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

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

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, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Calderwood & Harkness LLP

DATE: November 20, 2022

RE: First Amendment to Equity Purchase Agreement — Considerations for Extension of Outside Date from December 31, 2022 to March 31, 2023

MATTER NO.: 1023-00001

I. Executive Summary

This memorandum analyzes the implications for Ironside Capital Management LP ("Ironside" or "ICM"), in its capacity as the sole limited partner (holding a 99.99% economic interest, representing a $299,970,000 commitment) in ICM Cascadia Co-Invest, LP ("ICM Co-Invest" or the "Vehicle"), of a proposed First Amendment (the "First Amendment") to the Equity Purchase Agreement dated September 15, 2022 (the "EPA"). The First Amendment would extend the outside date — the date by which the closing of the transactions contemplated by the EPA must occur or either party may elect to terminate — from December 31, 2022 to March 31, 2023.

The EPA governs the acquisition by Cascadia Acquisition Corp., a newly formed Delaware corporation wholly owned by Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Co-Invest, of 100% of the issued and outstanding equity interests of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation engaged in the ownership and operation of renewable energy generation and water-treatment infrastructure assets. The agreed enterprise value for the transaction is $1.95 billion.

The proposed extension is necessitated by a material development that has introduced uncertainty into both the closing timeline and the satisfaction of certain closing conditions under the EPA. Specifically, on October 28, 2022, the Portland Metropolitan Water District (the "PMWD") delivered formal notice to Cascadia of its intent to renegotiate the terms of the 40-year water-treatment concession agreement for the Bull Run Filtration Project (the "Bull Run Concession"), which was originally executed in approximately 2018. The PMWD cited changed regulatory requirements under Oregon Senate Bill 1567 (2022) ("SB 1567") as the basis for the renegotiation. The Bull Run Concession generates annual revenue of approximately $64 million, representing approximately 13.1% of Cascadia's FY 2021 revenue. This renegotiation, which commenced in November 2022 and remains unresolved, has created uncertainty regarding the satisfaction of certain closing conditions, including the no-Material Adverse Effect ("MAE") condition and, potentially, the third-party consent condition.

Meridian Infrastructure Partners LP ("Meridian"), acting through its general partner Meridian Infrastructure GP IV LLC ("Meridian GP IV"), has communicated through its legal counsel Breckenridge Sloane & Pratt LLP ("BSP") — with Charles A. Delacroix serving as lead partner on the engagement — that all parties to the EPA are amenable to the extension. This includes the selling shareholders: Timberline Growth Equity Fund III, LP (holding 62% of the equity of Cascadia), the Weir Family Trust (holding 18%), and the Management Rollover Pool (holding 20%).

Based on the analysis set forth in detail below, Calderwood & Harkness LLP ("C&H") recommends that Ironside support the First Amendment extending the outside date to March 31, 2023, subject to the specific conditions and reservations outlined in Section VIII.C of this memorandum. These conditions are designed to preserve Ironside's contractual rights under the LP Agreement and Side Letter, ensure adequate information flow regarding the concession renegotiation and regulatory proceedings, and protect Ironside's economic position in the event that the transaction ultimately does not close or closes on terms that are materially different from those originally contemplated.

II. Background

A. Transaction Overview

The transaction at the center of this analysis involves the acquisition of 100% of the issued and outstanding equity interests of Cascadia Renewables Holdings, Inc. by Cascadia Acquisition Corp. (the "Buyer"), a newly formed Delaware corporation established as a special-purpose acquisition vehicle. The Buyer is jointly owned by Fund IV and ICM Co-Invest, with Fund IV holding a 71.43% ownership interest and ICM Co-Invest holding a 28.57% ownership interest.

The transaction was negotiated and structured over the spring and summer of 2022, with the EPA executed on September 15, 2022 following a competitive auction process managed by Ostrander Consulting Group on behalf of the selling shareholders.

Valuation and Purchase Price. The agreed enterprise value for Cascadia is $1,950,000,000. The equity value is $1,050,000,000, calculated as the enterprise value less approximately $900 million in net debt (inclusive of existing senior secured credit facilities and project-level non-recourse debt). The implied EV/EBITDA multiple is approximately 14.1x, based on Cascadia's FY 2021 adjusted EBITDA of $138 million as reported in the audited financial statements prepared by Halstead & Greer LLP. Cascadia's FY 2021 revenue was $487 million. The valuation reflects the contracted, long-duration nature of Cascadia's revenue streams, the favorable regulatory environment for renewable energy and water infrastructure in the Pacific Northwest, and the portfolio's geographic diversification across three states.

Sources and Uses of Funds. The acquisition is financed through a combination of equity contributions from the sponsors and third-party debt:

Sources:

Uses:

The revolving credit facility of $150 million, committed by Atlas National Bank, N.A., is expected to remain undrawn at close but will be available post-closing to fund working capital needs and capital expenditure programs. Total equity contribution of $1,050,000,000 represents approximately 51.9% of the total sources, reflecting a conservative leverage profile appropriate for infrastructure assets.

Cascadia's Business. Cascadia Renewables Holdings, Inc. is an Oregon corporation that owns and operates a diversified portfolio of renewable energy generation and water-treatment infrastructure assets across the Pacific Northwest. Cascadia's asset base consists of:

• Fourteen (14) hydroelectric generation facilities located in Oregon, Washington, and Idaho, with a combined installed capacity of approximately 840 MW;

• Six (6) wind farms located in eastern Oregon and southern Washington, with a combined installed capacity of approximately 475 MW; and

• Three (3) water-treatment concessions, including the Bull Run Filtration Project in Portland, Oregon; the Yakima County Water Treatment Facility in Yakima, Washington; and the Boise Regional Water Reclamation Plant in Boise, Idaho.

The revenues generated by these assets are supported by long-term power purchase agreements ("PPAs") with public utilities and municipal water-service concession agreements. The weighted-average remaining contractual life across the portfolio is approximately 22 years, providing substantial revenue visibility and cash flow predictability.

Cascadia is currently led by Jonathan M. Weir (Chief Executive Officer) and Sandra K. Llewellyn (Chief Financial Officer). Mr. Weir is also a beneficiary of the Weir Family Trust, which holds an 18% equity interest in Cascadia and is one of the selling shareholders under the EPA.

B. The Concession Renegotiation Development

On October 28, 2022, the Portland Metropolitan Water District delivered a formal written notice (the "Renegotiation Notice") to Cascadia regarding the Bull Run Filtration Project concession. The Renegotiation Notice stated that the PMWD intends to renegotiate the terms of the 40-year water-treatment concession agreement for the Bull Run Filtration Project, which was originally executed in approximately 2018. The Bull Run Filtration Project is a state-of-the-art water filtration facility serving the Portland metropolitan area, and the concession represents one of the largest public-private partnership arrangements in the Oregon water infrastructure sector.

The PMWD cited as the basis for the renegotiation the enactment of Oregon Senate Bill 1567 (2022), which was signed into law by Governor Kate Brown on July 1, 2022. SB 1567 introduced new regulatory requirements applicable to water-treatment concession agreements with municipal water districts in Oregon, including enhanced performance standards, revised rate-setting methodologies, and expanded reporting and transparency obligations. The PMWD's position, as articulated in the Renegotiation Notice, is that SB 1567 constitutes a "change in law" event under the concession agreement that entitles the PMWD to renegotiate certain material terms, including the annual concession fee, performance benchmarks, and capital expenditure obligations.

The Bull Run Concession generates annual revenue of approximately $64 million, which represents approximately 13.1% of Cascadia's FY 2021 total revenue of $487 million. While the Bull Run Concession is a meaningful contributor to Cascadia's revenue and EBITDA profile, it is one of three water-treatment concessions in the portfolio, and the overall portfolio is anchored by the larger hydroelectric and wind generation assets.

Formal renegotiation discussions between Cascadia and the PMWD commenced in early November 2022. As of the date of this memorandum, no resolution has been reached, and the PMWD has not provided a formal proposal for revised concession terms. The renegotiation process is being managed by Cascadia's in-house legal team under the direction of Jonathan M. Weir, with outside counsel support from Ridgeway, Ashford & Malone PC (Portland, Oregon).

Meridian notified Ironside of this material adverse development on November 10, 2022, through a formal written communication from Charles A. Delacroix of BSP to Pamela Cross of C&H. The notification was relayed to Renata Obasi by Theresa Kim on the same date via telephone call and follow-up email. C&H subsequently prepared a separate memorandum dated November 14, 2022, analyzing the impact of the concession renegotiation on the Material Adverse Effect definition under the EPA and assessing whether the Renegotiation Notice itself, standing alone, could constitute or contribute to an MAE for purposes of the no-MAE closing condition.

C. Current EPA Outside Date

The EPA, as executed on September 15, 2022, provides for an outside date (variously referred to in the EPA as the "End Date" or the "Drop Dead Date") of December 31, 2022. The outside date provisions are contained in Section 10.01(b)(i) of the EPA, which provides, in relevant part:

"This Agreement may be terminated at any time prior to the Closing by either the Buyer or the Seller Representative, by written notice to the other party, if the Closing shall not have occurred on or before December 31, 2022 (the 'End Date'); provided, however, that the right to terminate this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or before such date."

This provision is a standard "drop dead" termination right that functions as a mutual option exercisable by either the buy-side or sell-side if the transaction has not closed by the specified date, subject to the important qualification that the terminating party must not itself be in material breach of its obligations under the EPA.

As of the date of this memorandum, several closing conditions under the EPA remain unsatisfied. These include:

(i) OPUC Approval. The application for approval by the Oregon Public Utility Commission ("OPUC") of the change of control of certain of Cascadia's regulated assets was filed on October 14, 2022, and has been assigned Docket No. UM-2287. The OPUC has not yet issued a decision, and the application remains pending as of the date of this memorandum. The OPUC approval process typically requires six to twelve months, and the original December 31, 2022 outside date was, in retrospect, an aggressive timeline for this regulatory condition.

(ii) Resolution or Waiver of Conditions Related to the Concession Renegotiation. The concession renegotiation has introduced uncertainty as to the satisfaction of the no-MAE closing condition (EPA Section 8.02(a)) and potentially the third-party consent condition (EPA Section 8.02(c)), as discussed in greater detail in Section VII below.

(iii) FERC §203 Approval. The application for approval under Section 203 of the Federal Power Act was filed with the Federal Energy Regulatory Commission on October 19, 2022, and has been assigned Docket No. EC22-143-000. This application remains pending as of the date of this memorandum, though based on FERC processing timelines and the straightforward nature of the filing, approval is anticipated in the near term.

With respect to the Committee on Foreign Investment in the United States ("CFIUS"), the parties filed a voluntary notice in connection with the transaction, which was acknowledged by CFIUS on September 20, 2022, with no further action required. The CFIUS review process is complete and poses no impediment to closing.

Given the foregoing outstanding closing conditions — particularly the OPUC approval — it is clear that the closing of the transaction by December 31, 2022 is not feasible. The proposed extension to March 31, 2023 is intended to provide sufficient additional time to satisfy the remaining conditions, although, as discussed in Section VI below, even the extended outside date may prove insufficient for OPUC approval depending on the commission's procedural calendar.

D. Co-Investment Vehicle Status

ICM Cascadia Co-Invest, LP was formed on July 22, 2022, as a Delaware limited partnership (Delaware Secretary of State File No. 7439218; Employer Identification Number 88-3921457). The Vehicle was formed as a single-deal co-investment vehicle for the sole purpose of participating alongside Fund IV in the acquisition of Cascadia.

The Limited Partnership Agreement (the "LP Agreement") was executed on July 29, 2022, between Meridian Infrastructure GP IV LLC, as general partner, and Ironside, as limited partner. A Side Letter (the "Side Letter") between Ironside and Meridian GP IV LLC was also executed on July 29, 2022, providing for enhanced reporting, most-favored-nation protections, and certain other accommodations as described in Section IV.B below.

