1022-00005 · Hargrove, Deluca & Stein LLP · Insurance

letter-to-ironclad-tender.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law

425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200 Facsimile: (212) 496-7201

September 5, 2024

Via Overnight Courier and Email

Patricia Dwyer Vice President of Claims Ironclad Surety Group Inc. 300 North Meridian Street, Suite 1800 Indianapolis, IN 46204

Re: Performance Bond No. ISG-2020-NE-04417; Demand by Meridian Infrastructure Partners LLC; Master Construction Agreement dated March 15, 2020 between Northgate Fiber Americas Inc. (Owner/Obligee) and Meridian Infrastructure Partners LLC (Contractor/Principal)

Calderwood & Harkness LLP Matter No. 1022-00005

Dear Ms. Dwyer:

I. Introduction and Identification of Representation

This firm, Calderwood & Harkness LLP ("C&H"), represents Northgate Fiber Americas Inc. ("NFA"), a Delaware corporation (File No. 7182934), with its principal office at 600 Lexington Avenue, 28th Floor, New York, NY 10022, and NFA's parent company, Northgate Telecommunications PLC ("Northgate" or "NTP"), a public limited company incorporated in England and Wales (Company No. 08234517), headquartered at 14 Cavendish Square, London W1G 0BX, United Kingdom. The C&H engagement team for this matter consists of Linda Osei, Responsible Partner; Priya Anand, Billing Partner; Jeffrey Park, Lead Associate; and Yuki Nakamura, Working Associate.

C&H was retained effective August 19, 2024 to defend NFA in the action captioned Meridian Infrastructure Partners LLC v. Northgate Fiber Americas Inc., Index No. 654321/2024, pending in the Supreme Court of the State of New York, New York County, Commercial Division, before the Honorable Eleanor M. Ricci, Part 49 (the "Litigation"). Our engagement extends to all matters arising out of or related to the underlying Master Construction Agreement and the performance bond that is the subject of this letter.

The purpose of this letter is threefold. First, we write to formally notify Ironclad Surety Group Inc. ("Ironclad" or "ISG") of Meridian Infrastructure Partners LLC's ("Meridian") demand on Performance Bond No. ISG-2020-NE-04417 (the "Performance Bond" or the "Bond") and to tender the defense of that claim to Ironclad. Second, we request that Ironclad state its position regarding the bond demand and the pending Litigation. Third, we seek written confirmation of the terms of Ironclad's previously communicated agreement to contribute toward NFA's defense costs. We set forth below the factual and contractual background necessary for Ironclad's evaluation of these matters.

II. Background — The Master Construction Agreement

On March 15, 2020, NFA, as Owner, and Meridian, as Contractor, executed a Master Construction Agreement (the "MCA") for the design, engineering, permitting, and construction of approximately 18,500 route miles of underground and aerial fiber-optic cable across a seven-state footprint in the northeastern United States, encompassing New York, New Jersey, Connecticut, Massachusetts, Pennsylvania, Maryland, and Virginia. A true and complete copy of the MCA, together with all exhibits thereto, is enclosed herewith as Enclosure 2.

The total contract price under the MCA was One Billion Two Hundred Million Dollars ($1,200,000,000), structured as a combination of fixed-price milestones aggregating Seven Hundred Eighty Million Dollars ($780,000,000), representing approximately sixty-five percent (65%) of the total contract price, and unit-rate pricing aggregating Four Hundred Twenty Million Dollars ($420,000,000), representing approximately thirty-five percent (35%) of the total contract price. The contract term was five (5) years from the date of the Notice to Proceed, which was issued on April 1, 2020, establishing an original completion date of March 31, 2025.

The MCA is governed by the laws of the State of New York (MCA § 22.1). The parties agreed that all disputes arising under the MCA shall be litigated exclusively in the courts of New York County (MCA § 22.3), and both parties expressly waived the right to a jury trial (MCA § 22.4).

The MCA established fourteen (14) defined construction milestones under Section 8.2, each carrying specific scope, schedule, and payment obligations. To incentivize timely performance and to compensate the Owner for the foreseeable harms associated with delay, the MCA provided for liquidated damages at the rate of One Hundred Seventy-Five Thousand Dollars ($175,000) per day per milestone under Section 9.1. These liquidated damages are capped at ten percent (10%) of the applicable milestone value per individual milestone and five percent (5%) of the total contract price — Sixty Million Dollars ($60,000,000) — in the aggregate.

Quality standards for all work under the MCA are governed by Northgate's proprietary Technical Specification NS-FIBER-2020 and applicable industry standards, including ANSI/TIA-568 and BICSI guidelines, as set forth in MCA § 12.4. Meridian's compliance with these quality standards was a material obligation under the MCA and a condition to milestone acceptance and payment.

III. Background — The Performance Bond

In connection with the MCA, and as a condition to the issuance of the Notice to Proceed, Ironclad issued Performance Bond No. ISG-2020-NE-04417 in the penal sum of One Hundred Twenty Million Dollars ($120,000,000). A true and complete copy of the Performance Bond is enclosed herewith as Enclosure 1.

The Bond names NFA as the Obligee and Meridian as the Principal. The Bond secures Meridian's faithful performance of all of its obligations under the MCA. Under the terms of the Bond, Ironclad's obligations may be triggered upon Meridian's material breach of the MCA and the Owner's declaration of a Contractor default in accordance with the contractual cure and termination provisions. The Bond is co-extensive with the MCA and is subject to the same governing law.

NFA notes that Ironclad's liability under the Bond is limited to the penal sum of $120,000,000, but within that limit, Ironclad is obligated to respond to the Obligee's proper demands arising from the Principal's default. As set forth below, Meridian's breaches of the MCA have caused and will continue to cause damages to NFA that are expected to exceed the penal sum of the Bond.

IV. Summary of Meridian's Performance Failures and Material Breach

A. Schedule Delays

Meridian's persistent and escalating failure to meet its contractual milestone obligations constitutes a central basis for NFA's termination of the MCA. The following is a summary of the schedule delays across all three phases of the project.

Phase 1 (NY Metro & Northern NJ). Phase 1 encompassed approximately 3,200 route miles and carried a milestone value of Two Hundred Eight Million Dollars ($208,000,000). Milestone 3 under Phase 1 was completed forty-seven (47) days late, with a contractual target date of August 28, 2021 and an actual completion date of October 14, 2021. Liquidated damages in the amount of Eight Million Two Hundred Twenty-Five Thousand Dollars ($8,225,000) were assessed by NFA via written notice dated November 5, 2021 and were deducted from Meridian's subsequent payment applications in accordance with MCA § 9.1.

Phase 2 (CT, Western MA, Southern PA). Phase 2 encompassed approximately 5,600 route miles and carried a milestone value of Three Hundred Sixty-Three Million Dollars ($363,000,000). The schedule delays in Phase 2 were significantly more severe and reflected a pattern of deteriorating performance:

• Milestone 5: Completed twenty-two (22) days late, resulting in assessed liquidated damages of Three Million Eight Hundred Fifty Thousand Dollars ($3,850,000).

• Milestone 6: Completed sixty-eight (68) days late, resulting in assessed liquidated damages of Eleven Million Nine Hundred Thousand Dollars ($11,900,000).

• Milestone 7: Completed ninety-one (91) days late, resulting in assessed liquidated damages of Fifteen Million Nine Hundred Twenty-Five Thousand Dollars ($15,925,000).

