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

ironside-rights-remedies-mae-memo.docx DOCUMENT Funds

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MEMORANDUM

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

FROM: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP, Funds & Asset Management Group Theresa Kim, Lead Associate, Calderwood & Harkness LLP, Funds & Asset Management Group

DATE: November 18, 2022

RE: Ironside's Rights and Remedies Under Limited Partnership Agreement of ICM Cascadia Co-Invest, LP in the Event of a Material Adverse Effect or Failed Closing

C&H Matter No.: 1023-00001

I. Executive Summary

The purpose of this memorandum is to analyze the contractual rights and remedies available to Ironside Capital Management LP ("Ironside" or the "LP") under the Amended and Restated Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest"), dated July 29, 2022 (the "LP Agreement"), in connection with recent material adverse developments affecting the proposed acquisition of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"). Specifically, on October 28, 2022, the Portland Metropolitan Water District issued formal notice to Cascadia of its intent to renegotiate the 40-year Bull Run Filtration Project water-treatment concession, which generates approximately $64 million in annual revenue. The concession renegotiation was initiated pursuant to Oregon Senate Bill 1567 (2022) and remains ongoing without resolution as of the date of this memorandum.

Meridian Infrastructure Partners LP ("Meridian") notified Ironside of this material adverse development on November 10, 2022, approximately two weeks after Cascadia received the Portland Metropolitan Water District's notice. The delay in notification is itself a matter that warrants attention in the context of the GP's reporting obligations, though we do not address that issue in detail here. In the interim, the parties have commenced discussions regarding an extension of the outside date under the Equity Purchase Agreement ("EPA"), and the renegotiation process initiated under Oregon SB 1567 remains open with no indication of a timeline for resolution.

This memorandum analyzes three principal scenarios and their implications for Ironside's rights under the LP Agreement:

(A) A Material Adverse Effect under the EPA leading to non-closing of the acquisition, and the resulting capital return and wind-down mechanisms available to Ironside under the LP Agreement;

(B) Failed closing due to the failure of conditions precedent other than a Material Adverse Effect — including regulatory failure (FERC or OPUC denial), financing failure, or buyer default — and the allocation of economic risk and reverse termination fee exposure as between Fund IV and the Co-Invest; and

(C) A GP declaration of a "Material Impediment Event" under LP Agreement §7.04, leading to dormancy of the Vehicle and, potentially, the maturation of Ironside's unilateral wind-down election right 18 months after dormancy commences pursuant to §7.04(c).

Our key conclusion is that Ironside possesses significant contractual protections under the LP Agreement across all three scenarios. These protections include robust capital return provisions requiring the GP to distribute remaining Vehicle cash and assets net of specified deductions upon EPA termination, expense allocation rights that constrain the GP's ability to charge the Vehicle for costs not properly attributable to it, limitations on GP liability that focus Ironside's remedies on contractual mechanisms rather than damages claims, and — most critically — the wind-down election right under §7.04(c), which matures 18 months after the commencement of dormancy and entitles Ironside, acting unilaterally, to compel an orderly wind-down of the Vehicle. The 18-month dormancy clock, if triggered, represents Ironside's ultimate backstop against indefinite deployment of its capital in a non-performing co-investment structure.

We note that this memorandum should be read in conjunction with two companion Calderwood & Harkness memoranda:

(i) the memorandum dated November 14, 2022, analyzing the definition of "Material Adverse Effect" under the EPA and assessing whether the Bull Run concession renegotiation satisfies that definition, including a review of applicable carve-outs and quantitative materiality thresholds; and

(ii) the memorandum dated November 20, 2022 (forthcoming), addressing the considerations relevant to any extension of the EPA outside date, including the implications for Ironside's rights under the LP Agreement, the debt commitment letter, and the R&W insurance policy.

This memorandum does not address the merits of the underlying investment thesis for the Cascadia acquisition, nor does it opine on the commercial desirability of proceeding with or abandoning the transaction. Those determinations are the province of Ironside's investment team.

II. Background and Context

A. The Co-Investment Vehicle

ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest") is a Delaware limited partnership formed on July 22, 2022, by the filing of a Certificate of Limited Partnership with the Delaware Secretary of State (Delaware Secretary of State File Number 7439218; Federal Employer Identification Number 88-3921457). The Vehicle was formed for the specific and sole purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the acquisition of 100% of the equity of Cascadia Renewables Holdings, Inc.

The general partner of the Vehicle is Meridian Infrastructure GP IV LLC ("Meridian GP IV" or the "GP"), a Delaware limited liability company and an affiliate of Meridian Infrastructure Partners LP. Meridian GP IV holds a 0.01% general partner interest in the Vehicle, representing a capital commitment of $30,000. The GP is responsible for the management and operation of the Vehicle in accordance with the LP Agreement.

The sole limited partner of the Vehicle is Ironside Capital Management LP, which holds a 99.99% limited partner interest, representing a capital commitment of $299,970,000. The total committed capital of the Vehicle is $300,000,000.

The LP Agreement was executed on July 29, 2022, contemporaneously with the Co-Investment Allocation Agreement between Fund IV and the Vehicle and with certain ancillary documents, including a Side Letter between Ironside and Meridian GP IV. The LP Agreement is governed by the laws of the State of Delaware without regard to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.

The stated purpose of the Vehicle under the LP Agreement is to co-invest alongside Fund IV in the acquisition of 100% of the outstanding equity interests of CRH through Cascadia Acquisition Corp., a newly formed Delaware corporation organized as a wholly owned acquisition subsidiary. The Vehicle has no operations, employees, or assets other than those directly related to the proposed acquisition.

B. The Underlying Acquisition

The acquisition target is Cascadia Renewables Holdings, Inc., an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia is a diversified renewable energy and water infrastructure company that owns and operates a portfolio of 14 hydroelectric facilities, 6 wind farms, and 3 water-treatment concessions across the states of Oregon, Washington, and Idaho. The company was founded in 2006 and has been majority-owned by Timberline Growth Equity Fund III, LP since its Series C financing round in 2012.

The selling shareholders in the proposed acquisition are: (i) Timberline Growth Equity Fund III, LP, holding approximately 62% of Cascadia's outstanding equity; (ii) the Weir Family Trust (Jonathan M. Weir, Trustee), holding approximately 18% of Cascadia's outstanding equity; and (iii) the Management Rollover Pool, holding approximately 20% of Cascadia's outstanding equity, of which approximately 50% (representing 10% of total equity) is expected to be rolled over into the post-acquisition capital structure.

The acquisition is being pursued at an enterprise value of $1,950,000,000, implying an EV/EBITDA multiple of approximately 14.1x based on Cascadia's fiscal year 2021 adjusted EBITDA of $138 million, as reported in the audited financial statements prepared by Halstead & Greer LLP. Cascadia reported total revenue of $487 million for fiscal year 2021. The implied equity value is approximately $1,050,000,000, calculated as the enterprise value of $1.95 billion less net debt of approximately $900 million.

The total equity required for the acquisition is $1,050,000,000, allocated between Fund IV and the Co-Invest as follows:

The Equity Purchase Agreement (the "EPA") was executed on September 15, 2022, among the Selling Shareholders, Cascadia, and Cascadia Acquisition Corp. as the buyer. The EPA is governed by the laws of the State of Delaware. The original outside date under the EPA is December 31, 2022, by which date the closing of the acquisition must occur unless the EPA is terminated or the outside date is extended by agreement of the parties.

The acquisition is to be financed with a combination of equity contributions from Fund IV and the Co-Invest and senior secured debt. The debt financing package consists of: (i) a $975 million senior secured term loan, provided by Atlas National Bank, N.A. (as Administrative Agent and Lead Arranger, committing $650 million) and Pinnacle Credit Partners LLC (as Co-Lender, committing $325 million); and (ii) a $150 million revolving credit facility provided by Atlas National Bank, N.A. A debt commitment letter reflecting these terms was executed on August 30, 2022.

The following table summarizes the total sources and uses for the proposed acquisition:

C. The Material Adverse Development

On October 28, 2022, the Portland Metropolitan Water District (the "PMWD") delivered formal written notice to Cascadia of the PMWD's intent to renegotiate the terms of the Bull Run Filtration Project water-treatment concession. The Bull Run concession was originally executed in approximately 2018 and has a 40-year term. Annual revenue attributable to the Bull Run concession is approximately $64 million, representing one of three water-treatment concessions held by Cascadia and constituting a material component of Cascadia's contracted revenue base.

The PMWD's notice invokes its right to renegotiate under Oregon Senate Bill 1567 (2022), which was enacted during the 2022 legislative session and introduced new regulatory requirements applicable to municipal water-treatment concessions, including enhanced environmental compliance standards, revised rate-setting methodologies, and expanded public oversight mechanisms. The PMWD's notice cites changed regulatory requirements under SB 1567 as the basis for the renegotiation demand and does not specify proposed revised terms. Formal renegotiation proceedings commenced in November 2022 and remain ongoing as of the date of this memorandum, with no resolution or interim agreement in place.

On November 10, 2022, Meridian notified Ironside of the PMWD's renegotiation notice and initiated discussions regarding the potential implications for the acquisition and the Co-Invest. We note that the approximately two-week delay between Cascadia's receipt of the PMWD notice (October 28) and Meridian's notification to Ironside (November 10) is a matter that Ironside may wish to raise with the GP, particularly in the context of the enhanced reporting provisions contained in the Side Letter dated July 29, 2022, which require the GP to notify the LP of material developments affecting the Target or the acquisition "promptly" and in no event later than five business days following the GP's receipt of such information.

The materiality of the Bull Run concession renegotiation in the context of the Cascadia acquisition cannot be overstated. The Bull Run concession's annual revenue of approximately $64 million represents approximately 13.1% of Cascadia's total fiscal year 2021 revenue of $487 million. More significantly, the concession generates high-margin, contracted cash flows that are among the most predictable components of Cascadia's revenue base and that figured prominently in the valuation analysis underpinning the acquisition price. The renegotiation introduces significant uncertainty regarding the duration, pricing, and terms of the concession, which in turn calls into question the cash flow projections and the contracted revenue base upon which the enterprise value of $1.95 billion was predicated. The companion C&H memorandum dated November 14, 2022 analyzes this question in further detail.

As of the date of this memorandum, the parties are actively discussing a First Amendment to the EPA that would extend the outside date from December 31, 2022 to March 31, 2023, providing additional time for the concession renegotiation to develop and for the parties to assess its impact on the transaction. This First Amendment was subsequently executed on November 22, 2022. The implications of the outside date extension for Ironside's rights and the debt commitment letter are addressed in the companion C&H memorandum dated November 20, 2022.

D. Capital Position

A single capital call has been issued to Ironside since the formation of the Vehicle. On August 15, 2022, the GP issued a capital call in the amount of $22,500,000, representing 7.5% of Ironside's total capital commitment of $300,000,000. Ironside funded the capital call in full and on time. The proceeds of the capital call were applied as follows:

Ironside's remaining unfunded commitment is $277,500,000. No distributions have been made to any partner of the Vehicle since its formation. The GP's pro rata share of the August 15 capital call ($2,250, representing 0.01% of $22,500,000) was funded contemporaneously.

III. Scenario Analysis: Ironside's Rights and Remedies

This Section III presents a detailed analysis of Ironside's rights and remedies under the LP Agreement and related transaction documents across three principal scenarios. Each scenario reflects a plausible path that the transaction may take in light of the Bull Run concession renegotiation and the broader uncertainty surrounding the closing.

A. Scenario 1: Material Adverse Effect Under the EPA — Non-Closing

1. MAE as a Closing Condition

Under Article VII of the EPA, the obligation of Cascadia Acquisition Corp. (and by extension, the equity investors — Fund IV and the Co-Invest — standing behind it) to consummate the closing of the acquisition is subject to a series of conditions precedent. Among the most significant of these conditions is the requirement set forth in EPA §7.02(a) that, as of the closing date, no Material Adverse Effect shall have occurred with respect to Cascadia since the date of execution of the EPA that is continuing as of the closing date.

