1030-00001 · Dralvecen Fenn & Co., Inc · Engagement

engagement-letter.docx DOCUMENT M&A / Corporate

14 / 37 ← → ✕

CALDERWOOD & HARKNESS LLP Attorneys at Law

1420 Fifth Avenue, Suite 3600 Seattle, Washington 98101

Telephone: (206) 555-8200 Facsimile: (206) 555-8201 www.calderwoodharkness.com

April 18, 2023

Mr. Harold K. Nakamura Executive Director Cascadia State Infrastructure Authority 1100 Capitol Way South, Suite 400 Olympia, Washington 98501

Re: Engagement of Calderwood & Harkness LLP as Issuer's Counsel — Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), in the Aggregate Principal Amount of $220,000,000

C&H Matter No. 1030-00001

Dear Mr. Nakamura:

1. Purpose and Engagement

Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm its engagement by the Cascadia State Infrastructure Authority ("CSIA" or the "Authority") to serve as Issuer's Counsel in connection with the proposed issuance of the Authority's Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or the "Bonds") in the anticipated aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000).

The proceeds of the Bonds will be used to finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project"), to be located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, on approximately eighteen (18) acres of CSIA-owned land adjacent to the existing Deschutes River Tertiary Treatment Plant. The Project consists of a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and UV-disinfection water-treatment facility, including influent and effluent pipelines, a five-million-gallon (5 MG) equalization basin, biosolids handling improvements, and supervisory control and data acquisition ("SCADA") system upgrades. The initial operating capacity of the facility is anticipated to be forty-two million gallons per day (42 MGD), with full design capacity expected to be achieved within thirty-six (36) months following commissioning.

The Bonds are expected to constitute tax-exempt obligations the interest on which is excludable from gross income of the holders thereof for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), subject to compliance with applicable provisions of the Code, including Sections 141 through 150 thereof, and the Treasury Regulations promulgated thereunder.

This engagement is effective as of the date hereof, April 18, 2023, and shall continue until the completion of the services described herein or the earlier termination of this engagement in accordance with Section 12 below. The terms and conditions set forth in this letter (this "Engagement Letter") shall govern the relationship between C&H and CSIA with respect to this matter.

2. Scope of Representation

C&H will represent CSIA as Issuer's Counsel in all aspects of the financing of the Series 2023A Bonds, including but not limited to the following:

(a) Bond Indenture. Negotiation, drafting, and review of the Bond Indenture (Trust Indenture) (the "Indenture") between CSIA and Pacific Northwest Trust Company, N.A. ("PNTC"), as Trustee, establishing the terms and conditions for the issuance of the Bonds and the administration of funds and accounts created thereunder.

(b) Supplemental Indenture. Drafting and negotiation of the First Supplemental Indenture (the "First Supplemental Indenture") authorizing and setting forth the specific terms of the Series 2023A Bonds, including maturity schedules, interest rates, redemption provisions, mandatory sinking fund requirements, and such other provisions as are customary for revenue bond financings of this nature.

(c) Revenue Pledge Agreement. Negotiation, drafting, and review of the Revenue Pledge Agreement (the "Revenue Pledge Agreement") pledging net water-treatment revenues to the Trustee for the benefit of the holders of the Bonds and other parity obligations, including the identification and documentation of pledged revenue streams, additional bonds tests, rate covenants, and coverage requirements.

(d) Bond Purchase Agreement. Negotiation and review of the Bond Purchase Agreement (the "BPA") between CSIA and Meridian Capital Partners LLC ("Meridian"), as representative of the underwriters, and Dralvecen Fenn & Co., Inc. ("Dralvecen Fenn"), as co-managing underwriter, setting forth the terms and conditions upon which the underwriters will purchase the Bonds from CSIA, including representations, warranties, conditions to closing, and indemnification provisions.

(e) Continuing Disclosure Agreement. Drafting of the Continuing Disclosure Agreement (the "CDA") between CSIA and PNTC, as Dissemination Agent, to satisfy the obligations of CSIA under Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. § 240.15c2-12), including the specification of annual financial information, audited financial statements, and material event notices to be filed with the Electronic Municipal Market Access ("EMMA") system maintained by the Municipal Securities Rulemaking Board.

(f) Tax Regulatory Agreement. Preparation of the Tax Regulatory Agreement and Certificate (the "Tax Certificate") relating to the tax-exempt status of the Bonds under the Code, including detailed analysis and documentation of compliance with the private-activity-bond tests set forth in Sections 141(a) through (d) of the Code, arbitrage rebate requirements under Section 148 of the Code, yield restriction provisions, spending exceptions, the two-year spending exception for construction issues under Treasury Regulation Section 1.148-7(d), and related compliance matters. C&H will coordinate closely with Co-Bond Counsel (as defined below) on all tax-related matters to ensure consistency between the Tax Certificate and the Tax Opinion.

(g) Escrow Deposit Agreement. Negotiation and review of the Escrow Deposit Agreement (the "Escrow Agreement") governing construction-fund disbursements, including requisition procedures, inspection and approval requirements, investment of escrowed funds, and release conditions.

(h) Surety Bond Agreement. Negotiation and review of the Debt-Service Reserve Fund Surety Bond Agreement (the "Surety Agreement") among CSIA, PNTC, and Olympia Guaranty Insurance Corp. ("Olympia Guaranty"), providing for the issuance of a municipal bond debt-service reserve fund surety bond in lieu of a cash-funded debt-service reserve fund, including the terms and conditions of the surety bond, replenishment obligations, claims procedures, and events of default.

(i) Legal Opinions and Negative Assurance. Preparation and delivery of the Issuer's Counsel Opinion, the Enforceability Opinion on the Revenue Pledge Agreement, and the 10b-5 Negative Assurance Letter addressed to the underwriters (Meridian and Dralvecen Fenn) in connection with the Official Statement. The Issuer's Counsel Opinion will address due authorization, valid execution and delivery, enforceability, and absence of conflicts. The 10b-5 Negative Assurance Letter will be prepared in accordance with customary market practice and will be based on C&H's participation in the due diligence process, including review of the Official Statement and discussions with CSIA officers and advisors.

(j) Coordination with Co-Bond Counsel. Coordination with Pryor Crestfield LLP ("Pryor Crestfield"), as Co-Bond Counsel, regarding the joint Approving Legal Opinion and Tax Opinion to be delivered at the Closing. C&H and Pryor Crestfield will collaborate on the scope and substance of such opinions to ensure consistency and completeness, and C&H will provide such supporting analysis and documentation as Pryor Crestfield may reasonably request.

(k) Official Statement Review. Review of and comment on the Preliminary Official Statement (the "POS") and Final Official Statement (the "OS"), including participation in the due diligence process, review of financial, engineering, and operational disclosures, verification of legal descriptions, and coordination with CSIA staff, the municipal advisor, and underwriters' counsel to ensure the accuracy and completeness of the disclosure document.

(l) Closing Certificates. Preparation of closing certificates, including the Certificate of Authorized Officer, the Chief Financial Officer's Certificate (Financial Covenant Compliance), the certificate regarding use of proceeds, and such other certificates as may be required by the transaction documents or customary for financings of this type.

(m) Closing Coordination. Preparation and maintenance of the Master Closing Checklist, the Closing Memorandum, the Signature Pages Package, and assembly and distribution of the Closing Transcript, including bound volumes of all executed transaction documents, opinions, certificates, and related materials. C&H will coordinate closing logistics with all transaction participants, including the scheduling of pre-closing and closing calls, the circulation of documents for review and execution, and the management of the closing timeline.

