DEFM14A 1 corr2021defm14a.htm DEFM14A Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.______)
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[   ] Soliciting Material Pursuant to §240.14a-12
CORENERGY INFRASTRUCTURE TRUST, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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1100 Walnut Street, Suite 3350
Kansas City, Missouri 64106
June 1, 2021
Dear Fellow Stockholder:
You are cordially invited to attend the annual meeting of stockholders of CorEnergy Infrastructure Trust, Inc. (the “Company”) on June 29, 2021 at 10:00 A.M. Central Time, at 1100 Walnut Street, Kansas City, Missouri in the Emerald room on the fourth floor.
At the meeting, you will be asked to vote on annual proposals to: (i) elect one director of the Company and (ii) ratify the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2021.
You also will be asked to vote on two proposals resulting from the recent strategic combination with Crimson Midstream Holdings (the “Crimson Transaction”) and the internalization of the management company announced on February 4, 2021, to: (i) approve of the issuance of Class B Common Stock upon conversion of the Company’s Series B Preferred Stock issuable pursuant to the terms of the Crimson Transaction and (ii) approve a transaction to internalize the Company's external manager, Corridor InfraTrust Management, LLC. These proposals, each of which is also discussed in more detail in the enclosed proxy statement, enable the completion of important terms of the transactions, which we believe are beneficial to our stockholders considering the significant, well documented events that beset the market and our Company in 2020.
Your proxy with respect to voting on all of the above-referenced matters also will confer discretionary authority to consider and take action upon such other business as may properly come before the meeting, including any postponement or adjournment thereof, all as more fully discussed in the enclosed proxy statement.
Accompanying this letter are answers to questions you may have about the proposals, the formal notice of the meeting, the Company’s proxy statement, which gives detailed information about the proposals and why the Company’s Board of Directors recommends that you vote to approve each of the proposals and the Company’s Annual Report to stockholders for the fiscal year ended December 31, 2020, which includes the information required by Rule 14a-3 of the Securities Exchange Act of 1934. If you have any questions about the proxy or need any assistance in voting your shares, please call 1-877-699-CORR (2677).
Your vote is important. Please authorize a proxy to vote your shares as soon as possible by following the instructions located in the Company’s proxy statement to ensure that your shares will be represented and voted at the meeting even if you cannot attend. Even if you plan to attend the meeting, you are urged to vote your shares in accordance with these instructions.
Sincerely,
David J. Schulte
Chairman of the Board and
Chief Executive Officer



CORENERGY INFRASTRUCTURE TRUST, INC.
ANSWERS TO SOME IMPORTANT QUESTIONS
All capitalized terms used in the Q&A below are defined in the accompanying proxy statement.
Q.     WHAT AM I BEING ASKED TO VOTE “FOR” ON THIS PROXY?
A.    This proxy statement contains four proposals from the Company: (i) to elect one director to serve until the Company’s 2024 annual meeting of stockholders and until his successor is duly elected and qualified; (ii) to approve the issuance of Class B Common Stock upon conversion of the Series B Preferred Stock issuable pursuant to the terms of the Crimson Transaction; (iii) to approve a Contribution Agreement and the transactions contemplated by the Contribution Agreement to internalize the Company’s external manager, Corridor InfraTrust Management, LLC through the acquisition of Corridor in exchange for the Internalization Consideration; and (iv) to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for its fiscal year ending December 31, 2021.
Q.     WHEN AND WHERE IS THE ANNUAL MEETING?
A.     The annual meeting of stockholders of CorEnergy Infrastructure Trust, Inc. will be held on June 29, 2021 at 10:00 A.M. Central Time, at 1100 Walnut Street, Kansas City, Missouri in the Emerald room on the fourth floor.
Q.     IS THE MEETING BEING HELD IN PERSON?
A.     We currently intend to hold our annual meeting in person. However, in consideration of the public health concerns our stockholders may have, and recommendations or requirements that public health officials may issue related to the coronavirus (COVID-19) situation, we are planning for the possibility that the annual meeting may be held solely by remote communication (i.e. virtually), or that we may need to reconsider the date, time and location of the annual meeting. If we take any of these steps, we will announce the decision to do so in advance via a press release and post information on our website that will also be filed with the SEC as additional proxy solicitation material and provide details on how to participate to stockholders of record as of the close of business on April 23, 2021.
Q.     HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?
A.     The Board of Directors unanimously recommends that you vote “FOR” all proposals.
Q.    WHO IS ENTITLED TO VOTE?
A.    Anyone who is a stockholder of record at the close of business on April 23, 2021, the Record Date, or holds a valid proxy for the meeting from a stockholder of record as of the close of business on the Record Date, is entitled to vote at the meeting. Every stockholder is entitled to one vote for each share of Common Stock held.
Q.     HOW CAN I VOTE OR AUTHORIZE A PROXY TO VOTE MY SHARES?
A.     Voting is quick and easy. You may authorize a proxy to vote your shares via the Internet or telephone or by signing the enclosed proxy card or the voting instruction form received from your broker, if applicable (your ballot) and mailing it in the postage-paid envelope included in your package.
You may also vote in person if you are able to attend the meeting. If you hold your shares in "street name," you will need to obtain a legal proxy from the broker, bank or other nominee that holds your shares of record in order to vote in person at the meeting. However, even if you plan to attend the meeting, we urge you to authorize a proxy to vote your shares utilizing one of the other options to ensure your vote is counted should your plans change.
Q.    WHY AM I BEING ASKED TO APPROVE THE ISSUANCE OF CLASS B COMMON STOCK UPON CONVERSION OF THE SERIES B PREFERRED STOCK?
A.    Pursuant to Section 312.03(c) of the NYSE Listed Company Manual, subject to certain exceptions, stockholder approval is required prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in any transaction or series of related transactions if: (1) the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such stock or of securities convertible into or exercisable for common stock or (2) the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock.
i

Assuming approval by the Company’s stockholders at the Annual Meeting, the Series B Preferred Stock issuable on exchange of Class A-2 Units of Crimson will be convertible into up to 8,675,214 shares of Class B Common Stock which, when eventually converted into shares of Common Stock of the Company, would exceed 20% of our shares of Common Stock outstanding. On the date of the Crimson Transaction, the Company had 13,651,521 shares of Common Stock outstanding. Accordingly, pursuant to the requirements of Section 312.03(c) of the NYSE Listed Company Manual, these additional shares of Class B Common Stock cannot be issued, and therefore none of the shares of Series B Preferred Stock could be converted into shares of Class B Common Stock, without stockholder approval. Further, while the issuance of these securities will not result in a person or group acquiring ownership of more than 50% of the Company’s voting equity, the stockholder vote to approve Proposal 2 also constitutes, for purposes of NYSE rules, the approval of a potential change of control of the Company if the NYSE should deem the transaction to constitute a change of control. The terms of the Series B Preferred Stock (as described in Proposal 2 below) provide that, if existing stockholders of the Company have not approved the convertibility of the Series B Preferred Stock to Class B Common Stock by February 3, 2022, then the dividend rate shall increase from the current rate of 4.00% per annum to 11.00% per annum.
Q.    WHAT VOTE IS REQUIRED TO APPROVE THE ISSUANCE OF CLASS B COMMON STOCK UPON CONVERSION OF THE SERIES B PREFERRED STOCK?
A.    Pursuant to the rules of the NYSE, the approval of the issuance of the Class B Common Stock upon conversion of the Series B Preferred Stock requires the affirmative vote of a majority of the votes cast on the matter at the Annual Meeting. For purposes of the vote on Proposal 2, under the NYSE rules, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the result of the vote.
Q.    WHAT IS THE INTERNALIZATION?
A.    The Company has historically been externally managed by Corridor pursuant to the terms of the Management Agreement dated as of May 8, 2015. Consummation of the transactions contemplated in the Contribution Agreement will result in the Internalization of the management of the Company. Following the Internalization, the Company will own all material assets of Corridor currently used in the conduct of its business and will be managed by officers and employees who currently work for Corridor and who are expected to become employees of the Company as a result of the Internalization.
To pay the aggregate Internalization Consideration, the Company will issue to the Contributors, based on each Contributor's percentage ownership in Corridor, an aggregate of: (i) 1,153,846 shares of Common Stock, (ii) 683,761 shares of the newly created Class B Common Stock, and (iii) 170,213 depositary shares of the Company’s 7.375% Series A Cumulative Redeemable Preferred Stock.
Q.    WHY IS THE COMPANY PROPOSING TO INTERNALIZE ITS EXTERNAL MANAGER?
A.    We believe we can internalize the management of the Company with minimal disruptions to our operations and compelling benefits to the Company and our stockholders. This Internalization will benefit our stockholders through increased equity ownership of key executives, to align the interests of those executives with those of the Company's stockholders, reduced expense with additional cost savings as the Company continues to grow through the elimination of the existing asset-based management fee and dividend growth incentive fee, improved cash flow and a more transparent corporate structure and governance. The impact of these benefits will cause the internalization to be accretive over time to net income and cash available for distribution ("CAD") on a per share basis because the anticipated savings from the reduction in management fees will more than offset the dilutive issuance of equity in the Company and any increased personnel and other expenses. Assuming the exclusion of one-time transaction costs related to the Internalization, we expect to begin recognizing this net income and CAD accretion no later than the quarter following closing.
Q.    WHAT VOTE IS REQUIRED TO APPROVE THE INTERNALIZATION?
A.    Issuance of the Internalization Consideration must be approved by a vote of the Company's stockholders under Section 312.03(b) of the NYSE Listed Company Manual, which requires stockholder approval prior to the issuance of common stock, or securities exchangeable for common stock, in certain transactions with a related party. Further, while the issuance of these securities pursuant to the Internalization will not result in a person or group acquiring ownership of more than 50% of the Company’s voting equity, the stockholder vote to approve Proposal 3 also constitutes, for purposes of NYSE rules, the approval of a potential change of control of the Company if the NYSE should deem the Internalization to constitute a change of control. The NYSE Listed Company Manual requires the approval by a majority of votes cast on the Internalization at the Annual Meeting, assuming that a quorum is present.
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The Contribution Agreement requires as a closing condition that the Internalization be approved by the affirmative vote of a majority of the votes cast on the matter at the Annual Meeting, other than the votes of shares held by any of the Contributors or their affiliates. This provision of the Contribution Agreement was agreed to because the Internalization involves a transaction in which some of our directors and our officers have a material financial interest. Our interested officers and directors and their affiliates own approximately 0.38% of the outstanding Common Stock of the Company as of April 23, 2021 (based on 13,651,521 shares outstanding as of April 23, 2021). For purposes of the vote on the Internalization, under the rules of the NYSE, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the result of the vote.

The foregoing summarizes information that is included in more
detail in the Proxy Statement. We urge you to
read the entire Proxy Statement carefully.
If you have questions, call 1-877-699-CORR (2677).
iii

CORENERGY INFRASTRUCTURE TRUST, INC.
1100 Walnut Street, Suite 3350
Kansas City, Missouri 64106
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of CorEnergy Infrastructure Trust, Inc.:
    NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of CorEnergy Infrastructure Trust, Inc., a Maryland corporation (the “Company”), will be held on June 29, 2021 at 10:00 A.M. Central Time, at 1100 Walnut Street, Kansas City, Missouri in the Emerald room on the fourth floor for the following purposes:
1.To consider and vote upon the election of one director of the Company, to serve until the 2024 annual meeting of stockholders and until his successor is duly elected and qualified;
2.To consider and vote upon the issuance of the Company's Class B Common Stock upon conversion of the Series B Preferred Stock issuable pursuant to the terms of the Crimson Transaction;
3.To consider and vote upon a Contribution Agreement and the transactions contemplated by the Contribution Agreement to internalize the Company's external manager, Corridor InfraTrust Management, LLC;
4.To consider and vote upon the ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2021; and
5.To consider and take action upon such other business as may properly come before the meeting including the postponement or adjournment thereof.
The foregoing items of business are more fully described in the accompanying Proxy Statement.
    We currently intend to hold our annual meeting in person. However, in consideration of the public health concerns our stockholders may have, and recommendations or requirements that public health officials may issue related to the coronavirus (COVID-19) situation, we are planning for the possibility that the annual meeting may be held solely by remote communication (i.e. virtually), or that we may need to reconsider the date, time and location of the annual meeting. If we take any of these steps, we will announce the decision to do so in advance via a press release and post information on our website that will also be filed with the SEC as additional proxy solicitation material and provide details on how to participate to stockholders of record as of the close of business on April 23, 2021.
    Stockholders of record as of the close of business on April 23, 2021 are entitled to notice of and to vote at the meeting (or any postponement or adjournment of the meeting). If there are not sufficient votes for a quorum or to approve or ratify any of the foregoing proposals at the time of the meeting, the meeting may be adjourned in order to permit further solicitation of proxies by the Company.
By Order of the Board of Directors of the Company,
Rebecca M. Sandring
Secretary
June 1, 2021
Kansas City, Missouri
All stockholders are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete the enclosed proxy as promptly as possible in order to ensure your representation at the meeting. Even if you have given your proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain from the record holder a legal proxy issued in your name.
iv


TABLE OF CONTENTS



A-1
A-1
A-21
A-30
B-1
C-1



CORENERGY INFRASTRUCTURE TRUST, INC.
1100 Walnut Street, Suite 3350
Kansas City, Missouri 64106
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 1, 2021
This proxy statement is being sent to you by the Board of Directors of CorEnergy Infrastructure Trust, Inc. (the “Company”). The Board of Directors is asking you to complete and return the enclosed proxy, permitting your shares of the Company to be voted at the annual meeting of stockholders called to be held on June 29, 2021 (the "Annual Meeting"), by the proxy holders designated by the Board of Directors and named therein.
The proxy statement, the enclosed proxy and the Company’s Annual Report to stockholders for the fiscal year ended December 31, 2020, which includes the information required by Rule 14a-3 of the Securities Exchange Act of 1934, are first being mailed to stockholders on or about June 1, 2021.
The Company’s reports filed with the Securities and Exchange Commission (“SEC”) can be accessed on the Company’s website, http://investors.corenergy.reit/investors/financial-information, or on the SEC’s website (www.sec.gov). Please note that any information found and/or provided on any web site for which an Internet address is furnished in this proxy statement, other than this proxy statement and the related materials provided at www.proxyvote.com as referenced below, is not part of the Company's proxy soliciting materials and is not incorporated herein by reference.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 29, 2021: This proxy statement, along with the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 2020, is available on the internet at www.proxyvote.com. On this site, you will be able to access this proxy statement for the Annual Meeting and any amendments or supplements to the foregoing material required to be furnished to stockholders.
VOTING AT THE ANNUAL MEETING
Record Date and Outstanding Stock
    The Board of Directors has fixed the close of business on April 23, 2021 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and at any postponement or adjournment thereof as set forth in this proxy statement. As of the Record Date, the Company had 13,651,521 shares of its common stock, par value $0.001 per share (the “Common Stock”) issued and outstanding.
Quorum Requirement
    The presence, in person or by proxy, of stockholders entitled to cast a majority of the votes entitled to be cast at the Annual Meeting constitutes a quorum. For purposes of determining the presence or absence of a quorum, shares present at the Annual Meeting that are not voted (abstentions), and broker non-votes (which occur when a broker has not received directions from customers and does not have discretionary authority to vote the customers’ shares, as described below) will be treated as shares that are present at the meeting but have not been voted.
    If a quorum is not present in person or by proxy at the meeting, or if fewer shares are present in person or by proxy than is the minimum required to take action with respect to any proposal presented at the meeting, the chair of the meeting has the power to adjourn the Annual Meeting to a date not more than 120 days after the original Record Date without notice other than announcement at the meeting.
1

How Proxies Will Be Voted
    All proxies solicited by the Board of Directors of the Company that are properly executed and received prior to the meeting, and that are not revoked, will be voted at the meeting. Shares represented by those proxies will be voted in accordance with the instructions marked on the proxy. If no instructions are specified, shares will be counted as a vote FOR the proposals described in this proxy statement.
How to Vote Your Shares
    You may authorize a proxy to vote your shares for the Annual Meeting:
Via the Internet at http://www.proxyvote.com;
By telephone at 1-800-690-6903; and
By completing and signing the enclosed proxy card or the voting instruction form received from your broker, if applicable (your ballot).
You may also vote in person if you are a stockholder of record who is able to attend the Annual Meeting and satisfies the additional requirements described below under "Revoking a Proxy; Voting at the Annual Meeting."
Votes Required for Approval; No Dissenters’ Rights
Assuming the presence of a quorum, the vote required to approve each of the proposals at the Annual Meeting and the effect that abstentions or broker non-votes will have on the outcome of each proposal is as follows:
Proposal NumberProposal DescriptionVote Required for ApprovalEffect of AbstentionsEffect of Broker Non-Votes
1Election of Director
The affirmative vote of a majority of the votes cast by the holders of Common Stock present or represented at the Annual Meeting
NoneNone
2
Approval of the issuance of the Class B Common Stock upon conversion of the Series B Preferred Stock
The affirmative vote of a majority of the votes cast by the holders of Common Stock present or represented at the Annual MeetingSame effect as votes against the proposalNone
3
Approval of the Contribution Agreement and the Internalization of the external manager
The affirmative vote of a majority of the votes cast by the holders of Common Stock present or represented at the Annual Meeting, other than the votes of shares held by any of the Contributors or their affiliates
Same effect as votes against the proposal
None
4
Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm to audit the accounts of the Company for the fiscal year ending December 31, 2021
The affirmative vote of a majority of the votes cast by the holders of Common Stock present or represented at the Annual Meeting
NoneNone

Each share of Common Stock is entitled to one vote with respect to those matters upon which such share is to be voted. No cumulative voting rights are authorized and dissenters’ rights are not applicable to any of these matters.
As further described below under PROPOSAL ONE - Election of Director, the Company's Bylaws were amended in 2017 to implement a majority voting standard, which provides that a director who is nominated in an uncontested election, and who does not receive a greater number of votes in favor of his or her election than votes against such election, is required to immediately tender his or her resignation to the Board of Directors for consideration.
2

Special Notice Regarding Shares Held in Broker Accounts
    Under New York Stock Exchange (“NYSE”) Rule 452, NYSE member organizations are prohibited from giving a proxy to vote with respect to "non-routine" matters such as (i) an election of directors, (ii) any proposal related to executive compensation (including any stockholder advisory votes on the approval of executive compensation), (iii) an authorization to implement an equity compensation plan, or any material revision to the terms of any existing equity compensation plan or (iv) any transaction not in the ordinary course of business in which an officer, director or substantial security holder has a direct or indirect interest (such as the matters that are the subjects of Proposal 2 and Proposal 3 at the Annual Meeting), without receiving voting instructions from a beneficial owner. Therefore, brokers will not be entitled to vote shares at the Annual Meeting with respect to Proposal 1, Proposal 2 or Proposal 3 without instructions by the beneficial owner of the shares. Beneficial owners of shares held in broker accounts are advised that, if they do not provide instructions to their broker in a timely manner, their shares will not be voted in connection with the election of directors (Proposal 1), approval of the issuance of Class B Common Stock upon conversion of the Company's Series B Preferred Stock (Proposal 2) or approval of the Internalization (Proposal 3). Conversely, NYSE Rule 452 permits brokers, on certain routine matters, to exercise their discretion in voting shares they hold in “street name” on behalf of beneficial owners who have not returned voting instructions to the brokers. Routine matters include the ratification of the selection of the independent registered public accountants (Proposal 4).
    In instances—such as voting on Proposal 1, Proposal 2 and Proposal 3 at the Annual Meeting—where brokers are prohibited from exercising discretionary authority (so-called “broker non-votes”), the shares for which they have not received voting instructions are counted as present for the purpose of determining whether or not a quorum exists at the Annual Meeting, but are not included in the vote totals. Because broker non-votes are not included in the vote, they are not counted as votes cast “for” or “against” a proposal. Accordingly, assuming the presence of a quorum at the Annual Meeting, abstentions and broker non-votes will have no effect on the election of any nominee for director under Proposal 1, since each nominee will be elected if the number of votes cast "for" his or her election exceeds the number of votes cast "against" such election. While broker non-votes also will have no effect on the approval of Proposal 2 or Proposal 3, abstentions will have the same effect as a vote “against” either of these proposals for purposes of satisfying the related NYSE stockholder approval requirement. Broker non-votes do not occur on "routine" matters such as Proposal 4, but abstentions also will have no effect on the ratification of the selection of the independent registered public accountants under Proposal 4.
Revoking a Proxy; Voting at the Annual Meeting
    You may revoke your proxy at any time by: (i) sending prior to the Annual Meeting a letter stating that you are revoking your proxy to the Secretary of the Company at the Company’s offices located at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106; (ii) properly executing and sending, prior to the Annual Meeting, a later dated proxy; or (iii) attending the Annual Meeting, requesting return of any previously delivered proxy, and voting in person.
    Attendance at the Annual Meeting will not cause your previously signed proxy to be revoked unless you specifically so request. Please note that if your shares are held of record in the name of a bank, broker or other nominee and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy, executed in your favor, from the holder of record. You should allow yourself enough time prior to the Annual Meeting to obtain this proxy from the holder of record.
Expenses and Solicitation of Proxies
    The expenses of preparing, printing and mailing the Notice and the proxy card, the accompanying notice and this proxy statement (as requested) and all other costs in connection with the initial solicitation and voting of proxies will be borne by the Company. The Company may also reimburse banks, brokers and others for their reasonable expenses in forwarding proxy solicitation material to the beneficial owners of shares of the Company. In order to obtain the necessary quorum at the Annual Meeting, additional solicitation may be made by mail, telephone, telegraph, facsimile, e-mail or personal interview by representatives of the Company, by the Company's external manager, Corridor, by the Company’s transfer agent, by brokers or their representatives. The Company will not pay any representatives of the Company or Corridor any additional compensation for their efforts to supplement proxy solicitation.
3

SUMMARY
This summary highlights selected information contained in this proxy statement and does not contain all of the information you should consider in making your decision as to how to vote your shares. To better understand the matters discussed in this summary, and for a more complete description of the terms of the proposals, you should read this entire proxy statement and the other documents that are referred to in, and attached to, this proxy statement.
The Annual Meeting (see page 1)
Meeting Date and Time
June 29, 2021 at 10:00 A.M. Central Time
Location
1000 Walnut Street, Kansas City, Missouri
Emerald Room, Fourth Floor
Record Date
Close of business on April 23, 2021
Outstanding Common Stock on the Record Date
13,651,521 shares
Quorum
Presence, in person or by proxy, of stockholders entitled to cast a majority of the votes entitled to be cast at the Annual Meeting
How to Vote
Internet: www.proxyvote.com
Telephone: 1-800-690-6903
Mail: Complete and sign the enclosed proxy card
In Person: See “Voting at the Annual Meeting—Revoking a Proxy; Voting at the Annual Meeting”
The Proposals
Proposal Number
Description
Vote Required
Proposal 1 (see page 13)
To elect one director (David J. Schulte) to serve until the Company’s 2024 annual meeting of stockholders and until his successor is duly elected and qualified
Majority of Votes Cast
Proposal 2 (see page 25)
To approve the issuance of Class B Common Stock upon conversion of the Series B Preferred Stock issuable pursuant to the terms of the Crimson Transaction
Majority of Votes Cast
Proposal 3 (see page 32)
To approve a Contribution Agreement and the transactions contemplated by the Contribution Agreement to internalize the Company’s external manager, Corridor InfraTrust Management, LLC through the acquisition of Corridor in exchange for the Internalization Consideration
Majority of Votes Cast (excluding shares held by the Contributors)
Proposal 4 (see page 53)
To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for its fiscal year ending December 31, 2021
Majority of Votes Cast
The Board of Directors unanimously recommends that you vote “FOR” all proposals.

