MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Oliver Mackenzie, Responsible Partner, Mergers & Acquisitions
FROM: Harrison Wexford, Billing Partner, Mergers & Acquisitions
DATE: February 28, 2025
RE: Staffing Allocation & Budget Projection — Northgate Telecommunications PLC Acquisition of Cascadia Fiber Networks, Inc.
Matter No.: 1022-00006
Billing No.: 78432.001
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I. Purpose and Overview
This memorandum sets forth the proposed engagement team staffing, workstream assignments, estimated hours, and projected fee budget for Calderwood & Harkness LLP's ("C&H" or the "Firm") representation of Northgate Telecommunications PLC ("Northgate" or "NTP") in connection with its proposed acquisition of Cascadia Fiber Networks, Inc. ("Cascadia" or "CFN"), a Delaware corporation, by means of an all-cash forward merger valued at approximately $750,000,000 (the "Transaction"). The Transaction will be effected pursuant to Section 251 of the Delaware General Corporation Law (the "DGCL"), under which NTP Acquisition Sub, Inc. — a Delaware merger subsidiary incorporated on February 21, 2025, with Liam Sutherland serving as sole director — will merge with and into Cascadia, with Cascadia surviving the merger as a wholly owned subsidiary of Northgate.
The engagement was formally opened on February 26, 2025. On that date, an engagement letter was delivered to Philippa Ashworth, General Counsel of Northgate, setting forth the scope of the Firm's representation, applicable hourly rates, and standard terms of engagement. As of the date of this memorandum, we have received a countersigned copy of the engagement letter, and conflict clearance has been obtained through the Firm's General Counsel's office, subject to the notation regarding Elkhorn Capital Markets' dual role discussed in Section III.D below.
The purpose of this memorandum is to provide Oliver Mackenzie, as Responsible Partner, with a comprehensive overview of the resources the Firm expects to deploy, the allocation of those resources across the Transaction's principal workstreams, and a range-based budget estimate for total professional fees and disbursements. This memorandum is intended to facilitate approval of the proposed staffing plan and to serve as a baseline for ongoing budget monitoring throughout the life of the engagement.
The Transaction is structured as follows. Northgate, a public limited company organized under the laws of England and Wales and listed on the London Stock Exchange (LSE: NTP), will acquire one hundred percent of the outstanding equity interests of Cascadia through the merger of NTP Acquisition Sub, Inc. with and into Cascadia. Cascadia stockholders will receive $15.79 per share in cash (the "Per Share Merger Consideration"), representing an implied fully diluted equity value of approximately $750,000,000 based on approximately 47.5 million fully diluted shares of Cascadia common stock. No portion of the consideration will consist of Northgate securities or any form of equity rollover.
Key Transaction Milestones. The parties have established a target signing date of April 7, 2025, with an estimated closing in August 2025. The merger agreement is expected to provide for an outside date of September 30, 2025, with a provision allowing either party to extend the outside date to November 29, 2025, in the event that all conditions to closing other than the receipt of required regulatory approvals have been satisfied or waived as of the initial outside date.
Scope of Engagement. C&H's representation of Northgate in this matter encompasses the following principal areas of legal work: (i) negotiation, drafting, and execution of all Transaction documentation, including the merger agreement, ancillary agreements, and related corporate documents; (ii) comprehensive legal due diligence of Cascadia; (iii) regulatory approval workstreams, including filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the Federal Communications Commission transfer of control process, and the Committee on Foreign Investment in the United States ("CFIUS") voluntary notice process; (iv) review and negotiation of the acquisition financing arrangements; (v) representations and warranties ("R&W") insurance and directors' and officers' ("D&O") tail insurance coordination; and (vi) closing and post-closing mechanics and deliverables.
Opposing Counsel. Cascadia is represented by Whitmore, Kessler & Braun LLP ("WKB"), based in Portland, Oregon. Jonathan Kessler leads the M&A team for the target, and Aaron Whitmore leads the regulatory workstream. We have had preliminary contact with Mr. Kessler's office to establish a working timeline and to coordinate the initial exchange of due diligence materials.
Client's Financial Advisor. Northgate has retained Prumvane Brothers & Co. as its financial advisor for the Transaction. The lead engagement team at Prumvane Brothers consists of Simone Favreau, Lead Managing Director, and Nathan Chu, Vice President. We anticipate close coordination with Prumvane Brothers on valuation matters, deal term negotiation strategy, and the financial aspects of the merger consideration.