• Milestone 8: Never completed prior to the termination of the MCA. As of the date of termination, one hundred thirty-four (134) days of delay had accrued against Milestone 8. The daily liquidated damages rate would yield $23,450,000 in total delay damages; however, because Milestone 8 carries a value of Ninety-One Million Dollars ($91,000,000), the per-milestone cap of ten percent (10%) limits the Milestone 8 liquidated damages to Nine Million One Hundred Thousand Dollars ($9,100,000).

Total Phase 2 liquidated damages assessed: Forty Million Seven Hundred Seventy-Five Thousand Dollars ($40,775,000).

Phase 3 (MD, VA, Eastern PA). Phase 3 encompassed approximately 9,700 route miles and carried a milestone value of Six Hundred Twenty-Nine Million Dollars ($629,000,000). Meridian mobilized crews in Maryland in July 2023 but achieved only approximately 340 of 9,700 route miles — a mere 3.5% — before the termination of the MCA. This grossly inadequate mobilization further demonstrates Meridian's inability or unwillingness to perform its obligations under the MCA.

Total liquidated damages assessed across all phases: Forty-Nine Million Dollars ($49,000,000). This amount remains below the aggregate liquidated damages cap of Sixty Million Dollars ($60,000,000) under MCA § 9.1.

B. Quality Defects

In addition to the schedule delays described above, Meridian's work was plagued by pervasive quality deficiencies. Over the course of Phase 2, NFA issued two hundred eighty-seven (287) non-conformance reports ("NCRs") identifying deviations from the contractual quality standards set forth in Technical Specification NS-FIBER-2020 and the applicable ANSI/TIA-568 and BICSI guidelines. Of these 287 NCRs, forty-three (43) were classified as "critical," meaning they involved deficiencies that directly affected the performance, reliability, or safety of the fiber-optic network. Critical NCRs included, without limitation, instances of splice loss exceeding specification, improper conduit depth in violation of applicable codes and the MCA's technical specifications, and unauthorized deviations from the approved route alignment.

The quality failures accelerated toward the end of Meridian's tenure on the project. In February 2024 alone, NFA issued twelve (12) additional critical NCRs, underscoring the fact that Meridian's quality performance was not improving but was, instead, continuing to deteriorate.

NFA has estimated the cost of remediating all outstanding NCRs at approximately Eighteen Million Three Hundred Thousand Dollars ($18,300,000). This estimate is derived from the anticipated remediation cost of approximately $275,000 per critical NCR (43 critical NCRs × $275,000 = $11,825,000) and approximately $26,500 per non-critical NCR (244 non-critical NCRs × $26,500 = $6,466,000), rounded to the nearest hundred thousand. NFA reserves the right to revise this estimate as remediation proceeds and actual costs are determined.

C. Failure to Cure

NFA followed the contractual cure procedures set forth in MCA § 14.1 before terminating the MCA. The relevant chronology is as follows:

January 18, 2024 — Cure Notice No. 1. NFA, through Renata Voss, Vice President of US Network Infrastructure, issued a formal Cure Notice to Meridian identifying the following as events of material breach: (i) Meridian's failure to achieve Milestone 8; (ii) Meridian's inadequate mobilization for Phase 3; and (iii) the forty-three (43) critical NCRs then outstanding. The Cure Notice demanded that Meridian cure all identified breaches within thirty (30) calendar days, as required by MCA § 14.1. A copy of Cure Notice No. 1 is enclosed as Enclosure 3.

February 2, 2024 — Meridian's Response. Meridian, through its Chief Executive Officer, Victor Sandoval, responded to Cure Notice No. 1 by disputing NFA's characterization of the breaches. Meridian asserted that the schedule delays were attributable to alleged failures by NFA to secure necessary permits in a timely manner, to fourteen (14) purported informal scope changes allegedly directed by NFA's field representatives, and to unspecified force majeure events. Meridian did not, however, identify any specific force majeure event as defined under MCA § 16.1, nor did Meridian provide the contemporaneous notices required by MCA § 16.3 for any force majeure claim. NFA's position is that each of these asserted defenses is without merit and unsupported by the contemporaneous project records.

February 19, 2024 — Cure Notice No. 2. Having determined that Meridian had failed to cure the identified breaches within the contractual cure period, NFA issued a second Cure Notice stating that Meridian remained in continuing material breach of the MCA. The second Cure Notice demanded that Meridian submit a comprehensive remediation plan within fifteen (15) days. A copy of Cure Notice No. 2 is enclosed as Enclosure 4.

March 5, 2024 — Meridian's Corrective Action Plan. Meridian submitted a document titled "Corrective Action Plan" that proposed an accelerated schedule, the deployment of additional construction crews, a nine-month extension of the MCA term, and Eighty-Seven Million Dollars ($87,000,000) in additional compensation to Meridian. Notably, the Corrective Action Plan did not address the 43 outstanding critical NCRs in any substantive manner and conditioned all proposed corrective measures on NFA's agreement to pay significant additional sums and to extend the contract deadline — terms that would have effectively rewarded Meridian for its own defaults.

March 12, 2024 — NFA's Rejection. NFA rejected Meridian's Corrective Action Plan as inadequate, citing Meridian's continued quality failures and the plan's failure to propose any meaningful remediation of the outstanding critical NCRs. NFA reiterated that Meridian remained in material breach of the MCA.

V. Termination for Cause

On April 1, 2024, NFA delivered a Notice of Termination for Cause pursuant to MCA § 14.1, effective immediately. The termination was based on Meridian's persistent and uncured material breaches of the MCA, including its chronic schedule delays, pervasive quality failures, and its failure to cure within the contractual cure periods after receiving two formal Cure Notices. A copy of the Notice of Termination is enclosed as Enclosure 5.

Under MCA § 14.5, upon a valid termination for cause, NFA is entitled to, among other things: (a) complete the remaining work using substitute contractors and charge all excess costs of completion to Meridian; (b) draw on the Performance Bond to recover amounts owed as a result of Meridian's default; and (c) treat Meridian's right to any termination-for-convenience fee under MCA § 14.3 as forfeited.

At the time of termination, the project status was as follows:

• Approximately 9,140 of 18,500 route miles had been completed, representing 49.4% of the total scope.

• The total contract value earned by Meridian based on completed work was approximately Five Hundred Sixty-Nine Million Seven Hundred Thousand Dollars ($569,700,000).

• The remaining unperformed value under the MCA was approximately Six Hundred Thirty Million Three Hundred Thousand Dollars ($630,300,000).

• Total payments made to Meridian during the term of the MCA were Five Hundred Twelve Million Seven Hundred Thousand Dollars ($512,700,000), broken down as follows: Phase 1 — $199,775,000; Phase 2 — $281,225,000; Phase 3 — $31,700,000.

• Retainage held by NFA as of the date of termination was Fifty-Six Million Nine Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($56,966,667), representing ten percent (10%) of gross certified work of $569,666,670.

NFA's position is that the termination was fully justified under the terms of the MCA and that Meridian has no right to the retainage, the termination-for-convenience fee, or any additional compensation.

VI. Replacement Contractor and Excess Completion Costs

Following the termination of the MCA, NFA undertook a commercially reasonable process to engage a replacement contractor to complete the remaining scope of the project. On June 10, 2024, NFA entered into a replacement construction agreement (the "Crestline Agreement") with Crestline Construction Group Inc. ("Crestline"), a Virginia corporation with its principal office at 8200 Greensboro Drive, Suite 900, McLean, VA 22102. Crestline is a nationally recognized fiber-optic and telecommunications infrastructure contractor with extensive experience in the northeastern United States.

