the Sellers' Representative were to terminate the EPA under Section 9.01(b), the reverse termination fee would not be payable because the prerequisite conditions — namely, that all conditions other than the financing condition have been satisfied — are not met.

Seller-Side Termination Fee. The EPA does not provide for a termination fee payable by the Sellers to the Buyer. This is consistent with the typical allocation of termination-fee risk in leveraged acquisition transactions, where the reverse termination fee addresses the Buyer's financing risk and no reciprocal fee protects the Buyer against Seller-initiated termination.

C. Return of Deposits and Escrow Amounts

The EPA contemplated a $25 million working-capital adjustment escrow, which was to be funded at closing. Because the closing has not occurred, this escrow has not been funded, and no escrow amounts are at issue in connection with termination.

However, certain deposits have been made by or on behalf of Cascadia Acquisition Corp. in connection with the transaction, including deposits related to due diligence, environmental assessments, title and survey work, and similar pre-closing activities. The recoverability of these deposits depends on the terms of the individual deposit agreements and contracts under which they were made. Some deposits may be refundable upon termination of the underlying transaction, while others may have been earned by the recipients upon delivery of services or the occurrence of specified milestones. We recommend that Ironside instruct us to conduct a comprehensive review of all outstanding deposit agreements to determine which amounts, if any, may be recoverable in the event of EPA termination. We note that the due-diligence costs included in the co-invest vehicle's $22.5 million capital call ($12,790,000) include both direct costs (consultants, environmental reports, technical studies) and third-party deposits, and the recoverability analysis may be relevant to the ultimate distribution to Ironside upon a wind-down of the co-invest vehicle.

D. Effect on R&W Insurance Policy

Northgate Specialty Insurance Co. issued a representations and warranties insurance policy (Policy No. NSW-RI-2022-09814) in connection with the Cascadia transaction, providing a coverage limit of $195 million. A premium deposit of $4,875,000 was paid from the proceeds of the capital call made to ICM Co-Invest on August 15, 2022. As noted in Section II.D above, the R&W policy has been tolled pursuant to a Side Letter dated January 20, 2023, suspending the policy period during the dormancy.

Upon termination of the EPA, the R&W insurance policy would lose its practical utility, as there would be no underlying transaction to insure and, consequently, no representations and warranties that could give rise to a covered claim. The question of whether the $4,875,000 premium deposit is refundable is a significant economic issue for Ironside and ICM Co-Invest.

Under typical R&W insurance policy structures, the premium (or the binding deposit portion thereof) is earned by the insurer upon binding — that is, upon the insurer's commitment to issue the policy and the insured's commitment to procure the coverage. In many cases, the premium is fully earned and non-refundable regardless of whether the underlying transaction closes. However, the specific terms of the Northgate Specialty policy and any negotiated refund provisions in the R&W insurance binder or the Side Letter may provide for a partial or full refund of the premium deposit in the event that the transaction is abandoned prior to closing. We have identified this as a priority review item and recommend that Ironside authorize us to conduct a detailed analysis of the Northgate Specialty policy terms, the binder, and the Side Letter to determine the scope, if any, of premium deposit refundability. See Section X (Next Steps), item 4.

E. Effect on Regulatory Approvals

FERC Section 203 Approval (Docket EC22-143-000). The FERC approval order dated December 15, 2022 authorized the transaction under Section 203 of the Federal Power Act, subject to specified conditions including the completion of license-transfer filings post-closing. Termination of the EPA does not, by its terms, void the FERC approval. However, if the transaction is abandoned, the FERC approval becomes moot, as there would be no transaction to consummate. Moreover, the FERC approval is subject to an eighteen-month lapse provision, and the lapse date is approximately June 15, 2024. If the transaction is not closed — or if FERC does not grant a further extension — prior to that date, the approval will expire by its own terms, and any future transaction involving the transfer of Cascadia's jurisdictional assets would require a new Section 203 filing. We discuss the FERC lapse risk further in Section VIII.B below.

OPUC Proceedings (Docket UM-2287). The OPUC application has been stayed since February 2023 at the joint request of the parties. If the EPA is terminated, the parties would likely file a joint motion to withdraw the application. OPUC approval would need to be re-sought in connection with any future transaction involving a change of control of Cascadia's Oregon-regulated assets.

CFIUS Clearance. CFIUS clearance was effectively obtained upon acknowledgment of the voluntary notice on September 20, 2022 and the absence of any further action. No further obligations are outstanding with respect to CFIUS. However, CFIUS clearance is transaction-specific: it applies to the transaction as described in the voluntary notice. Any materially different transaction — including a transaction with different investors, a different capital structure, or a different acquisition vehicle — may require a new voluntary notice and review process.

V. Consequences of Non-Exercise of Termination Rights

A. Legal Status of the EPA Post-Outside Date If No Party Terminates

As discussed in Section III.A above, the EPA does not automatically terminate upon the expiration of the Outside Date. If December 31, 2023 passes and no party delivers a written notice of termination, the EPA will remain in full force and effect. However, the EPA will be in a state of legal limbo: the Outside Date — the agreed-upon deadline for closing — will have passed, but the agreement itself will continue to impose obligations on the parties.

This creates a number of significant legal and practical issues:

Continuing Obligations. All of the parties' obligations under the EPA — other than those that were tied specifically to the achievement of closing by the Outside Date — would remain operative. In particular, Cascadia's obligation under Section 5.01 to conduct its business in the ordinary course consistent with past practice would continue in effect, potentially constraining the Company's ability to take actions outside the ordinary course (such as incurring debt, making material capital expenditures, or entering into material contracts) without the Buyer's consent. Similarly, the Buyer's access rights under Section 5.02 (permitting reasonable access to the Company's books, records, and personnel) would remain operative, as would the non-solicitation provisions under Section 5.04 (prohibiting the Sellers from soliciting or engaging in discussions regarding alternative transactions). These continuing obligations impose real-world constraints on the parties and may become a source of friction if the transaction remains in limbo for an extended period.

Unilateral Termination Overhang. Following the expiration of the Outside Date, each party would have the right to terminate the EPA at any time by delivering written notice. This creates an asymmetric and unstable situation: any party could terminate without warning, at a time of its choosing, potentially at a strategically disadvantageous moment for the other parties. For Ironside, this means that Meridian (through Acquisition Corp.) could terminate the EPA unilaterally, or that the Sellers could terminate unilaterally, at any time — with no advance notice requirement beyond the delivery of the termination notice itself.

No Structured Framework. Without a formal agreement governing the post-Outside Date period, there is no mechanism for allocating expenses, preserving regulatory approvals, managing the continuing obligations, or coordinating the parties' conduct. Each party would be left to manage its own position without any structured coordination, increasing the risk of miscommunication, inconsistent actions, and unintended consequences.

Statute of Limitations and Laches Concerns. While the EPA's surviving provisions (including confidentiality and dispute resolution) would continue, the passage of time without either closing or termination could give rise to arguments regarding the staleness of claims, the erosion of contractual expectations, or the application of equitable defenses such as laches if disputes arise. These concerns are speculative at this stage but become more acute as the period of inactivity lengthens.

In summary, the non-exercise of termination rights following the Outside Date creates a period of maximum legal uncertainty. While the EPA technically remains in effect, the practical ability to consummate the transaction diminishes with each passing day, and the risk of unilateral termination by any party introduces ongoing instability. This analysis strongly supports the pursuit of a structured standstill arrangement, as recommended in Section VI.C below.

B. Impact on ICM Cascadia Co-Invest, LP and Ironside

The non-exercise of termination rights has specific and material consequences for ICM Co-Invest and Ironside:

Continued Dormancy. If the EPA remains in limbo, the co-invest vehicle would continue in its current state of dormancy. Ironside's $22,500,000 in called capital would remain deployed — or, more accurately, largely expended — within the co-invest vehicle, with no near-term prospect of either deployment into the acquisition or return to Ironside. The working-capital reserve of $3,500,000 would remain on hand, accruing minimal interest income, while the remaining called amounts have been allocated to expenses and deposits that are either sunk or of uncertain recoverability.

Unfunded Commitment Overhang. Ironside's unfunded commitment of $277,500,000 would remain outstanding. While the LP Agreement's dormancy provisions restrict the GP's ability to make capital calls during a Material Impediment Event (other than for ordinary-course operating expenses), the continued existence of the unfunded commitment creates a contingent liability on Ironside's balance sheet and may limit Ironside's ability to deploy that capital to other investment opportunities.

Ongoing Dormancy Costs. The co-invest vehicle would continue to incur approximately $185,000 per year in dormancy-related operating expenses. While this amount is modest in absolute terms, it represents an ongoing drag on the vehicle's (and Ironside's) returns.