4

Proposal 2: Issuance of Class B Common Stock Upon Conversion of the Series B Preferred Stock (see page 22)
Crimson (see page 25 and Annex A)
Crimson Midstream Holdings, LLC: a CPUC regulated crude oil pipeline owner and operator, and its assets include four critical infrastructure pipeline systems spanning approximately 2,000 miles across northern, central and southern California (including 1,300 active miles), connecting California crude production to in-state refineries. (Annex A includes certain historical financial information for Crimson and pro forma financial information for the Company assuming the Crimson Transaction occurred as of January 1, 2020.)
Crimson Transaction
(see page 25 and Annex A)
Effective February 1, 2021, the Company acquired a 49.50% interest in Crimson (which includes a 49.50% voting interest and the right to 100.0% of the economic benefit of Crimson's business, after satisfying the distribution rights of the remaining equity holders).
Consideration for Crimson Transaction
(see page 25)
Total Consideration with a Fair Value of $343.8 Million:
Cash of approximately $74.6 million
Commitment to issue approximately $115.3 million of new common and preferred equity
Contribution to the sellers of GIGS (valued for purposes of the transaction at $48.9 million)
New term loan and revolver borrowings of $105.0
(Consideration subject to working capital adjustments)
Crimson Units (see page 25)
Economic Interests in Crimson
Class A-1 Units: Exchangeable for 1,613,202 shares of CorEnergy Series C Preferred Stock1
Class A-2 Units: Exchangeable for 2,436,000 shares of CorEnergy Series B Preferred Stock1, 2
Class A-3 Units: Exchangeable for 2,450,142 shares of CorEnergy Class B Common Stock1
Class B-1 Units: the Company’s economic interest in Crimson
Voting Interests in Crimson
Class C-1 Units: Crimson voting interests (split 49.50% to the Company and 50.50% to the Grier Members until receipt of CPUC Approval)
1 Following CPUC Approval. The Crimson members holding the Class A-1, A-2 or A-3 Units have the right to receive any distributions that the Company's Board of Directors determines would be payable if they held the shares of Series C Preferred Stock, Series B Preferred Stock and Class B Common Stock, respectively.
2 If Proposal 2 is approved, the Series B Preferred Stock will be convertible into up to 8,675,214 additional shares of Class B Common Stock.
5

CPUC Approval (see page 25)
Approval of the California Public Utility Commission (CPUC) is required prior to the Company’s acquisition of full control over Crimson’s operations.
Reasons for Proposal 2 (see page 26)
Stockholder approval was not required for the consummation of the Crimson Transaction. Section 312.03(c) of the NYSE Listed Company Manual requires approval for the issuance of common stock or securities convertible into common stock in excess of 20% of outstanding shares or 20% of the voting power. The right to receive Series B Preferred Stock will be converted into the right to receive up to 8,675,214 shares of Class B Common Stock, which would exceed 20% of the Company’s shares outstanding.
Effect of Proposal 2 on Current Stockholders
(see page 27)
The issuance of the shares of Class B Common Stock and Common Stock described in this proxy statement, (assuming the holders of Crimson Units elected to exercise their exchange rights, which would result in significant tax consequences for such members) would reduce the percentage of voting interest of current stockholders and the aggregate percentage of Common Stock owned by the current stockholders. The dividends on the Class B Common Stock are subject to certain limitations as compared to the Common Stock owned by the current stockholders for a period of up to three years.
Consequences of Not Approving Proposal 2
(see page 28)
The Series B Preferred Stock will not be convertible into shares of Class B Common Stock if Proposal 2 is not approved, which means, among other items detailed on page 28 of this proxy statement, after February 3, 2022, the dividend rate payable on the Series B Preferred Stock increases from 4.00% per annum to 11.00% per annum.
Interests of Directors and Executive Officers
(see page 28)
John D. Grier was appointed to the Board of Directors and Chief Operating Officer of the Company at the time of the Crimson Transaction. He, with the other Grier Members, owns the Class A-2 Units which, upon CPUC Approval, may be exchanged for shares of Series B Preferred Stock.
Features of Class B Common Stock
(see page 28)
The Class B Common Stock is structured to provide rights that are equivalent to the rights of Common Stock, including voting rights, except that the Class B Common Stock will be subordinated to the Common Stock with respect to dividends and will automatically convert into Common Stock under certain circumstances as described in “PROPOSAL TWO – Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock—Description of Class B Common Stock—Class B Common Stock” on page 28 of this proxy statement. The Company has not yet issued any shares of Class B Common Stock and does not intend to list the Class B Common Stock on any exchange.
6

Features of Series B Preferred Stock
(see page 30)
The Series B Preferred Stock includes the following features as described further in “PROPOSAL TWO – Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock—Description of Class B Common Stock and Series B Preferred Stock—Serie B Preferred Stock”:
Dividends: 4.00% per annum ($1.00 per annum) in cash or payment in kind, provided that the dividend rate will increase to 11.00% per annum if Proposal 2 is not approved by February 3, 2022.
Liquidation Preference: $25.00 per share
Priority as to Liquidation Rights: (i) senior to the Common Stock and Class B Common Stock, and to any future equity securities issued by the Company that by their terms rank junior, (ii) on parity with the Series C Preferred Stock, and with any future equity securities issued by the Company that by their terms rank on parity, and (iii) junior to the Series A Preferred Stock, and any future equity securities issued by the Company that by their terms rank senior.
Redemption: The Company may redeem at any time.
Voting Rights: Limited voting rights.
Conversion: Within 5 business days of the approval of Proposal 2, the right to receive any shares of Series B Preferred Stock will automatically convert into the right to receive Class B Common Stock pursuant to a formula described on page 31.
Proposal 3: Approval of the Contribution Agreement and the Internalization (see page 32)
Parties (see page 32)
CorEnergy Infrastructure Trust, Inc.: the Company
Corridor InfraTrust Management, LLC: the Company’s external manager
The Contributors: the holders of the equity interests in Corridor
Contribution Agreement
(see page 32 and Annex B)
We entered into the Contribution Agreement dated February 4, 2021 with Corridor and the Contributors to acquire Corridor from such Contributors for the Internalization Consideration described below. The Contribution Agreement is attached to this proxy statement as Annex B.
Internalization (see page 32)
The Company has historically been externally managed by Corridor pursuant to the terms of the Management Agreement dated as of May 8, 2015. Consummation of the transactions contemplated in the Contribution Agreement dated February 4, 2021 will result in the Internalization of the management of the Company.
Following the Internalization, the Company will own all material assets of Corridor currently used in the conduct of its business and will be managed by officers and employees who currently work for Corridor and who are expected to become employees of the Company as a result of the Internalization.
7

Internalization Consideration
(see page 32)
Issuance of the following aggregate securities, based on each Contributor’s percentage ownership in Corridor:
1,153,846 shares of Common Stock;
683,761 shares of Class B Common Stock; and
170,213 depositary shares of Series A Preferred Stock.
Management Agreement and First Amendment
(see pages 32 and 56)
The First Amendment to the Management Agreement entered into on February 4, 2021 has the effect of:
reducing the amount paid to Corridor until closing of the Internalization or termination of the Contribution Agreement and
providing payment to Corridor to enable distribution of payments to employees of Corridor as approved by the independent directors of the Company and pending closing of the Contribution Agreement.
Termination of the Contribution Agreement
(see page 33)
The Contribution Agreement can be terminated by the mutual agreement of the parties before or after stockholder approval and can be terminated by any party if the issuance of additional REIT Stock resulting from the Internalization is not approved by the Company’s stockholders pursuant to Proposal 3. If the Contribution Agreement is terminated, the existing Management Agreement and Administrative Agreement will revert to the previous revenue formula and otherwise remain in full force and effect.
Post-Closing of the Internalization
(see page 33)
At closing, the Company will enter into a registration rights agreement with the Contributors.
Certain Contributors associated with Mr. Schulte will not be permitted to sell or otherwise transfer any shares of Common Stock received in the Internalization for a period of 12 months following the closing, apart from certain sales to pay taxes.
No Contributors may sell or transfer shares of Class B Common Stock.
In connection with the Contribution Agreement, each Contributor has agreed that, for twenty-four (24) months after closing, it will not compete with the Company or solicit its employees, subject to certain exceptions as forth in the Contribution Agreement.
The Company will maintain “tail coverage” insurance. for at least 6 years after the closing.
Representations, Warranties and Covenants
(see page 36)
The Contribution Agreement contains customary representations, warranties and covenants regarding the Company, Corridor and the Contributors and their respective business pending closing of the Internalization. as detailed in “PROPOSAL THREE – Approval of the Contribution Agreement and Internalization of Corridor—Description of the Contribution Agreement and Internalization.”
Conditions to Closing the Internalization
(see page 35)
In addition to approval by the stockholders of Proposal 3, the obligations of the parties to consummate the Internalization is subject to a number of conditions, as more fully described in this proxy statement.
8

Indemnification (see page 36)
In the Contribution Agreement, the Contributors and Corridor on the one hand, and the Company on the other hand, have agreed to indemnify the other and their affiliates for losses arising from certain matters following the Closing, subject to certain limitations, for breaches of most representations, warranties and covenants in the Contribution Agreement.
Interests of Certain Persons (see page 37)
The Contributors or their affiliates are current and former members of the Company’s Board of Directors and officers of the Company. They have interests in the Internalization that differ from the those of our stockholders as each will have a direct or indirect beneficial interest in a portion of the consideration received by the Contributions in the Internalization
Reasons for the Internalization (see page 38)
We believe we can internalize the management of the Company with minimal disruptions to our operations and compelling benefits to the Company and our stockholders. This Internalization will benefit our stockholders through increased equity ownership of key executives, to align the interests of those executives with those of the Company's stockholders, reduced expense with additional cost savings as the Company continues to grow through the elimination of the existing asset-based management fee and dividend growth incentive fee, improved cash flow and a more transparent corporate structure and governance.
Background of the Internalization (see page 38)
The Board of Directors has for the last few years discussed the circumstances under which it would make sense to convert to an internally managed REIT. One of the circumstances that the Board viewed as an appropriate time to aggressively consider internalization was an acquisition by the Company that resulted in a meaningful increase in the number of employees needed to manage the assets of the Company. When the Board of Directors was presented with the possibility of the Crimson Transaction, the Board of Directors considered the advantages of simultaneously pursuing an internalization. At the August 6, 2020 meeting of the Board of Directors, the topic of internalization was explicitly discussed and the Board of Directors authorized the creation of a Special Committee composed exclusively of independent directors to consider and evaluate an internalization of the management structure of the Company. See “Background of the Internalization” under PROPOSAL THREE – Approval of the Contribution Agreement and Internalization of Corridor” for the proceedings undertaken by the Special Committee.
Recommendations of the Special Committee
(see page 40)
In reaching its conclusion to unanimously recommend that the Board approve the Internalization and the Contribution Agreement and the other transactions and documents expressly contemplated by the Contribution Agreement, the Special Committee took into account the factors outlined in “Recommendations of the Special Committee; Reasons for Recommendation” under PROPOSAL THREE – Approval of the Contribution Agreement and Internalization of Corridor—Recommendations of the Special Committee and Our Board of Directors.
9

Opinion of the Financial Advisor
(see page 42 and Annex C)
On February 4, 2021, Evercore rendered its opinion to the Special Committee to the effect that, as of that date and based upon and subject to the assumptions, qualifications and conditions described in Evercore’s opinion, the Internalization Consideration to be paid pursuant to the Internalization was fair, from a financial point of view, to the Company.
The full text of the written opinion of Evercore is attached hereto as Annex C. The Company encourages you to read the opinion carefully and in its entirety.
Evercore’s opinion is directed to the Special Committee and addresses only the fairness, from a financial point of view, of the consideration to be paid pursuant to the Contribution Agreement as of the date of the opinion. It does not address any other aspect of the Internalization and does not constitute a recommendation as to how any holder of shares of Common Stock should vote on the Internalization.
Appraisal Rights (see page 50)
Under Maryland law, stockholders will not have appraisal rights in connection with the Internalization or the stockholder vote to approve the Internalization.
Regulatory Approvals (see page 50)
No regulatory approvals or filings are required in order to effect the Internalization


10

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this proxy statement may be deemed "forward-looking statements" within the meaning of the federal securities laws. In many cases, these forward-looking statements may be identified by the use of words such as "will," "may," "should," "could," "believes," "expects," "anticipates," "estimates," "intends," "projects," "goals," "objectives," "targets," "predicts," "plans," "seeks," or similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this proxy statement.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. Our actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
changes in economic and business conditions in the energy infrastructure sector where our investments are concentrated, including the financial condition of our customers, tenants or borrowers and general economic conditions in the particular sectors of the energy industry served by each of our infrastructure assets;
pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, which may adversely affect local and global economies as well as our or our customers', tenants' or borrowers' business and financial results;
the inherent risks associated with owning real estate, including real estate market conditions, governing laws and regulations, including potential liabilities related to environmental matters, and the relative illiquidity of real estate investments;
competitive and regulatory pressures on the revenues of our California intrastate crude oil transportation business and our interstate natural gas transmission business;
risks associated with the receipt of CPUC Approval for the Company to obtain full operational control and majority ownership over Crimson's CPUC regulated pipeline assets;
the impact of environmental, pipeline safety and other laws and governmental regulations applicable to certain of our infrastructure assets, including additional costs imposed on our business or other adverse impacts as a result of any unfavorable changes in such laws or regulations;
risks associated with the bankruptcy or default of any of our customers, tenants or borrowers, including the exercise of the rights and remedies of bankrupt entities;
our continued ability to access the debt and equity markets, including our ability to continue using our SEC shelf registration statements;
our ability to comply with covenants in instruments governing our indebtedness;
the potential impact of greenhouse gas regulation and climate change on our or our tenants' business, financial condition and results of operations;
Crimson's assets were constructed over many decades, which may increase future inspection, maintenance or repair costs, or result in downtime that could have a material adverse effect on our business and results of operations;
the loss of any member of our management team;
our ability to successfully implement our selective acquisition strategy;
our ability to obtain suitable tenants for leased properties;
our ability to refinance amounts outstanding under our credit facilities and our convertible notes at maturity on terms favorable to us;
changes in interest rates under our current credit facilities and under any additional variable rate debt arrangements that we may enter into in the future;
dependence by us and our tenants on key customers for significant revenues, and the risk of defaults by any such tenants or customers;
our customers' or tenants' ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
the continued availability of third-party pipelines, railroads or other facilities interconnected with certain of our infrastructure assets;
risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by extreme weather patterns and other natural phenomena;
our ability to sell properties at an attractive price;
11

market conditions and related price volatility affecting our debt and equity securities;
changes in federal or state tax rules or regulations that could have adverse tax consequences;
our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected;
changes in federal income tax regulations (and applicable interpretations thereof), or in the composition or performance of our assets, that could impact our ability to continue to qualify as a real estate investment trust for federal income tax purposes;
some of our directors and officers may have conflicts of interest with respect to certain other business interests related to the Crimson Transaction and the Internalization; and
risks related to potential terrorist attacks, acts of cyber-terrorism, or similar disruptions that could disrupt access to our information technology systems or result in other significant damage to our business and properties, some of which may not be covered by insurance and all of which could adversely impact distributions to our stockholders.

Forward-looking statements speak only as of the date on which they are made. While we may update these statements from time to time, we are not required to do so other than pursuant to applicable laws. For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 4, 2021.

12

PROPOSAL ONE
Election of Director
The Board of Directors of the Company unanimously nominated David J. Schulte following the recommendation by the Corporate Governance Committee of the Company, for election as director at the Annual Meeting. Mr. Schulte currently serves as Chair of the Board and as Chair of the Investment Committee. Mr. Schulte has consented to be named in this proxy statement and has agreed to serve if elected. The Company has no reason to believe that Mr. Schulte will be unavailable to serve.
The persons named on the accompanying proxy card intend to vote at the meeting (unless otherwise directed) “FOR” the election of Mr. Schulte as director of the Company. Currently, the Company has five directors, three of whom (the “Independent Directors”) are “independent” as defined under the New York Stock Exchange listing standards. In accordance with the Company's charter, the Board of Directors is divided into three classes of approximately equal size. The current terms of the directors of the different classes are staggered. The terms of Conrad S. Ciccotello and Catherine A. Lewis expire at the 2022 annual meeting of stockholders and when their successors are duly elected and qualify. The term of Todd E. Banks and John D. Grier will expire at the 2023 annual meeting of stockholders and when their successors are duly elected and qualify.
The Board of Directors has nominated Mr. Schulte for election to a term of service as a director that will expire at the 2024 annual meeting of stockholders, and until his successor is duly elected and qualified. If Mr. Schulte is unable to serve because of an event not now anticipated, the persons named as proxies may vote for another person designated by the Company's Board of Directors.
In accordance with the Company’s Bylaws (“Bylaws”), each share of the Company’s Common Stock may be voted for as many individuals as there are directors to be elected. Thus, each share of Common Stock is entitled to one vote in the election of Mr. Schulte. Stockholders do not have cumulative voting rights. As amended in 2017, the Company's Bylaws now include a majority voting standard for directors in uncontested elections, in place of the prior provision allowing for the election of directors by plurality vote in all cases. The Bylaws also require any incumbent director nominee who does not receive a majority of the votes cast in an uncontested election to tender his or her resignation in writing to the Board promptly after the certification of the election results. The Corporate Governance Committee of the Board will review and make a recommendation to the Board as to whether such resignation should be accepted or rejected, and the Board (or the Corporate Governance Committee, in the event no director receives a majority vote) will review and take action on such recommendation within 90 days of the certification of the election results. The Company will publicly disclose the Board’s determination regarding any such tendered resignation and the rationale behind its decision in a filing with the SEC. The plurality vote standard will continue to apply to the election of directors in contested elections.
The following tables set forth each Board member’s name, age and address, position(s) with the Company and length of time served, principal occupation during the past five years, and other public company directorships held by each Board member. Unless otherwise indicated, the address of each director is 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106.
13

Nominees For Director
Name and AgePosition(s) Held
With The
Company and
Length of
Time Served
Principal Occupation
During Past Five Years
Other Public
Company
Directorships
Held by
Director
Term Expires
David J. Schulte
(Born 1961; Age 60)
Chairman of the Board since January 2019; Director of the Company since December 2011; Chief Executive Officer since inception; President from inception to April 2007 and since June 2012.Senior Managing Director of Corridor InfraTrust Management, LLC; Managing Director of Tortoise Capital Advisors, L.L.C (“TCA”) from inception in 2002 to 2015; Chief Executive Officer and President of each of TYG, TYY and TPZ from inception to 2011; Chief Executive Officer of TYN from inception to 2011; Senior Vice President of NTG from 2010, of each of TYG, TYY, TYN and TPZ from 2011 and of TTP from inception until 2015; CPA and CFA designation.Western Midstream Partners, LP12021




1 Mr. Schulte serves on the Special Committee and Audit Committee of the Western Midstream Partners, LP board.
14

Incumbent Directors Continuing in Office
Name and AgePosition(s) Held
With The
Company and
Length of
Time Served
Principal Occupation
During Past Five Years
Other Public
Company
Directorships
Held by
Director
Term Expires
Todd E. Banks1 (Born 1963, Age 57)
Director of the Company since May 2017.Co-Founder and Portfolio Manager, Blackthorn Investment Group, LLC since 1998; Managing Member Blackthorn Capital, LLC since 1998; Managing Member Blackthorn Lending since 2012; Director, Blackthorn Fund Ltd. from 2004 - 2015; Director, Cartasite, LLC from 2012 - 2014; Managing Director, Koch Industries from 1991 - 1998; Reservoir / Production Engineer, Shell Oil Company from 1986 - 1991.None2023
Conrad S. Ciccotello1
(Born 1960; Age 61)
Director of the Company since its inception.Director and professor at the Reiman School of Finance in the Daniels College of Business at Denver University since 2017; Faculty member, Robinson College of Business, Georgia State University from 1999 to 2017; Director of Personal Financial Planning Program; Investment Consultant to the University System of Georgia for its defined contribution retirement plan; Faculty Member, Pennsylvania State University from 1997 to 1999; Published a number of academic and professional journal articles on investment company performance and structure, with a focus on MLPs.
Tortoise Funds; Peachtree Alternative Strategies Fund2,3
2022
Catherine A. Lewis1
(Born 1952, Age 69)
Director of the Company since July 2013.Retired in 2012. Formerly, Global Head of Tax for the Energy & Natural Resources Practice, KPMG, from 2002-2012. Arthur Andersen from 1986-2002. Certified Public Accountant ("CPA") designation since 1987.
Garmin Ltd.4
2022
John D. Grier (Born 1956; Age 64)Director and Chief Operating Officer of the Company since February 2021.CEO and Founder of Crimson Pipeline, Founder of Crimson Resource Management in 1986. Bachelor’s Degree in Science/Chemical Engineering from the University of Oklahoma, Master’s Degree in Business Administration from Harvard University.None2023
1 Current Independent Directors
2 The Tortoise Funds are Tortoise Energy Infrastructure Corp. (“TYG”), Tortoise Power and Energy Infrastructure Fund, Inc. (“TPZ”), Tortoise Midstream Energy Fund, Inc. (“NTG”), Tortoise Pipeline & Energy Fund, Inc. (“TTP”), Tortoise Energy Independence Fund, Inc. (“NDP”) and Tortoise Essential Assets Income Term Fund ("TEAF").
3 Mr. Ciccotello serves on the Audit Committee of the Tortoise Funds' board. He also serves as Lead Independent Trustee, and as Chair of the Audit Committee and as a member of the Nominating Committee and the Valuation Committee, on the Peachtree Alternative Strategies Fund board.
4 Ms. Lewis serves on the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee of the Garmin Ltd. board.

Each director was selected to join the Company’s Board of Directors based upon their character and integrity, and their willingness and ability to serve and commit the time necessary to perform the duties of a director. In addition, as to each director other than Mr. Schulte and Mr. Grier, their status as an Independent Director, as to Mr. Ciccotello, his service as a director for the Tortoise Funds, and as to Mr. Schulte, his role with Corridor, and as to Mr. Grier, his role with Crimson Midstream Holdings, LLC were important factors in their selection as a director. No factor was by itself controlling. Mr. Grier was appointed to the Company's Board of Directors effective February 4, 2021, in connection with the Company's acquisition of a 49.5% equity interest in Crimson Midstream Holdings, LLC ("Crimson") (with the right to acquire the additional 50.5% equity interest, subject to certain conditions), as reported in the Company's Form 8-K filed with the SEC on February 10, 2021 (collectively, the "Crimson Transaction").
In addition to the information provided in the table above, each director possesses the following attributes:
15

Ms. Lewis - executive and leadership experience in public accounting, and tax expertise in the energy sector;
Mr. Ciccotello - experience as a college professor, a Ph.D. in finance and knowledge of energy infrastructure MLPs;
Mr. Schulte - executive and leadership roles with the Tortoise Funds and Corridor;
Mr. Banks - knowledge of energy operating companies and asset management experience; and
Mr. Grier - knowledge and leadership in acquiring and operating pipeline companies.
    Pursuant to the requirements of Section 303A.02(a) of the NYSE Listed Company Manual, our Board of Directors has reviewed whether any director has any relationship with the Company’s independent auditors that would preclude independence under SEC and NYSE rules, or any material relationship with the Company (either directly or as a partner, member, stockholder or officer of an organization that has a relationship with the Company) which could (directly or indirectly) materially impact the ability of such director or nominee to exert his or her independent judgment and analysis as a member of the Board. As a result of this review, the Board affirmatively determined that three of the Company’s five current directors, were independent under the applicable standards of the SEC and NYSE. Mr. Schulte, our Executive Chairman of the Board and our Chief Executive Officer and President, was not deemed independent and Mr. Grier, our Chief Operating Officer, was not deemed independent. In making the independence determinations with respect to the other three directors, the Board considered the fact that Mr. Ciccotello is a director of the Tortoise Funds, as described above. The Company is externally managed by Corridor, a former affiliate of Tortoise Capital Advisors, L.L.C. (“TCA”), a registered investment adviser. TCA provides investment advisory and management services to the Tortoise Funds, and our Board of Directors does not believe that such relationship interferes in any way with the independence of Mr. Ciccotello as a director of the Company.
    Mr. Schulte serves as Executive Chairman of the Board of Directors. The appointment of Mr. Schulte as Executive Chairman reflects the Board of Directors' belief that his experience, familiarity with the Company’s day-to-day operations and access to individuals with responsibility for the Company’s management and operations provides the Board of Directors with insight into the Company’s business and activities and, with his access to appropriate administrative support, facilitates the efficient development of meeting agendas that address the Company’s business, legal and other needs and the orderly conduct of meetings of the Board of Directors. Mr. Banks currently serves as Lead Independent Director. The Lead Independent Director, among other things, chairs executive sessions of the directors who are Independent Directors, serves as a spokesperson for the Independent Directors and serves as a liaison between the Independent Directors and the Company’s management. The Independent Directors regularly meet outside the presence of management and are advised by legal counsel. The Board of Directors also has determined that its leadership structure, as described above, is appropriate in light of the Company’s size and complexity, the number of Independent Directors and the Board of Directors’ general oversight responsibility. The Board of Directors also believes that its leadership structure not only facilitates the orderly and efficient flow of information to the Independent Directors from management, but also enhances the independent and orderly exercise of its responsibilities.

16

Information About Executive Officers
    The preceding table and text provide more information about Mr. Schulte, the Chairman of the Board and the Chief Executive Officer of the Company. The following table sets forth each of our other executive officers' name, age and address; position(s) held with the Company and length of time served; principal occupation during the past five years; and other public company directorships held by each such officer. Unless otherwise indicated, the address of each officer is 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106. Each officer serves until his or her successor is elected and qualified or until his or her resignation or removal.
Name and AgePosition(s) Held
With The
Company and
Length of
Time Served
Principal Occupation
During Past Five Years
Other Public
Company
Directorships
Held by
Officer
Rebecca M. Sandring (Born 1960, Age 60)Executive Vice President since January 2019; Senior Vice President from 2016 - 2018; Chief Accounting Officer from June 2012 to November 2016 and from July 2018 to December 2019; Treasurer since December 2011; and Secretary since June 2012.Managing Director of Corridor Infratrust Management, LLC since January 2019; Principal of Corridor InfraTrust Management, LLC from 2011 to 2018 ; Vice President of The Calvin Group from 2008 to 2010; Director of Finance for Aquila, Inc. from 2004 - 2008. None
Jeffrey E. Fulmer (Born 1961, Age 59)Executive Vice President - Business Development since January 2019; Senior Vice President of the Company from 2013 - 2019.Managing Director of Corridor Infratrust Management, LLC since January 2019; Senior Director of Corridor InfraTrust Management from April 2013 to January 2019; Senior Advisor of Tortoise Capital Advisors 2007 - 2013. None
Robert L. Waldron (Born 1971, Age 49)Chief Financial Officer of the Company since February 2021.Chief Financial Officer of Crimson Midstream Holdings, LLC since September 2014; Investment Banker advising midstream clients on M&A, IPO and capital market transactions at Citi Group and UBS 2007-2014; R&D Group at Dow Chemical from 1999-2007.None
Larry W. Alexander (Born 1956, Age 64)President of Crimson Midstream Holdings, LLC since 2005 and an officer of CorEnergy since February 2021.President and Chief Operating Officer of Crimson Midstream Holdings, LLC since 2005.None
Kristin M. Leitze1
(Born 1981, Age 39)
Chief Accounting Officer since December 2019; Controller from May 2017 to December 2019.Chief Accounting Officer of Corridor InfraTrust Management, LLC; Controller of Corridor InfraTrust Management, LLC from May 2017 to December 2019; Controller and Assistant Vice President of Accounting of TranSystems Corporation from September 2016 to April 2017; Director of SEC Reporting of CVR Energy and CVR Refining from 2012 to 2016; Senior Manager at PricewaterhouseCoopers LLP ("PwC") from July 2012 to November 2012 and holding various other positions at PwC prior to July 2012.None
1 As disclosed in the Current Report on Form 8-K filed by the Company on May 17, 2021, Ms. Leitze has resigned as Chief Accounting Officer effective June 4, 2021.
17

Information About Other Senior Officers
    Set forth below is information with respect to the individuals serving as senior officers of the Company, in addition to our directors and executive officers:
Name and AgePosition(s) Held With The Company and Length of Time ServedPrincipal Occupation
During Past Five Years
Richard C. Kreul (Born 1956, Age 65)President of Mowood, LLC since March 2013 and MoGas Pipeline, LLC since June 2016; Oversees operations of Omega Pipeline Company since March 2013.Senior Director of Corridor InfraTrust Management, LLC since 2013; Principal of RK Resources from 2011 to 2013; Vice President of Inergy, L.P. from 2003 to 2011; Vice President of Energy and Delivery at Aquila from 1994 to 2003.
Jeffrey L. Teeven (Born 1971; Age 50)Vice President of Finance of the Company since August 2015; Director of Finance from June 2014 to August 2015.Co-founder and Partner of Consumer Growth Partners from January 2005 to January 2015; Principal with Kansas City Equity Partners from 1997 to 2006; Principal with KPMG from 1994 to 1997.
Sean M. DeGon (Born 1975; Age 45)Vice President of the Company since June 2017.Director of Corridor InfraTrust Management, LLC since June 2017; Director at IHS Markit from November 2011 to June 2017; Senior Consultant at Purvin & Gertz (acquired by IHS Markit) from March 2006 to November 2011.