(n) Coordination with Underwriters' Counsel. Coordination with Alderman & Locke LLP ("Alderman & Locke"), counsel to the underwriters, and all other transaction parties, including PNTC, Olympia Guaranty, Clearfield Municipal Advisors LLC ("Clearfield"), and the rating agencies, as necessary to facilitate the efficient and timely completion of the financing.

(o) General Counsel. General legal advice and counsel to CSIA regarding the financing as reasonably requested from time to time by CSIA or its officers, including advice on structuring alternatives, legal risks, regulatory requirements, and market practice considerations.

The scope of representation set forth in this Section 2 is intended to be comprehensive but not exhaustive with respect to the services customarily performed by issuer's counsel in a municipal revenue bond financing of this nature. C&H will perform such additional services as are reasonably necessary and incident to the engagement, consistent with the fixed-fee arrangement described in Section 5 below. Any services that are materially beyond the scope described herein will be undertaken only upon the mutual agreement of the parties.

3. Matters Outside the Scope of Engagement

Notwithstanding the broad scope of the services described in Section 2 above, this engagement specifically does not include the following matters, which are expressly excluded from the scope of C&H's representation:

(a) Design-Build Contract Matters. Representation of CSIA in connection with the negotiation, interpretation, administration, or enforcement of the design-build contract with Northtide Environmental Engineering, Inc. ("Northtide") (GMP Contract No. CSIA-DB-2023-001, executed March 10, 2023) or any construction-related disputes, claims, change orders, or mechanic's lien matters arising thereunder or in connection with the Project. CSIA acknowledges that it has retained or will retain separate counsel for any such matters.

(b) Environmental and Regulatory Matters. Environmental permitting, regulatory compliance, or administrative proceedings of any kind, including without limitation matters arising under the State Environmental Policy Act ("SEPA"), the National Environmental Policy Act ("NEPA"), the Clean Water Act, or the Washington State Water Pollution Control Act. C&H notes for the record that the SEPA Determination of Non-Significance for the Project was issued on September 12, 2022, and the National Pollutant Discharge Elimination System ("NPDES") Permit No. WA-004837-2 modification for the Project was approved on January 6, 2023. C&H does not express any opinion or provide any assurance regarding the adequacy or continued validity of such determinations or permits.

(c) Litigation and Enforcement Proceedings. Representation of CSIA in any litigation, arbitration, administrative proceedings, or enforcement actions, whether arising out of the financing, the Project, or otherwise, except to the extent that such matters are directly related to the issuance of the Bonds and are included within the scope of Section 2 above.

(d) Rate-Setting Proceedings. Representation of CSIA in connection with water and sewer rate-setting proceedings before the Authority's Board of Directors, the Washington Utilities and Transportation Commission, or any other regulatory body, whether or not such proceedings may have an impact on the revenues pledged to the repayment of the Bonds.

(e) Other Bond Issuances. Representation of CSIA in connection with any prior or subsequent bond issuances, refundings, or other debt financings, unless C&H is separately engaged in writing for such purposes.

(f) Financial Advisory Services. Financial advisory services of any kind, including advice regarding the structure, timing, pricing, or marketing of the Bonds. CSIA acknowledges that Clearfield Municipal Advisors LLC ("Clearfield") serves as CSIA's SEC-registered municipal advisor under the Securities Exchange Act of 1934 and Municipal Securities Rulemaking Board ("MSRB") Rule G-42, and that all financial advisory services in connection with the financing are being provided by Clearfield.

(g) Audit and Accounting Services. Audit, accounting, or financial reporting services of any kind. CSIA acknowledges that Hargrove & Associates CPAs, PLLC ("Hargrove") serves as CSIA's independent auditor and that all audit and accounting services in connection with CSIA's financial statements and reports are being provided by Hargrove.

If any of the foregoing excluded matters arises during the course of the engagement and CSIA desires to engage C&H to provide legal services in connection therewith, such engagement would be subject to a separate engagement letter and separate fee arrangements to be agreed upon at that time.

4. Engagement Team

C&H has assembled the following team of attorneys to handle this engagement. Each team member brings substantial experience in municipal finance, public infrastructure, and tax-exempt bond transactions:

George Trujillo — Responsible Partner, Energy & Infrastructure Practice. Mr. Trujillo will have overall supervisory responsibility for the engagement and will be the senior partner accountable for the quality and timeliness of all work product delivered to CSIA. Mr. Trujillo has more than twenty-five (25) years of experience representing governmental issuers, underwriters, and trustees in municipal bond financings, with a particular focus on water, wastewater, and environmental infrastructure projects throughout the Pacific Northwest. His standard hourly rate is $1,150 per hour (provided for informational purposes only, given the fixed-fee arrangement described in Section 5 below).

Patricia Dunmore — Billing Partner, Energy & Infrastructure Practice. Ms. Dunmore will serve as the billing partner for this engagement and will assist Mr. Trujillo on strategic and business matters throughout the financing process. Ms. Dunmore has extensive experience in public finance transactions and has represented numerous governmental entities in revenue bond issuances. Her standard hourly rate is $1,100 per hour.

Leonard Cross — Specialist Partner, Tax Practice. Mr. Cross will be responsible for all federal and state tax aspects of the financing, including preparation of the Tax Regulatory Agreement and Certificate, tax compliance analysis under Sections 103 and 141 through 150 of the Code and the Treasury Regulations promulgated thereunder, post-issuance tax compliance procedures, and coordination with Co-Bond Counsel on the Tax Opinion to be delivered at Closing. Mr. Cross is a recognized authority on tax-exempt bond matters and has advised on tax compliance for over $15 billion in aggregate principal amount of tax-exempt obligations. His standard hourly rate is $1,075 per hour.

Michelle Tsao — Lead Associate, Energy & Infrastructure Practice. Ms. Tsao will serve as the day-to-day lead on the engagement, with primary responsibility for drafting and negotiation of core transaction documents, coordination of the due diligence process, review of the Official Statement, preparation of legal opinions, and management of closing logistics. Ms. Tsao will be CSIA's primary point of contact at C&H for day-to-day matters. Her standard hourly rate is $725 per hour.

Brett Callahan — Working Associate, Energy & Infrastructure Practice. Mr. Callahan will assist Ms. Tsao with legal research, document drafting, closing logistics, and assembly of the Closing Transcript. His standard hourly rate is $625 per hour.

All hourly rates set forth above are provided solely for informational purposes; as described in Section 5 below, the engagement will be billed on a fixed-fee basis. C&H may assign additional attorneys, paralegals, or other staff to the engagement as reasonably necessary to ensure the timely and efficient completion of the services described herein, without additional charge to CSIA, and subject in all cases to the fixed-fee arrangement set forth in Section 5.

5. Fees and Billing Arrangements

Fixed Fee. C&H will perform the services described in Section 2 of this Engagement Letter for a fixed fee of Four Hundred Eighty-Five Thousand Dollars ($485,000) (the "Fixed Fee"). The Fixed Fee is inclusive of all attorney time, paralegal time, and internal administrative costs associated with the engagement. The Fixed Fee has been established based on C&H's assessment of the anticipated scope, complexity, and timeline of the financing, taking into account the aggregate principal amount of the Bonds, the number and complexity of the transaction documents, the number of transaction parties, and the anticipated timeline to Closing.

Reimbursable Expenses. In addition to the Fixed Fee, CSIA will reimburse C&H for reasonable out-of-pocket expenses actually incurred in connection with the engagement, including but not limited to the following categories:

(i) travel expenses (airfare, ground transportation, hotel, and per diem) for trips reasonably required in connection with the engagement, including travel to Olympia, Tumwater, New York, and such other locations as may be necessary for meetings with transaction parties, rating agency presentations, or closing;

(ii) filing fees, recording fees, and similar governmental charges;

(iii) document reproduction and printing costs, including the printing of the Official Statement;

(iv) courier and messenger services;

(v) computerized legal research charges (Westlaw, Cascade Services Inc., and similar services); and

(vi) long-distance telephone and videoconference charges directly attributable to the engagement.