Wind-Down Election Right. As discussed further in Section VII.B below, Ironside's wind-down election right under Section 7.04(c) of the LP Agreement will ripen on July 9, 2024, providing Ironside with an independent exit mechanism. The continued existence of the EPA — whether in active or limbo status — does not affect this right, which is governed by the LP Agreement rather than the EPA.

C. Impact on Meridian Fund IV

While this memorandum is prepared for Ironside's benefit, it is relevant to consider Meridian Fund IV's position, as Meridian's strategic calculus will significantly influence the trajectory of the EPA and the standstill negotiations.

Fund IV has committed $750 million to the Cascadia transaction and has incurred significant costs, including the $2,437,500 debt commitment extension fee paid to Atlas National Bank and Pinnacle Credit Partners, as well as internal deal-team costs, due-diligence expenses, and advisory fees allocated to Fund IV directly. Meridian also serves as the GP of the co-invest vehicle and controls Cascadia Acquisition Corp. Meridian's interest in keeping the EPA alive likely stems from the possibility that the concession renegotiation may be resolved favorably and the transaction revived — potentially at revised economics that reflect the changed circumstances. A termination of the EPA would extinguish this optionality and could require Meridian to write off the sunk costs associated with the transaction, a significant event for a fund-level investment.

At the same time, Meridian faces its own pressure to manage Fund IV's deployment schedule, deal-flow pipeline, and LP communications. Ironside should be aware that Meridian's strategic interests and Ironside's may not be perfectly aligned, particularly with respect to the timeline for resolution, the allocation of standstill-period expenses, and the conditions under which the transaction should be definitively abandoned.

VI. Strategic Options for Ironside

We have identified four principal strategic options available to Ironside in light of the impending Outside Date expiration. We analyze each in turn.

A. Option 1: Support or Acquiesce in EPA Termination

Under this option, Ironside would communicate to Meridian its support for (or acquiescence in) the termination of the EPA, either by Acquisition Corp. (the Buyer) or by one of the other parties. In practice, this would mean that Ironside would not oppose a termination notice delivered by any party and would cooperate in the orderly unwinding of the transaction.

Advantages:

• Provides a clean break from the Cascadia transaction, eliminating the ongoing uncertainty and the associated opportunity cost of maintaining the co-invest vehicle in dormancy.

• Would accelerate the wind-down of the co-invest vehicle and the potential return of a portion of the called capital to Ironside. The working-capital reserve ($3,500,000) is the most likely recoverable amount; the R&W premium deposit ($4,875,000) may or may not be recoverable depending on the Northgate Specialty policy terms. The remaining called amounts ($285,000 organizational expenses, $1,050,000 placement-agent fee, and $12,790,000 due-diligence costs) are largely sunk.

• Frees up Ironside's unfunded commitment of $277,500,000 for deployment into other investment opportunities.

• Eliminates ongoing dormancy costs of approximately $185,000 per year.

Disadvantages:

• Forecloses the possibility of transaction reactivation if the concession renegotiation is resolved favorably. If the Bull Run concession is renegotiated on terms that preserve substantially all of the existing revenue and cash flow, the Cascadia acquisition could represent an attractive investment opportunity that Ironside would no longer have access to.

• Sunk cost exposure is significant: of the $22,500,000 called, a substantial portion is non-recoverable regardless of whether the EPA is terminated or maintained. Termination crystallizes these losses.

• Could send a negative signal to Meridian regarding Ironside's willingness to weather uncertainty in a co-investment relationship. Given the importance of the Ironside-Meridian relationship for future infrastructure co-investment opportunities, this reputational risk should not be underestimated. Meridian may view Ironside's support for termination as evidence of limited risk tolerance or an unwillingness to support the sponsor through a challenging period.

B. Option 2: Exercise or Cause Exercise of Termination Right on Behalf of Buyer

Under this option, Ironside would seek to direct or cause Cascadia Acquisition Corp. (the Buyer) to exercise its termination right under Section 9.01(b) of the EPA.

Analysis of Ironside's Ability to Direct Termination: Ironside is the limited partner of ICM Cascadia Co-Invest, LP, which in turn is a 28.57% equity holder of Cascadia Acquisition Corp. The GP of the co-invest vehicle — Meridian Infrastructure GP IV LLC — controls the co-invest vehicle's governance, including the exercise of its rights as a stockholder of Acquisition Corp. Furthermore, Acquisition Corp. is jointly controlled by Fund IV (through the Fund IV GP) and the co-invest vehicle (through its GP), with Fund IV holding the majority interest. As a practical matter, Ironside cannot unilaterally direct the Buyer to deliver a termination notice. The governance structure vests decision-making authority with Meridian.

However, Ironside retains significant practical leverage:

• Ironside holds 28.57% of the total equity commitment for the Cascadia transaction. Any reactivation of the transaction would require Ironside's continued participation (or its replacement with another co-investor, which would involve significant time, cost, and complexity).

• Ironside's consent or cooperation may be contractually required for certain actions under the LP Agreement, the co-invest vehicle's side letter, or the stockholders' agreement governing Acquisition Corp.

• Ironside's relationship with Meridian as a co-investor and potential future partner gives Ironside informal influence over Meridian's decision-making, even in the absence of a formal consent right.

If Ironside wishes to pursue a termination, the most effective approach would be to communicate its strong preference for termination to Meridian and request that Meridian cause Acquisition Corp. to deliver the termination notice. This approach relies on persuasion and relationship leverage rather than contractual compulsion.

Advantages and Disadvantages: The advantages and disadvantages of this option are substantially similar to those described in Option 1, with the additional downside that an assertive or confrontational approach to forcing Meridian's hand could damage the Ironside-Meridian relationship more significantly than a passive acquiescence in termination.

C. Option 3: Negotiate a Mutual Standstill and Preservation Agreement (Recommended)

Under this option, Ironside would propose that all EPA parties enter into a Mutual Standstill and Preservation Agreement (the "Standstill Agreement") providing a structured framework for managing the post-Outside Date period. The Standstill Agreement would serve as an alternative to both termination and passive non-exercise, preserving the transaction framework while providing clarity, stability, and protections for all parties during the interim period.

Description: The Standstill Agreement would be a multi-party agreement among the Buyer, the Company, the Selling Shareholders, and — to the extent applicable — ICM Co-Invest and its GP, providing that: (a) no party would exercise its termination right under Section 9.01(b) of the EPA during a defined standstill period; (b) the parties would use commercially reasonable efforts to resolve the concession renegotiation and assess the feasibility of transaction reactivation; and (c) the parties' respective rights and obligations would be preserved and managed through an agreed-upon framework during the standstill period.

Key Terms to Negotiate:

Standstill Period. The Standstill Agreement should define a specific period during which no party may exercise its termination right under Section 9.01(b) of the EPA. We recommend a standstill period of six (6) to twelve (12) months — i.e., through approximately June 30, 2024 or December 31, 2024, depending on the parties' assessment of the likely timeline for concession renegotiation resolution. The standstill period should be long enough to provide a meaningful window for resolution but not so long as to indefinitely extend the period of uncertainty. A shorter standstill period (six months) would align more closely with the FERC lapse date (approximately June 15, 2024) and Ironside's wind-down election date (July 9, 2024), providing Ironside with natural exit points if the transaction has not been reactivated by that time.

Reactivation Triggers. The Standstill Agreement should specify milestones or conditions that would trigger reactivation of the closing process and provide a timeline for consummating the transaction. Appropriate reactivation triggers might include: (i) the execution of a definitive revised concession agreement between Cascadia and the Portland Metropolitan Water District on terms acceptable to the Buyer; (ii) the arrangement of new committed financing for the acquisition, in an aggregate amount and on terms substantially consistent with the original financing structure (or on revised terms acceptable to the parties); and (iii) the lifting of the stay in the OPUC proceedings and the OPUC's approval of the transaction. Reactivation should require the satisfaction of all specified triggers, not merely one.

Termination After Standstill. At the expiration of the standstill period, each party should again have the right to terminate the EPA upon delivery of written notice. The Standstill Agreement should expressly provide for a defined notice period (e.g., thirty (30) days) following the end of the standstill during which any party may deliver a termination notice, after which the EPA would terminate automatically if no party has elected to extend the standstill or if the reactivation triggers have not been satisfied.

Expense Allocation. The Standstill Agreement should address the allocation of expenses incurred during the standstill period, including legal fees, regulatory maintenance costs, and operating expenses of the co-invest vehicle. From Ironside's perspective, it is critical that the Standstill Agreement provide that no additional capital calls may be made to ICM Co-Invest during the standstill period without the prior written consent of Ironside. This protection is consistent with the LP Agreement's dormancy provisions but should be separately and expressly confirmed in the Standstill Agreement to avoid any ambiguity. The ongoing dormancy costs of approximately $185,000 per year should be allocated in accordance with the LP Agreement's existing expense-allocation provisions and should not be increased without Ironside's consent.