The definition of "Material Adverse Effect" under the EPA is a negotiated provision of considerable specificity, the contours of which are analyzed in detail in the companion C&H memorandum dated November 14, 2022. For present purposes, we note that the definition contains a series of carve-outs — including carve-outs for general economic conditions, changes in applicable law and regulation, and industry-wide developments — that may or may not insulate the Bull Run concession renegotiation from constituting an MAE. The question turns in significant part on whether the concession renegotiation is properly characterized as a "change in applicable law" (since it arises from SB 1567) or as a company-specific commercial development. The companion memorandum analyzes the quantitative materiality thresholds that Delaware courts have applied in comparable contexts, including the benchmark established in Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), which remains the only Delaware Chancery decision to find that a Material Adverse Effect had occurred.

If a Material Adverse Effect has occurred and is continuing as of the outside date (currently March 31, 2023, as extended), the buyer parties — i.e., Cascadia Acquisition Corp. — would have the right, but not the obligation, to decline to close the acquisition. In such circumstances, the buyer parties would be entitled to terminate the EPA pursuant to EPA §9.01(b) (termination for failure of conditions precedent), without liability for any reverse termination fee or other damages, provided that the failure to close is not attributable to a breach by the buyer parties of their own obligations under the EPA.

2. Impact on Co-Invest Vehicle Upon EPA Termination for MAE

If the EPA is terminated as a result of a Material Adverse Effect (or for any other reason resulting in non-closing of the acquisition), the LP Agreement provides a structured mechanism for addressing the consequences to the Vehicle and its partners.

LP Agreement §7.02 — Consequences of Transaction Failure. Section 7.02 of the LP Agreement provides that if the EPA is terminated and the acquisition does not close for any reason — including, without limitation, the occurrence of a Material Adverse Effect — the GP is required to take certain specified actions with respect to the Vehicle's capital and operations. Section 7.02 functions as the principal provision governing the economic consequences of a failed transaction to the Vehicle's partners.

Capital Return Provisions — §7.02(a). Upon termination of the EPA, the GP is required to return to Ironside (as LP) its pro rata share of the remaining cash and assets of the Vehicle, net of the following deductions:

(i) all Vehicle expenses incurred or accrued through the date of distribution, including but not limited to organizational expenses, legal fees, accounting fees, administration fees, and regulatory filing costs;

(ii) reasonable reserves for contingent liabilities of the Vehicle, including any obligations arising from the EPA or ancillary transaction documents that survive termination (for example, confidentiality obligations, indemnification tail provisions, and regulatory undertakings); and

(iii) all costs and expenses of the wind-down of the Vehicle, including dissolution filings, final audit, tax return preparation, and any legal fees incurred in connection therewith.

Timing of Distribution. Section 7.02(a) provides that the return of capital is to commence "as promptly as practicable" following the effective date of EPA termination, but the GP retains the right to establish and retain reasonable reserves for the categories described above. The LP Agreement does not specify a maximum period for the retention of reserves, though the implied covenant of good faith and fair dealing under Delaware law would require the GP to act reasonably and in good faith in establishing and maintaining reserves. A final distribution would be made upon completion of the wind-down of the Vehicle and settlement of all outstanding obligations.

We note that the "as promptly as practicable" standard provides the GP with meaningful discretion regarding the timing of distributions. In practice, the wind-down of a single-purpose co-investment vehicle of this nature should be achievable within approximately six to twelve months following EPA termination, depending on the complexity of residual obligations. Ironside should be prepared to monitor the GP's compliance with this standard and to press for expeditious distributions.

3. Recoverability of Capital Called

A central concern for Ironside in a non-closing scenario is the recoverability of the $22,500,000 already called and funded. As detailed in Section II.D above, the capital call proceeds have been deployed to specific uses, each of which presents a different recoverability profile. We address each category in turn.

Organizational Expenses ($285,000). Organizational expenses — including Delaware filing fees, formation costs, and initial legal and accounting fees associated with the establishment of the Vehicle — are sunk costs. These amounts were incurred and paid at or near the time of the Vehicle's formation and are not recoverable in any scenario.

Placement-Agent Fee ($1,050,000). The placement-agent fee of $1,050,000 was paid to Rivermark Capital Markets Inc. pursuant to a placement-agent engagement letter that was reviewed by Calderwood & Harkness on July 18, 2022, as part of the Vehicle formation process. The engagement letter, as we reviewed it, does not contain a contractual clawback or refund provision that would require Rivermark to return any portion of the placement-agent fee in the event that the underlying transaction does not close. Accordingly, we consider this amount to be non-recoverable absent a renegotiation of the engagement terms, which we consider unlikely to succeed on a voluntary basis.

R&W Insurance Premium Deposit ($4,875,000). The representations and warranties insurance policy was issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) and was bound on September 1, 2022. The coverage limit under the policy is $195,000,000, representing approximately 10% of the enterprise value of the acquisition. The premium deposit of $4,875,000 represents 2.5% of the coverage limit.

If the transaction does not close, the R&W policy would never attach — that is, the coverage would never become effective — because R&W insurance is triggered only upon the closing of the insured transaction and relates to breaches of the seller's representations and warranties discovered post-closing. In such circumstances, the premium deposit may be subject to a partial or full refund, net of underwriting costs incurred by Northgate in evaluating and binding the policy. The typical market practice for R&W insurance policies is to provide for a cancellation fee or retention of a portion of the deposit (often in the range of 10% to 25% of the total deposit) to compensate the insurer for underwriting expenses, with the balance refundable to the insured. However, the specific terms of the Northgate policy must be reviewed to determine the precise refund mechanics. We recommend that C&H undertake a detailed review of the policy cancellation provisions, including any notice requirements and timing constraints, as a matter of priority. Our preliminary estimate is that between $3,650,000 and $4,390,000 of the premium deposit may be recoverable, depending on the applicable cancellation fee.

Due-Diligence Costs and Deposits ($12,790,000). This category encompasses a range of expenditures, including: (i) professional fees paid to legal advisors, accounting firms, environmental consultants, and engineering consultants engaged in connection with the diligence process; (ii) regulatory filing fees (including FERC and OPUC application fees); and (iii) deposits paid under the EPA or ancillary transaction documents.

Professional fees and regulatory filing fees that have already been paid to third-party service providers are generally non-recoverable, as they represent consideration for services rendered. The aggregate amount of such non-recoverable fees within this category is estimated at approximately $8,200,000 to $9,500,000, though a precise figure would require reconciliation against the Vehicle's accounts.

Deposits paid under the EPA or ancillary transaction documents present a more nuanced analysis. The recoverability of such deposits depends on the specific termination provisions of the EPA, including whether the termination is attributable to the buyer parties (in which case deposits may be forfeited) or to the seller parties or to conditions outside the buyer's control (in which case deposits may be refundable). If the EPA is terminated due to an MAE — which is, by its nature, not attributable to buyer breach — the buyer parties should have a strong argument for refund of any deposits. The estimated recoverable portion of deposits within this category is approximately $2,500,000 to $3,500,000, subject to the EPA's specific termination mechanics.

Working-Capital Reserve ($3,500,000). The working-capital reserve consists of cash held in the Vehicle's operating account at Atlas National Bank, N.A. This amount should be substantially recoverable, as it represents liquid cash that has not been deployed to third parties. The reserve would be reduced by any Vehicle-level operating expenses charged against it during the period between the date of this memorandum and the date of distribution, but such expenses are expected to be modest (estimated at approximately $15,000 to $25,000 per month for ongoing administration, registered agent fees, and bank charges).

Summary of Estimated Recovery. Based on the foregoing analysis, we estimate the net recovery of called capital as follows:

These estimates are preliminary and subject to further refinement based on detailed review of the relevant contractual provisions, policy terms, and actual expenditure reconciliation. The estimated net loss to Ironside on called capital in a non-closing scenario is therefore in the range of approximately $11,160,000 to $13,050,000, before consideration of any tax benefits that may be available from loss recognition. Tax consequences are to be addressed by Sylvia Hartwell in the C&H Tax group.

4. Unfunded Commitment

LP Agreement §4.01(d) — Limitation on Capital Calls Following EPA Termination. Section 4.01(d) of the LP Agreement provides an important protection for Ironside in the event of a failed transaction. Under this provision, following termination of the EPA, the GP may not issue further capital calls to the LP except for the following limited purposes:

(i) payment of Vehicle-level expenses and wind-down costs that are not covered by existing Vehicle cash and reserves; and

(ii) satisfaction of any obligations of the Vehicle arising from the EPA or ancillary transaction documents that survive termination of the EPA, including indemnification obligations, confidentiality undertakings, and regulatory commitments.

The practical significance of this provision is that Ironside's unfunded commitment of $277,500,000 would be effectively released upon completion of the wind-down of the Vehicle, except to the extent that post-termination capital is needed for the limited purposes described above. Given the single-purpose nature of the Vehicle and the limited scope of its obligations, the amount of any post-termination capital call is expected to be modest — likely in the range of $500,000 to $1,500,000, and in no event exceeding the wind-down capital call cap discussed in Section IV.C below.

Upon completion of the wind-down and final distribution, any remaining unfunded commitment would be permanently released, and Ironside would have no further funding obligation to the Vehicle.

B. Scenario 2: Failed Closing Due to Failure of Conditions Precedent Other Than MAE

This scenario addresses circumstances in which the acquisition fails to close not because of a Material Adverse Effect, but because of the failure of one or more other conditions precedent under the EPA. While the Bull Run concession renegotiation is the immediate catalyst for the present analysis, it is important for Ironside to understand the full range of closing risks and their implications under the LP Agreement.

1. Regulatory Failure

The acquisition is subject to regulatory approvals from multiple federal and state agencies, each of which constitutes a separate condition precedent to closing under the EPA.

FERC §203 Approval. Because Cascadia owns and operates hydroelectric facilities subject to the jurisdiction of the Federal Energy Regulatory Commission, the change in ownership effected by the acquisition requires approval under Section 203 of the Federal Power Act, 16 U.S.C. § 824b. An application for FERC approval was filed on October 19, 2022, and is currently pending before the Commission under Docket No. EC22-143-000. As of the date of this memorandum, no order has been issued. FERC approval is a condition to closing under EPA §7.01(c). If FERC denies the application or imposes conditions that are unacceptable to the buyer parties, the acquisition cannot proceed, and the consequences for the Vehicle would be analogous to those described under Scenario 1.

OPUC Approval. Cascadia's operations in Oregon are subject to the jurisdiction of the Oregon Public Utility Commission. An application for OPUC approval of the change in control was filed on October 14, 2022, and is pending under Docket No. UM-2287. OPUC approval is a condition to closing under EPA §7.01(d). The timeline for OPUC review is uncertain and may be affected by the Bull Run concession renegotiation, which involves a related but distinct Oregon regulatory process. If OPUC denies the application or imposes materially adverse conditions, the acquisition cannot close.

CFIUS. A voluntary notice was filed with the Committee on Foreign Investment in the United States in connection with the acquisition. The notice was acknowledged on September 20, 2022, and no further action has been required. We consider the CFIUS process to be effectively cleared and do not identify CFIUS as a meaningful closing risk.

Allocation of Regulatory Failure Risk. The allocation of risk associated with regulatory failure is an important consideration in the transactional context. Under the EPA, the buyer parties typically bear the risk of obtaining regulatory approvals necessary for closing. In many acquisition agreements involving regulated industries, the buyer group is subject to "hell or high water" covenants requiring the buyer to take all actions necessary to obtain regulatory approvals, including accepting divestitures, behavioral remedies, or conditions imposed by the relevant agencies. The extent of any "hell or high water" obligation in the EPA should be reviewed carefully by Ironside, as such obligations could require the buyer parties to accept regulatory conditions that materially alter the economics of the transaction. If such obligations exist and the buyer parties refuse to accept imposed conditions, the resulting failure to close could be characterized as a buyer breach, potentially triggering reverse termination fee exposure (as discussed in Section III.B.3 below).

