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

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

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

MEMORANDUM

September 2, 2022

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

FROM: Pamela Cross, Responsible Partner Nicholas Stern, Billing Partner Theresa Kim, Lead Associate — Funds & Asset Management Group

RE: Analysis of Representations and Warranties Under the Equity Purchase Agreement — Allocation of Risk as Between Meridian Infrastructure Partners Fund IV, LP and ICM Cascadia Co-Invest, LP

MATTER NUMBER: 1023-00001

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I. Executive Summary

This memorandum has been prepared at the request of Ironside Capital Management LP ("Ironside") to analyze how the representations and warranties contained in the draft Equity Purchase Agreement (the "EPA") for the proposed acquisition of Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Target") allocate risk between the two equity participants in the transaction — Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest" or the "Vehicle") — and to identify areas where Ironside should seek enhanced structural protections for the co-investment vehicle. The analysis set forth herein is intended to inform Ironside's negotiating posture with respect to the EPA and related transaction documents in advance of the anticipated September 15, 2022 signing date.

Transaction Overview. The proposed transaction involves a 100% equity acquisition of Cascadia, an Oregon corporation, by Cascadia Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation organized for the sole purpose of effecting the acquisition. AcquisitionCo is owned jointly by Fund IV, which holds a 71.43% equity interest and has committed $750 million in equity capital, and ICM Co-Invest, which holds a 28.57% equity interest and has committed $300 million in equity capital, for an aggregate equity capitalization of $1,050,000,000.

Enterprise Value and Financial Terms. The transaction ascribes an enterprise value to Cascadia of $1,950,000,000 and an equity value of $1,050,000,000. The implied EV/EBITDA multiple is approximately 14.1x, calculated on the basis of Cascadia's fiscal year 2021 EBITDA of $138 million as reflected in audited financial statements prepared by Halstead & Greer LLP. This multiple is within the range of comparable precedent transactions in the North American renewable energy infrastructure sector, though it sits at the higher end of the range, reflecting the value attributed to Cascadia's long-duration contracted revenue base and its portfolio of water infrastructure concessions.

Financing Structure. The acquisition will be financed through a combination of equity contributions and senior secured debt. The debt component consists of a $975 million senior secured term loan, with Atlas National Bank, N.A. serving as lead arranger and administrative agent for $650 million and Pinnacle Credit Partners LLC participating for $325 million, together with a $150 million undrawn revolving credit facility available for post-closing working capital and capital expenditure purposes. Total sources of funding amount to $2,025,000,000 (equity of $1,050 million plus the term loan of $975 million), which will be applied as follows: $1,950 million toward the enterprise value purchase price; approximately $50 million toward estimated transaction costs (including advisory fees, legal fees, financing fees, and regulatory filing costs); and $25 million toward a working-capital adjustment escrow to be established at closing.

Selling Shareholders. The selling shareholders under the EPA are: (i) Timberline Growth Equity Fund III, LP ("Timberline"), which holds 62% of Cascadia's outstanding equity; (ii) the Weir Family Trust, which holds 18% of Cascadia's outstanding equity; and (iii) the Management Rollover Pool, comprising approximately 25 senior members of Cascadia's management team, which collectively holds the remaining 20% of Cascadia's outstanding equity. The Management Rollover Pool participants are expected to roll over approximately 50% of their equity (representing 10% of Cascadia's total outstanding equity) into the post-acquisition capital structure through a separate management equity plan, with the remaining 50% being cashed out at closing.

EPA Signing and Governing Law. The EPA signing date is anticipated to be September 15, 2022. The EPA is governed by the laws of the State of Delaware, without regard to conflict-of-laws principles.

Key Conclusion. The EPA as currently drafted in the initial version prepared by Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian GP IV LLC ("Meridian" or the "Sponsor"), allocates risk to the "Buyer" (defined as AcquisitionCo) on a unified basis without differentiating between the distinct obligations and exposures of Fund IV and ICM Co-Invest. This undifferentiated approach creates the potential for disproportionate liability allocation to ICM Co-Invest — and by extension to Ironside as the 99.99% limited partner of ICM Co-Invest — particularly with respect to the reverse termination fee, post-closing indemnification obligations, and the financing representation. Calderwood & Harkness LLP ("C&H") recommends a series of specific structural protections, described in detail in this memorandum, designed to ensure that Ironside's economic exposure under the EPA and related agreements is proportional to its 28.57% equity stake and to protect against the risk of cross-default and disproportionate liability. These recommendations should be incorporated into C&H's revised marked draft of the EPA and into proposed amendments to the Co-Investment Allocation Agreement and the Side Letter prior to the anticipated signing date.

II. Scope and Methodology

Documents Reviewed

In preparing this memorandum, we have reviewed the following documents, each of which bears upon the allocation of risk arising from the representations and warranties contained in the EPA:

1. BSP Initial Draft of the Equity Purchase Agreement. This is the initial draft of the EPA circulated by Breckenridge Sloane & Pratt LLP, counsel to Meridian, on August 12, 2022. BSP's lead partner on this engagement is Charles A. Delacroix. The initial draft runs approximately 148 pages (exclusive of exhibits and disclosure schedules) and contains the standard suite of representations, warranties, covenants, closing conditions, indemnification provisions, and termination rights typical of a private equity-sponsored acquisition of a mid-market infrastructure platform.

2. C&H Marked Draft with Ironside Comments (August 20, 2022). This is the marked draft prepared by C&H incorporating Ironside's preliminary comments and proposed revisions. The marked draft was circulated to BSP on August 20, 2022 for discussion and reflects Ironside's initial positions on a range of issues, including certain of the co-invest protection issues addressed more comprehensively in this memorandum.

3. Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (July 29, 2022). This is the governing document for the co-investment vehicle, executed on July 29, 2022. ICM Co-Invest is a Delaware limited partnership in which Ironside serves as the 99.99% limited partner and Meridian Infrastructure GP IV LLC serves as the general partner. The LP Agreement establishes the capital commitment structure, capital call mechanics, distribution waterfall, governance provisions, and the fiduciary duty framework applicable to the GP.

4. Co-Investment Allocation Agreement between Fund IV and ICM Co-Invest (July 29, 2022). This agreement, executed concurrently with the LP Agreement, governs the allocation of investment economics as between Fund IV and ICM Co-Invest on a 71.43%/28.57% basis, respectively. As discussed in detail below, the Co-Investment Allocation Agreement in its current form addresses the allocation of investment returns and certain costs but does not expressly address the allocation of EPA-related liabilities, including indemnification obligations and the reverse termination fee.

5. Side Letter between Ironside and Meridian Infrastructure GP IV LLC (July 29, 2022). This side letter, also executed on July 29, 2022, grants Ironside certain enhanced governance and economic protections in connection with the co-investment, including: no management fee on the co-invest; most-favored-nation provisions relative to other co-investors (if any); enhanced quarterly reporting obligations; and certain consent rights relating to material decisions of the GP. As discussed below, C&H recommends that the Side Letter be supplemented to address EPA representation and indemnification matters.

6. Debt Commitment Letter (August 30, 2022). This commitment letter, dated August 30, 2022, sets forth the terms on which Atlas National Bank, N.A. (as lead arranger and administrative agent, $650 million) and Pinnacle Credit Partners LLC ($325 million) have committed to provide the $975 million senior secured term loan and the $150 million revolving credit facility to AcquisitionCo in connection with the acquisition. The commitment letter contains customary conditions precedent to funding, including certain bring-down conditions relating to the representations and warranties in the EPA.

In addition, we have reviewed the Northgate Specialty Insurance Co. representation and warranty insurance policy (Policy No. NSW-RI-2022-09814), which provides a coverage limit of $195 million and was bound on September 1, 2022. Our analysis of the R&W insurance policy is set forth in a companion memorandum dated August 31, 2022, and is cross-referenced in this memorandum where relevant to the co-invest risk allocation analysis.

Analytical Framework

Our analysis proceeds in the following steps:

(i) Identification. We identify each category of representation and warranty contained in the EPA, organized by the party making the representation (Sellers, Target, and Buyer).

(ii) Mapping. We map the flow of obligations created by each representation, tracing how the Buyer's representations create obligations at the AcquisitionCo level that flow through to its equity owners (Fund IV and ICM Co-Invest).

(iii) Liability Analysis. We analyze the joint and several liability structure embedded in the current draft of the Equity Commitment Letters and assess how this structure could result in disproportionate exposure for ICM Co-Invest and, by extension, for Ironside.

(iv) Recommendations. We identify and recommend co-invest-specific protections designed to ensure proportional risk allocation, including modifications to the EPA, the Equity Commitment Letters, the Co-Investment Allocation Agreement, and the Side Letter.

This memorandum does not address the substance of the Target's or Sellers' representations and warranties from a due diligence perspective — that is, we do not opine on whether Cascadia's business operations, financial condition, or legal compliance conform to the representations being made. Our analysis is limited to the structural allocation of risk arising from the representation and warranty framework as between Fund IV and ICM Co-Invest. Separate due diligence memoranda addressing the substantive adequacy of Cascadia's representations and warranties are being prepared by C&H's M&A group.

III. Overview of the EPA Representation and Warranty Framework

The EPA contains representations and warranties organized into three principal categories: (A) representations made by the Sellers; (B) representations made by the Target (Cascadia); and (C) representations made by the Buyer (AcquisitionCo). Each category is discussed below, together with an analysis of its relevance to the co-invest risk allocation.

A. Seller Representations and Warranties

The Seller representations and warranties are set forth in Article III of the EPA and are made severally (and not jointly) by each of the three selling shareholder groups: Timberline Growth Equity Fund III, LP; the Weir Family Trust; and each individual participant in the Management Rollover Pool, in each case solely with respect to such Seller's own shares and the matters within such Seller's knowledge and control.

The Seller representations cover the following subjects:

• Authority and Organization. Each Seller represents that it is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization (in the case of Timberline, a Delaware limited partnership; in the case of the Weir Family Trust, a trust established under the laws of the State of Oregon; and in the case of the Management Rollover Pool participants, natural persons and residents of the State of Oregon or the State of Washington). Each Seller represents that it has the requisite power and authority to execute and deliver the EPA and to consummate the transactions contemplated thereby.

• Capitalization and Ownership of Shares. Each Seller represents that it is the record and beneficial owner of its respective shares of Cascadia common stock, free and clear of all liens, pledges, security interests, claims, options, or other encumbrances (other than restrictions under applicable securities laws and the Cascadia stockholders' agreement). Timberline represents ownership of shares constituting 62% of Cascadia's outstanding common stock; the Weir Family Trust represents ownership of shares constituting 18%; and the Management Rollover Pool participants collectively represent ownership of shares constituting 20%.

• Enforceability. Each Seller represents that the EPA and any ancillary agreements to which it is a party constitute legal, valid, and binding obligations of such Seller, enforceable in accordance with their respective terms, subject to customary enforceability exceptions (bankruptcy, insolvency, reorganization, and equitable principles).

• No Conflicts. Each Seller represents that the execution, delivery, and performance of the EPA and the consummation of the transactions contemplated thereby do not (i) violate or conflict with such Seller's organizational documents (if applicable), (ii) violate any law, regulation, order, or judgment applicable to such Seller, or (iii) result in a breach of, or constitute a default under, any material contract to which such Seller is a party.

• Absence of Broker Fees. Each Seller represents that it has not engaged any broker, finder, or investment banker in connection with the transactions contemplated by the EPA, except for such brokers or advisors as are disclosed in the Seller disclosure schedules.

Survival Periods. The Seller representations are subject to the following survival periods, as set forth in Article IX of the EPA:

• Fundamental Representations. The Seller fundamental representations — defined to include the representations regarding organization, authority, capitalization, and title to shares — survive until the later of (x) the expiration of the applicable statute of limitations (including any extensions or tolling thereof) and (y) six (6) years following the Closing Date.