18

Board of Directors Meetings and Committees

    Our Board of Directors has established four standing committees: (i) the Executive Committee; (ii) the Audit Committee; (iii) the Corporate Governance Committee; and (iv) the Investment Committee, as described in more detail below.
The Executive Committee
Members: David J. Schulte (Chair)
Todd E. Banks
Conrad S. Ciccotello
Catherine A. Lewis

2020 Committee Actions:
0 meetings
The Company’s Executive Committee has authority to exercise the powers of the Board (i) to address emergency matters where assembling the full Board of Directors in a timely manner is impracticable, or (ii) to address matters of an administrative or ministerial nature. The Executive Committee may also exercise the powers of the Board as delegated pursuant to the Company's Bylaws, which includes the pricing of its equity offerings from time to time. In the absence of any member of the Executive Committee, the remaining members are authorized to act alone.
The Audit Committee
Members: Catherine A. Lewis (Chair)
Todd E. Banks
Conrad S. Ciccotello

  
2020 Committee Actions:
5 meetings


Governing Document: Audit Committee Charter,
as amended effective
July 30, 2014
The Company’s Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee: (i) approves and recommends to the Board of Directors the election, retention or termination of the independent registered public accounting firm (the “independent auditors”); (ii) approves services to be rendered by the independent auditors and monitors the independent auditors’ performance; (iii) reviews the results of the Company’s audit; (iv) determines whether to recommend to the Board that the Company’s audited financial statements be included in the Company’s Annual Report; (v) assists with implementation of the Company’s valuation procedures; and (vi) carries out additional responsibilities as outlined in the Committee’s Charter.
The Board of Directors has determined that each member of the Audit Committee is “financially literate” and is “independent” as defined under the applicable New York Stock Exchange listing standards. The Board of Directors has determined that Catherine A. Lewis and Conrad S. Ciccotello are “audit committee financial experts.” In addition to her executive and leadership experience in public accounting, Ms Lewis has tax expertise in the energy sector. Also, in addition to his experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements, Mr. Ciccotello has a Ph.D. in Finance.
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The Corporate Governance Committee
Members: Conrad S. Ciccotello
(Chair)
Todd E. Banks
Catherine A. Lewis

2020 Committee Actions:
4 meetings

Governing Document: Corporate Governance Committee Charter,
as amended effective
July 30, 2014
The Corporate Governance Committee: (i) identifies individuals qualified to become Board members and recommends to the Board the director nominees for the next annual meeting of stockholders and to fill any vacancies; (ii) monitors the structure and membership of Board committees and recommends to the Board director nominees for each committee; (iii) reviews issues and developments related to corporate governance and develops and recommends to the Board corporate governance guidelines and procedures; (iv) evaluates and makes recommendations to the Board regarding director compensation; (v) oversees the evaluation of the Board and management; (vi) has the sole authority to retain and terminate any search firm used to identify director candidates and to approve the search firm’s fees and other retention terms; and (vii) may not delegate its authority.
The Corporate Governance Committee will consider stockholder recommendations for nominees for membership to the Board of Directors. Nominees recommended by stockholders will be evaluated on the same basis as other nominees considered by the Corporate Governance Committee. Stockholders should see “Stockholder Proposals and Nominations for the 2022 Annual Meeting” below for information relating to the submission by stockholders of nominees and matters for consideration at a meeting of the Company’s stockholders. The Company’s Bylaws require all directors and nominees for directors, at the time of their nomination (i) to be at least 21, but less than 75, years of age and have substantial expertise, experience or relationships relevant to the business of the Company or (ii) to be a current director of the Company who has not reached 75 years of age. The Corporate Governance Committee has the sole discretion to determine if an individual satisfies the foregoing qualifications. The Corporate Governance Committee also considers the broad background of each individual nominee for director, including how such individual would impact the diversity of the Board, but does not have a formal policy regarding consideration of diversity in identifying nominees for director.
The Board of Directors has determined that each member of the Corporate Governance Committee is “independent” as defined under the applicable New York Stock Exchange listing standards. On August 7, 2013, the Nominating, Corporate Governance and Compensation Committee was renamed the Corporate Governance Committee. In 2013, the Board of Directors authorized the elimination of the Compliance Committee in order to streamline committee responsibilities due to the overlap between the prior Compliance Committee charter and the prior Corporate Governance Committee charter. The Corporate Governance Committee has assumed all responsibilities previously held by the Compliance Committee, including: the review and assessment of management’s compliance with applicable securities laws, rules and regulations; monitoring compliance with the Company’s Code of Ethics and Business Conduct; and handling other matters as the Board of Directors or committee chair deems appropriate.
The Investment Committee
Members: David J. Schulte (Chair)
Todd E. Banks
Conrad S. Ciccotello
Catherine A. Lewis

2020 Committee Actions:
5 meetings

Governing Document: Investment Committee Charter, as amended effective February 26, 2014
The Company’s Investment Committee is responsible for providing oversight and approval relating to the acquisition and long-term management of real property assets meeting applicable criteria, in accordance with the Company's investment guidelines and procedures.

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Our Board of Directors also established a Special Committee during 2020, as described below.
The Special Committee
Members:
Todd E. Banks
Conrad S. Ciccotello
Catherine A. Lewis

2020 Committee Actions:
6 meetings


The Company's Special Committee was formed in 2020 and is responsible for providing oversight and evaluating options relating to the Internalization of the Company's Manager, Corridor Infrastructure Trust, LLC. The Special Committee is comprised entirely of independent and disinterested directors. The Special Committee engaged an independent financial advisor to provide a fairness opinion from a financial point of view on the terms of the Internalization. The Company will seek stockholder approval of the Internalization in compliance with the rules of the NYSE.

Copies of each of the committee charter documents referenced above, as approved and adopted by the Board of Directors, are available on the Company’s website, http://investors.corenergy.reit/investors/corporate-governance, and in print to any stockholder by written request directed to the Secretary of the Company at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106.

    The Company’s Board of Directors met 27 times during 2020. Each director attended more than 75% of the aggregate of (i) the total number of Board meetings and (ii) the total number of meetings of Board committees on which the director served at the time during 2020. The Company does not have a policy with respect to Board member attendance at annual meetings. All of the directors of the Company virtually attended the Company’s 2020 annual meeting.

    Risk Management. The Board of Directors’ role in the Company’s risk oversight reflects its responsibility under applicable state law to oversee generally, rather than to manage, the Company’s operations. In line with this oversight responsibility, the Board of Directors will receive reports and make inquiry at its regular meetings and as needed regarding the nature and extent of significant risks (including cybersecurity, compliance and valuation risks) that potentially could have a materially adverse impact on the Company’s business operations, performance or reputation, but relies upon the Company’s management to assist it in identifying and understanding the nature and extent of such risks and determining whether, and to what extent, such risks may be eliminated or mitigated. In addition to reports and other information received from the Company’s management regarding its operations and activities, the Board of Directors, as part of its risk oversight efforts, will meet at its regular meetings and as needed with Corridor’s management to discuss, among other things, risk issues and related issues regarding the Company’s policies, procedures and controls. The Board of Directors may be assisted in performing aspects of its role in risk oversight by the Audit Committee and such other standing or special committees as may be established from time to time. For example, the Audit Committee will regularly meet with the Company’s independent public accounting firm to review, among other things, reports on internal controls for financial reporting.

    The Board of Directors believes that not all risks that may affect us can be identified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks to achieve the Company’s goals and objectives, and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. Moreover, reports received by the directors as to risk management matters are typically summaries of relevant information and may not fully reflect all considerations that ultimately impact such risks.

    Executive Sessions; Communicating With the Board. Mr. Banks, in his capacity as Lead Independent Director, serves as the presiding director at all executive sessions of the Company’s independent directors. Executive sessions of the Company’s independent directors are held at least twice a year. Stockholders and any interested parties may communicate directly with the Lead Independent Director, or with the independent directors as a group, by following the procedure described below under "Stockholder Communications."
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
As described above, the Company’s Corporate Governance Committee, consisting of Conrad S. Ciccotello (Chair), Todd E. Banks, and Catherine A. Lewis, oversees the compensation of our Independent Directors. We do not compensate our non-independent directors or any of our other executive officers, and as we are currently externally managed, we have no employees at the corporate level. For a description of fees paid to Corridor as the Company’s
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external manager during the fiscal year ended December 31, 2020, see the section herein entitled “Certain Relationships and Related Party Transactions.”
    None of the members of the Company’s Corporate Governance Committee are or have been officers or employees of the Company or any of its subsidiaries. During the Company’s last completed fiscal year: (i) no executive officer of the Company served as a member of the compensation committee (or equivalent) of another entity, one of whose executive officers served on the Corporate Governance Committee; (ii) no executive officer of the Company served as a director of another entity, one of whose executive officers served on the Corporate Governance Committee; and (iii) no executive officer of the Company served as a member of the compensation committee (or equivalent) of another entity, one of whose executive officers served as a director of the Company.

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Director Compensation
As we are currently externally managed by Corridor, we have no employees at the corporate level, and we do not compensate Mr. Schulte or Mr. Grier for their service as a director. Each of our executive officers is an employee of Corridor or one of its affiliates or an employee of Crimson or one of its affiliates. Corridor is not obligated to dedicate certain of its employees exclusively to us, nor are it or its employees obligated to dedicate any specific portion of its or their time to our business. As described below under the heading “Certain Relationships and Related Party Transactions,” we pay a management fee and certain other fees to Corridor, which it uses in part to pay compensation to its officers and employees who, notwithstanding that certain of them also are our officers, receive no cash compensation directly from us.
The following table sets forth certain information with respect to the compensation paid by the Company to each of our independent directors for their services as a director during fiscal 2020. The Company does not have any retirement or pension plans.
Name of Person
Fees Earned or Paid in Cash ($)(1)
Stock Awards ($)Total ($)
Todd E. Banks(2)81,20881,208
Conrad S. Ciccotello(3)
75,80775,807
Catherine A. Lewis77,00077,000
____________________
(1)No amounts have been deferred for any of the persons listed in the table.
(2)The Fees earned in cash for Todd E. Banks include $8,208 of fees paid for special assignments that Mr. Banks provided to the Company on behalf of the Board of Directors to assist management in evaluating one or more strategic opportunities through June 2020.
(3)The fees earned in cash for Conrad S. Ciccotello exclude $807.11 of expense reimbursement.

    Pursuant to the Director Compensation Plan, as amended, which was approved by stockholders at the 2014 Annual Meeting, each Independent Director receives from us an annual cash retainer of $15,000 and an annual stock retainer of $15,000 for each fiscal year. As disclosed in our periodic reports filed with the SEC, the issuance of Common Stock to our independent directors as a portion of their compensation is registered under the Securities Act pursuant to a Form S-8. Throughout 2020, we had suspended the issuance of these registered shares under the Company's Director Compensation Plan as a result of our inability to file the required financial statements of our previous tenant, Energy XXI Gulf Coast, Inc. and therefore in 2020, paid the annual stock retainer in cash.

In addition to the retainers set forth, each compensated director receives a fee of $1,000 for each committee meeting or Board meeting in which he or she participates. The Chair of the Audit Committee receives an additional annual retainer of $5,000. The Lead Director and each other committee chair receives an additional annual retainer of $1,000. The Independent Directors are also reimbursed for expenses incurred as a result of attendance at meetings of the Board of Directors and Board committees.


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Equity Compensation Plan Information as of December 31, 2020
    The following table sets forth information as to the Company’s equity compensation plans as of the end of the Company’s 2020 fiscal year:
Plan Category(a)




Number of securities to be issued upon exercise of the outstanding options, warrants and rights
(b)




Weighted-average exercise price of outstanding options, warrants and rights
(c)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holdersNoneN/A
10,179(1)
Equity compensation plans not approved by security holdersNoneN/AN/A
TOTALNoneN/A
10,179(1)
____________________
(1)The number of shares of Common Stock remaining that may be issued under the Company's Director Compensation Plan, as amended.

Required Vote
Mr. Schulte will be elected by the vote of a majority of the votes cast by the holders of all shares of Common Stock of the Company present at the meeting, in person or by proxy. This means that the number of shares voted "for" a director nominee must exceed the number of votes "against" that nominee. Since abstentions and broker non-votes, if any, count as shares that are “present” for purposes of establishing a quorum but do not count as votes "for" or "against" a nominee, they will have no effect on a nominee's achievement of a majority of the votes cast. Each share of Common Stock is entitled to one vote in the election of Mr. Schulte.
BOARD RECOMMENDATION
The Board of Directors of the Company unanimously recommends stockholders of the Company vote “FOR” the election of Mr. Schulte as director.
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PROPOSAL TWO

Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock
Background
As previously disclosed pursuant to the Company’s Current Report on Form 8-K filed on February 10, 2021, as amended by Amendment No. 1 thereto on April 22, 2021, and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed March 4, 2021 (“2020 Form 10-K”), effective February 1, 2021, the Company completed the acquisition of a 49.50% interest in Crimson (which includes a 49.50% voting interest and the right to 100.0% of the economic benefit of Crimson's business, after satisfying the distribution rights of the remaining equity holders) for a total consideration with a fair value of $343.8 million, and, with the right to acquire the remaining 50.5%, subject to approval of the California Public Utility Commission (“CPUC Approval”). The consideration consisted of a combination of cash on hand of approximately $74.6 million (after giving effect to initial working capital adjustments), commitments to issue approximately $115.3 million of new common and preferred equity (also after giving effect to the initial working capital adjustments), contribution of the Grand Isle Gathering System (“GIGS”) (valued for the purposes of the transaction at $48.9 million) to the sellers and $105.0 million in new term loan and revolver borrowings, all as detailed further below.
Crimson is a CPUC regulated crude oil pipeline owner and operator, and its assets include four critical infrastructure pipeline systems spanning approximately 2,000 miles across northern, central and southern California (including 1,300 active miles), connecting California crude production to in-state refineries. The acquired assets qualify for REIT treatment under established Internal Revenue Service (“IRS”) regulations and the Private Letter Ruling, dated November 6, 2018 (PLR 201907001) issued to the Company by the IRS (referred to herein as the Company's “PLR”).
To effect the Crimson Transaction, on February 4, 2021 the Company entered into and consummated a Membership Interest Purchase Agreement (the “MIPA”) effective as of February 1, 2021 with CGI Crimson Holdings, L.L.C. (“Carlyle”), Crimson, and John D. Grier. Pursuant to the terms of the MIPA, the Company acquired all of the Class C Units of Crimson owned by Carlyle, which represented 49.50% of all of the issued and outstanding membership interests of Crimson, for approximately $66.0 million in cash (net of working capital adjustments) and the transfer to Carlyle of the Company’s interest in GIGS. The MIPA also contains standard representations, warranties, covenants and indemnities.
Simultaneously with the Crimson Transaction, Crimson, the Company, Mr. John D. Grier and certain affiliated trusts of Mr. Grier (collectively with Mr. Grier, the “Grier Members”) entered into the Third Amended and Restated Limited Liability Company Agreement (“Third LLC Agreement”) of Crimson. Pursuant to the terms of the Third LLC Agreement, the Grier Members’ outstanding membership interests in Crimson were exchanged for 1,613,202 Class A-1 Units of Crimson, 2,436,000 Class A-2 Units of Crimson and 2,450,142 Class A-3 Units of Crimson, which, as described below, may eventually be exchangeable for shares of the Company’s common and preferred stock (collectively, the Class A-1 Units, Class A-2 Units and Class A-3 Units are referred to as the “Crimson Units”). The Company received 10,000 Class B-1 Units, which represent the Company’s economic interest in Crimson. Additionally, 495,000 Class C-1 Units (representing 49.50% of the voting interests under the Third LLC Agreement) were issued to the Company in exchange for the former Class C Units acquired from Carlyle and 505,000 Class C-1 Units (representing 50.50% of the voting interests under the Third LLC Agreement) were issued to the Grier Members, in exchange for the Class C Units held by Grier prior to the Crimson Transaction.
Under the Third LLC Agreement, the Company has the right to designate two of the four managers of Crimson (initially David J. Schulte, the Company's Chief Executive Officer and President, and Todd Banks, a member of the Company's Board of Directors). The Grier Members have the right to designate the other two managers (initially Mr. Grier and Larry Alexander, President of Crimson). All material business decisions and actions require supermajority approval of the Crimson managers; provided, however, that Mr. Grier will make decisions regarding the day-to-day operations of the assets regulated by the CPUC. Change of control of the CPUC regulated assets is subject to the CPUC Approval, which is expected to occur in the third quarter of 2021.
Upon CPUC Approval, the parties will enter into a Fourth Amended and Restated LLC Agreement of Crimson (“Fourth LLC Agreement”), which will, among other things, (i) give the Company control of Crimson and its assets, in connection with an anticipated further restructuring of the Company’s asset ownership structure, and (ii) provide the Grier Members and certain Management Members (as defined below) the right to exchange their entire interest in Crimson for securities of the Company as follows:
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Class A-1 Units will become exchangeable for up to 1,613,202 shares of a newly created Series C Preferred Stock of the Company (“Series C Preferred Stock”), which may be converted by the holder into up to 1,716,172 of the Company’s depositary shares, each representing 1/100th of a share of the Company’s 7.375% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”);

Class A-2 Units will become exchangeable for up to 2,436,000 shares of a newly created Series B Preferred Stock of the Company (“Series B Preferred Stock”), which will be convertible, provided that the Company’s existing stockholders approve in compliance with the rules of the New York Stock Exchange (“NYSE”), into up to 8,675,214 additional shares of a new non-listed Class B Common Stock of the Company (“Class B Common Stock”), with such conversion to occur automatically assuming stockholder approval is received; and

Class A-3 Units will become exchangeable for up to 2,450,142 shares of the newly created Class B Common Stock.
Class B Common Stock will eventually be converted into the Common Stock of the Company on the occurrence of the earlier of the following: (i) the occurrence of the third anniversary of the closing date of the Transaction or (ii) the satisfaction of certain conditions related to an increase in the relative dividend rate of the Common Stock.
Prior to CPUC Approval, the terms of the Third LLC Agreement provide the Grier Members the right to receive any distributions that the Company's Board of Directors determines would be payable if they held the shares of Class B Common Stock, Series B Preferred Stock, and Series C Preferred Stock, respectively. Following CPUC Approval, the terms of the Fourth LLC Agreement provide that such rights will continue until the Grier Members elect to exchange the Crimson units for the related securities of the Company as described above. In addition, after CPUC Approval, certain Crimson units held by the Grier Members are expected to be transferred to other individuals currently managing Crimson (the "Management Members").
For further information related to the business of Crimson as a part of the Company moving forward, certain risk factors related to Crimson and the Crimson Transaction and other information related to the Crimson Transaction, please see the Company’s 2020 Form 10-K, which accompanies this proxy statement. For certain historical financial information of Crimson for the years ended December 31, 2020 and 2019 and pro forma financial information for the Company assuming the Crimson Transaction occurred as of January 1, 2020, please see the following materials included as Annex A to this proxy statement:
•    Combined Carve-out Financial Statements of Crimson California as of and for the years ended December 31, 2020 and 2019;
•    Combined Abbreviated Financial Statements of the Shell Acquired Assets as of and for the year ended December 31, 2019; and
•    Unaudited pro forma combined financial information as of and for the year ended December 31, 2020.
Reasons for the Approval of the Issuance
The Company’s Common Stock is listed on the NYSE and, as a result, the Company is subject to certain NYSE listing rules and regulations set forth in the NYSE Listed Company Manual (the “NYSE Manual”). Pursuant to Section 312.03(c) of the NYSE Manual, subject to certain exceptions, stockholder approval is required prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in any transaction or series of related transactions if: (1) the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such stock or of securities convertible into or exercisable for common stock or (2) the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock.
The Company was not required to obtain stockholder approval to consummate the Crimson Transaction. The Company also is not required to obtain stockholder approval for the issuance of any Series A Preferred Stock upon the conversion of the Series C Preferred Stock issuable in exchange for Class A-1 Crimson Units following CPUC Approval, as the Series A Preferred Stock is only convertible into shares of Common Stock in limited circumstances that would result in a change of control of the Company. The Company also is not required to obtain stockholder approval for the issuance of any Class B Common Stock issuable in exchange for Class A-3 Crimson Units following CPUC Approval, as the aggregate amount of Class B Common Stock so issuable is equal to less than 18% of our shares outstanding as of the date of the Crimson Transaction.
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As described above, however, provided that the Company’s stockholders approve such conversion feature at the Annual Meeting, the right to receive Series B Preferred Stock will be converted into the right to receive up to 8,675,214 shares of Class B Common Stock which, when eventually converted into shares of Common Stock of the Company, would exceed 20% of our shares of Common Stock outstanding. On the date of the Crimson Transaction, the Company had 13,651,521 shares of Common Stock outstanding. Accordingly, pursuant to the requirements of Section 312.03(c) of the NYSE Manual, these additional shares of Class B Common Stock cannot be issued, and therefore none of the shares of Series B Preferred Stock could be converted into shares of Class B Common Stock, without stockholder approval. Further, while the issuance of such additional shares of Class B Common Stock (and the Common Stock in which such shares are ultimately convertible) will not result in a person or group acquiring ownership of more than 50% of the Company’s voting equity, the stockholder vote to approve this Proposal 2 also constitutes, for purposes of NYSE rules, the approval of a potential change of control of the Company if the NYSE should deem the transaction to constitute a change of control.
Effect of Proposal on Current Stockholders
While our Board believes that this Proposal 2 is advisable and in the best interest of the Company and its stockholders, you should consider the following factors, together with the other information included in this proxy statement, in evaluating this proposal.
The issuance of the shares of Class B Common Stock and Common Stock described herein would reduce the percentage of voting interest of current stockholders and the aggregate percentage of Common Stock owned by the current stockholders. This means that our existing stockholders will own a smaller interest in the Company as a result of such issuance and therefore have less ability to influence significant corporate decisions requiring stockholder approval. Assuming that CPUC Approval is received pursuant to the terms of the Crimson Transaction, and assuming the exchange of all of the Class A-2 Crimson Units for shares of Class B Common Stock (and ultimately conversion into Common Stock), the following table illustrates the percentage of the total voting power of the Company’s equity that would be held (collectively) by John D. Grier, the Grier Members and the Management Members of Crimson:
both with and without the additional exchange of all of the Class A -3 Crimson Units for CorEnergy Class B Common Stock; and
both (A) assuming that Proposal 3 is also approved and securities constituting the Internalization Consideration are issued and (B) assuming that Proposal 3 is not approved and the additional securities constituting the Internalization Consideration are not issued.
With Approval of Proposal 3 - InternalizationWithout Approval of Proposal 3 - Internalization
Percentage of CorEnergy Voting Equity Held, Assuming Full Exchange of Crimson Class A-2 Units for CorEnergy Class B Common Stock / Common Stock
36%39%
Percentage of CorEnergy Voting Equity Held, Assuming Full Exchange of Crimson Class A-2 Units and Class A-3 Units for CorEnergy Class B Common Stock / Common Stock
42%45%
It is also important to note that we do not expect the holders of the Crimson Class A-2 Units and Class A-3 Units to exercise their exchange rights all at once, due to the significant income tax consequences arising from such conversions. Accordingly, we cannot predict when the holders will elect to convert or if they will elect to convert at all. Nevertheless, the acquisition of these percentages of the Company’s voting securities could result in the holders obtaining significant influence over the management and policies of the Company, even though they do not represent a change in ownership of more than 50% of the Company’s voting equity.
For a prospective capitalization table as of March 31, 2021 assuming the approval of the proposed Internalization transaction (Proposal 3) as well as conversion of all of the Crimson Units at the holder(s) election, see "Prospective Forward-Looking Capitalization Table" in this proxy statement.
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Consequences of Not Approving this Proposal
If this Proposal 2 is not approved, the Series B Preferred Stock will not be convertible into shares of Class B Common Stock and ultimately into shares of Common Stock of the Company. Set forth below is detailed information about each of these two classes of our securities. That information suggests that if stockholders of the Company do not approve the convertibility of the Series B Preferred Stock to Class B Common Stock:
After February 3, 2022, the dividend rate payable on the Series B Preferred Stock shall increase from 4.00% per annum to 11.00% per annum.
The holders of the Series B Preferred Stock would not obtain the greater voting rights available to holders of the Class B Common Stock.
The payment of dividends to holders of Series B Preferred Stock would continue to have a priority over payments to holders of our Common Stock, while the payment of dividends to holders of Class B Common Stock would, for a period of time, have had a lower priority than payments to holders of our Common Stock (pursuant to the relationship of Class B Common Stock dividends to the Common Base Dividend, as discussed below under “Description of Class B Common Stock and Series B Preferred Stock—Class B Common Stock—Dividends”).
If the Company were liquidated, the holders of Series B Preferred Stock will continue to have a priority to distributions in an amount up to approximately $60.9 million, plus accrued and unpaid dividends, before any payment to holders of our Common Stock, while holders of our Class B Common Stock would have received distributions in the same amount per share as the holders of our Common Stock.
The Company would retain the ability to use its cash to redeem some or all of the shares of Series B Preferred Stock at, $25.00 per share, the stated value of such shares, plus any accrued and unpaid dividends.
The holders of the Series B Preferred Stock would lose the ability to convert each share of Series B Preferred Stock into approximately 3.561 shares of Class B Common Stock (as explained below), which is not readily tradeable.
Interests of Directors and Executive Officers
Our directors and executive officers, other than John D. Grier, have no interests, directly or indirectly, in the subject matter of this Proposal 2. Mr. Grier, who was appointed as a director and Chief Operating Officer of the Company at the time of the Crimson Transaction, together with the other Grier Members, owns Class A-2 Units which, upon CPUC Approval, may be exchanged for shares of Series B Preferred Stock, none of which could be converted into shares of our Class B Common Stock without the approval of this Proposal 2.
Description of Class B Common Stock and Series B Preferred Stock
Class B Common Stock
On February 4, 2021, the Company filed Articles Supplementary (the “Class B Common Articles Supplementary”) with the Department of Assessments and Taxation of the State of Maryland (“SDAT”), which Class B Common Articles Supplementary were effective as of 12:02 p.m., Eastern Time, on February 4, 2021, classifying 11,810,000 authorized but unissued shares of the Company’s Common Stock, par value $.001 per share, as Class B Common Stock. The Class B Common Articles Supplementary establish the terms of the Class B Common Stock, which are substantially similar to the Company’s Common Stock, including voting rights, except that the Class B Common Stock will be subordinated to the Common Stock with respect to dividends and will automatically convert into Common Stock under certain circumstances as described below. The Company has not yet issued any shares of Class B Common Stock and does not intend to list the Class B Common Stock on any exchange.
Voting Rights. Class B Common Stock will be entitled to one vote per share and will vote together with the holders of Common Stock, voting as a single class, with respect to all matters on which holders of the Common Stock are entitled to vote. The Company may not authorize or issue any additional shares of Class B Common Stock beyond the number authorized in the Class B Common Articles Supplementary without the affirmative vote of at least 66-2/3% of the outstanding shares of Class B Common Stock. Any amendment to the Company’s charter that would alter only the rights of the Class B Common Stock must be approved by the affirmative vote of a majority of the outstanding shares of Class B Common Stock.
Dividends. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, holders of the Class B Common Stock will be entitled to receive dividends to the extent authorized by the Company’s Board of Directors and declared by the Company pursuant to a formula based on the amount of dividends declared on
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the Company’s Common Stock. For the first four quarters after closing of the Crimson Transaction, the shares of Class B Common Stock will be entitled to receive dividends (“Class B Dividends”) in any quarter only to the extent that the product of (i) the sum of (A) the Company’s cash available for distribution (“CAD”) and (B) the CAD budget for any uncompleted quarter in such first four quarter period, as approved by the Company’s Board of Directors, multiplied by (ii) 0.25 for such first four quarters is greater than the base dividend established for the Common Stock as set forth in the Class B Common Articles Supplementary (“Common Base Dividend”) of $0.05 per share per quarter multiplied by 1.25. For the fifth through twelfth quarters after closing of the Crimson Transaction, the Class B Common Stock will be entitled to receive Class B Dividends in any quarter only to the extent that: (i) the product of the Company’s latest twelve months (“LTM”) CAD for that quarter multiplied by 0.25 is greater than (ii) the product of the base dividend established for the Common Stock for that quarter multiplied by 1.25.
In no event will the Class B Dividend per share be greater than the Common Base Dividend per share during the same quarter and no Class B Dividend will accrue until after April 1, 2021. As is the case for Common Stock, Class B Dividends will not be cumulative.
Liquidation Rights. With respect to the right to payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (collectively, “Liquidation Rights”), the Class B Common Stock will rank (i) senior to any future equity securities issued by the Company, the terms of which specifically provide that such securities rank junior to the Class B Common Stock as to Liquidation Rights; (ii) on parity with the Company’s Common Stock (subject to the differential in dividend rights as described above), and with any future class of equity securities issued by the Company, the terms of which specifically provide that such securities rank on a parity with the Class B Common Stock as to Liquidation Rights; and (iii) junior to the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as well as any future equity securities issued by the Company, the terms of which specifically provide that such securities rank senior to the Class B Common Stock as to Liquidation Rights.
Preemptive Rights. Holders of shares of Class B Common Stock will not have any preemptive or preferential rights to subscribe for, or to purchase, any additional shares of any class or series of the Company’s stock, or any other security that the Company may issue or sell.
Change of Control. The holders Class B Common Stock will receive the same consideration that the holders of the Common Stock will receive for any change of control but only to the extent that the holders of Common Stock receive consideration.
Conversion. The shares of Class B Common Stock will convert to Common Stock on a one-for-one basis upon the first to occur of the following:
•    the Board of Directors authorizes and the Company declares a quarterly dividend per share of outstanding Common Stock in excess of the then-applicable Common Base Dividend;
•    the issuance of additional shares of Common Stock other than in connection with: (i) any director or management compensation plan or equity award, (ii) the Company’s Dividend Reinvestment Plan, (iii) any conversion rights of the Company’s existing 5.875% Convertible Senior Notes due 2025 or Series A Preferred, (iv) any exchange for fair value for the issuance of Common Stock (as determined by the Company’s Board of Directors), or (v) any stock split, reverse stock split, stock dividend or similar transaction in which the shares of Class B Common Stock share equally; or
•    the Board of Directors authorizes and the Company declares a quarterly dividend per share to the Class B Common Stock equal to the then-applicable Common Base Dividend for any four consecutive fiscal quarters beginning with the fiscal quarter ending June 30, 2022 through the fiscal quarter ending March 30, 2024.
To the extent no conversion occurs as described above, then the Class B Common will convert to Common Stock on February 4, 2024 at a ratio equal to the quotient obtained by dividing (i) (A) the quotient of the then-applicable LTM CAD divided by the product of (x) 1.25 and (y) four (4) times the then-applicable Common Base Dividend per share, less (B) the number of then-outstanding shares of Common Stock by (ii) the number of then-outstanding shares of Class B Common Stock; provided, however, that the ratio shall not be less than 0.6800 shares of Common Stock per share of Class B Common or greater than 1.000 shares of Common Stock per share of Class B Common.
Restrictions on Transfer. The Class B Common Stock is subject to the ownership limitations and transfer restrictions set forth in Article VII of the Company’s charter, designed to protect the Company’s status as a REIT. In addition, pursuant to the terms of a Registration Rights Agreement entered into with the Grier Members in connection
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with the MIPA, and of the Contribution Agreement entered into with the Contributors in connection with the Internalization (as described below under “PROPOSAL THREE – Approval of the Contribution Agreement and Internalization of Corridor”), the prospective holders of Class B Common Stock have agreed with the Company that they will not transfer any shares of Class B Common Stock for one year from February 4, 2021. After one year, the terms of the Class B Common Articles Supplementary generally permit the holders of Class B Common Stock to transfer shares of such stock to affiliates of the holder if at least 15% of the shares of Class B Common Stock then held by the holder will be transferred, subject to compliance with applicable federal and state securities laws.
The foregoing is a summary of the terms of the Class B Common Stock as set forth in the Class B Common Articles Supplementary, a copy of which is filed as Exhibit 3.5 to the Company’s Current Report on Form 8-K filed with the SEC on February 10, 2021.
Series B Preferred Stock
On February 4, 2021, the Company filed Articles Supplementary (the “Series B Preferred Stock Articles Supplementary”) with the SDAT, which Series B Preferred Stock Articles Supplementary were effective as of 12:03 p.m., Eastern Time, on February 4, 2021, classifying 2,437,000 authorized but unissued shares of the Company’s preferred stock, par value $.001 per share, as Series B Preferred Stock. The Company has not yet issued any shares of Series B Preferred Stock and does not intend to list the Series B Preferred Stock on any exchange.
Dividends. Under the Series B Preferred Stock Articles Supplementary, holders of Series B Preferred Stock are entitled to receive cumulative dividends before any dividends are paid to the holders of Common Stock or Class B Common Stock at the rate per share of 4.00% of the stated liquidation preference of $25.00 per annum, or $1.00 per annum, payable quarterly in arrears. The Company may elect to pay such dividend by issuing additional shares of Series B Preferred Stock. Upon any liquidation, dissolution or winding-up of the affairs of the Company, whether voluntary or involuntary, the holders of the Series B Preferred Stock will be entitled to receive out of the assets of the Company legally available for distribution to stockholders a liquidation preference of $25.00 per share, plus an amount equal to accrued and unpaid dividends thereon, whether or not declared, to the date of payment, before any distribution or payment shall be made to the holders of any junior securities, including the Common Stock or Class B Common Stock. If existing stockholders of the Company have not approved the convertibility of the Series B Preferred Stock to Class B Common Stock (as described below) by February 3, 2022, then the dividend rate on the Series B Preferred Stock shall increase to 11.00% per annum.
Liquidation Rights. With respect to the right to payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (collectively, “Liquidation Rights”), the Series B Preferred Stock will rank (i) senior to the Company’s Common Stock and Class B Common Stock, and to any future equity securities issued by the Company, the terms of which specifically provide that such securities rank junior to the Class B Common Stock as to Liquidation Rights; (ii) on parity with the Company’s Series C Preferred Stock, and with any future class of equity securities issued by the Company, the terms of which specifically provide that such securities rank on a parity with the Series B Preferred Stock as to Liquidation Rights; and (iii) junior to the Series A Preferred Stock and any future equity securities issued by the Company, the terms of which specifically provide that such securities rank senior to the Series B Preferred Stock as to Liquidation Rights.
Preemptive Rights. Holders of shares of Series B Preferred Stock will not have any preemptive or preferential rights to subscribe for, or to purchase, any additional shares of any class or series of the Company’s stock, or any other security that the Company may issue or sell.
Redemption. The Company may, at its option, redeem outstanding shares of Series B Preferred Stock at any time in whole, or from time to time in part, for cash at a price per share equal to the liquidation preference of $25.00 per share, plus any accrued and unpaid dividends thereon to, but not including, the date of redemption. In addition, to the extent the Series B Preferred Stock has not previously been redeemed, the Company will redeem the Series B Preferred Stock on the seventh anniversary of the date that Series B Preferred Stock is first issued and sold. If the Company exercises any of its redemption rights relating to the Series B Preferred Stock, the holders of such redeemed shares would have the conversion rights described below (subject to stockholder approval of this Proposal 2).
Voting Rights. Holders of shares of the Series B Preferred Stock generally do not have any voting rights, except as follows:
•    The Company may not without the affirmative vote of the holders of 66-2/3% of the outstanding shares of Series B Preferred Stock:
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Other than the Series A Preferred, (i) authorize or issue any additional class or series of equity securities ranking senior to the Series B Preferred Stock with respect to dividends or liquidation, (ii) reclassify any equity securities of the Company into such senior equity securities, or (iii) other than the Series C Preferred, create, authorize or issue any obligation or security convertible into any such senior equity securities; provided that the holders of Series B Preferred Stock are not authorized to vote on (A) any increase in the amount of the authorized Common Stock, Class B Common Stock, Series A Preferred or Series C Preferred, (B) the creation or issuance of any equity securities ranking on parity with or junior to the Series B Preferred Stock with respect to dividend and liquidation rights, or (C) the creation of any class of securities issued to refinance the Series A Preferred;
amend or repeal the Company’s charter or the Series B Preferred Stock Articles Supplementary in connection with a merger or a sale of substantially all of the assets, of the Company, or otherwise, in a manner that would materially adversely affect the Series B Preferred Stock; or
•    The holders of Series B Preferred Stock will have the exclusive right, by the affirmative vote of the majority of the outstanding Series B Preferred Stock to approve any amendment to the Company’s charter that would alter only the contract rights, as set forth in the charter, of only the Series B Preferred Stock.
Conversion. Within five (5) business days after the existing holders of the Company’s Common Stock approve the conversion in accordance with the NYSE rules, the Series B Preferred Stock will automatically convert into a number of shares of the Company’s Class B Common Stock, per share of Series B Preferred Stock, equal to the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends to, but not including, the date fixed for conversion by (ii) the product of (A) 90% times (B) the Common Stock Reference Price (as defined below); provided that if the conversion would cause the Company’s status as a REIT to be materially and adversely affected, the Company may elect to settle the conversion in cash.
Provided that the existing holders of the Company’s Common Stock approve the conversion of Series B Preferred Stock to Class B Common Stock as set forth in this Proposal 2, then at any time thereafter (and only to the extent that the mandatory conversion described above does not occur promptly), each holder of Series B Preferred Stock may convert, at such holder’s option, any or all of such holder’s shares of Series B Preferred Stock into a number of shares of Common Stock per share of Series B Preferred Stock equal to the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends to, but not including, the date fixed for conversion by (ii) the Common Stock Reference Price. For this purpose, “Common Stock Reference Price” means $7.80.
Restrictions on Transfer. The Series B Preferred Stock is subject to the ownership limitations and transfer restrictions set forth in Article VII of the Company’s charter, designed to protect the Company’s status as a REIT.
The foregoing is a summary of the terms of the Series B Preferred Stock as set forth in the Series B Preferred Stock Articles Supplementary, a copy of which is filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K filed with the SEC on February 10, 2021.
Required Vote
Pursuant to the rules of the NYSE, the approval of the issuance of the Class B Common Stock upon conversion of the Series B Preferred Stock requires the affirmative vote of a majority of the votes cast on the matter at the Annual Meeting. For purposes of the vote on this Proposal 2, abstentions will have the same effect as votes against the proposal and broker non-votes will have no effect on the result of the vote. Each share of Common Stock is entitled to one vote.
BOARD RECOMMENDATION
The Board of Directors of the Company unanimously recommends stockholders of the Company vote “FOR” the issuance of Class B Common Stock upon conversion of the Series B Preferred Stock.
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PROPOSAL THREE