Under the Crestline Agreement, Crestline will complete the remaining Phase 2 work (Milestone 8) and all Phase 3 work for a total contract price of Seven Hundred Twelve Million Dollars ($712,000,000). The Crestline Agreement has a term of thirty (30) months, with an estimated completion date in December 2026.

The excess completion costs resulting from Meridian's default are calculated as follows:

• Crestline contract price for remaining scope: $712,000,000

• Remaining MCA value (unperformed at termination): $630,300,000

• Excess completion costs: $81,700,000

These excess completion costs are direct, foreseeable, and proximately caused by Meridian's material breach and default under the MCA. They are recoverable from Meridian as the defaulting Contractor and from Ironclad as the Surety under the Performance Bond, subject to the Bond's penal sum.

VII. Meridian's Bond Demand and Pending Litigation

A. Meridian's Demand on the Bond

On April 8, 2024, seven days after NFA's termination of the MCA, Meridian sent correspondence to NFA contesting the validity of the termination, characterizing it as pretextual and asserting that NFA's true motivation was to avoid paying amounts owed to Meridian under the MCA. NFA categorically rejects this characterization.

On April 15, 2024, Meridian filed a demand on Ironclad for the full penal sum of the Performance Bond — One Hundred Twenty Million Dollars ($120,000,000) — purportedly under what Meridian describes as a "subcontractor protection endorsement" to the Bond. To the extent NFA has a copy of this demand, it is enclosed as Enclosure 6.

NFA and Northgate vigorously dispute Meridian's standing to make any demand whatsoever on the Performance Bond. Meridian is the Principal — not the Obligee — under the Bond. The Bond was issued for the protection of NFA as the Owner and Obligee, securing Meridian's faithful performance of its obligations to NFA. The notion that a defaulting contractor may make a demand against its own surety, for its own benefit, is fundamentally inconsistent with the nature and purpose of a performance bond. NFA, as the sole Obligee under the Bond, has not consented to any payment by Ironclad to Meridian, and NFA hereby instructs Ironclad not to make any such payment.

B. The Litigation

On July 15, 2024, Meridian filed a Verified Complaint against NFA in the Supreme Court of the State of New York, New York County, Commercial Division, Index No. 654321/2024 (the "Litigation"). The Verified Complaint seeks approximately Two Hundred Million Dollars ($200,000,000) in damages across four causes of action:

Count I — Breach of Contract (Wrongful Termination): $92,400,000. Meridian alleges that NFA's termination of the MCA was wrongful and seeks $50,424,000 representing the hypothetical termination-for-convenience fee that would have been payable under MCA § 14.3 had the termination been without cause, plus $41,976,000 in alleged lost profits on the unperformed portion of the MCA.

Count II — Breach of Contract (Unpaid Invoices): $16,500,000. Meridian alleges that NFA failed to pay $16,500,000 in payment applications submitted by Meridian for Phase 3 work performed prior to termination.

Count III — Breach of Contract (Wrongful Withholding of Retainage): $56,966,667. Meridian seeks the release of all retainage held by NFA, alleging that NFA's continued retention of these funds is unjustified.

Count IV — Breach of Implied Covenant of Good Faith and Fair Dealing: $34,133,333. Meridian alleges that NFA's termination and related conduct caused Meridian a loss of bonding capacity and reputational harm, and seeks damages in the amount of $34,133,333.

Meridian is represented by the law firm of Hargrove, Deluca & Stein LLP, 51 West 52nd Street, 40th Floor, New York, NY 10019, with Thomas Deluca serving as lead partner. A copy of Meridian's Verified Complaint is enclosed as Enclosure 7.

On September 3, 2024, NFA, through this firm, filed its Answer with Affirmative Defenses and Counterclaims. NFA's principal affirmative defenses include: (i) that the termination was justified as a termination for material breach under MCA § 14.1; (ii) the contractual consequential damages waiver set forth in MCA § 20.1; (iii) Meridian's failure to mitigate damages; (iv) comparative fault; and (v) set-off of NFA's counterclaims against any amounts that might otherwise be owed to Meridian. NFA's counterclaims are as follows:

• Counterclaim I — Liquidated Damages: $49,000,000, representing the aggregate liquidated damages assessed for Meridian's schedule delays across all phases, as described in Section IV.A above.

• Counterclaim II — Excess Completion Costs: $81,700,000, representing the difference between the Crestline contract price and the remaining MCA value, as described in Section VI above.

• Counterclaim III — Remediation of Defective Work: $18,300,000, representing the estimated cost of remediating the 287 outstanding NCRs, including 43 critical NCRs, as described in Section IV.B above.

• Total Counterclaims: $149,000,000.

A copy of NFA's Answer with Affirmative Defenses and Counterclaims is enclosed as Enclosure 8.

VIII. Formal Tender and Request for Ironclad's Position

A. Tender of Defense of Meridian's Bond Demand

NFA, as the Obligee under Performance Bond No. ISG-2020-NE-04417, hereby formally tenders to Ironclad the defense of Meridian's April 15, 2024 demand on the Performance Bond. Ironclad, as the issuer of the Bond, has a direct interest in and obligation with respect to the disposition of Meridian's demand. NFA's position is unequivocal: Meridian, as Principal under the Bond, has no right to make a demand against its own surety for the benefit of itself. The Performance Bond secures Meridian's obligations to NFA, not the reverse. Any payment by Ironclad to Meridian on the Bond would be adverse to NFA's interests and inconsistent with the fundamental purpose of the Bond.

NFA requests that Ironclad deny Meridian's demand in its entirety and that Ironclad confirm such denial in writing to NFA at its earliest opportunity.

B. NFA's Claim Under the Performance Bond

NFA hereby reserves all rights to make its own claim under the Performance Bond for Meridian's material breach and default under the MCA. NFA's potential claim under the Bond includes, but is not limited to, the following categories of damages:

• Excess completion costs: $81,700,000

• Remediation costs for defective work: $18,300,000

• Liquidated damages for schedule delays: $49,000,000

• Total potential claim: $149,000,000 (subject to the penal sum of the Bond, i.e., up to $120,000,000)

NFA will provide a formal demand letter and supporting documentation in due course and reserves the right to present its formal claim at any time during the pendency of the Litigation or thereafter. Nothing in this letter shall be construed as a presentment of NFA's formal demand under the Bond, nor shall the absence of a formal demand at this time be construed as a waiver or abandonment of NFA's rights under the Bond.

C. Request for Ironclad's Position

NFA requests that Ironclad confirm in writing, within fifteen (15) business days of receipt of this letter, its position on each of the following matters:

(a) Ironclad's position on Meridian's April 15, 2024 demand — specifically, whether Ironclad intends to honor, deny, or investigate the demand, and if Ironclad intends to investigate, the anticipated scope and timeline of such investigation;

(b) Whether Ironclad acknowledges NFA as the sole Obligee entitled to make demands under the Performance Bond, and whether Ironclad disputes NFA's position that Meridian, as Principal, lacks standing to demand payment under its own bond;

(c) Ironclad's position regarding the pending Litigation, including whether Ironclad intends to intervene in the Litigation, to monitor the proceedings informally, or to participate in any other capacity; and

(d) The status of Ironclad's previously communicated agreement to contribute up to Two Million Dollars ($2,000,000) toward NFA's defense costs under a reservation of rights, and the specific terms and conditions of that contribution, as addressed in greater detail in Section IX below.