• General Representations. All other Seller representations (including the representations regarding no conflicts, enforceability, and absence of broker fees) survive for a period of eighteen (18) months following the Closing Date.

Relevance to Co-Invest Risk Allocation. The Seller representations run to the benefit of AcquisitionCo as the "Buyer" under the EPA. Any recovery by AcquisitionCo for a breach of a Seller representation will flow through to the equity participants — Fund IV and ICM Co-Invest — in proportion to their respective equity interests (71.43% and 28.57%, respectively), subject to the distribution and allocation provisions of the Co-Investment Allocation Agreement. Because the Seller representations create rights (rather than obligations) for the Buyer, they do not directly create disproportionate risk for ICM Co-Invest. However, the mechanism for distributing any recovery to the equity participants must be clearly established in the Co-Investment Allocation Agreement to ensure proportional treatment, as discussed further in Section V.B below.

B. Target (Cascadia) Representations and Warranties

The Target representations and warranties are set forth in Article IV of the EPA and represent the most extensive set of representations in the agreement. These representations are made by Cascadia and cover the following subjects in detail:

Organization and Good Standing. Cascadia represents that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Oregon, with its principal office and headquarters located at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia further represents that it is duly qualified and in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification, including the States of Washington and Idaho.

Subsidiaries. Cascadia represents that it has disclosed in the disclosure schedules a complete and accurate list of all of its direct and indirect subsidiaries, together with the jurisdiction of organization of each subsidiary, the authorized and outstanding capital stock of each subsidiary, and the record and beneficial ownership thereof. This representation encompasses the full portfolio of operating entities through which Cascadia conducts its hydroelectric, wind, and water infrastructure operations across the Pacific Northwest.

Financial Statements. Cascadia represents that it has delivered to the Buyer true and complete copies of its audited consolidated financial statements for fiscal years 2019, 2020, and 2021, and unaudited interim financial statements for the six-month period ended June 30, 2022. Cascadia's fiscal year 2021 audited financial statements, prepared in accordance with GAAP and audited by Halstead & Greer LLP, reflect total revenue of $487 million and EBITDA of $138 million. Cascadia represents that such financial statements fairly present in all material respects the financial condition and results of operations of Cascadia and its subsidiaries as of the dates and for the periods indicated, and that such financial statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered.

No Undisclosed Liabilities. Cascadia represents that neither it nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent, or otherwise) that would be required to be disclosed on a balance sheet prepared in accordance with GAAP, except for liabilities reflected or reserved against in the most recent balance sheet included in the financial statements, liabilities incurred in the ordinary course of business since the balance-sheet date, and liabilities disclosed in the disclosure schedules.

Absence of Certain Changes. Cascadia represents that since the balance-sheet date (December 31, 2021), Cascadia and its subsidiaries have conducted their businesses in the ordinary course of business consistent with past practice in all material respects, and that there has been no event, occurrence, development, or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

Material Contracts. Cascadia represents that it has delivered to the Buyer true and complete copies of all contracts that are material to the business, operations, financial condition, or results of operations of Cascadia and its subsidiaries (the "Material Contracts"), including all contracts involving aggregate consideration in excess of $5 million, all contracts with governmental authorities, all power purchase agreements, all concession agreements, and all contracts with remaining terms in excess of five years. The Material Contracts representation is of particular significance to the co-invest risk allocation analysis given Cascadia's long-term contractual revenue base.

Cascadia's portfolio includes fourteen (14) hydroelectric facilities, six (6) wind farms, and three (3) water-treatment concessions, supported by power purchase agreements and municipal water-service contracts with a weighted-average remaining contractual life of approximately twenty-two (22) years. The most significant single contract in Cascadia's portfolio is the Bull Run Filtration Project concession with the Portland Metropolitan Water District (the "Bull Run Concession"), which generates approximately $64 million in annual revenue and has a 40-year term commencing approximately in 2018. The Bull Run Concession represents approximately 13% of Cascadia's total fiscal year 2021 revenue of $487 million and is a significant driver of the valuation assigned to the Target. Cascadia represents that all Material Contracts are in full force and effect, that neither Cascadia nor any counterparty is in material breach or default thereunder, and that no party has given written notice of termination, cancellation, renegotiation, or material modification of any Material Contract.

Real Property. Cascadia represents that it has disclosed a complete list of all real property owned or leased by Cascadia and its subsidiaries and that Cascadia and its subsidiaries have good and marketable title to (or valid leasehold interests in) such properties, free and clear of all liens other than permitted liens.

intellectual Property. Cascadia represents that it owns or has valid licenses to use all intellectual property material to the conduct of its business and that the conduct of Cascadia's business does not infringe upon the intellectual property rights of any third party.

Environmental Compliance. Cascadia represents that it and its subsidiaries are and have been in compliance in all material respects with all applicable environmental laws, that all necessary environmental permits have been obtained and are in full force and effect, and that there are no pending or, to Cascadia's knowledge, threatened environmental claims, investigations, or enforcement actions. This representation is supported by the Phase I and Phase II environmental site assessments prepared by Clearwater Environmental Consulting Inc., which have been delivered to AcquisitionCo as part of the due diligence process. C&H notes that the environmental representations are of heightened importance given the nature of Cascadia's operations — hydroelectric and water-treatment facilities are subject to extensive federal and state environmental regulation, including requirements under the Clean Water Act, the Endangered Species Act, and state-level water quality and discharge standards.

Employee and Benefit Matters. Cascadia represents that it has disclosed all material employee benefit plans and that such plans are in compliance with applicable laws, including ERISA and the Internal Revenue Code. Cascadia further represents that there are no pending or threatened labor disputes, work stoppages, or union organizing activities. The approximately 25 senior management members in the Management Rollover Pool are identified in the disclosure schedules, and Cascadia represents that all employment agreements with such individuals are in full force and effect and have been provided to the Buyer.

Tax. Cascadia represents that all material tax returns required to be filed have been timely filed, that all material taxes due and payable have been paid, and that there are no pending or threatened tax audits, assessments, or disputes. Cascadia further represents that it has not been a party to any "listed transaction" within the meaning of Treasury Regulations Section 1.6011-4.

Litigation. Cascadia represents that there is no pending or, to its knowledge, threatened litigation, arbitration, administrative proceeding, or governmental investigation against Cascadia or any of its subsidiaries that, individually or in the aggregate, would reasonably be expected to result in liability in excess of $2.5 million or that would reasonably be expected to have a Material Adverse Effect.

Regulatory Permits and Licenses. Cascadia represents that it and its subsidiaries hold all permits, licenses, franchises, approvals, and authorizations of governmental authorities necessary for the conduct of their respective businesses as currently conducted, including without limitation: (i) Federal Energy Regulatory Commission ("FERC") hydroelectric licenses for each of its fourteen hydroelectric facilities; (ii) Oregon Public Utility Commission ("OPUC") utility permits; and (iii) water rights across the States of Oregon, Washington, and Idaho. Cascadia represents that all such permits and licenses are in full force and effect and that no revocation, suspension, cancellation, or modification proceedings are pending or, to Cascadia's knowledge, threatened. C&H notes that FERC Docket No. EC22-143-000 relates to the Section 203 transfer application that must be approved in connection with the change of control of Cascadia's FERC-licensed hydroelectric facilities, and OPUC Docket No. UM-2287 relates to the OPUC's review of the transaction under Oregon public utility change-of-control statutes. These regulatory approvals are conditions precedent to closing under the EPA.

Insurance. Cascadia represents that it maintains insurance policies providing adequate coverage for the risks and liabilities incident to its business and that all such policies are in full force and effect.

Compliance with Laws. Cascadia represents that it and its subsidiaries are and have been in compliance in all material respects with all applicable laws, regulations, orders, and judgments.

Survival Periods. The Target representations are subject to the following survival periods:

• Fundamental Target Representations (organization, authority, capitalization): survive for six (6) years following the Closing Date or until the expiration of the applicable statute of limitations, whichever is later.

• Tax Representations: survive until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof).

• Environmental Representations: survive for three (3) years following the Closing Date, reflecting the heightened environmental risk profile inherent in Cascadia's infrastructure operations.

• All Other General Target Representations: survive for eighteen (18) months following the Closing Date.

Materiality Qualifiers and MAE Qualifiers. Many of the Target representations are qualified by references to "materiality" or "Material Adverse Effect." The EPA defines "Material Adverse Effect" (or "MAE") with respect to the Target as any event, occurrence, development, or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, assets, financial condition, or results of operations of Cascadia and its subsidiaries, taken as a whole. The MAE definition includes customary carve-outs for (a) changes in general economic or political conditions, (b) changes affecting the industry in which the Target operates generally, (c) changes in applicable law or GAAP, (d) acts of war, terrorism, or natural disasters, and (e) the announcement or pendency of the transactions contemplated by the EPA. C&H notes that the carve-out for "changes in applicable law" may be particularly relevant in the context of Oregon Senate Bill 1567 (2022), which, if enacted, could affect the regulatory framework governing water-treatment concessions in Oregon, including the Bull Run Concession. The interaction between the MAE carve-outs and the material contracts representation warrants careful monitoring.

For indemnification purposes, the EPA contains a standard double-materiality "scrape" provision in Article IX, which provides that materiality and MAE qualifiers contained in the Target representations shall be disregarded for purposes of both (i) determining whether a breach of a representation has occurred and (ii) calculating the amount of losses arising from such breach. This scrape is favorable to the Buyer and, by extension, to both Fund IV and ICM Co-Invest.

C. Buyer (AcquisitionCo) Representations and Warranties

The Buyer representations and warranties are set forth in Article V of the EPA and are made by AcquisitionCo. These representations are of central importance to the co-invest risk allocation analysis because they are the representations that create obligations flowing from the Buyer to the Sellers — and, through the equity commitment structure, indirectly from Fund IV and ICM Co-Invest to the Sellers.

AcquisitionCo makes the following representations:

Organization and Authority. AcquisitionCo represents that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and that it has the requisite corporate power and authority to execute, deliver, and perform the EPA and to consummate the transactions contemplated thereby. As a newly formed shell entity with no prior operating history and no assets other than its organizational documents and the equity commitment letters, this representation is largely a formality.

Enforceability. AcquisitionCo represents that the EPA and any ancillary agreements to which it is a party constitute legal, valid, and binding obligations of AcquisitionCo, enforceable in accordance with their respective terms, subject to customary enforceability exceptions.

No Conflicts. AcquisitionCo represents that the execution, delivery, and performance of the EPA do not violate or conflict with its certificate of incorporation or bylaws, or any law, regulation, order, or judgment applicable to AcquisitionCo.

Availability of Financing (the "Financing Representation"). AcquisitionCo represents that it has received (i) binding equity commitment letters from Fund IV (committing $750 million) and ICM Co-Invest (committing $300 million), and (ii) a binding debt commitment letter from Atlas National Bank, N.A. (as lead arranger and administrative agent, committing $650 million under the senior secured term loan and $150 million under the revolving credit facility) and Pinnacle Credit Partners LLC (committing $325 million under the senior secured term loan), and that the aggregate proceeds from such commitments ($2,025,000,000 in total — $1,050 million in equity plus $975 million in term loan) are sufficient to consummate the transactions contemplated by the EPA and to pay all related fees, costs, and expenses. This is the single most critical Buyer representation from a co-invest risk allocation perspective, and it is analyzed in detail in Section V.A below.

Absence of Broker Fees. AcquisitionCo represents that it has not engaged any broker, finder, or investment banker in connection with the transactions contemplated by the EPA, except for Blackthorn Advisory Group LLC, which serves as financial advisor to Meridian in connection with the acquisition. C&H notes that Rivermark Capital Markets Inc. served as placement agent for the ICM Co-Invest capital raise and was paid a placement-agent fee of $1,050,000 from initial capital call proceeds, but Rivermark's role was limited to the co-invest placement function and does not constitute a "transaction broker" engagement within the scope of this representation.