Preservation of Regulatory Approvals. The Standstill Agreement should include a covenant requiring the parties to use reasonable efforts to preserve the FERC Section 203 approval, including by filing a request for extension with FERC if the lapse date of approximately June 15, 2024 approaches without the transaction having closed. The costs of any such extension request should be allocated among the parties. The Standstill Agreement should also require the parties to maintain the OPUC application in its current stayed status and to cooperate in any necessary communications with the OPUC regarding the status of the transaction.

Preservation of R&W Insurance. The Standstill Agreement should provide for the continuation of the tolling arrangement with Northgate Specialty Insurance Co., ensuring that the R&W insurance policy remains available for the transaction if and when the closing process is reactivated. If the Standstill Agreement expires and the EPA is subsequently terminated, the Standstill Agreement should address the process for terminating the R&W policy and recovering any refundable portion of the premium deposit.

Co-Invest Protections. The Standstill Agreement should expressly acknowledge and preserve Ironside's rights under the LP Agreement and the Side Letter, including (without limitation) the wind-down election right under Section 7.04(c) that ripens on July 9, 2024. The Standstill Agreement should provide that nothing therein shall be construed to modify, waive, or impair any of Ironside's rights under the LP Agreement, the Side Letter, or any other agreement governing the co-invest vehicle. This is a critical protection for Ironside: while the Standstill Agreement governs the inter-party relationship under the EPA, it should not interfere with the separate contractual framework governing the co-invest vehicle.

No Modification of Co-Invest Economics. Ironside should ensure that the Standstill Agreement does not alter the economic terms of the co-investment, including the carried-interest waterfall (10% carried interest above an 8% preferred return), the absence of a management fee, and the allocation of distributions and expenses as set forth in the LP Agreement. Any attempt by Meridian to renegotiate the co-invest economics in connection with the standstill discussions should be firmly resisted.

Confidentiality and Non-Disclosure. The Standstill Agreement should include a reaffirmation of the existing confidentiality obligations under the EPA (Section 5.05) and any other applicable non-disclosure agreements, ensuring that all parties remain bound by their confidentiality obligations during the standstill period and beyond.

Advantages:

• Preserves optionality for transaction reactivation without committing additional capital. If the concession renegotiation is resolved favorably, Ironside retains the ability to participate in a potentially attractive infrastructure investment on pre-agreed terms.

• Maintains and potentially strengthens the Ironside-Meridian relationship, demonstrating Ironside's willingness to take a constructive approach during a challenging period.

• Provides a structured, negotiated framework for managing the post-Outside Date period, reducing legal uncertainty and the risk of unilateral action by any party.

• Protects Ironside's contractual rights, including the wind-down election right, through express preservation provisions.

• Establishes clear milestones and deadlines, preventing indefinite drift and ensuring that the parties are accountable for progress toward resolution.

Disadvantages:

• Extends the period of uncertainty for Ironside and the co-invest vehicle. The standstill period could be six to twelve months, during which Ironside's called capital remains deployed and its unfunded commitment remains outstanding.

• Dormancy costs continue during the standstill period (approximately $185,000 per year), although these costs are relatively modest.

• Ironside's $22.5 million in called capital remains tied up, with no near-term prospect of return.

• The FERC approval may lapse during the standstill period (lapse date approximately June 15, 2024), requiring additional cost and effort to obtain a new approval or an extension.

• There is no guarantee that the concession renegotiation will be resolved during the standstill period, or that the transaction will ultimately be reactivated. The standstill may simply delay the inevitable termination.

Notwithstanding these disadvantages, we believe that Option 3 offers the best risk-adjusted outcome for Ironside, balancing the preservation of a potentially valuable investment opportunity against the need for clarity, structure, and protection. We recommend that Ironside pursue this option.

D. Option 4: Do Nothing (Passive Non-Exercise of Termination)

Under this option, Ironside would take no affirmative action following the expiration of the Outside Date. No party would deliver a termination notice, and no standstill agreement would be negotiated. The EPA would remain in effect, with each party retaining the right to terminate at any time.

Disadvantages:

• Creates the maximum degree of legal uncertainty. Without a negotiated framework, none of the parties has visibility into the others' intentions, and any party could terminate without warning at any time.

• No structured mechanism for expense allocation, preservation of regulatory approvals, or coordination of the parties' conduct during the interim period.

• No express protection against additional capital calls or modification of co-invest economics.

• No defined timeline for resolution or termination, allowing the situation to drift indefinitely.

• Ironside would have no ability to influence the conduct of the other parties or the trajectory of the transaction during the interim period, beyond the exercise of its existing contractual rights under the LP Agreement.

For the foregoing reasons, we do not recommend Option 4. The passive non-exercise of termination rights, without a structured standstill arrangement, exposes Ironside to unnecessary risk and uncertainty and fails to take advantage of the bargaining leverage that the impending Outside Date expiration provides.

VII. Interaction with Co-Investment Vehicle Governance

The analysis of Ironside's strategic options would be incomplete without consideration of the co-invest vehicle's governance framework, which operates independently of the EPA and provides Ironside with separate contractual protections and exit mechanisms.

A. LP Agreement Section 7.04 — Material Impediment Event and Dormancy Provisions

As described in Section II.D above, the co-invest vehicle entered dormancy on January 9, 2023 following the GP's declaration of a Material Impediment Event under Section 7.04 of the LP Agreement. The dormancy provisions operate as follows:

(a) Upon the declaration of a Material Impediment Event, the GP shall notify the limited partners in writing, specifying the nature of the event and the anticipated duration of the dormancy period.

(b) During the dormancy period: (i) no capital calls may be made except for amounts necessary to fund ordinary-course operating expenses and legal costs of the co-invest vehicle; (ii) the GP shall use commercially reasonable efforts to assess the feasibility of reactivating the investment purpose; and (iii) the GP shall deliver quarterly reports to the limited partners regarding the status of the Material Impediment Eve