We note that the LP Agreement does not itself address the allocation of regulatory risk at the Vehicle level; rather, the allocation is governed by the EPA and the Co-Investment Allocation Agreement. However, Ironside's economic exposure to regulatory failure flows through the Vehicle's participation in the acquisition.

2. Financing Failure

The debt financing for the acquisition consists of a $975 million senior secured term loan and a $150 million revolving credit facility, as evidenced by the debt commitment letter executed on August 30, 2022, by Atlas National Bank, N.A. and Pinnacle Credit Partners LLC. The conditions precedent to funding under the debt commitment letter are separate and distinct from the conditions precedent to closing under the EPA, though there is significant overlap.

A financing failure could arise in several circumstances:

(i) The lenders exercise market-flex provisions in the commitment letter to modify the pricing, structure, or terms of the debt financing in ways that render the financing uneconomic or otherwise unacceptable to the buyer parties;

(ii) The conditions precedent to funding under the commitment letter are not satisfied (for example, if the Bull Run concession renegotiation results in a decline in projected cash flows that triggers a coverage ratio test failure or other financial condition under the commitment letter);

(iii) The commitment letter expires (or is terminated) prior to closing, and replacement financing cannot be obtained on acceptable terms; or

(iv) The lenders simply decline to fund, notwithstanding satisfaction of conditions precedent, though this scenario would give rise to a breach of contract claim by the buyer parties against the lenders.

If the lenders decline to fund or the debt financing otherwise becomes unavailable, the equity investors — Fund IV and the Co-Invest — would face the choice of either (a) funding the full purchase price from equity (an additional $975 million, allocated between Fund IV and the Co-Invest in accordance with the Co-Investment Allocation Agreement), or (b) terminating the EPA and forgoing the acquisition. In the latter case, the consequences for the Vehicle would again be analogous to those described under Scenario 1.

LP Agreement Provisions on Capital Calls. Under LP Agreement §4.01, Ironside's obligation to fund capital calls is expressed in absolute terms during the investment period — that is, upon receipt of a valid capital call notice from the GP, Ironside is obligated to fund the called amount within ten business days, without set-off, counterclaim, or defense. However, the GP has sole discretion regarding whether and when to issue capital calls. If the GP determines not to proceed with the acquisition due to financing failure, the GP would not issue further capital calls for the acquisition itself, and the consequences for the Vehicle and Ironside would be governed by §7.02 (Consequences of Transaction Failure) and §7.04 (Material Impediment Event and Dormancy), as applicable.

We note that Calderwood & Harkness negotiated certain co-invest structural protections in the credit agreement term sheet, as reflected in the C&H comment letter to Atlas National Bank, N.A. dated September 6, 2022. These protections include: (i) a provision requiring the lenders to extend the commitment letter termination date if the EPA outside date is extended, subject to payment of an extension fee; (ii) a requirement that any market-flex modifications to the debt financing that would increase the equity contribution required from investors must be disclosed to the Co-Invest prior to implementation; and (iii) a covenant that the Co-Invest's exposure to debt financing conditionality be no greater than its pro rata share (28.57%) of total equity. Ironside should ensure that these protections remain effective in any amendment to the EPA or the debt commitment letter.

3. Buyer Default / Reverse Termination Fee

A scenario that warrants careful attention is one in which the acquisition fails to close due to a default by the buyer parties — i.e., Cascadia Acquisition Corp. and its equity sponsors — in circumstances where all conditions precedent to closing have been satisfied. In such a case, the EPA may provide for the payment of a reverse termination fee by the buyer parties to the Selling Shareholders as the sole and exclusive remedy for the buyer's failure to close.

The reverse termination fee under the EPA is understood to be in the range of 3% to 5% of the equity value, which would imply a fee of approximately $31,500,000 to $52,500,000 based on an equity value of $1,050,000,000. The precise amount and triggering conditions are set forth in EPA §9.03, which we have reviewed in connection with the companion memoranda.

Allocation Between Fund IV and Co-Invest. Under the Co-Investment Allocation Agreement executed on July 29, 2022, all transaction-level economic costs and liabilities — including any reverse termination fee — are allocated between Fund IV (71.43%) and the Co-Invest (28.57%) on a pro rata basis based on their respective equity commitments. Accordingly, if a reverse termination fee of $52,500,000 were payable (at the high end of the estimated range), Ironside's share through the Co-Invest would be approximately $15,000,000 (28.57% of $52,500,000).

Capital Call for Reverse Termination Fee. LP Agreement §5.03 expressly permits the GP to call capital from the LP for the purpose of satisfying the Vehicle's share of any reverse termination fee or similar buyer-side liability arising under the EPA. Such a capital call would be in addition to any amounts previously called and would reduce Ironside's remaining unfunded commitment. Ironside would be obligated to fund such a capital call under the absolute funding obligation set forth in §4.01.

The exposure to a reverse termination fee represents a meaningful contingent liability for Ironside and underscores the importance of ensuring that any decision to decline to close the acquisition is based on a legitimate failure of conditions precedent (such as an MAE or regulatory non-approval) rather than a discretionary buyer withdrawal. If the buyer parties terminate the EPA in circumstances that trigger the reverse termination fee, Ironside's ability to challenge the GP's decision is limited by the exculpation and liability limitation provisions of the LP Agreement (discussed in Section V below).

C. Scenario 3: Material Impediment Event and Dormancy Under LP Agreement §7.04

1. Definition of Material Impediment Event

Section 7.04(a) of the LP Agreement introduces a concept that is tailored specifically to single-purpose co-investment vehicles: the "Material Impediment Event." This provision recognizes that there may be circumstances in which the underlying acquisition neither closes nor is definitively terminated, but instead enters a period of uncertainty during which the investment thesis is materially impaired but not yet abandoned. The Material Impediment Event mechanism provides a structured framework for addressing this intermediate scenario.

Under §7.04(a), a "Material Impediment Event" is defined as either:

(a) the failure, or reasonably expected failure, of a condition precedent to closing under the EPA that is not reasonably likely to be cured within 90 days following the date of the GP's determination; or

(b) the occurrence of a Material Adverse Effect (as defined in the EPA) with respect to Cascadia.

The Bull Run concession renegotiation may constitute a Material Impediment Event under either limb of the definition. Under limb (a), the concession renegotiation could be viewed as giving rise to a reasonably expected failure of the MAE closing condition, which — given the complexity of the renegotiation process and the involvement of Oregon state regulatory authorities — is not reasonably likely to be resolved within 90 days. Under limb (b), if the concession renegotiation constitutes a Material Adverse Effect (as analyzed in the companion C&H memorandum dated November 14, 2022), its occurrence would directly trigger the Material Impediment Event definition. The determination of whether a Material Impediment Event has occurred is made by the GP in its reasonable discretion, subject to the good faith standard set forth in §8.01.

2. GP's Powers During Dormancy

Upon a declaration by the GP that a Material Impediment Event has occurred, the LP Agreement activates a set of dormancy provisions that govern the management and operation of the Vehicle during the period of uncertainty. The principal features of the dormancy regime are as follows:

Suspension of Capital Calls and Investment Activity (§7.04(b)). The GP is authorized, but not required, to suspend capital calls and all investment activity of the Vehicle during the dormancy period. This means that, upon declaration of a Material Impediment Event, the GP would not issue further capital calls to Ironside for the purpose of funding the acquisition. The suspension protects Ironside from being required to commit additional capital during a period in which the investment thesis is materially uncertain.

Quarterly Status Reports. The GP is required to provide quarterly status reports to the LP during the dormancy period, detailing the status of the EPA, the underlying transaction, the concession renegotiation (or other impediment), and the GP's assessment of reactivation prospects. This reporting obligation is reinforced and expanded by the Side Letter dated July 29, 2022, which provides Ironside with enhanced reporting rights, including the right to receive copies of material correspondence between Meridian and the Selling Shareholders, material regulatory filings and correspondence, and any draft amendments to the EPA or debt commitment letter.

Maintenance of Vehicle as Going Concern. During dormancy, the GP retains the authority to maintain the Vehicle as a going concern. This includes the power to pay ordinary operating expenses (fund administration fees, Delaware franchise taxes, registered agent fees, and similar recurring costs), to maintain the Vehicle's contractual positions (including the EPA, the debt commitment letter, and the R&W insurance policy), and to take such other actions as the GP reasonably deems necessary to preserve the Vehicle's ability to consummate the acquisition if the impediment is resolved.

Estimated Annual Dormancy Operating Expenses. Based on the Vehicle's current cost structure, we estimate annual dormancy operating expenses to be approximately $185,000, comprised of the following:

These estimates assume that no material legal fees or other extraordinary expenses are incurred during the dormancy period. If substantial legal work is required in connection with the EPA, the concession renegotiation, or regulatory proceedings, the annual cost could be materially higher. The GP would fund dormancy operating expenses from the Vehicle's existing working-capital reserve ($3,500,000), which, at the estimated annual run rate of $185,000, would be sufficient to cover approximately 18.9 years of dormancy operating expenses. Accordingly, we do not anticipate that an additional capital call for dormancy expenses would be necessary in any realistic scenario.

3. Wind-Down Election Right — §7.04(c)

The single most important protection available to Ironside in the dormancy scenario is the wind-down election right set forth in LP Agreement §7.04(c). This provision, which was specifically negotiated by Calderwood & Harkness on Ironside's behalf during the LP Agreement drafting process, provides Ironside with the unilateral right to compel an orderly wind-down of the Vehicle if the dormancy period extends beyond a specified duration.

Trigger. The wind-down election right matures if dormancy persists for 18 consecutive months following the GP's declaration of a Material Impediment Event. The 18-month period runs continuously from the date of the GP's formal declaration; it is not tolled by any intervening developments or discussions between the parties.

Mechanics. Upon maturation of the wind-down election right, Ironside may exercise the right by delivering written notice to the GP. The notice need not specify reasons for the election and is not subject to the GP's consent or approval. Upon receipt of the written notice, the GP is required to commence an orderly wind-down of the Vehicle within 30 days. The wind-down must be conducted in accordance with the procedures specified in the LP Agreement, including the following:

(i) Liquidation of all Vehicle assets, including the termination or assignment of the EPA and any ancillary transaction documents;

(ii) Settlement of all Vehicle obligations, including payment of outstanding expenses, satisfaction of contingent liabilities, and discharge of any indemnification obligations;

(iii) Return of remaining cash and assets to the partners in accordance with the distribution waterfall set forth in §6.01 of the LP Agreement; and

(iv) Dissolution and termination of the Vehicle by filing a Certificate of Cancellation with the Delaware Secretary of State.

Distribution Waterfall. The return of remaining cash and assets to the partners upon wind-down is governed by the distribution waterfall set forth in §6.01, which provides for distributions in the following order of priority:

(a) First, to the LP (Ironside), a preferred return of 8% per annum, compounded quarterly, on unreturned capital contributions, calculated from the date of each capital contribution to the date of distribution;

(b) Second, to the LP (Ironside), return of unreturned capital contributions;

(c) Third, 10% to the GP (Meridian GP IV) as carried interest and 90% to the LP (Ironside), until the GP has received aggregate distributions equal to 10% of cumulative net profits above the preferred return hurdle; and

(d) Fourth, the balance, if any, to the LP (Ironside) and the GP (Meridian GP IV) in proportion to their respective partnership interests (99.99% and 0.01%, respectively).

In a wind-down scenario where the transaction has not closed and no investment returns have been generated, the distribution waterfall would effectively collapse to a simple return of remaining Vehicle cash to the LP, net of Vehicle expenses and wind-down costs. The preferred return and carried interest provisions would have no economic effect, as there would be no profits to distribute. The GP's 0.01% interest in remaining cash would be de minimis.

Illustrative Timeline. If the GP declares a Material Impediment Event on, for example, January 9, 2023 (a date that represents a reasonable projection based on the current trajectory of events), the 18-month dormancy period would expire on approximately July 9, 2024. At that point, Ironside's wind-down election right would mature, and Ironside could exercise the right by delivering written notice to the GP at any time on or after that date. The GP would then be required to commence wind-down within 30 days (i.e., by approximately August 8, 2024), and the wind-down process itself would likely take an additional six to twelve months to complete.