Investment Intent. AcquisitionCo represents that it is acquiring the shares of Cascadia for investment purposes and not with a view to distribution in violation of applicable securities laws. This is a standard representation in private acquisitions.

Solvency. AcquisitionCo represents that, after giving effect to the transactions contemplated by the EPA (including the incurrence of the acquisition indebtedness), AcquisitionCo and its subsidiaries, on a consolidated basis, will be solvent, will be able to pay their debts as they become due, and will have adequate capital to carry on their business. This representation is analyzed further in Section VI.C below.

Critical Structural Issue. AcquisitionCo is a newly formed shell entity with no independent assets, no operating history, and no revenue. Its ability to perform its obligations under the EPA — including the obligation to close the transaction and fund the purchase price — is entirely dependent on the equity contributions to be made by Fund IV and ICM Co-Invest and on the debt financing to be provided by Atlas National Bank and Pinnacle Credit Partners. Accordingly, AcquisitionCo's representations regarding financing availability effectively function as indirect representations regarding the willingness and ability of the equity commitment sources and the debt commitment sources to fund their respective commitments. If any one of these funding sources fails to perform, AcquisitionCo will be unable to close, potentially triggering the reverse termination fee and exposing the remaining equity participants to liability. The implications of this structure for ICM Co-Invest are analyzed in detail in Sections IV and V below.

IV. Joint and Several Liability Analysis

A. Structure of Buyer Obligations

Under the EPA as currently drafted, AcquisitionCo is the sole entity defined as the "Buyer." Neither Fund IV nor ICM Co-Invest is a direct party to the EPA. This structure is typical of private equity-sponsored acquisitions, where the acquisition vehicle serves as the contracting counterparty and the fund and any co-investment vehicles stand behind the acquisition vehicle through equity commitment letters.

However, the EPA contains an "Equity Commitment Letter" provision (Section 5.05) that requires each equity source — Fund IV and ICM Co-Invest — to deliver an equity commitment letter (each, an "ECL") directly to the Sellers as a condition to the execution and delivery of the EPA. The ECLs are attached to the EPA as Exhibits D-1 and D-2, respectively, and are incorporated into the EPA by reference.

Under the ECLs as currently drafted by BSP, each of Fund IV and ICM Co-Invest provides the following commitments to the Sellers:

(a) A commitment to fund its respective portion of the equity capitalization of AcquisitionCo ($750 million for Fund IV; $300 million for ICM Co-Invest) in order to enable AcquisitionCo to consummate the closing.

(b) A guarantee of AcquisitionCo's payment obligations under the EPA in the event that the EPA is terminated and AcquisitionCo is obligated to pay the reverse termination fee.

(c) A guarantee of AcquisitionCo's indemnification obligations under Article IX of the EPA arising from breaches of the Buyer representations and warranties.

Critically, the guarantees described in clauses (b) and (c) above are structured on a joint and several basis. Under the current draft, Fund IV and ICM Co-Invest are each jointly and severally liable for the full amount of AcquisitionCo's payment obligations, up to the aggregate amount of the reverse termination fee, without any limitation to their respective pro rata shares of such obligations.

Reverse Termination Fee. The EPA provides for a reverse termination fee equal to 3% of the equity value, calculated as 3% × $1,050,000,000 = $31,500,000. The reverse termination fee is payable by AcquisitionCo to the Sellers in the event that (i) the EPA is terminated by the Sellers due to AcquisitionCo's failure to consummate the closing when all conditions to closing have been satisfied or waived, (ii) the EPA is terminated due to a breach by AcquisitionCo of its representations, warranties, or covenants that would cause the failure of a condition to closing, or (iii) the EPA is terminated due to the failure of the financing condition (if applicable). Under the ECLs as currently drafted, the reverse termination fee guarantee operates as the sole and exclusive monetary remedy of the Sellers against Fund IV and ICM Co-Invest (subject to the Sellers' right to seek specific performance of the obligation to close in certain circumstances).

B. Risk of Disproportionate Liability

The joint and several liability structure embedded in the current draft of the ECLs creates a significant risk of disproportionate liability for ICM Co-Invest and, by extension, for Ironside. This risk manifests in several ways:

Reverse Termination Fee Exposure. Under joint and several liability, if AcquisitionCo fails to close and the reverse termination fee of $31,500,000 is triggered, the Sellers may recover the full amount from either Fund IV or ICM Co-Invest (or both), without regard to their respective pro rata equity interests. If Meridian (through Fund IV) were unable or unwilling to pay its pro rata share of the reverse termination fee — whether due to Fund IV liquidity constraints, a dispute between the GP and Fund IV's limited partners, or any other reason — the Sellers could seek recovery of the entire $31,500,000 from ICM Co-Invest. Ironside's maximum exposure to the reverse termination fee would thus be $31,500,000 rather than its pro rata share of approximately $9,000,000 (28.57% × $31,500,000 = $9,000,450). This represents a potential over-exposure of approximately $22.5 million relative to Ironside's pro rata allocation.

Indemnification Exposure. Similarly, any post-closing indemnification obligations of AcquisitionCo arising from breaches of the Buyer representations and warranties could, under the guarantee provisions of the ECLs, create indirect liability for both Fund IV and ICM Co-Invest. While the EPA contains customary caps on Buyer indemnification (the aggregate cap on general indemnification is 10% of the equity value, or $105 million; the cap on fundamental representation indemnification is the full equity value of $1,050 million), the joint and several nature of the ECL guarantees means that ICM Co-Invest could be exposed to the full amount of any Buyer indemnification obligation rather than its 28.57% pro rata share.

Co-Investment Allocation Agreement Gap. The Co-Investment Allocation Agreement between Fund IV and ICM Co-Invest, dated July 29, 2022, provides that the two vehicles share investment economics on a 71.43%/28.57% basis, reflecting their respective equity contributions. However, the Co-Investment Allocation Agreement does not expressly address the allocation of EPA indemnification liabilities, reverse termination fee obligations, or other EPA-related liabilities. This gap creates ambiguity as to the internal allocation of such liabilities between Fund IV and ICM Co-Invest. While Fund IV and ICM Co-Invest could, as a matter of internal agreement, seek to allocate such liabilities on a pro rata basis, the absence of an express provision creates enforcement risk — particularly in a scenario where the interests of Fund IV and ICM Co-Invest are not aligned or where the GP (Meridian Infrastructure GP IV LLC) is subject to conflicting obligations.

LP Agreement Limitations. The LP Agreement of ICM Co-Invest limits Ironside's obligation to fund capital calls to its unfunded commitment amount. As of the initial capital call of $22,500,000 made on August 15, 2022 (representing 7.5% of the $300 million total commitment), Ironside's remaining unfunded commitment stands at $277,500,000. Any indemnification funding obligation imposed on ICM Co-Invest would need to be effected through a capital call under Section 4.01 of the LP Agreement, and Ironside's obligation to fund such capital call would be limited to its unfunded commitment. However, the LP Agreement does not by its terms limit the amount that may be called for indemnification purposes, and there is no express provision addressing the interaction between AcquisitionCo-level indemnification exposure and the capital call mechanics of the LP Agreement. This creates the risk that the GP could call capital from Ironside to fund AcquisitionCo's indemnification obligations in amounts that are disproportionate to ICM Co-Invest's 28.57% equity interest.

C. C&H Recommendation: Several (Not Joint) Liability

C&H strongly recommends that the ECLs and any guarantee provisions in the EPA be restructured so that the liability of each equity source — Fund IV and ICM Co-Invest — is several and not joint, with each equity source liable only for its pro rata share of any Buyer obligations.

Specifically, C&H recommends the following modifications:

(a) Several Liability Standard. The ECLs should expressly provide that Fund IV's and ICM Co-Invest's obligations thereunder are several and not joint, and that each equity source is liable for its respective obligations only in proportion to its equity interest (71.43% for Fund IV and 28.57% for ICM Co-Invest).

(b) Reverse Termination Fee Cap. ICM Co-Invest's maximum exposure under the ECL with respect to the reverse termination fee should be capped at 28.57% of the reverse termination fee amount, or approximately $9,000,000 (28.57% × $31,500,000 = $9,000,450, rounded to $9,000,000 for purposes of setting a defined cap).

(c) Indemnification Cap. ICM Co-Invest's maximum exposure under the ECL with respect to Buyer indemnification obligations should be capped at 28.57% of any applicable Buyer indemnification cap.

(d) No Cross-Default. The ECLs should provide that a default by Fund IV under its ECL shall not constitute a default by ICM Co-Invest under its ECL, and vice versa. This "no cross-default" provision is essential to insulating ICM Co-Invest from the consequences of Fund IV's failure to perform.

This recommendation is consistent with market practice for minority co-investors in sponsor-led acquisitions. In transactions where a co-investor is contributing a minority portion of the equity (typically less than 30%), it is standard for the co-investor's ECL to be structured on a several (not joint) basis with a pro rata liability cap. The joint and several structure in the current BSP draft appears to reflect BSP's approach of maximizing the Sellers' remedies against the Buyer and its equity sources, but it does so at the expense of appropriate risk allocation between the majority equity participant (Fund IV) and the minority co-investor (ICM Co-Invest). C&H anticipates that BSP and the Sellers' counsel (understood to be Harmon, Wexler & Tate LLP) may resist the several liability position, but the market justification for this position is strong, and Ironside should be prepared to make this a point of significant negotiating focus.

V. Co-Invest-Specific Protections — Analysis and Recommendations

A. Financing Representation: Equity Commitment Scope

As discussed in Section III.C above, the Financing Representation (Section 5.04 of the EPA) is the single most critical Buyer representation from a co-invest risk allocation perspective. Under the current draft, AcquisitionCo represents that it has received binding equity commitment letters from Fund IV ($750 million) and ICM Co-Invest ($300 million), and that the aggregate proceeds from such commitments, together with the debt financing, are sufficient to consummate the transactions. This representation, while accurate as a factual matter, creates two distinct risks for ICM Co-Invest:

Cross-Guarantee Risk. The Financing Representation, as currently structured, does not distinguish between Fund IV's commitment and ICM Co-Invest's commitment. By representing that it has received commitments "sufficient" to consummate the transactions, AcquisitionCo effectively makes each equity source's commitment a component of the overall financing package. If Fund IV fails to fund its $750 million commitment, the overall financing package would be insufficient, potentially triggering a breach of the Financing Representation and exposing AcquisitionCo — and, through the ECLs, ICM Co-Invest — to liability for the reverse termination fee or indemnification claims.

Indirect Guarantee of Fund IV's Obligation. To the extent the Financing Representation is interpreted to require AcquisitionCo to represent that Fund IV will fund its commitment, ICM Co-Invest could be viewed as indirectly guaranteeing Fund IV's funding obligation by virtue of its guarantee of AcquisitionCo's obligations under the ECL. This is an inappropriate allocation of risk that must be addressed.

C&H recommends the following modifications to the Financing Representation:

(a) The Financing Representation should be revised to separately identify and distinguish between Fund IV's equity commitment ($750 million) and ICM Co-Invest's equity commitment ($300 million), making clear that each commitment is an independent obligation of the respective equity source.

(b) A "Funding Failure" provision should be added to the EPA (or to the ECLs) expressly providing that ICM Co-Invest is not required to fund any amount in excess of its $300 million committed capital under any circumstances, and that ICM Co-Invest shall have no liability or obligation to fund, guarantee, backstop, or otherwise support Fund IV's equity commitment or any portion thereof.

(c) To the extent the Sellers require comfort regarding the sufficiency of the overall financing package, such comfort should be directed to Fund IV and Meridian Infrastructure GP IV LLC, which controls Fund IV and has the primary economic interest in the transaction, rather than to ICM Co-Invest.