Ironside is the sole limited partner in the Vehicle, holding a 99.99% economic interest. Ironside's total capital commitment to the Vehicle is $300,000,000, of which $299,970,000 represents its limited partner commitment and $30,000 represents the general partner's nominal capital commitment.

The first and, to date, only capital call (Capital Call #1) was issued on August 15, 2022, in the amount of $22,500,000, representing 7.5% of Ironside's total commitment. The capital call proceeds have been deployed as follows:

The unfunded commitment as of the date of this memorandum is $277,500,000.

The economics of the Vehicle, as set forth in the LP Agreement and the Side Letter, provide for no management fee (consistent with market practice for single-deal co-investment vehicles) and a carried interest of 10% of profits above an 8% preferred return (compounded quarterly) payable to the general partner. These terms compare favorably to the economics of Fund IV itself (which carries a 1.5% management fee and 20% carried interest above an 8% hurdle) and reflect the co-investment nature of Ironside's participation.

III. Proposed First Amendment — Summary of Terms

Based on our review of the term sheet circulated by BSP on November 17, 2022, and our subsequent discussions with Mr. Delacroix on November 18, 2022, the proposed First Amendment is expected to contain the following material terms. We note that a formal draft has not yet been circulated, and the final form may differ in certain respects from the summary below.

A. Extension of Outside Date

The central operative provision of the First Amendment is the extension of the EPA's outside date from December 31, 2022 to March 31, 2023. Under the amended EPA, Section 10.01(b)(i) would be revised to replace each reference to "December 31, 2022" with "March 31, 2023."

Importantly, no change is proposed to the substantive closing conditions under Articles VIII and IX of the EPA. All conditions precedent to the obligations of the Buyer and the selling shareholders to consummate the closing — including the no-MAE condition, regulatory approvals (FERC and OPUC), third-party consents, and the accuracy of representations and warranties — remain in full force and effect as originally negotiated.

The mutual termination right under Section 10.01(b)(i) would continue to apply, with the sole modification being the substitution of the new date. Thus, either the Buyer or the Seller Representative may terminate the EPA by written notice to the other party if the closing has not occurred on or before March 31, 2023, provided that the terminating party is not in material breach of its obligations under the EPA. The same non-breaching-party limitation applies, ensuring that a party whose failure to perform has caused the delay cannot avail itself of the termination right.

This approach — a simple date substitution without modification of any other EPA term — is the cleanest and most commonly employed structure for outside date extensions in the context of M&A transactions where the underlying commercial terms remain unchanged and the delay is attributable to exogenous factors (here, the concession renegotiation and regulatory timeline) rather than any change in the economic deal.

B. Representations and Warranties Bring-Down

A threshold question in any EPA amendment involving an outside date extension is whether the representations and warranties of the parties must be "brought down" — that is, reaffirmed — as of the date of the amendment, or whether they remain applicable only as of their original statement dates (the signing date and, ultimately, the closing date).

The expected approach, as communicated by BSP, is that the representations and warranties of all parties will remain as given at the original signing date of September 15, 2022, with the standard bring-down occurring at closing only. The First Amendment would not require any party to restate or reaffirm its representations and warranties as of the amendment execution date, and the bring-down standard (whether "in all respects" or subject to a "Material Adverse Effect" qualifier) would not be modified.

This approach is consistent with market practice for outside date extensions that do not involve any substantive change to the transaction terms. However, we note two potential negotiation points:

Seller Disclosure Schedule Updates. Counsel to the selling shareholders — Ridgeway, Ashford & Malone PC (led by Nina R. Castellano for the Weir Family Trust and the Management Rollover Pool) and Garvey Lennox LLP (led by Steven F. Yun for Timberline Growth Equity Fund III, LP) — may request the right to update or supplement the disclosure schedules to the EPA to reflect the concession renegotiation and any other developments that have occurred since the September 15, 2022 signing date. If such schedule updates are permitted, the practical effect may be to narrow the scope of the representations and warranties, potentially limiting the Buyer's (and, by extension, Ironside's) ability to assert a breach of representation or warranty claim arising from the concession renegotiation or related matters. C&H recommends that Ironside resist any such schedule updates unless they are purely informational (i.e., provided for disclosure purposes only, without affecting the bring-down standard or the remedies available for any breach).

Interim Disclosure Obligation. Alternatively, the selling shareholders may seek to include an ongoing disclosure obligation during the extended interim period, requiring Cascadia to promptly notify the Buyer of any developments that would reasonably be expected to cause any representation or warranty to become inaccurate. While such provisions are common in the ordinary course, C&H would want to ensure that any such disclosure obligation does not include language that would constitute a deemed waiver of the Buyer's bring-down condition or indemnification rights.

We will monitor these negotiation points as the drafting process advances and will provide further guidance to Ironside as warranted.

C. Interim Operating Covenants

The EPA contains detailed interim operating covenants (set forth in Article VI) that restrict Cascadia — under the direction of CEO Jonathan M. Weir and CFO Sandra K. Llewellyn — from taking certain actions during the period between signing and closing without the prior written consent of the Buyer. These covenants are designed to preserve the value of the business and prevent the selling shareholders and Cascadia management from taking actions that could materially alter the character, operations, or financial condition of the business during the pre-closing period.

Under the proposed First Amendment, the interim operating covenants would continue to apply without modification through the extended outside date of March 31, 2023. No amendment to the scope, substance, or mechanics of the interim operating covenants is proposed. This means that Cascadia will continue to be required to operate its business in the ordinary course consistent with past practice and to refrain from entering into material contracts, disposing of assets, making capital expenditures in excess of agreed thresholds, or taking other specified actions without the Buyer's consent.

The continuation of the interim operating covenants is appropriate and important, particularly in light of the concession renegotiation. The covenants should ensure that Cascadia does not, during the extended pre-closing period, agree to concession terms with the PMWD that would be adverse to the Buyer without the Buyer's prior consent. C&H will review the final form of the First Amendment to confirm that the interim operating covenant framework clearly applies to the concession renegotiation and that any agreement reached between Cascadia and the PMWD during the extended interim period would require the Buyer's consent.

D. Other Provisions

The First Amendment is not expected to modify any other material term of the EPA. In particular:

• No change to the purchase price, enterprise value ($1.95 billion), equity value ($1.05 billion), or the working-capital adjustment mechanism;

• No change to the escrow arrangements, including the $25 million working-capital adjustment escrow;

• No change to the indemnification provisions, including the survival periods, basket and cap amounts, or the scope of fundamental representations;

• No change to the termination fee or reverse termination fee provisions (if any);

• No change to the representations and warranties, covenants, or conditions precedent (other than the extension of the outside date); and

• No change to the governing law, which remains Delaware, consistent with the original EPA.

The First Amendment will be executed by all parties to the EPA: the selling shareholders (Timberline Growth Equity Fund III, LP; the Weir Family Trust; and the Management Rollover Pool), Cascadia Renewables Holdings, Inc. (as the company), and Cascadia Acquisition Corp. (as the buyer). The Seller Representative (Timberline Growth Equity Fund III, LP, acting through its general partner) will execute on behalf of the selling shareholders to the extent authorized by the seller-representative provisions of the EPA.

IV. Impact on ICM Cascadia Co-Invest, LP

A. LP Agreement Provisions

A critical question for Ironside is whether the proposed outside date extension requires any action or consent on its part under the LP Agreement governing the Vehicle.

GP Authority to Consent to EPA Amendments. The LP Agreement grants Meridian GP IV LLC, as general partner of the Vehicle, broad authority to manage the affairs of the Vehicle and to take such actions as the GP deems necessary or appropriate in connection with the Vehicle's investment. Specifically, Section 5.01 of the LP Agreement provides that the GP shall have full power and authority to manage the business and affairs of the Partnership, including the authority to negotiate, execute, amend, and terminate agreements on behalf of the Partnership. Section 5.01(g) further provides that the GP is authorized to consent to amendments of the EPA and any ancillary agreements on behalf of the Vehicle, provided that such amendments do not (i) materially adversely affect the economic interests of the limited partners or (ii) increase any limited partner's capital commitment without such limited partner's written consent.

The proposed First Amendment does not increase Ironside's commitment beyond the agreed $300,000,000, nor does it alter the Vehicle's economic terms (including the carried interest, preferred return, or allocation waterfall). On its face, the extension of the outside date also does not appear to "materially adversely affect" Ironside's economic interests, although a colorable argument could be made that the extension subjects Ironside's deployed capital to additional time-value risk and prolongs the period of uncertainty. We do not believe this argument would be sufficient to override the GP's authority under Section 5.01(g), but it is worth noting for the record.

Accordingly, Meridian GP IV LLC has the authority under the LP Agreement to consent to the First Amendment on behalf of the Vehicle without obtaining Ironside's prior written consent as limited partner.

Material Impediment Event. Notwithstanding the GP's authority to approve the amendment, LP Agreement Section 7.04 — "Material Impediment Events" — merits careful attention. Under Section 7.04(a), a "Material Impediment Event" is defined as the occurrence of any event or circumstance that, in the reasonable judgment of the GP, makes it unlikely that the closing of the transaction contemplated by the EPA will occur, including without limitation (i) the failure or inability to satisfy any material closing condition, (ii) the occurrence of a Material Adverse Effect, or (iii) the termination or threatened termination of the EPA.

The extension of the outside date itself does not constitute a Material Impediment Event. However, the underlying concession renegotiation — particularly if it progresses in a direction that threatens the satisfaction of a closing condition — could trigger the GP's obligation to consider whether a Material Impediment Event should be declared. If the GP determines, in its reasonable judgment, that a closing condition is not reasonably likely to be satisfied within 90 days, Section 7.04(b) requires the GP to deliver a Material Impediment Notice to the limited partners, setting forth the GP's assessment of the situation and the options available to the Vehicle.

At this time, the GP has not declared a Material Impediment Event, and the extension of the outside date suggests that all parties believe the transaction remains viable and that the closing conditions can be satisfied within the extended timeframe. Nevertheless, C&H recommends that Ironside request formal written confirmation from Meridian GP IV LLC that the extension does not constitute a Material Impediment Event and that the GP will promptly notify Ironside if circumstances change such that a Material Impediment Event should be declared.

GP Notice and Communication Obligations. Separately from the Material Impediment Event provisions, Section 6.02 of the LP Agreement requires the GP to provide prompt written notice to the limited partners of any material development affecting the Vehicle's investment. While the GP satisfied this obligation with respect to the concession renegotiation through the November 10, 2022 notification, C&H recommends that Ironside formally request that the GP provide continuing updates on the status of the concession renegotiation, the regulatory approval proceedings, and the closing timeline, in each case on a frequency no less than bi-weekly during the extended pre-closing period.

B. Side Letter Protections

The Side Letter dated July 29, 2022, between Ironside and Meridian GP IV LLC, provides Ironside with certain enhanced protections beyond those contained in the LP Agreement. These protections remain in full force and effect and are not affected by the First Amendment.

Enhanced Reporting. Section 3 of the Side Letter requires the GP to provide Ironside with quarterly reports on the status of the Vehicle's investment, including financial reports, regulatory updates, and a narrative summary of material developments. The Side Letter also requires the GP to provide ad hoc reports within five (5) business days of the occurrence of any material development that could reasonably be expected to affect the Vehicle's investment or the closing timeline. Ironside should confirm in writing that the GP acknowledges the continuing applicability of these reporting obligations during the extended pre-closing period and will provide timely updates on the concession renegotiation status, including copies of any material correspondence with the PMWD, any draft or final revised concession terms, and any analysis of the financial impact of the renegotiation on Cascadia's revenue and EBITDA.