IX. Defense Cost Contribution

NFA understands, based on prior communications between Ironclad and NFA's in-house counsel, that Ironclad has indicated a willingness to contribute up to Two Million Dollars ($2,000,000) toward NFA's defense costs in the Litigation, subject to a reservation of rights. NFA appreciates Ironclad's willingness to participate in the defense and now requests written confirmation of the terms of this contribution. Specifically, NFA requests that Ironclad address the following:

(a) Payment schedule: Whether the contribution will be made as a lump sum, periodic reimbursements against invoices submitted, or on some other basis, and if periodic, the frequency and timing of payments;

(b) Documentation requirements: What documentation Ironclad requires in connection with defense cost invoices, including the level of detail required for legal fee statements and expert cost invoices, and whether Ironclad requires the use of particular billing codes or formats;

(c) Conditions and limitations: Any conditions or limitations on the contribution, including whether the contribution is subject to reduction, recoupment, or offset in the event of certain outcomes in the Litigation or under the Bond, and whether there are categories of costs that Ironclad considers ineligible for reimbursement; and

(d) Approval of counsel and strategy: Whether Ironclad requires prior approval of defense counsel, defense strategy, or significant litigation decisions (such as motions, settlement discussions, or trial strategy) as a condition of its contribution.

For informational purposes, NFA's current defense budget through trial is estimated at Eight Million Five Hundred Thousand Dollars ($8,500,000) to Eleven Million Two Hundred Thousand Dollars ($11,200,000) in legal fees, plus Two Million Four Hundred Thousand Dollars ($2,400,000) to Three Million One Hundred Thousand Dollars ($3,100,000) in expert costs. NFA anticipates retaining a construction and delay expert and a damages expert in the near term. Specifically, NFA plans to retain Dr. Elinor Chazen of Lakeview Consulting Group LLC as a construction and delay expert, and Professor Gordon Whitfield of Pinnacle Economics LLC as a damages expert. Formal retention agreements with both experts are anticipated in the coming weeks, and NFA will provide Ironclad with further details regarding these expert engagements as they are finalized.

X. Coordination and Communication

In order to ensure effective coordination between NFA and Ironclad regarding the Bond and the Litigation, NFA requests the following:

(a) Ironclad Contact. NFA requests that Ironclad designate a contact person for ongoing coordination regarding all matters related to the Performance Bond and the Litigation. We understand that you, Ms. Dwyer, currently serve as the primary claims contact, and we are prepared to continue directing all correspondence to your attention unless Ironclad designates an alternative contact.

(b) Litigation Updates. NFA will keep Ironclad reasonably informed of material developments in the Litigation, including significant pleadings, motions, court orders, discovery developments, and any settlement discussions. NFA will provide copies of material filings and orders as they become available.

(c) Meridian Communications. NFA requests that Ironclad promptly notify NFA and this firm of any and all communications received from Meridian or its counsel, Hargrove, Deluca & Stein LLP, regarding the Performance Bond, the Litigation, or any related matter. NFA considers it essential that it be aware of any efforts by Meridian to communicate directly with the Surety, particularly given Meridian's pending demand on the Bond.

(d) NFA Contacts. NFA's primary contacts for all matters related to this letter, the Bond, and the Litigation are as follows:

Linda Osei, Partner Calderwood & Harkness LLP 425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200

Email: losei@calderwoodharkness.com

Dominic Hale, General Counsel Northgate Telecommunications PLC 14 Cavendish Square London W1G 0BX, United Kingdom Telephone: +44 (0)20 7946 0123

Email: dominic.hale@northgatetelecom.co.uk

All substantive communications regarding the Bond and the Litigation should be directed to both Ms. Osei and Mr. Hale.

XI. Reservation of Rights

NFA hereby expressly reserves all rights, claims, defenses, and remedies available to it under the Performance Bond, the MCA, and applicable law, whether at law or in equity. Without limiting the generality of the foregoing, NFA reserves:

(a) The right to make a formal demand on the Performance Bond at any time, up to the full penal sum of One Hundred Twenty Million Dollars ($120,000,000);

(b) The right to seek recovery from Meridian directly in the pending Litigation, including through its counterclaims totaling One Hundred Forty-Nine Million Dollars ($149,000,000);

(c) The right to supplement, amend, or revise its claims, counterclaims, and damages calculations as additional information becomes available through discovery and as the completion of the remaining work by Crestline proceeds; and

(d) All other rights and remedies available under the Bond, the MCA, and the laws of the State of New York.

Nothing in this letter, and no action or failure to act by NFA or its counsel, shall be construed as a waiver, limitation, or release of any of NFA's rights under the Performance Bond, the MCA, or applicable law. NFA's decision to tender the defense of Meridian's bond demand to Ironclad does not constitute an election of remedies or a limitation on NFA's ability to pursue its own affirmative claims under the Bond or against Meridian.

XII. Confidentiality

This letter and all of its contents are confidential and are provided to Ironclad solely for the purpose of addressing the matters set forth herein. This letter, its enclosures, and any information contained herein should not be disclosed to Meridian, its counsel Hargrove, Deluca & Stein LLP, or any third party without the prior written consent of NFA. If Ironclad receives any request or demand from Meridian, its counsel, or any third party for the production or disclosure of this letter or its contents, NFA requests that Ironclad promptly notify NFA and this firm before making any disclosure.

All communications from Ironclad regarding the matters addressed in this letter should be directed to Calderwood & Harkness LLP at the address set forth above, with a copy to Dominic Hale at the address set forth in Section X.

XIII. Enclosures

The following documents are enclosed with this letter:

1. Copy of Performance Bond No. ISG-2020-NE-04417

2. Copy of the Master Construction Agreement dated March 15, 2020, with all exhibits thereto

3. Copy of Cure Notice No. 1, dated January 18, 2024

4. Copy of Cure Notice No. 2, dated February 19, 2024

5. Copy of Notice of Termination for Cause, dated April 1, 2024

6. Copy of Meridian's demand letter to Ironclad dated April 15, 2024 (to the extent in NFA's possession)

7. Copy of Meridian's Verified Complaint, Index No. 654321/2024, filed July 15, 2024

8. Copy of NFA's Answer with Affirmative Defenses and Counterclaims, filed September 3, 2024

We trust that the foregoing provides Ironclad with sufficient information to evaluate the matters set forth in this letter. Given the significance of the pending Litigation, the magnitude of Meridian's bond demand, and the importance of NFA's own rights under the Performance Bond, we respectfully request Ironclad's prompt attention to this matter and a written response within fifteen (15) business days of receipt of this letter.