Approval of the Contribution Agreement and
Internalization of Corridor
Our Company
CorEnergy Infrastructure Trust, Inc.
1100 Walnut Street, Suite 3350
Kansas City, MO 64106
Telephone: 816.875.3705
We are a publicly traded real estate investment trust ("REIT") focused on energy infrastructure. Our business strategy is to own and operate or lease critical energy midstream infrastructure connecting the upstream and downstream sectors within the industry. We currently generate revenue from the transportation, via pipeline, of natural gas and crude oil for our customers in Missouri and California. The pipelines are located in areas where it would be difficult to replicate rights of way or transport natural gas or crude oil via non-pipeline alternatives resulting in our assets providing utility-like criticality in the midstream supply chain for our customers.
The Manager and the Management Agreement
Corridor InfraTrust Management, LLC
1100 Walnut Street, Suite 3350
Kansas City, MO 64106
Telephone: 816.875.3705
The Company is managed by Corridor InfraTrust Management, LLC ("Corridor"), an asset manager specializing in financing the acquisition or development of infrastructure real property assets. Under our Management Agreement, Corridor (i) presents us with suitable acquisition opportunities consistent with our investment policies and our objectives, (ii) is responsible for our day-to-day operations and (iii) performs such services and activities relating to our assets and operations as may be appropriate. The Management Agreement as in effect prior to February 4, 2021, did not have a specific term, and was amended with the First Amendment to the Management Agreement on February 4, 2021. For a description of the Management Agreement and the related Administrative Agreement, see “Certain Relationships and Related Party Transactions” in this proxy statement.
Description of the Internalization and Contribution Agreement
Set forth below is a summary of the Internalization and the material terms of the Contribution Agreement implementing the Internationalization. The summary of the Contribution Agreement set forth below is qualified in its entirety by reference to the Contribution Agreement attached as Annex B to this proxy statement.
General
On February 4, 2021, the Company entered into a Contribution Agreement with Richard C. Green, Rick Kreul, Rebecca M. Sandring, Sean DeGon, Jeff Teeven, Jeffrey E. Fulmer, David J. Schulte (as Trustee of the DJS Trust under Trust Agreement dated July 18, 2016), and Campbell Hamilton, Inc., which is an entity controlled by David J. Schulte (collectively, the "Contributors"), and Corridor.
Consummation of the transactions contemplated in the Contribution Agreement will result in the Internalization of the management of the Company. Following the Internalization, the Company will (i) own all material assets of Corridor currently used in the conduct of the business of Corridor, and (ii) be managed by officers and employees who currently work for Corridor and who are expected to become employees of the Company.
To pay the aggregate Internalization consideration (the "Internalization Consideration"), the Company will issue to the Contributors, based on each Contributor's percentage ownership in Corridor, an aggregate of: (i) 1,153,846 shares of Common Stock, (ii) 683,761 shares of the newly created Class B Common Stock (the terms of which are described above in PROPOSAL TWO - Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock under the heading “Description of Class B Common Stock and Series B Preferred Stock”), and (iii) 170,213 depositary shares of Series A Preferred Stock (collectively with the Common Stock and Class B Common Stock, the "REIT Stock").
Contemporaneously with execution of the Contribution Agreement, the Company and Corridor entered into the First Amendment (the "First Amendment") to the Management Agreement dated as of May 8, 2015 (as amended,
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the "Management Agreement") that has the effect of (i) reducing the amount paid to Corridor until closing of the Internalization or termination of the Contribution Agreement and (ii) providing payment to Corridor to enable distribution of payments to employees of Corridor as approved by the independent directors of the Company and pending closing of the Contribution Agreement. The Contribution Agreement acknowledges the funding of these retention bonus payments by Corridor to its employees pursuant to the First Amendment, which payments are expected to total $1,000,000.
Following execution of the First Amendment, fees incurred under the Management Agreement for the three months ended March 31, 2021 totaled approximately $1.9. million, which consisted of (i) $1.0 million paid in connection with the execution of the First Amendment, to fund the retention bonus payments to Corridor’s employees in connection with the Internalization; (ii) $321 thousand for January 2021 management fees earned pursuant to the Management Agreement prior to execution of the First Amendment; and (iii) $608 thousand for reimbursement to Corridor for employee salaries and office-related expenses under the First Amendment to the Management Agreement. The First Amendment also provides that, beginning April 1, 2021, the Company will pay Corridor additional cash fees equivalent to the aggregate amount of all dividends that would accrue, if declared, on and after such date with respect to the securities to be issued as the Internalization Consideration pursuant to the Contribution Agreement (an amount, assuming payment on a cash basis equal to approximately $172 thousand per quarter assuming $0.05 dividends per quarter on Common Stock and Class B Common Stock). This agreement is in effect until the closing of the Internalization or termination of the Contribution Agreement.
Closing and Post-Closing
The Contribution Agreement provides that the Internalization will be consummated within seven calendar days following stockholder approval of this proposal.
The Contribution Agreement can be terminated by the mutual agreement of the parties before or after stockholder approval and can be terminated by any party in the event of a material breach of its terms by the other (subject to a 30-day cure period), or if the issuance of the REIT Stock is not approved by the Company's stockholders. Either the Company or the Contributors also may terminate the Contribution Agreement if the closing does not occur within one year of February 4, 2021. If the Contribution Agreement is terminated, the existing Management Agreement and Administrative Agreement will revert to the previous revenue formula and otherwise remain in full force and effect.
At closing of the Internalization, the Company will enter into a registration rights agreement with the Contributors that will be substantially similar to the form of the Registration Rights Agreement entered into with the Grier Members in connection with the Crimson Transaction. The registration rights agreement, subject to the terms thereof, will provide for certain demand and piggyback registration rights in favor of the Contributors, subject to customary underwriter cutbacks, to require the Company to file a shelf registration statement covering the resale of listed Company securities they may ultimately acquire as part of the Internalization. The Company will agree to pay certain fees and expenses relating to registrations under the registration rights agreement. Notwithstanding any registration rights, and pursuant to the Contribution Agreement: (i) subject to certain exceptions to sell a number of shares to pay tax obligations in connection with the Internalization, neither Campbell Hamilton, Inc. nor David J. Schulte as Trustee of the DJS Trust under Trust Agreement dated July 18, 2016 will be permitted to sell or otherwise transfer any of the shares of Common Stock received in connection with the Internalization for a period of twelve months following the closing of the Internalization and (ii) no Contributor may sell or otherwise transfer any shares of Class B Common Stock.
Each Contributor has agreed in the Contribution Agreement that, for twenty-four months after closing, it will not compete with the Company or solicit its employees, subject to certain exceptions in the Contribution Agreement.
The Company has agreed, for a period of at least six years after the closing of the Internalization, to indemnify all current and former directors, officers and employees of Corridor for a damages in connection with any actual or threatened action or proceeding based on, or arising out of, the service of such person in any such capacity prior to the closing, to the same extent Corridor would have been permitted to indemnify such persons under applicable law. The Company will maintain director and officer "tail coverage" insurance, covering all current and former directors and officers of Corridor for at least six years after closing of the Internalization.
Conduct of Business Prior to Closing
The Contributors and Corridor have agreed that, until the closing, except to the extent expressly provided in the Contribution Agreement, they shall cause Corridor, to:
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conduct the business in the ordinary course, consistent with past practice and in compliance with the requirements of the Management Agreement;
use commercially reasonable efforts to preserve substantially intact Corridor's present organization;
use commercially reasonable efforts to keep available the services of Corridor's present officers and employees and of all other persons who provide material services to the Company and its subsidiaries and
use commercially reasonable efforts to preserve its relationships with others having business dealings with it relating to the business.
The Contributors and Corridor have also agreed that, until the closing, without the prior consent of the Special Committee, they will not, and will cause Corridor not to:
sell, lease, encumber, transfer, license or dispose of any assets, contracts or intellectual property that will be transferred to the Company or any subsidiary, in each case except in the ordinary course of business;
enter into, amend or terminate any material contract;
fail to timely pay any account payable in the ordinary course of business relating to Corridor's business other than amounts that are subject to dispute in good faith;
take any action that would adversely affect the Company's qualification as a real estate investment trust within the meaning of Section 856 of the Code;
make any material change in any financial accounting principles or practices, in each case except for any such change required by a change in GAAP or applicable law;
enter into any material commitment or transaction relating to Corridor's business except in the ordinary course of business;
enter into any new line of business;
incur, create, assume or guarantee any indebtedness;
make any loans, advances or capital contributions to, or investments in, any other person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity;
change (or permit to be changed) any accounting or tax procedure, method, or practice (including any method of accounting for tax purposes), make (or permit to be made) any tax election or settle or compromise any tax liability;
increase the compensation or benefits of any Corridor employee or pay or otherwise grant any benefit not required by any plan with respect to any employee, or enter into any contract to do any of the foregoing, subject to certain exceptions;
commit to any single or aggregate capital expenditure or commitment in excess of $50,000 (on a consolidated basis);
acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or person or division thereof;
enter into, or amend, terminate, or assign its rights under, any lease for real property;
cancel any debts or waive any claims or rights of substantial value relating to the business or Corridor;
issue, sell or grant any equity interests of Corridor, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any equity interests of Corridor, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any equity interest of Corridor or any other securities in respect of, in lieu of, or in substitution for, the equity interest of Corridor that are outstanding on February 4, 2021;
settle or compromise any material claim, action, suit or proceeding pending or threatened against Corridor or relating to its business, other than any such settlement or compromise in the ordinary course of business consistent with past practice that involves solely the payment of money damages in an amount not in excess of $50,000 individually or $100,000 in the aggregate that is paid prior to closing (subject to a requirement not to enter into any settlement involving injunctive or similar relief that would have a restrictive impact on Corridor’s business);
hire or terminate, or enter into any transaction or any contract with, an employee. promote or appoint any person to a position of executive officer or director of Corridor;
make or authorize any change in the organizational documents of Corridor;
abandon, encumber, convey title (in whole or part), exclusively license or grant any right or other licenses to intellectual property of Corridor;
take, or agree or otherwise commit to take, or cause the Company to take or to agree or otherwise commit to take, any action that would reasonably be expected to, individually or in the aggregate, to prevent, materially delay or materially impede the consummation of the Internalization; or
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take, or agree or otherwise commit to take, any of the foregoing actions or any other action that if taken would reasonably be expected to prevent the satisfaction of the closing conditions set forth in the Contribution Agreement.
Conditions to Closing
Conditions to Each Party's Obligations
The respective obligations of the Company and the Contributors to effect the closing of the Internalization are subject to the satisfaction or waiver at or prior to the closing of the following, among other conditions:
the Company's stockholders shall have approved the Internalization;
the Management and Administrative Agreements shall have been terminated;
no statute, rule, regulation, order, decree or injunction shall have been enacted, entered, promulgated or enforced by a governmental authority that prohibits the consummation of the transactions contemplated by the Contribution Agreement;
no action, suit or proceeding shall be pending before any governmental authority which is reasonably likely to result in an injunction, judgment, order, decree or ruling that would prevent the consummation of the transactions contemplated by the Contribution Agreement and the other Internalization documents; and
any necessary consents and approvals of any governmental authority required for the consummation of the Internalization shall have been obtained.
Conditions to Our Obligations
The obligations of the Company to effect the closing of the Internalization are subject to the satisfaction or waiver at or prior to the closing of the following, among other conditions:
each of the representations and warranties of the Contributors that is qualified by reference to materiality or material adverse effect shall be true and correct, and each of the other representations and warranties of the Contributors shall be true and correct in all material respects as of the closing date (except in any case the representations and warranties that expressly speak as of a specified date or time need only be true and correct or true and correct in all material respects, as the case may be, as of such specified date or time);
all of the covenants and agreements of the Contributors required by the Contribution Agreement to have been performed as of the closing date shall have been performed in all material respects as of the closing date;
each of the representations and warranties of Corridor that is qualified by reference to materiality or material adverse effect shall be true and correct, and each of the other representations and warranties of Corridor shall be true and correct in all material respects as of the closing date (except in any case the representations and warranties that expressly speak as of a specified date or time need only be true and correct or true and correct in all material respects, as the case may be, as of such specified date or time);
all of the covenants and agreements of Corridor required by the Contribution Agreement to have been performed as of the closing date shall have been performed in all material respects as of the closing date;
there shall not have occurred a material adverse effect with respect to Corridor; and
we shall have received certificates, in form and substance reasonably satisfactory to us, confirming these facts.
Conditions to the Obligations of the Contributors
The obligations of the Contributors to effect the closing of the Internalization are subject to the satisfaction or waiver at or prior to the closing of the following conditions:
each of the representations and warranties of the Company that is qualified by reference to materiality or material adverse effect shall be true and correct, and each of the other representations and warranties of the Company shall be true and correct in all material respects as of the closing date (except in any case the representations and warranties that expressly speak as of a specified date or time need only be true and correct or true and correct in all material respects, as the case may be, as of such specified date or time);
all of the covenants and agreements of the Company required by the Contribution Agreement to have been performed as of the closing date shall have been performed in all material respects as of the closing date;
there shall not have occurred a material adverse effect with respect to the Company;
the Company shall have delivered evidence of the issuance of the securities constituting the Internalization Consideration, as well as the executed the registration rights agreement, to the Contributors; and
the Contributors shall have received a certificate, in form and substance reasonably satisfactory to them, confirming these facts.
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Certain Pre-Closing Covenants
Pursuant to the Contribution Agreement, we, and the Contributors have agreed to certain covenants, among others, as described below.
Corridor and the Contributors have agreed to continue to conduct the Company’s business in the ordinary course, consistent with past practice and in compliance with the Management Agreement and related terms of the Contribution Agreement, prior to the closing of the Internalization.

The Contributors have agreed to furnish the Special Committee, the Company and their representatives with any information and data (including copies of contracts, plans and other books and records) concerning the business, Corridor and operations of the business as the Special Committee, we or any of our representatives reasonably may request.