Most-Favored-Nation. Section 5 of the Side Letter contains a most-favored-nation ("MFN") provision, pursuant to which Ironside is entitled to receive the benefit of any more favorable terms granted to any other co-investor in the Vehicle. As of the date of this memorandum, Ironside is the sole limited partner and no other co-investor has been admitted. However, if any additional co-investor is admitted in connection with the extension or otherwise, and receives more favorable economic or governance terms, the MFN provision would entitle Ironside to elect to receive those same terms. C&H recommends that Ironside request confirmation from the GP that no additional co-investors are being admitted and that the MFN provision remains in full force and effect.

C. Wind-Down Right Timeline

Under LP Agreement Section 7.04(c), Ironside has the right to elect to wind down the Vehicle if a "Dormancy Period" exceeds eighteen (18) months. A Dormancy Period commences upon the occurrence of a "Dormancy Event," which is defined as the declaration by the GP of a Material Impediment Event followed by a determination by the GP that the transaction will not close and that the Vehicle's assets should be preserved pending orderly disposition.

As of the date of this memorandum, no Material Impediment Event has been declared, and the Vehicle is not in dormancy. The extension of the outside date does not itself trigger dormancy; rather, the extension is predicated on the parties' shared expectation that the transaction will proceed to closing within the extended timeframe. However, the extension does prolong the pre-closing period, which has the practical effect of pushing further into the future the earliest possible date at which Ironside could exercise its wind-down right if the transaction ultimately fails to close.

To illustrate: if the transaction does not close by March 31, 2023, and the GP subsequently declares a Material Impediment Event and commences a Dormancy Period, the 18-month wind-down election clock would begin running from the date of that declaration — not from the date of the First Amendment or the original EPA signing date. This means that in a worst-case scenario, Ironside's deployed capital could remain tied up in the Vehicle for a considerable period before the wind-down right becomes available.

C&H recommends that Ironside be aware of this timeline risk and consider requesting that the First Amendment, or a side agreement between Ironside and the GP, provide for an accelerated wind-down mechanism in the event that the transaction does not close by the extended outside date of March 31, 2023. At a minimum, Ironside should preserve its right to argue that the GP should declare a Material Impediment Event if the closing conditions remain unsatisfied as of March 31, 2023, thereby starting the Dormancy Period clock at the earliest reasonable date.

D. Capital at Risk

Ironside has contributed $22,500,000 to the Vehicle pursuant to Capital Call #1 (August 15, 2022). These funds have been deployed as summarized in Section II.D above, primarily to cover organizational expenses, the placement-agent fee, the R&W insurance premium deposit, due-diligence costs, and a working-capital reserve.

The extension of the outside date does not, in itself, trigger any additional capital call. However, Ironside should be aware that the extended pre-closing period may give rise to additional costs that the GP could fund through a subsequent capital call from the unfunded commitment of $277,500,000. Such costs could include:

• Additional due-diligence costs related to the concession renegotiation (e.g., engagement of independent consultants to assess the financial impact of revised concession terms);

• Extension fees or consent fees payable to the lenders under the debt commitment letter (discussed in Section V.A below);

• Additional R&W insurance premium or adjustments required by Northgate (discussed in Section V.B below);

• Legal fees and expenses incurred by the GP, BSP, and other advisors in connection with the negotiation and execution of the First Amendment and the concession renegotiation; and

• Any other costs or expenses arising from the extended pre-closing period.

Any subsequent capital call would be subject to the notice and procedural requirements of LP Agreement Section 4.01, which requires the GP to provide at least ten (10) business days' advance written notice of a capital call, specifying the amount and purpose of the call. Ironside should monitor for any indication from the GP that a subsequent capital call may be forthcoming and should request advance notice of any anticipated additional costs.

The total capital at risk for Ironside, as of the date of this memorandum, is $22,500,000. In the event that the transaction does not close and the Vehicle is wound down, Ironside's recovery of this capital would depend on the extent to which the costs already incurred are recoverable (e.g., recovery of the R&W insurance premium if the policy is cancelled; recovery of due-diligence deposits). As discussed in greater detail in Section VIII, the preservation of the transaction through the extension provides the best opportunity to avoid the realization of losses on this deployed capital.

V. Impact on Financing Commitments

A. Debt Commitment Letter Status

The debt financing for the transaction is governed by a commitment letter (the "Commitment Letter") executed on August 30, 2022, by Atlas National Bank, N.A. ("Atlas"), as lead arranger and administrative agent, and Pinnacle Credit Partners LLC ("Pinnacle"), as co-lender. The Commitment Letter provides for:

• A senior secured term loan in the aggregate principal amount of $975,000,000, allocated $650,000,000 to Atlas and $325,000,000 to Pinnacle; and

• A revolving credit facility in the aggregate principal amount of $150,000,000, committed by Atlas.

The Commitment Letter is governed by New York law and is subject to customary conditions precedent to funding, including the execution of definitive credit documentation, the accuracy of specified representations, the absence of a material adverse change in the borrower's financial condition, and the simultaneous equity contribution by Fund IV and ICM Co-Invest.

Termination Date Alignment. A critical question is whether the Commitment Letter's termination date is aligned with, or tied to, the EPA outside date. Commitment letters in leveraged acquisition financings typically include either (i) a fixed termination date, after which the lenders' commitments expire, or (ii) a termination date that is expressly tied to the outside date of the acquisition agreement, with an automatic adjustment if the outside date is extended.

If the Commitment Letter contains a termination date that is expressly tied to the EPA outside date (which is the more common approach), the extension of the outside date to March 31, 2023 should result in an automatic extension of the Commitment Letter termination date to the same date. However, if the Commitment Letter contains a fixed termination date (e.g., December 31, 2022 or January 31, 2023), a separate lender consent or amendment to the Commitment Letter would be required to extend the lenders' commitments to March 31, 2023.

C&H has requested a copy of the Commitment Letter from BSP to confirm the mechanics of the termination date provision. As of the date of this memorandum, we have not yet received the document and are relying on the summary provided by BSP during our November 18, 2022 discussion.

Potential Extension Fees and Repricing Risk. Even if the Commitment Letter's termination date is automatically extended in connection with the EPA extension, the lenders may seek to exercise certain rights in connection with the passage of time. Specifically:

• Extension Fees. Some commitment letters include provisions requiring the borrower or sponsors to pay an extension fee (typically expressed as a percentage of the commitment amount) if the closing does not occur within a specified period after the initial commitment date. If the Atlas/Pinnacle Commitment Letter includes such a provision, the extension fee could be substantial given the size of the commitment ($975 million plus $150 million).

• Market Flex. Commitment letters typically include "market flex" provisions that permit the lead arranger to adjust the pricing, structure, or terms of the debt facilities to reflect changes in market conditions. Since the Commitment Letter was executed on August 30, 2022, credit market conditions have evolved, and the lenders may seek to exercise market flex provisions to increase interest rates, add additional covenants, or modify other terms. Any such adjustment could increase the cost of capital for the transaction, which would be borne by the equity investors (Fund IV and ICM Co-Invest) to the extent the increased costs reduce distributable cash flow.

C&H notes that Meridian, as sponsor and general partner of Fund IV, bears the primary responsibility for managing the lender relationship and ensuring that the debt financing remains in place through the closing. However, any extension fee, repricing, or other modification to the debt terms could affect the total transaction costs and, therefore, the sources-and-uses balance. To the extent that additional transaction costs reduce the equity value of Cascadia or require additional equity contributions from the sponsors, Ironside's economic position could be adversely affected.

C&H recommends that Ironside request formal written confirmation from Meridian and BSP that:

(i) the lenders have consented to the extension of the outside date, or the Commitment Letter's termination date automatically adjusts to March 31, 2023;

(ii) no extension fee or other incremental cost has been incurred or is expected to be incurred by the Buyer, the Vehicle, or the sponsors in connection with the extension; and

(iii) no market flex provisions have been exercised or are reasonably expected to be exercised by the lenders, and the pricing and terms of the debt facilities remain as originally committed.

B. R&W Insurance Policy

The representations and warranties insurance policy (the "R&W Policy") was bound on September 1, 2022, with Northgate Specialty Insurance Co. ("Northgate") as the insurer. The R&W Policy bears Policy Number NSW-RI-2022-09814 and provides coverage with a limit of $195,000,000, representing 10% of the $1.95 billion enterprise value. The premium deposit of $4,875,000 (2.5% of the $195 million coverage limit) was paid on September 2, 2022, from the proceeds of Capital Call #1. The R&W Policy is governed by Connecticut law.

The R&W Policy was underwritten based on the representations and warranties contained in the EPA as executed on September 15, 2022, and the diligence materials provided to Northgate's underwriting team during the underwriting process. The policy is a "buy-side" policy, providing coverage to the Buyer (Cascadia Acquisition Corp.) for losses arising from breaches of the sellers' representations and warranties in the EPA, subject to customary exclusions, retention amounts, and policy limits.

Effective Date and Closing Contingency. The R&W Policy is "bound" — meaning that Northgate has committed to provide coverage — but the coverage does not attach until the closing of the transaction. If the closing is delayed to March 31, 2023, the effective date of coverage under the R&W Policy would shift accordingly. C&H must confirm that the R&W Policy does not contain a sunset provision or a maximum binding period after which the policy lapses or requires renewal if the closing has not occurred.

Many R&W insurance policies include a provision stating that the policy must "attach" (i.e., coverage must become effective upon closing) within a specified period — often 90 or 120 days — after the binding date. If the R&W Policy contains such a provision, the extension of the outside date to March 31, 2023 — approximately seven months after the September 1, 2022 binding date — could exceed the maximum binding period, potentially requiring a policy extension, additional premium, or re-underwriting.

Concession Renegotiation and Coverage Scope. Of particular concern is the potential impact of the concession renegotiation on the scope of coverage under the R&W Policy. The Renegotiation Notice from the PMWD, and the ongoing renegotiation of the Bull Run Concession, constitute a development that occurred after the binding of the R&W Policy and after the execution of the EPA. Depending on how the underwriters view this development:

• Northgate may take the position that the concession renegotiation constitutes a "known issue" that is excluded from coverage under the R&W Policy, either pursuant to a general exclusion for matters known to the insured or pursuant to a specific exclusion that Northgate may seek to add as a condition to extending the policy through the new outside date;

• Alternatively, Northgate may require updated diligence disclosures regarding the concession renegotiation and, based on its review, may seek to narrow the scope of certain representations and warranties covered by the policy (e.g., representations regarding the validity and enforceability of material contracts, the absence of defaults under material contracts, or the accuracy of revenue projections); or

• In the best case, Northgate may confirm that the existing coverage remains in full force and effect without modification, on the basis that the renegotiation notice does not, by itself, constitute a breach of any representation or warranty.

C&H recommends immediate engagement with Northgate to obtain confirmation regarding the policy's status, any sunset or maximum binding period provisions, and the impact (if any) of the concession renegotiation on coverage scope. This engagement should be coordinated with BSP, as the R&W Policy was procured through Meridian's insurance broker and BSP managed the placement process.

C. Placement-Agent Fee

Rivermark Capital Markets Inc. ("Rivermark") served as the placement agent for the Vehicle and was paid a placement-agent fee of $1,050,000, calculated as 0.35% of the $300,000,000 committed capital. The fee was paid at the first close on July 29, 2022, from the proceeds of Capital Call #1.

No additional placement-agent fee is triggered by the extension of the outside date. The engagement letter between the Vehicle and Rivermark, dated June 15, 2022, provides for a one-time fee payable upon the initial closing of the Vehicle and does not contain any provisions tied to the timing of the underlying acquisition closing. C&H has reviewed the Rivermark engagement letter and confirms that it does not contain any provisions that would be triggered by the delay, extension, or restructuring of the transaction. No further action is required with respect to the Rivermark engagement.