Permissive Nature of the Right. We emphasize that the wind-down election right is permissive, not mandatory. Ironside is not obligated to exercise the right upon its maturation. If, at the 18-month mark, reactivation of the transaction appears favorable — for example, if the concession renegotiation has been substantially resolved, debt financing is available, and regulatory approvals have been obtained or remain obtainable — Ironside may choose to defer exercise of the wind-down election right indefinitely. The right remains available to Ironside at all times after the 18-month maturation date, regardless of when it is ultimately exercised.

4. Interaction with EPA Outside Date and Standstill

The dormancy regime under §7.04 does not exist in a vacuum; it interacts in important ways with the EPA, the debt commitment letter, and the regulatory approval process.

EPA Outside Date. During dormancy, the EPA outside date may be extended by agreement of the parties. As noted above, a First Amendment extending the outside date from December 31, 2022 to March 31, 2023 was under discussion at the time Meridian notified Ironside of the concession renegotiation and was subsequently executed on November 22, 2022. Further extensions may be negotiated if the dormancy period continues. Each extension of the EPA outside date preserves the buyer parties' right to consummate the acquisition if the impediment is resolved, but also prolongs the period during which Ironside's capital is committed to the Vehicle.

EPA Termination During Dormancy. If the EPA is terminated during the dormancy period — whether by expiration of the outside date, mutual agreement, or unilateral termination by either party — the wind-down provisions of §7.02 (Consequences of Transaction Failure) would apply in addition to the dormancy provisions of §7.04. In such circumstances, the GP would be required to commence wind-down of the Vehicle in accordance with §7.02, regardless of whether the 18-month wind-down election right had matured. The practical effect is that EPA termination during dormancy would accelerate the wind-down process.

Standstill Arrangements. If the EPA outside date expires without formal termination by any party, the parties may choose to negotiate a standstill arrangement to preserve the transaction documents and the parties' optionality. A standstill would typically provide that the EPA remains in effect on its terms but that neither party is obligated to consummate the closing until specified conditions are met. From Ironside's perspective, a standstill should be approached with caution, as it could effectively extend the dormancy period without triggering the protections of §7.02 (which require EPA termination) and could delay the maturation of the wind-down election right.

IV. Expense Allocation

A. Vehicle-Level Expenses

All expenses of the Vehicle — whether incurred during the investment period, the dormancy period, or the wind-down period — are borne by the Vehicle and are therefore allocated between the partners in proportion to their respective partnership interests: 99.99% to Ironside (as LP) and 0.01% to Meridian GP IV (as GP). In practical terms, the economic burden of Vehicle-level expenses falls almost entirely on Ironside.

Vehicle-level expenses include the following categories:

• Fund administration fees payable to Kendrick Thorne & Associates LLP, the Vehicle's fund administrator, for services including NAV calculation, capital account maintenance, investor reporting, and regulatory compliance;

• Delaware franchise tax, assessed annually by the Delaware Division of Corporations based on the Vehicle's authorized capital structure;

• Annual report filing fees payable to the Delaware Secretary of State;

• Registered agent fees payable to Cascade Systems (160 Greentree Drive, Suite 101, Dover, Delaware 19904), the Vehicle's registered agent for service of process in Delaware;

• Audit fees for the annual audit of the Vehicle's financial statements;

• K-1 preparation fees for the preparation and filing of Schedule K-1 forms for each partner;

• Legal fees incurred in connection with the Vehicle's ordinary-course operations, compliance, and contractual administration; and

• Any other ordinary-course costs reasonably incurred by the GP in the management of the Vehicle.

The LP Agreement does not impose a specific cap on Vehicle-level operating expenses (as distinct from wind-down capital calls, which are capped as discussed in Section IV.C below). However, the GP's obligation to act in good faith and with commercially reasonable judgment (§8.01) constrains the GP from incurring unreasonable or excessive expenses. Ironside should monitor Vehicle-level expenses through the quarterly reporting mechanisms provided in the LP Agreement and the Side Letter.

B. Transaction-Level Expense Allocation Between Fund IV and Co-Invest

Transaction-level costs — that is, costs incurred in connection with the proposed acquisition itself, as distinct from Vehicle-level operating costs — are allocated between Fund IV and the Co-Invest on a pro rata basis in accordance with the Co-Investment Allocation Agreement executed on July 29, 2022. The pro rata allocation is based on the parties' respective equity commitments:

• Fund IV: $750,000,000 / $1,050,000,000 = 71.43%

• ICM Co-Invest: $300,000,000 / $1,050,000,000 = 28.57%

Transaction-level costs subject to this pro rata allocation include:

• Due-diligence costs (professional fees for legal, accounting, environmental, and engineering advisors);

• Regulatory filing fees (FERC, OPUC, CFIUS);

• R&W insurance premium ($4,875,000 Vehicle share; the total premium may be higher if Fund IV bears a separate share);

• Debt commitment fees;

• Any reverse termination fee or other EPA-related liability; and

• Other costs reasonably incurred in connection with the acquisition.

We draw attention to one specific item that warrants careful monitoring: the debt commitment letter extension fee. The extension fee of $2,437,500, which was to be payable in connection with any extension of the commitment letter termination date, was — per our understanding of the arrangement between Meridian and Atlas National Bank — to be borne by Meridian Fund IV under its separate arrangement with Atlas and should not be charged to the Co-Invest absent a specific agreement to the contrary. Ironside should confirm that this understanding is documented and that no portion of the extension fee is included in the expenses allocated to the Co-Invest.

More broadly, Calderwood & Harkness recommends that Ironside continue to monitor the allocation of transaction-level costs between Fund IV and the Co-Invest to ensure that Ironside is not bearing a disproportionate share of costs — particularly during an extended dormancy or wind-down period, when cost visibility may decrease and the GP may face pressure from Fund IV to shift expenses to the Co-Invest. The quarterly reporting obligations under the LP Agreement and the Side Letter provide a mechanism for Ironside to request and review detailed cost allocation data.

C. Wind-Down Costs

In the event of a wind-down of the Vehicle — whether triggered by EPA termination under §7.02, by exercise of the wind-down election right under §7.04(c), or otherwise — the costs of the wind-down process would be borne by the Vehicle and therefore by the partners in proportion to their interests. Wind-down costs typically include:

• Filing of a Certificate of Cancellation with the Delaware Secretary of State;

• Final audit of the Vehicle's financial statements;

• Preparation and filing of final tax returns (federal and state);

• Legal fees incurred in connection with the wind-down, including settlement of contractual obligations, termination of agreements, and dissolution proceedings; and

• Any other costs reasonably necessary to effect an orderly wind-down.

If the Vehicle's existing cash reserves are insufficient to fund wind-down costs, the GP is authorized to issue a final capital call to the partners under §7.04(c)(ii) for the purpose of funding the shortfall. Critically, the LP Agreement caps any such wind-down capital call at 1% of total committed capital. Based on the Vehicle's total committed capital of $300,000,000, the maximum wind-down capital call is $3,000,000. This cap was specifically negotiated by Calderwood & Harkness as a protection for Ironside against open-ended wind-down expense exposure.

In practice, we do not anticipate that a wind-down capital call would be necessary, given the $3,500,000 working-capital reserve currently held by the Vehicle. Even after accounting for dormancy operating expenses (estimated at $185,000 per annum), the Vehicle should have sufficient cash to fund the wind-down process. However, the $3,000,000 cap provides an important backstop in the event of unforeseen complications.

V. GP Liability and Fiduciary Duties

A. Standard of Care

The LP Agreement establishes the standard of care applicable to the GP in the performance of its duties. Section 8.01 of the LP Agreement provides that the GP's standard of care is one of "good faith and commercially reasonable judgment." This standard is common in Delaware limited partnership agreements and reflects the parties' negotiated understanding of the level of diligence and care expected of the GP in managing the Vehicle's affairs.

The GP does not owe traditional fiduciary duties of loyalty and care to the extent that such duties have been modified or eliminated by the LP Agreement. This modification is permitted under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-1101(d), which allows a limited partnership agreement to expand, restrict, or eliminate fiduciary duties, subject to the implied contractual covenant of good faith and fair dealing.

Notwithstanding the modification of traditional fiduciary duties, the GP remains subject to two important constraints:

(i) The implied contractual covenant of good faith and fair dealing. Under Delaware law, the implied covenant prohibits a party from engaging in conduct that, while not expressly prohibited by the contract, is inconsistent with the parties' reasonable expectations at the time of contracting. The implied covenant cannot be waived under the Delaware Revised Uniform Limited Partnership Act. 6 Del. C. § 17-1101(d). This provides Ironside with a residual layer of protection against opportunistic or bad-faith conduct by the GP.

(ii) The specific duties set forth in the LP Agreement. The LP Agreement imposes a series of specific procedural obligations on the GP, including quarterly reporting during dormancy (§7.04(b)), prompt notification of material developments (Side Letter), adherence to the capital call procedures of §4.01, compliance with the wind-down election procedures of §7.04(c), and observance of the expense allocation framework. Breach of any of these specific obligations could give rise to a contractual claim by Ironside.

B. GP Liability Limitations

Section 8.02 of the LP Agreement provides broad exculpation for the GP. The GP is not liable to the Vehicle or to any partner for any losses, damages, or expenses arising from the GP's actions or inactions in connection with the Vehicle's activities, except to the extent that such losses, damages, or expenses are determined by a court of competent jurisdiction (by final, non-appealable judgment) to have resulted from the GP's fraud, willful misconduct, or gross negligence.

The exculpation standard applies to the full range of GP decision-making, including:

• The GP's decision to pursue the Cascadia acquisition, including the selection of the Target, the negotiation of the EPA, and the structuring of the transaction;

• The GP's exercise of discretion regarding capital calls, including the timing, amount, and purpose of calls;

• The GP's decision to suspend capital calls and declare a Material Impediment Event under §7.04;

• The GP's conduct during the dormancy period, including decisions regarding maintenance of the EPA, extension of the outside date, and engagement with regulatory authorities; and

• The GP's management of the wind-down process, including liquidation of assets, settlement of obligations, and timing of distributions.

The exculpation standard of "fraud, willful misconduct, or gross negligence" is a relatively high threshold under Delaware law. Mere negligence — even significant negligence — in the conduct of the GP's duties would not give rise to liability under this standard. A claimant must demonstrate intentional wrongdoing, reckless indifference, or conscious disregard of known risks.

Indemnification. In addition to the exculpation provision, Section 8.03 of the LP Agreement provides that the GP is indemnified by the Vehicle for any liabilities, losses, damages, costs, or expenses arising from or in connection with the GP's activities on behalf of the Vehicle, except to the extent that such liabilities are attributable to the GP's fraud, willful misconduct, or gross negligence. The indemnification obligation is an obligation of the Vehicle, and its economic burden therefore falls on Ironside as the 99.99% LP. In practical terms, this means that Ironside would bear the cost of defending and indemnifying the GP against third-party claims arising from the Vehicle's activities, unless the GP is found to have engaged in fraud, willful misconduct, or gross negligence.

C. Ironside's Potential Claims Against the GP

In light of the foregoing, we assess the viability of potential claims by Ironside against Meridian GP IV in the current scenario.

General Assessment. Based on the information available to us, Ironside is unlikely to have viable claims against Meridian GP IV for losses arising from the Bull Run concession renegotiation or the potential failure of the Cascadia acquisition. The concession renegotiation appears to be a development that arose from external regulatory action (Oregon SB 1567) rather than from any act or omission by the GP. The GP's decision to pursue the Cascadia acquisition, including its assessment of the concession risk during the due-diligence process, appears to fall within the range of commercially reasonable investment judgments and is therefore protected by the exculpation provisions of §8.02.