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004
MEMORANDUM
Date: December 18, 2023
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 — Funds & Asset Management Practice Calderwood & Harkness LLP
Re: Expiration of Outside Date Under the Equity Purchase Agreement — Termination Rights, Consequences of Non-Exercise, and Standstill Options
Matter No.: 1023-00001
I. Executive Summary
The Outside Date under the Equity Purchase Agreement dated September 15, 2022 (as amended by the First Amendment dated November 22, 2022, the Second Amendment dated March 15, 2023, and the Third Amendment dated June 28, 2023) (collectively, the "EPA") is December 31, 2023. As of the date of this memorandum, the closing has not occurred, and the transaction to acquire one hundred percent (100%) of the equity interests in Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Company"), at an agreed enterprise value of $1.95 billion, remains stalled. Two principal impediments have prevented the transaction from proceeding to closing: (i) the unresolved concession renegotiation initiated by the Portland Metropolitan Water District with respect to the Bull Run Filtration Project concession, and (ii) the expiration of the debt commitment letter from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC on October 31, 2023, without further extension. No replacement financing has been arranged.
Upon the expiration of the Outside Date, each party to the EPA — the Selling Shareholders (Timberline Growth Equity Fund III, LP, Weir Family Trust, and Management Rollover Pool), the Company (Cascadia), and the Buyer (Cascadia Acquisition Corp., the joint acquisition vehicle of Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest")) — will have the right, but not the obligation, to terminate the EPA by written notice to the other parties. The EPA does not automatically terminate upon the passing of the Outside Date; affirmative action by at least one party is required.
This memorandum provides a comprehensive analysis of the following: (a) the termination mechanics available under the EPA upon the expiration of the Outside Date; (b) the consequences of the exercise or non-exercise of those termination rights on the transaction, the parties, and the ancillary agreements; (c) the specific impact on ICM Cascadia Co-Invest, LP and Ironside Capital Management LP's ("Ironside") $300 million commitment and $22.5 million in called capital; and (d) the strategic options available to Ironside at this juncture. Based on the analysis set forth herein, Calderwood & Harkness recommends that Ironside pursue the negotiation of a Mutual Standstill and Preservation Agreement among all EPA parties as an alternative to termination or passive non-exercise, in order to preserve optionality, manage risk, and protect Ironside's contractual rights during the interim period.
This memorandum should be read in conjunction with our prior analyses, including our memorandum dated November 14, 2022 concerning the Material Adverse Effect question and our memorandum dated February 3, 2023 concerning the dormancy provisions of the LP Agreement. We note that the factual predicates underlying this memorandum are based on information available to us as of the date hereof and are subject to change.
II. Background and Procedural History
A. Overview of the Transaction
Cascadia Renewables Holdings, Inc. is an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia is led by Jonathan M. Weir, Chief Executive Officer, and Sandra K. Llewellyn, Chief Financial Officer. The Company owns and operates a diversified portfolio of renewable energy and water infrastructure assets across the Pacific Northwest, consisting of fourteen (14) hydroelectric generation facilities, six (6) wind farm projects, and three (3) water-treatment concessions. These assets are located across the states of Oregon, Washington, and Idaho, and the portfolio benefits from a weighted-average remaining contract life of approximately twenty-two (22) years, providing long-duration, contracted cash flows consistent with core infrastructure investment characteristics.
For the fiscal year ended December 31, 2021 (audited by Halstead & Greer LLP), Cascadia reported revenue of approximately $487 million and EBITDA of approximately $138 million. The parties agreed to an enterprise value of $1.95 billion, implying an EV/EBITDA multiple of approximately 14.1x on FY 2021 EBITDA, which was broadly consistent with comparable transaction multiples observed in the North American renewable infrastructure sector at the time of execution.
The transaction was structured as a 100% equity acquisition by Cascadia Acquisition Corp. ("Acquisition Corp."), a Delaware corporation formed as the joint acquisition vehicle of Meridian Infrastructure Partners Fund IV, LP ("Fund IV" or "Meridian Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest"). Ownership of Acquisition Corp. is allocated as follows: Fund IV holds a 71.43% interest, corresponding to a $750 million equity commitment, and ICM Co-Invest holds a 28.57% interest, corresponding to a $300 million equity commitment. The total equity contribution by the sponsors was $1.05 billion.
The sources and uses for the transaction were structured as follows:
Atlas National Bank, N.A. served as lead arranger and administrative agent for the senior secured credit facilities, committing $650 million of the $975 million term loan, with Pinnacle Credit Partners LLC committing the remaining $325 million. A $150 million revolving credit facility was included in the financing structure but was not expected to be drawn at closing. As discussed further in Section II.C below, the debt commitment letter expired on October 31, 2023 without further extension.
B. The Equity Purchase Agreement and Amendments
The EPA was executed on September 15, 2022 among the following parties: (i) the Selling Shareholders — Timberline Growth Equity Fund III, LP (holding approximately 62% of Cascadia's equity, represented by Garvey Lennox LLP, with Steven F. Yun as lead partner), Weir Family Trust (holding approximately 18% of Cascadia's equity, with Jonathan M. Weir serving as trustee), and Management Rollover Pool (holding approximately 20% of Cascadia's equity, with an expected 50% rollover into the post-acquisition capital structure, representing 10% of total equity post-closing); (ii) the Company (Cascadia Renewables Holdings, Inc., represented by Ridgeway, Ashford & Malone PC, with Nina R. Castellano as lead partner); and (iii) the Buyer (Cascadia Acquisition Corp., represented by Breckenridge Sloane & Pratt LLP ("BSP"), with Charles A. Delacroix as lead partner, acting as deal counsel to Meridian Infrastructure Partners). The EPA is governed by the laws of the State of Delaware, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction.
The EPA as originally executed established an Outside Date of December 31, 2022. Since execution, the EPA has been amended on three occasions, in each case principally to extend the Outside Date in response to the developing impediments to closing:
First Amendment (November 22, 2022): Following the Portland Metropolitan Water District's formal notice dated October 28, 2022 that it intended to renegotiate the terms of the Bull Run Filtration Project concession agreement — citing the passage of Oregon SB 1567 (2022), which granted certain municipal water authorities enhanced regulatory authority over privately operated water-treatment facilities — the parties agreed to extend the Outside Date from December 31, 2022 to March 31, 2023. The First Amendment was negotiated among all parties and their respective counsel on an expedited basis in order to avoid triggering termination rights while the concession renegotiation was in its preliminary stages.
Second Amendment (March 15, 2023): As the concession renegotiation continued without material progress, the parties agreed to a further extension of the Outside Date from March 31, 2023 to June 30, 2023. The Second Amendment included a mutual acknowledgment that the parties were operating in good faith to resolve the concession issue, but did not include any binding commitments regarding the substance of the renegotiation or the allocation of risk arising therefrom.
Third Amendment (June 28, 2023): The most recent amendment extended the Outside Date from June 30, 2023 to December 31, 2023 — the current Outside Date. Notably, this extension was for a six-month period, reflecting the parties' expectation that the concession renegotiation might be resolved in the second half of 2023. That expectation has not materialized. The Third Amendment also included certain updated representations by the Company regarding the status of the concession renegotiation and the Company's financial condition, but did not substantively modify the conditions to closing, the termination provisions, or the allocation of the financing risk. No fee or additional consideration was payable in connection with any of the three amendments.
As of the date of this memorandum, no fourth amendment has been proposed, and we are not aware of any ongoing discussions among the parties regarding a further extension of the Outside Date. The current Outside Date of December 31, 2023 is now thirteen (13) days away.
C. Status of Closing Conditions as of December 18, 2023
We have reviewed the status of the principal conditions to closing under the EPA and summarize the current position as follows:
Federal Energy Regulatory Commission — Section 203 Approval (Docket EC22-143-000). The application for FERC approval under Section 203 of the Federal Power Act was filed in September 2022 and was approved by order dated December 15, 2022. The approval is conditioned on the completion of license-transfer filings within a specified period following closing. Critically, the FERC approval is subject to an eighteen (18)-month lapse provision — that is, if the transaction has not closed within eighteen months of the date of the approval order, the approval will lapse unless FERC grants a further extension. Based on the December 15, 2022 approval date, the lapse date is approximately June 15, 2024. We understand that no request for an extension of the FERC approval has been filed to date. The implications of the FERC lapse timeline are discussed further in Section VIII.B below.
Oregon Public Utility Commission (Docket UM-2287). An application for OPUC approval was filed on October 14, 2022. Following the commencement of the concession renegotiation and the resulting uncertainty regarding the transaction timeline, the parties filed a joint motion in February 2023 requesting that the OPUC stay proceedings in Docket UM-2287 pending further developments. The stay was granted, and no substantive action has been taken by the OPUC since that time. The OPUC application remains pending but is functionally dormant.
Committee on Foreign Investment in the United States (CFIUS). A voluntary notice was submitted to CFIUS in September 2022 and was acknowledged on September 20, 2022. No further action has been required by CFIUS, and clearance has been effectively obtained. We note, however, that CFIUS clearance is transaction-specific, and any materially different transaction structure (including a revised capital structure or change in the identity of the acquiring parties) may require a new filing.
Debt Commitment Letter. The original committed financing letter from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC was executed on August 30, 2022, committing $975 million in senior secured term loan financing and $150 million in revolving credit facility capacity. The commitment was extended once, with a revised expiration date of October 31, 2023. The extension fee was $2,437,500 (calculated as 0.25% of the $975 million term loan commitment), which was paid by Fund IV. The debt commitment letter expired on October 31, 2023 without further extension. As of the date of this memorandum, no replacement financing has been arranged, and we are not aware of any active discussions between the sponsors and the lenders (or any alternative lenders) regarding a new commitment. The absence of committed financing is a significant practical impediment to any near-term closing, even if the concession renegotiation were to be resolved.