B. Indemnification Allocation Between Equity Participants

The EPA provides for post-closing indemnification by AcquisitionCo (as Buyer) in the event of breaches of the Buyer representations and warranties, as well as in the event of breaches of certain Buyer covenants. These indemnification obligations, once triggered, must be funded by AcquisitionCo's equity owners through capital contributions or, if AcquisitionCo has sufficient operating cash flow post-closing, from AcquisitionCo's own resources.

Under the current structure, the mechanism for allocating indemnification funding obligations between Fund IV and ICM Co-Invest is unclear. The Co-Investment Allocation Agreement addresses the allocation of investment returns and certain operating costs but does not contain an express provision governing the allocation of EPA indemnification liabilities. This gap must be addressed.

C&H recommends the following:

(a) Proportional Allocation. The Co-Investment Allocation Agreement should be amended to include an express indemnification allocation provision providing that all Buyer indemnification obligations under the EPA shall be allocated between Fund IV and ICM Co-Invest on a 71.43%/28.57% basis, consistent with their respective equity interests.

(b) Escrow Contributions. Any escrow contributions required of AcquisitionCo under the EPA should be funded proportionally by Fund IV and ICM Co-Invest. The EPA currently provides for a $25 million working-capital adjustment escrow to be established at closing. Under a proportional allocation, Fund IV would contribute $17,857,500 (71.43% × $25,000,000) and ICM Co-Invest would contribute $7,142,500 (28.57% × $25,000,000). The Co-Investment Allocation Agreement should expressly confirm this allocation.

(c) Joint Defense Mechanism. In the event that the Sellers assert an indemnification claim against AcquisitionCo for breach of a Buyer representation, the defense of such claim should be coordinated between Fund IV and ICM Co-Invest through a joint defense mechanism established in the Co-Investment Allocation Agreement. The joint defense mechanism should provide for (i) selection of joint defense counsel (with ICM Co-Invest's consent), (ii) allocation of defense costs on a 71.43%/28.57% basis, and (iii) a requirement that neither Fund IV nor ICM Co-Invest settle any indemnification claim without the consent of the other.

C. Consent Rights on Buyer Representation Amendments

Under the EPA as currently drafted, the "Buyer" — AcquisitionCo — has the authority to agree to amendments, modifications, or waivers of any provision of the EPA, including the Buyer representations and warranties, the indemnification provisions, and the reverse termination fee provisions. AcquisitionCo is controlled by its board of directors, which in turn is controlled by Meridian Infrastructure GP IV LLC in its capacity as the entity controlling both Fund IV and ICM Co-Invest.

This structure creates a significant conflict of interest. Meridian Infrastructure GP IV LLC serves as the general partner of both Fund IV and ICM Co-Invest, and its managers — David R. Hargreaves (Managing Partner), Lillian Fong (Partner, Portfolio), and Graham Whitfield (Partner, Operations) — owe fiduciary duties to both vehicles. However, the GP's primary economic incentives are aligned with Fund IV. Fund IV is a $6.2 billion institutional infrastructure fund with a broad investor base and a carried interest structure providing 20% carry above the preferred return. ICM Co-Invest, by contrast, is a single-asset co-investment vehicle with a more limited carry structure (10% carry above an 8% preferred return). In situations where the interests of Fund IV and ICM Co-Invest diverge — for example, where an amendment to the Buyer representations would reduce the overall indemnification exposure of AcquisitionCo but at the cost of accepting greater risk on a specific representation that disproportionately affects the co-invest — the GP's incentives may favor Fund IV's interests.

C&H recommends the following protections:

(a) Co-Invest Consent Provision. The LP Agreement (or the Side Letter) should be amended to include a "Co-Invest Consent Provision" requiring the prior written consent of Ironside (as the 99.99% limited partner of ICM Co-Invest) before Meridian Infrastructure GP IV LLC, in its capacity as GP of ICM Co-Invest or as the controlling person of AcquisitionCo, may agree to any amendment, modification, or waiver of the EPA that affects (i) the Buyer representations and warranties, (ii) the Buyer indemnification obligations, (iii) the reverse termination fee, (iv) the ECLs, or (v) any other provision of the EPA that would materially increase ICM Co-Invest's economic exposure under the transaction.

(b) Standard of Review. The Co-Invest Consent Provision should provide that the GP's consent to any such amendment, modification, or waiver is subject to the GP's fiduciary duties to ICM Co-Invest and its limited partner, and that the GP shall not agree to any such action that would disproportionately allocate risk to ICM Co-Invest relative to Fund IV.

This recommendation is supported by the governance framework already established in the Side Letter, which grants Ironside enhanced governance rights in recognition of its status as a significant co-investor. The Co-Invest Consent Provision would be a natural extension of the existing Side Letter protections and is consistent with the principle that a minority co-investor should have meaningful consent rights over actions that affect its economic exposure.

D. Information Rights Regarding Representation Compliance

To enable Ironside to monitor compliance with the Buyer representations and to assess the adequacy of the GP's performance of its obligations in connection with the EPA, Ironside should be granted the following information rights:

(a) Bring-Down Certificates. Ironside should receive copies of all bring-down certificates delivered by AcquisitionCo at closing, certifying that the Buyer representations and warranties are true and correct as of the Closing Date (or as of such other date as specified in the EPA). These certificates are typically delivered as a condition precedent to the Sellers' obligation to close and provide the most direct evidence of the status of the Buyer representations at closing.

(b) Compliance Certificates. Ironside should receive copies of any compliance certificates or officer's certificates delivered by AcquisitionCo in connection with the satisfaction of conditions precedent to closing, including certificates relating to the absence of legal proceedings, regulatory approvals, and the sufficiency of financing.

(c) Fund IV Diligence Obligation. To the extent that any Buyer representation requires knowledge of Fund IV's status — for example, the Financing Representation (which requires AcquisitionCo to represent that the equity commitments are in full force and effect) and the solvency representation (which requires AcquisitionCo to represent that it will be solvent after giving effect to the transactions) — the GP should be required to conduct reasonable diligence to verify Fund IV's ability to perform its equity commitment before certifying on behalf of AcquisitionCo. The results of this diligence should be communicated to Ironside in writing prior to the Closing Date.

E. R&W Insurance — Allocation of Coverage Benefit

The Northgate Specialty Insurance Co. representation and warranty insurance policy (Policy No. NSW-RI-2022-09814) provides a coverage limit of $195 million (representing approximately 10% of the enterprise value) and was bound on September 1, 2022. The policy insures AcquisitionCo as the named insured against losses arising from breaches of the Seller representations and Target representations contained in the EPA. The premium deposit for the policy is $4,875,000 (approximately 2.5% of the coverage limit), which was paid from the proceeds of the initial capital call on August 15, 2022.

The R&W insurance policy is a critical component of the risk allocation framework for this transaction, as it provides AcquisitionCo — and, through AcquisitionCo, Fund IV and ICM Co-Invest — with an independent source of recovery for breaches of the Seller and Target representations, thereby reducing the equity participants' reliance on direct indemnification from the Sellers (which is subject to the customary indemnification caps, baskets, and survival periods described above).

C&H recommends the following protections with respect to the allocation of R&W insurance benefits:

(a) Proportional Allocation of Recoveries. The Co-Investment Allocation Agreement should be amended to confirm expressly that any recovery by AcquisitionCo under the R&W insurance policy shall be distributed to Fund IV and ICM Co-Invest in proportion to their respective equity interests (71.43% and 28.57%, respectively). In the absence of such a provision, there is a risk that the GP could exercise its discretion in allocating R&W insurance recoveries in a manner that favors Fund IV over ICM Co-Invest.

(b) Premium Cost-Sharing. The premium deposit of $4,875,000 was paid from the initial capital call proceeds. To the extent that the initial capital call was funded proportionally by Fund IV and ICM Co-Invest, the premium cost has already been shared on a 71.43%/28.57% basis ($3,482,143 borne by Fund IV and $1,392,857 borne by ICM Co-Invest). However, the Co-Investment Allocation Agreement should expressly confirm this allocation and provide that any subsequent premium payments, deductible amounts, or retention amounts under the R&W insurance policy are similarly shared on a proportional basis.

(c) Named Insured Status. While the R&W insurance policy names AcquisitionCo as the insured, C&H recommends that Ironside confirm with the Northgate Specialty underwriter whether ICM Co-Invest (or Ironside) can be added as an additional insured or loss payee under the policy. This would provide ICM Co-Invest with direct rights against the insurer in the event that AcquisitionCo fails to pursue or distribute a recovery.

For a comprehensive analysis of the R&W insurance policy, including coverage terms, exclusions, retention amounts, and claims procedures, please refer to C&H's companion memorandum dated August 31, 2022 (the "R&W Insurance Coverage Analysis Memorandum").

VI. Specific Representation Categories — Risk Mapping

This section maps each principal category of representation and warranty in the EPA to the specific risk implications for ICM Co-Invest, organized by the party making the representation.

A. Fundamental Representations (Seller and Target)

The fundamental representations — covering organization, authority, capitalization, and title to shares — are the "bedrock" representations of the EPA and carry the most favorable terms for the Buyer from an indemnification perspective. They are subject to the longest survival periods (six years or the statute of limitations, whichever is later) and are typically uncapped for indemnification purposes (that is, the Sellers' indemnification liability for breaches of fundamental representations is not subject to the general indemnification cap, though it remains subject to the overall purchase price cap).

From a risk allocation perspective, the fundamental representations present relatively low direct risk to ICM Co-Invest. These representations create obligations running from the Sellers and the Target to the Buyer (AcquisitionCo), and any recovery by AcquisitionCo for a breach of a fundamental representation will benefit both Fund IV and ICM Co-Invest proportionally, provided that the distribution mechanism in the Co-Investment Allocation Agreement is properly established. The primary risk to ICM Co-Invest in connection with the fundamental representations is not one of excess liability but rather one of ensuring that the recovery mechanism operates proportionally — that is, that any indemnification payments or R&W insurance recoveries received by AcquisitionCo are distributed to Fund IV and ICM Co-Invest in proportion to their respective equity interests rather than being retained by AcquisitionCo (where they could be used to repay acquisition indebtedness or for other purposes that do not benefit the equity participants directly).

C&H recommends that the Co-Investment Allocation Agreement include a provision requiring AcquisitionCo to distribute any net indemnification or insurance recovery to Fund IV and ICM Co-Invest on a proportional basis within a specified time period (e.g., thirty days) following receipt, subject to appropriate reserves for pending claims and contingent liabilities.

B. Business Representations (Target)

The business representations made by the Target — covering financial statements, material contracts, environmental compliance, employment and benefits, regulatory permits, tax, litigation, intellectual property, and real property — represent the broadest and most detailed set of representations in the EPA. These representations are subject to the general eighteen-month survival period (with exceptions for environmental representations, which survive three years, and tax representations, which survive sixty days beyond the applicable statute of limitations).

From a risk allocation perspective, the business representations present both opportunities and risks for ICM Co-Invest. On the opportunity side, these representations provide the primary basis for post-closing indemnification claims against the Sellers and for R&W insurance claims, which can mitigate the economic impact of undisclosed liabilities or misrepresentations regarding Cascadia's business. On the risk side, the breadth of the business representations and the complexity of Cascadia's operations create a significant due diligence burden and a potentially substantial indemnification exposure.