Target's Financial Advisor. Cascadia's financial advisor is Copperfield Zanthor & Partners, led by Paul Tremaine. We expect that Copperfield Zanthor will be engaged to deliver a fairness opinion to the Cascadia board of directors in connection with the board's approval of the Transaction.
II. Engagement Team — Core Staffing
Set forth below is the proposed core engagement team, together with each team member's role, principal areas of responsibility, and estimated hours for the duration of the engagement. Estimated hours are presented as ranges reflecting the inherent uncertainty at this stage of the Transaction regarding the complexity of certain workstreams, the pace of negotiations with WKB, and the potential for regulatory complications.
A. Partners
1. Oliver Mackenzie — Responsible Partner, Mergers & Acquisitions
Oliver Mackenzie will serve as the Responsible Partner for the engagement and will have overall leadership responsibility for the Transaction. His principal duties will include:
• Client Relationship Management. Mr. Mackenzie will serve as the primary point of contact for Northgate's senior leadership, including Philippa Ashworth (General Counsel), Liam Sutherland (Vice President, Corporate Development), and, as appropriate, Sir Malcolm Trent, KBE (Chief Executive Officer) and Gemma Haverford (Chief Financial Officer). He will be available on a direct-dial basis for strategic and time-sensitive matters throughout the engagement.
• Board and Management Advisory. Mr. Mackenzie will provide strategic legal advice to the Northgate board of directors, chaired by Dame Catherine Enright, DBE, in connection with board-level decision-making regarding the Transaction, including the authorization of the merger agreement, any amendments thereto, and the exercise or waiver of conditions to closing. To the extent that Northgate's board convenes to consider the Transaction, Mr. Mackenzie will attend or make himself available by video conference.
• Transaction Documentation Review and Approval. Mr. Mackenzie will review and approve all principal Transaction documents prior to delivery to opposing counsel or the client, including the merger agreement and all schedules and exhibits thereto, the escrow agreement, voting and support agreements, and all regulatory filings of a substantive nature.
• Negotiation Leadership. Mr. Mackenzie will lead or participate in key negotiation sessions with WKB regarding the merger agreement and will set the strategic direction for the Firm's approach to open deal terms and commercially sensitive provisions.
Estimated Hours: 180–220
2. Harrison Wexford — Billing Partner, Mergers & Acquisitions
Harrison Wexford will serve as the Billing Partner for the engagement. His principal duties will include:
• Budget Oversight and Fee Reporting. Mr. Wexford will be responsible for ongoing monitoring of actual hours and fees against the budget projections established in this memorandum. He will prepare monthly budget variance reports and will communicate any anticipated budget overruns to Mr. Mackenzie and, as appropriate, to the client.
• Invoice Preparation and Submission. Mr. Wexford will oversee the preparation of monthly invoices on Billing No. 78432.001, ensuring compliance with any billing guidelines or formatting requirements specified by Northgate.
• Secondary Transaction Documentation Review. In addition to his administrative functions, Mr. Wexford will serve as a secondary reviewer on certain Transaction documents, including the escrow agreement, voting and support agreements, and disclosure schedules, thereby providing an additional level of quality control and reducing the review burden on Mr. Mackenzie.
• Engagement Economics. Mr. Wexford will be responsible for monitoring the overall profitability of the engagement, including realization rates, leverage ratios, and any adjustments to the budget that may be necessitated by changes in Transaction scope or timeline.
Estimated Hours: 80–100
3. Howard Bellamy — Specialist Partner, Antitrust & Competition
Howard Bellamy, a partner in the Firm's Antitrust & Competition Practice Group, will lead all regulatory approval workstreams for the Transaction. His principal duties will include:
• HSR Act Compliance. Mr. Bellamy will oversee the preparation and filing of the premerger notification form under the HSR Act, including the compilation of required documentary attachments and Item 4(c)/4(d) submissions. He will manage communications with the Federal Trade Commission ("FTC") and/or the Antitrust Division of the U.S. Department of Justice ("DOJ") during the applicable waiting period.
• FCC Transfer of Control. Mr. Bellamy will lead the preparation and filing of the application for FCC consent to the transfer of control of Cascadia's international Section 214 authorization and any other FCC-regulated licenses or authorizations held by Cascadia or its subsidiaries. He will manage the FCC review process, including responses to any information requests or petitions to deny.