We look forward to working constructively with Ironclad to address these matters and to protect NFA's interests as the Obligee under the Performance Bond. Please do not hesitate to contact me directly at (212) 496-7200 should you wish to discuss any aspect of this letter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Linda Osei Partner 425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200 Facsimile: (212) 496-7201

Email: losei@calderwoodharkness.com

Enclosures (8)

cc:

Dominic Hale, General Counsel, Northgate Telecommunications PLC Renata Voss, Vice President, US Network Infrastructure, Northgate Fiber Americas Inc. Priya Anand, Calderwood & Harkness LLP Jeffrey Park, Calderwood & Harkness LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law
425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200 Facsimile: (212) 496-7201
September 5, 2024
Via Overnight Courier and Email
Patricia Dwyer Vice President of Claims Ironclad Surety Group Inc. 300 North Meridian Street, Suite 1800 Indianapolis, IN 46204
Re: Performance Bond No. ISG-2020-NE-04417; Demand by Meridian Infrastructure Partners LLC; Master Construction Agreement dated March 15, 2020 between Northgate Fiber Americas Inc. (Owner/Obligee) and Meridian Infrastructure Partners LLC (Contractor/Principal)
Calderwood & Harkness LLP Matter No. 1022-00005
Dear Ms. Dwyer:
I. Introduction and Identification of Representation
This firm, Calderwood & Harkness LLP ("C&H"), represents Northgate Fiber Americas Inc. ("NFA"), a Delaware corporation (File No. 7182934), with its principal office at 600 Lexington Avenue, 28th Floor, New York, NY 10022, and NFA's parent company, Northgate Telecommunications PLC ("Northgate" or "NTP"), a public limited company incorporated in England and Wales (Company No. 08234517), headquartered at 14 Cavendish Square, London W1G 0BX, United Kingdom. The C&H engagement team for this matter consists of Linda Osei, Responsible Partner; Priya Anand, Billing Partner; Jeffrey Park, Lead Associate; and Yuki Nakamura, Working Associate.
C&H was retained effective August 19, 2024 to defend NFA in the action captioned Meridian Infrastructure Partners LLC v. Northgate Fiber Americas Inc., Index No. 654321/2024, pending in the Supreme Court of the State of New York, New York County, Commercial Division, before the Honorable Eleanor M. Ricci, Part 49 (the "Litigation"). Our engagement extends to all matters arising out of or related to the underlying Master Construction Agreement and the performance bond that is the subject of this letter.
The purpose of this letter is threefold. First, we write to formally notify Ironclad Surety Group Inc. ("Ironclad" or "ISG") of Meridian Infrastructure Partners LLC's ("Meridian") demand on Performance Bond No. ISG-2020-NE-04417 (the "Performance Bond" or the "Bond") and to tender the defense of that claim to Ironclad. Second, we request that Ironclad state its position regarding the bond demand and the pending Litigation. Third, we seek written confirmation of the terms of Ironclad's previously communicated agreement to contribute toward NFA's defense costs. We set forth below the factual and contractual background necessary for Ironclad's evaluation of these matters.
II. Background — The Master Construction Agreement
On March 15, 2020, NFA, as Owner, and Meridian, as Contractor, executed a Master Construction Agreement (the "MCA") for the design, engineering, permitting, and construction of approximately 18,500 route miles of underground and aerial fiber-optic cable across a seven-state footprint in the northeastern United States, encompassing New York, New Jersey, Connecticut, Massachusetts, Pennsylvania, Maryland, and Virginia. A true and complete copy of the MCA, together with all exhibits thereto, is enclosed herewith as Enclosure 2.
The total contract price under the MCA was One Billion Two Hundred Million Dollars ($1,200,000,000), structured as a combination of fixed-price milestones aggregating Seven Hundred Eighty Million Dollars ($780,000,000), representing approximately sixty-five percent (65%) of the total contract price, and unit-rate pricing aggregating Four Hundred Twenty Million Dollars ($420,000,000), representing approximately thirty-five percent (35%) of the total contract price. The contract term was five (5) years from the date of the Notice to Proceed, which was issued on April 1, 2020, establishing an original completion date of March 31, 2025.
The MCA is governed by the laws of the State of New York (MCA § 22.1). The parties agreed that all disputes arising under the MCA shall be litigated exclusively in the courts of New York County (MCA § 22.3), and both parties expressly waived the right to a jury trial (MCA § 22.4).
The MCA established fourteen (14) defined construction milestones under Section 8.2, each carrying specific scope, schedule, and payment obligations. To incentivize timely performance and to compensate the Owner for the foreseeable harms associated with delay, the MCA provided for liquidated damages at the rate of One Hundred Seventy-Five Thousand Dollars ($175,000) per day per milestone under Section 9.1. These liquidated damages are capped at ten percent (10%) of the applicable milestone value per individual milestone and five percent (5%) of the total contract price — Sixty Million Dollars ($60,000,000) — in the aggregate.
Quality standards for all work under the MCA are governed by Northgate's proprietary Technical Specification NS-FIBER-2020 and applicable industry standards, including ANSI/TIA-568 and BICSI guidelines, as set forth in MCA § 12.4. Meridian's compliance with these quality standards was a material obligation under the MCA and a condition to milestone acceptance and payment.
III. Background — The Performance Bond
In connection with the MCA, and as a condition to the issuance of the Notice to Proceed, Ironclad issued Performance Bond No. ISG-2020-NE-04417 in the penal sum of One Hundred Twenty Million Dollars ($120,000,000). A true and complete copy of the Performance Bond is enclosed herewith as Enclosure 1.
The Bond names NFA as the Obligee and Meridian as the Principal. The Bond secures Meridian's faithful performance of all of its obligations under the MCA. Under the terms of the Bond, Ironclad's obligations may be triggered upon Meridian's material breach of the MCA and the Owner's declaration of a Contractor default in accordance with the contractual cure and termination provisions. The Bond is co-extensive with the MCA and is subject to the same governing law.
NFA notes that Ironclad's liability under the Bond is limited to the penal sum of $120,000,000, but within that limit, Ironclad is obligated to respond to the Obligee's proper demands arising from the Principal's default. As set forth below, Meridian's breaches of the MCA have caused and will continue to cause damages to NFA that are expected to exceed the penal sum of the Bond.
IV. Summary of Meridian's Performance Failures and Material Breach
A. Schedule Delays
Meridian's persistent and escalating failure to meet its contractual milestone obligations constitutes a central basis for NFA's termination of the MCA. The following is a summary of the schedule delays across all three phases of the project.
Phase 1 (NY Metro & Northern NJ). Phase 1 encompassed approximately 3,200 route miles and carried a milestone value of Two Hundred Eight Million Dollars ($208,000,000). Milestone 3 under Phase 1 was completed forty-seven (47) days late, with a contractual target date of August 28, 2021 and an actual completion date of October 14, 2021. Liquidated damages in the amount of Eight Million Two Hundred Twenty-Five Thousand Dollars ($8,225,000) were assessed by NFA via written notice dated November 5, 2021 and were deducted from Meridian's subsequent payment applications in accordance with MCA § 9.1.
Phase 2 (CT, Western MA, Southern PA). Phase 2 encompassed approximately 5,600 route miles and carried a milestone value of Three Hundred Sixty-Three Million Dollars ($363,000,000). The schedule delays in Phase 2 were significantly more severe and reflected a pattern of deteriorating performance:
• Milestone 5: Completed twenty-two (22) days late, resulting in assessed liquidated damages of Three Million Eight Hundred Fifty Thousand Dollars ($3,850,000).
• Milestone 6: Completed sixty-eight (68) days late, resulting in assessed liquidated damages of Eleven Million Nine Hundred Thousand Dollars ($11,900,000).