Several categories of business representations warrant particular attention:

Material Contracts. The material contracts representation is of critical importance given Cascadia's long-term contractual revenue base. Cascadia's portfolio consists of fourteen hydroelectric facilities, six wind farms, and three water-treatment concessions, supported by power purchase agreements and municipal contracts with a weighted-average remaining contractual life of approximately twenty-two years. The value of Cascadia — and, by extension, the value of the equity investments by Fund IV and ICM Co-Invest — is heavily dependent on the

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, New York 10004
MEMORANDUM
September 2, 2022
TO: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
FROM: Pamela Cross, Responsible Partner Nicholas Stern, Billing Partner Theresa Kim, Lead Associate — Funds & Asset Management Group
RE: Analysis of Representations and Warranties Under the Equity Purchase Agreement — Allocation of Risk as Between Meridian Infrastructure Partners Fund IV, LP and ICM Cascadia Co-Invest, LP
MATTER NUMBER: 1023-00001
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I. Executive Summary
This memorandum has been prepared at the request of Ironside Capital Management LP ("Ironside") to analyze how the representations and warranties contained in the draft Equity Purchase Agreement (the "EPA") for the proposed acquisition of Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Target") allocate risk between the two equity participants in the transaction — Meridian Infrastructure Partners Fund IV, LP ("Fund IV") and ICM Cascadia Co-Invest, LP ("ICM Co-Invest" or the "Vehicle") — and to identify areas where Ironside should seek enhanced structural protections for the co-investment vehicle. The analysis set forth herein is intended to inform Ironside's negotiating posture with respect to the EPA and related transaction documents in advance of the anticipated September 15, 2022 signing date.
Transaction Overview. The proposed transaction involves a 100% equity acquisition of Cascadia, an Oregon corporation, by Cascadia Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation organized for the sole purpose of effecting the acquisition. AcquisitionCo is owned jointly by Fund IV, which holds a 71.43% equity interest and has committed $750 million in equity capital, and ICM Co-Invest, which holds a 28.57% equity interest and has committed $300 million in equity capital, for an aggregate equity capitalization of $1,050,000,000.
Enterprise Value and Financial Terms. The transaction ascribes an enterprise value to Cascadia of $1,950,000,000 and an equity value of $1,050,000,000. The implied EV/EBITDA multiple is approximately 14.1x, calculated on the basis of Cascadia's fiscal year 2021 EBITDA of $138 million as reflected in audited financial statements prepared by Halstead & Greer LLP. This multiple is within the range of comparable precedent transactions in the North American renewable energy infrastructure sector, though it sits at the higher end of the range, reflecting the value attributed to Cascadia's long-duration contracted revenue base and its portfolio of water infrastructure concessions.
Financing Structure. The acquisition will be financed through a combination of equity contributions and senior secured debt. The debt component consists of a $975 million senior secured term loan, with Atlas National Bank, N.A. serving as lead arranger and administrative agent for $650 million and Pinnacle Credit Partners LLC participating for $325 million, together with a $150 million undrawn revolving credit facility available for post-closing working capital and capital expenditure purposes. Total sources of funding amount to $2,025,000,000 (equity of $1,050 million plus the term loan of $975 million), which will be applied as follows: $1,950 million toward the enterprise value purchase price; approximately $50 million toward estimated transaction costs (including advisory fees, legal fees, financing fees, and regulatory filing costs); and $25 million toward a working-capital adjustment escrow to be established at closing.
Selling Shareholders. The selling shareholders under the EPA are: (i) Timberline Growth Equity Fund III, LP ("Timberline"), which holds 62% of Cascadia's outstanding equity; (ii) the Weir Family Trust, which holds 18% of Cascadia's outstanding equity; and (iii) the Management Rollover Pool, comprising approximately 25 senior members of Cascadia's management team, which collectively holds the remaining 20% of Cascadia's outstanding equity. The Management Rollover Pool participants are expected to roll over approximately 50% of their equity (representing 10% of Cascadia's total outstanding equity) into the post-acquisition capital structure through a separate management equity plan, with the remaining 50% being cashed out at closing.
EPA Signing and Governing Law. The EPA signing date is anticipated to be September 15, 2022. The EPA is governed by the laws of the State of Delaware, without regard to conflict-of-laws principles.
Key Conclusion. The EPA as currently drafted in the initial version prepared by Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian GP IV LLC ("Meridian" or the "Sponsor"), allocates risk to the "Buyer" (defined as AcquisitionCo) on a unified basis without differentiating between the distinct obligations and exposures of Fund IV and ICM Co-Invest. This undifferentiated approach creates the potential for disproportionate liability allocation to ICM Co-Invest — and by extension to Ironside as the 99.99% limited partner of ICM Co-Invest — particularly with respect to the reverse termination fee, post-closing indemnification obligations, and the financing representation. Calderwood & Harkness LLP ("C&H") recommends a series of specific structural protections, described in detail in this memorandum, designed to ensure that Ironside's economic exposure under the EPA and related agreements is proportional to its 28.57% equity stake and to protect against the risk of cross-default and disproportionate liability. These recommendations should be incorporated into C&H's revised marked draft of the EPA and into proposed amendments to the Co-Investment Allocation Agreement and the Side Letter prior to the anticipated signing date.
II. Scope and Methodology
Documents Reviewed
In preparing this memorandum, we have reviewed the following documents, each of which bears upon the allocation of risk arising from the representations and warranties contained in the EPA:
1. BSP Initial Draft of the Equity Purchase Agreement. This is the initial draft of the EPA circulated by Breckenridge Sloane & Pratt LLP, counsel to Meridian, on August 12, 2022. BSP's lead partner on this engagement is Charles A. Delacroix. The initial draft runs approximately 148 pages (exclusive of exhibits and disclosure schedules) and contains the standard suite of representations, warranties, covenants, closing conditions, indemnification provisions, and termination rights typical of a private equity-sponsored acquisition of a mid-market infrastructure platform.
2. C&H Marked Draft with Ironside Comments (August 20, 2022). This is the marked draft prepared by C&H incorporating Ironside's preliminary comments and proposed revisions. The marked draft was circulated to BSP on August 20, 2022 for discussion and reflects Ironside's initial positions on a range of issues, including certain of the co-invest protection issues addressed more comprehensively in this memorandum.
3. Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (July 29, 2022). This is the governing document for the co-investment vehicle, executed on July 29, 2022. ICM Co-Invest is a Delaware limited partnership in which Ironside serves as the 99.99% limited partner and Meridian Infrastructure GP IV LLC serves as the general partner. The LP Agreement establishes the capital commitment structure, capital call mechanics, distribution waterfall, governance provisions, and the fiduciary duty framework applicable to the GP.
4. Co-Investment Allocation Agreement between Fund IV and ICM Co-Invest (July 29, 2022). This agreement, executed concurrently with the LP Agreement, governs the allocation of investment economics as between Fund IV and ICM Co-Invest on a 71.43%/28.57% basis, respectively. As discussed in detail below, the Co-Investment Allocation Agreement in its current form addresses the allocation of investment returns and certain costs but does not expressly address the allocation of EPA-related liabilities, including indemnification obligations and the reverse termination fee.
5. Side Letter between Ironside and Meridian Infrastructure GP IV LLC (July 29, 2022). This side letter, also executed on July 29, 2022, grants Ironside certain enhanced governance and economic protections in connection with the co-investment, including: no management fee on the co-invest; most-favored-nation provisions relative to other co-investors (if any); enhanced quarterly reporting obligations; and certain consent rights relating to material decisions of the GP. As discussed below, C&H recommends that the Side Letter be supplemented to address EPA representation and indemnification matters.
6. Debt Commitment Letter (August 30, 2022). This commitment letter, dated August 30, 2022, sets forth the terms on which Atlas National Bank, N.A. (as lead arranger and administrative agent, $650 million) and Pinnacle Credit Partners LLC ($325 million) have committed to provide the $975 million senior secured term loan and the $150 million revolving credit facility to AcquisitionCo in connection with the acquisition. The commitment letter contains customary conditions precedent to funding, including certain bring-down conditions relating to the representations and warranties in the EPA.
In addition, we have reviewed the Northgate Specialty Insurance Co. representation and warranty insurance policy (Policy No. NSW-RI-2022-09814), which provides a coverage limit of $195 million and was bound on September 1, 2022. Our analysis of the R&W insurance policy is set forth in a companion memorandum dated August 31, 2022, and is cross-referenced in this memorandum where relevant to the co-invest risk allocation analysis.
Analytical Framework
Our analysis proceeds in the following steps:
(i) Identification. We identify each category of representation and warranty contained in the EPA, organized by the party making the representation (Sellers, Target, and Buyer).
(ii) Mapping. We map the flow of obligations created by each representation, tracing how the Buyer's representations create obligations at the AcquisitionCo level that flow through to its equity owners (Fund IV and ICM Co-Invest).
(iii) Liability Analysis. We analyze the joint and several liability structure embedded in the current draft of the Equity Commitment Letters and assess how this structure could result in disproportionate exposure for ICM Co-Invest and, by extension, for Ironside.
(iv) Recommendations. We identify and recommend co-invest-specific protections designed to ensure proportional risk allocation, including modifications to the EPA, the Equity Commitment Letters, the Co-Investment Allocation Agreement, and the Side Letter.
This memorandum does not address the substance of the Target's or Sellers' representations and warranties from a due diligence perspective — that is, we do not opine on whether Cascadia's business operations, financial condition, or legal compliance conform to the representations being made. Our analysis is limited to the structural allocation of risk arising from the representation and warranty framework as between Fund IV and ICM Co-Invest. Separate due diligence memoranda addressing the substantive adequacy of Cascadia's representations and warranties are being prepared by C&H's M&A group.
III. Overview of the EPA Representation and Warranty Framework
The EPA contains representations and warranties organized into three principal categories: (A) representations made by the Sellers; (B) representations made by the Target (Cascadia); and (C) representations made by the Buyer (AcquisitionCo). Each category is discussed below, together with an analysis of its relevance to the co-invest risk allocation.
A. Seller Representations and Warranties
The Seller representations and warranties are set forth in Article III of the EPA and are made severally (and not jointly) by each of the three selling shareholder groups: Timberline Growth Equity Fund III, LP; the Weir Family Trust; and each individual participant in the Management Rollover Pool, in each case solely with respect to such Seller's own shares and the matters within such Seller's knowledge and control.
The Seller representations cover the following subjects:
• Authority and Organization. Each Seller represents that it is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization (in the case of Timberline, a Delaware limited partnership; in the case of the Weir Family Trust, a trust established under the laws of the State of Oregon; and in the case of the Management Rollover Pool participants, natural persons and residents of the State of Oregon or the State of Washington). Each Seller represents that it has the requisite power and authority to execute and deliver the EPA and to consummate the transactions contemplated thereby.
• Capitalization and Ownership of Shares. Each Seller represents that it is the record and beneficial owner of its respective shares of Cascadia common stock, free and clear of all liens, pledges, security interests, claims, options, or other encumbrances (other than restrictions under applicable securities laws and the Cascadia stockholders' agreement). Timberline represents ownership of shares constituting 62% of Cascadia's outstanding common stock; the Weir Family Trust represents ownership of shares constituting 18%; and the Management Rollover Pool participants collectively represent ownership of shares constituting 20%.
• Enforceability. Each Seller represents that the EPA and any ancillary agreements to which it is a party constitute legal, valid, and binding obligations of such Seller, enforceable in accordance with their respective terms, subject to customary enforceability exceptions (bankruptcy, insolvency, reorganization, and equitable principles).
• No Conflicts. Each Seller represents that the execution, delivery, and performance of the EPA and the consummation of the transactions contemplated thereby do not (i) violate or conflict with such Seller's organizational documents (if applicable), (ii) violate any law, regulation, order, or judgment applicable to such Seller, or (iii) result in a breach of, or constitute a default under, any material contract to which such Seller is a party.
