MUTUAL STANDSTILL AND PRESERVATION AGREEMENT
Dated as of February 15, 2024
among
TIMBERLINE GROWTH EQUITY FUND III, LP
THE WEIR FAMILY TRUST
THE MANAGEMENT ROLLOVER PARTICIPANTS LISTED ON SCHEDULE A HERETO
(collectively, the "Selling Shareholders")
CASCADIA RENEWABLES HOLDINGS, INC.
(the "Company")
CASCADIA ACQUISITION CORP.
("AcquisitionCo")
MERIDIAN INFRASTRUCTURE PARTNERS FUND IV, LP
("Fund IV")
ICM CASCADIA CO-INVEST, LP
("ICM Co-Invest")
and
MERIDIAN INFRASTRUCTURE GP IV LLC
("Meridian GP IV"), solely in its capacity as general partner of Fund IV and ICM Co-Invest
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This MUTUAL STANDSTILL AND PRESERVATION AGREEMENT (this "Agreement") is entered into as of February 15, 2024, by and among (i) Timberline Growth Equity Fund III, LP, a Delaware limited partnership ("Timberline Seller"), (ii) The Weir Family Trust, a trust organized under the laws of the State of Oregon (the "Weir Seller"), (iii) the management rollover participants identified on Schedule A attached hereto (the "Management Rollover Participants" and, together with Timberline Seller and Weir Seller, the "Selling Shareholders"), (iv) Cascadia Renewables Holdings, Inc., an Oregon corporation (the "Company" or "Cascadia"), (v) Cascadia Acquisition Corp., a Delaware corporation ("AcquisitionCo"), (vi) Meridian Infrastructure Partners Fund IV, LP, a Delaware limited partnership ("Fund IV"), (vii) ICM Cascadia Co-Invest, LP, a Delaware limited partnership ("ICM Co-Invest"), and (viii) Meridian Infrastructure GP IV LLC, a Delaware limited liability company ("Meridian GP IV"), solely in its capacity as the general partner of Fund IV and ICM Co-Invest. Each of the foregoing is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Selling Shareholders, the Company, and AcquisitionCo entered into that certain Equity Purchase Agreement, dated as of September 15, 2022 (the "Original EPA"), pursuant to which AcquisitionCo, a Delaware corporation organized for purposes of acquiring 100% of the issued and outstanding equity interests of the Company and wholly owned by Fund IV and ICM Co-Invest, agreed to acquire all of the equity of Cascadia Renewables Holdings, Inc., an Oregon corporation, at an enterprise value of One Billion Nine Hundred Fifty Million Dollars ($1,950,000,000) (the "Transaction");
WHEREAS, the parties to the Original EPA entered into a First Amendment to the Equity Purchase Agreement, dated as of November 22, 2022 (the "First Amendment"), pursuant to which the outside date for the consummation of the Transaction was extended from December 31, 2022 to March 31, 2023;
WHEREAS, the parties to the Original EPA entered into a Second Amendment to the Equity Purchase Agreement, dated as of March 15, 2023 (the "Second Amendment"), pursuant to which the outside date for the consummation of the Transaction was further extended from March 31, 2023 to June 30, 2023;
WHEREAS, the parties to the Original EPA entered into a Third Amendment to the Equity Purchase Agreement, dated as of June 28, 2023 (the "Third Amendment"), pursuant to which the outside date for the consummation of the Transaction was further extended from June 30, 2023 to December 31, 2023 (the Original EPA, as amended by the First Amendment, the Second Amendment, and the Third Amendment, the "EPA");
WHEREAS, the outside date under the EPA, as extended by the Third Amendment, expired on December 31, 2023 (the "Expired Outside Date"), and no Party has exercised any termination right under Section 8.01 of the EPA as of the date hereof;
WHEREAS, on or about October 28, 2022, the Portland Metropolitan Water District (the "Water District") notified the Company of its intent to renegotiate the forty (40)-year water-treatment concession for the Bull Run Filtration Project (originally executed in approximately 2018) (the "Concession"), citing changed regulatory requirements under Oregon Senate Bill 1567 (2022), and the renegotiation of the Concession (the "Concession Renegotiation") contributed to the suspension of the Transaction and the declaration of a Material Impediment Event under Section 7.04 of the Limited Partnership Agreement of ICM Cascadia Co-Invest, LP, dated July 29, 2022 (the "Co-Invest LP Agreement"), on January 9, 2023, and the Concession Renegotiation remains pending as of the date hereof;
WHEREAS, the debt commitment letter, dated as of August 30, 2022, from Atlas National Bank, N.A. (as lead arranger and administrative agent) and Pinnacle Credit Partners LLC (collectively, the "Original Financing Sources"), providing for a Nine Hundred Seventy-Five Million Dollar ($975,000,000) senior secured term loan facility and a One Hundred Fifty Million Dollar ($150,000,000) revolving credit facility, expired on October 31, 2023 without further extension, and new financing arrangements will be required in the event of transaction reactivation;
WHEREAS, (i) approval under Section 203 of the Federal Power Act was received on December 15, 2022 (FERC Docket No. EC22-143-000) (the "FERC Approval"), conditional on license-transfer filings and subject to an eighteen (18)-month lapse provision (as extended by FERC staff letter to June 15, 2024), (ii) an application was filed with the Oregon Public Utility Commission on October 14, 2022 (OPUC Docket No. UM-2287) (the "OPUC Application"), and proceedings thereon have been stayed at the joint request of the parties since February 2023, and (iii) a voluntary notice was filed with the Committee on Foreign Investment in the United States ("CFIUS"), which was acknowledged on September 20, 2022, with no further action required;