• Milestone 7: Completed ninety-one (91) days late, resulting in assessed liquidated damages of Fifteen Million Nine Hundred Twenty-Five Thousand Dollars ($15,925,000).
• Milestone 8: Never completed prior to the termination of the MCA. As of the date of termination, one hundred thirty-four (134) days of delay had accrued against Milestone 8. The daily liquidated damages rate would yield $23,450,000 in total delay damages; however, because Milestone 8 carries a value of Ninety-One Million Dollars ($91,000,000), the per-milestone cap of ten percent (10%) limits the Milestone 8 liquidated damages to Nine Million One Hundred Thousand Dollars ($9,100,000).
Total Phase 2 liquidated damages assessed: Forty Million Seven Hundred Seventy-Five Thousand Dollars ($40,775,000).
Phase 3 (MD, VA, Eastern PA). Phase 3 encompassed approximately 9,700 route miles and carried a milestone value of Six Hundred Twenty-Nine Million Dollars ($629,000,000). Meridian mobilized crews in Maryland in July 2023 but achieved only approximately 340 of 9,700 route miles — a mere 3.5% — before the termination of the MCA. This grossly inadequate mobilization further demonstrates Meridian's inability or unwillingness to perform its obligations under the MCA.
Total liquidated damages assessed across all phases: Forty-Nine Million Dollars ($49,000,000). This amount remains below the aggregate liquidated damages cap of Sixty Million Dollars ($60,000,000) under MCA § 9.1.
B. Quality Defects
In addition to the schedule delays described above, Meridian's work was plagued by pervasive quality deficiencies. Over the course of Phase 2, NFA issued two hundred eighty-seven (287) non-conformance reports ("NCRs") identifying deviations from the contractual quality standards set forth in Technical Specification NS-FIBER-2020 and the applicable ANSI/TIA-568 and BICSI guidelines. Of these 287 NCRs, forty-three (43) were classified as "critical," meaning they involved deficiencies that directly affected the performance, reliability, or safety of the fiber-optic network. Critical NCRs included, without limitation, instances of splice loss exceeding specification, improper conduit depth in violation of applicable codes and the MCA's technical specifications, and unauthorized deviations from the approved route alignment.
The quality failures accelerated toward the end of Meridian's tenure on the project. In February 2024 alone, NFA issued twelve (12) additional critical NCRs, underscoring the fact that Meridian's quality performance was not improving but was, instead, continuing to deteriorate.
NFA has estimated the cost of remediating all outstanding NCRs at approximately Eighteen Million Three Hundred Thousand Dollars ($18,300,000). This estimate is derived from the anticipated remediation cost of approximately $275,000 per critical NCR (43 critical NCRs × $275,000 = $11,825,000) and approximately $26,500 per non-critical NCR (244 non-critical NCRs × $26,500 = $6,466,000), rounded to the nearest hundred thousand. NFA reserves the right to revise this estimate as remediation proceeds and actual costs are determined.
C. Failure to Cure
NFA followed the contractual cure procedures set forth in MCA § 14.1 before terminating the MCA. The relevant chronology is as follows:
January 18, 2024 — Cure Notice No. 1. NFA, through Renata Voss, Vice President of US Network Infrastructure, issued a formal Cure Notice to Meridian identifying the following as events of material breach: (i) Meridian's failure to achieve Milestone 8; (ii) Meridian's inadequate mobilization for Phase 3; and (iii) the forty-three (43) critical NCRs then outstanding. The Cure Notice demanded that Meridian cure all identified breaches within thirty (30) calendar days, as required by MCA § 14.1. A copy of Cure Notice No. 1 is enclosed as Enclosure 3.
February 2, 2024 — Meridian's Response. Meridian, through its Chief Executive Officer, Victor Sandoval, responded to Cure Notice No. 1 by disputing NFA's characterization of the breaches. Meridian asserted that the schedule delays were attributable to alleged failures by NFA to secure necessary permits in a timely manner, to fourteen (14) purported informal scope changes allegedly directed by NFA's field representatives, and to unspecified force majeure events. Meridian did not, however, identify any specific force majeure event as defined under MCA § 16.1, nor did Meridian provide the contemporaneous notices required by MCA § 16.3 for any force majeure claim. NFA's position is that each of these asserted defenses is without merit and unsupported by the contemporaneous project records.
February 19, 2024 — Cure Notice No. 2. Having determined that Meridian had failed to cure the identified breaches within the contractual cure period, NFA issued a second Cure Notice stating that Meridian remained in continuing material breach of the MCA. The second Cure Notice demanded that Meridian submit a comprehensive remediation plan within fifteen (15) days. A copy of Cure Notice No. 2 is enclosed as Enclosure 4.
March 5, 2024 — Meridian's Corrective Action Plan. Meridian submitted a document titled "Corrective Action Plan" that proposed an accelerated schedule, the deployment of additional construction crews, a nine-month extension of the MCA term, and Eighty-Seven Million Dollars ($87,000,000) in additional compensation to Meridian. Notably, the Corrective Action Plan did not address the 43 outstanding critical NCRs in any substantive manner and conditioned all proposed corrective measures on NFA's agreement to pay significant additional sums and to extend the contract deadline — terms that would have effectively rewarded Meridian for its own defaults.
March 12, 2024 — NFA's Rejection. NFA rejected Meridian's Corrective Action Plan as inadequate, citing Meridian's continued quality failures and the plan's failure to propose any meaningful remediation of the outstanding critical NCRs. NFA reiterated that Meridian remained in material breach of the MCA.
V. Termination for Cause
On April 1, 2024, NFA delivered a Notice of Termination for Cause pursuant to MCA § 14.1, effective immediately. The termination was based on Meridian's persistent and uncured material breaches of the MCA, including its chronic schedule delays, pervasive quality failures, and its failure to cure within the contractual cure periods after receiving two formal Cure Notices. A copy of the Notice of Termination is enclosed as Enclosure 5.
Under MCA § 14.5, upon a valid termination for cause, NFA is entitled to, among other things: (a) complete the remaining work using substitute contractors and charge all excess costs of completion to Meridian; (b) draw on the Performance Bond to recover amounts owed as a result of Meridian's default; and (c) treat Meridian's right to any termination-for-convenience fee under MCA § 14.3 as forfeited.
At the time of termination, the project status was as follows:
• Approximately 9,140 of 18,500 route miles had been completed, representing 49.4% of the total scope.
• The total contract value earned by Meridian based on completed work was approximately Five Hundred Sixty-Nine Million Seven Hundred Thousand Dollars ($569,700,000).
• The remaining unperformed value under the MCA was approximately Six Hundred Thirty Million Three Hundred Thousand Dollars ($630,300,000).
• Total payments made to Meridian during the term of the MCA were Five Hundred Twelve Million Seven Hundred Thousand Dollars ($512,700,000), broken down as follows: Phase 1 — $199,775,000; Phase 2 — $281,225,000; Phase 3 — $31,700,000.
• Retainage held by NFA as of the date of termination was Fifty-Six Million Nine Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($56,966,667), representing ten percent (10%) of gross certified work of $569,666,670.
NFA's position is that the termination was fully justified under the terms of the MCA and that Meridian has no right to the retainage, the termination-for-convenience fee, or any additional compensation.
VI. Replacement Contractor and Excess Completion Costs
Following the termination of the MCA, NFA undertook a commercially reasonable process to engage a replacement contractor to complete the remaining scope of the project. On June 10, 2024, NFA entered into a replacement construction agreement (the "Crestline Agreement") with Crestline Construction Group Inc. ("Crestline"), a Virginia corporation with its principal office at 8200 Greensboro Drive, Suite 900, McLean, VA 22102. Crestline is a nationally recognized fiber-optic and telecommunications infrastructure contractor with extensive experience in the northeastern United States.