VI. Regulatory Timeline Implications

A. FERC §203 Approval

The application for approval under Section 203 of the Federal Power Act, 16 U.S.C. § 824b, was filed with the Federal Energy Regulatory Commission ("FERC") on October 19, 2022. The application was assigned Docket No. EC22-143-000 and seeks FERC authorization for the change in control of Cascadia's FERC-jurisdictional hydroelectric generation assets resulting from the acquisition.

Based on publicly available information regarding FERC processing timelines for Section 203 applications of similar complexity, C&H anticipates that FERC approval will be received in the near term. Section 203 applications involving the transfer of control of generation assets are typically processed within 60 to 90 days of filing, assuming no objections or requests for evidentiary hearing are filed. As of the date of this memorandum, no interventions or protests have been filed in Docket No. EC22-143-000, and the FERC staff review appears to be proceeding on a normal timeline. Based on this trajectory, approval is anticipated by approximately December 15, 2022.

FERC Section 203 approvals are typically conditioned on the completion of certain post-approval filings, including the filing of updated market-based rate authorization applications reflecting the change in ownership and the submission of license-transfer applications for any FERC-licensed hydroelectric projects (applicable to a portion of Cascadia's 14 hydroelectric facilities). These post-approval filings would be handled by the Buyer and Cascadia after the closing.

Importantly for purposes of the outside date extension, FERC Section 203 approvals typically include an 18-month lapse provision, pursuant to which the authorization expires if the transaction does not close within 18 months of the approval date. If FERC approval is received on or about December 15, 2022, the 18-month window would extend to approximately June 15, 2024. This provides a substantial buffer relative to the proposed March 31, 2023 outside date, and the FERC approval should not be at risk even if the closing is delayed beyond March 31, 2023.

C&H will continue to monitor the FERC proceeding and will notify Ironside promptly upon receipt of the FERC order.

B. OPUC Approval

The application for approval by the Oregon Public Utility Commission ("OPUC") of the change of control of Cascadia's OPUC-regulated assets was filed on October 14, 2022, and has been assigned Docket No. UM-2287. The OPUC application is required because certain of Cascadia's hydroelectric and water-treatment assets are classified as public utilities subject to OPUC jurisdiction under Oregon Revised Statutes Chapter 757.

The OPUC approval process is significantly more involved and time-consuming than the FERC process. OPUC change-of-control proceedings typically require six to twelve months from the date of filing, depending on the complexity of the transaction, the level of public interest, and the commission's hearing calendar. The process generally includes:

(i) A public notice and comment period, during which interested parties (including ratepayer advocacy groups, environmental organizations, and other stakeholders) may file comments or petitions to intervene;

(ii) A staff review and investigation, during which OPUC staff evaluates the application and may issue information requests to the applicant;

(iii) A public hearing or evidentiary hearing, if requested by staff, intervenors, or the commission;

(iv) The issuance of a proposed order by the Administrative Law Judge ("ALJ"), followed by a briefing period and oral argument before the full commission; and

(v) The issuance of a final order by the commission, which may include conditions or commitments imposed on the applicant.

Given that the application was filed on October 14, 2022, the OPUC process is still in its early stages. The public notice and comment period is expected to close in late November or early December 2022. As of the date of this memorandum, no interventions or protests have been filed, though this is not unusual given the early stage of the proceeding.

The original December 31, 2022 outside date was, with the benefit of hindsight, unrealistic for OPUC approval. Even in the most expedited proceedings, OPUC rarely issues a final order within 60 to 75 days of the filing date. The extension to March 31, 2023 provides an additional three months, but there is a meaningful risk that even the extended outside date may prove insufficient for full OPUC approval. This risk is heightened by the concession renegotiation, which may complicate the OPUC's review. Specifically, the OPUC may take the position that it cannot meaningfully evaluate the financial impact of the change of control on Cascadia's regulated operations until the terms of the revised Bull Run Concession are known. If the commission elects to defer action on the application pending resolution of the renegotiation, the OPUC approval timeline could extend well beyond March 31, 2023.

C&H recommends that Ironside raise this timing concern with Meridian and BSP and request that the parties discuss contingency plans for a further extension beyond March 31, 2023 in the event that OPUC approval is not obtained by that date. One option would be to include in the First Amendment a mechanism for one or more additional automatic extensions (e.g., successive 90-day extensions at the mutual election of the parties), which would avoid the need for repeated amendment negotiations and the associated transaction costs.

C. CFIUS. As noted above, a voluntary notice was filed with the Committee on Foreign Investment in the United States in connection with the transaction, which was acknowledged by CFIUS on September 20, 2022, with no further action required. The CFIUS review is complete, and the extension of the outside date has no impact on the CFIUS clearance. No further action is required with respect to CFIUS.

VII. Analysis of Concession Renegotiation Impact on Closing Conditions

A. No-MAE Closing Condition

The EPA contains a closing condition (Section 8.02(a)) requiring that no Material Adverse Effect shall have occurred with respect to Cascadia since the signing date. The definition of "Material Adverse Effect" in the EPA is detailed and includes carve-outs for changes attributable to general economic conditions, industry-wide conditions, changes in law, and certain other specified categories of events, in each case except to the extent such changes disproportionately affect Cascadia relative to its peers.

C&H addressed the interaction between the concession renegotiation and the MAE definition in a separate memorandum dated November 14, 2022, delivered to Marcus J. Calloway and Renata Obasi. The key conclusions of that memorandum, which remain applicable, are summarized as follows:

(i) The issuance of the Renegotiation Notice by the PMWD, standing alone, likely does not constitute an MAE. A notice of intent to renegotiate is a preliminary step that does not, by itself, result in any change to the terms of the concession or any reduction in revenue. The MAE analysis is focused on the actual impact on the business, not on the risk of a future impact.

(ii) However, a materially adverse outcome of the renegotiation — such as a significant reduction in the annual concession fee, the imposition of burdensome capital expenditure requirements, or, in an extreme scenario, the termination of the concession — could, depending on its magnitude and duration, constitute an MAE. The $64 million annual revenue from the Bull Run Concession represents approximately 13.1% of Cascadia's FY 2021 total revenue and a higher percentage of EBITDA, given the relatively fixed-cost nature of the concession operations. A significant reduction in this revenue stream could materially affect Cascadia's cash flow profile, debt service capacity, and overall enterprise value.

(iii) Whether a particular renegotiation outcome constitutes an MAE would require a fact-specific analysis at the time of closing, taking into account the magnitude of the impact, its duration, the availability of mitigation measures, and the applicability of any carve-outs in the MAE definition (including, notably, the "change in law" carve-out, which could be argued to encompass the effects of SB 1567).

The extension of the outside date provides additional time to assess whether the renegotiation will rise to the level of an MAE. If the renegotiation is resolved on commercially acceptable terms before the extended outside date, the no-MAE closing condition can likely be satisfied. If the renegotiation results in materially adverse terms, the Buyer (and, by extension, Ironside through its interest in the Vehicle) would have the ability to invoke the no-MAE condition and decline to close.

C&H will continue to monitor the renegotiation and will update the MAE analysis as developments warrant.

B. Third-Party Consent Condition

The EPA may contain a closing condition requiring that certain material third-party consents have been obtained, or that no material counterparty has exercised a right to terminate, modify, or renegotiate a material contract. The precise scope of this condition depends on the language of the EPA, which C&H is reviewing.

The Bull Run Concession renegotiation is not, at this stage, a termination of the concession. Rather, it is a counterparty-initiated renegotiation under a contractual "change in law" provision. Whether this triggers any third-party consent condition or contract-stability representation depends on:

(i) Whether the EPA's third-party consent condition is drafted to encompass renegotiations as well as terminations and modifications. Some EPA consent conditions are broad enough to encompass any adverse action by a material counterparty, while others are limited to terminations and assignments;

(ii) Whether the Bull Run Concession is listed as a "Scheduled Contract" or "Material Contract" on the disclosure schedules to the EPA, and whether the consent condition applies to all material contracts or only to those specifically identified; and

(iii) Whether any representation in the EPA regarding the status of material contracts (e.g., a representation that no material contract is subject to any pending or threatened renegotiation, modification, or termination) has been breached by the PMWD's issuance of the Renegotiation Notice.

C&H is conducting a detailed review of the relevant EPA provisions and the disclosure schedules and will provide a separate analysis if this issue proves material to the closing analysis.

C. Risk of Further Delay

The extension of the outside date to March 31, 2023 provides an additional three months for the parties to satisfy the remaining closing conditions. However, there is a meaningful risk that the concession renegotiation and/or the OPUC approval process will not be resolved by that date. If the closing conditions remain unsatisfied as of March 31, 2023, the parties will face the same decision point that they face today: whether to extend the outside date further, declare an MAE and terminate the EPA, or seek alternative solutions (such as closing with a holdback or escrow mechanism for the concession renegotiation risk).

To mitigate this risk, C&H recommends that Ironside consider requesting that the First Amendment include a mechanism for one or more additional automatic extensions of the outside date. For example, the First Amendment could provide that if, as of March 31, 2023, the sole unsatisfied closing conditions are the OPUC approval and/or the resolution of the concession renegotiation, the outside date would automatically extend by an additional 90 days (to June 30, 2023) upon the mutual written election of the Buyer and the Seller Representative. This mechanism would avoid the need for a Second Amendment and the associated negotiation costs and timeline pressures. We recognize that the selling shareholders may resist such a provision, as extended timelines impose costs on sellers (including continued compliance with interim operating covenants and deferred receipt of sale proceeds), but we believe the proposal is commercially reasonable given the regulatory and contractual uncertainties at hand.

VIII. Ironside Strategic Considerations

A. Arguments in Favor of Supporting the Extension

Based on our analysis, there are compelling reasons for Ironside to support the First Amendment and the extension of the outside date to March 31, 2023:

1. Attractive Underlying Asset Base. The Cascadia portfolio — comprising 14 hydroelectric generation facilities, 6 wind farms, and 3 water-treatment concessions across Oregon, Washington, and Idaho — remains a highly attractive infrastructure investment. The portfolio benefits from long-duration, contracted revenue streams with a weighted-average remaining contractual life of approximately 22 years, providing substantial cash flow visibility and predictability. The asset base is well-positioned to benefit from secular tailwinds in renewable energy and water infrastructure, including increasing regulatory support for clean energy and growing demand for water-treatment capacity in the Pacific Northwest.

2. Concession Renegotiation Is Limited in Scope. The concession renegotiation affects only one of Cascadia's three water-treatment concessions, representing approximately $64 million in annual revenue out of a total of $487 million (approximately 13.1%). While the Bull Run Concession is a meaningful contributor to Cascadia's revenue profile, it is not the dominant revenue driver, and the renegotiation may ultimately result in modified but commercially viable terms. The other 13 hydroelectric facilities, 6 wind farms, and 2 water-treatment concessions are not directly affected by the renegotiation or by SB 1567.

3. Preservation of Favorable Financing Terms. The acquisition financing provided by Atlas National Bank and Pinnacle Credit Partners, committed in August 2022, reflects favorable credit market conditions. The $975 million senior secured term loan and $150 million revolving credit facility were committed at pricing and terms that may not be available if the transaction were terminated and subsequently relaunched. Given the significant tightening of credit markets since August 2022, including rising interest rates and widening credit spreads, terminating the EPA and forfeiting the committed financing could result in materially higher borrowing costs in any subsequent transaction. The extension preserves the benefit of the existing commitment.