The Company agreed to prepare and file with the SEC this proxy statement to approve the Internalization and to call and hold a meeting for the approval of the Internalization, and the Company and the Contributors have agreed to take all other actions necessary, proper and advisable to cause all closing conditions to be satisfied and to consummate the Internalization, and in connection therewith to make all necessary filings with governmental authorities or other persons or entities, as applicable.
Representations and Warranties
The Contribution Agreement contains customary representations and warranties and covenants of (a) the Contributors (severally and not jointly), (b) the Contributors and Corridor (severally and jointly) and (c) the Company relating to, among other things, their ability to enter into the Contribution Agreement and our outstanding capitalization.
Indemnification
Contributor and Corridor Indemnification of the Company
Subject to the qualifications and limitations described below, each Contributor shall, severally and not jointly, indemnify and hold harmless the Company and its successors and the stockholders, members, managers, partners, officers, directors, employees and agents of each such indemnified person (collectively, the "Company Indemnified Parties") from and against any and all losses that may be asserted against, or paid, suffered or incurred by any Company Indemnified Party to the extent arising out of, resulting from, based upon or relating to any breach of any representation or warranty of such Contributor.
Subject to the qualifications and limitations described below, each Contributor shall, jointly and severally, indemnify and hold harmless the Company Indemnified Parties from and against any and all losses that may be asserted against, or paid, suffered or incurred by any Company Indemnified Party to the extent arising out of, resulting from, based upon or relating to:
any breach of any representation or warranty made by Corridor in the Contribution Agreement or any related transaction documents;
any failure by the Contributors or Corridor duly and timely to perform or fulfill any of their covenants or agreements required to be performed by them under the Contribution Agreement or any related transaction documents;
any act or omission for which Corridor would be required to provide indemnity to the Company under the Management or Administrative Agreements, to the extent such act, omission or state of affairs preceded the closing and the Company did not have prior knowledge of such matter and makes a demand for such indemnification within 12 months after the closing of the Internalization; and
any liability for taxes payable in respect of any pre-closing tax period, taxes of the Contributors or any affiliate or taxes resulting from any transfer of the Contributors' membership interest in Corridor pursuant to the transaction documents.
Limitations to Contributor Indemnification of the Company
Subject to exceptions for any fraud or a breach of certain fundamental representations specified in the Contribution Agreement, no amounts of indemnity will be payable by the Contributors with respect to any claim relating to a breach or alleged breach of a representation or warranty, or acts or omissions for which Corridor would be required to indemnify the Company under the Management or Administrative Agreements, unless and until the
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Company Indemnified Parties have paid, suffered or incurred losses with respect to such breaches in excess of one percent of the aggregate indemnity cap of $16,900,000 (the “Cap”), or $169,000 (the “Basket”), in which case the Company Indemnified Parties may bring a claim for all losses; provided, no such Basket or Cap exists with respect to fraud and certain specified representations. The maximum aggregate liability of Contributors under their indemnity obligations with respect to breaches of representations and warranties shall not exceed 25% of the Cap.
Company Indemnification of the Contributors
Subject to the qualifications and limitations described below, the Company shall, severally and not jointly, indemnify and hold harmless the Contributors and their respective successors and the respective stockholders, members, managers, partners, officers, directors, employees and agents of each such indemnified person (collectively, the "Contributor Indemnified Parties") from and against any and all losses that may be asserted against, or paid, suffered or incurred by any Contributor Indemnified Party to the extent arising out of, resulting from, based upon or relating to:
any breach of any representation or warranty made by the Company in the Contribution Agreement or any related transaction documents; and
any failure by the Company duly and timely to perform or fulfill any of the Company's covenants or agreements required to be performed by it under the Contribution Agreement or any related transaction documents.
Limitations to Company Indemnification of the Contributors
No amounts of indemnity will be payable by the Company with respect to any claim relating to a breach or alleged breach of a representation or warranty unless and until the Contributor Indemnified Parties have paid, suffered, incurred, sustained or become subject to losses with respect to such breaches in excess of the Basket in the aggregate, in which case the Contributor Indemnified Parties may bring a claim for all losses; provided, no such Basket or Cap exists with respect to fraud or certain specified representations. The maximum aggregate liability of the Company under its indemnity obligations with respect to breaches of representations and warranties shall not exceed 25% of the Cap.
Interests of Certain Persons in the Internalization
Directors and Officers of the Company
David J. Schulte is a member of our Board of Directors and is our President and Chief Executive Officer. Each of Rick Kreul, Rebecca M. Sandring, Sean DeGon, Jeff Teeven and Jeffrey E. Fulmer is an officer of the Company and each has an interest in Corridor. All of these individuals are either a Contributor or control a Contributor. As a result, each has interests in the Internalization that differ from those of our stockholders as each will have a direct or indirect beneficial interest in a portion of the consideration received by the Contributors in the Internalization.
The directors and executive officers of the Company will have the following interests in the Internalization.
Director or Executive OfficerPercentage Interest of Internalization ConsiderationRetention Bonus ($)
David J. Schulte53.42%$50,000 
Rebecca M. Sandring5.25%150,000 
Jeffrey E. Fulmer8.08%150,000 
Special Committee Compensation
In consideration of the expected time and effort that would be required of the members of the Special Committee in evaluating a potential internalization transaction, the Board of Directors determined that each other member of the Special Committee would receive a retainer of $1,000 per meeting of the Special Committee. Such fees were payable whether or not an internalization transaction was entered into by the Company and payment of such fees is not conditioned upon the Internalization being completed. No other meeting fees or other compensation (other than reimbursement for out-of-pocket expenses in connection with attending Special Committee meetings) will be paid to the members of the Special Committee in connection with their service on the Special Committee.
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Reasons for the Internalization
Our relationship with Corridor been instrumental to our development as a publicly traded REIT and the establishment of our business operations. We believe we can internalize the systems, personnel and management of Corridor with minimal disruption to our operations and compelling benefits to the Company and our stockholders through reduced expense in the combined general and administrative and advisory fee expense categories, improved cash flow, and a simplified corporate structure. Internalization provides to the Company the opportunity to align the interests and incentives of the Corridor employees and owners with the interests and incentives of the employees joining the Company as a result of the Crimson Transaction.
Following the proposed Internalization, we will own all material assets of Corridor currently used in the conduct of its business. The existing employees of Corridor will become employees of the Company. Following the Internalization, we will be managed by officers and employees who currently manage our business and who have industry expertise, management capabilities and a unique knowledge of our assets and business strategies.
One important benefit of the Internalization is the overall reduction in the combined general and administrative and advisory fee expense categories, which we expect to result in improved cash flow, net income and CAD. The Company estimates that if the Internalization had occurred as of January 1, 2020, on a cash basis the unadjusted net savings to the Company for 2020 would have been approximately $1.64 million. Further adjusting that number for annualized management compensation of approximately $700,000 paid by Corridor in 2020 that, as a result of certain retirements, will not be present in future years, would lead to projected annual cash savings using 2020 figures of approximately $2.34 million. If this projected savings number is further adjusted by subtracting the aggregate annual dividends of $681,352 expected to be payable on the securities constituting the Internalization Consideration (including $313,830 per year on 170,213 depositary shares of Series A Preferred Stock at the applicable preferred dividend rate of 7.375%, plus aggregate dividends of $367,521 on 1,153,846 shares of Common Stock and 683,761 shares of Class B Common Stock, based on the current annualized dividend rate of $0.20 per share on the Company’s Common Stock), such adjustment would still result in a projected annual net benefit to the Company’s Common Stock holders of approximately $1.66 million, even after accounting for payment of new dividends attributable to the Internalization Consideration.
The Internalization will also simplify our organizational structure in a way that may assist us in attracting new investors. Certain institutional investors have a notable preference for internally managed equity REITs given the perception that externally managed REITs are more susceptible to conflicts of interest that might negatively impact stockholder interests. Thus, the Internalization may positively impact efforts to diversify our stockholder base, although no assurances can be given that such a result will occur.
Background of the Internalization
The Board of Directors has for the last few years discussed the circumstances under which it would make sense to convert to an internally managed REIT. One of the circumstances that the Board viewed as an appropriate time to aggressively consider internalization was an acquisition by the Company that resulted in a meaningful increase in the number of employees needed to manage the assets of the Company. When the Board of Directors was presented with the possibility of the Crimson Transaction, the Board of Directors considered the advantages of simultaneously pursuing an internalization. At the August 6, 2020 meeting of the Board of Directors, the topic of internalization was explicitly discussed and the Board of Directors authorized the creation of a Special Committee composed exclusively of independent directors to consider and evaluate an internalization of the management structure of the Company.
Proceedings of the Special Committee
The Special Committee of the Board consists of Todd Banks, Conrad Ciccotello, and Catherine Lewis. None of the members of the Special Committee is an officer or employee of the Company or Corridor, none of them has an ownership or other direct or indirect interest in Corridor, and they are all of the independent directors of the Company. The Special Committee was authorized by the Board to spend such funds and undertake such analysis as the Special Committee might deem prudent and to retain any advisors it felt necessary to completion of their work, including legal and financial advisors.
The Special Committee met a total of eleven times. At no time during the work of the Special Committee did the topic of internalization receive focused discussion by the full Board of Directors. The following is a brief summary of the meetings of the Special Committee.
The first meeting of the Special Committee was held on August 6, 2020 and was attended by the three members of the Special Committee and, at their invitation, representatives of Evercore Group L.L.C. ("Evercore"), Mr.
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Michael Coster of TD Securities, and Mr. Steven Carman of Husch Blackwell LLP. Based on the familiarity of the Special Committee with each of the two financial advisors and the legal advisor and the independence of each from Corridor, the Special Committee retained the three advisors to assist and support their work. After a discussion of process, the Special Committee directed Mr. Carman to contact counsel for Corridor and request a term sheet for a potential internalization.
Mr. Carman spoke to counsel for Corridor on August 6 and requested the desired term sheet. An initial draft of a term sheet was provided to Mr. Carman on August 18, was discussed between counsel on August 19 in order to confirm and clarify certain timing issues, and then was revised and forwarded to Mr. Carman on August 21. Mr. Carman forwarded that draft of the term sheet to the Special Committee on August 22.
The Special Committee met on August 24 to review with Mr. Carman the draft term sheet. The term sheet proposed a transaction value of $19.0 million, with the consideration payable in a combination of cash and Company Common Stock. Mr. Carman was asked to explain numerous aspects of the proposed term sheet, and the Special Committee directed Mr. Carman to forward the term sheet to Evercore and TD Securities to solicit their input and analysis and to inform counsel to Corridor of the analysis to be undertaken.
The Special Committee met again on September 18, 2020 with Mr. Carman, who updated the Special Committee on a discussion the prior week with counsel to Corridor to discuss structuring alternatives that might be more tax efficient for the Contributors in light of the structure then being considered for the Crimson Transaction. Mr. Carman confirmed for the Special Committee the structure that minimized tax risk for the Company, and the Special Committee noted their preference for that structure and asked Mr. Carman to ask the financial advisors to prepare to share their preliminary evaluations with the Special Committee.
At the October 9, 2020 meeting of the Special Committee, the Special Committee met with representatives of Evercore, and TD Securities and Mr. Carman. After Mr. Carman updated the group on the status of the contemplated Crimson Transaction, the representatives of Evercore provided a detailed review of their analysis of the proposed acquisition and the incremental economic benefit of the Internalization. The representatives of TD Securities then presented their analysis of the proposed cost savings that may result from the Internalization. The Special Committee then directed Mr. Carman to revise for consideration by the Special Committee the term sheet proposed by Corridor to adjust the proposed consideration, include non compete protection for the Company, and revise the form of consideration.
The Special Committee met again on November 9, 2020 with representatives of Evercore and TD Securities and Mr. Carman. Evercore provided an updated financial analysis of the Internalization as a result of changes in the contemplated Crimson Transaction. TD Securities briefly updated its analysis, noting that use of Company securities presented limitations for the TD Securities analysis. After receiving the analyses, and in light of the uncertainty of the Crimson Transaction, the Special Committee chose to not respond at that time to the initial proposed Corridor term sheet.
In light of progress seeming to be made on the Crimson Transaction, and because the Special Committee had concluded that the Internalization would only benefit the Company at the current time if it occurred as a part of that transaction, the Special Committee met again on November 25, 2020 with representatives of TD Securities and Evercore and Mr. Carman to receive updated analyses from Evercore and TD Securities. After discussing at length the various issues that could be addressed in the revised term sheet prepared by Mr. Carman, the Special Committee asked Mr. Carman to further revise the term sheet and circulate a revised draft to the Special Committee.
Mr. Carman revised the term sheet to reduce the consideration from $19.0 million to $16.9 million, to change the form of consideration from units in Crimson Midstream Holdings to Company Common Stock, to give the Special Committee authority over allocation of the retention/bonus pool to be created, and to make other less material changes. The revised term sheet was approved by the Special Committee, which directed Mr. Carman to forward the revised term sheet to counsel for Corridor on November 27.
As a result of a restructuring of the Crimson Transaction, the Special Committee met on January 14, 2021 with representatives of Evercore and TD Securities and Mr. Carman. Evercore provided to the Special Committee a thorough update of their financial analysis as a result of changes to the structure of the Crimson Transaction. A representative of TD Securities shared thoughts on the Internalization and reminded the Special Committee of its challenges in valuing the Company securities to be used in consideration in the Internalization. This meeting was important for the Special Committee to maintain its support for the Internalization in spite of the negotiated changes to the structure of the Crimson Transaction. On January 19, 2021, counsel for Corridor forwarded a revised term sheet that changed the proposed form of consideration from Company Common Stock to a combination of the following
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securities of the Company: (i) approximately $8.1 million of Common Stock, (ii) approximately $4.8 million of Class B Common Stock, and (iii) approximately $4.0 million of Series A Preferred Stock.
On January 21, 2021, the Special Committee met with representatives of Evercore and TD Securities and Mr. Carman to review the mix of securities to be used as consideration in the Crimson Transaction and to consider similarly aligning the Internalization consideration. After receiving the analyses from Evercore and discussing the matter at length, the Special Committee directed Mr. Carman to revise the term sheet with Corridor to allocate the $16.9 million in consideration among: (i) approximately $10.1 million or Company Common Stock, (ii) approximately $2.0 million of Series A Preferred Stock, and (iii) approximately $4.8 million of Class B Common Stock of the Company. Mr. Carman delivered that revised term sheet to counsel for Corridor on January 21.
After receiving the revised term sheet from the Special Committee, Mr. Green and Mr. Schulte, the two largest owners of Corridor asked to meet with the Special Committee to present their views on the two important issues in the term sheet that remained unresolved; namely, the mix of Company securities to be used as consideration and the timing and allocation of the proposed retention bonuses. The Special Committee agreed to the request for a virtual meeting, and on January 23, 2021 the Special Committee met with Mr. Schulte, Mr. Green, and counsel for Corridor and with Mr. Carman. The Special Committee provided to the Corridor representatives the opportunity to explain their logic and desired result on the two noted items and were then excused from the meeting. After considering that information and analyzing the request in the context of the Evercore analysis, the Special Committee directed Mr. Carman to propose to counsel for Corridor a consideration allocation among Company securities of: (i) $8.1 million Common Stock; (ii) $4.8 million of Class B Common Stock, and (iii) $4.0 million of Series A Preferred Stock. Mr. Carman was also asked to note the acceptance by the Special Committee of the proposal that the retention bonus amounts be paid to Corridor at the time of execution of the Contribution Agreement and the reduced management fee amount that would be paid through April 1, 2021 after execution of the Contribution Agreement. Mr. Carman conveyed that information to counsel for Corridor on January 23. Later on January 23, counsel for Corridor indicated to Mr. Carman that Corridor accepted the proposed consideration allocation, and Mr. Carman conveyed this response to the Special Committee via email and, after confirming with Evercore its views on that consideration mix, each of the members of the Special Committee noted their acceptance of that package. Mr. Carman was authorized to work expeditiously to document that agreement.
The Special Committee met with Mr. Carman on January 29, 2021 to receive an update on the status of documentation for the Internalization. Mr. Carman requested and received guidance on the extent of the non compete sought by the Special Committee and the allocation of the $1 million cash payment among Corridor employees.
The final meeting of the Special Committee occurred on February 1, 2021 and was attended by representatives of Evercore and Mr. Carman. In advance of the meeting, Mr. Carman had provided to committee members near final drafts of the documents for the Internalization and Evercore had provided both an updated version of their financial analyses and a draft of their fairness opinion. Mr. Carman explained the agreements, responding to questions from the Special Committee, and representatives of Evercore provided an updated review of their financial analyses and the expectation that Evercore would be able to provide to the Special Committee its fairness opinion described in detail below. The Special Committee then voted unanimously to recommend the Internalization to the Board of Directors for approval and directed Mr. Carman to complete his work on the documents and requested that Evercore prepare to deliver its written fairness opinion at a meeting of the Board of Directors.
The Board of Directors met on February 4 to accept the written fairness opinion from Evercore and to vote unanimously (with Mr. Schulte abstaining from such vote because of his interest in Corridor) to approve the Internalization.
Recommendations of the Special Committee and Our Board of Directors
Recommendation of the Special Committee; Reasons for Recommendation
In reaching its conclusion to unanimously recommend that the Board approve the Internalization and the Contribution Agreement and the other transactions and documents expressly contemplated by the Contribution Agreement, the Special Committee took into account the following factors (without assigning relative weights) which the Special Committee believes support the Internalization:
the removal of an asset based management fee;
the ability to accommodate integration of the Crimson management team in a more uniform manner;
allocation of compensation responsibility and control to a committee of the Board;
the ability to complete the Internalization using Company securities as the Internalization Consideration;
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the timing of the transaction, particularly compared to the price that might have been paid in the past;
the fair and customary terms of the relevant agreements;
the subordinated feature of the Class B Common Stock used as a portion of the consideration;
conforming to the predominant REIT governance model;
the belief that the Internalization would enable the Company to realize certain efficiencies arising from an internally managed structure in that the Company will pay for management, advisory, acquisition and development services directly rather than paying a third-party fee for such services, thereby enabling the Company to both eliminate the profits that were previously being realized by the Manager for providing such services and potentially allowing the Company in the future to raise additional equity without a proportionate increase in the cost of managing the Company that would likely result had the Company continued to be externally managed;
the terms and conditions of the Contribution Agreement, including (i) the type and amount of consideration to be paid to the Contributors, (ii) the indemnities obtained, and (iii) certain conditions to the Company's obligation to consummate the Internalization, including approval by the Company's stockholders of the Internalization;
an estimate of the amount of aggregate management fees that the Company would pay to the Manager prior as contrasted with the estimated savings from the Internalization;
the extensive financial analysis of Evercore and the opinion of Evercore, dated February 4, 2021, to the effect that, as of that date and based upon and subject to the assumptions, qualifications and conditions described therein, the Internalization Consideration to be paid by the Company pursuant to the Contribution Agreement was fair, from a financial point of view, to the Company, as more fully described in the section entitled "—Opinion of the Financial Advisor to the Special Committee"; and
the limited termination provisions under the existing management agreement.
The Special Committee also took into account, without assigning relative weights to, the following factors. Although the Special Committee viewed these as potentially negative factors with respect to the Internalization, the Special Committee believed these factors were outweighed by the positive factors set forth above:
the appearance of potential conflicts of interest between the Company and Corridor, including certain directors with the Company and Corridor and the compensation and/or other benefits to be received by such persons, either directly or indirectly, as a result of the Internalization, as well as the fact that: (i) each of the Contributors is an owner of equity interests in Corridor, and (ii) each will have a beneficial interest in the consideration paid to the Contributors in the Internalization and could make substantial profits as a result of the transaction; although the Special Committee believes that this risk is mitigated by the steps taken (such as the creation of the Special Committee and the retention of its own financial advisor) to ensure that the Internalization would not be negatively affected by such conflicts; and
the potential liabilities associated with the direct employment of personnel.
The Special Committee determined that, in light of all the factors that it considered, the Contribution Agreement, the Internalization and the transactions expressly contemplated by the Contribution Agreement are advisable and are fair and reasonable to and in the best interests of the Company and our stockholders. Accordingly, the Special Committee unanimously recommended that our Board approve the Contribution Agreement and the Internalization.
Recommendation of the Board
Our Board (Mr. Schulte, who had material financial interests in the Internalization, abstained from voting on the approval of the Contribution Agreement) approved the Contribution Agreement, the Internalization and the other transactions expressly contemplated by the Contribution Agreement, having determined that they are advisable and are fair and reasonable to and in the best interests of the Company and our stockholders. Accordingly, our Board (excluding Mr. Schulte who has material financial interests in the Internalization and, accordingly, is abstaining from joining in our Board's recommendation) recommends that stockholders vote FOR the Internalization.
Our Board based its determination that the Internalization is advisable and fair and reasonable to and in the best interests of the Company and our stockholders primarily on:
the factors considered and conclusions of the Special Committee (which were adopted by our Board as its own); and
the extensive negotiations of the Special Committee with representatives of the Contributors.
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Our Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination.
Opinion of the Financial Advisor to the Special Committee
The Special Committee retained Evercore to act as its financial advisor in connection with the Internalization. As part of this engagement, the Special Committee requested that Evercore evaluate the fairness, from a financial point of view, of the Internalization. Consideration payable by the Company pursuant to the Contribution Agreement. On February 4, 2021, Evercore rendered its opinion to the Special Committee to the effect that, as of that date and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s opinion, the Internalization Consideration to be paid by the Company pursuant to the Contribution Agreement was fair, from a financial point of view, to the Company.
The full text of the written opinion of Evercore, dated February 4, 2021, is attached hereto as Annex C. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Evercore in rendering its opinion. The Company encourages you to read the opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Special Committee in its evaluation of the Internalization and addresses only the fairness, from a financial point of view, of the Internalization Consideration to be paid by the Company pursuant to the Contribution Agreement. It does not address any other aspect of the Internalization and does not constitute a recommendation as to how any holder of shares of Common Stock should vote on the Internalization or the issuance of the REIT Stock pursuant to the Internalization or any matter related thereto. The summary of the opinion of Evercore set forth below is qualified in its entirety by reference to the full text of the opinion.
In connection with rendering its opinion and performing its related financial analysis, Evercore, among other things:
reviewed certain publicly available historical business and financial information related to the Company that Evercore deemed relevant, including as set forth in the Annual Report on Form 10-K for the year ended December 31, 2019, the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, and certain Current Reports on Form 8-K, in each case as filed with or furnished to the U.S. Securities and Exchange Commission by the Company since December 31, 2019;
reviewed certain internal projected financial and operating data and assumptions related to the Company, Crimson, Crimson combined with the Company (“Pro Forma CORR” and, such financial and operating data and assumptions, the “Pro Forma CorEnergy Financial Projections”) and Corridor including cost savings from the Internalization (the “Corridor Cost Savings”) as prepared and furnished to Evercore by management of the Company;
discussed with management of the Company the historical and projected financial and operating data and assumptions relating to the Company, Crimson, Pro Forma CORR and Corridor;
discussed with management of the Company their assessment of the past and current operations, financial condition and prospects of the Company, Crimson, Pro Forma CORR and Corridor;
performed a discounted cash flow analysis for Pro Forma CORR based on forecasts and other data provided by management of the Company;
compared the financial performance of Pro Forma CORR utilizing forecasts and other data provided by management of the Company with the trading performance (including equity market trading multiples) of public issuers that Evercore deemed relevant;
reviewed the financial metrics of certain historical transactions that Evercore deemed relevant involving assets similar to Pro Forma CORR and applied such financial metrics to the Pro Forma CorEnergy Financial Projections;
reviewed the financial metrics of certain historical transactions that Evercore deemed relevant involving assets similar to Corridor and compared such financial metrics to those implied by the Internalization;
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performed a discounted cash flow analysis for the Corridor Cost Savings on forecasts and other data provided by management of the Company;
reviewed a draft of the Contribution Agreement, dated January 31, 2021;
reviewed a draft of the MIPA, dated February 2, 2021;
reviewed a draft of the Third LLC Agreement, dated February 2, 2021; and
performed such other analyses and examinations, held such other discussions, reviewed such other information and considered such other factors that Evercore deemed appropriate for the purposes of providing the opinion included as Annex C.
For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumes no liability therefor. With respect to the projected financial and operating data relating to the Company, Crimson, Pro Forma CORR and Corridor, Evercore assumed that such data had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company as to the future financial performance of the Company, Crimson, Pro Forma CORR and Corridor, as applicable, under the assumptions reflected therein. Evercore expressed no view as to any projected financial or operating data or any judgments, estimates or assumptions on which they are based. Evercore relied, at direction of the Special Committee, without independent verification, upon the assessments of the management of the Company as to the future financial and operating performance of the Company, Crimson, Pro Forma CORR and Corridor.
For purposes of its analysis and opinion, Evercore assumed, in all respects material to its analysis, that the executed Contribution Agreement, MIPA and Third LLC Agreement would not differ from the draft forms reviewed by Evercore, that the representations and warranties of each party contained in the Contribution Agreement, the MIPA and the Third LLC Agreement (in the draft forms reviewed by Evercore) were, and when executed were, true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the Contribution Agreement, MIPA and Third LLC Agreement and that all conditions to the consummation of the Internalization and Crimson Transaction would be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Internalization and the Crimson Transaction would be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on the Company, Crimson, Pro Forma CORR, Corridor or the consummation of the Internalization or the Crimson Transaction or materially reduce the benefits of the Internalization or the Crimson Transaction to the Company. Evercore assumed that the final versions of all documents reviewed by Evercore in draft form would conform in all material respects to the drafts reviewed by Evercore.
Evercore did not make nor assumed any responsibility for making any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of the Company, Crimson, Pro Forma CORR or Corridor, nor was Evercore furnished with any such valuations or appraisals, nor has Evercore evaluated the solvency or fair value of the Company, Crimson, Pro Forma CORR or Corridor under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to Evercore as of the date of its opinion and financial, economic, monetary, market, regulatory and other conditions and circumstances as they existed and as could be evaluated by Evercore on the date of its opinion. Therefore, in Evercore’s opinion and this “PROPOSAL THREE — Opinion of the Financial Advisor to the Special Committee,” references to the Company are to the Company as it existed prior to consummation of the Crimson Transaction and references to Pro Forma CORR are to the Company as it exists after the Crimson Transaction and assuming that the Grier Members and the certain Management Members exercise their right to exchange their interest in Crimson for securities of the Company as described in “PROPOSAL TWO — Background.” It is understood that subsequent developments may affect Evercore’s opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.
Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness to the Company, from a financial point of view, of the Internalization Consideration to be paid by the Company pursuant to the Contribution Agreement. Evercore did not express any view on, and its opinion did not address, the fairness of the Internalization to, or any consideration received in connection therewith by, the holders of any securities, creditors or other constituencies of the Company, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of any party to the Contribution Agreement, or any class of such persons, whether relative to the Internalization Consideration or otherwise. Evercore
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was not asked to, nor did Evercore express any view on, and its opinion did not address, any other term or aspect of the Contribution Agreement or the Internalization, including, without limitation, the structure or form of the Internalization, or any term or aspect of any other agreement or instrument contemplated by the Contribution Agreement or entered into or amended in connection with the Contribution Agreement. Evercore’s opinion did not address the relative merits of the Internalization as compared to other business or financial strategies that might be available to the Company, nor did it address the underlying business decision of the Company to engage in the Internalization. Evercore’s opinion does not constitute a recommendation to the Special Committee or to any other persons in respect of the Internalization, including as to how any holder of shares of Common Stock should vote or act in respect of the Internalization. Evercore expressed no opinion as to the price at which the Common Stock, the Class B Common Stock, the Series A Preferred Stock or other securities of the Company would trade at any time. Evercore is not a legal, regulatory, accounting or tax expert and assumed the accuracy and completeness of assessments by the Company and its advisors with respect to legal, regulatory, accounting and tax matters.
Set forth below is a summary of the financial analyses performed by Evercore and reviewed with the Special Committee in connection with the rendering of Evercore’s opinion to the Special Committee. Each analysis was provided to the Special Committee. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. In connection with arriving at its opinion, Evercore considered all of its analyses as a whole, and the order of the analyses described and the results of these analyses do not represent any relative importance or particular weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on February 4, 2021, and is not necessarily indicative of current market conditions.
Summary of Evercore’s Financial Analyses
Assumptions with Respect to Pro Forma CORR
Evercore performed a series of analyses to derive indicative valuation ranges for the Internalization Consideration. Evercore performed its analyses utilizing the Pro Forma CorEnergy Financial Projections prepared and furnished by management of the Company at the request of the Special Committee. The Pro Forma CorEnergy Financial Projections assumed the consummation of the Crimson Transaction and that the Grier Members and certain Management Members exercise their right to exchange their interest in Crimson for securities of the Company as described in “Proposal Two — Background.”
Pro Forma CORR Common Stock – Discounted Cash Flow Analysis
Evercore performed a discounted cash flow analysis for a share of Pro Forma CORR Common Stock based on the Pro Forma CorEnergy Financial Projections. Evercore calculated the per share value range for the Pro Forma CORR Common Stock by utilizing a range of discount rates based on Pro Forma CORR’s Weighted Average Cost of Capital (“WACC”), as estimated by Evercore based on the Capital Asset Pricing Model (“CAPM”), and Pro Forma CORR’s business peer group, and terminal values based on a range of estimated EBITDA exit multiples and perpetuity growth rates. Evercore assumed a range of after-tax discount rates of 9.0% to 10.0%, a range of EBITDA exit multiples of 8.5x to 10.5x and a range of perpetuity growth rates of (0.25%) to 0.25% to derive a range of enterprise values. Evercore then adjusted such enterprise values for debt, cash and preferred equity of Pro Forma CORR as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections and divided the resulting equity values by the number of shares of Common Stock and Class B Common Stock outstanding as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections, which resulted in an implied equity value per share of Pro Forma CORR Common Stock of (i) $6.18 to $10.35 based on the EBITDA exit multiple discounted cash flow analysis and (ii) $6.04 to $9.31 based on the perpetuity growth discounted cash flow analysis.
Pro Forma CORR Common Share – Peer Group Trading Analysis (Sum of the Parts)
Evercore performed a series of peer group trading analyses to derive an indicative valuation range for Pro Forma CORR common shares based on a sum-of-the-parts approach aggregating the enterprise values of the distinct segments of Pro Forma CORR and subtracting the range of enterprise values for G&A. The sum of the implied enterprise values from the peer group trading analyses based on 2021 EBITDA after adjusting for debt, cash and preferred equity as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections, and dividing by the number of shares of Common Stock and Class B Common Stock outstanding as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections, resulted in an implied equity value range per share of Pro Forma CORR Common Stock of $2.93 to $4.89. The sum of the implied enterprise values from the peer group trading analyses based on 2022 EBITDA after adjusting for debt, cash and preferred equity as of January 1, 2021, and dividing by the number of shares of Common Stock and Class B Common Stock outstanding as of January 1, 2021 in the Pro Forma CorEnergy
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Financial Projections, resulted in an implied equity value range per share of Pro Forma CORR Common Stock of $3.47 to $5.51.
a.Standalone CORR
Evercore performed a peer group trading analysis of the Company excluding the effects of the Crimson Transaction other than the disposition of the GIGS (“Standalone CORR”) by reviewing and comparing the market values and trading multiples of the following four natural gas pipeline companies that Evercore deemed to have certain characteristics that are similar to those of Standalone CORR:
Business Peer Group – Natural Gas Pipeline Companies:
Equitrans Midstream Corporation
Kinder Morgan, Inc.
ONEOK, Inc.
The Williams Companies, Inc.
Although the peer group was compared to Standalone CORR for purposes of this analysis, no corporation used in the peer group analysis is identical or directly comparable to Standalone CORR. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.
For each of the peer group corporations, Evercore calculated the following trading multiples:
Enterprise Value/2021 EBITDA, which is defined as Enterprise Value divided by estimated EBITDA for the calendar year 2021; and