Under the Crestline Agreement, Crestline will complete the remaining Phase 2 work (Milestone 8) and all Phase 3 work for a total contract price of Seven Hundred Twelve Million Dollars ($712,000,000). The Crestline Agreement has a term of thirty (30) months, with an estimated completion date in December 2026.
The excess completion costs resulting from Meridian's default are calculated as follows:
• Crestline contract price for remaining scope: $712,000,000
• Remaining MCA value (unperformed at termination): $630,300,000
• Excess completion costs: $81,700,000
These excess completion costs are direct, foreseeable, and proximately caused by Meridian's material breach and default under the MCA. They are recoverable from Meridian as the defaulting Contractor and from Ironclad as the Surety under the Performance Bond, subject to the Bond's penal sum.
VII. Meridian's Bond Demand and Pending Litigation
A. Meridian's Demand on the Bond
On April 8, 2024, seven days after NFA's termination of the MCA, Meridian sent correspondence to NFA contesting the validity of the termination, characterizing it as pretextual and asserting that NFA's true motivation was to avoid paying amounts owed to Meridian under the MCA. NFA categorically rejects this characterization.
On April 15, 2024, Meridian filed a demand on Ironclad for the full penal sum of the Performance Bond — One Hundred Twenty Million Dollars ($120,000,000) — purportedly under what Meridian describes as a "subcontractor protection endorsement" to the Bond. To the extent NFA has a copy of this demand, it is enclosed as Enclosure 6.
NFA and Northgate vigorously dispute Meridian's standing to make any demand whatsoever on the Performance Bond. Meridian is the Principal — not the Obligee — under the Bond. The Bond was issued for the protection of NFA as the Owner and Obligee, securing Meridian's faithful performance of its obligations to NFA. The notion that a defaulting contractor may make a demand against its own surety, for its own benefit, is fundamentally inconsistent with the nature and purpose of a performance bond. NFA, as the sole Obligee under the Bond, has not consented to any payment by Ironclad to Meridian, and NFA hereby instructs Ironclad not to make any such payment.
B. The Litigation
On July 15, 2024, Meridian filed a Verified Complaint against NFA in the Supreme Court of the State of New York, New York County, Commercial Division, Index No. 654321/2024 (the "Litigation"). The Verified Complaint seeks approximately Two Hundred Million Dollars ($200,000,000) in damages across four causes of action:
Count I — Breach of Contract (Wrongful Termination): $92,400,000. Meridian alleges that NFA's termination of the MCA was wrongful and seeks $50,424,000 representing the hypothetical termination-for-convenience fee that would have been payable under MCA § 14.3 had the termination been without cause, plus $41,976,000 in alleged lost profits on the unperformed portion of the MCA.
Count II — Breach of Contract (Unpaid Invoices): $16,500,000. Meridian alleges that NFA failed to pay $16,500,000 in payment applications submitted by Meridian for Phase 3 work performed prior to termination.
Count III — Breach of Contract (Wrongful Withholding of Retainage): $56,966,667. Meridian seeks the release of all retainage held by NFA, alleging that NFA's continued retention of these funds is unjustified.
Count IV — Breach of Implied Covenant of Good Faith and Fair Dealing: $34,133,333. Meridian alleges that NFA's termination and related conduct caused Meridian a loss of bonding capacity and reputational harm, and seeks damages in the amount of $34,133,333.
Meridian is represented by the law firm of Hargrove, Deluca & Stein LLP, 51 West 52nd Street, 40th Floor, New York, NY 10019, with Thomas Deluca serving as lead partner. A copy of Meridian's Verified Complaint is enclosed as Enclosure 7.
On September 3, 2024, NFA, through this firm, filed its Answer with Affirmative Defenses and Counterclaims. NFA's principal affirmative defenses include: (i) that the termination was justified as a termination for material breach under MCA § 14.1; (ii) the contractual consequential damages waiver set forth in MCA § 20.1; (iii) Meridian's failure to mitigate damages; (iv) comparative fault; and (v) set-off of NFA's counterclaims against any amounts that might otherwise be owed to Meridian. NFA's counterclaims are as follows:
• Counterclaim I — Liquidated Damages: $49,000,000, representing the aggregate liquidated damages assessed for Meridian's schedule delays across all phases, as described in Section IV.A above.
• Counterclaim II — Excess Completion Costs: $81,700,000, representing the difference between the Crestline contract price and the remaining MCA value, as described in Section VI above.
• Counterclaim III — Remediation of Defective Work: $18,300,000, representing the estimated cost of remediating the 287 outstanding NCRs, including 43 critical NCRs, as described in Section IV.B above.
• Total Counterclaims: $149,000,000.
A copy of NFA's Answer with Affirmative Defenses and Counterclaims is enclosed as Enclosure 8.
VIII. Formal Tender and Request for Ironclad's Position
A. Tender of Defense of Meridian's Bond Demand
NFA, as the Obligee under Performance Bond No. ISG-2020-NE-04417, hereby formally tenders to Ironclad the defense of Meridian's April 15, 2024 demand on the Performance Bond. Ironclad, as the issuer of the Bond, has a direct interest in and obligation with respect to the disposition of Meridian's demand. NFA's position is unequivocal: Meridian, as Principal under the Bond, has no right to make a demand against its own surety for the benefit of itself. The Performance Bond secures Meridian's obligations to NFA, not the reverse. Any payment by Ironclad to Meridian on the Bond would be adverse to NFA's interests and inconsistent with the fundamental purpose of the Bond.
NFA requests that Ironclad deny Meridian's demand in its entirety and that Ironclad confirm such denial in writing to NFA at its earliest opportunity.
B. NFA's Claim Under the Performance Bond
NFA hereby reserves all rights to make its own claim under the Performance Bond for Meridian's material breach and default under the MCA. NFA's potential claim under the Bond includes, but is not limited to, the following categories of damages:
• Excess completion costs: $81,700,000
• Remediation costs for defective work: $18,300,000
• Liquidated damages for schedule delays: $49,000,000
• Total potential claim: $149,000,000 (subject to the penal sum of the Bond, i.e., up to $120,000,000)
NFA will provide a formal demand letter and supporting documentation in due course and reserves the right to present its formal claim at any time during the pendency of the Litigation or thereafter. Nothing in this letter shall be construed as a presentment of NFA's formal demand under the Bond, nor shall the absence of a formal demand at this time be construed as a waiver or abandonment of NFA's rights under the Bond.
C. Request for Ironclad's Position
NFA requests that Ironclad confirm in writing, within fifteen (15) business days of receipt of this letter, its position on each of the following matters:
(a) Ironclad's position on Meridian's April 15, 2024 demand — specifically, whether Ironclad intends to honor, deny, or investigate the demand, and if Ironclad intends to investigate, the anticipated scope and timeline of such investigation;
(b) Whether Ironclad acknowledges NFA as the sole Obligee entitled to make demands under the Performance Bond, and whether Ironclad disputes NFA's position that Meridian, as Principal, lacks standing to demand payment under its own bond;
(c) Ironclad's position regarding the pending Litigation, including whether Ironclad intends to intervene in the Litigation, to monitor the proceedings informally, or to participate in any other capacity; and
(d) The status of Ironclad's previously communicated agreement to contribute up to Two Million Dollars ($2,000,000) toward NFA's defense costs under a reservation of rights, and the specific terms and conditions of that contribution, as addressed in greater detail in Section IX below.