• Absence of Broker Fees. Each Seller represents that it has not engaged any broker, finder, or investment banker in connection with the transactions contemplated by the EPA, except for such brokers or advisors as are disclosed in the Seller disclosure schedules.
Survival Periods. The Seller representations are subject to the following survival periods, as set forth in Article IX of the EPA:
• Fundamental Representations. The Seller fundamental representations — defined to include the representations regarding organization, authority, capitalization, and title to shares — survive until the later of (x) the expiration of the applicable statute of limitations (including any extensions or tolling thereof) and (y) six (6) years following the Closing Date.
• General Representations. All other Seller representations (including the representations regarding no conflicts, enforceability, and absence of broker fees) survive for a period of eighteen (18) months following the Closing Date.
Relevance to Co-Invest Risk Allocation. The Seller representations run to the benefit of AcquisitionCo as the "Buyer" under the EPA. Any recovery by AcquisitionCo for a breach of a Seller representation will flow through to the equity participants — Fund IV and ICM Co-Invest — in proportion to their respective equity interests (71.43% and 28.57%, respectively), subject to the distribution and allocation provisions of the Co-Investment Allocation Agreement. Because the Seller representations create rights (rather than obligations) for the Buyer, they do not directly create disproportionate risk for ICM Co-Invest. However, the mechanism for distributing any recovery to the equity participants must be clearly established in the Co-Investment Allocation Agreement to ensure proportional treatment, as discussed further in Section V.B below.
B. Target (Cascadia) Representations and Warranties
The Target representations and warranties are set forth in Article IV of the EPA and represent the most extensive set of representations in the agreement. These representations are made by Cascadia and cover the following subjects in detail:
Organization and Good Standing. Cascadia represents that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Oregon, with its principal office and headquarters located at 1100 SW Sixth Avenue, Suite 1800, Portland, Oregon 97204. Cascadia further represents that it is duly qualified and in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification, including the States of Washington and Idaho.
Subsidiaries. Cascadia represents that it has disclosed in the disclosure schedules a complete and accurate list of all of its direct and indirect subsidiaries, together with the jurisdiction of organization of each subsidiary, the authorized and outstanding capital stock of each subsidiary, and the record and beneficial ownership thereof. This representation encompasses the full portfolio of operating entities through which Cascadia conducts its hydroelectric, wind, and water infrastructure operations across the Pacific Northwest.
Financial Statements. Cascadia represents that it has delivered to the Buyer true and complete copies of its audited consolidated financial statements for fiscal years 2019, 2020, and 2021, and unaudited interim financial statements for the six-month period ended June 30, 2022. Cascadia's fiscal year 2021 audited financial statements, prepared in accordance with GAAP and audited by Halstead & Greer LLP, reflect total revenue of $487 million and EBITDA of $138 million. Cascadia represents that such financial statements fairly present in all material respects the financial condition and results of operations of Cascadia and its subsidiaries as of the dates and for the periods indicated, and that such financial statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered.
No Undisclosed Liabilities. Cascadia represents that neither it nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent, or otherwise) that would be required to be disclosed on a balance sheet prepared in accordance with GAAP, except for liabilities reflected or reserved against in the most recent balance sheet included in the financial statements, liabilities incurred in the ordinary course of business since the balance-sheet date, and liabilities disclosed in the disclosure schedules.
Absence of Certain Changes. Cascadia represents that since the balance-sheet date (December 31, 2021), Cascadia and its subsidiaries have conducted their businesses in the ordinary course of business consistent with past practice in all material respects, and that there has been no event, occurrence, development, or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.
Material Contracts. Cascadia represents that it has delivered to the Buyer true and complete copies of all contracts that are material to the business, operations, financial condition, or results of operations of Cascadia and its subsidiaries (the "Material Contracts"), including all contracts involving aggregate consideration in excess of $5 million, all contracts with governmental authorities, all power purchase agreements, all concession agreements, and all contracts with remaining terms in excess of five years. The Material Contracts representation is of particular significance to the co-invest risk allocation analysis given Cascadia's long-term contractual revenue base.
Cascadia's portfolio includes fourteen (14) hydroelectric facilities, six (6) wind farms, and three (3) water-treatment concessions, supported by power purchase agreements and municipal water-service contracts with a weighted-average remaining contractual life of approximately twenty-two (22) years. The most significant single contract in Cascadia's portfolio is the Bull Run Filtration Project concession with the Portland Metropolitan Water District (the "Bull Run Concession"), which generates approximately $64 million in annual revenue and has a 40-year term commencing approximately in 2018. The Bull Run Concession represents approximately 13% of Cascadia's total fiscal year 2021 revenue of $487 million and is a significant driver of the valuation assigned to the Target. Cascadia represents that all Material Contracts are in full force and effect, that neither Cascadia nor any counterparty is in material breach or default thereunder, and that no party has given written notice of termination, cancellation, renegotiation, or material modification of any Material Contract.
Real Property. Cascadia represents that it has disclosed a complete list of all real property owned or leased by Cascadia and its subsidiaries and that Cascadia and its subsidiaries have good and marketable title to (or valid leasehold interests in) such properties, free and clear of all liens other than permitted liens.
intellectual Property. Cascadia represents that it owns or has valid licenses to use all intellectual property material to the conduct of its business and that the conduct of Cascadia's business does not infringe upon the intellectual property rights of any third party.
Environmental Compliance. Cascadia represents that it and its subsidiaries are and have been in compliance in all material respects with all applicable environmental laws, that all necessary environmental permits have been obtained and are in full force and effect, and that there are no pending or, to Cascadia's knowledge, threatened environmental claims, investigations, or enforcement actions. This representation is supported by the Phase I and Phase II environmental site assessments prepared by Clearwater Environmental Consulting Inc., which have been delivered to AcquisitionCo as part of the due diligence process. C&H notes that the environmental representations are of heightened importance given the nature of Cascadia's operations — hydroelectric and water-treatment facilities are subject to extensive federal and state environmental regulation, including requirements under the Clean Water Act, the Endangered Species Act, and state-level water quality and discharge standards.
Employee and Benefit Matters. Cascadia represents that it has disclosed all material employee benefit plans and that such plans are in compliance with applicable laws, including ERISA and the Internal Revenue Code. Cascadia further represents that there are no pending or threatened labor disputes, work stoppages, or union organizing activities. The approximately 25 senior management members in the Management Rollover Pool are identified in the disclosure schedules, and Cascadia represents that all employment agreements with such individuals are in full force and effect and have been provided to the Buyer.
Tax. Cascadia represents that all material tax returns required to be filed have been timely filed, that all material taxes due and payable have been paid, and that there are no pending or threatened tax audits, assessments, or disputes. Cascadia further represents that it has not been a party to any "listed transaction" within the meaning of Treasury Regulations Section 1.6011-4.
Litigation. Cascadia represents that there is no pending or, to its knowledge, threatened litigation, arbitration, administrative proceeding, or governmental investigation against Cascadia or any of its subsidiaries that, individually or in the aggregate, would reasonably be expected to result in liability in excess of $2.5 million or that would reasonably be expected to have a Material Adverse Effect.
Regulatory Permits and Licenses. Cascadia represents that it and its subsidiaries hold all permits, licenses, franchises, approvals, and authorizations of governmental authorities necessary for the conduct of their respective businesses as currently conducted, including without limitation: (i) Federal Energy Regulatory Commission ("FERC") hydroelectric licenses for each of its fourteen hydroelectric facilities; (ii) Oregon Public Utility Commission ("OPUC") utility permits; and (iii) water rights across the States of Oregon, Washington, and Idaho. Cascadia represents that all such permits and licenses are in full force and effect and that no revocation, suspension, cancellation, or modification proceedings are pending or, to Cascadia's knowledge, threatened. C&H notes that FERC Docket No. EC22-143-000 relates to the Section 203 transfer application that must be approved in connection with the change of control of Cascadia's FERC-licensed hydroelectric facilities, and OPUC Docket No. UM-2287 relates to the OPUC's review of the transaction under Oregon public utility change-of-control statutes. These regulatory approvals are conditions precedent to closing under the EPA.
Insurance. Cascadia represents that it maintains insurance policies providing adequate coverage for the risks and liabilities incident to its business and that all such policies are in full force and effect.
Compliance with Laws. Cascadia represents that it and its subsidiaries are and have been in compliance in all material respects with all applicable laws, regulations, orders, and judgments.
Survival Periods. The Target representations are subject to the following survival periods:
• Fundamental Target Representations (organization, authority, capitalization): survive for six (6) years following the Closing Date or until the expiration of the applicable statute of limitations, whichever is later.
• Tax Representations: survive until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof).
• Environmental Representations: survive for three (3) years following the Closing Date, reflecting the heightened environmental risk profile inherent in Cascadia's infrastructure operations.
• All Other General Target Representations: survive for eighteen (18) months following the Closing Date.
Materiality Qualifiers and MAE Qualifiers. Many of the Target representations are qualified by references to "materiality" or "Material Adverse Effect." The EPA defines "Material Adverse Effect" (or "MAE") with respect to the Target as any event, occurrence, development, or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, assets, financial condition, or results of operations of Cascadia and its subsidiaries, taken as a whole. The MAE definition includes customary carve-outs for (a) changes in general economic or political conditions, (b) changes affecting the industry in which the Target operates generally, (c) changes in applicable law or GAAP, (d) acts of war, terrorism, or natural disasters, and (e) the announcement or pendency of the transactions contemplated by the EPA. C&H notes that the carve-out for "changes in applicable law" may be particularly relevant in the context of Oregon Senate Bill 1567 (2022), which, if enacted, could affect the regulatory framework governing water-treatment concessions in Oregon, including the Bull Run Concession. The interaction between the MAE carve-outs and the material contracts representation warrants careful monitoring.
For indemnification purposes, the EPA contains a standard double-materiality "scrape" provision in Article IX, which provides that materiality and MAE qualifiers contained in the Target representations shall be disregarded for purposes of both (i) determining whether a breach of a representation has occurred and (ii) calculating the amount of losses arising from such breach. This scrape is favorable to the Buyer and, by extension, to both Fund IV and ICM Co-Invest.
C. Buyer (AcquisitionCo) Representations and Warranties
The Buyer representations and warranties are set forth in Article V of the EPA and are made by AcquisitionCo. These representations are of central importance to the co-invest risk allocation analysis because they are the representations that create obligations flowing from the Buyer to the Sellers — and, through the equity commitment structure, indirectly from Fund IV and ICM Co-Invest to the Sellers.
AcquisitionCo makes the following representations:
Organization and Authority. AcquisitionCo represents that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and that it has the requisite corporate power and authority to execute, deliver, and perform the EPA and to consummate the transactions contemplated thereby. As a newly formed shell entity with no prior operating history and no assets other than its organizational documents and the equity commitment letters, this representation is largely a formality.
Enforceability. AcquisitionCo represents that the EPA and any ancillary agreements to which it is a party constitute legal, valid, and binding obligations of AcquisitionCo, enforceable in accordance with their respective terms, subject to customary enforceability exceptions.
No Conflicts. AcquisitionCo represents that the execution, delivery, and performance of the EPA do not violate or conflict with its certificate of incorporation or bylaws, or any law, regulation, order, or judgment applicable to AcquisitionCo.