Enterprise Value/2022 EBITDA, which is defined as Enterprise Value divided by estimated EBITDA for the calendar year 2022.
The mean and median trading multiples are set forth below. The table also includes relevant multiple ranges selected by Evercore based on the resulting range of multiples and certain other considerations related to the specific characteristics of Standalone CORR and each of the four natural gas pipeline companies noted by Evercore.
BenchmarkMeanMedian
Enterprise Value/2021 EBITDA10.2x10.0x
Enterprise Value/2022 EBITDA9.4x9.8x
BenchmarkReference Range
Enterprise Value/2021 EBITDA9.5x – 10.5x
Enterprise Value/2022 EBITDA9.0x – 10.0x
Evercore derived a range of implied enterprise values for Standalone CORR of (i) $112.6 million to $124.5 million based on 2021 EBITDA and (ii) $119.3 million to $132.6 million based on 2022 EBITDA.
b.Crimson
Evercore performed a peer group trading analysis of Crimson by reviewing and comparing the market values and trading multiples of the following seven crude oil / refined products partnerships that Evercore deemed to have certain characteristics that are similar to those of Crimson:
Business Peer Group – Crude Oil / Refined Product MLPs:
BP Midstream Partners LP
Holly Energy Partners, L.P.
Magellan Midstream Partners, L.P.
MPLX LP
NuStar Energy L.P.
Phillips 66 Partners LP
Plains All American Pipeline, L.P.
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Although the peer group was compared to Crimson for purposes of this analysis, no partnership used in the peer group analysis is identical or directly comparable to Crimson. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.
For each of the peer group partnerships, Evercore calculated the following trading multiples:
Enterprise Value/2021 EBITDA, which is defined as Enterprise Value divided by estimated EBITDA for the calendar year 2021; and

Enterprise Value/2022 EBITDA, which is defined as Enterprise Value divided by estimated EBITDA for the calendar year 2022.
The mean and median trading multiples are set forth below. The table also includes relevant multiple ranges selected by Evercore based on the resulting range of multiples and certain other considerations related to the specific characteristics of Crimson and each of the crude oil/ refined products partnerships noted by Evercore.
BenchmarkMeanMedian
Enterprise Value/2021 EBITDA9.0x9.1x
Enterprise Value/2022 EBITDA8.7x8.9x
BenchmarkReference Range
Enterprise Value/2021 EBITDA8.5x – 9.5x
Enterprise Value/2022 EBITDA8.5x – 9.5x
Evercore derived a range of implied enterprise values for Crimson of (i) $370.8 million to $414.5 million based on 2021 EBITDA and (ii) $378.0 million to $422.5 million based on 2022 EBITDA.
c.Corporate G&A
Evercore valued G&A for Pro Forma CORR using the multiple ranges of 8.7x to 9.7x and 8.6x to 9.6x for 2021 and 2022, respectively, that represent the average Enterprise Value to EBITDA multiple of Standalone CORR and Crimson for the applicable period weighted based on their respective projected EBITDAs for such period. The peer group trading analysis utilizing the 2021 EBITDA multiple methodology resulted in a range of implied enterprise value for G&A of $28.9 million to $32.2 million. The peer group trading analysis utilizing the 2022 EBITDA multiple methodology resulted in a range of implied enterprise value for G&A of $28.5 million to $31.8 million.
Pro Forma CORR Common Share - Precedent M&A Transaction Analysis (Sum of the Parts)
Evercore also performed a series of precedent M&A transaction analyses to derive an indicative valuation range for a share of Pro Forma CORR Common Stock based on a sum-of-the-parts approach aggregating the enterprise values of the distinct segments of Pro Forma CORR and subtracting the range of enterprise values for G&A. The sum of the implied enterprise values from the sum-of-the-parts precedent transaction analyses after adjusting for debt, cash and preferred equity as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections, and dividing by the number of shares of Common Stock and Class B Common Stock outstanding as of January 1, 2021 in the Pro Forma CorEnergy Financial Projections, resulted in an implied equity value per share of Pro Forma CORR Common Stock of $1.97 to $5.55.
a.Standalone CORR
Evercore reviewed selected transactions involving the sale of natural gas transmission assets or the entities that owned them that Evercore deemed to have certain characteristics similar to those of Standalone CORR.
Evercore reviewed transactions involving the sale of natural gas transmission assets announced since August 2015 and selected the following eight transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of Standalone CORR, although Evercore noted that none of the selected transactions or the entities that participated in the selected transactions were directly comparable to Standalone CORR:
46

Date
Announced
Acquiror / Target (Seller)
01/2019NEXUS Gas Transmission, LLC (Enbridge Inc.; DTE Energy Company) / Generation Pipeline LLC
11/2017American Midstream Partners, LP / Trans-Union Interstate Pipeline (ArcLight Capital Partners, LLC)
07/2017Blackstone Energy Partners / 32.44% interest in Rover Pipeline (Energy Transfer Partners, LP)
06/2017TC PipeLines, LP / 49.3% interest in Iroquois Gas Transmission System, LP and 11.8% interest in Portland Natural Gas Transmission (TransCanada Corp.)
10/2016Dominion Midstream Partners / Questar Pipeline LLC (Dominion Resources)
07/2016Southern Company / 50% interest in Southern Natural Gas Pipeline System (Kinder Morgan, Inc.)
11/2015TC Pipelines, LP / 49.9% interest in Portland Natural Gas Transmission System (TransCanada Corp.)
08/2015Dominion Midstream Partners, LP / 25.93% interest in Iroquois Gas Transmission System, LP (National Grid and New Jersey Resources Corp.)
Evercore noted that the mean and median of the implied Enterprise Value to EBITDA multiples for the selected natural gas transmission transactions were equal to 10.4x and 10.6x, respectively.
Based on Evercore’s review of the above precedent transactions, Evercore selected a range of relevant implied multiples of Enterprise Value to EBITDA of 9.0x to 11.0x. Evercore then applied this range of selected multiples to 2021 EBITDA for Standalone CORR to derive the enterprise value range implied by 2021 EBITDA.. This analysis resulted in a range of enterprise value attributed to Standalone CORR of $106.7 million to $130.4 million utilizing 2021 EBITDA.
b.Crimson
Evercore reviewed selected transactions involving the sale of crude oil transportation pipeline assets or the entities that owned them that Evercore deemed to have certain characteristics similar to those of Crimson.
Evercore reviewed transactions involving crude oil transportation pipeline assets announced since January 2016 and selected the following 14 transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of Crimson, although Evercore noted that none of the selected transactions or the entities that participated in the selected transactions were directly comparable to Crimson:
Date
Announced
Acquiror / Target (Seller)
05/2019Delek Logistics Partners, LP / 33.0% interest in Red River Pipeline Company LLC (Plains All American Pipeline L.P.)
04/2019Stonepeak Infrastructure Partners / Oryx Midstream Services LLC
08/2018OMERS Infrastructure Management, Inc. / 50% interest in BridgeTex Pipeline Company, LLC (Plains All American Pipeline, L.P., Magellan Midstream, L.P.)
08/2018Lotus Midstream LLC; Moda Midstream LLC / Centurion pipeline and crude gathering assets; Ingleside crude terminal (Occidental Petroleum Corp)
02/2018Andeavor Logistics LP / Wamsutter Pipeline System (Plains All American, LP)
02/2018Silver Creek Midstream LLC / Gathering system in Powder River Basin and 25% interest in Wyoming pipeline (Tallgrass Energy Partners LP)
01/2018Andeavor / 110-mile crude oil pipeline and oil storage terminals (Rangeland Energy II, LLC)
12/2017Noble Midstream Partners LP; Greenfield Midstream, LLC / Saddle Butte Rockies Midstream, LLC
11/2017BlackRock Inc., Navigator Energy Services, LLC / 50% Interest in Glass Mountain Pipeline (SemGroup / NGL Energy Partners)
09/2017MPLX LP / Acquisition of interests in Explorer and Lincoln Pipelines and LOOP (Marathon Petroleum Corp.)
08/2017Holly Energy Partners LP / Remaining 50% interest in Frontier Aspen LLC and 75% interest in SLC Pipeline LLC (Plains All American Pipeline L.P.)
04/2017NuStar Energy L.P. / Navigator Energy Services, LLC
02/2017Plains All American Pipeline L.P. & Noble Midstream Partners LP / Advantage Pipeline, LLC
01/2016Tallgrass Energy Partners, LP / 31.3% interest in Tallgrass Pony Express Pipeline (Tallgrass Development, LP)
Evercore noted that the mean and median of the implied Enterprise Value to EBITDA multiples for the selected crude oil transportation pipeline transactions were equal to 12.4x and 9.9x, respectively.
Based on Evercore’s review of the above precedent transactions, Evercore selected a range of relevant implied multiples of Enterprise Value to EBITDA of 9.0x to 11.0x. Evercore then applied this range of selected
47

multiples to 2021 EBITDA for Crimson to derive the enterprise value range implied by 2021 EBITDA. This analysis resulted in a range of enterprise value for Crimson of $392.6 million to $479.9 million.
c.Corporate G&A
Evercore valued G&A for Pro Forma CORR using the multiple range of 9.0x to 11.0x for 2021 that represents the average Enterprise Value to EBITDA multiple for Standalone CORR and Crimson weighted based on their respective projected EBITDAs for the period. The precedent M&A transaction analysis resulted in a range of implied enterprise value for G&A of $29.7 million to $36.4 million.
Indicative Value of the Internalization Consideration
The Internalization Consideration is comprised of 170,213 shares of Series A Preferred Stock, 1,153,846 shares of Common Stock and 683,761 shares of Class B Common Stock. Evercore derived the indicative value of the Internalization Consideration based on the various analyses as previously reviewed above which resulted in valuation ranges of $15.3 million to $23.3 million utilizing the discounted cash flow analysis, $9.6 million to $14.4 million utilizing the peer group trading analysis and $7.9 million to $14.4 million utilizing the precedent M&A transactions analysis. Evercore selected an indicative value range for the Internalization Consideration of $13.0 million to $21.0 million.
a.CORR Series A Preferred Stock
For the indicative value of the Internalization Consideration, Evercore valued the 0.2 million shares of Series A Preferred Stock at $25.00 per share based on the value of its liquidation preference on a pro forma basis for each of the analyses.
b.Common Stock
For the indicative value of the Internalization Consideration, Evercore valued the 1.2 million shares of Common Stock based on the values for a share of Pro Forma CORR Common Stock derived in each of Evercore’s respective analyses.
c.CORR Class B Common Stock
For the indicative value of the Internalization Consideration, Evercore valued the 0.7 million shares of Class B Common Stock based on the values for a share of Pro Forma CORR Common Stock derived in each of Evercore’s respective analyses. Evercore determined to value Class B Common Stock based on the value of Pro Forma CORR Common Stock because, based on the Pro Forma CorEnergy Financial Projections, dividends paid with respect to a share of Class B Common Stock through December 2023 equaled those paid with respect to a share of Common Stock.
Analysis of Corridor Cost Savings
Assumptions with Respect to Corridor Cost Savings
Evercore performed a series of analyses to derive implied valuation ranges for the Corridor Cost Savings. Evercore performed its analyses utilizing the unaudited, non-public financial projections for the Corridor Cost Savings which were prepared and furnished by Company management at the request of the Special Committee.
Corridor Cost Savings - Transaction Multiple Analysis
Evercore reviewed transactions involving internalizations of public REITs announced since January 2014 and selected the following 15 transactions involving internalizations that Evercore deemed to have certain characteristics that were similar to those of the Internalization, although Evercore noted that none of the selected transactions or the entities that participated in the selected transactions were directly comparable to the Internalization, Corridor or the Company.
48

Date
Announced
Acquiror / External Manager
10/2020Granite Point Mortgage Trust / Pine River Capital Management
04/2020Two Harbors / PRCM Advisors
02/2020Preferred Apartment Communities, Inc. / Preferred Apartment Advisors, LLC
12/2019Jernigan Capital / JCAP Advisors
11/2018New Senior Investment Group / Fortress
12/2017Drive Shack / Fortress
08/2017Bluerock Residential Growth / BRG Manager, LLC
05/2016American Capital Agency Corp. / American Capital Mortgage Management
05/2016New York Mortgage Trust, Inc. / RiverBanc
11/2015City Office REIT / City Office
09/2015Starwood Waypoint / Starwood Capital
08/2015Chimera Investment Corporation / Annaly Capital Management
04/2015Colony Financial / Colony Capital
08/2014Silver Bay Realty Trust Corp. / Pine River and Provident
01/2014American Realty Capital Properties / American Realty Capital Trust
Evercore noted that the mean and median of the multiple of cost savings for the selected internalization transactions were equal to 6.1x and 5.5x, respectively.
Based on Evercore’s review of the above precedent transactions, Evercore selected a range of relevant multiples of cost savings of 4.0x to 9.0x. To derive the implied value range of the Corridor Cost Savings, Evercore multiplied the range of selected multiples by the Corridor Cost Savings utilizing two cases for the estimated annual cost savings provided by Company management. The first annual estimated cost savings provided by Company management equaled $2.1 million assuming no adjustment to the gross book value of MoGas Pipeline, LLC (“MoGas”) and no incremental capital expenditures (“Case 1”). The second annual estimated cost savings provided by Company management equaled $2.8 million assuming a $42.8 million fair market value adjustment to the gross book value of MoGas and $13.5 million of incremental capital expenditures (“Case 2”). This analysis resulted in a range of value for the Corridor Cost Savings of $8.5 million to $19.2 million based on Case 1 and $11.0 million to $24.8 million based on Case 2.
Corridor Cost Savings – Present Value Analysis
Evercore performed a present value analysis utilizing dividend yield as the discount rate for the Corridor Cost Savings by calculating the present value of cost savings for each of the three fiscal years ending December 31, 2023, and adding a terminal value based on an assumed perpetuity growth rate. Evercore assumed (i) interim and terminal discount rates of 8.0% to 11.0% based on dividend yields of Pro Forma CORR’s business peer group and 2.75% to 3.25% based on dividend yields of Pro Forma CORR’s REIT peer group, (ii) a perpetuity growth rate of (0.5%) to 0.5% and (iii) annual cost savings of $1.9 million to $2.4 million for Case 1 and $2.5 million to $3.0 million for Case 2. Based on Pro Forma CORR’s business peer group dividend yield, the implied values of the Corridor Cost Savings were $18.0 million to $30.9 million based on Case 1 and $24.0 million to $39.1 million based on Case 2. Based on Pro Forma CORR’s REIT peer group dividend yield, the implied values of the Corridor Manager Cost Savings were $58.3 million to $95.0 million based on Case 1 and $75.4 million to $123.0 million based on Case 2.
Evercore also performed a present value analysis for Corridor Cost Savings utilizing WACC as the discount rate by calculating the present value of cost savings for fiscal years ending December 31, of 2021, 2022 and 2023, and adding a terminal value. Evercore assumed (i) interim and terminal discount rates of 10.0% to 12.0% based on the WACC of Pro Forma CORR’s REIT peer group and 9.0% to 10.0% based on the WACC of Pro Forma CORR’s business peer group, (ii) a perpetuity growth rate of (0.5%) to 0.5% and (iii) annual cost savings of $1.9 million to $2.4 million for Case 1 and $2.5 million to $3.0 million for Case 2. Based on Pro Forma CORR’s REIT peer group WACC, the implied values of the Corridor Cost Savings were $16.6 million to $25.0 million based on Case 1 and $22.1 million to $31.5 million based on Case 2. Based on Pro Forma CORR’s business peer group WACC, the implied values of the Corridor Cost Savings were $19.7 million to $27.6 million based on Case 1 and $26.3 million to $34.9 million based on Case 2.
49

General
Evercore’s opinion was one of many factors taken into consideration by the Special Committee in making its recommendation to the Board and by the Board (other than Mr. Schulte) in making its determination to approve the Internalization, and should not be considered determinative of the views of the Special Committee or the Board with respect to the Internalization or the Internalization Consideration.
Evercore was selected by the Special Committee based on Evercore’s qualifications, expertise and reputation. Evercore is an internationally recognized investment banking and advisory firm. Evercore, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.
In connection with Evercore's services as the Special Committee's financial advisor, the Company paid Evercore a fee in the amount of $500,000 on Evercore's opinion and an additional fee in the amount of $750,000 for advisory work done by Evercore for the Special Committee. No portion of the opinion fee was contingent on the conclusion expressed in Evercore's opinion. The Company also agreed to reimburse Evercore for its reasonable expenses, including reasonable fees and expenses of its legal counsel, and to indemnify Evercore and related parties against certain liabilities, including liabilities under the federal securities laws, relating to or arising out of its engagement. In the ordinary course of business, Evercore and its affiliates may trade or hold securities of the Company for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in those securities. In addition, Evercore may seek to, in the future, provide financial advisory and financing services to the Company, for which it would expect to receive compensation.
No Appraisal Rights
Under Maryland law, stockholders will not have appraisal rights in connection with the Internalization or the stockholder vote to approve the Internalization.
Regulatory Approval
No regulatory approvals or filings are required in order to effect the Internalization.
Required Vote
Because the securities to be issued to "related parties" in the Internalization will be shares of Common Stock of the Company or securities convertible into shares of Common Stock of the Company, Section 312.03(b) of the NYSE Listed Company Manual requires that approval for the Internalization be obtained from the stockholders of the Company. Further, while the issuance of these securities pursuant to the Internalization will not result in a person or group acquiring ownership of more than 50% of the Company’s voting equity, the stockholder vote to approve this Proposal 3 also constitutes, for purposes of NYSE rules, the approval of a potential change of control of the Company if the NYSE should deem the Internalization to constitute a change of control.
Pursuant to the rules of the NYSE, the approval of the Internalization requires the affirmative vote of a majority of the votes cast on the matter at the Annual Meeting. For purposes of the vote on the Internalization, abstentions will have the same effect as votes against the proposal and broker non-votes will have no effect on the result of the vote. In addition, pursuant to the terms of the Contribution Agreement, votes of shares owned of record or beneficially by any interested director, firm or other entity, which includes Corridor, the Contributors and their affiliates, will not be counted for purposes of the vote on the Internalization. Our interested officers and directors and their affiliates own an aggregate of 51,969 shares, representing 0.38% of the outstanding Common Stock of the Company as of April 23, 2021 (based on 13,651,521 shares outstanding as of April 23, 2021). Accordingly, the approval of the Contribution Agreement and the Internalization will require the approval of the majority of the votes cast on the matter at the Annual Meeting by the remaining 13,599,552 shares of the outstanding Common Stock of the Company. If such approval is not received, then the Internalization will not be consummated.
BOARD RECOMMENDATION
The Board of Directors of the Company (excluding Mr. Schulte who has material financial interests in the Internalization and, accordingly, has abstained from joining in our Board's recommendation) unanimously recommends stockholders of the Company vote “FOR” the Contribution Agreement and the transactions it contemplates, including the Internalization and the issuance of the REIT Stock pursuant to the Internalization.
50


PROSPECTIVE FORWARD-LOOKING CAPITALIZATION TABLE (as of March 31, 2021)
Prospective for Non-Controlling Interest Reorg. and InternalizationProspective for Non-Controlling Interest Conversion
March 31, 2021
Actual(1)
Prospective
Adjustments(2)
Prospective
Adjustments(3)
Cash and Cash Equivalents$18,839,994 $— $18,839,994 $— $18,839,994 
Debt
Revolving Credit Facility25,000,000 — 25,000,000 — 25,000,000 
Long-Term Debt (including current maturities)(4)
193,440,040 — 193,440,040 — 193,440,040 
Total Debt218,440,040 — 218,440,040 — 218,440,040 
Redeemable Equity
Redeemable Series C Preferred Stock— 38,442,604 38,442,604 (38,442,604)— 
Redeemable Series B Preferred Stock— 59,949,960 59,949,960 (59,949,960)— 
Total Redeemable Equity— 98,392,564 98,392,564 (98,392,564)— 
Stockholders' Equity
Preferred Stock
Series A Preferred Stock125,270,350 4,255,325 129,525,675 42,904,300 172,429,975 
Total125,270,350 4,255,325 129,525,675 42,904,300 172,429,975 
Common Stock
Common Stock13,652 1,154 14,806 — 14,806 
Class B Common Stock— 3,134 3,134 8,675 11,809 
Additional Paid-In Capital336,750,132 32,635,906 369,386,038 59,937,054 429,323,092 
Retained Deficit(327,926,126)— (327,926,126)— (327,926,126)
Total8,837,658 32,640,194 41,477,852 59,945,729 101,423,581 
Non-controlling interest116,928,344 (116,928,344)— — — 
Total Stockholders' Equity$251,036,352 $(80,032,825)$171,003,527 $102,850,029 $273,853,556 
Total Capitalization$469,476,392 $487,836,131 $492,293,596 
Shares Outstanding(5)
Common Stock13,651,521 1,153,846 14,805,367 — 14,805,367 
Class B Common Stock— 3,133,903 3,133,903 8,675,214 11,809,117 
Total Shares Outstanding13,651,521 4,287,749 17,939,270 8,675,214 26,614,484 
(1) The non-controlling interest reflects the Grier Members' equity consideration for the A-1, A-2 and A-3 units representing a 50.50% interest in Crimson. Subject to CPUC regulatory approval and certain stockholder approvals, these units are convertible into certain CorEnergy securities as illustrated in the prospective adjustments above.
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(2) The increase in Series A Preferred Stock, Common Stock and Class B Common Stock reflect the prospective adjustment for the equity consideration outlined in the Internalization agreement. The Internalization agreement is subject to stockholder approval before such equity consideration can be issued, as further described in Proposal 3 – Approval of the Contribution Agreement and Internalization of Corridor in this proxy statement Further, the prospective adjustments also reflect the Grier Members' conversion of the non-controlling interest presently represented by their A-1, A-2 and A-3 units into Series C Preferred Stock, Series B Preferred Stock and Class B Common Stock, respectively. Such conversions are subject to receiving CPUC Approval and, in case of the further conversion of Series B Preferred Stock to Class B Common Stock, approval by our stockholders as described in Proposal 2 – Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock, and are at the election of the holders. Further, we do not expect the holders to exercise their conversion rights all at once due to the significant income tax consequences arising from such conversions. We cannot predict when the holders will elect to convert or if they will elect to convert at all.
(3) The increase in the Series A Preferred Stock assumes the Grier Members elect to convert their Series C Preferred Stock. The increase in Class B Common Stock assumes stockholder approval is received allowing the Grier Members to convert the Series B Preferred Stock to Class B Common Stock.
(4) Long-term debt is presented net of discount and deferred financing costs.
(5) The shares outstanding do not include the impact of in kind dividends declared by the CorEnergy Board of Directors on the Series B Preferred.

52

PROPOSAL FOUR
Ratification of Selection of
Independent Registered Public Accounting Firm
    The Board of Directors of the Company recommends that the stockholders of the Company ratify the selection of Ernst & Young LLP (“E&Y”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021. E&Y’s selection was approved by the Company’s Audit Committee and was also ratified and approved by the Board of Directors of the Company, including all of the Independent Directors.
    E&Y has served the Company's independent registered public accounting firm since the Company’s commencement of operations on December 8, 2005, and does not have any direct financial interest or any material indirect financial interest in the Company. A representative of E&Y is expected to be available at the Annual Meeting, to have the opportunity to make a statement and respond to appropriate questions from the stockholders. The Company’s Audit Committee intends to meet quarterly in 2021 with representatives of E&Y to discuss the scope of their engagement, review the financial statements of the Company and the results of their examination.
Required Vote
    E&Y will be ratified as the Company’s independent registered public accounting firm by the affirmative vote of a majority of the votes cast on the matter at the meeting by the holders of Common Stock. Each share of Common Stock is entitled to one vote on this proposal. For the purposes of the vote on this proposal, while abstentions and broker non-votes, if any, count as shares that are "present" for purposes of establishing a quorum, they will not be counted as "votes cast" and will have no effect on the result of the vote.
BOARD RECOMMENDATION
    The Board of Directors of the Company unanimously recommends that stockholders of the Company vote “FOR” the ratification of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm.
53

AUDIT COMMITTEE REPORT
    The Audit Committee of the Company reviews the Company’s annual financial statements with both management and the Company’s independent auditors, and carries out the additional responsibilities described above under "Board of Directors Meetings and Committees - the Audit Committee".
    The Audit Committee of the Company, in discharging its duties, has met with and has held discussions with management and the Company’s independent auditors. The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2020 with management of the Company and the Company's independent auditors. Management of the Company has represented to the independent auditors of the Company and to the Audit Committee that the Company’s financial statements were prepared in accordance with U.S. generally accepted accounting principles.
    The Audit Committee has also discussed with the independent auditors of the Company the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board and the SEC. The independent auditors of the Company provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence, and the Audit Committee discussed with representatives of the independent auditors of the Company their firm’s independence with respect to the Company.
    Based on the Audit Committee’s review and discussions with management and the independent auditors referred to above, and the representations of management and the reports of the independent auditors to the committee, the Audit Committee recommended that the Board include the audited financial statements of the Company in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.
The Audit Committee of the Company
 
Catherine A. Lewis (Chair)
Conrad S. Ciccotello
Todd E. Banks

54

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    The Company’s Audit Committee selected E&Y as the independent registered public accounting firm for its fiscal year ending December 31, 2021, and the Board of Directors has recommended that the Company's stockholders ratify such selection pursuant to Proposal 4. E&Y is registered with the Public Company Accounting Oversight Board and has served as the Company's independent registered public accounting firm since the Company's commencement of operations on December 8, 2005.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FEES AND SERVICES
         The following table sets forth the amounts of the aggregate fees billed to the Company by E&Y for the fiscal years ended December 31, 2020 and 2019, respectively:
20202019
Audit Fees1
$790,478 $768,180 
Audit-Related Fees2
224,192 31,647 
Tax Fees3
229,814 208,200 
All Other Fees— — 
____________________
(1)For professional services rendered auditing the Company’s annual financial statements, reviewing interim financial statements, and reviewing the Company’s statutory and regulatory filings with the SEC. The audit fees for December 31, 2020 and December 31, 2019 are based on amounts billed and expected to be billed by E&Y.
(2)For accounting consultation in connection with transactions and pro forma financial statements.
(3)For professional services rendered to the Company for tax compliance, tax advice and tax planning.
    