Potential Claim Scenarios. Notwithstanding the foregoing general assessment, potential claims against the GP could arise in the following circumstances:

(i)

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
FROM: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP, Funds & Asset Management Group Theresa Kim, Lead Associate, Calderwood & Harkness LLP, Funds & Asset Management Group
DATE: November 18, 2022
RE: Ironside's Rights and Remedies Under Limited Partnership Agreement of ICM Cascadia Co-Invest, LP in the Event of a Material Adverse Effect or Failed Closing
C&H Matter No.: 1023-00001
I. Executive Summary
The purpose of this memorandum is to analyze the contractual rights and remedies available to Ironside Capital Management LP ("Ironside" or the "LP") under the Amended and Restated Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest"), dated July 29, 2022 (the "LP Agreement"), in connection with recent material adverse developments affecting the proposed acquisition of Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"). Specifically, on October 28, 2022, the Portland Metropolitan Water District issued formal notice to Cascadia of its intent to renegotiate the 40-year Bull Run Filtration Project water-treatment concession, which generates approximately $64 million in annual revenue. The concession renegotiation was initiated pursuant to Oregon Senate Bill 1567 (2022) and remains ongoing without resolution as of the date of this memorandum.
Meridian Infrastructure Partners LP ("Meridian") notified Ironside of this material adverse development on November 10, 2022, approximately two weeks after Cascadia received the Portland Metropolitan Water District's notice. The delay in notification is itself a matter that warrants attention in the context of the GP's reporting obligations, though we do not address that issue in detail here. In the interim, the parties have commenced discussions regarding an extension of the outside date under the Equity Purchase Agreement ("EPA"), and the renegotiation process initiated under Oregon SB 1567 remains open with no indication of a timeline for resolution.
This memorandum analyzes three principal scenarios and their implications for Ironside's rights under the LP Agreement:
(A) A Material Adverse Effect under the EPA leading to non-closing of the acquisition, and the resulting capital return and wind-down mechanisms available to Ironside under the LP Agreement;
(B) Failed closing due to the failure of conditions precedent other than a Material Adverse Effect — including regulatory failure (FERC or OPUC denial), financing failure, or buyer default — and the allocation of economic risk and reverse termination fee exposure as between Fund IV and the Co-Invest; and
(C) A GP declaration of a "Material Impediment Event" under LP Agreement §7.04, leading to dormancy of the Vehicle and, potentially, the maturation of Ironside's unilateral wind-down election right 18 months after dormancy commences pursuant to §7.04(c).
Our key conclusion is that Ironside possesses significant contractual protections under the LP Agreement across all three scenarios. These protections include robust capital return provisions requiring the GP to distribute remaining Vehicle cash and assets net of specified deductions upon EPA termination, expense allocation rights that constrain the GP's ability to charge the Vehicle for costs not properly attributable to it, limitations on GP liability that focus Ironside's remedies on contractual mechanisms rather than damages claims, and — most critically — the wind-down election right under §7.04(c), which matures 18 months after the commencement of dormancy and entitles Ironside, acting unilaterally, to compel an orderly wind-down of the Vehicle. The 18-month dormancy clock, if triggered, represents Ironside's ultimate backstop against indefinite deployment of its capital in a non-performing co-investment structure.
We note that this memorandum should be read in conjunction with two companion Calderwood & Harkness memoranda:
(i) the memorandum dated November 14, 2022, analyzing the definition of "Material Adverse Effect" under the EPA and assessing whether the Bull Run concession renegotiation satisfies that definition, including a review of applicable carve-outs and quantitative materiality thresholds; and
(ii) the memorandum dated November 20, 2022 (forthcoming), addressing the considerations relevant to any extension of the EPA outside date, including the implications for Ironside's rights under the LP Agreement, the debt commitment letter, and the R&W insurance policy.
This memorandum does not address the merits of the underlying investment thesis for the Cascadia acquisition, nor does it opine on the commercial desirability of proceeding with or abandoning the transaction. Those determinations are the province of Ironside's investment team.
II. Background and Context
A. The Co-Investment Vehicle
ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest") is a Delaware limited partnership formed on July 22, 2022, by the filing of a Certificate of Limited Partnership with the Delaware Secretary of State (Delaware Secretary of State File Number 7439218; Federal Employer Identification Number 88-3921457). The Vehicle was formed for the specific and sole purpose of co-investing alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the acquisition of 100% of the equity of Cascadia Renewables Holdings, Inc.
The general partner of the Vehicle is Meridian Infrastructure GP IV LLC ("Meridian GP IV" or the "GP"), a Delaware limited liability company and an affiliate of Meridian Infrastructure Partners LP. Meridian GP IV holds a 0.01% general partner interest in the Vehicle, representing a capital commitment of $30,000. The GP is responsible for the management and operation of the Vehicle in accordance with the LP Agreement.
The sole limited partner of the Vehicle is Ironside Capital Management LP, which holds a 99.99% limited partner interest, representing a capital commitment of $299,970,000. The total committed capital of the Vehicle is $300,000,000.
The LP Agreement was executed on July 29, 2022, contemporaneously with the Co-Investment Allocation Agreement between Fund IV and the Vehicle and with certain ancillary documents, including a Side Letter between Ironside and Meridian GP IV. The LP Agreement is governed by the laws of the State of Delaware without regard to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.
The stated purpose of the Vehicle under the LP Agreement is to co-invest alongside Fund IV in the acquisition of 100% of the outstanding equity interests of CRH through Cascadia Acquisition Corp., a newly formed Delaware corporation organized as a wholly owned acquisition subsidiary. The Vehicle has no operations, employees, or assets other than those directly related to the proposed acquisition.
B. The Underlying Acquisition
The acquisition target is Cascadia Renewables Holdings, Inc., an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia is a diversified renewable energy and water infrastructure company that owns and operates a portfolio of 14 hydroelectric facilities, 6 wind farms, and 3 water-treatment concessions across the states of Oregon, Washington, and Idaho. The company was founded in 2006 and has been majority-owned by Timberline Growth Equity Fund III, LP since its Series C financing round in 2012.
The selling shareholders in the proposed acquisition are: (i) Timberline Growth Equity Fund III, LP, holding approximately 62% of Cascadia's outstanding equity; (ii) the Weir Family Trust (Jonathan M. Weir, Trustee), holding approximately 18% of Cascadia's outstanding equity; and (iii) the Management Rollover Pool, holding approximately 20% of Cascadia's outstanding equity, of which approximately 50% (representing 10% of total equity) is expected to be rolled over into the post-acquisition capital structure.
The acquisition is being pursued at an enterprise value of $1,950,000,000, implying an EV/EBITDA multiple of approximately 14.1x based on Cascadia's fiscal year 2021 adjusted EBITDA of $138 million, as reported in the audited financial statements prepared by Halstead & Greer LLP. Cascadia reported total revenue of $487 million for fiscal year 2021. The implied equity value is approximately $1,050,000,000, calculated as the enterprise value of $1.95 billion less net debt of approximately $900 million.
The total equity required for the acquisition is $1,050,000,000, allocated between Fund IV and the Co-Invest as follows:
The Equity Purchase Agreement (the "EPA") was executed on September 15, 2022, among the Selling Shareholders, Cascadia, and Cascadia Acquisition Corp. as the buyer. The EPA is governed by the laws of the State of Delaware. The original outside date under the EPA is December 31, 2022, by which date the closing of the acquisition must occur unless the EPA is terminated or the outside date is extended by agreement of the parties.
The acquisition is to be financed with a combination of equity contributions from Fund IV and the Co-Invest and senior secured debt. The debt financing package consists of: (i) a $975 million senior secured term loan, provided by Atlas National Bank, N.A. (as Administrative Agent and Lead Arranger, committing $650 million) and Pinnacle Credit Partners LLC (as Co-Lender, committing $325 million); and (ii) a $150 million revolving credit facility provided by Atlas National Bank, N.A. A debt commitment letter reflecting these terms was executed on August 30, 2022.
The following table summarizes the total sources and uses for the proposed acquisition:
C. The Material Adverse Development
On October 28, 2022, the Portland Metropolitan Water District (the "PMWD") delivered formal written notice to Cascadia of the PMWD's intent to renegotiate the terms of the Bull Run Filtration Project water-treatment concession. The Bull Run concession was originally executed in approximately 2018 and has a 40-year term. Annual revenue attributable to the Bull Run concession is approximately $64 million, representing one of three water-treatment concessions held by Cascadia and constituting a material component of Cascadia's contracted revenue base.
The PMWD's notice invokes its right to renegotiate under Oregon Senate Bill 1567 (2022), which was enacted during the 2022 legislative session and introduced new regulatory requirements applicable to municipal water-treatment concessions, including enhanced environmental compliance standards, revised rate-setting methodologies, and expanded public oversight mechanisms. The PMWD's notice cites changed regulatory requirements under SB 1567 as the basis for the renegotiation demand and does not specify proposed revised terms. Formal renegotiation proceedings commenced in November 2022 and remain ongoing as of the date of this memorandum, with no resolution or interim agreement in place.
On November 10, 2022, Meridian notified Ironside of the PMWD's renegotiation notice and initiated discussions regarding the potential implications for the acquisition and the Co-Invest. We note that the approximately two-week delay between Cascadia's receipt of the PMWD notice (October 28) and Meridian's notification to Ironside (November 10) is a matter that Ironside may wish to raise with the GP, particularly in the context of the enhanced reporting provisions contained in the Side Letter dated July 29, 2022, which require the GP to notify the LP of material developments affecting the Target or the acquisition "promptly" and in no event later than five business days following the GP's receipt of such information.
The materiality of the Bull Run concession renegotiation in the context of the Cascadia acquisition cannot be overstated. The Bull Run concession's annual revenue of approximately $64 million represents approximately 13.1% of Cascadia's total fiscal year 2021 revenue of $487 million. More significantly, the concession generates high-margin, contracted cash flows that are among the most predictable components of Cascadia's revenue base and that figured prominently in the valuation analysis underpinning the acquisition price. The renegotiation introduces significant uncertainty regarding the duration, pricing, and terms of the concession, which in turn calls into question the cash flow projections and the contracted revenue base upon which the enterprise value of $1.95 billion was predicated. The companion C&H memorandum dated November 14, 2022 analyzes this question in further detail.
As of the date of this memorandum, the parties are actively discussing a First Amendment to the EPA that would extend the outside date from December 31, 2022 to March 31, 2023, providing additional time for the concession renegotiation to develop and for the parties to assess its impact on the transaction. This First Amendment was subsequently executed on November 22, 2022. The implications of the outside date extension for Ironside's rights and the debt commitment letter are addressed in the companion C&H memorandum dated November 20, 2022.
D. Capital Position
A single capital call has been issued to Ironside since the formation of the Vehicle. On August 15, 2022, the GP issued a capital call in the amount of $22,500,000, representing 7.5% of Ironside's total capital commitment of $300,000,000. Ironside funded the capital call in full and on time. The proceeds of the capital call were applied as follows:
Ironside's remaining unfunded commitment is $277,500,000. No distributions have been made to any partner of the Vehicle since its formation. The GP's pro rata share of the August 15 capital call ($2,250, representing 0.01% of $22,500,000) was funded contemporaneously.
III. Scenario Analysis: Ironside's Rights and Remedies
This Section III presents a detailed analysis of Ironside's rights and remedies under the LP Agreement and related transaction documents across three principal scenarios. Each scenario reflects a plausible path that the transaction may take in light of the Bull Run concession renegotiation and the broader uncertainty surrounding the closing.
A. Scenario 1: Material Adverse Effect Under the EPA — Non-Closing
1. MAE as a Closing Condition
Under Article VII of the EPA, the obligation of Cascadia Acquisition Corp. (and by extension, the equity investors — Fund IV and the Co-Invest — standing behind it) to consummate the closing of the acquisition is subject to a series of conditions precedent. Among the most significant of these conditions is the requirement set forth in EPA §7.02(a) that, as of the closing date, no Material Adverse Effect shall have occurred with respect to Cascadia since the date of execution of the EPA that is continuing as of the closing date.