WHEREAS, ICM Cascadia Co-Invest, LP is a Delaware limited partnership (EIN 88-3921457), formed on July 22, 2022 (Delaware Secretary of State File No. 7439218), with Meridian Infrastructure GP IV LLC serving as its general partner (holding a 0.01% general partner interest) and Ironside Capital Management LP, a Delaware limited partnership ("Ironside"), serving as its sole limited partner (holding a 99.99% limited partner interest), with total committed capital of Three Hundred Million Dollars ($300,000,000), of which Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000) has been called and funded as of the date hereof and Two Hundred Seventy-Seven Million Five Hundred Thousand Dollars ($277,500,000) remains as unfunded commitment, and ICM Co-Invest has been dormant since January 9, 2023;
WHEREAS, a representations and warranties insurance policy was issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) (the "R&W Policy"), bound on September 1, 2022, with a coverage limit of One Hundred Ninety-Five Million Dollars ($195,000,000), and a premium deposit of Four Million Eight Hundred Seventy-Five Thousand Dollars ($4,875,000) was paid on September 2, 2022, and the coverage period under the R&W Policy has been tolled during the dormancy period pursuant to a Side Letter dated January 20, 2023 (the "Tolling Side Letter"); and
WHEREAS, the Parties desire to enter into a mutual standstill on termination rights arising from the expiration of the Expired Outside Date, to preserve the Transaction Documents and any remaining regulatory approvals during the Preservation Period, and to establish a framework for either the reactivation of the Transaction or an orderly wind-down of the Transaction and the related arrangements, all on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Mutual Standstill and Preservation Agreement, including all schedules and exhibits hereto, as the same may be amended, supplemented, or modified from time to time in accordance with Section 10.6.
"Buyer Parties" means, collectively, AcquisitionCo, Fund IV, and ICM Co-Invest.
"CFIUS" means the Committee on Foreign Investment in the United States.
"Co-Invest LP Agreement" means the Limited Partnership Agreement of ICM Cascadia Co-Invest, LP, dated as of July 29, 2022, as amended, supplemented, or modified from time to time.
"Company" means Cascadia Renewables Holdings, Inc., an Oregon corporation.
"Concession" means the forty (40)-year water-treatment concession for the Bull Run Filtration Project between the Company and the Portland Metropolitan Water District, originally executed in approximately 2018.
"Concession Renegotiation" means the renegotiation of the Concession between the Company and the Portland Metropolitan Water District, initiated by the Water District's notice of intent delivered on or about October 28, 2022.
"EPA" means the Equity Purchase Agreement, dated as of September 15, 2022, among the Selling Shareholders, the Company, and AcquisitionCo, as amended by the First Amendment dated November 22, 2022, the Second Amendment dated March 15, 2023, and the Third Amendment dated June 28, 2023.
"Expired Outside Date" means December 31, 2023.
"FERC Approval" means the approval under Section 203 of the Federal Power Act received on December 15, 2022 in FERC Docket No. EC22-143-000, including any extensions thereof.
"First Amendment" means the First Amendment to the Equity Purchase Agreement, dated as of November 22, 2022.
"Fund IV" means Meridian Infrastructure Partners Fund IV, LP, a Delaware limited partnership.
"GAAP" means generally accepted accounting principles in the United States, consistently applied.
"ICM Co-Invest" means ICM Cascadia Co-Invest, LP, a Delaware limited partnership.
"Ironside" means Ironside Capital Management LP, a Delaware limited partnership, in its capacity as the sole limited partner of ICM Co-Invest (holding a 99.99% limited partner interest).
"Material Impediment Event" has the meaning ascribed to such term in Section 7.04 of the Co-Invest LP Agreement.
"Meridian GP IV" means Meridian Infrastructure GP IV LLC, a Delaware limited liability company, in its capacity as the general partner of each of Fund IV and ICM Co-Invest.
"OPUC" means the Oregon Public Utility Commission.
"OPUC Application" means the application filed with the Oregon Public Utility Commission on October 14, 2022, assigned OPUC Docket No. UM-2287.
"Original EPA" means the Equity Purchase Agreement, dated as of September 15, 2022, among the Selling Shareholders, the Company, and AcquisitionCo, prior to giving effect to any amendments thereto.
"Original Financing Sources" means Atlas National Bank, N.A. (as lead arranger and administrative agent) and Pinnacle Credit Partners LLC.
"Preservation Period" means the period commencing on the date hereof and continuing through the earliest to occur of (a) the Reactivation Date, (b) the Wind-Down Date, or (c) the Termination Date.
"R&W Policy" means the representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814), bound on September 1, 2022, with a coverage limit of One Hundred Ninety-Five Million Dollars ($195,000,000).
"Reactivation" has the meaning set forth in Section 4.1.
"Reactivation Date" has the meaning set forth in Section 4.1.
"Reactivation Notice" has the meaning set forth in Section 4.2.
"Second Amendment" means the Second Amendment to the Equity Purchase Agreement, dated as of March 15, 2023.
"Selling Shareholders" means, collectively, Timberline Growth Equity Fund III, LP, The Weir Family Trust, and the Management Rollover Participants listed on Schedule A hereto.
"Standstill Period" has the meaning set forth in Section 2.1.
"Termination Date" has the meaning set forth in Section 6.1.
"Third Amendment" means the Third Amendment to the Equity Purchase Agreement, dated as of June 28, 2023.
"Tolling Side Letter" means the Side Letter, dated January 20, 2023, among AcquisitionCo, ICM Co-Invest, and Northgate Specialty Insurance Co., pursuant to which the coverage period under the R&W Policy was tolled during the dormancy period.