4. Protection of Sunk Costs. Ironside has already deployed $22,500,000 in capital call proceeds, including $285,000 in organizational expenses, $1,050,000 in placement-agent fees, $4,875,000 in R&W insurance premium, $12,790,000 in due-diligence costs and deposits, and $3,500,000 in working-capital reserves. If the EPA is terminated without the transaction closing, a significant portion of these costs — particularly the organizational expenses, placement-agent fee, and a portion of the due-diligence costs — would be unrecoverable. The R&W insurance premium may be partially recoverable upon policy cancellation, depending on Northgate's cancellation terms, but this is uncertain. The exte

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
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, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Calderwood & Harkness LLP
DATE: November 20, 2022
RE: First Amendment to Equity Purchase Agreement — Considerations for Extension of Outside Date from December 31, 2022 to March 31, 2023
MATTER NO.: 1023-00001
I. Executive Summary
This memorandum analyzes the implications for Ironside Capital Management LP ("Ironside" or "ICM"), in its capacity as the sole limited partner (holding a 99.99% economic interest, representing a $299,970,000 commitment) in ICM Cascadia Co-Invest, LP ("ICM Co-Invest" or the "Vehicle"), of a proposed First Amendment (the "First Amendment") to the Equity Purchase Agreement dated September 15, 2022 (the "EPA"). The First Amendment would extend the outside date — the date by which the closing of the transactions contemplated by the EPA must occur or either party may elect to terminate — from December 31, 2022 to March 31, 2023.
The EPA governs the acquisition by Cascadia Acquisition Corp., a newly formed Delaware corporation wholly owned by Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Co-Invest, of 100% of the issued and outstanding equity interests of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation engaged in the ownership and operation of renewable energy generation and water-treatment infrastructure assets. The agreed enterprise value for the transaction is $1.95 billion.
The proposed extension is necessitated by a material development that has introduced uncertainty into both the closing timeline and the satisfaction of certain closing conditions under the EPA. Specifically, on October 28, 2022, the Portland Metropolitan Water District (the "PMWD") delivered formal notice to Cascadia of its intent to renegotiate the terms of the 40-year water-treatment concession agreement for the Bull Run Filtration Project (the "Bull Run Concession"), which was originally executed in approximately 2018. The PMWD cited changed regulatory requirements under Oregon Senate Bill 1567 (2022) ("SB 1567") as the basis for the renegotiation. The Bull Run Concession generates annual revenue of approximately $64 million, representing approximately 13.1% of Cascadia's FY 2021 revenue. This renegotiation, which commenced in November 2022 and remains unresolved, has created uncertainty regarding the satisfaction of certain closing conditions, including the no-Material Adverse Effect ("MAE") condition and, potentially, the third-party consent condition.
Meridian Infrastructure Partners LP ("Meridian"), acting through its general partner Meridian Infrastructure GP IV LLC ("Meridian GP IV"), has communicated through its legal counsel Breckenridge Sloane & Pratt LLP ("BSP") — with Charles A. Delacroix serving as lead partner on the engagement — that all parties to the EPA are amenable to the extension. This includes the selling shareholders: Timberline Growth Equity Fund III, LP (holding 62% of the equity of Cascadia), the Weir Family Trust (holding 18%), and the Management Rollover Pool (holding 20%).
Based on the analysis set forth in detail below, Calderwood & Harkness LLP ("C&H") recommends that Ironside support the First Amendment extending the outside date to March 31, 2023, subject to the specific conditions and reservations outlined in Section VIII.C of this memorandum. These conditions are designed to preserve Ironside's contractual rights under the LP Agreement and Side Letter, ensure adequate information flow regarding the concession renegotiation and regulatory proceedings, and protect Ironside's economic position in the event that the transaction ultimately does not close or closes on terms that are materially different from those originally contemplated.
II. Background
A. Transaction Overview
The transaction at the center of this analysis involves the acquisition of 100% of the issued and outstanding equity interests of Cascadia Renewables Holdings, Inc. by Cascadia Acquisition Corp. (the "Buyer"), a newly formed Delaware corporation established as a special-purpose acquisition vehicle. The Buyer is jointly owned by Fund IV and ICM Co-Invest, with Fund IV holding a 71.43% ownership interest and ICM Co-Invest holding a 28.57% ownership interest.
The transaction was negotiated and structured over the spring and summer of 2022, with the EPA executed on September 15, 2022 following a competitive auction process managed by Ostrander Consulting Group on behalf of the selling shareholders.
Valuation and Purchase Price. The agreed enterprise value for Cascadia is $1,950,000,000. The equity value is $1,050,000,000, calculated as the enterprise value less approximately $900 million in net debt (inclusive of existing senior secured credit facilities and project-level non-recourse debt). The implied EV/EBITDA multiple is approximately 14.1x, based on Cascadia's FY 2021 adjusted EBITDA of $138 million as reported in the audited financial statements prepared by Halstead & Greer LLP. Cascadia's FY 2021 revenue was $487 million. The valuation reflects the contracted, long-duration nature of Cascadia's revenue streams, the favorable regulatory environment for renewable energy and water infrastructure in the Pacific Northwest, and the portfolio's geographic diversification across three states.
Sources and Uses of Funds. The acquisition is financed through a combination of equity contributions from the sponsors and third-party debt:
Sources:
Uses:
The revolving credit facility of $150 million, committed by Atlas National Bank, N.A., is expected to remain undrawn at close but will be available post-closing to fund working capital needs and capital expenditure programs. Total equity contribution of $1,050,000,000 represents approximately 51.9% of the total sources, reflecting a conservative leverage profile appropriate for infrastructure assets.
Cascadia's Business. Cascadia Renewables Holdings, Inc. is an Oregon corporation that owns and operates a diversified portfolio of renewable energy generation and water-treatment infrastructure assets across the Pacific Northwest. Cascadia's asset base consists of:
• Fourteen (14) hydroelectric generation facilities located in Oregon, Washington, and Idaho, with a combined installed capacity of approximately 840 MW;
• Six (6) wind farms located in eastern Oregon and southern Washington, with a combined installed capacity of approximately 475 MW; and
• Three (3) water-treatment concessions, including the Bull Run Filtration Project in Portland, Oregon; the Yakima County Water Treatment Facility in Yakima, Washington; and the Boise Regional Water Reclamation Plant in Boise, Idaho.
The revenues generated by these assets are supported by long-term power purchase agreements ("PPAs") with public utilities and municipal water-service concession agreements. The weighted-average remaining contractual life across the portfolio is approximately 22 years, providing substantial revenue visibility and cash flow predictability.
Cascadia is currently led by Jonathan M. Weir (Chief Executive Officer) and Sandra K. Llewellyn (Chief Financial Officer). Mr. Weir is also a beneficiary of the Weir Family Trust, which holds an 18% equity interest in Cascadia and is one of the selling shareholders under the EPA.
B. The Concession Renegotiation Development
On October 28, 2022, the Portland Metropolitan Water District delivered a formal written notice (the "Renegotiation Notice") to Cascadia regarding the Bull Run Filtration Project concession. The Renegotiation Notice stated that the PMWD intends to renegotiate the terms of the 40-year water-treatment concession agreement for the Bull Run Filtration Project, which was originally executed in approximately 2018. The Bull Run Filtration Project is a state-of-the-art water filtration facility serving the Portland metropolitan area, and the concession represents one of the largest public-private partnership arrangements in the Oregon water infrastructure sector.
The PMWD cited as the basis for the renegotiation the enactment of Oregon Senate Bill 1567 (2022), which was signed into law by Governor Kate Brown on July 1, 2022. SB 1567 introduced new regulatory requirements applicable to water-treatment concession agreements with municipal water districts in Oregon, including enhanced performance standards, revised rate-setting methodologies, and expanded reporting and transparency obligations. The PMWD's position, as articulated in the Renegotiation Notice, is that SB 1567 constitutes a "change in law" event under the concession agreement that entitles the PMWD to renegotiate certain material terms, including the annual concession fee, performance benchmarks, and capital expenditure obligations.
The Bull Run Concession generates annual revenue of approximately $64 million, which represents approximately 13.1% of Cascadia's FY 2021 total revenue of $487 million. While the Bull Run Concession is a meaningful contributor to Cascadia's revenue and EBITDA profile, it is one of three water-treatment concessions in the portfolio, and the overall portfolio is anchored by the larger hydroelectric and wind generation assets.
Formal renegotiation discussions between Cascadia and the PMWD commenced in early November 2022. As of the date of this memorandum, no resolution has been reached, and the PMWD has not provided a formal proposal for revised concession terms. The renegotiation process is being managed by Cascadia's in-house legal team under the direction of Jonathan M. Weir, with outside counsel support from Ridgeway, Ashford & Malone PC (Portland, Oregon).
Meridian notified Ironside of this material adverse development on November 10, 2022, through a formal written communication from Charles A. Delacroix of BSP to Pamela Cross of C&H. The notification was relayed to Renata Obasi by Theresa Kim on the same date via telephone call and follow-up email. C&H subsequently prepared a separate memorandum dated November 14, 2022, analyzing the impact of the concession renegotiation on the Material Adverse Effect definition under the EPA and assessing whether the Renegotiation Notice itself, standing alone, could constitute or contribute to an MAE for purposes of the no-MAE closing condition.
C. Current EPA Outside Date
The EPA, as executed on September 15, 2022, provides for an outside date (variously referred to in the EPA as the "End Date" or the "Drop Dead Date") of December 31, 2022. The outside date provisions are contained in Section 10.01(b)(i) of the EPA, which provides, in relevant part:
"This Agreement may be terminated at any time prior to the Closing by either the Buyer or the Seller Representative, by written notice to the other party, if the Closing shall not have occurred on or before December 31, 2022 (the 'End Date'); provided, however, that the right to terminate this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or before such date."
This provision is a standard "drop dead" termination right that functions as a mutual option exercisable by either the buy-side or sell-side if the transaction has not closed by the specified date, subject to the important qualification that the terminating party must not itself be in material breach of its obligations under the EPA.
As of the date of this memorandum, several closing conditions under the EPA remain unsatisfied. These include:
(i) OPUC Approval. The application for approval by the Oregon Public Utility Commission ("OPUC") of the change of control of certain of Cascadia's regulated assets was filed on October 14, 2022, and has been assigned Docket No. UM-2287. The OPUC has not yet issued a decision, and the application remains pending as of the date of this memorandum. The OPUC approval process typically requires six to twelve months, and the original December 31, 2022 outside date was, in retrospect, an aggressive timeline for this regulatory condition.
(ii) Resolution or Waiver of Conditions Related to the Concession Renegotiation. The concession renegotiation has introduced uncertainty as to the satisfaction of the no-MAE closing condition (EPA Section 8.02(a)) and potentially the third-party consent condition (EPA Section 8.02(c)), as discussed in greater detail in Section VII below.
(iii) FERC §203 Approval. The application for approval under Section 203 of the Federal Power Act was filed with the Federal Energy Regulatory Commission on October 19, 2022, and has been assigned Docket No. EC22-143-000. This application remains pending as of the date of this memorandum, though based on FERC processing timelines and the straightforward nature of the filing, approval is anticipated in the near term.
With respect to the Committee on Foreign Investment in the United States ("CFIUS"), the parties filed a voluntary notice in connection with the transaction, which was acknowledged by CFIUS on September 20, 2022, with no further action required. The CFIUS review process is complete and poses no impediment to closing.
Given the foregoing outstanding closing conditions — particularly the OPUC approval — it is clear that the closing of the transaction by December 31, 2022 is not feasible. The proposed extension to March 31, 2023 is intended to provide sufficient additional time to satisfy the remaining conditions, although, as discussed in Section VI below, even the extended outside date may prove insufficient for OPUC approval depending on the commission's procedural calendar.
D. Co-Investment Vehicle Status
ICM Cascadia Co-Invest, LP was formed on July 22, 2022, as a Delaware limited partnership (Delaware Secretary of State File No. 7439218; Employer Identification Number 88-3921457). The Vehicle was formed as a single-deal co-investment vehicle for the sole purpose of participating alongside Fund IV in the acquisition of Cascadia.
The Limited Partnership Agreement (the "LP Agreement") was executed on July 29, 2022, between Meridian Infrastructure GP IV LLC, as general partner, and Ironside, as limited partner. A Side Letter (the "Side Letter") between Ironside and Meridian GP IV LLC was also executed on July 29, 2022, providing for enhanced reporting, most-favored-nation protections, and certain other accommodations as described in Section IV.B below.