No Material Adverse Effect Condition. The EPA includes, as a condition to the Buyer's obligation to close, a bring-down of the Company's representations and warranties, including the representation that no Material Adverse Effect (as defined in the EPA) has occurred since the date of the EPA. As discussed in our prior memorandum dated November 14, 2022, the question of whether the Portland Metropolitan Water District's concession renegotiation constitutes a Material Adverse Effect within the meaning of the EPA is complex and depends on the ultimate outcome of the renegotiation. That question remains open as of the date hereof, and we continue to monitor developments. We note that the MAE analysis may become moot if the EPA is terminated; however, it would be relevant to any reactivation analysis and may bear on the "fault" carve-out discussed in Section III.A below.
Bull Run Concession Renegotiation. The renegotiation of the Bull Run Filtration Project concession agreement between Cascadia and the Portland Metropolitan Water District has been ongoing since November 2022. The Bull Run concession generates approximately $64 million in annual revenue, representing approximately 13% of Cascadia's total revenue of $487 million. The renegotiation was triggered by the passage of Oregon SB 1567 (2022), which enhanced the regulatory authority of certain municipal water authorities over privately operated water-treatment facilities. We understand that multiple negotiation sessions have occurred, but no definitive agreement has been reached. The range of potential outcomes includes: (a) continuation of the concession on substantially similar terms, (b) modification of the concession terms with a reduction in the annual concession payment, and (c) termination of the concession with a buyout payment. The outcome of the renegotiation will have a material impact on Cascadia's revenue profile, cash flow, and, consequently, on the transaction economics. No timeline for resolution has been established by the parties to the renegotiation.
D. Status of ICM Cascadia Co-Invest, LP
ICM Cascadia Co-Invest, LP is a Delaware limited partnership (EIN: 88-3921457; Delaware Secretary of State File No. 7439218) formed on July 22, 2022 for the purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP in the acquisition of Cascadia. The vehicle conducted its first close on July 29, 2022, at which time the limited partnership agreement (the "LP Agreement") and related side letters were executed.
The partnership structure of ICM Co-Invest is as follows:
A single capital call was made on August 15, 2022, in the aggregate amount of $22,500,000, representing 7.5% of total commitments. The proceeds of the capital call were allocated as follows:
The unfunded commitment attributable to Ironside and the GP as of the date of this memorandum is $277,500,000.
On January 9, 2023, the General Partner (Meridian Infrastructure GP IV LLC) declared a Material Impediment Event under Section 7.04 of the LP Agreement, citing the unresolved concession renegotiation and the resulting inability to proceed toward closing on a reasonable timeline. Upon the declaration of a Material Impediment Event, the LP Agreement provides for a period of dormancy during which: (i) no further capital calls may be made (subject to limited exceptions for ordinary-course operating expenses and legal costs), (ii) the General Partner shall use commercially reasonable efforts to assess the feasibility of reactivating the investment purpose, and (iii) the General Partner shall deliver quarterly reports to the limited partners regarding the status of the Material Impediment Event and the dormancy.
The co-invest vehicle has been in continuous dormancy since January 9, 2023 — a period of approximately eleven (11) months as of the date of this memorandum. Annual operating expenses during the dormancy period are estimated at approximately $185,000, principally comprising partnership accounting, tax preparation, registered agent and Delaware franchise tax fees, and minimal legal costs.
In connection with the dormancy, Ironside and Northgate Specialty Insurance Co. entered into a Side Letter dated January 20, 2023, pursuant to which the representations and warranties insurance policy (Policy No. NSW-RI-2022-09814, providing $195 million in coverage with a $4,875,000 premium deposit) was tolled — i.e., the policy period was suspended and will resume upon reactivation of the transaction or be terminated in accordance with its terms. The tolling arrangement was negotiated to avoid the running of the policy period during a period in which no closing could occur.
Under Section 7.04(c) of the LP Agreement, the limited partner (Ironside) has the right to elect to wind down the co-invest vehicle if the Material Impediment Event has continued for a period of eighteen (18) consecutive months without resolution. Given that the Material Impediment Event was declared on January 9, 2023, the eighteen-month trigger date is July 9, 2024. This wind-down election right is a significant contractual protection for Ironside and operates independently of the EPA's termination provisions, as discussed further in Section VII below.
III. Termination Rights Under the EPA
A. Section 9.01(b) — Termination Upon Expiration of Outside Date
Article IX of the EPA sets forth the circumstances under which the EPA may be terminated prior to the consummation of the transactions contemplated thereby. Section 9.01(b) provides the principal termination mechanism relevant to the current analysis: the right to terminate the EPA upon the expiration of the Outside Date.
Specifically, Section 9.01(b) provides that if the closing of the transactions contemplated by the EPA shall not have occurred on or before the Outside Date (as such date may be extended from time to time by amendment), then each of the Buyer, the Company, and the Sellers' Representative (acting on behalf of the Selling Shareholders) may terminate the EPA by delivering written notice of termination to the other parties. The following features of this termination right warrant specific attention:
Permissive, Not Automatic. The right to terminate under Section 9.01(b) is permissive rather than self-executing. The EPA does not automatically terminate upon the expiration of the Outside Date. Unless and until a party affirmatively delivers a written notice of termination in accordance with the EPA's notice provisions, the EPA remains in full force and effect. This is a critical distinction, as it means that the passage of December 31, 2023 without a termination notice does not, by itself, end the parties' obligations under the EPA. The implications of non-exercise are discussed in detail in Section V below.
Multi-Party Right. Each of the three categories of parties — the Buyer (Acquisition Corp.), the Company (Cascadia), and the Sellers' Representative (acting on behalf of Timberline III, Weir Family Trust, and Management Rollover Pool) — independently holds the termination right. Any one of these parties may terminate the EPA unilaterally by delivering the required written notice; unanimity is not required. However, none is obligated to do so.
"Fault" Carve-Out. Section 9.01(b) contains an important qualification: a party whose material breach of any representation, warranty, covenant, or agreement contained in the EPA has been the principal cause of, or principally resulted in, the failure of the closing to occur on or before the Outside Date shall not be entitled to exercise the termination right under Section 9.01(b). This "fault" carve-out operates as an equitable limitation, preventing a party from benefiting from its own breach by using the resulting delay as a basis for termination.
As applied to the current facts, we have undertaken a preliminary assessment of whether any party appears to be in material breach of its obligations under the EPA such that the "fault" carve-out would preclude that party from exercising the termination right. Based on the information available to us, we do not believe that any party is in material breach. The failure to close appears to be attributable primarily to two external factors: (i) the Portland Metropolitan Water District's initiation of the concession renegotiation, which was prompted by legislative action (Oregon SB 1567) beyond the control of any EPA party, and (ii) the resulting inability to satisfy the conditions precedent to the lenders' obligations under the debt commitment letter, which in turn led to the expiration of the financing commitment. Neither Cascadia (which has cooperated in the renegotiation process), nor the Selling Shareholders (who have consented to three extensions of the Outside Date), nor the Buyer (which has continued to participate in the renegotiation and extension discussions) appears to have taken any action — or failed to take any action — that would constitute a material breach principally causing the failure to close.
We note, however, that this analysis could evolve if additional facts emerge. For example, if it were determined that the Company failed to disclose material information regarding the concession renegotiation or failed to use commercially reasonable efforts to resolve the renegotiation (as may be required by certain interim operating covenants), a breach-based argument might be available. We do not have sufficient factual basis to reach such a conclusion at this time, but we recommend that Ironside continue to monitor the Company's conduct in the renegotiation process.
B. Section 9.01(a) — Mutual Consent Termination
Section 9.01(a) of the EPA provides that the EPA may be terminated at any time prior to the closing by the mutual written agreement of the Buyer, the Company, and the Sellers' Representative. This provision offers a consensual mechanism for termination that is distinct from the unilateral Outside Date termination right under Section 9.01(b). A mutual consent termination could be utilized if all parties agree that the transaction should be abandoned, and it could be coupled with a negotiated settlement of any outstanding claims or obligations (e.g., allocation of sunk costs, treatment of deposits, and release of continuing obligations). In practice, this mechanism may be relevant if the parties determine, after the Outside Date has passed, that reactivation of the transaction is not feasible and that a consensual unwinding is preferable to unilateral termination.
C. Section 9.01(c)–(d) — Other Termination Triggers
For completeness, we note that the EPA contains two additional termination triggers under Sections 9.01(c) and 9.01(d), neither of which is currently implicated:
Section 9.01(c) — Governmental Order. Either the Buyer or the Sellers' Representative may terminate the EPA if a governmental authority of competent jurisdiction has issued a final, non-appealable order, decree, or ruling, or has taken any other action, that permanently restrains, enjoins, or otherwise prohibits the consummation of the transactions contemplated by the EPA. No such order, decree, or ruling has been issued. While the OPUC proceedings remain pending, those proceedings have been stayed and do not constitute a prohibition on the transaction.