Availability of Financing (the "Financing Representation"). AcquisitionCo represents that it has received (i) binding equity commitment letters from Fund IV (committing $750 million) and ICM Co-Invest (committing $300 million), and (ii) a binding debt commitment letter from Atlas National Bank, N.A. (as lead arranger and administrative agent, committing $650 million under the senior secured term loan and $150 million under the revolving credit facility) and Pinnacle Credit Partners LLC (committing $325 million under the senior secured term loan), and that the aggregate proceeds from such commitments ($2,025,000,000 in total — $1,050 million in equity plus $975 million in term loan) are sufficient to consummate the transactions contemplated by the EPA and to pay all related fees, costs, and expenses. This is the single most critical Buyer representation from a co-invest risk allocation perspective, and it is analyzed in detail in Section V.A below.
Absence of Broker Fees. AcquisitionCo represents that it has not engaged any broker, finder, or investment banker in connection with the transactions contemplated by the EPA, except for Blackthorn Advisory Group LLC, which serves as financial advisor to Meridian in connection with the acquisition. C&H notes that Rivermark Capital Markets Inc. served as placement agent for the ICM Co-Invest capital raise and was paid a placement-agent fee of $1,050,000 from initial capital call proceeds, but Rivermark's role was limited to the co-invest placement function and does not constitute a "transaction broker" engagement within the scope of this representation.
Investment Intent. AcquisitionCo represents that it is acquiring the shares of Cascadia for investment purposes and not with a view to distribution in violation of applicable securities laws. This is a standard representation in private acquisitions.
Solvency. AcquisitionCo represents that, after giving effect to the transactions contemplated by the EPA (including the incurrence of the acquisition indebtedness), AcquisitionCo and its subsidiaries, on a consolidated basis, will be solvent, will be able to pay their debts as they become due, and will have adequate capital to carry on their business. This representation is analyzed further in Section VI.C below.
Critical Structural Issue. AcquisitionCo is a newly formed shell entity with no independent assets, no operating history, and no revenue. Its ability to perform its obligations under the EPA — including the obligation to close the transaction and fund the purchase price — is entirely dependent on the equity contributions to be made by Fund IV and ICM Co-Invest and on the debt financing to be provided by Atlas National Bank and Pinnacle Credit Partners. Accordingly, AcquisitionCo's representations regarding financing availability effectively function as indirect representations regarding the willingness and ability of the equity commitment sources and the debt commitment sources to fund their respective commitments. If any one of these funding sources fails to perform, AcquisitionCo will be unable to close, potentially triggering the reverse termination fee and exposing the remaining equity participants to liability. The implications of this structure for ICM Co-Invest are analyzed in detail in Sections IV and V below.
IV. Joint and Several Liability Analysis
A. Structure of Buyer Obligations
Under the EPA as currently drafted, AcquisitionCo is the sole entity defined as the "Buyer." Neither Fund IV nor ICM Co-Invest is a direct party to the EPA. This structure is typical of private equity-sponsored acquisitions, where the acquisition vehicle serves as the contracting counterparty and the fund and any co-investment vehicles stand behind the acquisition vehicle through equity commitment letters.
However, the EPA contains an "Equity Commitment Letter" provision (Section 5.05) that requires each equity source — Fund IV and ICM Co-Invest — to deliver an equity commitment letter (each, an "ECL") directly to the Sellers as a condition to the execution and delivery of the EPA. The ECLs are attached to the EPA as Exhibits D-1 and D-2, respectively, and are incorporated into the EPA by reference.
Under the ECLs as currently drafted by BSP, each of Fund IV and ICM Co-Invest provides the following commitments to the Sellers:
(a) A commitment to fund its respective portion of the equity capitalization of AcquisitionCo ($750 million for Fund IV; $300 million for ICM Co-Invest) in order to enable AcquisitionCo to consummate the closing.
(b) A guarantee of AcquisitionCo's payment obligations under the EPA in the event that the EPA is terminated and AcquisitionCo is obligated to pay the reverse termination fee.
(c) A guarantee of AcquisitionCo's indemnification obligations under Article IX of the EPA arising from breaches of the Buyer representations and warranties.
Critically, the guarantees described in clauses (b) and (c) above are structured on a joint and several basis. Under the current draft, Fund IV and ICM Co-Invest are each jointly and severally liable for the full amount of AcquisitionCo's payment obligations, up to the aggregate amount of the reverse termination fee, without any limitation to their respective pro rata shares of such obligations.
Reverse Termination Fee. The EPA provides for a reverse termination fee equal to 3% of the equity value, calculated as 3% × $1,050,000,000 = $31,500,000. The reverse termination fee is payable by AcquisitionCo to the Sellers in the event that (i) the EPA is terminated by the Sellers due to AcquisitionCo's failure to consummate the closing when all conditions to closing have been satisfied or waived, (ii) the EPA is terminated due to a breach by AcquisitionCo of its representations, warranties, or covenants that would cause the failure of a condition to closing, or (iii) the EPA is terminated due to the failure of the financing condition (if applicable). Under the ECLs as currently drafted, the reverse termination fee guarantee operates as the sole and exclusive monetary remedy of the Sellers against Fund IV and ICM Co-Invest (subject to the Sellers' right to seek specific performance of the obligation to close in certain circumstances).
B. Risk of Disproportionate Liability
The joint and several liability structure embedded in the current draft of the ECLs creates a significant risk of disproportionate liability for ICM Co-Invest and, by extension, for Ironside. This risk manifests in several ways:
Reverse Termination Fee Exposure. Under joint and several liability, if AcquisitionCo fails to close and the reverse termination fee of $31,500,000 is triggered, the Sellers may recover the full amount from either Fund IV or ICM Co-Invest (or both), without regard to their respective pro rata equity interests. If Meridian (through Fund IV) were unable or unwilling to pay its pro rata share of the reverse termination fee — whether due to Fund IV liquidity constraints, a dispute between the GP and Fund IV's limited partners, or any other reason — the Sellers could seek recovery of the entire $31,500,000 from ICM Co-Invest. Ironside's maximum exposure to the reverse termination fee would thus be $31,500,000 rather than its pro rata share of approximately $9,000,000 (28.57% × $31,500,000 = $9,000,450). This represents a potential over-exposure of approximately $22.5 million relative to Ironside's pro rata allocation.
Indemnification Exposure. Similarly, any post-closing indemnification obligations of AcquisitionCo arising from breaches of the Buyer representations and warranties could, under the guarantee provisions of the ECLs, create indirect liability for both Fund IV and ICM Co-Invest. While the EPA contains customary caps on Buyer indemnification (the aggregate cap on general indemnification is 10% of the equity value, or $105 million; the cap on fundamental representation indemnification is the full equity value of $1,050 million), the joint and several nature of the ECL guarantees means that ICM Co-Invest could be exposed to the full amount of any Buyer indemnification obligation rather than its 28.57% pro rata share.
Co-Investment Allocation Agreement Gap. The Co-Investment Allocation Agreement between Fund IV and ICM Co-Invest, dated July 29, 2022, provides that the two vehicles share investment economics on a 71.43%/28.57% basis, reflecting their respective equity contributions. However, the Co-Investment Allocation Agreement does not expressly address the allocation of EPA indemnification liabilities, reverse termination fee obligations, or other EPA-related liabilities. This gap creates ambiguity as to the internal allocation of such liabilities between Fund IV and ICM Co-Invest. While Fund IV and ICM Co-Invest could, as a matter of internal agreement, seek to allocate such liabilities on a pro rata basis, the absence of an express provision creates enforcement risk — particularly in a scenario where the interests of Fund IV and ICM Co-Invest are not aligned or where the GP (Meridian Infrastructure GP IV LLC) is subject to conflicting obligations.
LP Agreement Limitations. The LP Agreement of ICM Co-Invest limits Ironside's obligation to fund capital calls to its unfunded commitment amount. As of the initial capital call of $22,500,000 made on August 15, 2022 (representing 7.5% of the $300 million total commitment), Ironside's remaining unfunded commitment stands at $277,500,000. Any indemnification funding obligation imposed on ICM Co-Invest would need to be effected through a capital call under Section 4.01 of the LP Agreement, and Ironside's obligation to fund such capital call would be limited to its unfunded commitment. However, the LP Agreement does not by its terms limit the amount that may be called for indemnification purposes, and there is no express provision addressing the interaction between AcquisitionCo-level indemnification exposure and the capital call mechanics of the LP Agreement. This creates the risk that the GP could call capital from Ironside to fund AcquisitionCo's indemnification obligations in amounts that are disproportionate to ICM Co-Invest's 28.57% equity interest.
C. C&H Recommendation: Several (Not Joint) Liability
C&H strongly recommends that the ECLs and any guarantee provisions in the EPA be restructured so that the liability of each equity source — Fund IV and ICM Co-Invest — is several and not joint, with each equity source liable only for its pro rata share of any Buyer obligations.
Specifically, C&H recommends the following modifications:
(a) Several Liability Standard. The ECLs should expressly provide that Fund IV's and ICM Co-Invest's obligations thereunder are several and not joint, and that each equity source is liable for its respective obligations only in proportion to its equity interest (71.43% for Fund IV and 28.57% for ICM Co-Invest).
(b) Reverse Termination Fee Cap. ICM Co-Invest's maximum exposure under the ECL with respect to the reverse termination fee should be capped at 28.57% of the reverse termination fee amount, or approximately $9,000,000 (28.57% × $31,500,000 = $9,000,450, rounded to $9,000,000 for purposes of setting a defined cap).
(c) Indemnification Cap. ICM Co-Invest's maximum exposure under the ECL with respect to Buyer indemnification obligations should be capped at 28.57% of any applicable Buyer indemnification cap.
(d) No Cross-Default. The ECLs should provide that a default by Fund IV under its ECL shall not constitute a default by ICM Co-Invest under its ECL, and vice versa. This "no cross-default" provision is essential to insulating ICM Co-Invest from the consequences of Fund IV's failure to perform.
This recommendation is consistent with market practice for minority co-investors in sponsor-led acquisitions. In transactions where a co-investor is contributing a minority portion of the equity (typically less than 30%), it is standard for the co-investor's ECL to be structured on a several (not joint) basis with a pro rata liability cap. The joint and several structure in the current BSP draft appears to reflect BSP's approach of maximizing the Sellers' remedies against the Buyer and its equity sources, but it does so at the expense of appropriate risk allocation between the majority equity participant (Fund IV) and the minority co-investor (ICM Co-Invest). C&H anticipates that BSP and the Sellers' counsel (understood to be Harmon, Wexler & Tate LLP) may resist the several liability position, but the market justification for this position is strong, and Ironside should be prepared to make this a point of significant negotiating focus.
V. Co-Invest-Specific Protections — Analysis and Recommendations
A. Financing Representation: Equity Commitment Scope
As discussed in Section III.C above, the Financing Representation (Section 5.04 of the EPA) is the single most critical Buyer representation from a co-invest risk allocation perspective. Under the current draft, AcquisitionCo represents that it has received binding equity commitment letters from Fund IV ($750 million) and ICM Co-Invest ($300 million), and that the aggregate proceeds from such commitments, together with the debt financing, are sufficient to consummate the transactions. This representation, while accurate as a factual matter, creates two distinct risks for ICM Co-Invest:
Cross-Guarantee Risk. The Financing Representation, as currently structured, does not distinguish between Fund IV's commitment and ICM Co-Invest's commitment. By representing that it has received commitments "sufficient" to consummate the transactions, AcquisitionCo effectively makes each equity source's commitment a component of the overall financing package. If Fund IV fails to fund its $750 million commitment, the overall financing package would be insufficient, potentially triggering a breach of the Financing Representation and exposing AcquisitionCo — and, through the ECLs, ICM Co-Invest — to liability for the reverse termination fee or indemnification claims.
Indirect Guarantee of Fund IV's Obligation. To the extent the Financing Representation is interpreted to require AcquisitionCo to represent that Fund IV will fund its commitment, ICM Co-Invest could be viewed as indirectly guaranteeing Fund IV's funding obligation by virtue of its guarantee of AcquisitionCo's obligations under the ECL. This is an inappropriate allocation of risk that must be addressed.
C&H recommends the following modifications to the Financing Representation:
(a) The Financing Representation should be revised to separately identify and distinguish between Fund IV's equity commitment ($750 million) and ICM Co-Invest's equity commitment ($300 million), making clear that each commitment is an independent obligation of the respective equity source.
(b) A "Funding Failure" provision should be added to the EPA (or to the ECLs) expressly providing that ICM Co-Invest is not required to fund any amount in excess of its $300 million committed capital under any circumstances, and that ICM Co-Invest shall have no liability or obligation to fund, guarantee, backstop, or otherwise support Fund IV's equity commitment or any portion thereof.