• CFIUS Voluntary Notice. Given Northgate's domicile in the United Kingdom and Cascadia's proximity to certain government and Department of Defense customer sites, Mr. Bellamy will prepare and file a voluntary joint notice with CFIUS. Although the risk assessment is considered low given the United Kingdom's status as a Five Eyes ally, a proactive filing is deemed advisable to provide transaction certainty and to preclude any post-closing CFIUS review risk.
• State PUC Notifications. Mr. Bellamy will prepare and file notification letters or applications, as applicable, with the public utility commissions in the four states in which Cascadia holds certifications: the Oregon Public Utility Commission, the Washington Utilities and Transportation Commission, the Idaho Public Utilities Commission, and the Public Utilities Commission of Nevada.
• Coordination with Target's Regulatory Counsel. Mr. Bellamy will coordinate with Aaron Whitmore at WKB on all joint filings and regulatory matters requiring cooperation between the parties.
Estimated Hours: 120–160
B. Associates
4. Andrew Fitzpatrick — Lead Associate, Mergers & Acquisitions
Andrew Fitzpatrick, a seventh-year associate in the Firm's M&A Practice Group, will serve as the Lead Associate on the engagement. Mr. Fitzpatrick has extensive experience on transactions of comparable size and complexity, including his recent work on the Firm's representation of Broadfield Industries in its $620 million acquisition of Sentinel Manufacturing (Matter No. 1022-00006). His principal duties will include:
• Primary Drafting of Transaction Documents. Mr. Fitzpatrick will serve as the primary drafter of all Transaction documents, including the merger agreement (and all schedules and exhibits thereto), the disclosure schedules (shell/form for population by the client and its advisors), the escrow agreement with Clearfield Escrow Services, the stockholder representative agreement (with Clive Atherton expected to be designated as the stockholder representative), the voting and support agreements with Cascadia's principal stockholders, the officer's and secretary's certificates for both Northgate and Cascadia, the certificate of merger for filing with the Delaware Secretary of State, the FIRPTA certificate, and the letter of transmittal (to be administered by Trident Transfer Agency). He will also prepare the amended and restated certificate of incorporation and bylaws of the surviving corporation.
• Due Diligence Coordination. Mr. Fitzpatrick will lead the preparation and management of the comprehensive due diligence request list, will oversee the organization and review of materials produced by Cascadia and WKB through the virtual data room, and will coordinate the preparation of the legal due diligence report summarizing findings and identifying areas of risk.
• Financing Workstream. Mr. Fitzpatrick will lead the financing workstream, including analysis of the Pinnacle Atlantic Bank commitment letter (Reference No. PAB-CL-2025-03102, dated March 10, 2025), and will draft and/or review the definitive credit agreement, guaranty agreement, security and pledge agreements, and the payoff letter for Cascadia's existing Elkhorn Capital Markets credit facility (approximately $82.6 million in outstanding principal plus a 1.0% prepayment premium of approximately $826,000). He will serve as the Firm's primary contact with Victoria Penn at Hargreaves & Liddell LLP, lender's counsel, on all financing documentation matters.
• R&W Insurance Analysis. Mr. Fitzpatrick will review and analyze the representations and warranties insurance policy being placed through Gresham Underwriting Group, Ltd. (London), and underwritten by Marlowe Asset Management Specialty Insurance Co. (New York), with a particular focus on coverage gaps and exclusions relative to the indemnification provisions of the merger agreement.
• Pre-Closing and Closing Mechanics. Mr. Fitzpatrick will prepare the pre-closing checklist, the closing agenda, and the funds flow memorandum, and will coordinate the assembly and execution of all closing deliverables.
Estimated Hours: 550–650
5. Naomi Petersen — Working Associate, Mergers & Acquisitions
Naomi Petersen, a fifth-year associate in the Firm's M&A Practice Group, will serve as the Working Associate on the engagement. Ms. Petersen will be dedicated to this matter on a substantially full-time basis during the period from engagement opening through closing. Her principal duties will include:
• Due Diligence Review. Ms. Petersen will serve as the primary reviewer of due diligence materials across all substantive categories, including: corporate organization and good standing; financial statements and audit reports; tax compliance and tax attributes; intellectual property (patents, trademarks, trade secrets, and software); regulatory and FCC license compliance; environmental matters; employment and employee benefits; pending and threatened litigation; real property, easements, and rights-of-way; and material commercial contracts.