Reimbursable expenses are subject to a cap of Thirty-Five Thousand Dollars ($35,000) (the "Expense Cap"). Any expenses that would cause the cumulative total to exceed the Expense Cap must receive prior written approval from an authorized officer of CSIA before such expenses are incurred. For purposes of this provision, an authorized officer of CSIA means the Executive Director, the Chief Financial Officer, or the General Counsel.

Invoicing Schedule. The Fixed Fee will be invoiced in two equal installments, as follows:

(i) First Invoice: Two Hundred Forty-Two Thousand Five Hundred Dollars ($242,500), representing fifty percent (50%) of the Fixed Fee, shall be invoiced upon the execution of the Bond Purchase Agreement (the "Signing"), which is currently anticipated to occur on or about August 30, 2023;

(ii) Second Invoice: Two Hundred Forty-Two Thousand Five Hundred Dollars ($242,500), representing the remaining fifty percent (50%) of the Fixed Fee, shall be invoiced upon the closing and delivery of the Bonds (the "Closing"), which is currently anticipated to occur on or about the last week of October 2023; and

(iii) Reimbursable Expenses: Reimbursable expenses shall be invoiced at Closing, or on an interim basis as incurred if the cumulative amount exceeds Ten Thousand Dollars ($10,000), accompanied by supporting documentation (receipts or itemized statements) for individual expenses exceeding Two Hundred Fifty Dollars ($250).

Payment Terms. All invoices are due and payable within thirty (30) calendar days of receipt by CSIA. C&H will submit all invoices to the attention of the Chief Financial Officer, Cascadia State Infrastructure Authority, 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, or to such other address or person as CSIA may designate in writing.

Fee Adjustment. The Fixed Fee is based upon the assumption that the engagement involves a single series of tax-exempt revenue bonds with an aggregate principal amount not exceeding $220,000,000, with a single closing expected to occur on or before December 31, 2023. If the scope of the engagement materially changes — including, by way of example and not limitation, the addition of one or more additional series of bonds, a significant restructuring of the financing, the bifurcation of the closing into multiple closings, the addition of a taxable component, the onset of significant litigation related to the bond issuance, or material delays beyond December 31, 2023, caused by circumstances outside the control of C&H — the parties will negotiate in good faith a reasonable adjustment to the Fixed Fee that reflects the additional work required.

6. Relationship with Other Counsel and Advisors

C&H understands that the following other counsel and advisors have been or will be engaged in connection with the financing of the Series 2023A Bonds:

Pryor Crestfield LLP — Co-Bond Counsel. Margaret S. Yoon, Partner (lead), and Elliot R. Stanton, Associate. Pryor Crestfield has been jointly retained with C&H and serves as local Washington bond counsel, with responsibility for providing the approving legal opinion (the "Approving Opinion") and the tax opinion (the "Tax Opinion") in connection with the issuance and delivery of the Bonds. C&H will coordinate closely with Pryor Crestfield on all legal matters affecting the validity and enforceability of the Bonds and the tax-exempt status of interest thereon. Office: 999 Third Avenue, Suite 4800, Seattle, Washington 98104; Telephone: (206) 555-4900.

Alderman & Locke LLP — Counsel to the Underwriters. Daniel F. Obermeyer, Partner (lead), and Christina M. Vega, Associate. Alderman & Locke serves as counsel to Meridian Capital Partners LLC, as senior managing underwriter, and Dralvecen Fenn & Co., Inc., as co-managing underwriter, in connection with the financing. Office: 51 West 52nd Street, New York, New York 10019; Telephone: (212) 555-7700.

Clearfield Municipal Advisors LLC — Municipal Advisor. Kenneth W. Barclay, Principal. Clearfield is registered with the Securities and Exchange Commission as a municipal advisor and is subject to the fiduciary duty and other regulatory requirements of MSRB Rule G-42. Clearfield has been retained by CSIA to provide financial advisory services in connection with the structure, timing, and pricing of the Bonds. Office: 805 SW Broadway, Suite 1400, Portland, Oregon 97205; Telephone: (503) 555-2100.

Hargrove & Associates CPAs, PLLC — Independent Auditor. Victoria L. Fong, CPA, Engagement Partner. Hargrove serves as the independent auditor of CSIA and will provide audited financial statements and comfort letters as required in connection with the Official Statement. Office: 520 Pike Street, Suite 2200, Seattle, Washington 98101; Telephone: (206) 555-3300.

C&H does not represent any of the foregoing parties, and the engagement of C&H does not create any attorney-client relationship with any party other than CSIA. C&H's duties of loyalty, confidentiality, and competent representation run exclusively to CSIA. While C&H will work cooperatively with all transaction parties and their respective counsel and advisors to facilitate the efficient completion of the financing, such cooperation does not constitute or imply representation of, or the creation of any duty to, any party other than CSIA.

Martin J. Espinoza, General Counsel of CSIA, will serve as the primary in-house contact for the engagement. Day-to-day communications between C&H and CSIA shall be directed to Mr. Espinoza unless otherwise agreed. All substantive strategic decisions regarding the engagement will be made by or with the approval of Mr. Nakamura, as Executive Director, or his designee.

7. Key Transaction Parties and Structure

For reference, the following is a brief summary of the anticipated financing structure and key transaction parties for the Series 2023A Bonds:

Issuer/Borrower: Cascadia State Infrastructure Authority, a Washington State governmental instrumentality and public body corporate created by and existing under Chapter 43.160A of the Revised Code of Washington.

Bond Title: Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt).

Aggregate Principal Amount: $220,000,000.

Use of Proceeds: Finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project").

Security: Net water-treatment revenues of CSIA, including wholesale water treatment service charges received from fourteen (14) participating Puget Sound-region municipal water and sewer districts pursuant to long-term interlocal service agreements, connection fees and system development charges, and investment earnings on pledged funds held by the Trustee, all pledged on a parity basis with CSIA's existing outstanding revenue bond obligations secured by such revenues.

Existing Outstanding Parity Debt (pre-issuance): $3,120,000,000 in aggregate principal amount.

Total Parity Debt (post-issuance): $3,340,000,000 in aggregate principal amount.

Bond Trustee / Paying Agent / Registrar / Escrow Agent: Pacific Northwest Trust Company, N.A. Alan M. Greer, Vice President, Corporate Trust Services. 1201 Third Avenue, Suite 1600, Seattle, Washington 98101.

Senior Managing Underwriter: Meridian Capital Partners LLC. Jonathan D. Kessler, Managing Director. 600 Third Avenue, 28th Floor, New York, New York 10016.

Co-Managing Underwriter: Dralvecen Fenn & Co., Inc. Sarah E. Mulvaney, Director. 200 Park Avenue, Suite 3100, New York, New York 10166.

Municipal Bond Insurance / Surety Provider: Olympia Guaranty Insurance Corp. Rachel P. Dominguez, Senior Vice President. 125 Broad Street, 14th Floor, New York, New York 10004.

Rating Agencies: Lakeshore Ratings Group, Inc. and Pinnacle Credit Analytics, Inc. C&H understands that CSIA and Clearfield will manage the rating agency presentation process and that C&H may be asked to participate in such presentations as Issuer's Counsel.

Design-Build Contractor: Northtide Environmental Engineering, Inc. Garrett L. Henriksen, Chief Executive Officer. Guaranteed Maximum Price ("GMP") Contract No. CSIA-DB-2023-001, in the amount of $193,500,000, executed March 10, 2023.