"Transaction" means the acquisition of 100% of the issued and outstanding equity interests of the Company by AcquisitionCo, as contemplated by the EPA.
"Transaction Documents" means, collectively, the EPA (including each amendment thereto), the Co-Investment Allocation Agreement dated July 29, 2022, the R&W Policy, the Tolling Side Letter, the FERC Approval, the OPUC Application, and all ancillary agreements, side letters, disclosure schedules, exhibits, certificates, and instruments executed and delivered in connection with the Transaction.
"Water District" means the Portland Metropolitan Water District.
"Wind-Down" has the meaning set forth in Section 5.1.
"Wind-Down Date" has the meaning set forth in Section 5.1.
Section 1.2 — EPA Definitions Incorporated
Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the EPA. In the event of any conflict between the definitions set forth in this Agreement and those set forth in the EPA, the definitions set forth in this Agreement shall control for purposes of this Agreement.
Section 1.3 — Interpretation
Unless the context otherwise requires:
(a) The headings and captions of the Articles, Sections, and subsections of this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.
(b) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(c) The words "herein," "hereof," "hereby," "hereto," and "hereunder" refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision of this Agreement.
(d) References to any Article, Section, Schedule, or Exhibit mean the Article, Section, Schedule, or Exhibit of or to this Agreement, unless otherwise specified.
(e) Words in the singular form shall include the plural form and vice versa, and words importing one gender shall include all genders.
(f) The word "or" is not exclusive, and the word "extent" in the phrase "to the extent" means the degree to which a subject or other thing extends, and such phrase shall not mean simply "if."
(g) All references to "days" shall mean calendar days unless otherwise specified as "business days."
(h) References to "dollars" and "$" mean the lawful currency of the United States of America.
(i) Any reference to any agreement, document, or instrument means such agreement, document, or instrument as amended, supplemented, or modified from time to time to the extent permitted by the provisions thereof and by this Agreement.
(j) Any reference to any statute or regulation shall be deemed to include all amendments thereto and any successor statute or regulation, together with the rules and regulations promulgated thereunder.
ARTICLE II — MUTUAL STANDSTILL
Section 2.1 — Standstill Period
The mutual standstill established by this Article II (the "Standstill Period") shall commence on the date hereof, February 15, 2024, and shall continue until the earliest to occur of:
(a) the Reactivation Date;
(b) the Wind-Down Date;
(c) the Termination Date; or
(d) twenty-four (24) months from the date hereof (i.e., February 15, 2026).
The Standstill Period may be extended beyond the date specified in clause (d) above by mutual written consent of all Parties to this Agreement. Any such extension shall specify the new expiration date of the Standstill Period and shall be executed in the manner provided for amendments in Section 10.6.
Section 2.2 — Forbearance of Termination Rights
(a) During the Standstill Period, each Party hereby agrees that it shall not exercise, assert, or purport to exercise any termination right under the EPA (including, without limitation, under Sections 8.01(b), 8.01(c), 8.01(d), and 8.01(e) thereof) arising from or related to, directly or indirectly, the expiration of the Expired Outside Date or any matter or circumstance that existed or arose on or prior to the date hereof and that is related to the passage of time beyond the Expired Outside Date.
(b) Each Party hereby irrevocably waives any claim for termination fees, break-up fees, reverse break-up fees, or similar payments that may have accrued or become payable by reason of the expiration of the Expired Outside Date, including, without limitation, any amounts that may otherwise be payable under Section 8.02 or Section 8.03 of the EPA in connection with the expiration of the Expired Outside Date. For the avoidance of doubt, the waiver set forth in this Section 2.2(b) shall be permanent and shall survive the expiration or termination of the Standstill Period and this Agreement.
(c) Notwithstanding anything to the contrary in this Section 2.2, the standstill and forbearance set forth herein shall not constitute a waiver of any termination right arising from (i) a breach of this Agreement, (ii) any event, circumstance, or condition first occurring after the date hereof that would independently give rise to a termination right under the EPA (without reference to the expiration of the Expired Outside Date), or (iii) any right of termination arising under this Agreement (including under Article V or Article VI hereof).
Section 2.3 — No Prejudice
(a) The standstill and forbearance set forth in this Article II shall not prejudice, impair, or otherwise affect any Party's substantive rights under the EPA or any Transaction Document, other than the specific termination rights and fee-related claims expressly forborne and waived under Section 2.2. Without limiting the generality of the foregoing, the Parties acknowledge and agree that all representations, warranties, covenants, conditions, indemnification obligations, and other provisions of the EPA and the Transaction Documents (other than termination rights specifically forborne under Section 2.2) shall remain in full force and effect during the Standstill Period, subject to their respective terms.
(b) No Party shall be deemed to have waived any representation, warranty, covenant, or condition under the EPA or any Transaction Document solely by reason of entering into this Agreement, participating in the standstill contemplated hereby, or forbearing from the exercise of termination rights during the Standstill Period. Entry into this Agreement shall not constitute an admission by any Party of the existence or non-existence of any condition, right, or obligation under the EPA or any Transaction Document.
Section 2.4 — Reservation of Rights — ICM Co-Invest
(a) Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall limit, impair, restrict, or otherwise affect any right of Ironside Capital Management LP (as the limited partner of ICM Co-Invest) under the Co-Invest LP Agreement, including, without limitation, (i) any wind-down election right under Section 7.04(c) of the Co-Invest LP Agreement, (ii) any information and reporting rights under Article VIII of the Co-Invest LP Agreement, (iii) any consent or approval rights with respect to actions by Meridian GP IV as general partner of ICM Co-Invest, and (iv) any rights with respect to the return of capital, distribution of assets, or dissolution and winding-up of ICM Co-Invest.
