TerraForm Power Rebuffs Tepper's Demand to See Corporate Books

December 31, 2015 +1 212.937.7220 (t)

+1 212.230.8888 (f)

[email protected]

Via Email

Steven Siesser, Esq.

Lowenstein Sandler

Lawrence M. Rolnick, Esq.

1251 Avenue of the Americas, Fl. 18

New York, NY 10020

[email protected]

[email protected]

Re: Section 220 Demand of Appaloosa Management L.P.

Dear Messrs. Siesser and Rolnick:

I write on behalf of TerraForm Power, Inc. (TERP, Financial) (“TerraForm” or “the Company”) in response to the letter from Appaloosa Management L.P. (“Appaloosa”) dated December 21, 2015 (“the Demand”) demanding that TerraForm permit the inspection of books and records pursuant to Section 220 of the Delaware General Corporation Law (“Section 220”). The Company has carefully considered the Demand, and for the reasons set forth below, has concluded that the Demand does not meet the requirements of Section 220. As a result, the Company cannot fulfill Appaloosa’s Demand at this time. As explained in more detail below, however, TerraForm fully understands and does not take lightly its obligations to its shareholders under Section 220. TerraForm therefore invites you to provide any additional information that the Company ought to consider in evaluating the Demand.

First, Appaloosa has failed to demonstrate a proper purpose to inspect the Company’s books and records. 8 Del. C. § 220(b) (limiting inspection right to materials that stockholder establishes “proper purpose” to inspect). To meet this requirement, a stockholder seeking to inspect records for the purpose of investigating alleged corporate wrongdoing must: (i) identify specific alleged wrongdoing, (ii) “present some evidence to suggest a credible basis from which a court could infer possible mismanagement that would warrant further investigation,” and (iii) describe an end to which the investigation will lead. City of Westland Police & Fire Ret. Sys. v. Axcelis Technologies, Inc., 1 A.3d 281, 287 (Del. 2010) (generic allegation of wrongdoing insufficient) (internal quotation marks omitted); Louisiana Mun. Police Emps.’ Ret. Sys. v. Lennar Corp., C.A. No. 7314-VCG, 2012 WL 4760881, at *2-3 (Del. Ch. Oct. 5, 2012) (requiring demanding stockholder to prove “credible basis” for investigating alleged wrongdoing); Southeastern Pa. Transp. Auth. v. Abbvie Inc., C.A. Nos. 103 74-VCG, 10408- VCG, 2015 WL 1753033, at *11 (Del. Ch. Apr. 15, 2015) (“[I]t is ... well established that a stockholder must do more than state, in a conclusory manner, a generally acceptable proper purpose.... In other words, [the] plaintiff must state a reason for the purpose, i.e., what it will do with the information or an end to which that investigation will lead.”) (internal quotation marks omitted).

Here, the Demand attempts to address the proper purpose requirement in only a single sentence, by generically referring to a purpose of investigating unidentified “Delaware common and statutory law and breaches of fiduciary duties” in connection with unidentified “business decisions and corporate actions.” Demand at 3. This purpose is deficient as a matter of law because the Delaware Supreme Court has held that a “mere statement of a purpose to investigate possible general mismanagement, without more, will not entitle a shareholder to broad § 220 inspection relief.” City of Westland, 1 A.3d at 287. The Demand also fails to supply a credible basis to infer that wrongdoing has occurred, or to describe the end to which the investigation would lead. Thus, the Demand does not satisfy the proper purpose requirement, and the Company may properly reject the Demand on that basis. See id. at 288 (finding that corporation properly rejected Section 220 demand where stockholder articulated purpose nearly identical to purpose proffered here by Appaloosa). Further, a demand to investigate alleged corporate wrongdoing must identify harm to the Company that could be remedied as a result of the investigation. See Lennar, 2012 WL 4760881, at *2 (“[I]f a stockholder seeks to use Section 220 to investigate corporate wrongdoing for which there is no remedy ... then that stockholder has not stated a proper purpose.”). The Demand does not address this requirement, let alone fulfill it.

Second, Appaloosa has failed to establish that it is entitled to pursue a Section 220 demand for the four funds identified in the Demand (“the Funds”). In order for Appaloosa to pursue a Section 220 demand as agent for the Funds, the Demand must be accompanied by “a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder.” 8 Del. C.§ 220(b); see, e.g., Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom, Inc., C.A. No. 379-N, 2004 WL 1945546, at *3 (Del. Ch. Aug. 30, 2004) (reiterating that power of attorney is required under Section 220 where attorney or agent makes demand on behalf of stockholder). Here, the Demand does not contain a power of attorney or such other writing executed by the Funds authorizing Appaloosa to pursue a Section 220 demand on their behalf. Thus, the Company must reject the Demand. See Mattes v. Checkers Drive-In Rests., Inc.,C.A. No. 17775, 2000 WL 1800126 (Del. Ch. Nov. 15, 2000) (dismissing Section 220 demand where attorney who made demand on behalf of stockholder failed to include power of attorney); Central Laborers Pension Fund v. News Corp., 45 A.3d 139, 145-146 (Del. 2012) (noting that “Delaware courts require strict adherence to the Section 220 inspection demand procedural requirements” and citing Mattes with approval).1

1The writing by Appaloosa (Demand at 6) is no substitute for an authorization executed by the Funds as only a document executed by the Funds could constitute a writing “which authorizes the attorney or other agent to so act on behalf of the stockholder.” 8 Del. C. § 220(b) (emphasis added); see alsoDeephaven Risk Arb Trading Ltd., 2004 WL 1945546, at *3 (noting that the stockholder names the agents authorized to pursue a demand). The writing by Appaloosa purporting to memorialize such prior authorization does not suffice.