The definition of "Material Adverse Effect" under the EPA is a negotiated provision of considerable specificity, the contours of which are analyzed in detail in the companion C&H memorandum dated November 14, 2022. For present purposes, we note that the definition contains a series of carve-outs — including carve-outs for general economic conditions, changes in applicable law and regulation, and industry-wide developments — that may or may not insulate the Bull Run concession renegotiation from constituting an MAE. The question turns in significant part on whether the concession renegotiation is properly characterized as a "change in applicable law" (since it arises from SB 1567) or as a company-specific commercial development. The companion memorandum analyzes the quantitative materiality thresholds that Delaware courts have applied in comparable contexts, including the benchmark established in Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), which remains the only Delaware Chancery decision to find that a Material Adverse Effect had occurred.
If a Material Adverse Effect has occurred and is continuing as of the outside date (currently March 31, 2023, as extended), the buyer parties — i.e., Cascadia Acquisition Corp. — would have the right, but not the obligation, to decline to close the acquisition. In such circumstances, the buyer parties would be entitled to terminate the EPA pursuant to EPA §9.01(b) (termination for failure of conditions precedent), without liability for any reverse termination fee or other damages, provided that the failure to close is not attributable to a breach by the buyer parties of their own obligations under the EPA.
2. Impact on Co-Invest Vehicle Upon EPA Termination for MAE
If the EPA is terminated as a result of a Material Adverse Effect (or for any other reason resulting in non-closing of the acquisition), the LP Agreement provides a structured mechanism for addressing the consequences to the Vehicle and its partners.
LP Agreement §7.02 — Consequences of Transaction Failure. Section 7.02 of the LP Agreement provides that if the EPA is terminated and the acquisition does not close for any reason — including, without limitation, the occurrence of a Material Adverse Effect — the GP is required to take certain specified actions with respect to the Vehicle's capital and operations. Section 7.02 functions as the principal provision governing the economic consequences of a failed transaction to the Vehicle's partners.
Capital Return Provisions — §7.02(a). Upon termination of the EPA, the GP is required to return to Ironside (as LP) its pro rata share of the remaining cash and assets of the Vehicle, net of the following deductions:
(i) all Vehicle expenses incurred or accrued through the date of distribution, including but not limited to organizational expenses, legal fees, accounting fees, administration fees, and regulatory filing costs;
(ii) reasonable reserves for contingent liabilities of the Vehicle, including any obligations arising from the EPA or ancillary transaction documents that survive termination (for example, confidentiality obligations, indemnification tail provisions, and regulatory undertakings); and
(iii) all costs and expenses of the wind-down of the Vehicle, including dissolution filings, final audit, tax return preparation, and any legal fees incurred in connection therewith.
Timing of Distribution. Section 7.02(a) provides that the return of capital is to commence "as promptly as practicable" following the effective date of EPA termination, but the GP retains the right to establish and retain reasonable reserves for the categories described above. The LP Agreement does not specify a maximum period for the retention of reserves, though the implied covenant of good faith and fair dealing under Delaware law would require the GP to act reasonably and in good faith in establishing and maintaining reserves. A final distribution would be made upon completion of the wind-down of the Vehicle and settlement of all outstanding obligations.
We note that the "as promptly as practicable" standard provides the GP with meaningful discretion regarding the timing of distributions. In practice, the wind-down of a single-purpose co-investment vehicle of this nature should be achievable within approximately six to twelve months following EPA termination, depending on the complexity of residual obligations. Ironside should be prepared to monitor the GP's compliance with this standard and to press for expeditious distributions.
3. Recoverability of Capital Called
A central concern for Ironside in a non-closing scenario is the recoverability of the $22,500,000 already called and funded. As detailed in Section II.D above, the capital call proceeds have been deployed to specific uses, each of which presents a different recoverability profile. We address each category in turn.
Organizational Expenses ($285,000). Organizational expenses — including Delaware filing fees, formation costs, and initial legal and accounting fees associated with the establishment of the Vehicle — are sunk costs. These amounts were incurred and paid at or near the time of the Vehicle's formation and are not recoverable in any scenario.
Placement-Agent Fee ($1,050,000). The placement-agent fee of $1,050,000 was paid to Rivermark Capital Markets Inc. pursuant to a placement-agent engagement letter that was reviewed by Calderwood & Harkness on July 18, 2022, as part of the Vehicle formation process. The engagement letter, as we reviewed it, does not contain a contractual clawback or refund provision that would require Rivermark to return any portion of the placement-agent fee in the event that the underlying transaction does not close. Accordingly, we consider this amount to be non-recoverable absent a renegotiation of the engagement terms, which we consider unlikely to succeed on a voluntary basis.
R&W Insurance Premium Deposit ($4,875,000). The representations and warranties insurance policy was issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) and was bound on September 1, 2022. The coverage limit under the policy is $195,000,000, representing approximately 10% of the enterprise value of the acquisition. The premium deposit of $4,875,000 represents 2.5% of the coverage limit.
If the transaction does not close, the R&W policy would never attach — that is, the coverage would never become effective — because R&W insurance is triggered only upon the closing of the insured transaction and relates to breaches of the seller's representations and warranties discovered post-closing. In such circumstances, the premium deposit may be subject to a partial or full refund, net of underwriting costs incurred by Northgate in evaluating and binding the policy. The typical market practice for R&W insurance policies is to provide for a cancellation fee or retention of a portion of the deposit (often in the range of 10% to 25% of the total deposit) to compensate the insurer for underwriting expenses, with the balance refundable to the insured. However, the specific terms of the Northgate policy must be reviewed to determine the precise refund mechanics. We recommend that C&H undertake a detailed review of the policy cancellation provisions, including any notice requirements and timing constraints, as a matter of priority. Our preliminary estimate is that between $3,650,000 and $4,390,000 of the premium deposit may be recoverable, depending on the applicable cancellation fee.
Due-Diligence Costs and Deposits ($12,790,000). This category encompasses a range of expenditures, including: (i) professional fees paid to legal advisors, accounting firms, environmental consultants, and engineering consultants engaged in connection with the diligence process; (ii) regulatory filing fees (including FERC and OPUC application fees); and (iii) deposits paid under the EPA or ancillary transaction documents.
Professional fees and regulatory filing fees that have already been paid to third-party service providers are generally non-recoverable, as they represent consideration for services rendered. The aggregate amount of such non-recoverable fees within this category is estimated at approximately $8,200,000 to $9,500,000, though a precise figure would require reconciliation against the Vehicle's accounts.
Deposits paid under the EPA or ancillary transaction documents present a more nuanced analysis. The recoverability of such deposits depends on the specific termination provisions of the EPA, including whether the termination is attributable to the buyer parties (in which case deposits may be forfeited) or to the seller parties or to conditions outside the buyer's control (in which case deposits may be refundable). If the EPA is terminated due to an MAE — which is, by its nature, not attributable to buyer breach — the buyer parties should have a strong argument for refund of any deposits. The estimated recoverable portion of deposits within this category is approximately $2,500,000 to $3,500,000, subject to the EPA's specific termination mechanics.
Working-Capital Reserve ($3,500,000). The working-capital reserve consists of cash held in the Vehicle's operating account at Atlas National Bank, N.A. This amount should be substantially recoverable, as it represents liquid cash that has not been deployed to third parties. The reserve would be reduced by any Vehicle-level operating expenses charged against it during the period between the date of this memorandum and the date of distribution, but such expenses are expected to be modest (estimated at approximately $15,000 to $25,000 per month for ongoing administration, registered agent fees, and bank charges).
Summary of Estimated Recovery. Based on the foregoing analysis, we estimate the net recovery of called capital as follows:
These estimates are preliminary and subject to further refinement based on detailed review of the relevant contractual provisions, policy terms, and actual expenditure reconciliation. The estimated net loss to Ironside on called capital in a non-closing scenario is therefore in the range of approximately $11,160,000 to $13,050,000, before consideration of any tax benefits that may be available from loss recognition. Tax consequences are to be addressed by Sylvia Hartwell in the C&H Tax group.
4. Unfunded Commitment
LP Agreement §4.01(d) — Limitation on Capital Calls Following EPA Termination. Section 4.01(d) of the LP Agreement provides an important protection for Ironside in the event of a failed transaction. Under this provision, following termination of the EPA, the GP may not issue further capital calls to the LP except for the following limited purposes:
(i) payment of Vehicle-level expenses and wind-down costs that are not covered by existing Vehicle cash and reserves; and
(ii) satisfaction of any obligations of the Vehicle arising from the EPA or ancillary transaction documents that survive termination of the EPA, including indemnification obligations, confidentiality undertakings, and regulatory commitments.
The practical significance of this provision is that Ironside's unfunded commitment of $277,500,000 would be effectively released upon completion of the wind-down of the Vehicle, except to the extent that post-termination capital is needed for the limited purposes described above. Given the single-purpose nature of the Vehicle and the limited scope of its obligations, the amount of any post-termination capital call is expected to be modest — likely in the range of $500,000 to $1,500,000, and in no event exceeding the wind-down capital call cap discussed in Section IV.C below.
Upon completion of the wind-down and final distribution, any remaining unfunded commitment would be permanently released, and Ironside would have no further funding obligation to the Vehicle.
B. Scenario 2: Failed Closing Due to Failure of Conditions Precedent Other Than MAE
This scenario addresses circumstances in which the acquisition fails to close not because of a Material Adverse Effect, but because of the failure of one or more other conditions precedent under the EPA. While the Bull Run concession renegotiation is the immediate catalyst for the present analysis, it is important for Ironside to understand the full range of closing risks and their implications under the LP Agreement.
1. Regulatory Failure
The acquisition is subject to regulatory approvals from multiple federal and state agencies, each of which constitutes a separate condition precedent to closing under the EPA.
FERC §203 Approval. Because Cascadia owns and operates hydroelectric facilities subject to the jurisdiction of the Federal Energy Regulatory Commission, the change in ownership effected by the acquisition requires approval under Section 203 of the Federal Power Act, 16 U.S.C. § 824b. An application for FERC approval was filed on October 19, 2022, and is currently pending before the Commission under Docket No. EC22-143-000. As of the date of this memorandum, no order has been issued. FERC approval is a condition to closing under EPA §7.01(c). If FERC denies the application or imposes conditions that are unacceptable to the buyer parties, the acquisition cannot proceed, and the consequences for the Vehicle would be analogous to those described under Scenario 1.
OPUC Approval. Cascadia's operations in Oregon are subject to the jurisdiction of the Oregon Public Utility Commission. An application for OPUC approval of the change in control was filed on October 14, 2022, and is pending under Docket No. UM-2287. OPUC approval is a condition to closing under EPA §7.01(d). The timeline for OPUC review is uncertain and may be affected by the Bull Run concession renegotiation, which involves a related but distinct Oregon regulatory process. If OPUC denies the application or imposes materially adverse conditions, the acquisition cannot close.
CFIUS. A voluntary notice was filed with the Committee on Foreign Investment in the United States in connection with the acquisition. The notice was acknowledged on September 20, 2022, and no further action has been required. We consider the CFIUS process to be effectively cleared and do not identify CFIUS as a meaningful closing risk.
Allocation of Regulatory Failure Risk. The allocation of risk associated with regulatory failure is an important consideration in the transactional context. Under the EPA, the buyer parties typically bear the risk of obtaining regulatory approvals necessary for closing. In many acquisition agreements involving regulated industries, the buyer group is subject to "hell or high water" covenants requiring the buyer to take all actions necessary to obtain regulatory approvals, including accepting divestitures, behavioral remedies, or conditions imposed by the relevant agencies. The extent of any "hell or high water" obligation in the EPA should be reviewed carefully by Ironside, as such obligations could require the buyer parties to accept regulatory conditions that materially alter the economics of the transaction. If such obligations exist and the buyer parties refuse to accept imposed conditions, the resulting failure to close could be characterized as a buyer breach, potentially triggering reverse termination fee exposure (as discussed in Section III.B.3 below).