(b) The standstill set forth in this Article II relates solely to the EPA termination rights as among the parties to the EPA and does not restrict ICM Co-Invest, Ironside, or Meridian GP IV (in its capacity as general partner of ICM Co-Invest) from exercising any right, making any election, or taking any action that is available to such person under the Co-Invest LP Agreement, the organizational documents of ICM Co-Invest, or applicable law, including, without limitation, any right arising from the dormancy of ICM Co-Invest or the continued existence of a Material Impediment Event.
(c) Ironside Capital Management LP is an intended third-party beneficiary of this Section 2.4 and of the Wind-Down framework set forth in Article V, and shall be entitled to enforce the provisions of this Section 2.4 and Article V as if it were a direct party to this Agreement, in accordance with and subject to Section 10.8.
ARTICLE III — PRESERVATION OBLIGATIONS
Section 3.1 — Preservation of Transaction Documents
(a) Each Party shall preserve and maintain in full force and effect all Transaction Documents to which it is a party or with respect to which it has rights or obligations during the Preservation Period; provided, that the expired debt commitment letter dated August 30, 2022 from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC, which expired on October 31, 2023 without further extension, shall not be subject to this preservation obligation, and the references herein to such expired debt commitment letter are for historical and contextual purposes only.
(b) No Party shall amend, modify, supplement, terminate, cancel, waive, or release any provision of any Transaction Document without the prior written consent of all Parties to this Agreement. Any such amendment, modification, supplement, termination, cancellation, waiver, or release undertaken without such prior written consent shall be void and of no force or effect.
(c) Without limiting the generality of the foregoing, the Parties shall maintain the OPUC Application (OPUC Docket No. UM-2287) in stayed status throughout the Preservation Period, and no Party shall take any action to withdraw, dismiss, or abandon the OPUC Application, or to request the OPUC to take any action with respect to the OPUC Application (other than to maintain the stay), without the prior written consent of all Parties to this Agreement.
Section 3.2 — Preservation of FERC Approval
(a) The Parties acknowledge that the FERC Approval (FERC Docket No. EC22-143-000), received on December 15, 2022, is subject to a lapse provision pursuant to which the FERC Approval will expire and be of no further force or effect if the Transaction does not close within the period specified by FERC. The Parties further acknowledge that the lapse period has been extended by a FERC staff letter to June 15, 2024, and that the FERC Approval will lapse on such date if the Transaction has not been consummated by that date and no further extension is obtained.
(b) Each of AcquisitionCo, Fund IV, and ICM Co-Invest shall use commercially reasonable efforts to seek a further extension of the FERC Approval if reasonably requested by any Party prior to the lapse of the FERC Approval. Such commercially reasonable efforts shall include, without limitation, the preparation and filing of a request for extension with FERC, cooperation with FERC staff in connection with such request, and the provision of such information and documentation as may be reasonably required by FERC in connection therewith. The Company and the Selling Shareholders shall cooperate in good faith with the Buyer Parties in connection with any such extension request.
(c) If the FERC Approval lapses notwithstanding the commercially reasonable efforts described in Section 3.2(b), the obligation to file a new FERC Section 203 application shall be governed by Article IV (Reactivation Framework), and no Party shall have any liability to any other Party by reason of such lapse, except to the extent such lapse resulted from a breach of the obligations set forth in this Section 3.2.
Section 3.3 — Preservation of R&W Insurance
(a) ICM Co-Invest and AcquisitionCo shall maintain the R&W Policy (Policy No. NSW-RI-2022-09814) issued by Northgate Specialty Insurance Co. and the Tolling Side Letter dated January 20, 2023 in full force and effect during the Preservation Period, and shall comply with all terms and conditions thereof required to preserve the coverage and the tolling of the coverage period.
(b) No Party shall take any action, or fail to take any action, that would cause the cancellation, forfeiture, lapse, or impairment of the R&W Policy or the Tolling Side Letter, or that would result in the loss or forfeiture of the premium deposit of Four Million Eight Hundred Seventy-Five Thousand Dollars ($4,875,000) paid to Northgate Specialty Insurance Co. on September 2, 2022.
(c) Any renewal, extension, amendment, modification, or replacement of the R&W Policy or the Tolling Side Letter during the Preservation Period shall require the prior written consent of ICM Co-Invest (acting through Meridian GP IV as its general partner), such consent not to be unreasonably withheld, conditioned, or delayed. In providing or withholding such consent, Meridian GP IV shall act in accordance with its fiduciary obligations to Ironside as the sole limited partner of ICM Co-Invest under the Co-Invest LP Agreement.
Section 3.4 — Company Ordinary Course Operations
(a) The Company and the Selling Shareholders shall cause the Company to continue to operate in the ordinary course of business, consistent with past practice and the interim operating covenants set forth in Article V of the EPA, during the Preservation Period. Without limiting the generality of the foregoing, the Company shall use commercially reasonable efforts to (i) preserve the goodwill and business relationships of the Company, (ii) retain the services of its key employees, (iii) maintain all material permits, licenses, and approvals, and (iv) comply with all applicable laws and regulations in all material respects.
(b) The Company shall promptly (and in any event within five (5) business days) notify each of the Buyer Parties and the Selling Shareholders in writing of any material development, correspondence, or communication with respect to the Concession Renegotiation, including, without limitation, any proposal, counterproposal, term sheet, draft agreement, or other material document received from or delivered to the Portland Metropolitan Water District in connection therewith. The Company shall provide copies of all such material documents to the Buyer Parties simultaneously with or promptly following the delivery of such notice.