Estimated Total Project Cost: $237,400,000, comprised of bond proceeds of $220,000,000 and a CSIA equity contribution of $17,400,000 from existing capital reserves.

The foregoing summary is provided for reference purposes and is subject to change as the terms of the financing are further developed and refined. C&H will promptly advise CSIA of any changes to the transaction structure or parties that may have implications for the legal aspects of the financing.

8. Authorization and Board Action

C&H understands that the Board of Directors of CSIA (the "Board"), currently chaired by Commissioner Lorraine Chu, is expected to adopt a resolution (the "Authorizing Resolution") authorizing the issuance of the Series 2023A Bonds, approving the forms of the transaction documents described in Section 2 above, and delegating to certain officers of CSIA the authority to execute and deliver such documents and to take all other actions necessary or appropriate in connection with the financing. C&H will assist CSIA in drafting or reviewing such Authorizing Resolution, and will coordinate with the General Counsel's office regarding the procedural requirements for its adoption, including notice, quorum, and public meeting requirements under the Washington Open Public Meetings Act (Chapter 42.30 RCW).

CSIA acknowledges and agrees that C&H may proceed with the services described in Section 2 of this Engagement Letter in advance of the formal adoption of the Authorizing Resolution by the Board, and that CSIA's execution and delivery of this Engagement Letter constitutes sufficient authorization for C&H to commence work on the engagement. The commencement of such work shall not be contingent upon or delayed pending the adoption of the Authorizing Resolution, and C&H's fees and expenses shall be payable in accordance with Section 5 regardless of whether the Board ultimately adopts the Authorizing Resolution or the Bonds are ultimately issued.

9. Conflicts of Interest

C&H has conducted a thorough conflicts check in accordance with the Firm's standard conflicts-clearance procedures and the applicable Washington Rules of Professional Conduct (RPC 1.7 and 1.9), and has determined that, as of the date hereof, C&H has no conflicts of interest that would prevent it from undertaking this representation.

C&H does not currently represent, and covenants that it will not during the pendency of this engagement represent, any other party to the transaction described herein — including, without limitation, Meridian Capital Partners LLC, Dralvecen Fenn & Co., Inc., Pacific Northwest Trust Company, N.A., Olympia Guaranty Insurance Corp., Northtide Environmental Engineering, Inc., or any of the fourteen participating municipal water and sewer districts — in any matter that is adverse to, or would create a material conflict of interest with respect to, C&H's representation of CSIA in connection with the issuance of the Series 2023A Bonds.

In the event that an actual or potential conflict of interest arises during the course of the engagement, C&H will promptly notify CSIA in writing of the nature and circumstances of such conflict and will take all appropriate action in accordance with the applicable Rules of Professional Conduct, including, if necessary, obtaining informed written consent from CSIA or withdrawing from the engagement as to the conflicting matter.

10. Confidentiality

C&H will maintain the confidentiality of all non-public information received from CSIA in connection with this engagement, in accordance with the Firm's obligations under the Washington Rules of Professional Conduct (RPC 1.6) and applicable law. C&H will not disclose such information to any third party without the prior consent of CSIA, except as required by law, court order, or ethical obligation, or as necessary in connection with the defense of any claim against C&H arising out of this engagement.

CSIA acknowledges and agrees that certain non-public information provided by CSIA to C&H in connection with the engagement will necessarily be shared with other transaction parties in the ordinary course of the financing process, including, without limitation, information included in or used in the preparation of the Official Statement, information provided to the rating agencies in connection with rating agency presentations and credit analyses, information provided to the Trustee and surety provider in connection with their due diligence, and information included in closing deliverables. The sharing of such information with transaction parties in connection with the financing shall not constitute a breach of C&H's confidentiality obligations hereunder.

11. Document Retention

C&H will maintain files, records, and work product relating to this engagement in accordance with the Firm's standard document retention policies, as may be in effect from time to time. Under the Firm's current retention policy, client files for completed matters are maintained for a period of not less than seven (7) years following the date of the final invoice rendered in connection with the engagement, after which time the files may be destroyed in accordance with the Firm's standard procedures without further notice to or consent from the client, unless the client has made prior written arrangements for the return or continued storage of such files.

At the conclusion of the engagement, C&H will deliver to CSIA three (3) bound copies of the Closing Transcript, containing all executed original documents (or conformed copies thereof), legal opinions, certificates, and related materials, together with a complete electronic copy of the Closing Transcript on a USB flash drive in portable document format (PDF). All executed original documents in C&H's possession that are the property of CSIA will be returned to CSIA as part of the Closing Transcript or as otherwise requested.

12. Termination

Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party. In addition, C&H may withdraw from the engagement if circumstances arise that, in C&H's reasonable judgment, require withdrawal under the applicable Rules of Professional Conduct, including but not limited to the discovery of a disqualifying conflict of interest or the failure of CSIA to fulfill a material obligation under this Engagement Letter.

In the event of termination of this engagement prior to the Closing, CSIA will be responsible for the payment of fees earned by C&H through the effective date of termination, calculated on a pro rata basis reflecting the percentage of the total work performed through such date relative to the total scope of the engagement, and for the reimbursement of all out-of-pocket expenses actually incurred by C&H through such date. The pro rata calculation of fees earned shall be determined by C&H in good faith, with reference to the time expended by the engagement team, the complexity and significance of the work performed, and the stage of the financing at the time of termination.

Upon termination, C&H will cooperate in the orderly transition of the matter to successor counsel designated by CSIA, including the prompt delivery of all files, work product, and documents in C&H's possession relating to the engagement, and will take all steps reasonably necessary to protect CSIA's interests during the transition period.

13. Governing Law

This Engagement Letter shall be governed by, and construed in accordance with, the laws of the State of Washington, without regard to principles of conflicts of law. Any dispute arising out of or relating to this Engagement Letter or the engagement described herein shall be subject to the exclusive jurisdiction of the courts of the State of Washington located in King County, Washington, or the United States District Court for the Western District of Washington at Seattle.

14. Acceptance and Execution

We respectfully request that CSIA confirm its agreement to the terms and conditions set forth in this Engagement Letter by having an authorized officer execute and return the enclosed duplicate original of this letter to C&H at the address set forth above, to the attention of George Trujillo. Upon execution by CSIA, this Engagement Letter shall constitute a binding agreement between C&H and CSIA with respect to the engagement described herein.

This Engagement Letter constitutes the entire agreement between C&H and CSIA with respect to the scope, terms, and conditions of C&H's representation of CSIA in connection with the issuance of the Series 2023A Bonds, and supersedes any and all prior understandings, negotiations, agreements, or representations, whether written or oral, between the parties regarding the subject matter hereof.