Ironside is the sole limited partner in the Vehicle, holding a 99.99% economic interest. Ironside's total capital commitment to the Vehicle is $300,000,000, of which $299,970,000 represents its limited partner commitment and $30,000 represents the general partner's nominal capital commitment.
The first and, to date, only capital call (Capital Call #1) was issued on August 15, 2022, in the amount of $22,500,000, representing 7.5% of Ironside's total commitment. The capital call proceeds have been deployed as follows:
The unfunded commitment as of the date of this memorandum is $277,500,000.
The economics of the Vehicle, as set forth in the LP Agreement and the Side Letter, provide for no management fee (consistent with market practice for single-deal co-investment vehicles) and a carried interest of 10% of profits above an 8% preferred return (compounded quarterly) payable to the general partner. These terms compare favorably to the economics of Fund IV itself (which carries a 1.5% management fee and 20% carried interest above an 8% hurdle) and reflect the co-investment nature of Ironside's participation.
III. Proposed First Amendment — Summary of Terms
Based on our review of the term sheet circulated by BSP on November 17, 2022, and our subsequent discussions with Mr. Delacroix on November 18, 2022, the proposed First Amendment is expected to contain the following material terms. We note that a formal draft has not yet been circulated, and the final form may differ in certain respects from the summary below.
A. Extension of Outside Date
The central operative provision of the First Amendment is the extension of the EPA's outside date from December 31, 2022 to March 31, 2023. Under the amended EPA, Section 10.01(b)(i) would be revised to replace each reference to "December 31, 2022" with "March 31, 2023."
Importantly, no change is proposed to the substantive closing conditions under Articles VIII and IX of the EPA. All conditions precedent to the obligations of the Buyer and the selling shareholders to consummate the closing — including the no-MAE condition, regulatory approvals (FERC and OPUC), third-party consents, and the accuracy of representations and warranties — remain in full force and effect as originally negotiated.
The mutual termination right under Section 10.01(b)(i) would continue to apply, with the sole modification being the substitution of the new date. Thus, either the Buyer or the Seller Representative may terminate the EPA by written notice to the other party if the closing has not occurred on or before March 31, 2023, provided that the terminating party is not in material breach of its obligations under the EPA. The same non-breaching-party limitation applies, ensuring that a party whose failure to perform has caused the delay cannot avail itself of the termination right.
This approach — a simple date substitution without modification of any other EPA term — is the cleanest and most commonly employed structure for outside date extensions in the context of M&A transactions where the underlying commercial terms remain unchanged and the delay is attributable to exogenous factors (here, the concession renegotiation and regulatory timeline) rather than any change in the economic deal.
B. Representations and Warranties Bring-Down
A threshold question in any EPA amendment involving an outside date extension is whether the representations and warranties of the parties must be "brought down" — that is, reaffirmed — as of the date of the amendment, or whether they remain applicable only as of their original statement dates (the signing date and, ultimately, the closing date).
The expected approach, as communicated by BSP, is that the representations and warranties of all parties will remain as given at the original signing date of September 15, 2022, with the standard bring-down occurring at closing only. The First Amendment would not require any party to restate or reaffirm its representations and warranties as of the amendment execution date, and the bring-down standard (whether "in all respects" or subject to a "Material Adverse Effect" qualifier) would not be modified.
This approach is consistent with market practice for outside date extensions that do not involve any substantive change to the transaction terms. However, we note two potential negotiation points:
Seller Disclosure Schedule Updates. Counsel to the selling shareholders — Ridgeway, Ashford & Malone PC (led by Nina R. Castellano for the Weir Family Trust and the Management Rollover Pool) and Garvey Lennox LLP (led by Steven F. Yun for Timberline Growth Equity Fund III, LP) — may request the right to update or supplement the disclosure schedules to the EPA to reflect the concession renegotiation and any other developments that have occurred since the September 15, 2022 signing date. If such schedule updates are permitted, the practical effect may be to narrow the scope of the representations and warranties, potentially limiting the Buyer's (and, by extension, Ironside's) ability to assert a breach of representation or warranty claim arising from the concession renegotiation or related matters. C&H recommends that Ironside resist any such schedule updates unless they are purely informational (i.e., provided for disclosure purposes only, without affecting the bring-down standard or the remedies available for any breach).
Interim Disclosure Obligation. Alternatively, the selling shareholders may seek to include an ongoing disclosure obligation during the extended interim period, requiring Cascadia to promptly notify the Buyer of any developments that would reasonably be expected to cause any representation or warranty to become inaccurate. While such provisions are common in the ordinary course, C&H would want to ensure that any such disclosure obligation does not include language that would constitute a deemed waiver of the Buyer's bring-down condition or indemnification rights.
We will monitor these negotiation points as the drafting process advances and will provide further guidance to Ironside as warranted.
C. Interim Operating Covenants
The EPA contains detailed interim operating covenants (set forth in Article VI) that restrict Cascadia — under the direction of CEO Jonathan M. Weir and CFO Sandra K. Llewellyn — from taking certain actions during the period between signing and closing without the prior written consent of the Buyer. These covenants are designed to preserve the value of the business and prevent the selling shareholders and Cascadia management from taking actions that could materially alter the character, operations, or financial condition of the business during the pre-closing period.
Under the proposed First Amendment, the interim operating covenants would continue to apply without modification through the extended outside date of March 31, 2023. No amendment to the scope, substance, or mechanics of the interim operating covenants is proposed. This means that Cascadia will continue to be required to operate its business in the ordinary course consistent with past practice and to refrain from entering into material contracts, disposing of assets, making capital expenditures in excess of agreed thresholds, or taking other specified actions without the Buyer's consent.
The continuation of the interim operating covenants is appropriate and important, particularly in light of the concession renegotiation. The covenants should ensure that Cascadia does not, during the extended pre-closing period, agree to concession terms with the PMWD that would be adverse to the Buyer without the Buyer's prior consent. C&H will review the final form of the First Amendment to confirm that the interim operating covenant framework clearly applies to the concession renegotiation and that any agreement reached between Cascadia and the PMWD during the extended interim period would require the Buyer's consent.
D. Other Provisions
The First Amendment is not expected to modify any other material term of the EPA. In particular:
• No change to the purchase price, enterprise value ($1.95 billion), equity value ($1.05 billion), or the working-capital adjustment mechanism;
• No change to the escrow arrangements, including the $25 million working-capital adjustment escrow;
• No change to the indemnification provisions, including the survival periods, basket and cap amounts, or the scope of fundamental representations;
• No change to the termination fee or reverse termination fee provisions (if any);
• No change to the representations and warranties, covenants, or conditions precedent (other than the extension of the outside date); and
• No change to the governing law, which remains Delaware, consistent with the original EPA.
The First Amendment will be executed by all parties to the EPA: the selling shareholders (Timberline Growth Equity Fund III, LP; the Weir Family Trust; and the Management Rollover Pool), Cascadia Renewables Holdings, Inc. (as the company), and Cascadia Acquisition Corp. (as the buyer). The Seller Representative (Timberline Growth Equity Fund III, LP, acting through its general partner) will execute on behalf of the selling shareholders to the extent authorized by the seller-representative provisions of the EPA.
IV. Impact on ICM Cascadia Co-Invest, LP
A. LP Agreement Provisions
A critical question for Ironside is whether the proposed outside date extension requires any action or consent on its part under the LP Agreement governing the Vehicle.
GP Authority to Consent to EPA Amendments. The LP Agreement grants Meridian GP IV LLC, as general partner of the Vehicle, broad authority to manage the affairs of the Vehicle and to take such actions as the GP deems necessary or appropriate in connection with the Vehicle's investment. Specifically, Section 5.01 of the LP Agreement provides that the GP shall have full power and authority to manage the business and affairs of the Partnership, including the authority to negotiate, execute, amend, and terminate agreements on behalf of the Partnership. Section 5.01(g) further provides that the GP is authorized to consent to amendments of the EPA and any ancillary agreements on behalf of the Vehicle, provided that such amendments do not (i) materially adversely affect the economic interests of the limited partners or (ii) increase any limited partner's capital commitment without such limited partner's written consent.
The proposed First Amendment does not increase Ironside's commitment beyond the agreed $300,000,000, nor does it alter the Vehicle's economic terms (including the carried interest, preferred return, or allocation waterfall). On its face, the extension of the outside date also does not appear to "materially adversely affect" Ironside's economic interests, although a colorable argument could be made that the extension subjects Ironside's deployed capital to additional time-value risk and prolongs the period of uncertainty. We do not believe this argument would be sufficient to override the GP's authority under Section 5.01(g), but it is worth noting for the record.
Accordingly, Meridian GP IV LLC has the authority under the LP Agreement to consent to the First Amendment on behalf of the Vehicle without obtaining Ironside's prior written consent as limited partner.
Material Impediment Event. Notwithstanding the GP's authority to approve the amendment, LP Agreement Section 7.04 — "Material Impediment Events" — merits careful attention. Under Section 7.04(a), a "Material Impediment Event" is defined as the occurrence of any event or circumstance that, in the reasonable judgment of the GP, makes it unlikely that the closing of the transaction contemplated by the EPA will occur, including without limitation (i) the failure or inability to satisfy any material closing condition, (ii) the occurrence of a Material Adverse Effect, or (iii) the termination or threatened termination of the EPA.
The extension of the outside date itself does not constitute a Material Impediment Event. However, the underlying concession renegotiation — particularly if it progresses in a direction that threatens the satisfaction of a closing condition — could trigger the GP's obligation to consider whether a Material Impediment Event should be declared. If the GP determines, in its reasonable judgment, that a closing condition is not reasonably likely to be satisfied within 90 days, Section 7.04(b) requires the GP to deliver a Material Impediment Notice to the limited partners, setting forth the GP's assessment of the situation and the options available to the Vehicle.
At this time, the GP has not declared a Material Impediment Event, and the extension of the outside date suggests that all parties believe the transaction remains viable and that the closing conditions can be satisfied within the extended timeframe. Nevertheless, C&H recommends that Ironside request formal written confirmation from Meridian GP IV LLC that the extension does not constitute a Material Impediment Event and that the GP will promptly notify Ironside if circumstances change such that a Material Impediment Event should be declared.
GP Notice and Communication Obligations. Separately from the Material Impediment Event provisions, Section 6.02 of the LP Agreement requires the GP to provide prompt written notice to the limited partners of any material development affecting the Vehicle's investment. While the GP satisfied this obligation with respect to the concession renegotiation through the November 10, 2022 notification, C&H recommends that Ironside formally request that the GP provide continuing updates on the status of the concession renegotiation, the regulatory approval proceedings, and the closing timeline, in each case on a frequency no less than bi-weekly during the extended pre-closing period.
B. Side Letter Protections
The Side Letter dated July 29, 2022, between Ironside and Meridian GP IV LLC, provides Ironside with certain enhanced protections beyond those contained in the LP Agreement. These protections remain in full force and effect and are not affected by the First Amendment.
Enhanced Reporting. Section 3 of the Side Letter requires the GP to provide Ironside with quarterly reports on the status of the Vehicle's investment, including financial reports, regulatory updates, and a narrative summary of material developments. The Side Letter also requires the GP to provide ad hoc reports within five (5) business days of the occurrence of any material development that could reasonably be expected to affect the Vehicle's investment or the closing timeline. Ironside should confirm in writing that the GP acknowledges the continuing applicability of these reporting obligations during the extended pre-closing period and will provide timely updates on the concession renegotiation status, including copies of any material correspondence with the PMWD, any draft or final revised concession terms, and any analysis of the financial impact of the renegotiation on Cascadia's revenue and EBITDA.