Section 9.01(d) — Material Breach. Either the Buyer or the Sellers' Representative may terminate the EPA if the other party has breached any representation, warranty, covenant, or agreement in the EPA in a manner that would give rise to the failure of a condition to closing, and such breach has not been cured within thirty (30) days following written notice of the breach. As discussed above, we do not believe any party is in material breach as of the date hereof, and no notice of breach has been delivered by any party. Accordingly, Section 9.01(d) is not currently available as a termination basis.
D. Notice Mechanics
Termination under Section 9.01(b) requires the delivery of written notice to all other parties in accordance with the EPA's general notice provision (Section 11.01). The notice provision specifies that all notices, requests, and other communications under the EPA shall be in writing and shall be deemed duly given or made: (a) upon delivery if delivered personally; (b) on the date of confirmed receipt if sent by a nationally recognized overnight courier service; or (c) on the date of confirmed receipt if sent by email (with a copy sent by overnight courier). The EPA specifies designated notice addresses for each party. We have confirmed that the current notice addresses on file remain valid.
Importantly, no cure period applies to a termination notice delivered under Section 9.01(b). Unlike the breach-based termination right under Section 9.01(d), which affords the non-breaching party a thirty (30)-day cure period following notice, the Outside Date termination right is immediately effective upon delivery of proper notice. This means that once a valid termination notice is delivered after December 31, 2023, the termination takes effect and is not subject to withdrawal or cure.
IV. Consequences of Termination
A. Effect on EPA and Transaction Documents
Section 9.02 of the EPA governs the effect of termination. Upon valid termination of the EPA in accordance with Section 9.01, the EPA shall become void and of no further force or effect, and there shall be no liability on the part of any party or their respective affiliates, officers, directors, employees, or representatives, except as follows:
(i) Certain provisions of the EPA are expressly designated as surviving termination, including: the confidentiality obligations set forth in Section 5.05, the expense allocation provisions set forth in Section 11.03, the termination fee and reverse termination fee provisions set forth in Section 9.03, the governing law and jurisdiction provisions set forth in Section 11.08, the dispute resolution provisions set forth in Section 11.09, and the provisions of Section 9.02 itself.
(ii) Termination does not release any party from liability for any willful and material breach of the EPA prior to termination. This carve-out preserves the non-breaching party's right to seek damages for pre-termination breaches, notwithstanding the general release of future obligations.
Upon termination, the disclosure schedules delivered by the Company and the Selling Shareholders in connection with the EPA remain subject to the confidentiality obligations under Section 5.05, which survive termination for a period of two (2) years. This means that non-public business information about Cascadia obtained by the sponsors through the due-diligence process and reflected in the disclosure schedules cannot be freely used or disclosed following termination.
All representations and warranties made by the parties under the EPA cease to have any force or effect upon termination. Neither the Buyer nor the Sellers would be able to rely on such representations post-termination, and any bring-down or indemnification obligations tied to those representations would be extinguished.
The effect of EPA termination on ancillary agreements — including the equity commitment letters from Fund IV and ICM Co-Invest to Acquisition Corp. — would also need to be assessed. Generally, the equity commitment letters are conditioned on the closing of the transaction under the EPA, and EPA termination would release the sponsors from their funding obligations under those letters.
B. Termination Fee / Reverse Termination Fee Analysis
Section 9.03 of the EPA addresses the payment of termination fees and reverse termination fees. This provision is relevant to the economic consequences of termination and merits careful analysis.
Reverse Termination Fee. Under Section 9.03(b), the Buyer is obligated to pay a reverse termination fee to the Sellers' Representative if and only if the following conditions are satisfied: (i) the EPA is terminated by the Sellers' Representative pursuant to Section 9.01(b) (Outside Date termination) or Section 9.01(d) (material breach by the Buyer), (ii) at the time of such termination, the financing condition set forth in Section 7.03(d) is the only condition to the Buyer's obligation to close that has not been satisfied or waived (i.e., all other conditions precedent, including regulatory approvals, no-MAE bring-down, and other customary conditions, have been satisfied), and (iii) the Buyer's failure to obtain financing has been the principal cause of the failure to close.
As applied to the current circumstances, the reverse termination fee is likely not triggered for the following reasons:
First, while it is true that the debt commitment letter has expired and financing is not currently available, the financing condition is not the only unsatisfied condition to closing. The OPUC approval (a regulatory condition) has not been obtained; the proceedings are stayed and no substantive action has been taken. Additionally, the No-MAE condition remains uncertain given the unresolved Bull Run concession renegotiation. Multiple conditions to closing remain unsatisfied, not merely the financing condition.
Second, the reverse termination fee is drafted as a mechanism to address Buyer-side financing failure in circumstances where the transaction would otherwise be ready to close. That is not the case here. The failure to close is attributable to a combination of external factors (the concession renegotiation) and the cascading consequences of those factors (the expiration of the financing commitment and the stay of regulatory proceedings).
Accordingly, even if the Sellers' Representative were to terminate the EPA under Section 9.01(b), the reverse termination fee would not be payable because the prerequisite conditions — namely, that all conditions other than the financing condition have been satisfied — are not met.
Seller-Side Termination Fee. The EPA does not provide for a termination fee payable by the Sellers to the Buyer. This is consistent with the typical allocation of termination-fee risk in leveraged acquisition transactions, where the reverse termination fee addresses the Buyer's financing risk and no reciprocal fee protects the Buyer against Seller-initiated termination.
C. Return of Deposits and Escrow Amounts
The EPA contemplated a $25 million working-capital adjustment escrow, which was to be funded at closing. Because the closing has not occurred, this escrow has not been funded, and no escrow amounts are at issue in connection with termination.
However, certain deposits have been made by or on behalf of Cascadia Acquisition Corp. in connection with the transaction, including deposits related to due diligence, environmental assessments, title and survey work, and similar pre-closing activities. The recoverability of these deposits depends on the terms of the individual deposit agreements and contracts under which they were made. Some deposits may be refundable upon termination of the underlying transaction, while others may have been earned by the recipients upon delivery of services or the occurrence of specified milestones. We recommend that Ironside instruct us to conduct a comprehensive review of all outstanding deposit agreements to determine which amounts, if any, may be recoverable in the event of EPA termination. We note that the due-diligence costs included in the co-invest vehicle's $22.5 million capital call ($12,790,000) include both direct costs (consultants, environmental reports, technical studies) and third-party deposits, and the recoverability analysis may be relevant to the ultimate distribution to Ironside upon a wind-down of the co-invest vehicle.
D. Effect on R&W Insurance Policy
Northgate Specialty Insurance Co. issued a representations and warranties insurance policy (Policy No. NSW-RI-2022-09814) in connection with the Cascadia transaction, providing a coverage limit of $195 million. A premium deposit of $4,875,000 was paid from the proceeds of the capital call made to ICM Co-Invest on August 15, 2022. As noted in Section II.D above, the R&W policy has been tolled pursuant to a Side Letter dated January 20, 2023, suspending the policy period during the dormancy.
Upon termination of the EPA, the R&W insurance policy would lose its practical utility, as there would be no underlying transaction to insure and, consequently, no representations and warranties that could give rise to a covered claim. The question of whether the $4,875,000 premium deposit is refundable is a significant economic issue for Ironside and ICM Co-Invest.
Under typical R&W insurance policy structures, the premium (or the binding deposit portion thereof) is earned by the insurer upon binding — that is, upon the insurer's commitment to issue the policy and the insured's commitment to procure the coverage. In many cases, the premium is fully earned and non-refundable regardless of whether the underlying transaction closes. However, the specific terms of the Northgate Specialty policy and any negotiated refund provisions in the R&W insurance binder or the Side Letter may provide for a partial or full refund of the premium deposit in the event that the transaction is abandoned prior to closing. We have identified this as a priority review item and recommend that Ironside authorize us to conduct a detailed analysis of the Northgate Specialty policy terms, the binder, and the Side Letter to determine the scope, if any, of premium deposit refundability. See Section X (Next Steps), item 4.
E. Effect on Regulatory Approvals
FERC Section 203 Approval (Docket EC22-143-000). The FERC approval order dated December 15, 2022 authorized the transaction under Section 203 of the Federal Power Act, subject to specified conditions including the completion of license-transfer filings post-closing. Termination of the EPA does not, by its terms, void the FERC approval. However, if the transaction is abandoned, the FERC approval becomes moot, as there would be no transaction to consummate. Moreover, the FERC approval is subject to an eighteen-month lapse provision, and the lapse date is approximately June 15, 2024. If the transaction is not closed — or if FERC does not grant a further extension — prior to that date, the approval will expire by its own terms, and any future transaction involving the transfer of Cascadia's jurisdictional assets would require a new Section 203 filing. We discuss the FERC lapse risk further in Section VIII.B below.
OPUC Proceedings (Docket UM-2287). The OPUC application has been stayed since February 2023 at the joint request of the parties. If the EPA is terminated, the parties would likely file a joint motion to withdraw the application. OPUC approval would need to be re-sought in connection with any future transaction involving a change of control of Cascadia's Oregon-regulated assets.
CFIUS Clearance. CFIUS clearance was effectively obtained upon acknowledgment of the voluntary notice on September 20, 2022 and the absence of any further action. No further obligations are outstanding with respect to CFIUS. However, CFIUS clearance is transaction-specific: it applies to the transaction as described in the voluntary notice. Any materially different transaction — including a transaction with different investors, a different capital structure, or a different acquisition vehicle — may require a new voluntary notice and review process.