    The Audit Committee of the Company has adopted pre-approval policies and procedures, most recently updated as of February 24, 2021. Under these policies and procedures, the Audit Committee of the Company pre-approves: (i) the selection of the Company’s independent registered public accounting firm; (ii) the engagement of the independent registered public accounting firm to provide any non-audit services to the Company; (iii) the engagement of the independent registered public accounting firm to provide any non-audit services to the Company’s manager or advisor or any entity controlling, controlled by, or under common control with the Company’s manager or advisor that provides ongoing services to the Company, if the engagement relates directly to the operations and financial reporting of the Company; and (iv) the fees and other compensation to be paid to the independent registered public accounting firm. The Chair of the Audit Committee of the Company may grant the pre-approval of any engagement of the independent registered public accounting firm for non-audit services, and such delegated pre-approvals will be presented to the full Audit Committee at its next meeting for ratification. Under certain limited circumstances, pre-approvals are not required under securities law regulations for certain non-audit services below certain de minimus thresholds. Since the Company’s adoption of these policies and procedures, the Audit Committee of the Company has pre-approved all audit and non-audit services provided to the Company by E&Y. None of these services provided by E&Y were approved by the Audit Committee pursuant to the de minimus exception under Rule 2.01(c)(7)(i)(C) or Rule 2.01(c)(7)(ii) of Regulation S-X.
OTHER MATTERS
         The Board of Directors of the Company knows of no other matters that are intended to be brought before the meeting. If other matters are presented for action, the proxies named in the enclosed form of proxy will vote on those matters in their sole discretion.

55

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
    At April 23, 2021, each director, each executive officer and the directors and executive officers as a group, beneficially owned (as determined pursuant to Rule 13d-3 under the Exchange Act) the number of shares of Common Stock of the Company listed in the table below (or percentage of outstanding shares). Unless otherwise indicated, each individual has sole investment and voting power with respect to the shares listed in the table below.
Directors and Officers(1)
Number
of Shares
Percent of
Class(2)
Independent Directors and Nominees
        Todd E. Banks(3)
684.8634 *
       Conrad S. Ciccotello(4)
6,039.3510 *
        Catherine A. Lewis(5)
4,349.8625 *
Executive Directors and Additional Executive Officers
       David J. Schulte(6)
29,570.3390 *
 John D. Grier— *
       Rebecca M. Sandring(7)
5,374.0000 *
       Jeffrey Fulmer8,865.0000 *
 Robert L. Waldron— *
 Larry W. Alexander— *
       Kristin M. Leitze375.0000 *
Directors and Officers as a Group (10 Total)55,258.4159 *
    *Indicates less than 1%.
(1)Unless otherwise indicated, the business address of each of the individuals is 1100 Walnut, Suite 3350, Kansas City, MO 64106.
(2)Based on 13,651,521 shares outstanding as of April 23, 2021. As discussed elsewhere in this proxy statement, the approval by stockholders of Proposal 2 and Proposal 3 at the Annual Meeting could ultimately result in the issuance of a significant amount of additional voting securities to affiliates of the Company. For additional information, see "PROPOSAL TWO - Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock--Effect of Proposal on Current Stockholders," "PROPOSAL THREE - Approval of the Contribution Agreement and Internalization of Corridor--Description of the Internalization and Contribution" and "Prospective Forward-Looking Capitalization Table."
(3)Includes 620.9507 shares of restricted stock received under the Director Compensation Plan.
(4)Includes (i) 3,287.491 shares held in a trust of which Mr. Ciccotello is trustee; (ii) 402 shares held jointly with his wife and (iii) 2,349.86 shares of restricted stock received under the Director Compensation Plan.
(5)Includes (i) 2,000 shares held in the Catherine A. Lewis Trust U/A dtd 7/11/2013 of which Ms. Lewis is a trustee and (ii) 2,349.8625 shares of restricted stock received under the Director Compensation Plan.
(6)Includes (i) 27,000.339 shares held jointly with his wife; and (ii) 2,570 shares held in accounts for spouse’s children, for which she is the custodian and for which Mr. Schulte disclaims beneficial ownership.
(7)Includes 195 shares held indirectly by Ms. Sandring's daughter.

    As of April 23, 2021 based on filings made under Section 13(g) of the Exchange Act, the persons known by us to be beneficial owners of more than 5% of our Common Stock were as follows:
Name and Address of Beneficial OwnerNumber
of Shares
Percent of
Class(1)
BlackRock, Inc (2)
55 East 52nd Street
New York NY 10055
981,901 7.19%
______________
(1)For purposes of Rule 13d-3 of the Exchange Act, percentage ownership of the Common Stock is computed based on the sum of  13,651,521 shares of Common Stock actually outstanding as of April 23, 2021. Amounts shown were determined without regard to applicable ownership limits contained in the Company’s Charter.
(2)This information is based on a Schedule 13G/A filed with the SEC on January 29, 2021, by BlackRock, Inc., which reported sole voting power with respect to 964,829 shares, and sole dispositive power with respect to all 981,901 shares in the table.

56

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
        The Company has written policies and procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related to the Company. The Company has written procedures which prohibit certain transactions with affiliates of the Company and require board approval of certain transactions with affiliated persons of the Company. 
Management Agreement and Administrative Agreement
    The Company is managed by Corridor, an asset manager specializing in financing the acquisition or development of infrastructure real property assets. Corridor is located at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106. Under our Management Agreement, Corridor (i) presents us with suitable acquisition opportunities consistent with our investment policies and our objectives, (ii) is responsible for our day-to-day operations and (iii) performs such services and activities relating to our assets and operations as may be appropriate. The Management Agreement in effect until February 3, 2021, did not have a specific term, and was amended with the First Amendment to the Management Agreement on February 4, 2021 (See "Internalization of the Manager" below).
    The terms of the Management Agreement include a quarterly management fee equal to 0.25 percent (1.00 percent annualized) of the value of the Company’s Managed Assets as of the end of each quarter. For purposes of the Management Agreement, “Managed Assets” means the total assets of the Company (including any securities receivables, other personal property or real property purchased with or attributable to any borrowed funds) minus (A) the initial invested value of all non-controlling interests, (B) the value of any hedged derivative assets, (C) any prepaid expenses, and (D) all of the accrued liabilities other than (1) deferred taxes and (2) debt entered into for the purpose of leverage. For purposes of the definition of Managed Assets, the Company’s securities portfolio will be valued at then-current market value. For purposes of the definition of Managed Assets, other personal property and real property assets will include real and other personal property owned and the assets of the Company invested, directly or indirectly, in equity interests in or loans secured by real estate or personal property (including acquisition-related costs and acquisition costs that may be allocated to intangibles or are unallocated), valued at the aggregate historical cost, before reserves for depreciation, amortization, impairment charges or bad debts or other similar noncash reserves. In light of previous provisions for loan losses on certain of the Company's energy infrastructure financing investments, Corridor voluntarily recommended, and the Company agreed, that effective on and after the Company's March 31, 2016 balance sheet date, solely for the purpose of computing the value of the Company's Managed Assets in calculating the quarterly management fee under the terms of the Management Agreement, that portion of the Management Fee attributable to such loans shall be based on the estimated net realizable value of the loans, which shall not exceed the amount invested in the loans as of the end of the quarter for which the Management Fee is to be calculated.
In reviewing the application of the quarterly management fee provisions of the Management Agreement to the net proceeds received during the third quarter of 2019 from the offering of 5.875% Convertible Notes, which closed on August 12, 2019, Corridor waived any incremental management fee due as of the end of the first, second and third quarters of 2020 based on such proceeds (other than the cash portion of such proceeds that was utilized in connection with the exchange of the Company’s 7.00% Convertible Notes).
In reviewing the application of the quarterly management fee provisions of the Management Agreement to the sale of the Pinedale LGS, termination of the Pinedale Lease Agreement and settlement of the Amended Pinedale Term Credit Facility, which occurred on June 30, 2020 (collectively, the "Pinedale Transaction"), the Manager and the Company agreed that the incremental management fee attributable to the assets involved in the Pinedale Transaction should be paid for the second quarter of 2020 as such assets were under management for all but the last day of the period.
    The Management Agreement includes a quarterly incentive fee of 10% of the increase in distributions paid over a threshold distribution equal to $0.625 per share per quarter. The Management Agreement also requires at least half of any incentive fees to be reinvested in our Common Stock by Corridor's employees and its affiliates, which has been accomplished every year to align the interests of management with our stockholders. During the year ended December 31, 2020, the Manager voluntarily recommended, and the Company agreed, that the Manager would waive all of the $171 thousand incentive fee earned during first quarter 2020. The waiver represents voluntary actions of management to align our incentive payments with our stockholders' interests. During the second, third and fourth quarters of 2020, the Company did not earn the incentive fee that would otherwise be payable under the provisions of the Management Agreement with respect to dividends paid on the Company's Common Stock. Accordingly, Corridor received no incentive fees during the year ended December 31, 2020.
57

Under our Administrative Agreement, Corridor, as our administrator, performs (or oversees or arranges for the performance of) the administrative services necessary for our operation, including without limitation providing us with equipment, clerical, bookkeeping and record keeping services. For these services we pay our administrator a fee equal to 0.04% of our aggregate average daily Managed Assets, with a minimum annual fee of $30 thousand.
Pursuant to the Management and Administrative Agreements, Corridor furnishes us with office facilities and clerical and administrative services necessary for our operation (other than services provided by our custodian, accounting agent, administrator, dividend and interest paying agent and other service providers). Corridor is authorized to enter into agreements with third parties to provide such services. To the extent we request, Corridor will (i) oversee the performance and payment of the fees of our service providers and make such reports and recommendations to the Board of Directors concerning such matters as the parties deem desirable; (ii) respond to inquiries and otherwise assist such service providers in the preparation and filing of regulatory reports, proxy statements, and stockholder communications, and the preparation of materials and reports for the Board of Directors; (iii) establish and oversee the implementation of borrowing facilities or other forms of leverage authorized by the Board of Directors; and (iv) supervise any other aspect of our administration as may be agreed upon by us and Corridor. We have agreed, pursuant to the Management Agreement, to reimburse Corridor for all out-of-pocket expenses incurred in providing the foregoing.
We bear all expenses not specifically assumed by Corridor and incurred in our operations. The compensation and allocable routine overhead expenses of all management professionals of Corridor and its staff, when and to the extent engaged in providing us management services, is provided and paid for by Corridor and not us.
During the fiscal year ended December 31, 2020, the Company paid Corridor fees totaling $5,073,977 pursuant to the Management Agreement and total fees of $202,959 pursuant to the Administrative Agreement.
Internalization of the Manager
On February 4, 2021, the Company entered into a Contribution Agreement with the Contributors, and Corridor, the Company's external manager. For a description of the Contribution Agreement and the Internalization, see “PROPOSAL THREE - Description of the Internalization and Contribution Agreement” in this proxy statement. For a description of the interests of certain of the directors and executive officers of the Company in the Internalization, see "PROPOSAL THREE - Interests of Certain Persons in the Internalization--Directors and Officers of the Company."
Transition Services Agreements
The subsidiaries of Crescent Midstream Holdings, LLC ("Crescent Midstream Holdings") were formerly a part of Crimson Midstream Holdings, LLC ("Crimson"), prior to the Crimson Transaction. Prior to Crescent Midstream Holdings' spin-off from Crimson, Crimson or certain of its subsidiaries provided various business services for Crescent Midstream Holdings and its subsidiaries. Effective February 4, 2021, Crimson, certain of Crimson's subsidiaries or a combination thereof, entered into several transition services agreements (collectively, the "Transition Services Agreements" or "TSAs") with Crescent Midstream Holdings to facilitate its transition to operating independently. Each of the Transition Services Agreements are described in more detail below. Crimson and/or certain of its subsidiaries expect to be reimbursed at a fixed fee of $156 thousand per month for services provided under the TSAs, for which the billed amount is allocated 50% to Crescent Midstream, LLC ("Crescent Midstream"), a wholly-owned subsidiary of Crescent Midstream Holdings and 50% to Crescent Louisiana Midstream, LLC ("CLM"), a 70% owned subsidiary of Crescent Midstream. The amounts billed to Crescent Midstream will reduce a prepaid TSA liability on the Company's books until such time as the TSA liability is reduced to zero. As of March 31, 2021, the prepaid TSA liability related to Crescent Midstream was $1.2 million. For each of the months of February and March, 2021, Crimson billed both Crescent Midstream and CLM $78 thousand for services provided under the TSAs.
As previously disclosed, John D. Grier, a director and Chief Operating Officer of the Company, together with certain affiliated trusts of Mr. Grier (collectively with Mr. Grier, the “Grier Members”) own an aggregate 50.5% equity interest in Crimson, which the Company has a right to acquire in the future, pursuant to the terms of the Membership Interest Purchase Agreement, following receipt of California Public Utility Commission ("CPUC") approval for a change of control of Crimson's CPUC regulated assets. Mr. Grier and the Grier Members also retain an aggregate 50.5% equity interest in Crescent Midstream Holdings, which they held prior to the Crimson Transaction. The terms of each of the TSAs described below were reviewed and approved by the Company’s Board of Directors in connection with their approval of the Crimson Transaction.
58

Crimson Midstream Operating, LLC ("CMO") entered into a transition services agreement (the "Administrative TSA") to provide administrative-related services to Crescent Midstream Holdings through February 3, 2022 or upon receipt of Crescent Midstream Holdings' written notice to terminate the Administrative TSA prior to February 3, 2022.
CMO also entered into a transition services agreement (the "Control Center TSA") with Crescent Midstream Holdings to provide certain customary control center services and field transition support services necessary to operate a pipeline system. Unless terminated in writing by Crescent Midstream Holdings earlier, the Control Center TSA shall expire on February 3, 2022.
Similarly, Crimson and Crescent Midstream Holdings entered into a transition services agreement (the Employee TSA") whereby an indirect, wholly-owned subsidiary of Crimson shall continue to provide payroll, employee benefits and other related employment services to Crescent Midstream Holdings and its subsidiaries. Under the Employee TSA, Crimson’s indirect, wholly-owned subsidiary shall make available and assign to Crescent Midstream Holdings and its subsidiaries certain employees to provide services primarily to Crescent Midstream Holdings and its subsidiaries. While the Employee TSA is in effect, Crescent Midstream Holdings shall be responsible for the daily supervision of and assignment of work to the employees providing services to Crescent Midstream Holdings and its subsidiaries. The Employee TSA will conclude on February 3, 2022 if not previously terminated in writing by Crescent Midstream Holdings. For the months of February and March 2021, Crimson billed employee-related costs and benefits to Crescent Midstream and CLM totaling $1.1 million.
Likewise, a transition services agreement (the "Insurance Coverage TSA") was entered into between CMO, a wholly-owned subsidiary of Crimson and Crescent Midstream Operating, LLC ("Crescent Midstream Operating") (collectively, the "Insurance TSA Parties"). The Insurance Coverage TSA relates to the remaining term of coverage on certain insurance policies which were in place prior to the Crimson Transaction (the "Legacy Insurance Policies") and are shared by Crimson, certain of its subsidiaries (including CMO), Crescent Midstream Operating and certain other entities related to Crescent Midstream Operating (collectively, the "Insureds"). Under the Insurance Coverage TSA, the Insurance TSA Parties agreed to retain and maintain the Legacy Insurance Policies, and continue to split the premium payments among the Insureds in line with the historical practices prior to Crescent Midstream Holdings' spin-off from Crimson in conjunction with the Crimson Transaction. By entering into the Insurance Coverage TSA, the Insurance TSA Parties acknowledged that any claims made which result in a loss by one of the Insureds will erode and may exhaust the shared limits and/or aggregates stated in any of the Legacy Insurance Policies. Additionally, under the terms of the Insurance Coverage TSA, it was agreed that the Insurance TSA Party which is directly responsible for any incident that results in any loss of coverage under any of the Legacy Insurance Policies may be primarily financially responsible for such self-insurance and/or covering any increase in costs of the Legacy Insurance Policies that occurred as a result of such incident. The Insurance Coverage Transition TSA is set to expire on May 31, 2021 if not terminated earlier by mutual, written agreement of the Insurance TSA Parties. However, as stated in the Insurance Coverage TSA, the Insurance TSA Parties will either (i) seek to obtain alternative insurance coverage to be effective on the same date the Insurance Coverage TSA is terminated, or (ii) seek and obtain a renewal of the existing insurance policies for an additional term for all Insureds as currently provided in each of the Legacy Insurance Policies.
Other Related Party Transactions
As of March 31, 2021, certain entities affiliated with John D. Grier (CLM, Crimson Renewable Energy, L.P. and Delta Trading, L.P.) owe Crimson and its subsidiaries $827 thousand. Mr. Grier directly or indirectly owns a 35.35% interest in CLM and owns 100% of both Crimson Renewable Energy, L.P. and Delta Trading, L.P. These balances primarily represent receivables related to payroll, employee benefits and other related employment services that are provided by certain subsidiaries of Crimson. As of March 31, 2021, Crimson and its subsidiaries owe Crescent Midstream $406 thousand, net. This balance represents amounts owed to Crescent Midstream as part of the common control transfer completed prior to the Crimson Transaction, partially offset by receivables related to payroll, employee benefits and other related employment services.
The Company also agreed to reimburse Crescent Midstream for certain costs related to accounting and consulting services for the Crimson Transaction, which costs totaled $416 thousand as of March 31, 2021.
In addition, as a result of their ownership interests in Crimson prior to the Crimson Transaction, John D. Grier and the Grier Members collectively own all 2,436,000 of the outstanding Class A-2 Units of Crimson, which will become exchangeable (following CPUC Approval) for up to 2,436,000 shares of the Company’s newly created Series B Preferred Stock. Accordingly, as described further in “PROPOSAL TWO - Approval of the Issuance of Class B Common Stock upon Conversion of the Series B Preferred Stock” under the heading “Interests of Directors and
59

Executive Officers,” Mr. Grier has a direct interest in whether the Company’s stockholders approve the conversion of such units into up to 8,675,214 additional shares of the Company’s new non-listed Class B Common Stock, as further described in Proposal 2.
Each of the transactions described above was also reviewed and approved by the Company’s Board of Directors in connection with its approval of the terms of the Crimson Transaction and related intercompany transactions and amounts involved in the separation of Crimson, on the one hand, and Crescent Midstream Holdings and its subsidiaries, on the other hand.
60

STOCKHOLDER COMMUNICATIONS
    Stockholders are able to send communications to the Board of Directors of the Company or to a particular director. Communications should be addressed to the applicable director or directors, in care of the Secretary of the Company at its principal office at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106. The Secretary will forward any communications received directly to the Board of Directors or the particular director, as applicable.
CODE OF ETHICS AND BUSINESS CONDUCT, OFFICERS CODE OF ETHICS
AND CORPORATE GOVERNANCE POLICY
    The Company has adopted a code of ethics and business conduct, a code of ethics which applies to the Company’s principal executive officer and principal financial officer and a corporate governance policy. Each is available on the Company’s website http://investors.corenergy.reit/investors/corporate-governance or in print to any stockholder who requests it from the Secretary of the Company at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106.
AVAILABILITY OF ANNUAL REPORT
    The Company’s Annual Report includes its Annual Report on Form 10-K for the year ended December 31, 2020 (without exhibits) as filed with the SEC. The Company will furnish without charge upon written request a copy of its Annual Report on Form 10-K. The Annual Report on Form 10-K includes a list of all exhibits thereto. The Company will furnish copies of such exhibits upon written request and payment of its reasonable expenses in furnishing such exhibits. Each such request must include a good faith representation that, as of the Record Date, the person making such request was a beneficial owner of the Company’s Common Stock entitled to vote at the Annual Meeting of Stockholders. Such written request should be directed to the Company’s Secretary, CorEnergy Infrastructure Trust, Inc., 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106, (877)-669-CORR (2677).
HOUSEHOLDING OF PROXY MATERIALS
    If you and other residents at your mailing address own Common Stock in street name, your broker or bank may have sent you a notice that your household will receive only one annual report and proxy statement (together, "proxy materials"). This practice is known as “householding.” If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If the foregoing procedures apply to you, your broker has sent one copy of our proxy materials to your address. If you wish to revoke your consent to householding, or to request householding if you are receiving multiple copies of our proxy materials, you must contact your broker, bank or other nominee.
    If you did not receive an individual copy of the Notice (or proxy materials, if applicable), you can obtain a copy by contacting the Company’s Secretary, CorEnergy Infrastructure Trust, Inc., 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106, (877)-669-CORR (2677).

61

STOCKHOLDER PROPOSALS AND
NOMINATIONS FOR THE 2022 ANNUAL MEETING
        Method for Including Proposals in the Company’s Proxy Statement. Under the rules of the SEC, if you want to have a proposal included in the Company’s proxy statement for its next annual meeting of stockholders, that proposal must be received by the Secretary of the Company at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106, not later than 5:00 p.m., Central Time on February 1, 2022. Such proposal must comply with all applicable requirements of Rule 14a-8 of the Exchange Act. Timely submission of a proposal does not mean the proposal will be included in the proxy material sent to stockholders.
    Other Proposals and Nominations. If you want to nominate a director, or to have other business considered at the Company’s next annual meeting of stockholders outside of the process for having a proposal included in the Company's proxy statement pursuant to SEC Rule 14a-8, you must comply with the advance notice provision of the Company’s Bylaws. Under the Company’s Bylaws, nominations for director or other business proposals to be addressed at the Company’s next annual meeting may be made by a stockholder who has delivered a notice to the Secretary of the Company at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106, at least 120 days (e.g., 5:00 P.M. Central Time on February 1, 2022), but no more than 150 days (e.g., 5:00 P.M. Central Time on January 2, 2022), prior to the anniversary of the date of mailing of the proxy material for this year's Annual Meeting (June 1, 2021); however, if we hold our 2022 annual meeting more than 30 days before or after the anniversary date of this year's Annual Meeting (June 29, 2021), we must receive the notice not earlier than the 150th day prior to the annual meeting date, and not later than the 120th day prior to the annual meeting date or the tenth day following the date on which we first publicly announce the date of the 2022 annual meeting. The stockholder must satisfy certain requirements set forth in the Company’s Bylaws, including ownership of at least one percent (1%) of the Company's outstanding shares for a minimum period of at least three years prior to the date of such proposal or nomination and through the date of the related annual meeting, and the notice must contain specific information required by the Company’s Bylaws. With respect to nominees for director, the notice must include, among other things, the name, age, business address and residence address of any nominee for director, certain information regarding such person’s ownership of Company shares, and all other information relating to the nominee as is required to be disclosed in solicitations of proxies in an election contest or as otherwise required by Regulation 14A under the Exchange Act. With respect to other business to be brought before the meeting, a notice must include, among other things, a description of the business and any material interest in such business by the stockholder and certain associated persons proposing the business. Any stockholder wishing to make a proposal should carefully read and review the Company’s applicable Bylaws. A copy of the Company’s Bylaws may be obtained by contacting the Secretary of the Company at 877-699-CORR (2677) or by writing the Secretary of the Company at 1100 Walnut Street, Suite 3350, Kansas City, Missouri 64106. Timely submission of a proposal does not mean the proposal will be allowed to be brought before the meeting.
    These advance notice provisions are in addition to, and separate from, the requirements that a stockholder must meet in order to have a proposal included in the Company’s proxy statement under the rules of the SEC.
    
By Order of the Board of Directors
Rebecca M. Sandring
Secretary

62














Combined Carve-Out Financial Statements of Crimson California
As of and for the Years Ended December 31, 2020 and 2019

A-1


CRIMSON CALIFORNIA


Table of Contents



Page
Independent Auditors’ ReportA-3
Combined Financial Statements
Combined Balance Sheets as of December 31, 2020 and 2019A-4
Combined Statements of Operations for the Years ended December 31, 2020 and 2019A-5
Combined Statements of Changes in Members’ Deficit for the Years ended December 31, 2020 and 2019A-6
Combined Statements of Cash Flows for the Years ended December 31, 2020 and 2019A-7
Notes to Combined Financial Statements for the Years ended December 31, 2020 and 2019A-9

A-2



Report of Independent Auditors

To the Board of Members of
Crimson Midstream Operating, LLC

We have audited the accompanying combined financial statements of Crimson California, which comprise the combined balance sheets as of December 31, 2020 and 2019, and the related combined statements of operations, changes in members’ deficit, and cash flows for the years then ended.

Management's Responsibility for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Crimson California, as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.