• Change of Control Analysis Memorandum. Ms. Petersen will serve as the primary drafter of the change of control analysis memorandum, which will identify and analyze all provisions in Cascadia's material agreements and arrangements that are triggered by a change of control, including but not limited to: the Elkhorn Capital Markets term loan agreement (mandatory prepayment upon change of control); the Pacific Ridge Data Centers master services agreement (approximately $22 million in annual revenue, requiring consent to assignment); the Clearpath Internet Services indefeasible right of use ("IRU") agreement; the Oregon Municipal Broadband Cooperative Agreement; and the Cascadia Fiber Networks, Inc. 2019 Equity Incentive Plan (providing for accelerated vesting of outstanding equity awards upon a change of control).
• IP Diligence Memorandum. Ms. Petersen will prepare a specialized intellectual property due diligence memorandum analyzing Cascadia's portfolio of intellectual property assets, including its proprietary network management software platform, registered and pending patents, and trademarks. This memorandum will include an assessment of compatibility and integration considerations with Northgate's existing NetOrchestra SaaS platform.
• Employment & Benefits Diligence Summary. Ms. Petersen will prepare a summary of the employment and employee benefits due diligence findings, covering Cascadia's approximately 620 employees, applicable benefit plans, and key employment agreements for Derek Holmgren (Chief Technology Officer), Priya Ramachandran (Senior Vice President, Network Operations), and Tobias Engel (Vice President, Engineering).
• Ancillary Documentation. Ms. Petersen will assist Mr. Fitzpatrick with the preparation and population of the disclosure schedules, the preparation of the letter of transmittal (form for Trident Transfer Agency), and the preparation of ancillary corporate documents, including the amended and restated certificate of incorporation and bylaws of the surviving corporation.
Estimated Hours: 600–700
C. Additional Resources (As-Needed Basis)
In addition to the core engagement team described above, the following additional resources may be deployed on an as-needed basis depending on the evolution of the Transaction and the volume and complexity of work required:
• Junior Associate or Contract Attorney for Data Room Review. Depending on the volume of diligence materials produced by Cascadia and WKB, it may be necessary to staff an additional junior associate or, alternatively, one or more contract attorneys to assist with the document-by-document review of the virtual data room. The need for this additional resource will be assessed promptly following the initial population of the data room, which we anticipate will occur in mid-March 2025. If contract attorneys are retained, they will be engaged through the Firm's approved temporary staffing vendors and will be billed at rates agreed with the client.
• London Office Involvement. Given that Northgate is a UK-domiciled public limited company, there is potential need for involvement of the Firm's London office on matters of English corporate governance and board procedure, particularly in connection with Northgate board authorization of the Transaction and any shareholder notification obligations under English law or the UK Listing Rules. The London office may also provide support on cross-border regulatory aspects, including coordination with CFIUS on matters relating to foreign ownership considerations.
• Hawthorne & Sable LLP — Tax and Accounting Advisory. Northgate has retained Hawthorne & Sable LLP as its accounting and tax advisory firm for the Transaction. Douglas Kirwan serves as the engagement partner, and Elena Montague serves as the tax partner. C&H will coordinate closely with Hawthorne & Sable on matters of tax structuring, FIRPTA compliance, and purchase price allocation, but will not duplicate tax advisory workstreams. Tax advisory hours are not included in the C&H budget estimates set forth in this memorandum.
• Paralegal Support. The Firm's paralegal team will provide support for closing mechanics, including the preparation and coordination of signature pages, the filing of the certificate of merger with the Delaware Secretary of State, and the preparation and filing of regulatory submissions. Paralegal hours are included in the aggregate budget estimates at the rates specified in Section IV below.
III. Workstream Breakdown and Estimated Hours
The work required to complete the Transaction has been organized into six principal workstreams, each of which is described below with its scope, key deliverables, lead team member(s), and estimated hours. Hours are presented as ranges to account for the variability inherent in the pace of negotiations, the complexity of diligence findings, and the potential for regulatory complications. The sum of hours across individual workstreams may not precisely equal the aggregate hours shown for each team member in Section IV, as certain team members will allocate time across multiple workstreams, and hours are presented on a workstream basis (inclusive of all team members contributing to that workstream) rather than on a per-person basis.