We note that the LP Agreement does not itself address the allocation of regulatory risk at the Vehicle level; rather, the allocation is governed by the EPA and the Co-Investment Allocation Agreement. However, Ironside's economic exposure to regulatory failure flows through the Vehicle's participation in the acquisition.
2. Financing Failure
The debt financing for the acquisition consists of a $975 million senior secured term loan and a $150 million revolving credit facility, as evidenced by the debt commitment letter executed on August 30, 2022, by Atlas National Bank, N.A. and Pinnacle Credit Partners LLC. The conditions precedent to funding under the debt commitment letter are separate and distinct from the conditions precedent to closing under the EPA, though there is significant overlap.
A financing failure could arise in several circumstances:
(i) The lenders exercise market-flex provisions in the commitment letter to modify the pricing, structure, or terms of the debt financing in ways that render the financing uneconomic or otherwise unacceptable to the buyer parties;
(ii) The conditions precedent to funding under the commitment letter are not satisfied (for example, if the Bull Run concession renegotiation results in a decline in projected cash flows that triggers a coverage ratio test failure or other financial condition under the commitment letter);
(iii) The commitment letter expires (or is terminated) prior to closing, and replacement financing cannot be obtained on acceptable terms; or
(iv) The lenders simply decline to fund, notwithstanding satisfaction of conditions precedent, though this scenario would give rise to a breach of contract claim by the buyer parties against the lenders.
If the lenders decline to fund or the debt financing otherwise becomes unavailable, the equity investors — Fund IV and the Co-Invest — would face the choice of either (a) funding the full purchase price from equity (an additional $975 million, allocated between Fund IV and the Co-Invest in accordance with the Co-Investment Allocation Agreement), or (b) terminating the EPA and forgoing the acquisition. In the latter case, the consequences for the Vehicle would again be analogous to those described under Scenario 1.
LP Agreement Provisions on Capital Calls. Under LP Agreement §4.01, Ironside's obligation to fund capital calls is expressed in absolute terms during the investment period — that is, upon receipt of a valid capital call notice from the GP, Ironside is obligated to fund the called amount within ten business days, without set-off, counterclaim, or defense. However, the GP has sole discretion regarding whether and when to issue capital calls. If the GP determines not to proceed with the acquisition due to financing failure, the GP would not issue further capital calls for the acquisition itself, and the consequences for the Vehicle and Ironside would be governed by §7.02 (Consequences of Transaction Failure) and §7.04 (Material Impediment Event and Dormancy), as applicable.
We note that Calderwood & Harkness negotiated certain co-invest structural protections in the credit agreement term sheet, as reflected in the C&H comment letter to Atlas National Bank, N.A. dated September 6, 2022. These protections include: (i) a provision requiring the lenders to extend the commitment letter termination date if the EPA outside date is extended, subject to payment of an extension fee; (ii) a requirement that any market-flex modifications to the debt financing that would increase the equity contribution required from investors must be disclosed to the Co-Invest prior to implementation; and (iii) a covenant that the Co-Invest's exposure to debt financing conditionality be no greater than its pro rata share (28.57%) of total equity. Ironside should ensure that these protections remain effective in any amendment to the EPA or the debt commitment letter.
3. Buyer Default / Reverse Termination Fee
A scenario that warrants careful attention is one in which the acquisition fails to close due to a default by the buyer parties — i.e., Cascadia Acquisition Corp. and its equity sponsors — in circumstances where all conditions precedent to closing have been satisfied. In such a case, the EPA may provide for the payment of a reverse termination fee by the buyer parties to the Selling Shareholders as the sole and exclusive remedy for the buyer's failure to close.
The reverse termination fee under the EPA is understood to be in the range of 3% to 5% of the equity value, which would imply a fee of approximately $31,500,000 to $52,500,000 based on an equity value of $1,050,000,000. The precise amount and triggering conditions are set forth in EPA §9.03, which we have reviewed in connection with the companion memoranda.
Allocation Between Fund IV and Co-Invest. Under the Co-Investment Allocation Agreement executed on July 29, 2022, all transaction-level economic costs and liabilities — including any reverse termination fee — are allocated between Fund IV (71.43%) and the Co-Invest (28.57%) on a pro rata basis based on their respective equity commitments. Accordingly, if a reverse termination fee of $52,500,000 were payable (at the high end of the estimated range), Ironside's share through the Co-Invest would be approximately $15,000,000 (28.57% of $52,500,000).
Capital Call for Reverse Termination Fee. LP Agreement §5.03 expressly permits the GP to call capital from the LP for the purpose of satisfying the Vehicle's share of any reverse termination fee or similar buyer-side liability arising under the EPA. Such a capital call would be in addition to any amounts previously called and would reduce Ironside's remaining unfunded commitment. Ironside would be obligated to fund such a capital call under the absolute funding obligation set forth in §4.01.
The exposure to a reverse termination fee represents a meaningful contingent liability for Ironside and underscores the importance of ensuring that any decision to decline to close the acquisition is based on a legitimate failure of conditions precedent (such as an MAE or regulatory non-approval) rather than a discretionary buyer withdrawal. If the buyer parties terminate the EPA in circumstances that trigger the reverse termination fee, Ironside's ability to challenge the GP's decision is limited by the exculpation and liability limitation provisions of the LP Agreement (discussed in Section V below).
C. Scenario 3: Material Impediment Event and Dormancy Under LP Agreement §7.04
1. Definition of Material Impediment Event
Section 7.04(a) of the LP Agreement introduces a concept that is tailored specifically to single-purpose co-investment vehicles: the "Material Impediment Event." This provision recognizes that there may be circumstances in which the underlying acquisition neither closes nor is definitively terminated, but instead enters a period of uncertainty during which the investment thesis is materially impaired but not yet abandoned. The Material Impediment Event mechanism provides a structured framework for addressing this intermediate scenario.
Under §7.04(a), a "Material Impediment Event" is defined as either:
(a) the failure, or reasonably expected failure, of a condition precedent to closing under the EPA that is not reasonably likely to be cured within 90 days following the date of the GP's determination; or
(b) the occurrence of a Material Adverse Effect (as defined in the EPA) with respect to Cascadia.
The Bull Run concession renegotiation may constitute a Material Impediment Event under either limb of the definition. Under limb (a), the concession renegotiation could be viewed as giving rise to a reasonably expected failure of the MAE closing condition, which — given the complexity of the renegotiation process and the involvement of Oregon state regulatory authorities — is not reasonably likely to be resolved within 90 days. Under limb (b), if the concession renegotiation constitutes a Material Adverse Effect (as analyzed in the companion C&H memorandum dated November 14, 2022), its occurrence would directly trigger the Material Impediment Event definition. The determination of whether a Material Impediment Event has occurred is made by the GP in its reasonable discretion, subject to the good faith standard set forth in §8.01.
2. GP's Powers During Dormancy
Upon a declaration by the GP that a Material Impediment Event has occurred, the LP Agreement activates a set of dormancy provisions that govern the management and operation of the Vehicle during the period of uncertainty. The principal features of the dormancy regime are as follows:
Suspension of Capital Calls and Investment Activity (§7.04(b)). The GP is authorized, but not required, to suspend capital calls and all investment activity of the Vehicle during the dormancy period. This means that, upon declaration of a Material Impediment Event, the GP would not issue further capital calls to Ironside for the purpose of funding the acquisition. The suspension protects Ironside from being required to commit additional capital during a period in which the investment thesis is materially uncertain.
Quarterly Status Reports. The GP is required to provide quarterly status reports to the LP during the dormancy period, detailing the status of the EPA, the underlying transaction, the concession renegotiation (or other impediment), and the GP's assessment of reactivation prospects. This reporting obligation is reinforced and expanded by the Side Letter dated July 29, 2022, which provides Ironside with enhanced reporting rights, including the right to receive copies of material correspondence between Meridian and the Selling Shareholders, material regulatory filings and correspondence, and any draft amendments to the EPA or debt commitment letter.
Maintenance of Vehicle as Going Concern. During dormancy, the GP retains the authority to maintain the Vehicle as a going concern. This includes the power to pay ordinary operating expenses (fund administration fees, Delaware franchise taxes, registered agent fees, and similar recurring costs), to maintain the Vehicle's contractual positions (including the EPA, the debt commitment letter, and the R&W insurance policy), and to take such other actions as the GP reasonably deems necessary to preserve the Vehicle's ability to consummate the acquisition if the impediment is resolved.
Estimated Annual Dormancy Operating Expenses. Based on the Vehicle's current cost structure, we estimate annual dormancy operating expenses to be approximately $185,000, comprised of the following:
These estimates assume that no material legal fees or other extraordinary expenses are incurred during the dormancy period. If substantial legal work is required in connection with the EPA, the concession renegotiation, or regulatory proceedings, the annual cost could be materially higher. The GP would fund dormancy operating expenses from the Vehicle's existing working-capital reserve ($3,500,000), which, at the estimated annual run rate of $185,000, would be sufficient to cover approximately 18.9 years of dormancy operating expenses. Accordingly, we do not anticipate that an additional capital call for dormancy expenses would be necessary in any realistic scenario.
3. Wind-Down Election Right — §7.04(c)
The single most important protection available to Ironside in the dormancy scenario is the wind-down election right set forth in LP Agreement §7.04(c). This provision, which was specifically negotiated by Calderwood & Harkness on Ironside's behalf during the LP Agreement drafting process, provides Ironside with the unilateral right to compel an orderly wind-down of the Vehicle if the dormancy period extends beyond a specified duration.
Trigger. The wind-down election right matures if dormancy persists for 18 consecutive months following the GP's declaration of a Material Impediment Event. The 18-month period runs continuously from the date of the GP's formal declaration; it is not tolled by any intervening developments or discussions between the parties.
Mechanics. Upon maturation of the wind-down election right, Ironside may exercise the right by delivering written notice to the GP. The notice need not specify reasons for the election and is not subject to the GP's consent or approval. Upon receipt of the written notice, the GP is required to commence an orderly wind-down of the Vehicle within 30 days. The wind-down must be conducted in accordance with the procedures specified in the LP Agreement, including the following:
(i) Liquidation of all Vehicle assets, including the termination or assignment of the EPA and any ancillary transaction documents;
(ii) Settlement of all Vehicle obligations, including payment of outstanding expenses, satisfaction of contingent liabilities, and discharge of any indemnification obligations;
(iii) Return of remaining cash and assets to the partners in accordance with the distribution waterfall set forth in §6.01 of the LP Agreement; and
(iv) Dissolution and termination of the Vehicle by filing a Certificate of Cancellation with the Delaware Secretary of State.
Distribution Waterfall. The return of remaining cash and assets to the partners upon wind-down is governed by the distribution waterfall set forth in §6.01, which provides for distributions in the following order of priority:
(a) First, to the LP (Ironside), a preferred return of 8% per annum, compounded quarterly, on unreturned capital contributions, calculated from the date of each capital contribution to the date of distribution;
(b) Second, to the LP (Ironside), return of unreturned capital contributions;
(c) Third, 10% to the GP (Meridian GP IV) as carried interest and 90% to the LP (Ironside), until the GP has received aggregate distributions equal to 10% of cumulative net profits above the preferred return hurdle; and
(d) Fourth, the balance, if any, to the LP (Ironside) and the GP (Meridian GP IV) in proportion to their respective partnership interests (99.99% and 0.01%, respectively).
In a wind-down scenario where the transaction has not closed and no investment returns have been generated, the distribution waterfall would effectively collapse to a simple return of remaining Vehicle cash to the LP, net of Vehicle expenses and wind-down costs. The preferred return and carried interest provisions would have no economic effect, as there would be no profits to distribute. The GP's 0.01% interest in remaining cash would be de minimis.