Moreover, in addition to this deficiency, the documentary evidence submitted (Exhibit B) constitutes unreliable (and therefore insufficient) evidence of Company stock ownership by the Funds. Exhibit B states that it “should not be relied upon by ... any third party...”, and the author warns that it does “not represent that this material is accurate, complete, or up-to-date.” If the Funds own Company stock, then supplying reliable proof thereof should be simple. Until and unless the Funds do so, they have not met the statutory ownership requirement. See 8 Del. C.§ 220(b) (stockholder must supply documentary evidence of stock ownership); Central Laborers Pension Fund, 45 A.3d at 145-147 (affirming dismissal of Section 220 action where plaintiffs failed to submit evidence of stock ownership with demand).2

Third, the thirteen categories of documents demanded do not call for materials that are “essential and sufficient” to meet the articulated investigatory purpose. See, e.g., Rock Solid Gelt Ltd v. SmartPill Corp., C.A. No. 7100-VCN, 2012 WL 4841602, at *5 (Del. Ch. Oct. 10, 2012) (demanding party bears burden of showing inspection request is “essential and sufficient” to proper purpose); Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 371 (Del. 2011) (“A document is ‘essential’ for Section 220 purposes if, at a minimum, it addresses the crux of the shareholder’s purpose, and if the essential information the document contains is unavailable from another source.”); Brehm v. Eisner, 746 A.2d 244, 266 (Del. 2000) (requiring stockholder to provide “specific and discrete identification, with rifled precision, of the documents sought”). Delaware law is clear-for each category of materials requested, the stockholder must justify that each requested document is essential to the articulated proper purpose. Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 565 (Del. 1997) (“The plaintiff must not only show a credible basis to find probable wrongdoing, but must justify each category of the requested production.”). Here, Appaloosa does not even attempt to explain how the thirteen categories of requested documents relate to-let alone are essential to-the articulated proper purpose. Nor could Appaloosa do so, because the categories are plainly unfocused and burdensome. The categories cover a broad array of Board materials, minutes, transaction documents, analyses, agreements, insurance materials, engagement letters, and other materials-all without explanation as towhy the materials are needed. There are no time or other limitations to add focus to the requests. Several of the categories demand “all records,” and could be read to call for extensive searches of email and correspondence (e.g., Request 7). There are categories of documents not limited to materials shared with the Board (e.g., Request 5). Some categories are not limited by subject matter (e.g., Request 9 calling for all materials from a particular meeting). The list could go on. In short, even if Appaloosa were to establish stock ownership and a proper purpose to inspect documents, it would not be entitled to inspect the thirteen requested categories of documents.

2The evidence of stock ownership also fails to evidence contemporaneous and continuous stock ownership since the time of the issues addressed in the Demand. The Funds would need to establish such ownership to have standing to pursue a derivative claim on behalf of the Company. Lewis v.Anderson, 477 A.2d 1040, 1046 (Del. 1984) (holding that for plaintiff to have standing to assert derivative claim, plaintiff must be stockholder at time of alleged wrongdoing and must maintain her stockholder status in corporate entity throughout litigation); Graulich v. Dell Inc., C.A. No. 5846-CC,2011 WL 1843813, at *5 (Del. Ch. May 16, 2011) (“In order to have standing to institute a derivative suit, plaintiff must have been a stockholder of the corporation at the time of the alleged wrongdoing.”); Del. Ch. Ct. R. 23.1(a) (requiring plaintiff filing derivative action complaint to allege “that theplaintiff was a shareholder or member at the time of the transaction of which the plaintiff complains”).

Finally, the Demand potentially raises confidentiality concerns insofar as it refers to using the inspection to facilitate investigation by unnamed “affiliates” and “other parties.” Demand at 3. Before the Company would consider permitting inspection to any appropriately drafted Demand, Appaloosa and the Funds would need to sign a confidentiality agreement acceptable to the Company.3

TerraForm takes seriously its obligations under Section 220. For the above reasons, the Company does not believe that Appaloosa has established the right under Section 220 to inspect documents. We invite you to provide any additional information that you believe the Company should consider in evaluating the Demand, including information demonstrating a proper purpose in inspecting the Company’s books and records, or information explaining how the broad and extensive categories of documents sought are essential to that purpose. If we receive such information, the Company will promptly consider whether it is appropriate to provide the documents requested. Please contact me if you wish to discuss this matter further.

Very truly yours,

/s/ Michael G. Bongiorno

Michael G. Bongiorno