Most-Favored-Nation. Section 5 of the Side Letter contains a most-favored-nation ("MFN") provision, pursuant to which Ironside is entitled to receive the benefit of any more favorable terms granted to any other co-investor in the Vehicle. As of the date of this memorandum, Ironside is the sole limited partner and no other co-investor has been admitted. However, if any additional co-investor is admitted in connection with the extension or otherwise, and receives more favorable economic or governance terms, the MFN provision would entitle Ironside to elect to receive those same terms. C&H recommends that Ironside request confirmation from the GP that no additional co-investors are being admitted and that the MFN provision remains in full force and effect.
C. Wind-Down Right Timeline
Under LP Agreement Section 7.04(c), Ironside has the right to elect to wind down the Vehicle if a "Dormancy Period" exceeds eighteen (18) months. A Dormancy Period commences upon the occurrence of a "Dormancy Event," which is defined as the declaration by the GP of a Material Impediment Event followed by a determination by the GP that the transaction will not close and that the Vehicle's assets should be preserved pending orderly disposition.
As of the date of this memorandum, no Material Impediment Event has been declared, and the Vehicle is not in dormancy. The extension of the outside date does not itself trigger dormancy; rather, the extension is predicated on the parties' shared expectation that the transaction will proceed to closing within the extended timeframe. However, the extension does prolong the pre-closing period, which has the practical effect of pushing further into the future the earliest possible date at which Ironside could exercise its wind-down right if the transaction ultimately fails to close.
To illustrate: if the transaction does not close by March 31, 2023, and the GP subsequently declares a Material Impediment Event and commences a Dormancy Period, the 18-month wind-down election clock would begin running from the date of that declaration — not from the date of the First Amendment or the original EPA signing date. This means that in a worst-case scenario, Ironside's deployed capital could remain tied up in the Vehicle for a considerable period before the wind-down right becomes available.
C&H recommends that Ironside be aware of this timeline risk and consider requesting that the First Amendment, or a side agreement between Ironside and the GP, provide for an accelerated wind-down mechanism in the event that the transaction does not close by the extended outside date of March 31, 2023. At a minimum, Ironside should preserve its right to argue that the GP should declare a Material Impediment Event if the closing conditions remain unsatisfied as of March 31, 2023, thereby starting the Dormancy Period clock at the earliest reasonable date.
D. Capital at Risk
Ironside has contributed $22,500,000 to the Vehicle pursuant to Capital Call #1 (August 15, 2022). These funds have been deployed as summarized in Section II.D above, primarily to cover organizational expenses, the placement-agent fee, the R&W insurance premium deposit, due-diligence costs, and a working-capital reserve.
The extension of the outside date does not, in itself, trigger any additional capital call. However, Ironside should be aware that the extended pre-closing period may give rise to additional costs that the GP could fund through a subsequent capital call from the unfunded commitment of $277,500,000. Such costs could include:
• Additional due-diligence costs related to the concession renegotiation (e.g., engagement of independent consultants to assess the financial impact of revised concession terms);
• Extension fees or consent fees payable to the lenders under the debt commitment letter (discussed in Section V.A below);
• Additional R&W insurance premium or adjustments required by Northgate (discussed in Section V.B below);
• Legal fees and expenses incurred by the GP, BSP, and other advisors in connection with the negotiation and execution of the First Amendment and the concession renegotiation; and
• Any other costs or expenses arising from the extended pre-closing period.
Any subsequent capital call would be subject to the notice and procedural requirements of LP Agreement Section 4.01, which requires the GP to provide at least ten (10) business days' advance written notice of a capital call, specifying the amount and purpose of the call. Ironside should monitor for any indication from the GP that a subsequent capital call may be forthcoming and should request advance notice of any anticipated additional costs.
The total capital at risk for Ironside, as of the date of this memorandum, is $22,500,000. In the event that the transaction does not close and the Vehicle is wound down, Ironside's recovery of this capital would depend on the extent to which the costs already incurred are recoverable (e.g., recovery of the R&W insurance premium if the policy is cancelled; recovery of due-diligence deposits). As discussed in greater detail in Section VIII, the preservation of the transaction through the extension provides the best opportunity to avoid the realization of losses on this deployed capital.
V. Impact on Financing Commitments
A. Debt Commitment Letter Status
The debt financing for the transaction is governed by a commitment letter (the "Commitment Letter") executed on August 30, 2022, by Atlas National Bank, N.A. ("Atlas"), as lead arranger and administrative agent, and Pinnacle Credit Partners LLC ("Pinnacle"), as co-lender. The Commitment Letter provides for:
• A senior secured term loan in the aggregate principal amount of $975,000,000, allocated $650,000,000 to Atlas and $325,000,000 to Pinnacle; and
• A revolving credit facility in the aggregate principal amount of $150,000,000, committed by Atlas.
The Commitment Letter is governed by New York law and is subject to customary conditions precedent to funding, including the execution of definitive credit documentation, the accuracy of specified representations, the absence of a material adverse change in the borrower's financial condition, and the simultaneous equity contribution by Fund IV and ICM Co-Invest.
Termination Date Alignment. A critical question is whether the Commitment Letter's termination date is aligned with, or tied to, the EPA outside date. Commitment letters in leveraged acquisition financings typically include either (i) a fixed termination date, after which the lenders' commitments expire, or (ii) a termination date that is expressly tied to the outside date of the acquisition agreement, with an automatic adjustment if the outside date is extended.
If the Commitment Letter contains a termination date that is expressly tied to the EPA outside date (which is the more common approach), the extension of the outside date to March 31, 2023 should result in an automatic extension of the Commitment Letter termination date to the same date. However, if the Commitment Letter contains a fixed termination date (e.g., December 31, 2022 or January 31, 2023), a separate lender consent or amendment to the Commitment Letter would be required to extend the lenders' commitments to March 31, 2023.
C&H has requested a copy of the Commitment Letter from BSP to confirm the mechanics of the termination date provision. As of the date of this memorandum, we have not yet received the document and are relying on the summary provided by BSP during our November 18, 2022 discussion.
Potential Extension Fees and Repricing Risk. Even if the Commitment Letter's termination date is automatically extended in connection with the EPA extension, the lenders may seek to exercise certain rights in connection with the passage of time. Specifically:
• Extension Fees. Some commitment letters include provisions requiring the borrower or sponsors to pay an extension fee (typically expressed as a percentage of the commitment amount) if the closing does not occur within a specified period after the initial commitment date. If the Atlas/Pinnacle Commitment Letter includes such a provision, the extension fee could be substantial given the size of the commitment ($975 million plus $150 million).
• Market Flex. Commitment letters typically include "market flex" provisions that permit the lead arranger to adjust the pricing, structure, or terms of the debt facilities to reflect changes in market conditions. Since the Commitment Letter was executed on August 30, 2022, credit market conditions have evolved, and the lenders may seek to exercise market flex provisions to increase interest rates, add additional covenants, or modify other terms. Any such adjustment could increase the cost of capital for the transaction, which would be borne by the equity investors (Fund IV and ICM Co-Invest) to the extent the increased costs reduce distributable cash flow.
C&H notes that Meridian, as sponsor and general partner of Fund IV, bears the primary responsibility for managing the lender relationship and ensuring that the debt financing remains in place through the closing. However, any extension fee, repricing, or other modification to the debt terms could affect the total transaction costs and, therefore, the sources-and-uses balance. To the extent that additional transaction costs reduce the equity value of Cascadia or require additional equity contributions from the sponsors, Ironside's economic position could be adversely affected.
C&H recommends that Ironside request formal written confirmation from Meridian and BSP that:
(i) the lenders have consented to the extension of the outside date, or the Commitment Letter's termination date automatically adjusts to March 31, 2023;
(ii) no extension fee or other incremental cost has been incurred or is expected to be incurred by the Buyer, the Vehicle, or the sponsors in connection with the extension; and
(iii) no market flex provisions have been exercised or are reasonably expected to be exercised by the lenders, and the pricing and terms of the debt facilities remain as originally committed.
B. R&W Insurance Policy
The representations and warranties insurance policy (the "R&W Policy") was bound on September 1, 2022, with Northgate Specialty Insurance Co. ("Northgate") as the insurer. The R&W Policy bears Policy Number NSW-RI-2022-09814 and provides coverage with a limit of $195,000,000, representing 10% of the $1.95 billion enterprise value. The premium deposit of $4,875,000 (2.5% of the $195 million coverage limit) was paid on September 2, 2022, from the proceeds of Capital Call #1. The R&W Policy is governed by Connecticut law.
The R&W Policy was underwritten based on the representations and warranties contained in the EPA as executed on September 15, 2022, and the diligence materials provided to Northgate's underwriting team during the underwriting process. The policy is a "buy-side" policy, providing coverage to the Buyer (Cascadia Acquisition Corp.) for losses arising from breaches of the sellers' representations and warranties in the EPA, subject to customary exclusions, retention amounts, and policy limits.
Effective Date and Closing Contingency. The R&W Policy is "bound" — meaning that Northgate has committed to provide coverage — but the coverage does not attach until the closing of the transaction. If the closing is delayed to March 31, 2023, the effective date of coverage under the R&W Policy would shift accordingly. C&H must confirm that the R&W Policy does not contain a sunset provision or a maximum binding period after which the policy lapses or requires renewal if the closing has not occurred.
Many R&W insurance policies include a provision stating that the policy must "attach" (i.e., coverage must become effective upon closing) within a specified period — often 90 or 120 days — after the binding date. If the R&W Policy contains such a provision, the extension of the outside date to March 31, 2023 — approximately seven months after the September 1, 2022 binding date — could exceed the maximum binding period, potentially requiring a policy extension, additional premium, or re-underwriting.
Concession Renegotiation and Coverage Scope. Of particular concern is the potential impact of the concession renegotiation on the scope of coverage under the R&W Policy. The Renegotiation Notice from the PMWD, and the ongoing renegotiation of the Bull Run Concession, constitute a development that occurred after the binding of the R&W Policy and after the execution of the EPA. Depending on how the underwriters view this development:
• Northgate may take the position that the concession renegotiation constitutes a "known issue" that is excluded from coverage under the R&W Policy, either pursuant to a general exclusion for matters known to the insured or pursuant to a specific exclusion that Northgate may seek to add as a condition to extending the policy through the new outside date;
• Alternatively, Northgate may require updated diligence disclosures regarding the concession renegotiation and, based on its review, may seek to narrow the scope of certain representations and warranties covered by the policy (e.g., representations regarding the validity and enforceability of material contracts, the absence of defaults under material contracts, or the accuracy of revenue projections); or
• In the best case, Northgate may confirm that the existing coverage remains in full force and effect without modification, on the basis that the renegotiation notice does not, by itself, constitute a breach of any representation or warranty.
C&H recommends immediate engagement with Northgate to obtain confirmation regarding the policy's status, any sunset or maximum binding period provisions, and the impact (if any) of the concession renegotiation on coverage scope. This engagement should be coordinated with BSP, as the R&W Policy was procured through Meridian's insurance broker and BSP managed the placement process.
C. Placement-Agent Fee
Rivermark Capital Markets Inc. ("Rivermark") served as the placement agent for the Vehicle and was paid a placement-agent fee of $1,050,000, calculated as 0.35% of the $300,000,000 committed capital. The fee was paid at the first close on July 29, 2022, from the proceeds of Capital Call #1.
No additional placement-agent fee is triggered by the extension of the outside date. The engagement letter between the Vehicle and Rivermark, dated June 15, 2022, provides for a one-time fee payable upon the initial closing of the Vehicle and does not contain any provisions tied to the timing of the underlying acquisition closing. C&H has reviewed the Rivermark engagement letter and confirms that it does not contain any provisions that would be triggered by the delay, extension, or restructuring of the transaction. No further action is required with respect to the Rivermark engagement.
VI. Regulatory Timeline Implications
A. FERC §203 Approval
The application for approval under Section 203 of the Federal Power Act, 16 U.S.C. § 824b, was filed with the Federal Energy Regulatory Commission ("FERC") on October 19, 2022. The application was assigned Docket No. EC22-143-000 and seeks FERC authorization for the change in control of Cascadia's FERC-jurisdictional hydroelectric generation assets resulting from the acquisition.