V. Consequences of Non-Exercise of Termination Rights
A. Legal Status of the EPA Post-Outside Date If No Party Terminates
As discussed in Section III.A above, the EPA does not automatically terminate upon the expiration of the Outside Date. If December 31, 2023 passes and no party delivers a written notice of termination, the EPA will remain in full force and effect. However, the EPA will be in a state of legal limbo: the Outside Date — the agreed-upon deadline for closing — will have passed, but the agreement itself will continue to impose obligations on the parties.
This creates a number of significant legal and practical issues:
Continuing Obligations. All of the parties' obligations under the EPA — other than those that were tied specifically to the achievement of closing by the Outside Date — would remain operative. In particular, Cascadia's obligation under Section 5.01 to conduct its business in the ordinary course consistent with past practice would continue in effect, potentially constraining the Company's ability to take actions outside the ordinary course (such as incurring debt, making material capital expenditures, or entering into material contracts) without the Buyer's consent. Similarly, the Buyer's access rights under Section 5.02 (permitting reasonable access to the Company's books, records, and personnel) would remain operative, as would the non-solicitation provisions under Section 5.04 (prohibiting the Sellers from soliciting or engaging in discussions regarding alternative transactions). These continuing obligations impose real-world constraints on the parties and may become a source of friction if the transaction remains in limbo for an extended period.
Unilateral Termination Overhang. Following the expiration of the Outside Date, each party would have the right to terminate the EPA at any time by delivering written notice. This creates an asymmetric and unstable situation: any party could terminate without warning, at a time of its choosing, potentially at a strategically disadvantageous moment for the other parties. For Ironside, this means that Meridian (through Acquisition Corp.) could terminate the EPA unilaterally, or that the Sellers could terminate unilaterally, at any time — with no advance notice requirement beyond the delivery of the termination notice itself.
No Structured Framework. Without a formal agreement governing the post-Outside Date period, there is no mechanism for allocating expenses, preserving regulatory approvals, managing the continuing obligations, or coordinating the parties' conduct. Each party would be left to manage its own position without any structured coordination, increasing the risk of miscommunication, inconsistent actions, and unintended consequences.
Statute of Limitations and Laches Concerns. While the EPA's surviving provisions (including confidentiality and dispute resolution) would continue, the passage of time without either closing or termination could give rise to arguments regarding the staleness of claims, the erosion of contractual expectations, or the application of equitable defenses such as laches if disputes arise. These concerns are speculative at this stage but become more acute as the period of inactivity lengthens.
In summary, the non-exercise of termination rights following the Outside Date creates a period of maximum legal uncertainty. While the EPA technically remains in effect, the practical ability to consummate the transaction diminishes with each passing day, and the risk of unilateral termination by any party introduces ongoing instability. This analysis strongly supports the pursuit of a structured standstill arrangement, as recommended in Section VI.C below.
B. Impact on ICM Cascadia Co-Invest, LP and Ironside
The non-exercise of termination rights has specific and material consequences for ICM Co-Invest and Ironside:
Continued Dormancy. If the EPA remains in limbo, the co-invest vehicle would continue in its current state of dormancy. Ironside's $22,500,000 in called capital would remain deployed — or, more accurately, largely expended — within the co-invest vehicle, with no near-term prospect of either deployment into the acquisition or return to Ironside. The working-capital reserve of $3,500,000 would remain on hand, accruing minimal interest income, while the remaining called amounts have been allocated to expenses and deposits that are either sunk or of uncertain recoverability.
Unfunded Commitment Overhang. Ironside's unfunded commitment of $277,500,000 would remain outstanding. While the LP Agreement's dormancy provisions restrict the GP's ability to make capital calls during a Material Impediment Event (other than for ordinary-course operating expenses), the continued existence of the unfunded commitment creates a contingent liability on Ironside's balance sheet and may limit Ironside's ability to deploy that capital to other investment opportunities.
Ongoing Dormancy Costs. The co-invest vehicle would continue to incur approximately $185,000 per year in dormancy-related operating expenses. While this amount is modest in absolute terms, it represents an ongoing drag on the vehicle's (and Ironside's) returns.
Wind-Down Election Right. As discussed further in Section VII.B below, Ironside's wind-down election right under Section 7.04(c) of the LP Agreement will ripen on July 9, 2024, providing Ironside with an independent exit mechanism. The continued existence of the EPA — whether in active or limbo status — does not affect this right, which is governed by the LP Agreement rather than the EPA.
C. Impact on Meridian Fund IV
While this memorandum is prepared for Ironside's benefit, it is relevant to consider Meridian Fund IV's position, as Meridian's strategic calculus will significantly influence the trajectory of the EPA and the standstill negotiations.
Fund IV has committed $750 million to the Cascadia transaction and has incurred significant costs, including the $2,437,500 debt commitment extension fee paid to Atlas National Bank and Pinnacle Credit Partners, as well as internal deal-team costs, due-diligence expenses, and advisory fees allocated to Fund IV directly. Meridian also serves as the GP of the co-invest vehicle and controls Cascadia Acquisition Corp. Meridian's interest in keeping the EPA alive likely stems from the possibility that the concession renegotiation may be resolved favorably and the transaction revived — potentially at revised economics that reflect the changed circumstances. A termination of the EPA would extinguish this optionality and could require Meridian to write off the sunk costs associated with the transaction, a significant event for a fund-level investment.
At the same time, Meridian faces its own pressure to manage Fund IV's deployment schedule, deal-flow pipeline, and LP communications. Ironside should be aware that Meridian's strategic interests and Ironside's may not be perfectly aligned, particularly with respect to the timeline for resolution, the allocation of standstill-period expenses, and the conditions under which the transaction should be definitively abandoned.
VI. Strategic Options for Ironside
We have identified four principal strategic options available to Ironside in light of the impending Outside Date expiration. We analyze each in turn.
A. Option 1: Support or Acquiesce in EPA Termination
Under this option, Ironside would communicate to Meridian its support for (or acquiescence in) the termination of the EPA, either by Acquisition Corp. (the Buyer) or by one of the other parties. In practice, this would mean that Ironside would not oppose a termination notice delivered by any party and would cooperate in the orderly unwinding of the transaction.
Advantages:
•  Provides a clean break from the Cascadia transaction, eliminating the ongoing uncertainty and the associated opportunity cost of maintaining the co-invest vehicle in dormancy.
•  Would accelerate the wind-down of the co-invest vehicle and the potential return of a portion of the called capital to Ironside. The working-capital reserve ($3,500,000) is the most likely recoverable amount; the R&W premium deposit ($4,875,000) may or may not be recoverable depending on the Northgate Specialty policy terms. The remaining called amounts ($285,000 organizational expenses, $1,050,000 placement-agent fee, and $12,790,000 due-diligence costs) are largely sunk.
•  Frees up Ironside's unfunded commitment of $277,500,000 for deployment into other investment opportunities.
•  Eliminates ongoing dormancy costs of approximately $185,000 per year.
Disadvantages:
•  Forecloses the possibility of transaction reactivation if the concession renegotiation is resolved favorably. If the Bull Run concession is renegotiated on terms that preserve substantially all of the existing revenue and cash flow, the Cascadia acquisition could represent an attractive investment opportunity that Ironside would no longer have access to.
•  Sunk cost exposure is significant: of the $22,500,000 called, a substantial portion is non-recoverable regardless of whether the EPA is terminated or maintained. Termination crystallizes these losses.
•  Could send a negative signal to Meridian regarding Ironside's willingness to weather uncertainty in a co-investment relationship. Given the importance of the Ironside-Meridian relationship for future infrastructure co-investment opportunities, this reputational risk should not be underestimated. Meridian may view Ironside's support for termination as evidence of limited risk tolerance or an unwillingness to support the sponsor through a challenging period.
B. Option 2: Exercise or Cause Exercise of Termination Right on Behalf of Buyer
Under this option, Ironside would seek to direct or cause Cascadia Acquisition Corp. (the Buyer) to exercise its termination right under Section 9.01(b) of the EPA.
Analysis of Ironside's Ability to Direct Termination: Ironside is the limited partner of ICM Cascadia Co-Invest, LP, which in turn is a 28.57% equity holder of Cascadia Acquisition Corp. The GP of the co-invest vehicle — Meridian Infrastructure GP IV LLC — controls the co-invest vehicle's governance, including the exercise of its rights as a stockholder of Acquisition Corp. Furthermore, Acquisition Corp. is jointly controlled by Fund IV (through the Fund IV GP) and the co-invest vehicle (through its GP), with Fund IV holding the majority interest. As a practical matter, Ironside cannot unilaterally direct the Buyer to deliver a termination notice. The governance structure vests decision-making authority with Meridian.
However, Ironside retains significant practical leverage:
•  Ironside holds 28.57% of the total equity commitment for the Cascadia transaction. Any reactivation of the transaction would require Ironside's continued participation (or its replacement with another co-investor, which would involve significant time, cost, and complexity).
•  Ironside's consent or cooperation may be contractually required for certain actions under the LP Agreement, the co-invest vehicle's side letter, or the stockholders' agreement governing Acquisition Corp.
•  Ironside's relationship with Meridian as a co-investor and potential future partner gives Ironside informal influence over Meridian's decision-making, even in the absence of a formal consent right.
If Ironside wishes to pursue a termination, the most effective approach would be to communicate its strong preference for termination to Meridian and request that Meridian cause Acquisition Corp. to deliver the termination notice. This approach relies on persuasion and relationship leverage rather than contractual compulsion.
Advantages and Disadvantages: The advantages and disadvantages of this option are substantially similar to those described in Option 1, with the additional downside that an assertive or confrontational approach to forcing Meridian's hand could damage the Ironside-Meridian relationship more significantly than a passive acquiescence in termination.