(c) The Company shall provide quarterly written updates to each Buyer Party and the Selling Shareholders on the status of the Concession Renegotiation and the Company's financial condition. Such quarterly updates shall be delivered within thirty (30) days following the end of each calendar quarter (i.e., by April 30, July 31, October 31, and January 31 of each year, as applicable) and shall include, at a minimum, (i) a summary of the current status and expected timeline of the Concession Renegotiation, (ii) a description of any material changes to the terms or scope of the Concession Renegotiation since the prior quarterly update, (iii) unaudited interim financial statements of the Company for such calendar quarter, and (iv) a discussion of any material developments, risks, or contingencies affecting the Company's business, financial condition, or results of operations.
Section 3.5 — CFIUS
The Parties acknowledge that CFIUS clearance has been effectively received with respect to the Transaction, the voluntary notice having been acknowledged by CFIUS on September 20, 2022 with no further action required. No additional CFIUS filing is contemplated during the Preservation Period absent a change in the structure of the Transaction that would require a new or supplemental filing under Section 721 of the Defense Production Act of 1950, as amended, and the regulations promulgated thereunder (31 C.F.R. Parts 800–802). In the event that any change in the structure of the Transaction is proposed in connection with a Reactivation, the Parties shall consult in good faith regarding the need for any supplemental CFIUS filing and shall cooperate in the preparation and submission of any such filing as provided in Section 4.4.
Section 3.6 — Books and Records
(a) The Company shall maintain its books, records, and accounts in accordance with GAAP and applicable law during the Preservation Period. The Company shall make such books, records, and accounts available to the Buyer Parties for inspection, review, and copying upon reasonable prior written notice (not less than five (5) business days) during normal business hours at the Company's principal offices, subject to compliance with applicable confidentiality obligations and attorney-client or other applicable privileges.
(b) The Company shall prepare and deliver to each Buyer Party and the Selling Shareholders quarterly financial statements of the Company, including an unaudited balance sheet, income statement, statement of cash flows, and such other financial information as may be reasonably requested. Such quarterly financial statements shall be prepared in accordance with GAAP and shall be reviewed (but not audited) by Halstead & Greer LLP, the Company's independent registered public accounting firm. Such quarterly financial statements shall be delivered within thirty (30) days following the end of each calendar quarter, and may be combined with the quarterly updates required under Section 3.4(c).
(c) In addition to the quarterly financial statements described in Section 3.6(b), the Company shall prepare and deliver audited annual financial statements for each fiscal year (or portion thereof) ending during the Preservation Period, prepared in accordance with GAAP and audited by Halstead & Greer LLP, within ninety (90) days following the end of each fiscal year.
Section 3.7 — Negative Covenants
During the Preservation Period, without the prior written consent of the Buyer Parties (such consent to be provided or withheld in the Buyer Parties' sole discretion, unless otherwise specified below):
(a) No Competing Transaction. The Company shall not, and the Selling Shareholders shall cause the Company not to, directly or indirectly, (i) solicit, initiate, encourage, or facilitate any inquiry, proposal, or offer relating to a Competing Transaction (as defined in the EPA), (ii) enter into, continue, or participate in any discussions or negotiations with any person (other than the Buyer Parties and their representatives) regarding a Competing Transaction, (iii) furnish any non-public information regarding the Company or its business, assets, or operations to any person in connection with or in furtherance of a Competing Transaction, or (iv) enter into any agreement, arrangement, or understanding (whether or not binding) with respect to a Competing Transaction. The Company shall promptly notify the Buyer Parties in writing of the receipt of any inquiry, proposal, or offer relating to a Competing Transaction, including the identity of the person making such inquiry, proposal, or offer and the material terms thereof.
(b) No Transfer of Equity. The Selling Shareholders shall not, directly or indirectly, transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of any of their respective equity interests in the Company, or enter into any agreement, arrangement, or understanding (whether or not binding) to do any of the foregoing, or grant any proxy, power of attorney, or other authorization with respect to any such equity interests, other than, in the case of The Weir Family Trust, transfers for estate-planning purposes to trusts established for the benefit of Jonathan M. Weir or members of his immediate family, provided that any such transferee shall agree in writing to be bound by the terms of this Agreement as a Selling Shareholder.
(c) No Material Amendments to Concession or Material Contracts. The Company shall not make any material amendment, modification, supplement, or waiver to the Bull Run Filtration Project Concession or any other material contract (as defined in the EPA) without (i) providing at least fifteen (15) business days' prior written notice to the Buyer Parties, together with a copy of the proposed amendment, modification, supplement, or waiver, and (ii) engaging in good faith consultation with the Buyer Parties during such fifteen (15) business day period regarding the proposed action. For the avoidance of doubt, the resolution of the Concession Renegotiation shall be subject to the provisions of Section 4.1(a) and not solely to this Section 3.7(c).
(d) No Extraordinary Actions. The Company shall not, without the prior written consent of the Buyer Parties, (i) declare, set aside, or pay any dividend or other distribution on any equity interests (other than tax distributions to the Selling Shareholders as contemplated by the EPA), (ii) issue, sell, or authorize the issuance or sale of any equity interests or rights convertible into or exercisable for equity interests, (iii) incur any indebtedness for borrowed money in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate (other than borrowings under existing credit facilities in the ordinary course of business), (iv) make any capital expenditure or commitment in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) individually or Five Million Dollars ($5,000,000) in the aggregate (other than capital expenditures included in the Company's board-approved annual capital budget), or (v) enter into any settlement of any litigation, claim, or proceeding involving payment or liability in excess of One Million Dollars ($1,000,000).