Based on publicly available information regarding FERC processing timelines for Section 203 applications of similar complexity, C&H anticipates that FERC approval will be received in the near term. Section 203 applications involving the transfer of control of generation assets are typically processed within 60 to 90 days of filing, assuming no objections or requests for evidentiary hearing are filed. As of the date of this memorandum, no interventions or protests have been filed in Docket No. EC22-143-000, and the FERC staff review appears to be proceeding on a normal timeline. Based on this trajectory, approval is anticipated by approximately December 15, 2022.
FERC Section 203 approvals are typically conditioned on the completion of certain post-approval filings, including the filing of updated market-based rate authorization applications reflecting the change in ownership and the submission of license-transfer applications for any FERC-licensed hydroelectric projects (applicable to a portion of Cascadia's 14 hydroelectric facilities). These post-approval filings would be handled by the Buyer and Cascadia after the closing.
Importantly for purposes of the outside date extension, FERC Section 203 approvals typically include an 18-month lapse provision, pursuant to which the authorization expires if the transaction does not close within 18 months of the approval date. If FERC approval is received on or about December 15, 2022, the 18-month window would extend to approximately June 15, 2024. This provides a substantial buffer relative to the proposed March 31, 2023 outside date, and the FERC approval should not be at risk even if the closing is delayed beyond March 31, 2023.
C&H will continue to monitor the FERC proceeding and will notify Ironside promptly upon receipt of the FERC order.
B. OPUC Approval
The application for approval by the Oregon Public Utility Commission ("OPUC") of the change of control of Cascadia's OPUC-regulated assets was filed on October 14, 2022, and has been assigned Docket No. UM-2287. The OPUC application is required because certain of Cascadia's hydroelectric and water-treatment assets are classified as public utilities subject to OPUC jurisdiction under Oregon Revised Statutes Chapter 757.
The OPUC approval process is significantly more involved and time-consuming than the FERC process. OPUC change-of-control proceedings typically require six to twelve months from the date of filing, depending on the complexity of the transaction, the level of public interest, and the commission's hearing calendar. The process generally includes:
(i) A public notice and comment period, during which interested parties (including ratepayer advocacy groups, environmental organizations, and other stakeholders) may file comments or petitions to intervene;
(ii) A staff review and investigation, during which OPUC staff evaluates the application and may issue information requests to the applicant;
(iii) A public hearing or evidentiary hearing, if requested by staff, intervenors, or the commission;
(iv) The issuance of a proposed order by the Administrative Law Judge ("ALJ"), followed by a briefing period and oral argument before the full commission; and
(v) The issuance of a final order by the commission, which may include conditions or commitments imposed on the applicant.
Given that the application was filed on October 14, 2022, the OPUC process is still in its early stages. The public notice and comment period is expected to close in late November or early December 2022. As of the date of this memorandum, no interventions or protests have been filed, though this is not unusual given the early stage of the proceeding.
The original December 31, 2022 outside date was, with the benefit of hindsight, unrealistic for OPUC approval. Even in the most expedited proceedings, OPUC rarely issues a final order within 60 to 75 days of the filing date. The extension to March 31, 2023 provides an additional three months, but there is a meaningful risk that even the extended outside date may prove insufficient for full OPUC approval. This risk is heightened by the concession renegotiation, which may complicate the OPUC's review. Specifically, the OPUC may take the position that it cannot meaningfully evaluate the financial impact of the change of control on Cascadia's regulated operations until the terms of the revised Bull Run Concession are known. If the commission elects to defer action on the application pending resolution of the renegotiation, the OPUC approval timeline could extend well beyond March 31, 2023.
C&H recommends that Ironside raise this timing concern with Meridian and BSP and request that the parties discuss contingency plans for a further extension beyond March 31, 2023 in the event that OPUC approval is not obtained by that date. One option would be to include in the First Amendment a mechanism for one or more additional automatic extensions (e.g., successive 90-day extensions at the mutual election of the parties), which would avoid the need for repeated amendment negotiations and the associated transaction costs.
C. CFIUS. As noted above, a voluntary notice was filed with the Committee on Foreign Investment in the United States in connection with the transaction, which was acknowledged by CFIUS on September 20, 2022, with no further action required. The CFIUS review is complete, and the extension of the outside date has no impact on the CFIUS clearance. No further action is required with respect to CFIUS.
VII. Analysis of Concession Renegotiation Impact on Closing Conditions
A. No-MAE Closing Condition
The EPA contains a closing condition (Section 8.02(a)) requiring that no Material Adverse Effect shall have occurred with respect to Cascadia since the signing date. The definition of "Material Adverse Effect" in the EPA is detailed and includes carve-outs for changes attributable to general economic conditions, industry-wide conditions, changes in law, and certain other specified categories of events, in each case except to the extent such changes disproportionately affect Cascadia relative to its peers.
C&H addressed the interaction between the concession renegotiation and the MAE definition in a separate memorandum dated November 14, 2022, delivered to Marcus J. Calloway and Renata Obasi. The key conclusions of that memorandum, which remain applicable, are summarized as follows:
(i) The issuance of the Renegotiation Notice by the PMWD, standing alone, likely does not constitute an MAE. A notice of intent to renegotiate is a preliminary step that does not, by itself, result in any change to the terms of the concession or any reduction in revenue. The MAE analysis is focused on the actual impact on the business, not on the risk of a future impact.
(ii) However, a materially adverse outcome of the renegotiation — such as a significant reduction in the annual concession fee, the imposition of burdensome capital expenditure requirements, or, in an extreme scenario, the termination of the concession — could, depending on its magnitude and duration, constitute an MAE. The $64 million annual revenue from the Bull Run Concession represents approximately 13.1% of Cascadia's FY 2021 total revenue and a higher percentage of EBITDA, given the relatively fixed-cost nature of the concession operations. A significant reduction in this revenue stream could materially affect Cascadia's cash flow profile, debt service capacity, and overall enterprise value.
(iii) Whether a particular renegotiation outcome constitutes an MAE would require a fact-specific analysis at the time of closing, taking into account the magnitude of the impact, its duration, the availability of mitigation measures, and the applicability of any carve-outs in the MAE definition (including, notably, the "change in law" carve-out, which could be argued to encompass the effects of SB 1567).
The extension of the outside date provides additional time to assess whether the renegotiation will rise to the level of an MAE. If the renegotiation is resolved on commercially acceptable terms before the extended outside date, the no-MAE closing condition can likely be satisfied. If the renegotiation results in materially adverse terms, the Buyer (and, by extension, Ironside through its interest in the Vehicle) would have the ability to invoke the no-MAE condition and decline to close.
C&H will continue to monitor the renegotiation and will update the MAE analysis as developments warrant.
B. Third-Party Consent Condition
The EPA may contain a closing condition requiring that certain material third-party consents have been obtained, or that no material counterparty has exercised a right to terminate, modify, or renegotiate a material contract. The precise scope of this condition depends on the language of the EPA, which C&H is reviewing.
The Bull Run Concession renegotiation is not, at this stage, a termination of the concession. Rather, it is a counterparty-initiated renegotiation under a contractual "change in law" provision. Whether this triggers any third-party consent condition or contract-stability representation depends on:
(i) Whether the EPA's third-party consent condition is drafted to encompass renegotiations as well as terminations and modifications. Some EPA consent conditions are broad enough to encompass any adverse action by a material counterparty, while others are limited to terminations and assignments;
(ii) Whether the Bull Run Concession is listed as a "Scheduled Contract" or "Material Contract" on the disclosure schedules to the EPA, and whether the consent condition applies to all material contracts or only to those specifically identified; and
(iii) Whether any representation in the EPA regarding the status of material contracts (e.g., a representation that no material contract is subject to any pending or threatened renegotiation, modification, or termination) has been breached by the PMWD's issuance of the Renegotiation Notice.
C&H is conducting a detailed review of the relevant EPA provisions and the disclosure schedules and will provide a separate analysis if this issue proves material to the closing analysis.
C. Risk of Further Delay
The extension of the outside date to March 31, 2023 provides an additional three months for the parties to satisfy the remaining closing conditions. However, there is a meaningful risk that the concession renegotiation and/or the OPUC approval process will not be resolved by that date. If the closing conditions remain unsatisfied as of March 31, 2023, the parties will face the same decision point that they face today: whether to extend the outside date further, declare an MAE and terminate the EPA, or seek alternative solutions (such as closing with a holdback or escrow mechanism for the concession renegotiation risk).
To mitigate this risk, C&H recommends that Ironside consider requesting that the First Amendment include a mechanism for one or more additional automatic extensions of the outside date. For example, the First Amendment could provide that if, as of March 31, 2023, the sole unsatisfied closing conditions are the OPUC approval and/or the resolution of the concession renegotiation, the outside date would automatically extend by an additional 90 days (to June 30, 2023) upon the mutual written election of the Buyer and the Seller Representative. This mechanism would avoid the need for a Second Amendment and the associated negotiation costs and timeline pressures. We recognize that the selling shareholders may resist such a provision, as extended timelines impose costs on sellers (including continued compliance with interim operating covenants and deferred receipt of sale proceeds), but we believe the proposal is commercially reasonable given the regulatory and contractual uncertainties at hand.
VIII. Ironside Strategic Considerations
A. Arguments in Favor of Supporting the Extension
Based on our analysis, there are compelling reasons for Ironside to support the First Amendment and the extension of the outside date to March 31, 2023:
1. Attractive Underlying Asset Base. The Cascadia portfolio — comprising 14 hydroelectric generation facilities, 6 wind farms, and 3 water-treatment concessions across Oregon, Washington, and Idaho — remains a highly attractive infrastructure investment. The portfolio benefits from long-duration, contracted revenue streams with a weighted-average remaining contractual life of approximately 22 years, providing substantial cash flow visibility and predictability. The asset base is well-positioned to benefit from secular tailwinds in renewable energy and water infrastructure, including increasing regulatory support for clean energy and growing demand for water-treatment capacity in the Pacific Northwest.
2. Concession Renegotiation Is Limited in Scope. The concession renegotiation affects only one of Cascadia's three water-treatment concessions, representing approximately $64 million in annual revenue out of a total of $487 million (approximately 13.1%). While the Bull Run Concession is a meaningful contributor to Cascadia's revenue profile, it is not the dominant revenue driver, and the renegotiation may ultimately result in modified but commercially viable terms. The other 13 hydroelectric facilities, 6 wind farms, and 2 water-treatment concessions are not directly affected by the renegotiation or by SB 1567.
3. Preservation of Favorable Financing Terms. The acquisition financing provided by Atlas National Bank and Pinnacle Credit Partners, committed in August 2022, reflects favorable credit market conditions. The $975 million senior secured term loan and $150 million revolving credit facility were committed at pricing and terms that may not be available if the transaction were terminated and subsequently relaunched. Given the significant tightening of credit markets since August 2022, including rising interest rates and widening credit spreads, terminating the EPA and forfeiting the committed financing could result in materially higher borrowing costs in any subsequent transaction. The extension preserves the benefit of the existing commitment.
4. Protection of Sunk Costs. Ironside has already deployed $22,500,000 in capital call proceeds, including $285,000 in organizational expenses, $1,050,000 in placement-agent fees, $4,875,000 in R&W insurance premium, $12,790,000 in due-diligence costs and deposits, and $3,500,000 in working-capital reserves. If the EPA is terminated without the transaction closing, a significant portion of these costs — particularly the organizational expenses, placement-agent fee, and a portion of the due-diligence costs — would be unrecoverable. The R&W insurance premium may be partially recoverable upon policy cancellation, depending on Northgate's cancellation terms, but this is uncertain. The exte

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MATTER NO.: 1023-00001

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