IX. Defense Cost Contribution
NFA understands, based on prior communications between Ironclad and NFA's in-house counsel, that Ironclad has indicated a willingness to contribute up to Two Million Dollars ($2,000,000) toward NFA's defense costs in the Litigation, subject to a reservation of rights. NFA appreciates Ironclad's willingness to participate in the defense and now requests written confirmation of the terms of this contribution. Specifically, NFA requests that Ironclad address the following:
(a) Payment schedule: Whether the contribution will be made as a lump sum, periodic reimbursements against invoices submitted, or on some other basis, and if periodic, the frequency and timing of payments;
(b) Documentation requirements: What documentation Ironclad requires in connection with defense cost invoices, including the level of detail required for legal fee statements and expert cost invoices, and whether Ironclad requires the use of particular billing codes or formats;
(c) Conditions and limitations: Any conditions or limitations on the contribution, including whether the contribution is subject to reduction, recoupment, or offset in the event of certain outcomes in the Litigation or under the Bond, and whether there are categories of costs that Ironclad considers ineligible for reimbursement; and
(d) Approval of counsel and strategy: Whether Ironclad requires prior approval of defense counsel, defense strategy, or significant litigation decisions (such as motions, settlement discussions, or trial strategy) as a condition of its contribution.
For informational purposes, NFA's current defense budget through trial is estimated at Eight Million Five Hundred Thousand Dollars ($8,500,000) to Eleven Million Two Hundred Thousand Dollars ($11,200,000) in legal fees, plus Two Million Four Hundred Thousand Dollars ($2,400,000) to Three Million One Hundred Thousand Dollars ($3,100,000) in expert costs. NFA anticipates retaining a construction and delay expert and a damages expert in the near term. Specifically, NFA plans to retain Dr. Elinor Chazen of Lakeview Consulting Group LLC as a construction and delay expert, and Professor Gordon Whitfield of Pinnacle Economics LLC as a damages expert. Formal retention agreements with both experts are anticipated in the coming weeks, and NFA will provide Ironclad with further details regarding these expert engagements as they are finalized.
X. Coordination and Communication
In order to ensure effective coordination between NFA and Ironclad regarding the Bond and the Litigation, NFA requests the following:
(a) Ironclad Contact. NFA requests that Ironclad designate a contact person for ongoing coordination regarding all matters related to the Performance Bond and the Litigation. We understand that you, Ms. Dwyer, currently serve as the primary claims contact, and we are prepared to continue directing all correspondence to your attention unless Ironclad designates an alternative contact.
(b) Litigation Updates. NFA will keep Ironclad reasonably informed of material developments in the Litigation, including significant pleadings, motions, court orders, discovery developments, and any settlement discussions. NFA will provide copies of material filings and orders as they become available.
(c) Meridian Communications. NFA requests that Ironclad promptly notify NFA and this firm of any and all communications received from Meridian or its counsel, Hargrove, Deluca & Stein LLP, regarding the Performance Bond, the Litigation, or any related matter. NFA considers it essential that it be aware of any efforts by Meridian to communicate directly with the Surety, particularly given Meridian's pending demand on the Bond.
(d) NFA Contacts. NFA's primary contacts for all matters related to this letter, the Bond, and the Litigation are as follows:
Linda Osei, Partner Calderwood & Harkness LLP 425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200
Email: losei@calderwoodharkness.com
Dominic Hale, General Counsel Northgate Telecommunications PLC 14 Cavendish Square London W1G 0BX, United Kingdom Telephone: +44 (0)20 7946 0123
Email: dominic.hale@northgatetelecom.co.uk
All substantive communications regarding the Bond and the Litigation should be directed to both Ms. Osei and Mr. Hale.
XI. Reservation of Rights
NFA hereby expressly reserves all rights, claims, defenses, and remedies available to it under the Performance Bond, the MCA, and applicable law, whether at law or in equity. Without limiting the generality of the foregoing, NFA reserves:
(a) The right to make a formal demand on the Performance Bond at any time, up to the full penal sum of One Hundred Twenty Million Dollars ($120,000,000);
(b) The right to seek recovery from Meridian directly in the pending Litigation, including through its counterclaims totaling One Hundred Forty-Nine Million Dollars ($149,000,000);
(c) The right to supplement, amend, or revise its claims, counterclaims, and damages calculations as additional information becomes available through discovery and as the completion of the remaining work by Crestline proceeds; and
(d) All other rights and remedies available under the Bond, the MCA, and the laws of the State of New York.
Nothing in this letter, and no action or failure to act by NFA or its counsel, shall be construed as a waiver, limitation, or release of any of NFA's rights under the Performance Bond, the MCA, or applicable law. NFA's decision to tender the defense of Meridian's bond demand to Ironclad does not constitute an election of remedies or a limitation on NFA's ability to pursue its own affirmative claims under the Bond or against Meridian.
XII. Confidentiality
This letter and all of its contents are confidential and are provided to Ironclad solely for the purpose of addressing the matters set forth herein. This letter, its enclosures, and any information contained herein should not be disclosed to Meridian, its counsel Hargrove, Deluca & Stein LLP, or any third party without the prior written consent of NFA. If Ironclad receives any request or demand from Meridian, its counsel, or any third party for the production or disclosure of this letter or its contents, NFA requests that Ironclad promptly notify NFA and this firm before making any disclosure.
All communications from Ironclad regarding the matters addressed in this letter should be directed to Calderwood & Harkness LLP at the address set forth above, with a copy to Dominic Hale at the address set forth in Section X.
XIII. Enclosures
The following documents are enclosed with this letter:
1. Copy of Performance Bond No. ISG-2020-NE-04417
2. Copy of the Master Construction Agreement dated March 15, 2020, with all exhibits thereto
3. Copy of Cure Notice No. 1, dated January 18, 2024
4. Copy of Cure Notice No. 2, dated February 19, 2024
5. Copy of Notice of Termination for Cause, dated April 1, 2024
6. Copy of Meridian's demand letter to Ironclad dated April 15, 2024 (to the extent in NFA's possession)
7. Copy of Meridian's Verified Complaint, Index No. 654321/2024, filed July 15, 2024
8. Copy of NFA's Answer with Affirmative Defenses and Counterclaims, filed September 3, 2024
We trust that the foregoing provides Ironclad with sufficient information to evaluate the matters set forth in this letter. Given the significance of the pending Litigation, the magnitude of Meridian's bond demand, and the importance of NFA's own rights under the Performance Bond, we respectfully request Ironclad's prompt attention to this matter and a written response within fifteen (15) business days of receipt of this letter.
We look forward to working constructively with Ironclad to address these matters and to protect NFA's interests as the Obligee under the Performance Bond. Please do not hesitate to contact me directly at (212) 496-7200 should you wish to discuss any aspect of this letter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Linda Osei Partner 425 Park Avenue, 33rd Floor New York, NY 10022 Telephone: (212) 496-7200 Facsimile: (212) 496-7201
Email: losei@calderwoodharkness.com
Enclosures (8)
cc:
Dominic Hale, General Counsel, Northgate Telecommunications PLC Renata Voss, Vice President, US Network Infrastructure, Northgate Fiber Americas Inc. Priya Anand, Calderwood & Harkness LLP Jeffrey Park, Calderwood & Harkness LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

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