ARTICLE IV — REACTIVATION FRAMEWORK
Section 4.1 — Reactivation Conditions
A reactivation of the Transaction (a "Reactivation") may occur upon the satisfaction (or waiver by the Party entitled to the benefit thereof) of each of the following conditions:
(a) Concession Renegotiation Resolution. The Concession Renegotiation between the Company and the Portland Metropolitan Water District shall have been resolved on terms that are acceptable to the Buyer Parties, such acceptance not to be unreasonably withheld, conditioned, or delayed. In evaluating the acceptability of the resolution of the Concession Renegotiation, the Buyer Parties shall consider, among other factors, the impact of the revised concession terms on the Company's projected revenue, cash flow, and rate of return, and shall be entitled to engage independent advisors to evaluate the same at the Buyer Parties' expense.
(b) New Debt Financing. AcquisitionCo, Fund IV, and ICM Co-Invest shall have executed and delivered a new debt commitment letter or equivalent financing arrangement (or a series of commitment letters or financing arrangements) with one or more financial institutions on terms reasonably acceptable to the Buyer Parties, providing for committed financing sufficient to fund the Transaction, including the payment of the purchase price and all related transaction costs, fees, and expenses. For historical reference, the expired debt commitment from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC provided for a Nine Hundred Seventy-Five Million Dollar ($975,000,000) senior secured term loan facility and a One Hundred Fifty Million Dollar ($150,000,000) revolving credit facility; however, the terms of any new debt financing shall be determined by the prevailing market conditions at the time of Reactivation. The references herein to the expired commitment from the Original Financing Sources are for historical context only and do not create any obligation on the part of Atlas National Bank, N.A. or Pinnacle Credit Partners LLC under this Agreement.
(c) FERC Approval. Either (i) the FERC Approval shall remain in full force and effect and shall not have lapsed or been revoked, or (ii) a new application under Section 203 of the Federal Power Act shall have been filed with FERC and approved by FERC on terms no less favorable to the Transaction than the terms of the original FERC Approval.
(d) OPUC Approval. The OPUC proceedings under OPUC Docket No. UM-2287 shall have been reactivated and (i) approval shall have been received from the OPUC on terms reasonably acceptable to the Buyer Parties and the Selling Shareholders, or (ii) the Parties shall have a reasonable expectation, based on consultations with the OPUC staff and counsel, that such approval will be received within a reasonable period following the proposed new outside date.
(e) R&W Insurance. The R&W Policy (Policy No. NSW-RI-2022-09814) shall have been reactivated (including the lifting of the tolling arrangement under the Tolling Side Letter), or a replacement representations and warranties insurance policy shall have been obtained from Northgate Specialty Insurance Co. or another nationally recognized insurance carrier, in each case on terms reasonably acceptable to the Buyer Parties, with coverage limits, retentions, and terms consistent with market practice for transactions of similar size and type.
(f) Fourth Amendment or Restated EPA. The parties to the EPA shall have executed and delivered a Fourth Amendment to the Equity Purchase Agreement (or an Amended and Restated Equity Purchase Agreement) setting forth a new outside date and reflecting any revised terms agreed upon by the parties in connection with the Reactivation, including any adjustments to the enterprise value, purchase price, representations and warranties, covenants, conditions to closing, and indemnification provisions.
(g) Co-Investment Vehicle Reactivation. The capital-call suspension with respect to ICM Co-Invest under the Co-Invest LP Agreement (arising from the declaration of the Material Impediment Event on January 9, 2023) shall have been lifted by Meridian GP IV, with the written consent of Ironside as required under the Co-Invest LP Agreement, and ICM Co-Invest's unfunded commitment of Two Hundred Seventy-Seven Million Five Hundred Thousand Dollars ($277,500,000) shall be available for draw by Meridian GP IV in accordance with the terms of the Co-Invest LP Agreement.
The date on which all of the conditions set forth in clauses (a) through (g) above have been satisfied or waived shall be the "Reactivation Date."
Section 4.2 — Reactivation Notice
(a) Any Buyer Party or any Selling Shareholder may, at any time during the Standstill Period, deliver a written notice (a "Reactivation Notice") to all other Parties proposing the Reactivation of the Transaction. A Reactivation Notice shall specify in reasonable detail the basis for the delivering Party's belief that the Reactivation conditions set forth in Section 4.1 can be satisfied, including a description of the status of the Concession Renegotiation, the expected timeline and approach for obtaining new debt financing, the status of the FERC Approval and the OPUC Application, the status of the R&W Policy, and any proposed revisions to the terms of the EPA.
(b) Within thirty (30) days following receipt of a Reactivation Notice, the Parties shall meet (in person at a mutually agreed location or by teleconference or video conference) to discuss and negotiate in good faith the terms and conditions of the proposed Reactivation. The Parties shall use good faith efforts to reach agreement on the terms of Reactivation, including the terms of any Fourth Amendment or Restated EPA, within ninety (90) days following receipt of the Reactivation Notice; provided, that no Party shall be obligated to agree to any terms that are not acceptable to such Party in its reasonable discretion.
(c) The delivery of a Reactivation Notice shall not by itself constitute a commitment or obligation on the part of any Party to consummate the Transaction or to agree to any particular terms of Reactivation. The Parties acknowledge that the delivery of a Reactivation Notice is intended solely to initiate discussions regarding the potential Reactivation of the Transaction.