(c) To the extent the Sellers require comfort regarding the sufficiency of the overall financing package, such comfort should be directed to Fund IV and Meridian Infrastructure GP IV LLC, which controls Fund IV and has the primary economic interest in the transaction, rather than to ICM Co-Invest.
B. Indemnification Allocation Between Equity Participants
The EPA provides for post-closing indemnification by AcquisitionCo (as Buyer) in the event of breaches of the Buyer representations and warranties, as well as in the event of breaches of certain Buyer covenants. These indemnification obligations, once triggered, must be funded by AcquisitionCo's equity owners through capital contributions or, if AcquisitionCo has sufficient operating cash flow post-closing, from AcquisitionCo's own resources.
Under the current structure, the mechanism for allocating indemnification funding obligations between Fund IV and ICM Co-Invest is unclear. The Co-Investment Allocation Agreement addresses the allocation of investment returns and certain operating costs but does not contain an express provision governing the allocation of EPA indemnification liabilities. This gap must be addressed.
C&H recommends the following:
(a) Proportional Allocation. The Co-Investment Allocation Agreement should be amended to include an express indemnification allocation provision providing that all Buyer indemnification obligations under the EPA shall be allocated between Fund IV and ICM Co-Invest on a 71.43%/28.57% basis, consistent with their respective equity interests.
(b) Escrow Contributions. Any escrow contributions required of AcquisitionCo under the EPA should be funded proportionally by Fund IV and ICM Co-Invest. The EPA currently provides for a $25 million working-capital adjustment escrow to be established at closing. Under a proportional allocation, Fund IV would contribute $17,857,500 (71.43% × $25,000,000) and ICM Co-Invest would contribute $7,142,500 (28.57% × $25,000,000). The Co-Investment Allocation Agreement should expressly confirm this allocation.
(c) Joint Defense Mechanism. In the event that the Sellers assert an indemnification claim against AcquisitionCo for breach of a Buyer representation, the defense of such claim should be coordinated between Fund IV and ICM Co-Invest through a joint defense mechanism established in the Co-Investment Allocation Agreement. The joint defense mechanism should provide for (i) selection of joint defense counsel (with ICM Co-Invest's consent), (ii) allocation of defense costs on a 71.43%/28.57% basis, and (iii) a requirement that neither Fund IV nor ICM Co-Invest settle any indemnification claim without the consent of the other.
C. Consent Rights on Buyer Representation Amendments
Under the EPA as currently drafted, the "Buyer" — AcquisitionCo — has the authority to agree to amendments, modifications, or waivers of any provision of the EPA, including the Buyer representations and warranties, the indemnification provisions, and the reverse termination fee provisions. AcquisitionCo is controlled by its board of directors, which in turn is controlled by Meridian Infrastructure GP IV LLC in its capacity as the entity controlling both Fund IV and ICM Co-Invest.
This structure creates a significant conflict of interest. Meridian Infrastructure GP IV LLC serves as the general partner of both Fund IV and ICM Co-Invest, and its managers — David R. Hargreaves (Managing Partner), Lillian Fong (Partner, Portfolio), and Graham Whitfield (Partner, Operations) — owe fiduciary duties to both vehicles. However, the GP's primary economic incentives are aligned with Fund IV. Fund IV is a $6.2 billion institutional infrastructure fund with a broad investor base and a carried interest structure providing 20% carry above the preferred return. ICM Co-Invest, by contrast, is a single-asset co-investment vehicle with a more limited carry structure (10% carry above an 8% preferred return). In situations where the interests of Fund IV and ICM Co-Invest diverge — for example, where an amendment to the Buyer representations would reduce the overall indemnification exposure of AcquisitionCo but at the cost of accepting greater risk on a specific representation that disproportionately affects the co-invest — the GP's incentives may favor Fund IV's interests.
C&H recommends the following protections:
(a) Co-Invest Consent Provision. The LP Agreement (or the Side Letter) should be amended to include a "Co-Invest Consent Provision" requiring the prior written consent of Ironside (as the 99.99% limited partner of ICM Co-Invest) before Meridian Infrastructure GP IV LLC, in its capacity as GP of ICM Co-Invest or as the controlling person of AcquisitionCo, may agree to any amendment, modification, or waiver of the EPA that affects (i) the Buyer representations and warranties, (ii) the Buyer indemnification obligations, (iii) the reverse termination fee, (iv) the ECLs, or (v) any other provision of the EPA that would materially increase ICM Co-Invest's economic exposure under the transaction.
(b) Standard of Review. The Co-Invest Consent Provision should provide that the GP's consent to any such amendment, modification, or waiver is subject to the GP's fiduciary duties to ICM Co-Invest and its limited partner, and that the GP shall not agree to any such action that would disproportionately allocate risk to ICM Co-Invest relative to Fund IV.
This recommendation is supported by the governance framework already established in the Side Letter, which grants Ironside enhanced governance rights in recognition of its status as a significant co-investor. The Co-Invest Consent Provision would be a natural extension of the existing Side Letter protections and is consistent with the principle that a minority co-investor should have meaningful consent rights over actions that affect its economic exposure.
D. Information Rights Regarding Representation Compliance
To enable Ironside to monitor compliance with the Buyer representations and to assess the adequacy of the GP's performance of its obligations in connection with the EPA, Ironside should be granted the following information rights:
(a) Bring-Down Certificates. Ironside should receive copies of all bring-down certificates delivered by AcquisitionCo at closing, certifying that the Buyer representations and warranties are true and correct as of the Closing Date (or as of such other date as specified in the EPA). These certificates are typically delivered as a condition precedent to the Sellers' obligation to close and provide the most direct evidence of the status of the Buyer representations at closing.
(b) Compliance Certificates. Ironside should receive copies of any compliance certificates or officer's certificates delivered by AcquisitionCo in connection with the satisfaction of conditions precedent to closing, including certificates relating to the absence of legal proceedings, regulatory approvals, and the sufficiency of financing.
(c) Fund IV Diligence Obligation. To the extent that any Buyer representation requires knowledge of Fund IV's status — for example, the Financing Representation (which requires AcquisitionCo to represent that the equity commitments are in full force and effect) and the solvency representation (which requires AcquisitionCo to represent that it will be solvent after giving effect to the transactions) — the GP should be required to conduct reasonable diligence to verify Fund IV's ability to perform its equity commitment before certifying on behalf of AcquisitionCo. The results of this diligence should be communicated to Ironside in writing prior to the Closing Date.
E. R&W Insurance — Allocation of Coverage Benefit
The Northgate Specialty Insurance Co. representation and warranty insurance policy (Policy No. NSW-RI-2022-09814) provides a coverage limit of $195 million (representing approximately 10% of the enterprise value) and was bound on September 1, 2022. The policy insures AcquisitionCo as the named insured against losses arising from breaches of the Seller representations and Target representations contained in the EPA. The premium deposit for the policy is $4,875,000 (approximately 2.5% of the coverage limit), which was paid from the proceeds of the initial capital call on August 15, 2022.
The R&W insurance policy is a critical component of the risk allocation framework for this transaction, as it provides AcquisitionCo — and, through AcquisitionCo, Fund IV and ICM Co-Invest — with an independent source of recovery for breaches of the Seller and Target representations, thereby reducing the equity participants' reliance on direct indemnification from the Sellers (which is subject to the customary indemnification caps, baskets, and survival periods described above).
C&H recommends the following protections with respect to the allocation of R&W insurance benefits:
(a) Proportional Allocation of Recoveries. The Co-Investment Allocation Agreement should be amended to confirm expressly that any recovery by AcquisitionCo under the R&W insurance policy shall be distributed to Fund IV and ICM Co-Invest in proportion to their respective equity interests (71.43% and 28.57%, respectively). In the absence of such a provision, there is a risk that the GP could exercise its discretion in allocating R&W insurance recoveries in a manner that favors Fund IV over ICM Co-Invest.
(b) Premium Cost-Sharing. The premium deposit of $4,875,000 was paid from the initial capital call proceeds. To the extent that the initial capital call was funded proportionally by Fund IV and ICM Co-Invest, the premium cost has already been shared on a 71.43%/28.57% basis ($3,482,143 borne by Fund IV and $1,392,857 borne by ICM Co-Invest). However, the Co-Investment Allocation Agreement should expressly confirm this allocation and provide that any subsequent premium payments, deductible amounts, or retention amounts under the R&W insurance policy are similarly shared on a proportional basis.
(c) Named Insured Status. While the R&W insurance policy names AcquisitionCo as the insured, C&H recommends that Ironside confirm with the Northgate Specialty underwriter whether ICM Co-Invest (or Ironside) can be added as an additional insured or loss payee under the policy. This would provide ICM Co-Invest with direct rights against the insurer in the event that AcquisitionCo fails to pursue or distribute a recovery.
For a comprehensive analysis of the R&W insurance policy, including coverage terms, exclusions, retention amounts, and claims procedures, please refer to C&H's companion memorandum dated August 31, 2022 (the "R&W Insurance Coverage Analysis Memorandum").
VI. Specific Representation Categories — Risk Mapping
This section maps each principal category of representation and warranty in the EPA to the specific risk implications for ICM Co-Invest, organized by the party making the representation.
A. Fundamental Representations (Seller and Target)
The fundamental representations — covering organization, authority, capitalization, and title to shares — are the "bedrock" representations of the EPA and carry the most favorable terms for the Buyer from an indemnification perspective. They are subject to the longest survival periods (six years or the statute of limitations, whichever is later) and are typically uncapped for indemnification purposes (that is, the Sellers' indemnification liability for breaches of fundamental representations is not subject to the general indemnification cap, though it remains subject to the overall purchase price cap).
From a risk allocation perspective, the fundamental representations present relatively low direct risk to ICM Co-Invest. These representations create obligations running from the Sellers and the Target to the Buyer (AcquisitionCo), and any recovery by AcquisitionCo for a breach of a fundamental representation will benefit both Fund IV and ICM Co-Invest proportionally, provided that the distribution mechanism in the Co-Investment Allocation Agreement is properly established. The primary risk to ICM Co-Invest in connection with the fundamental representations is not one of excess liability but rather one of ensuring that the recovery mechanism operates proportionally — that is, that any indemnification payments or R&W insurance recoveries received by AcquisitionCo are distributed to Fund IV and ICM Co-Invest in proportion to their respective equity interests rather than being retained by AcquisitionCo (where they could be used to repay acquisition indebtedness or for other purposes that do not benefit the equity participants directly).
C&H recommends that the Co-Investment Allocation Agreement include a provision requiring AcquisitionCo to distribute any net indemnification or insurance recovery to Fund IV and ICM Co-Invest on a proportional basis within a specified time period (e.g., thirty days) following receipt, subject to appropriate reserves for pending claims and contingent liabilities.
B. Business Representations (Target)
The business representations made by the Target — covering financial statements, material contracts, environmental compliance, employment and benefits, regulatory permits, tax, litigation, intellectual property, and real property — represent the broadest and most detailed set of representations in the EPA. These representations are subject to the general eighteen-month survival period (with exceptions for environmental representations, which survive three years, and tax representations, which survive sixty days beyond the applicable statute of limitations).
From a risk allocation perspective, the business representations present both opportunities and risks for ICM Co-Invest. On the opportunity side, these representations provide the primary basis for post-closing indemnification claims against the Sellers and for R&W insurance claims, which can mitigate the economic impact of undisclosed liabilities or misrepresentations regarding Cascadia's business. On the risk side, the breadth of the business representations and the complexity of Cascadia's operations create a significant due diligence burden and a potentially substantial indemnification exposure.
Several categories of business representations warrant particular attention:
Material Contracts. The material contracts representation is of critical importance given Cascadia's long-term contractual revenue base. Cascadia's portfolio consists of fourteen hydroelectric facilities, six wind farms, and three water-treatment concessions, supported by power purchase agreements and municipal contracts with a weighted-average remaining contractual life of approximately twenty-two years. The value of Cascadia — and, by extension, the value of the equity investments by Fund IV and ICM Co-Invest — is heavily dependent on the

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