We look forward to working with you and your colleagues on this important transaction. Please do not hesitate to contact George Trujillo at (206) 555-8210 or george.trujillo@calderwoodharkness.com, or Michelle Tsao at (206) 555-8234 or michelle.tsao@calderwoodharkness.com, if you have any questions regarding this Engagement Letter or any other aspect of the engagement.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: George Trujillo

Title: Partner (Responsible Partner)

By: ________

Name: Patricia Dunmore

Title: Partner (Billing Partner)

AGREED AND ACCEPTED:

CASCADIA STATE INFRASTRUCTURE AUTHORITY

By: ________

Name: Harold K. Nakamura

Title: Executive Director

Date: ________

Encl.: Duplicate original of this Engagement Letter for execution and return

cc:

Denise R. Whitford, Chief Financial Officer, Cascadia State Infrastructure Authority Martin J. Espinoza, General Counsel, Cascadia State Infrastructure Authority Patricia Dunmore, Partner, Calderwood & Harkness LLP Leonard Cross, Partner, Calderwood & Harkness LLP Michelle Tsao, Associate, Calderwood & Harkness LLP Brett Callahan, Associate, Calderwood & Harkness LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law
1420 Fifth Avenue, Suite 3600 Seattle, Washington 98101
Telephone: (206) 555-8200 Facsimile: (206) 555-8201 www.calderwoodharkness.com
April 18, 2023
Mr. Harold K. Nakamura Executive Director Cascadia State Infrastructure Authority 1100 Capitol Way South, Suite 400 Olympia, Washington 98501
Re: Engagement of Calderwood & Harkness LLP as Issuer's Counsel — Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), in the Aggregate Principal Amount of $220,000,000
C&H Matter No. 1030-00001
Dear Mr. Nakamura:
1. Purpose and Engagement
Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm its engagement by the Cascadia State Infrastructure Authority ("CSIA" or the "Authority") to serve as Issuer's Counsel in connection with the proposed issuance of the Authority's Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or the "Bonds") in the anticipated aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000).
The proceeds of the Bonds will be used to finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project"), to be located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, on approximately eighteen (18) acres of CSIA-owned land adjacent to the existing Deschutes River Tertiary Treatment Plant. The Project consists of a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and UV-disinfection water-treatment facility, including influent and effluent pipelines, a five-million-gallon (5 MG) equalization basin, biosolids handling improvements, and supervisory control and data acquisition ("SCADA") system upgrades. The initial operating capacity of the facility is anticipated to be forty-two million gallons per day (42 MGD), with full design capacity expected to be achieved within thirty-six (36) months following commissioning.
The Bonds are expected to constitute tax-exempt obligations the interest on which is excludable from gross income of the holders thereof for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), subject to compliance with applicable provisions of the Code, including Sections 141 through 150 thereof, and the Treasury Regulations promulgated thereunder.
This engagement is effective as of the date hereof, April 18, 2023, and shall continue until the completion of the services described herein or the earlier termination of this engagement in accordance with Section 12 below. The terms and conditions set forth in this letter (this "Engagement Letter") shall govern the relationship between C&H and CSIA with respect to this matter.
2. Scope of Representation
C&H will represent CSIA as Issuer's Counsel in all aspects of the financing of the Series 2023A Bonds, including but not limited to the following:
(a) Bond Indenture. Negotiation, drafting, and review of the Bond Indenture (Trust Indenture) (the "Indenture") between CSIA and Pacific Northwest Trust Company, N.A. ("PNTC"), as Trustee, establishing the terms and conditions for the issuance of the Bonds and the administration of funds and accounts created thereunder.
(b) Supplemental Indenture. Drafting and negotiation of the First Supplemental Indenture (the "First Supplemental Indenture") authorizing and setting forth the specific terms of the Series 2023A Bonds, including maturity schedules, interest rates, redemption provisions, mandatory sinking fund requirements, and such other provisions as are customary for revenue bond financings of this nature.
(c) Revenue Pledge Agreement. Negotiation, drafting, and review of the Revenue Pledge Agreement (the "Revenue Pledge Agreement") pledging net water-treatment revenues to the Trustee for the benefit of the holders of the Bonds and other parity obligations, including the identification and documentation of pledged revenue streams, additional bonds tests, rate covenants, and coverage requirements.
(d) Bond Purchase Agreement. Negotiation and review of the Bond Purchase Agreement (the "BPA") between CSIA and Meridian Capital Partners LLC ("Meridian"), as representative of the underwriters, and Dralvecen Fenn & Co., Inc. ("Dralvecen Fenn"), as co-managing underwriter, setting forth the terms and conditions upon which the underwriters will purchase the Bonds from CSIA, including representations, warranties, conditions to closing, and indemnification provisions.
(e) Continuing Disclosure Agreement. Drafting of the Continuing Disclosure Agreement (the "CDA") between CSIA and PNTC, as Dissemination Agent, to satisfy the obligations of CSIA under Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. § 240.15c2-12), including the specification of annual financial information, audited financial statements, and material event notices to be filed with the Electronic Municipal Market Access ("EMMA") system maintained by the Municipal Securities Rulemaking Board.
(f) Tax Regulatory Agreement. Preparation of the Tax Regulatory Agreement and Certificate (the "Tax Certificate") relating to the tax-exempt status of the Bonds under the Code, including detailed analysis and documentation of compliance with the private-activity-bond tests set forth in Sections 141(a) through (d) of the Code, arbitrage rebate requirements under Section 148 of the Code, yield restriction provisions, spending exceptions, the two-year spending exception for construction issues under Treasury Regulation Section 1.148-7(d), and related compliance matters. C&H will coordinate closely with Co-Bond Counsel (as defined below) on all tax-related matters to ensure consistency between the Tax Certificate and the Tax Opinion.
(g) Escrow Deposit Agreement. Negotiation and review of the Escrow Deposit Agreement (the "Escrow Agreement") governing construction-fund disbursements, including requisition procedures, inspection and approval requirements, investment of escrowed funds, and release conditions.
(h) Surety Bond Agreement. Negotiation and review of the Debt-Service Reserve Fund Surety Bond Agreement (the "Surety Agreement") among CSIA, PNTC, and Olympia Guaranty Insurance Corp. ("Olympia Guaranty"), providing for the issuance of a municipal bond debt-service reserve fund surety bond in lieu of a cash-funded debt-service reserve fund, including the terms and conditions of the surety bond, replenishment obligations, claims procedures, and events of default.
(i) Legal Opinions and Negative Assurance. Preparation and delivery of the Issuer's Counsel Opinion, the Enforceability Opinion on the Revenue Pledge Agreement, and the 10b-5 Negative Assurance Letter addressed to the underwriters (Meridian and Dralvecen Fenn) in connection with the Official Statement. The Issuer's Counsel Opinion will address due authorization, valid execution and delivery, enforceability, and absence of conflicts. The 10b-5 Negative Assurance Letter will be prepared in accordance with customary market practice and will be based on C&H's participation in the due diligence process, including review of the Official Statement and discussions with CSIA officers and advisors.
(j) Coordination with Co-Bond Counsel. Coordination with Pryor Crestfield LLP ("Pryor Crestfield"), as Co-Bond Counsel, regarding the joint Approving Legal Opinion and Tax Opinion to be delivered at the Closing. C&H and Pryor Crestfield will collaborate on the scope and substance of such opinions to ensure consistency and completeness, and C&H will provide such supporting analysis and documentation as Pryor Crestfield may reasonably request.
(k) Official Statement Review. Review of and comment on the Preliminary Official Statement (the "POS") and Final Official Statement (the "OS"), including participation in the due diligence process, review of financial, engineering, and operational disclosures, verification of legal descriptions, and coordination with CSIA staff, the municipal advisor, and underwriters' counsel to ensure the accuracy and completeness of the disclosure document.
(l) Closing Certificates. Preparation of closing certificates, including the Certificate of Authorized Officer, the Chief Financial Officer's Certificate (Financial Covenant Compliance), the certificate regarding use of proceeds, and such other certificates as may be required by the transaction documents or customary for financings of this type.