Section 4.3 — Revised Economics
(a) The Parties acknowledge and agree that the passage of time since the execution of the Original EPA, the Concession Renegotiation, the expiration of the original debt financing commitments, and changes in market conditions may require the renegotiation of certain economic and other terms of the Transaction in connection with any Reactivation. Without limiting the foregoing, the Parties acknowledge that Reactivation may require renegotiation of any or all of the following:
(i) the enterprise value of the Transaction (originally One Billion Nine Hundred Fifty Million Dollars ($1,950,000,000)) and the corresponding equity value (originally One Billion Fifty Million Dollars ($1,050,000,000));
(ii) the terms and conditions of the debt financing (including applicable interest rates, tenor, financial covenants, amortization schedules, and security packages);
(iii) the terms and conditions of the R&W Policy (including coverage limits, retentions, exclusions, and the premium required);
(iv) the allocation of equity commitments between Fund IV (originally Seven Hundred Fifty Million Dollars ($750,000,000), representing approximately 71.43% of total equity) and ICM Co-Invest (originally Three Hundred Million Dollars ($300,000,000), representing approximately 28.57% of total equity);
(v) the treatment of the management rollover, pursuant to which the Management Rollover Participants were originally expected to roll over 50% of their 20% equity interest (representing approximately 10% of total equity in the post-closing structure); and
(vi) such other terms and conditions of the EPA and the Transaction Documents as the Parties may agree to revise.
(b) No Party shall be obligated to agree to revised terms that are, taken as a whole, materially less favorable to such Party than the corresponding terms of the Original EPA (as amended), without such Party's express written consent.
(c) For the avoidance of doubt, the renegotiation of terms contemplated by this Section 4.3 shall be conducted through good faith negotiations among the Parties and shall be subject to the consent and approval requirements set forth in Section 4.1(f) (with respect to the Fourth Amendment or Restated EPA) and in the Co-Invest LP Agreement (with respect to any change in ICM Co-Invest's commitment amount or allocation).
Section 4.4 — Regulatory Re-Filings
In the event of Reactivation, AcquisitionCo and the Company shall cooperate in good faith to prepare, file (or re-file), and prosecute all required regulatory applications and filings in connection with the Transaction, including, without limitation:
(a) a new application under Section 203 of the Federal Power Act with FERC, if the FERC Approval has lapsed or been revoked, including the preparation of all required supporting documentation, exhibits, and testimony;
(b) a motion or filing to reactivate the proceedings under OPUC Docket No. UM-2287, including any updated or supplemental testimony, exhibits, or information required by the OPUC;
(c) any supplemental CFIUS voluntary notice or declaration, if required by reason of any change in the structure of the Transaction, including any change in the identity, nationality, or ownership structure of any Buyer Party; and
(d) any other federal, state, or local regulatory filing, application, or approval that may be required in connection with the Transaction as a result of changes in applicable law or regulation since the date of the Original EPA.
The costs and expenses of all regulatory re-filings contemplated by this Section 4.4 shall be allocated among the Parties as set forth in Section 7.2.
Section 4.5 — Financing Refresh
(a) In the event of Reactivation, Fund IV and ICM Co-Invest shall cooperate with AcquisitionCo to obtain new committed debt financing for the Transaction. Meridian GP IV shall lead and manage the financing process on behalf of the Buyer Parties, including the selection of potential lenders, the negotiation of financing terms, and the execution and delivery of commitment letters and definitive financing documentation.
(b) ICM Co-Invest shall have information and consultation rights with respect to the new financing process, including the right to receive copies of all term sheets, commitment letters, and material correspondence with potential lenders, and to participate in discussions and meetings with potential lenders upon reasonable prior notice. ICM Co-Invest's information and consultation rights under this Section 4.5(b) shall be subject to the confidentiality obligations set forth in Article VIII.
(c) The Parties acknowledge that the references in this Agreement and the EPA to the expired debt commitment letter from Atlas National Bank, N.A. (as lead arranger and administrative agent) and Pinnacle Credit Partners LLC, providing for a Nine Hundred Seventy-Five Million Dollar ($975,000,000) senior secured term loan facility and a One Hundred Fifty Million Dollar ($150,000,000) revolving credit facility (originally committed on August 30, 2022 and expired on October 31, 2023), are for historical reference and context only. Nothing in this Agreement creates, or shall be construed to create, any obligation, commitment, or liability on the part of Atlas National Bank, N.A. or Pinnacle Credit Partners LLC to provide financing for the Transaction, and neither Atlas National Bank, N.A. nor Pinnacle Credit Partners LLC is a party to this Agreement or a third-party beneficiary hereof.
ARTICLE V — WIND-DOWN FRAMEWORK
Section 5.1 — Wind-Down Triggers
A wind-down (a "Wind-Down") of the Transaction and the related arrangements may be initiated upon the occurrence of any of the following events:
(a) Mutual Agreement. The mutual written agreement of all Parties to this Agreement to initiate a Wind-Down of the Transaction;
(b) Failure to Deliver Reactivation Notice. The failure of any Party to deliver a Reactivation Notice within eighteen (18) months of the date hereof (i.e., by August 15, 2025), unless the Standstill Period has been extended by mutual written consent of all Parties pursuant to Section 2.1 and the deadline for delivery of a Reactivation Notice has been correspondingly extended;
(c) Determination of Infeasibility. The delivery of written notice by any Party to all other Parties stating, in reasonable detail, that one or more of the Reactivation conditions set forth in Section 4.1 cannot reasonably be satisfied, and the failure of the remaining Parties to deliver, within sixty (60) days following receipt of such notice, a written response demonstrating a reasonable basis for believing that such Reactivation condition or conditions can be satisfied; or
(d) ICM Co-Invest Wind-Down Election. The exercise by Ironside Capital Management LP of its wind-down election right under Section 7.04(c) of the Co-Invest LP Agreement. The Parties acknowledge that the eighteen (18)-month dormancy trigger under Section 7.04(c) of the Co-Invest LP Agreement will ripen on July 9, 2024 (being eighteen (18) months following the declaration of the Material Impediment Event on January 9, 2023), and that, following such date, Ironside shall have the right to exercise its wind-down election under the Co-Invest LP Agreement in accordance with the terms thereof.