/s/ PricewaterhouseCoopers LLP
Denver, Colorado
March 11, 2021











A-3

Combined Balance Sheet
As of December 31,
20202019
ASSETS
CURRENT ASSETS
Cash and cash equivalents$27,572,934 $8,886,921 
Accounts receivable - trade10,718,998 3,365,594 
Accounts receivable - non-trade353,049 1,537,678 
Insurance receivable429,041 406,425 
Inventory899,193 1,276,671 
Due from affiliated companies, net2,206,745 1,353,619 
Deposits, prepaids, and other current assets5,932,665 18,084,460 
Total current assets48,112,625 34,911,368 
Property and equipment, net218,298,655 146,146,118 
Unamortized debt issuance costs257,271 1,093,250 
Other assets1,738,253 1,005,000 
TOTAL ASSETS$268,406,804 $183,155,736 
LIABILITIES AND MEMBERS” DEFICIT
CURRENT LIABILITIES
Short-term debt275,900,000 — 
Accounts payable - trade6,371,690 859,132 
Accrued pipeline release1,303,994 1,838,212 
Accrued liabilities and other current liabilities14,608,443 5,414,794 
Total current liabilities298,184,127 8,112,138 
NONCURRENT LIABILITIES
Long-term debt— 219,900,000 
Deferred revenue and other non-current liabilities4,182,827 4,956,733 
Total noncurrent liabilities4,182,827 224,856,733 
Total liabilities302,366,954 232,968,871 
Members’ Deficit
Accumulated members’ deficit(33,960,150)(49,813,135)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT$268,406,804 $183,155,736 










A-4

Combined Statements of Operations

For the Year Ended December 31,
20202019
Revenue
Transportation revenue$92,897,532 $41,785,805 
Pipeline loss allowance subsequent sales7,109,818 5,614,066 
Storage Lease Revenue1,341,900 — 
Other revenue682,432 498,746 
Realized loss on commodity derivatives(742,650)— 
Total revenue101,289,032 47,898,617 
Operating expenses
Cost of revenue (exclusive of items shown separately below)54,742,069 29,303,916 
Pipeline loss allowance subsequent sales cost of revenue6,263,454 5,328,874 
Depreciation and accretion expense9,167,615 5,760,084 
Total cost of revenue70,173,138 40,392,874 
Impairment of property and equipment (Note 4)55,731,523 — 
General and administrative expenses15,023,076 16,296,708 
Total operating expenses140,927,737 56,689,582 
Operating loss(39,638,705)(8,790,965)
Affiliate management fee3,472,548 6,945,069 
Other income, net436,897 1,160,181 
Reimbursable project gains674,975 1,812,490 
Interest expense(11,426,531)(11,518,075)
Net loss$(46,480,816)$(10,391,300)
























A-5

Combined Statements of Changes in Members’ Deficit

Members' Deficit
Balance at December 31, 2018$(38,567,820)
Net loss(10,391,300)
Contributions91,700,000 
Distributions(126,944,904)
Net parent investment34,390,889 
Balance at December 31, 2019(49,813,135)
Net loss(46,480,816)
Contributions45,000,000 
Net parent investment17,333,801 
Balance at December 31, 2020$(33,960,150)










































A-6

Combined Statements of Cash Flows


For the Year Ended December 31,
20202019
Cash flow from operating activities
Net income (loss)$(46,480,816)$(10,391,300)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities
Depreciation and accretion expense9,167,615 5,760,084 
Amortization of deferred financing costs835,979 672,584 
(Gain) Loss on disposal of property and equipment(3,128)1,050,311 
Impairment of fixed assets55,731,523 — 
Write off of capital projects30,996 1,385,701 
Gain on sale of line fill— (96,693)
Changes in operating assets and liabilities
Accounts receivable(9,092,221)(1,479)
Accounts receivable - non-trade1,195,170 (1,537,678)
Insurance receivables347,384 (658,016)
Due (to) from affiliated companies, net(853,126)137,829 
Inventory903,765 (1,134,941)
Prepaids and other current assets(2,338,776)846,427 
Accounts payable - trade5,512,558 (1,219,920)
Accrued liabilities6,812,054 930,202 
Accrued pipeline release(1,254,219)1,893,332 
Deferred revenue54,384 (96,496)
Net cash provided by (used for) operating activities20,569,142 (2,460,053)
Cash flow from investing activities
Cash received for sale of Cardinal line fill— 164,964 
Cash Received from Third Parties for Reimbursable Projects1,829,604 1,244,370 
Expenditures for property and equipment(24,357,366)(10,609,774)
Cash received from sale of property and equipment24,799 — 
Cash paid for asset acquisition(97,713,967)(16,798,872)
Net cash used for investing activities(120,216,930)(25,999,312)
Cash flow from financing activities
Proceeds of long-term debt152,000,000 132,200,000 
Payment of long-term debt(96,000,000)(94,600,000)
Contribution from parent45,000,000 89,294,412 
Distribution to parent— (125,039,316)
Net parent investment17,333,801 34,390,889 
Net cash provided by financing activities118,333,801 36,245,985 
Increase (decrease) in cash and cash equivalents18,686,013 7,786,620 
A-7

Cash and cash equivalents, beginning of period8,886,921 1,100,301 
Cash and cash equivalents, end of period$27,572,934 $8,886,921 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized$10,769,516 $10,885,777 
Accrued capital expenditures in accounts payable - trade and accrued liabilities3,047,635 1,132,330 
Non-cash contributions from members— 2,405,588 
Non-cash distribution to members— (1,905,588)















































A-8


Notes to Combined Financial Statements

Note 1 - Organization and Summary of Significant Accounting Policies

Crimson Midstream Holdings, LLC (“CMH”) wholly owns and controls Crimson Midstream Operating, LLC (“CMO”), collectively referred to as the “Parent.” CMH also wholly owns Crimson Midstream Services (“CMS”), which provides payroll and benefit services to the Parent’s subsidiaries. CMO wholly owns and controls Crimson Pipeline, LLC, San Pablo Bay Pipeline, LLC, Cardinal Pipeline, L.P. and Crimson California Pipeline, L.P. (jointly referred to as the “California Pipelines”) which own and operate crude oil pipeline systems in California. The California Pipelines and CMS comprise the Combined Financial Statements and are collectively referred to as “Crimson California,” or the “Company,” and represent the Parent's assets and liabilities. All assets and liabilities directly attributable to entities outside CMS and the California Pipelines have been removed. The accompanying carve-out Combined Financials Statements present the combined financial results of Crimson California for the years ended December 31, 2020 and 2019.

The California Pipelines serve the market that begins at the source of crude oil production (upstream) and extends to crude oil refineries (downstream) and is commonly referred to as the “midstream” market. The primary source of income on the California Pipelines is derived from fees generated from the transportation of crude oil through these pipeline systems, which are not generally exposed to commodity price risk as part of normal transportation operations. However, the California Pipelines are subject to nominal commodity price exposure due to pipeline loss allowance provisions in several of the California transportation agreements.

On January 11, 2019, the Parent entered into a Securities Purchase Agreement with CGI Crimson Holdings, LLC to obtain an equity investment from The Carlyle Group (“Carlyle”) and amended and restated the Limited Liability Company Agreement. The majority owner member interest percentage decreased from the prior fiscal year, with the majority of the remaining member interests being sold to Carlyle. As of December 31, 2020, Carlyle owns 49.5% of common ownership of CMH and the remaining 50.5% is held by the majority owner.

To create more durable, profitable, and strategically aligned operations, the Parent completed a major restructuring (the “Restructure”) which separated Crimson California from the Parent’s other operating subsidiaries in Louisiana and the Gulf of Mexico (“Crimson Gulf”). On February 4, 2021, the Company and Carlyle entered into a purchase and sale agreement with CorEnergy Infrastructure Trust, Inc. (“CORR”) to sell 100% of Carlyle’s interest in the Crimson California pipelines to CORR.

Concurrent with the close of the transaction, the majority interest owner and Carlyle contributed their respective interest in Crimson Gulf, a wholly owned subsidiary of CMO, and its subsidiaries to the newly formed Crescent Holdings (“Crescent”), a non-consolidated entity. CORR paid $66.0 million in cash and contributed the Grand Isle Gathering System (“GIGS”), valued at $50.0 million, to Carlyle in exchange for Carlyle’s 49.5% interest in Crimson California. Refer to footnote nine - Subsequent Events for additional information regarding the Restructure.

Principles of Combination and Consolidation

These Combined Financial Statements of Crimson California were derived from the Consolidated Financial Statements and accounting records of the Parent as if Crimson California were operated on a standalone basis during the periods presented and were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

The Combined Statements of Operations of Crimson California reflect general corporate and operating expenses provided by the Parent to Crimson California and Crimson Gulf including, but not limited to, executive management, finance, legal, information technology, employee benefits administration, treasury, procurement, control center monitoring, and other shared services. The related expenses have been recognized on a gross basis in the Combined Statements of Operations of Crimson California with an amount recognized as an “Affiliate Management Fee” reflecting the fees for the services provided by the Parent to Crimson Gulf. These allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenue, labor, and fixed assets. Management of Crimson California and the Parent consider these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to Crimson Gulf. These allocations may not, however, reflect the net expenses Crimson California would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if Crimson California had been a standalone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.
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The Combined Balance Sheets of Crimson California include Parent assets and liabilities that were specifically identifiable or otherwise attributable to Crimson California, including subsidiaries and affiliates in which the Parent has a controlling financial interest or is the primary beneficiary. Parent’s cash has been assigned to Crimson California for all of the periods presented because those cash balances are directly attributable to Crimson California. All cash inflows and outflows obtained and used from operations were swept to the Parent’s centralized account. Crimson California reflects transfers of cash to and from Parent’s cash management system as a component of Members’ Equity (Deficit) in the Combined Balance Sheets. Parent’s long-term debt has been included in the Crimson California Combined Financial Statements for the periods presented. The Parent’s debt obligations were settled as a result of the Restructure, whereby Crimson California entered into an amended and restated credit agreement. Refer to footnotes 6 and 9 for additional information regarding the Restructure and new debt obligation secured by Crimson California.

The Combined Financial Statements include Crimson California’s net assets and results of operations as described above. All intercompany transactions and accounts within the combined businesses of Crimson California have been eliminated.

Related party transactions between Crimson California and Crimson Gulf are considered to be effectively settled in the Combined Financial Statements at the time the transaction is recorded. Parent company investment in Crimson Gulf subsidiaries have been excluded from the Crimson California Combined Financial Statements. Certain other assets and liabilities that are directly attributable to Crimson Gulf are not included in these Crimson California Financial Statements.

The Combined Financial Statements of Crimson California do not necessarily reflect the financial results of Crimson California if it were operated as a distinct legal entity during the periods presented.

Use of Estimates in the Preparation of Combined Financial Statements

Preparation of financial statements in accordance with GAAP requires the Company to (1) adopt accounting policies within accounting rules set by the Financial Accounting Standards Board (“FASB”), and (2) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Combined Financial Statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of fixed assets, asset retirement obligations, the valuation of derivatives, valuation and impairment of fixed assets and inventories, and reserves for contingencies. Although management of the Company believes these estimates are reasonable, actual results could differ from those estimates.

Revenue Recognition and Inventory

The FASB issued ASU 2014-09, Revenue from Contract with Customers in May 2014, and the Company adopted this standard as of January 1, 2019. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has evaluated the impact of the adoption of ASU 2014-09 retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application, and no cumulative effect was required to be recorded. However, in accordance with ASC 606, when control of the pipeline loss allowance volumes have been transferred to the purchaser, the Company records this non-cash consideration as revenue at the contractual sales price within pipeline loss allowance (“PLA”) revenue and PLA cost of revenues.

The Company satisfies performance obligations over time as midstream transportation services are performed and as the customer receives the benefit of these services over the term of the tariff or contract. The Company’s transportation revenue includes amounts earned for transportation services and associated PLA. Revenue for crude oil transportation is recognized based on the volumes shipped at the associated tariff or contracted rates. PLA revenue, recorded within transportation revenue, represents the estimated realizable value of the earned loss allowance volumes received by the Company as applicable under the tariff or contract. As is common in the pipeline transportation industry, as crude oil is transported the Company earns a small percentage of the crude oil volume transported to offset any measurement uncertainty or actual volumes lost in transit. The Company will settle the PLA with its shippers either in-kind or in cash. PLA received by the Company typically exceeds actual pipeline losses in transit and typically results in a benefit to the Company. For PLA volumes received in-kind, the Company record these in inventory. Earned PLA revenue
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accounted for $5,400,485 and $6,463,815 of transportation revenue for the years ended December 31, 2020 and 2019, respectively.

When PLA is paid in-kind, the barrels are valued at current market price less standard deductions, recorded as inventory and recognized as non-cash consideration revenue concurrent with related transportation services. PLA paid in cash is treated in the same way as in-kind but no inventory is created.

Inventory primarily consists of crude oil earned as in-kind PLA payments and is valued using an average costing method at the lower of cost and net realizable value. Crude oil inventory is typically sold one to two months after it is earned at current market price less standard deductions. Crude oil inventory consists of 23,923 barrels valued at $899,193 and 20,721 barrels valued at $1,291,671 as of December 31, 2020 and 2019, respectively.

In May 2020, the Company entered into a one-year contract beginning July 1, 2020, to lease tank capacity to a customer. The Company analyzed this contract under ASC 840 and determined it should be treated as an operating lease. The lease allows for the customer to store 315,000 barrels per month at a fixed rate. The Company earned $1,341,900 in storage lease revenue for the year ended December 31, 2020.

To mitigate a portion of the potential exposure to adverse market changes in oil prices and the associated impact on cash flows, the Company has entered into derivative contracts, primarily commodity swaps or costless collars. These instruments allow the Company to predict with greater certainty the effective prices to be realized for its pipeline allowance oil transactions. All commodity derivative positions were closed as of December 31, 2020 and 2019.

These derivative instruments are not designated as hedging instruments for accounting purposes. During the years ended December 31, 2020, and 2019, respectively, the Company paid $411,875 and $19,050 for cash settlements of realized derivative positions.

Other revenue includes gauging, rental, truck rack offloading, and other ancillary transportation service performed for shippers. Crimson California will contract with shippers to perform services for a fixed monthly fee, and revenue is recognized as services are performed. Within other revenue, the Company has also recorded transactions for the purchase of inventory from, and sale of inventory to, the same counterparty at a rate that, in effect, is economically equivalent to a transportation fee. Sales of crude oil are recognized at the time title to the crude oil transfers to the purchaser, which typically occurs upon receipt of the crude oil by the purchaser. Such transactions that are entered into in contemplation of one another are recorded on a net basis as the entity’s supplier is the primary obligor in the arrangement and the amount the entity earns is fixed.

The following table summarizes the Company’s revenue streams.

For the Year Ended December 31,
20202019
Transportation revenue, net of PLA$87,497,047 $35,321,990 
Pipeline loss allowance revenue5,400,485 6,463,815 
Pipeline loss allowance subsequent sales revenue7,109,818 5,614,066 
Storage revenue1,341,900 — 
Realized loss on commodity derivatives(742,650)— 
Other revenue682,432 498,746 
Total revenue$101,289,032 $47,898,617 

Cash and Cash Equivalents

The Company considers its cash balances and other highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet date, and periodically throughout the year, the Company has maintained balances in various operating accounts in excess of insured limits.

The Parent maintains all cash generated by our operating pipeline entities, and any cash requirements to meet the obligations of the pipeline entities is provided by the parent. The Combined Financial Statements reflect the entire cash balance held by the Parent for the periods ending December 31, 2020 and December 31, 2019.
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Accounts Receivables, Allowance for Doubtful Accounts and Concentrations of Credit Risk

The Company’s accounts receivable balances result from transactions with crude oil shippers. This concentration of customers may impact the Company’s overall credit risk as its customers may be affected by changes in economic or other conditions within the oil industry. The Company’s management believes that concentrations of credit risk are limited and no credit losses were recognized during the years ended December 31, 2020 or 2019.

In determining the need for an allowance for doubtful accounts, management considers historical losses adjusted to take into account current market conditions and our customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. The Company writes off specific receivables when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The Company has not experienced significant credit losses in the past, and management has determined outstanding receivable balances to be collectible. The Company determined that no allowance was necessary as of December 31, 2020 or 2019.

Trade accounts receivable include receivables from four customers representing 83%, and three customers representing 84% of total trade accounts receivable as of December 31, 2020, and 2019, respectively. Revenue includes sales to four customers representing 82% and four customers representing 79% of total revenue for the years ended December 31, 2020, and 2019, respectively.

Non-trade accounts receivable includes receivables from third parties for non-transportation related services to include reimbursable project billings.

Property and Equipment

The Company records property and equipment at its original purchase or construction cost, or at estimated fair value as of the acquisition date for property and equipment acquired in connection with business combinations or asset acquisitions. Property and equipment is depreciated on the straight-line method over the estimated useful lives, which are as follows:

Life in Years
Pipelines35
Communication systems3-35
Station buildings, equipment, and vehicles5-20
Pumping equipment and tanks15
Furniture and equipment5-7
Rights-of-wayIndefinite
Leasehold improvementsLease term

Major improvements or betterments that improve or extend the useful lives of the assets are capitalized and depreciated accordingly. Expenditures for repair and maintenance of property and equipment are charged to expense as incurred. The Company expensed $10,238,874 and $5,622,496 for repairs and maintenance, which includes costs related to in-line inspections of pipeline wall integrity, for the years ended December 31, 2020, and 2019, respectively. These expenses are included in cost of revenues on the Combined Statements of Operations. Upon retirement or sale of property and equipment, the cost of such assets and related accumulated depreciation are removed from the accounts and the resulting gains or losses, if any, are reflected in other income in the year in which the asset is disposed. The resulting gains/(losses) from these types of transactions were $3,128 and ($1,050,311) for the years ended December 31, 2020 and 2019, respectively.

Reimbursable Projects

The Company has agreements with certain third parties to be reimbursed for its costs when it becomes necessary to repair or relocate a portion of its pipeline or to construct a new pipeline which enables a producer or shipper to connect with the Company’s existing pipeline. The Company maintains title to all pipeline assets constructed. If the Company relocates a pipeline due to a request of a government entity or landowner, the Company will record the reimbursements received as a gain or loss on the Combined Statements of Operations or as a reduction of cost of construction. The
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Company completed the relocation of a portion of its pipelines in California, at no cost to the Company, which resulted in $674,975 and $1,812,490 of other income classified as reimbursable project gains on the Combined Statements of Operations for the years ended December 31, 2020 and 2019, respectively. For the relocation projects completed in California, there were $543,487 and $1,307,078 of direct reimbursed relocation expenses which had no net cash impact to the Company for the years ended December 31, 2020 and 2019, respectively. The remainder was attributable to reimbursement of administrative overhead costs incurred by the Company.

If there is a commercial request for a pipeline or connection to be constructed to connect the Company’s existing pipelines, the arrangement is accounted for as an operating lease. As such, upon completion of construction, the reimbursements received and initially recorded as reimbursable projects liability are reclassified to deferred revenue and recognized as transportation revenue over the shorter of the estimated useful life of the constructed asset or the life of the customer.

The Company recorded $212,246 and $1,312,093 for cumulative costs incurred which is included in construction in process within property and equipment on the Combined Balance Sheets as of December 31, 2020 and 2019, respectively. Prepayments received to date remain in reimbursable projects liability until project completion. For the years ended December 31, 2020 and 2019, respectively, $315,000 and $192,000 of the reimbursable projects liability is classified within accrued and other liabilities on the Combined Balance Sheets.

The Company had $251,640 and $2,810,985 as outstanding deferred revenue related to reimbursable projects for shippers or producers as of December 31, 2020 and 2019, respectively.

Impairment of Long-Lived Assets

The Company periodically evaluates whether the carrying value of long-lived assets, including intangible assets, has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The Company considers various factors when determining if these assets should be evaluated for impairment, including but not limited to:

Significant adverse change in legal factors or business climate;
A current-period operating or cash flow loss combined with a history of operating or cash flow losses, or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset;
An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
Significant adverse changes in the extent or manner in which an asset is used, or in its physical condition;
A significant adverse change in the market value of an asset; or
A current expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its estimated useful life.

Significant changes in market conditions resulting from events such as the condition of an asset or a change in management’s intent to utilize the asset would generally require management to reassess the cash flows related to the long-lived assets. A prolonged period of lower commodity prices may adversely affect the estimate of future operating results, which could result in future impairment due to the potential impact on our operations and cash flows.

When an asset or group of assets is identified for potential impairment, the Company performs Step 1 of the impairment process to calculate the sum of undiscounted cash flows which are then compared to the carrying value of the asset group. If, upon review, the sum of the undiscounted cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value. The fair value of our asset group is measured using valuation techniques consistent with the income approach, converting future cash flows to a discounted amount using discount rates commensurate with the risks involved in the asset group. These fair values measurements are based on significant inputs that are not observable in the market and thus represent Level 3 measurements. All inputs and assumptions specific to the Company’s forecast used in the calculation of fair value are reasonably consistent with those used to develop other information, such as projections and budgets prepared for the asset group.

For the year ended December 31, 2020 management identified various indications of potential impairment of the Company’s long-lived assets and recorded total impairment charges of $55,731,523 for the year ended December 31, 2020. See footnote 4 for additional information. There was no impairment charge recorded for the year ended December 31, 2019.

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Debt Issuance Costs

Deferred debt issuance costs totaling $252,271 and $1,093,250 were recorded as a noncurrent asset on the Combined Balance Sheet as of December 31, 2020, and 2019, respectively. During the years ended December 31, 2020, and 2019, respectively, the Company recorded $835,979 and $672,584 relating to the amortization of deferred debt issuance costs, included within interest expense on the Combined Statements of Operations.

Income Taxes

The entities included in these Combined Financial Statements are all treated either as a limited liability company or a limited partnership for income tax purposes. Accordingly, taxable income and losses of the Company are reported on the income tax returns of the Company’s members, and no income tax provision or deferred tax assets or liabilities have been recorded in the accompanying Combined Financial Statements. The Company has evaluated potential tax uncertainties and has determined that there are no uncertain tax positions as of and for the years ended December 31, 2020 and 2019.

Derivative Instruments

The Company may utilize derivatives to hedge commodity price risk inherent in its business that primarily relate to barrels associated with PLA oil. The Company’s policy is to structure its sales contracts and derivatives hedges of these barrels so that price fluctuations of crude oil do not materially affect its Combined Statements of Operations by stabilizing PLA margins. The swap contracts utilized are placed with banks that the Company believes to be of high credit quality. The Company records all derivative instruments as either assets or liabilities at fair value within the accompanying Combined Balance Sheets. Changes in the derivatives will be recognized currently in earnings unless specific hedge accounting criteria are met. The Company has elected not to designate its derivatives as cash flow hedges; therefore, gains and losses on derivative instruments are recorded within realized and unrealized gain (loss) on commodity derivatives on the Combined Statements of Operations. The Company classifies realized gains and losses on derivative instruments within cash flows from operations in the accompanying Combined Statements of Cash Flows.

Comprehensive Income

There are no differences between net income (loss) and comprehensive income (loss) due to the absence of items of other comprehensive income in the periods presented.

New Accounting Standards Updates (“ASU”)

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. For non-public companies ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2022. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In January of 2019, the FASB issued ASU 2019-01, Leases, which permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842, land easements that exist or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. The Company believes that adoption of the standard will result in increases to assets and liabilities on the Combined Balance Sheets, as well as changes to the presentation of certain operating expenses on the Combined Statements of Operations; however, the Company has not yet determined the extent of the adjustments or impact to disclosures that will be required upon implementation of the standard.

The Company considered a comprehensive list of all other ASUs requiring adoption through 2021. The Company believes that adoption of all other required standards will not result in a material impact to the Company.


Note 2 – Fair Value of Financial Instruments and Non-Financial Instruments

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the
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Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1:Quoted prices are available in active markets for identical assets or liabilities;
Level 2:Quoted prices in active markets for similar assets and liabilities that are
observable for the asset or liability; or
Level 3:Unobservable pricing inputs from objective sources, such as discounted cash flow
models or valuations.

The assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s policy is to recognize transfers in or out of the fair value hierarchy as of the end of the reporting period for which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed below in the periods presented.

Recurring Fair-Value Measurements

Cash and cash equivalents, trade and other receivables, and accounts payable approximate their carrying amounts due to the short maturity of these instruments. Inventory primarily consists of crude oil earned as PLA inventory and is valued at the lower of cost and net realizable value. The carrying value of the Company’s revolving credit facilities approximates fair value due to their floating interest rates. The Company held a derivative payable of $330,775 at December 31, 2020. This liability represents a closed position; therefore, the carrying amount approximates its fair value.

Non-Recurring Fair Value Measurements

The Company uses the cost, income, or market valuation approaches to determine fair value. The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable. The basis for making such assessments are undiscounted future cash flows projections for the asset group being assessed. If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair value, which are based on discounted future cash flows using assumptions as to revenues, costs and discount rates typical of third-party market participants, which is a Level 3 measurement.


Note 3 – Pipeline Acquisitions

In March of 2020, the Company completed the acquisition of the San Pablo Bay System (“SPB”) and other proprietary assets (“the SPB Acquisition”) from Shell Pipeline Company, LP. (“Shell”) for a purchase price of $110 million. The purchase was accounted for as an asset acquisition. The purchase price was primarily financed with proceeds from long-term debt and a capital call from Carlyle of $45 million. The acquisition consists of the SPB System, a 400-mile, 20” common carrier pipeline system from the San Joaquin Valley to Bakersfield, California refineries and three refineries in the San Francisco Bay Area. Additionally, the Company acquired a proprietary system consisting of a 110-mile system of three separate line segments south of Bakersfield. The Company primarily acquired pipeline, tanks, metering systems and Rights of Way (“RoW”) as part of the acquisition. In addition to the purchase price of $110 million, acquisition-related costs totaling $2,373,871, were capitalized. The Company also incurred $2,138,968 in purchase price adjustments for inventory, linefill, prepaid taxes, and prepaid RoW. In connection with the SPB Acquisition, the Company entered into a Transition Services Agreement (“TSA”) through which the Company compensated the seller for the provision of specified services, such as certain control center activities and various measurement and oil accounting activities. The TSA was terminated after July 2020, and the total paid to the seller under the TSA was $2,378,226, which has been recorded in cost of revenue.

All proprietary assets purchased from Shell were contributed to Cardinal Pipeline, LP. SPB is a legal entity; therefore, all SPB assets were contributed to San Pablo Bay, LLC. Assets acquired and liabilities assumed were recorded at estimated fair value at the closing date of the SPB Acquisition as follows:

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ProprietarySan Pablo BayFair Value as of March 1, 2020
Line Pipe$5,504,408 $38,849,887 $44,354,295 
Other Property933,473 3,526,646 4,460,119 
Other Station Equipment1,482,711 11,666,317 13,149,028 
Line Pipe Fittings306,913 5,367,028 5,673,941 
Pumping Equipment359,977 4,502,383 4,862,360 
Tanks23,567 14,483,614 14,507,181 
Computer Hardware2,952 7,627 10,579 
Machinery and Tools— 118,295 118,295 
Computer Software— 2,658 2,658 
Office Furniture and Equipment— 6,138 6,138 
Linefill896,181 — 896,181 
Inventory— 526,287 526,287 
Prepaid RoW7,074 80,302 87,377 
Prepaid Taxes72,046 557,077 629,123 
RoW3,030,000 20,432,000 23,462,000 
Land and Leasehold Improvements28,218 1,739,059 1,767,277 
Total purchase price$12,647,520 $101,865,318 $114,512,839 


Note 4 – Property and Equipment

Property and equipment consist of the following:
As of December 31,
20202019
Pipelines$165,073,998 $120,590,603 
Right-of-way agreements26,601,531 28,645,630 
Station equipment22,607,995 10,773,493 
Pumping equipment6,350,469 2,534,069 
Communication systems10,209,170 8,514,015 
Work in process14,337,543 5,816,709 
Tanks16,654,683 3,681,841 
Buildings780,754 826,688 
Office furniture, vehicles, and other assets2,781,122 2,252,795 
Leasehold improvements2,054,286 1,729,470 
Land1,442,461 1,108,700 
Reimbursable projects – work in process212,245 1,312,093 
Property and equipment, gross269,106,257 187,786,106 
Less: accumulated depreciation(50,807,602)(41,639,988)
Property and equipment, net$218,298,655 $146,146,118 

Depreciation expense for the years ended December 31, 2020 and 2019, respectively, was $9,167,615 and $5,760,084. For the year ended December 31, 2020, capitalized interest was $996,228 and capitalized internal labor was $817,950. For the year ended December 31, 2019, capitalized interest was $981,711 and capitalized internal labor was $293,839.

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During the year ended December 31, 2020, management identified property and equipment that required impairment. As a result of conducting comparable fair market value analysis on all asset groups in conjunction with the preparation of the annual budget, the Company identified