C. Option 3: Negotiate a Mutual Standstill and Preservation Agreement (Recommended)
Under this option, Ironside would propose that all EPA parties enter into a Mutual Standstill and Preservation Agreement (the "Standstill Agreement") providing a structured framework for managing the post-Outside Date period. The Standstill Agreement would serve as an alternative to both termination and passive non-exercise, preserving the transaction framework while providing clarity, stability, and protections for all parties during the interim period.
Description: The Standstill Agreement would be a multi-party agreement among the Buyer, the Company, the Selling Shareholders, and — to the extent applicable — ICM Co-Invest and its GP, providing that: (a) no party would exercise its termination right under Section 9.01(b) of the EPA during a defined standstill period; (b) the parties would use commercially reasonable efforts to resolve the concession renegotiation and assess the feasibility of transaction reactivation; and (c) the parties' respective rights and obligations would be preserved and managed through an agreed-upon framework during the standstill period.
Key Terms to Negotiate:
Standstill Period. The Standstill Agreement should define a specific period during which no party may exercise its termination right under Section 9.01(b) of the EPA. We recommend a standstill period of six (6) to twelve (12) months — i.e., through approximately June 30, 2024 or December 31, 2024, depending on the parties' assessment of the likely timeline for concession renegotiation resolution. The standstill period should be long enough to provide a meaningful window for resolution but not so long as to indefinitely extend the period of uncertainty. A shorter standstill period (six months) would align more closely with the FERC lapse date (approximately June 15, 2024) and Ironside's wind-down election date (July 9, 2024), providing Ironside with natural exit points if the transaction has not been reactivated by that time.
Reactivation Triggers. The Standstill Agreement should specify milestones or conditions that would trigger reactivation of the closing process and provide a timeline for consummating the transaction. Appropriate reactivation triggers might include: (i) the execution of a definitive revised concession agreement between Cascadia and the Portland Metropolitan Water District on terms acceptable to the Buyer; (ii) the arrangement of new committed financing for the acquisition, in an aggregate amount and on terms substantially consistent with the original financing structure (or on revised terms acceptable to the parties); and (iii) the lifting of the stay in the OPUC proceedings and the OPUC's approval of the transaction. Reactivation should require the satisfaction of all specified triggers, not merely one.
Termination After Standstill. At the expiration of the standstill period, each party should again have the right to terminate the EPA upon delivery of written notice. The Standstill Agreement should expressly provide for a defined notice period (e.g., thirty (30) days) following the end of the standstill during which any party may deliver a termination notice, after which the EPA would terminate automatically if no party has elected to extend the standstill or if the reactivation triggers have not been satisfied.
Expense Allocation. The Standstill Agreement should address the allocation of expenses incurred during the standstill period, including legal fees, regulatory maintenance costs, and operating expenses of the co-invest vehicle. From Ironside's perspective, it is critical that the Standstill Agreement provide that no additional capital calls may be made to ICM Co-Invest during the standstill period without the prior written consent of Ironside. This protection is consistent with the LP Agreement's dormancy provisions but should be separately and expressly confirmed in the Standstill Agreement to avoid any ambiguity. The ongoing dormancy costs of approximately $185,000 per year should be allocated in accordance with the LP Agreement's existing expense-allocation provisions and should not be increased without Ironside's consent.
Preservation of Regulatory Approvals. The Standstill Agreement should include a covenant requiring the parties to use reasonable efforts to preserve the FERC Section 203 approval, including by filing a request for extension with FERC if the lapse date of approximately June 15, 2024 approaches without the transaction having closed. The costs of any such extension request should be allocated among the parties. The Standstill Agreement should also require the parties to maintain the OPUC application in its current stayed status and to cooperate in any necessary communications with the OPUC regarding the status of the transaction.
Preservation of R&W Insurance. The Standstill Agreement should provide for the continuation of the tolling arrangement with Northgate Specialty Insurance Co., ensuring that the R&W insurance policy remains available for the transaction if and when the closing process is reactivated. If the Standstill Agreement expires and the EPA is subsequently terminated, the Standstill Agreement should address the process for terminating the R&W policy and recovering any refundable portion of the premium deposit.
Co-Invest Protections. The Standstill Agreement should expressly acknowledge and preserve Ironside's rights under the LP Agreement and the Side Letter, including (without limitation) the wind-down election right under Section 7.04(c) that ripens on July 9, 2024. The Standstill Agreement should provide that nothing therein shall be construed to modify, waive, or impair any of Ironside's rights under the LP Agreement, the Side Letter, or any other agreement governing the co-invest vehicle. This is a critical protection for Ironside: while the Standstill Agreement governs the inter-party relationship under the EPA, it should not interfere with the separate contractual framework governing the co-invest vehicle.
No Modification of Co-Invest Economics. Ironside should ensure that the Standstill Agreement does not alter the economic terms of the co-investment, including the carried-interest waterfall (10% carried interest above an 8% preferred return), the absence of a management fee, and the allocation of distributions and expenses as set forth in the LP Agreement. Any attempt by Meridian to renegotiate the co-invest economics in connection with the standstill discussions should be firmly resisted.
Confidentiality and Non-Disclosure. The Standstill Agreement should include a reaffirmation of the existing confidentiality obligations under the EPA (Section 5.05) and any other applicable non-disclosure agreements, ensuring that all parties remain bound by their confidentiality obligations during the standstill period and beyond.
Advantages:
•  Preserves optionality for transaction reactivation without committing additional capital. If the concession renegotiation is resolved favorably, Ironside retains the ability to participate in a potentially attractive infrastructure investment on pre-agreed terms.
•  Maintains and potentially strengthens the Ironside-Meridian relationship, demonstrating Ironside's willingness to take a constructive approach during a challenging period.
•  Provides a structured, negotiated framework for managing the post-Outside Date period, reducing legal uncertainty and the risk of unilateral action by any party.
•  Protects Ironside's contractual rights, including the wind-down election right, through express preservation provisions.
•  Establishes clear milestones and deadlines, preventing indefinite drift and ensuring that the parties are accountable for progress toward resolution.
Disadvantages:
•  Extends the period of uncertainty for Ironside and the co-invest vehicle. The standstill period could be six to twelve months, during which Ironside's called capital remains deployed and its unfunded commitment remains outstanding.
•  Dormancy costs continue during the standstill period (approximately $185,000 per year), although these costs are relatively modest.
•  Ironside's $22.5 million in called capital remains tied up, with no near-term prospect of return.
•  The FERC approval may lapse during the standstill period (lapse date approximately June 15, 2024), requiring additional cost and effort to obtain a new approval or an extension.
•  There is no guarantee that the concession renegotiation will be resolved during the standstill period, or that the transaction will ultimately be reactivated. The standstill may simply delay the inevitable termination.
Notwithstanding these disadvantages, we believe that Option 3 offers the best risk-adjusted outcome for Ironside, balancing the preservation of a potentially valuable investment opportunity against the need for clarity, structure, and protection. We recommend that Ironside pursue this option.
D. Option 4: Do Nothing (Passive Non-Exercise of Termination)
Under this option, Ironside would take no affirmative action following the expiration of the Outside Date. No party would deliver a termination notice, and no standstill agreement would be negotiated. The EPA would remain in effect, with each party retaining the right to terminate at any time.
Disadvantages:
•  Creates the maximum degree of legal uncertainty. Without a negotiated framework, none of the parties has visibility into the others' intentions, and any party could terminate without warning at any time.
•  No structured mechanism for expense allocation, preservation of regulatory approvals, or coordination of the parties' conduct during the interim period.
•  No express protection against additional capital calls or modification of co-invest economics.
•  No defined timeline for resolution or termination, allowing the situation to drift indefinitely.
•  Ironside would have no ability to influence the conduct of the other parties or the trajectory of the transaction during the interim period, beyond the exercise of its existing contractual rights under the LP Agreement.
For the foregoing reasons, we do not recommend Option 4. The passive non-exercise of termination rights, without a structured standstill arrangement, exposes Ironside to unnecessary risk and uncertainty and fails to take advantage of the bargaining leverage that the impending Outside Date expiration provides.
VII. Interaction with Co-Investment Vehicle Governance
The analysis of Ironside's strategic options would be incomplete without consideration of the co-invest vehicle's governance framework, which operates independently of the EPA and provides Ironside with separate contractual protections and exit mechanisms.
A. LP Agreement Section 7.04 — Material Impediment Event and Dormancy Provisions
As described in Section II.D above, the co-invest vehicle entered dormancy on January 9, 2023 following the GP's declaration of a Material Impediment Event under Section 7.04 of the LP Agreement. The dormancy provisions operate as follows:
(a) Upon the declaration of a Material Impediment Event, the GP shall notify the limited partners in writing, specifying the nature of the event and the anticipated duration of the dormancy period.
(b) During the dormancy period: (i) no capital calls may be made except for amounts necessary to fund ordinary-course operating expenses and legal costs of the co-invest vehicle; (ii) the GP shall use commercially reasonable efforts to assess the feasibility of reactivating the investment purpose; and (iii) the GP shall deliver quarterly reports to the limited partners regarding the status of the Material Impediment Eve

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