(m) Closing Coordination. Preparation and maintenance of the Master Closing Checklist, the Closing Memorandum, the Signature Pages Package, and assembly and distribution of the Closing Transcript, including bound volumes of all executed transaction documents, opinions, certificates, and related materials. C&H will coordinate closing logistics with all transaction participants, including the scheduling of pre-closing and closing calls, the circulation of documents for review and execution, and the management of the closing timeline.
(n) Coordination with Underwriters' Counsel. Coordination with Alderman & Locke LLP ("Alderman & Locke"), counsel to the underwriters, and all other transaction parties, including PNTC, Olympia Guaranty, Clearfield Municipal Advisors LLC ("Clearfield"), and the rating agencies, as necessary to facilitate the efficient and timely completion of the financing.
(o) General Counsel. General legal advice and counsel to CSIA regarding the financing as reasonably requested from time to time by CSIA or its officers, including advice on structuring alternatives, legal risks, regulatory requirements, and market practice considerations.
The scope of representation set forth in this Section 2 is intended to be comprehensive but not exhaustive with respect to the services customarily performed by issuer's counsel in a municipal revenue bond financing of this nature. C&H will perform such additional services as are reasonably necessary and incident to the engagement, consistent with the fixed-fee arrangement described in Section 5 below. Any services that are materially beyond the scope described herein will be undertaken only upon the mutual agreement of the parties.
3. Matters Outside the Scope of Engagement
Notwithstanding the broad scope of the services described in Section 2 above, this engagement specifically does not include the following matters, which are expressly excluded from the scope of C&H's representation:
(a) Design-Build Contract Matters. Representation of CSIA in connection with the negotiation, interpretation, administration, or enforcement of the design-build contract with Northtide Environmental Engineering, Inc. ("Northtide") (GMP Contract No. CSIA-DB-2023-001, executed March 10, 2023) or any construction-related disputes, claims, change orders, or mechanic's lien matters arising thereunder or in connection with the Project. CSIA acknowledges that it has retained or will retain separate counsel for any such matters.
(b) Environmental and Regulatory Matters. Environmental permitting, regulatory compliance, or administrative proceedings of any kind, including without limitation matters arising under the State Environmental Policy Act ("SEPA"), the National Environmental Policy Act ("NEPA"), the Clean Water Act, or the Washington State Water Pollution Control Act. C&H notes for the record that the SEPA Determination of Non-Significance for the Project was issued on September 12, 2022, and the National Pollutant Discharge Elimination System ("NPDES") Permit No. WA-004837-2 modification for the Project was approved on January 6, 2023. C&H does not express any opinion or provide any assurance regarding the adequacy or continued validity of such determinations or permits.
(c) Litigation and Enforcement Proceedings. Representation of CSIA in any litigation, arbitration, administrative proceedings, or enforcement actions, whether arising out of the financing, the Project, or otherwise, except to the extent that such matters are directly related to the issuance of the Bonds and are included within the scope of Section 2 above.
(d) Rate-Setting Proceedings. Representation of CSIA in connection with water and sewer rate-setting proceedings before the Authority's Board of Directors, the Washington Utilities and Transportation Commission, or any other regulatory body, whether or not such proceedings may have an impact on the revenues pledged to the repayment of the Bonds.
(e) Other Bond Issuances. Representation of CSIA in connection with any prior or subsequent bond issuances, refundings, or other debt financings, unless C&H is separately engaged in writing for such purposes.
(f) Financial Advisory Services. Financial advisory services of any kind, including advice regarding the structure, timing, pricing, or marketing of the Bonds. CSIA acknowledges that Clearfield Municipal Advisors LLC ("Clearfield") serves as CSIA's SEC-registered municipal advisor under the Securities Exchange Act of 1934 and Municipal Securities Rulemaking Board ("MSRB") Rule G-42, and that all financial advisory services in connection with the financing are being provided by Clearfield.
(g) Audit and Accounting Services. Audit, accounting, or financial reporting services of any kind. CSIA acknowledges that Hargrove & Associates CPAs, PLLC ("Hargrove") serves as CSIA's independent auditor and that all audit and accounting services in connection with CSIA's financial statements and reports are being provided by Hargrove.
If any of the foregoing excluded matters arises during the course of the engagement and CSIA desires to engage C&H to provide legal services in connection therewith, such engagement would be subject to a separate engagement letter and separate fee arrangements to be agreed upon at that time.
4. Engagement Team
C&H has assembled the following team of attorneys to handle this engagement. Each team member brings substantial experience in municipal finance, public infrastructure, and tax-exempt bond transactions:
George Trujillo — Responsible Partner, Energy & Infrastructure Practice. Mr. Trujillo will have overall supervisory responsibility for the engagement and will be the senior partner accountable for the quality and timeliness of all work product delivered to CSIA. Mr. Trujillo has more than twenty-five (25) years of experience representing governmental issuers, underwriters, and trustees in municipal bond financings, with a particular focus on water, wastewater, and environmental infrastructure projects throughout the Pacific Northwest. His standard hourly rate is $1,150 per hour (provided for informational purposes only, given the fixed-fee arrangement described in Section 5 below).
Patricia Dunmore — Billing Partner, Energy & Infrastructure Practice. Ms. Dunmore will serve as the billing partner for this engagement and will assist Mr. Trujillo on strategic and business matters throughout the financing process. Ms. Dunmore has extensive experience in public finance transactions and has represented numerous governmental entities in revenue bond issuances. Her standard hourly rate is $1,100 per hour.
Leonard Cross — Specialist Partner, Tax Practice. Mr. Cross will be responsible for all federal and state tax aspects of the financing, including preparation of the Tax Regulatory Agreement and Certificate, tax compliance analysis under Sections 103 and 141 through 150 of the Code and the Treasury Regulations promulgated thereunder, post-issuance tax compliance procedures, and coordination with Co-Bond Counsel on the Tax Opinion to be delivered at Closing. Mr. Cross is a recognized authority on tax-exempt bond matters and has advised on tax compliance for over $15 billion in aggregate principal amount of tax-exempt obligations. His standard hourly rate is $1,075 per hour.
Michelle Tsao — Lead Associate, Energy & Infrastructure Practice. Ms. Tsao will serve as the day-to-day lead on the engagement, with primary responsibility for drafting and negotiation of core transaction documents, coordination of the due diligence process, review of the Official Statement, preparation of legal opinions, and management of closing logistics. Ms. Tsao will be CSIA's primary point of contact at C&H for day-to-day matters. Her standard hourly rate is $725 per hour.
Brett Callahan — Working Associate, Energy & Infrastructure Practice. Mr. Callahan will assist Ms. Tsao with legal research, document drafting, closing logistics, and assembly of the Closing Transcript. His standard hourly rate is $625 per hour.
All hourly rates set forth above are provided solely for informational purposes; as described in Section 5 below, the engagement will be billed on a fixed-fee basis. C&H may assign additional attorneys, paralegals, or other staff to the engagement as reasonably necessary to ensure the timely and efficient completion of the services described herein, without additional charge to CSIA, and subject in all cases to the fixed-fee arrangement set forth in Section 5.
5. Fees and Billing Arrangements
Fixed Fee. C&H will perform the services described in Section 2 of this Engagement Letter for a fixed fee of Four Hundred Eighty-Five Thousand Dollars ($485,000) (the "Fixed Fee"). The Fixed Fee is inclusive of all attorney time, paralegal time, and internal administrative costs associated with the engagement. The Fixed Fee has been established based on C&H's assessment of the anticipated scope, complexity, and timeline of the financing, taking into account the aggregate principal amount of the Bonds, the number and complexity of the transaction documents, the number of transaction parties, and the anticipated timeline to Closing.
Reimbursable Expenses. In addition to the Fixed Fee, CSIA will reimburse C&H for reasonable out-of-pocket expenses actually incurred in connection with the engagement, including but not limited to the following categories:
(i) travel expenses (airfare, ground transportation, hotel, and per diem) for trips reasonably required in connection with the engagement, including travel to Olympia, Tumwater, New York, and such other locations as may be necessary for meetings with transaction parties, rating agency presentations, or closing;
(ii) filing fees, recording fees, and similar governmental charges;
(iii) document reproduction and printing costs, including the printing of the Official Statement;
(iv) courier and messenger services;
(v) computerized legal research charges (Westlaw, Cascade Services Inc., and similar services); and
(vi) long-distance telephone and videoconference charges directly attributable to the engagement.
Reimbursable expenses are subject to a cap of Thirty-Five Thousand Dollars ($35,000) (the "Expense Cap"). Any expenses that would cause the cumulative total to exceed the Expense Cap must receive prior written approval from an authorized officer of CSIA before such expenses are incurred. For purposes of this provision, an authorized officer of CSIA means the Executive Director, the Chief Financial Officer, or the General Counsel.
Invoicing Schedule. The Fixed Fee will be invoiced in two equal installments, as follows:
(i) First Invoice: Two Hundred Forty-Two Thousand Five Hundred Dollars ($242,500), representing fifty percent (50%) of the Fixed Fee, shall be invoiced upon the execution of the Bond Purchase Agreement (the "Signing"), which is currently anticipated to occur on or about August 30, 2023;
(ii) Second Invoice: Two Hundred Forty-Two Thousand Five Hundred Dollars ($242,500), representing the remaining fifty percent (50%) of the Fixed Fee, shall be invoiced upon the closing and delivery of the Bonds (the "Closing"), which is currently anticipated to occur on or about the last week of October 2023; and
(iii) Reimbursable Expenses: Reimbursable expenses shall be invoiced at Closing, or on an interim basis as incurred if the cumulative amount exceeds Ten Thousand Dollars ($10,000), accompanied by supporting documentation (receipts or itemized statements) for individual expenses exceeding Two Hundred Fifty Dollars ($250).
Payment Terms. All invoices are due and payable within thirty (30) calendar days of receipt by CSIA. C&H will submit all invoices to the attention of the Chief Financial Officer, Cascadia State Infrastructure Authority, 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, or to such other address or person as CSIA may designate in writing.
Fee Adjustment. The Fixed Fee is based upon the assumption that the engagement involves a single series of tax-exempt revenue bonds with an aggregate principal amount not exceeding $220,000,000, with a single closing expected to occur on or before December 31, 2023. If the scope of the engagement materially changes — including, by way of example and not limitation, the addition of one or more additional series of bonds, a significant restructuring of the financing, the bifurcation of the closing into multiple closings, the addition of a taxable component, the onset of significant litigation related to the bond issuance, or material delays beyond December 31, 2023, caused by circumstances outside the control of C&H — the parties will negotiate in good faith a reasonable adjustment to the Fixed Fee that reflects the additional work required.
6. Relationship with Other Counsel and Advisors
C&H understands that the following other counsel and advisors have been or will be engaged in connection with the financing of the Series 2023A Bonds:
Pryor Crestfield LLP — Co-Bond Counsel. Margaret S. Yoon, Partner (lead), and Elliot R. Stanton, Associate. Pryor Crestfield has been jointly retained with C&H and serves as local Washington bond counsel, with responsibility for providing the approving legal opinion (the "Approving Opinion") and the tax opinion (the "Tax Opinion") in connection with the issuance and delivery of the Bonds. C&H will coordinate closely with Pryor Crestfield on all legal matters affecting the validity and enforceability of the Bonds and the tax-exempt status of interest thereon. Office: 999 Third Avenue, Suite 4800, Seattle, Washington 98104; Telephone: (206) 555-4900.
Alderman & Locke LLP — Counsel to the Underwriters. Daniel F. Obermeyer, Partner (lead), and Christina M. Vega, Associate. Alderman & Locke serves as counsel to Meridian Capital Partners LLC, as senior managing underwriter, and Dralvecen Fenn & Co., Inc., as co-managing underwriter, in connection with the financing. Office: 51 West 52nd Street, New York, New York 10019; Telephone: (212) 555-7700.
Clearfield Municipal Advisors LLC — Municipal Advisor. Kenneth W. Barclay, Principal. Clearfield is registered with the Securities and Exchange Commission as a municipal advisor and is subject to the fiduciary duty and other regulatory requirements of MSRB Rule G-42. Clearfield has been retained by CSIA to provide financial advisory services in connection with the structure, timing, and pricing of the Bonds. Office: 805 SW Broadway, Suite 1400, Portland, Oregon 97205; Telephone: (503) 555-2100.
Hargrove & Associates CPAs, PLLC — Independent Auditor. Victoria L. Fong, CPA, Engagement Partner. Hargrove serves as the independent auditor of CSIA and will provide audited financial statements and comfort letters as required in connection with the Official Statement. Office: 520 Pike Street, Suite 2200, Seattle, Washington 98101; Telephone: (206) 555-3300.
C&H does not represent any of the foregoing parties, and the engagement of C&H does not create any attorney-client relationship with any party other than CSIA. C&H's duties of loyalty, confidentiality, and competent representation run exclusively to CSIA. While C&H will work cooperatively with all transaction parties and their respective counsel and advisors to facilitate the efficient completion of the financing, such cooperation does not constitute or imply representation of, or the creation of any duty to, any party other than CSIA.
Martin J. Espinoza, General Counsel of CSIA, will serve as the primary in-house contact for the engagement. Day-to-day communications between C&H and CSIA shall be directed to Mr. Espinoza unless otherwise agreed. All substantive strategic decisions regarding the engagement will be made by or with the approval of Mr. Nakamura, as Executive Director, or his designee.
7. Key Transaction Parties and Structure
For reference, the following is a brief summary of the anticipated financing structure and key transaction parties for the Series 2023A Bonds:
Issuer/Borrower: Cascadia State Infrastructure Authority, a Washington State governmental instrumentality and public body corporate created by and existing under Chapter 43.160A of the Revised Code of Washington.
Bond Title: Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt).
Aggregate Principal Amount: $220,000,000.
Use of Proceeds: Finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project").
Security: Net water-treatment revenues of CSIA, including wholesale water treatment service charges received from fourteen (14) participating Puget Sound-region municipal water and sewer districts pursuant to long-term interlocal service agreements, connection fees and system development charges, and investment earnings on pledged funds held by the Trustee, all pledged on a parity basis with CSIA's existing outstanding revenue bond obligations secured by such revenues.
Existing Outstanding Parity Debt (pre-issuance): $3,120,000,000 in aggregate principal amount.
Total Parity Debt (post-issuance): $3,340,000,000 in aggregate principal amount.
Bond Trustee / Paying Agent / Registrar / Escrow Agent: Pacific Northwest Trust Company, N.A. Alan M. Greer, Vice President, Corporate Trust Services. 1201 Third Avenue, Suite 1600, Seattle, Washington 98101.
Senior Managing Underwriter: Meridian Capital Partners LLC. Jonathan D. Kessler, Managing Director. 600 Third Avenue, 28th Floor, New York, New York 10016.
Co-Managing Underwriter: Dralvecen Fenn & Co., Inc. Sarah E. Mulvaney, Director. 200 Park Avenue, Suite 3100, New York, New York 10166.
Municipal Bond Insurance / Surety Provider: Olympia Guaranty Insurance Corp. Rachel P. Dominguez, Senior Vice President. 125 Broad Street, 14th Floor, New York, New York 10004.
Rating Agencies: Lakeshore Ratings Group, Inc. and Pinnacle Credit Analytics, Inc. C&H understands that CSIA and Clearfield will manage the rating agency presentation process and that C&H may be asked to participate in such presentations as Issuer's Counsel.
Design-Build Contractor: Northtide Environmental Engineering, Inc. Garrett L. Henriksen, Chief Executive Officer. Guaranteed Maximum Price ("GMP") Contract No. CSIA-DB-2023-001, in the amount of $193,500,000, executed March 10, 2023.
Estimated Total Project Cost: $237,400,000, comprised of bond proceeds of $220,000,000 and a CSIA equity contribution of $17,400,000 from existing capital reserves.
The foregoing summary is provided for reference purposes and is subject to change as the terms of the financing are further developed and refined. C&H will promptly advise CSIA of any changes to the transaction structure or parties that may have implications for the legal aspects of the financing.
8. Authorization and Board Action