Illustrative Timeline. If the GP declares a Material Impediment Event on, for example, January 9, 2023 (a date that represents a reasonable projection based on the current trajectory of events), the 18-month dormancy period would expire on approximately July 9, 2024. At that point, Ironside's wind-down election right would mature, and Ironside could exercise the right by delivering written notice to the GP at any time on or after that date. The GP would then be required to commence wind-down within 30 days (i.e., by approximately August 8, 2024), and the wind-down process itself would likely take an additional six to twelve months to complete.
Permissive Nature of the Right. We emphasize that the wind-down election right is permissive, not mandatory. Ironside is not obligated to exercise the right upon its maturation. If, at the 18-month mark, reactivation of the transaction appears favorable — for example, if the concession renegotiation has been substantially resolved, debt financing is available, and regulatory approvals have been obtained or remain obtainable — Ironside may choose to defer exercise of the wind-down election right indefinitely. The right remains available to Ironside at all times after the 18-month maturation date, regardless of when it is ultimately exercised.
4. Interaction with EPA Outside Date and Standstill
The dormancy regime under §7.04 does not exist in a vacuum; it interacts in important ways with the EPA, the debt commitment letter, and the regulatory approval process.
EPA Outside Date. During dormancy, the EPA outside date may be extended by agreement of the parties. As noted above, a First Amendment extending the outside date from December 31, 2022 to March 31, 2023 was under discussion at the time Meridian notified Ironside of the concession renegotiation and was subsequently executed on November 22, 2022. Further extensions may be negotiated if the dormancy period continues. Each extension of the EPA outside date preserves the buyer parties' right to consummate the acquisition if the impediment is resolved, but also prolongs the period during which Ironside's capital is committed to the Vehicle.
EPA Termination During Dormancy. If the EPA is terminated during the dormancy period — whether by expiration of the outside date, mutual agreement, or unilateral termination by either party — the wind-down provisions of §7.02 (Consequences of Transaction Failure) would apply in addition to the dormancy provisions of §7.04. In such circumstances, the GP would be required to commence wind-down of the Vehicle in accordance with §7.02, regardless of whether the 18-month wind-down election right had matured. The practical effect is that EPA termination during dormancy would accelerate the wind-down process.
Standstill Arrangements. If the EPA outside date expires without formal termination by any party, the parties may choose to negotiate a standstill arrangement to preserve the transaction documents and the parties' optionality. A standstill would typically provide that the EPA remains in effect on its terms but that neither party is obligated to consummate the closing until specified conditions are met. From Ironside's perspective, a standstill should be approached with caution, as it could effectively extend the dormancy period without triggering the protections of §7.02 (which require EPA termination) and could delay the maturation of the wind-down election right.
IV. Expense Allocation
A. Vehicle-Level Expenses
All expenses of the Vehicle — whether incurred during the investment period, the dormancy period, or the wind-down period — are borne by the Vehicle and are therefore allocated between the partners in proportion to their respective partnership interests: 99.99% to Ironside (as LP) and 0.01% to Meridian GP IV (as GP). In practical terms, the economic burden of Vehicle-level expenses falls almost entirely on Ironside.
Vehicle-level expenses include the following categories:
• Fund administration fees payable to Kendrick Thorne & Associates LLP, the Vehicle's fund administrator, for services including NAV calculation, capital account maintenance, investor reporting, and regulatory compliance;
• Delaware franchise tax, assessed annually by the Delaware Division of Corporations based on the Vehicle's authorized capital structure;
• Annual report filing fees payable to the Delaware Secretary of State;
• Registered agent fees payable to Cascade Systems (160 Greentree Drive, Suite 101, Dover, Delaware 19904), the Vehicle's registered agent for service of process in Delaware;
• Audit fees for the annual audit of the Vehicle's financial statements;
• K-1 preparation fees for the preparation and filing of Schedule K-1 forms for each partner;
• Legal fees incurred in connection with the Vehicle's ordinary-course operations, compliance, and contractual administration; and
• Any other ordinary-course costs reasonably incurred by the GP in the management of the Vehicle.
The LP Agreement does not impose a specific cap on Vehicle-level operating expenses (as distinct from wind-down capital calls, which are capped as discussed in Section IV.C below). However, the GP's obligation to act in good faith and with commercially reasonable judgment (§8.01) constrains the GP from incurring unreasonable or excessive expenses. Ironside should monitor Vehicle-level expenses through the quarterly reporting mechanisms provided in the LP Agreement and the Side Letter.
B. Transaction-Level Expense Allocation Between Fund IV and Co-Invest
Transaction-level costs — that is, costs incurred in connection with the proposed acquisition itself, as distinct from Vehicle-level operating costs — are allocated between Fund IV and the Co-Invest on a pro rata basis in accordance with the Co-Investment Allocation Agreement executed on July 29, 2022. The pro rata allocation is based on the parties' respective equity commitments:
• Fund IV: $750,000,000 / $1,050,000,000 = 71.43%
• ICM Co-Invest: $300,000,000 / $1,050,000,000 = 28.57%
Transaction-level costs subject to this pro rata allocation include:
• Due-diligence costs (professional fees for legal, accounting, environmental, and engineering advisors);
• Regulatory filing fees (FERC, OPUC, CFIUS);
• R&W insurance premium ($4,875,000 Vehicle share; the total premium may be higher if Fund IV bears a separate share);
• Debt commitment fees;
• Any reverse termination fee or other EPA-related liability; and
• Other costs reasonably incurred in connection with the acquisition.
We draw attention to one specific item that warrants careful monitoring: the debt commitment letter extension fee. The extension fee of $2,437,500, which was to be payable in connection with any extension of the commitment letter termination date, was — per our understanding of the arrangement between Meridian and Atlas National Bank — to be borne by Meridian Fund IV under its separate arrangement with Atlas and should not be charged to the Co-Invest absent a specific agreement to the contrary. Ironside should confirm that this understanding is documented and that no portion of the extension fee is included in the expenses allocated to the Co-Invest.
More broadly, Calderwood & Harkness recommends that Ironside continue to monitor the allocation of transaction-level costs between Fund IV and the Co-Invest to ensure that Ironside is not bearing a disproportionate share of costs — particularly during an extended dormancy or wind-down period, when cost visibility may decrease and the GP may face pressure from Fund IV to shift expenses to the Co-Invest. The quarterly reporting obligations under the LP Agreement and the Side Letter provide a mechanism for Ironside to request and review detailed cost allocation data.
C. Wind-Down Costs
In the event of a wind-down of the Vehicle — whether triggered by EPA termination under §7.02, by exercise of the wind-down election right under §7.04(c), or otherwise — the costs of the wind-down process would be borne by the Vehicle and therefore by the partners in proportion to their interests. Wind-down costs typically include:
• Filing of a Certificate of Cancellation with the Delaware Secretary of State;
• Final audit of the Vehicle's financial statements;
• Preparation and filing of final tax returns (federal and state);
• Legal fees incurred in connection with the wind-down, including settlement of contractual obligations, termination of agreements, and dissolution proceedings; and
• Any other costs reasonably necessary to effect an orderly wind-down.
If the Vehicle's existing cash reserves are insufficient to fund wind-down costs, the GP is authorized to issue a final capital call to the partners under §7.04(c)(ii) for the purpose of funding the shortfall. Critically, the LP Agreement caps any such wind-down capital call at 1% of total committed capital. Based on the Vehicle's total committed capital of $300,000,000, the maximum wind-down capital call is $3,000,000. This cap was specifically negotiated by Calderwood & Harkness as a protection for Ironside against open-ended wind-down expense exposure.
In practice, we do not anticipate that a wind-down capital call would be necessary, given the $3,500,000 working-capital reserve currently held by the Vehicle. Even after accounting for dormancy operating expenses (estimated at $185,000 per annum), the Vehicle should have sufficient cash to fund the wind-down process. However, the $3,000,000 cap provides an important backstop in the event of unforeseen complications.
V. GP Liability and Fiduciary Duties
A. Standard of Care
The LP Agreement establishes the standard of care applicable to the GP in the performance of its duties. Section 8.01 of the LP Agreement provides that the GP's standard of care is one of "good faith and commercially reasonable judgment." This standard is common in Delaware limited partnership agreements and reflects the parties' negotiated understanding of the level of diligence and care expected of the GP in managing the Vehicle's affairs.
The GP does not owe traditional fiduciary duties of loyalty and care to the extent that such duties have been modified or eliminated by the LP Agreement. This modification is permitted under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-1101(d), which allows a limited partnership agreement to expand, restrict, or eliminate fiduciary duties, subject to the implied contractual covenant of good faith and fair dealing.
Notwithstanding the modification of traditional fiduciary duties, the GP remains subject to two important constraints:
(i) The implied contractual covenant of good faith and fair dealing. Under Delaware law, the implied covenant prohibits a party from engaging in conduct that, while not expressly prohibited by the contract, is inconsistent with the parties' reasonable expectations at the time of contracting. The implied covenant cannot be waived under the Delaware Revised Uniform Limited Partnership Act. 6 Del. C. § 17-1101(d). This provides Ironside with a residual layer of protection against opportunistic or bad-faith conduct by the GP.
(ii) The specific duties set forth in the LP Agreement. The LP Agreement imposes a series of specific procedural obligations on the GP, including quarterly reporting during dormancy (§7.04(b)), prompt notification of material developments (Side Letter), adherence to the capital call procedures of §4.01, compliance with the wind-down election procedures of §7.04(c), and observance of the expense allocation framework. Breach of any of these specific obligations could give rise to a contractual claim by Ironside.
B. GP Liability Limitations
Section 8.02 of the LP Agreement provides broad exculpation for the GP. The GP is not liable to the Vehicle or to any partner for any losses, damages, or expenses arising from the GP's actions or inactions in connection with the Vehicle's activities, except to the extent that such losses, damages, or expenses are determined by a court of competent jurisdiction (by final, non-appealable judgment) to have resulted from the GP's fraud, willful misconduct, or gross negligence.
The exculpation standard applies to the full range of GP decision-making, including:
• The GP's decision to pursue the Cascadia acquisition, including the selection of the Target, the negotiation of the EPA, and the structuring of the transaction;
• The GP's exercise of discretion regarding capital calls, including the timing, amount, and purpose of calls;
• The GP's decision to suspend capital calls and declare a Material Impediment Event under §7.04;
• The GP's conduct during the dormancy period, including decisions regarding maintenance of the EPA, extension of the outside date, and engagement with regulatory authorities; and
• The GP's management of the wind-down process, including liquidation of assets, settlement of obligations, and timing of distributions.
The exculpation standard of "fraud, willful misconduct, or gross negligence" is a relatively high threshold under Delaware law. Mere negligence — even significant negligence — in the conduct of the GP's duties would not give rise to liability under this standard. A claimant must demonstrate intentional wrongdoing, reckless indifference, or conscious disregard of known risks.
Indemnification. In addition to the exculpation provision, Section 8.03 of the LP Agreement provides that the GP is indemnified by the Vehicle for any liabilities, losses, damages, costs, or expenses arising from or in connection with the GP's activities on behalf of the Vehicle, except to the extent that such liabilities are attributable to the GP's fraud, willful misconduct, or gross negligence. The indemnification obligation is an obligation of the Vehicle, and its economic burden therefore falls on Ironside as the 99.99% LP. In practical terms, this means that Ironside would bear the cost of defending and indemnifying the GP against third-party claims arising from the Vehicle's activities, unless the GP is found to have engaged in fraud, willful misconduct, or gross negligence.
C. Ironside's Potential Claims Against the GP
In light of the foregoing, we assess the viability of potential claims by Ironside against Meridian GP IV in the current scenario.
General Assessment. Based on the information available to us, Ironside is unlikely to have viable claims against Meridian GP IV for losses arising from the Bull Run concession renegotiation or the potential failure of the Cascadia acquisition. The concession renegotiation appears to be a development that arose from external regulatory action (Oregon SB 1567) rather than from any act or omission by the GP. The GP's decision to pursue the Cascadia acquisition, including its assessment of the concession risk during the due-diligence process, appears to fall within the range of commercially reasonable investment judgments and is therefore protected by the exculpation provisions of §8.02.
Potential Claim Scenarios. Notwithstanding the foregoing general assessment, potential claims against the GP could arise in the following circumstances:
(i)

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