The date on which a Wind-Down trigger occurs pursuant to any of clauses (a) through (d) above shall be the "Wind-Down Date."
Section 5.2 — Wind-Down Procedures
Following a Wind-Down Date, the Parties shall promptly undertake the following actions in an orderly and commercially reasonable manner:
(a) EPA Termination. The EPA shall be terminated by mutual consent of all parties thereto. Each Party shall execute and deliver a mutual termination agreement, substantially in the form attached hereto as Exhibit A (the "Mutual Termination Agreement"), within thirty (30) days following the Wind-Down Date. The Mutual Termination Agreement shall be effective upon execution and delivery by all parties to the EPA.
(b) Dissolution of AcquisitionCo. AcquisitionCo shall be dissolved and liquidated in accordance with the Delaware General Corporation Law and its certificate of incorporation and bylaws. Meridian GP IV, as the sole stockholder of AcquisitionCo (through Fund IV and ICM Co-Invest), shall cause the board of directors of AcquisitionCo to adopt resolutions authorizing the dissolution and wind-up of AcquisitionCo, and shall cause all required filings to be made with the Delaware Secretary of State, including the filing of a certificate of dissolution.
(c) Withdrawal of OPUC Application. A motion or filing to withdraw the OPUC Application (OPUC Docket No. UM-2287) shall be submitted to the Oregon Public Utility Commission, and the Parties shall cooperate in the preparation and filing of such motion or filing and in taking any other action required by the OPUC in connection with the withdrawal.
(d) R&W Policy Termination. The R&W Policy shall be terminated, cancelled, or allowed to expire in accordance with its terms and the terms of the Tolling Side Letter. The Parties shall use commercially reasonable efforts to recover any refundable portion of the premium deposit of Four Million Eight Hundred Seventy-Five Thousand Dollars ($4,875,000) paid to Northgate Specialty Insurance Co. on September 2, 2022. Any amounts recovered shall be distributed as provided in Section 7.2.
(e) Wind-Down of ICM Co-Invest. ICM Co-Invest shall be wound down, dissolved, and liquidated in accordance with the terms of the Co-Invest LP Agreement and applicable Delaware law. Meridian GP IV, as the general partner of ICM Co-Invest, shall distribute any remaining assets of ICM Co-Invest to Ironside (net of all outstanding expenses, fees, liabilities, and obligations of ICM Co-Invest, including any amounts payable to Meridian GP IV) in accordance with the distribution waterfall and liquidation provisions of the Co-Invest LP Agreement.
The Parties shall use good faith efforts to complete all Wind-Down procedures set forth in this Section 5.2 within one hundred twenty (120) days following the Wind-Down Date, or such longer period as may be reasonably necessary to complete the dissolution and wind-down of AcquisitionCo and ICM Co-Invest in compliance with applicable law.
Section 5.3 — Mutual Release on Wind-Down
(a) Upon the completion of all Wind-Down procedures set forth in Section 5.2 (including the execution and delivery of the Mutual Termination Agreement and the completion of the dissolution and wind-down of AcquisitionCo and ICM Co-Invest), the Parties shall exchange mutual general releases (the "Mutual Releases") of any and all claims, demands, actions, causes of action, suits, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees) arising under or related to the EPA, the Transaction Documents, this Agreement, or the Transaction, whether known or unknown, fixed or contingent, liquidated or unliquidated, and whether at law or in equity.
(b) Notwithstanding the foregoing, the Mutual Releases shall not extend to, and the Parties shall retain their respective rights with respect to:
(i) any claims arising from intentional fraud or willful breach of any obligation under the EPA, any Transaction Document, or this Agreement;
(ii) any obligations that by their express terms survive the termination of the EPA, any Transaction Document, or this Agreement, including, without limitation, confidentiality obligations and indemnification obligations for pre-termination breaches; and
(iii) any obligations arising under this Article V that remain unsatisfied as of the date of the Mutual Releases.
Section 5.4 — No Break-Up Fee or Termination Fee
No Party shall owe any break-up fee, termination fee, reverse break-up fee, or similar payment to any other Party in connection with a Wind-Down initiated pursuant to this Article V, and no such fee or payment shall be payable by any Party to any other Party as a consequence of the termination of the Transaction pursuant to the Wind-Down procedures set forth herein. The foregoing shall not limit or affect any right of any Party to recover its costs and expenses as provided in Article VII or to receive indemnification for any breach of this Agreement as provided in Section 7.3. Notwithstanding the foregoing, the Parties may by mutual written agreement provide for the payment of a break-up fee, termination fee, or reverse break-up fee in connection with a Wind-Down if they determine, in their sole and absolute discretion, that such payment is appropriate under the circumstances.
ARTICLE VI — TERMINATION
Section 6.1 — Termination Date
This Agreement shall terminate on the earliest to occur of the following (such earliest date, the "Termination Date"):
(a) the Reactivation Date, upon which the EPA, as amended by the Fourth Amendment or Restated EPA, shall govern the rights and obligations of the parties thereto with respect to the Transaction, and this Agreement shall be of no further force or effect (except for the Surviving Provisions);
(b) the date on which all Wind-Down procedures under Article V have been completed, including the execution and delivery of the Mutual Termination Agreement and the Mutual Releases;