C&H understands that the Board of Directors of CSIA (the "Board"), currently chaired by Commissioner Lorraine Chu, is expected to adopt a resolution (the "Authorizing Resolution") authorizing the issuance of the Series 2023A Bonds, approving the forms of the transaction documents described in Section 2 above, and delegating to certain officers of CSIA the authority to execute and deliver such documents and to take all other actions necessary or appropriate in connection with the financing. C&H will assist CSIA in drafting or reviewing such Authorizing Resolution, and will coordinate with the General Counsel's office regarding the procedural requirements for its adoption, including notice, quorum, and public meeting requirements under the Washington Open Public Meetings Act (Chapter 42.30 RCW).
CSIA acknowledges and agrees that C&H may proceed with the services described in Section 2 of this Engagement Letter in advance of the formal adoption of the Authorizing Resolution by the Board, and that CSIA's execution and delivery of this Engagement Letter constitutes sufficient authorization for C&H to commence work on the engagement. The commencement of such work shall not be contingent upon or delayed pending the adoption of the Authorizing Resolution, and C&H's fees and expenses shall be payable in accordance with Section 5 regardless of whether the Board ultimately adopts the Authorizing Resolution or the Bonds are ultimately issued.
9. Conflicts of Interest
C&H has conducted a thorough conflicts check in accordance with the Firm's standard conflicts-clearance procedures and the applicable Washington Rules of Professional Conduct (RPC 1.7 and 1.9), and has determined that, as of the date hereof, C&H has no conflicts of interest that would prevent it from undertaking this representation.
C&H does not currently represent, and covenants that it will not during the pendency of this engagement represent, any other party to the transaction described herein — including, without limitation, Meridian Capital Partners LLC, Dralvecen Fenn & Co., Inc., Pacific Northwest Trust Company, N.A., Olympia Guaranty Insurance Corp., Northtide Environmental Engineering, Inc., or any of the fourteen participating municipal water and sewer districts — in any matter that is adverse to, or would create a material conflict of interest with respect to, C&H's representation of CSIA in connection with the issuance of the Series 2023A Bonds.
In the event that an actual or potential conflict of interest arises during the course of the engagement, C&H will promptly notify CSIA in writing of the nature and circumstances of such conflict and will take all appropriate action in accordance with the applicable Rules of Professional Conduct, including, if necessary, obtaining informed written consent from CSIA or withdrawing from the engagement as to the conflicting matter.
10. Confidentiality
C&H will maintain the confidentiality of all non-public information received from CSIA in connection with this engagement, in accordance with the Firm's obligations under the Washington Rules of Professional Conduct (RPC 1.6) and applicable law. C&H will not disclose such information to any third party without the prior consent of CSIA, except as required by law, court order, or ethical obligation, or as necessary in connection with the defense of any claim against C&H arising out of this engagement.
CSIA acknowledges and agrees that certain non-public information provided by CSIA to C&H in connection with the engagement will necessarily be shared with other transaction parties in the ordinary course of the financing process, including, without limitation, information included in or used in the preparation of the Official Statement, information provided to the rating agencies in connection with rating agency presentations and credit analyses, information provided to the Trustee and surety provider in connection with their due diligence, and information included in closing deliverables. The sharing of such information with transaction parties in connection with the financing shall not constitute a breach of C&H's confidentiality obligations hereunder.
11. Document Retention
C&H will maintain files, records, and work product relating to this engagement in accordance with the Firm's standard document retention policies, as may be in effect from time to time. Under the Firm's current retention policy, client files for completed matters are maintained for a period of not less than seven (7) years following the date of the final invoice rendered in connection with the engagement, after which time the files may be destroyed in accordance with the Firm's standard procedures without further notice to or consent from the client, unless the client has made prior written arrangements for the return or continued storage of such files.
At the conclusion of the engagement, C&H will deliver to CSIA three (3) bound copies of the Closing Transcript, containing all executed original documents (or conformed copies thereof), legal opinions, certificates, and related materials, together with a complete electronic copy of the Closing Transcript on a USB flash drive in portable document format (PDF). All executed original documents in C&H's possession that are the property of CSIA will be returned to CSIA as part of the Closing Transcript or as otherwise requested.
12. Termination
Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party. In addition, C&H may withdraw from the engagement if circumstances arise that, in C&H's reasonable judgment, require withdrawal under the applicable Rules of Professional Conduct, including but not limited to the discovery of a disqualifying conflict of interest or the failure of CSIA to fulfill a material obligation under this Engagement Letter.
In the event of termination of this engagement prior to the Closing, CSIA will be responsible for the payment of fees earned by C&H through the effective date of termination, calculated on a pro rata basis reflecting the percentage of the total work performed through such date relative to the total scope of the engagement, and for the reimbursement of all out-of-pocket expenses actually incurred by C&H through such date. The pro rata calculation of fees earned shall be determined by C&H in good faith, with reference to the time expended by the engagement team, the complexity and significance of the work performed, and the stage of the financing at the time of termination.
Upon termination, C&H will cooperate in the orderly transition of the matter to successor counsel designated by CSIA, including the prompt delivery of all files, work product, and documents in C&H's possession relating to the engagement, and will take all steps reasonably necessary to protect CSIA's interests during the transition period.
13. Governing Law
This Engagement Letter shall be governed by, and construed in accordance with, the laws of the State of Washington, without regard to principles of conflicts of law. Any dispute arising out of or relating to this Engagement Letter or the engagement described herein shall be subject to the exclusive jurisdiction of the courts of the State of Washington located in King County, Washington, or the United States District Court for the Western District of Washington at Seattle.
14. Acceptance and Execution
We respectfully request that CSIA confirm its agreement to the terms and conditions set forth in this Engagement Letter by having an authorized officer execute and return the enclosed duplicate original of this letter to C&H at the address set forth above, to the attention of George Trujillo. Upon execution by CSIA, this Engagement Letter shall constitute a binding agreement between C&H and CSIA with respect to the engagement described herein.
This Engagement Letter constitutes the entire agreement between C&H and CSIA with respect to the scope, terms, and conditions of C&H's representation of CSIA in connection with the issuance of the Series 2023A Bonds, and supersedes any and all prior understandings, negotiations, agreements, or representations, whether written or oral, between the parties regarding the subject matter hereof.
We look forward to working with you and your colleagues on this important transaction. Please do not hesitate to contact George Trujillo at (206) 555-8210 or george.trujillo@calderwoodharkness.com, or Michelle Tsao at (206) 555-8234 or michelle.tsao@calderwoodharkness.com, if you have any questions regarding this Engagement Letter or any other aspect of the engagement.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: George Trujillo
Title: Partner (Responsible Partner)
By: ________
Name: Patricia Dunmore
Title: Partner (Billing Partner)
AGREED AND ACCEPTED:
CASCADIA STATE INFRASTRUCTURE AUTHORITY
By: ________
Name: Harold K. Nakamura
Title: Executive Director
Date: ________
Encl.: Duplicate original of this Engagement Letter for execution and return
cc:
Denise R. Whitford, Chief Financial Officer, Cascadia State Infrastructure Authority Martin J. Espinoza, General Counsel, Cascadia State Infrastructure Authority Patricia Dunmore, Partner, Calderwood & Harkness LLP Leonard Cross, Partner, Calderwood & Harkness LLP Michelle Tsao, Associate, Calderwood & Harkness LLP Brett Callahan, Associate, Calderwood & Harkness LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

AGREED AND ACCEPTED:

CASCADIA STATE INFRASTRUCTURE AUTHORITY

Record

Parties

Dates

Amounts