A. Workstream 1: Transaction Documentation
Scope. This workstream encompasses the negotiation, drafting, and execution of all definitive Transaction agreements and related corporate documents. The principal documents to be prepared and/or negotiated include:
(a) Merger Agreement. The definitive Agreement and Plan of Merger by and among Northgate Telecommunications PLC, NTP Acquisition Sub, Inc., and Cascadia Fiber Networks, Inc. (the "Merger Agreement"), including all schedules and exhibits thereto. C&H will prepare and deliver an initial execution draft of the Merger Agreement to WKB, and will subsequently negotiate against WKB's markup through multiple rounds of redline exchange.
(b) Disclosure Schedules. Disclosure schedules to the Merger Agreement, to be prepared in shell/form by C&H and populated by Cascadia (with WKB's assistance) based on the target's representations and warranties.
(c) Voting and Support Agreements. Voting and support agreements with Cascadia's principal stockholders, namely Timberline Growth Partners (holding approximately 42.3% of Cascadia's outstanding common stock) and Ridgecrest Venture Fund III (holding approximately 17.8% of Cascadia's outstanding common stock). These two stockholders collectively hold approximately 60.1% of the outstanding voting power, which exceeds the majority threshold required for stockholder approval of the merger under DGCL Section 251(c), and accordingly the execution of binding voting agreements at signing is expected to provide a high degree of certainty regarding stockholder approval.
(d) Escrow Agreement. An escrow agreement among Northgate, the stockholder representative, and Clearfield Escrow Services (as escrow agent), providing for the establishment and administration of a $67.5 million indemnification escrow fund representing 9% of the aggregate merger consideration.
(e) Stockholder Representative Agreement. An agreement designating the stockholder representative (expected to be Clive Atherton, a managing director of Timberline Growth Partners) and setting forth the representative's authority, rights, and obligations in connection with post-closing indemnification claims, working capital adjustments, and other matters.
(f) Letter of Transmittal. A form letter of transmittal to be distributed to Cascadia stockholders by Trident Transfer Agency, as paying agent, in connection with the surrender of stock certificates (or book-entry shares) and the disbursement of the per share merger consideration.
(g) Certificate of Merger. The certificate of merger for filing with the Secretary of State of the State of Delaware.
(h) Amended and Restated Certificate of Incorporation and Bylaws. The amended and restated certificate of incorporation and bylaws of Cascadia as the surviving corporation of the merger.
(i) Officer's and Secretary's Certificates. Officer's certificates for each of Northgate and Cascadia, and a secretary's certificate for Cascadia, to be delivered at closing as conditions to the obligations of the respective parties.
(j) FIRPTA Certificate. A certificate of non-foreign status pursuant to Treasury Regulations Section 1.1445-2(c)(3), to be delivered by Cascadia at closing.
Key Deal Terms to Be Documented. The following key commercial terms have been agreed in principle between the parties and will be reflected in the Merger Agreement:
• Merger Consideration: $750,000,000 in cash, payable at $15.79 per share on an implied fully diluted basis (based on approximately 47.5 million fully diluted shares of Cascadia common stock).
• Indemnification Cap: 18% of the aggregate merger consideration, or $135,000,000.
• Indemnification Escrow: 9% of the aggregate merger consideration, or $67,500,000, to be held by Clearfield Escrow Services for the applicable survival periods.
• Survival Periods: General representations and warranties survive for 24 months following the closing date; fundamental representations (organization, authorization, capitalization, brokers, and tax) survive for 60 months following the closing date; tax representations survive until 60 days following the expiration of the applicable statute of limitations (including extensions).
• De Minimis Threshold: Individual claims below $250,000 are excluded from the indemnification basket.
• Tipping Basket: Indemnification claims are not payable until aggregate qualifying losses exceed $7,500,000 (representing 1% of the merger consideration), at which point all qualifying losses in excess of the de minimis threshold are recoverable from the first dollar.
• Working Capital Adjustment: Post-closing adjustment based on actual Net Working Capital as of the closing date, measured against a target of $14,800,000 (the "Target NWC"), with a $1,500,000 collar (i.e., no adjustment if actual NWC falls within the range of $13,300,000 to $16,300,000).
• Reverse Termination Fee: $30,000,000 (representing 4% of the merger consideration), payable by Northgate to Cascadia stockholders in the event of a termination of the Merger Agreement under specified circumstances related to Northgate's failure to obtain financing or regulatory approvals.
• Target Termination Fee: $26,250,000 (representing 3.5% of the merger consideration), payable by Cascadia to Northgate in the event of a termination of the Merger Agreement under specified circumstances related to a competing acquisition proposal or a change in the Cascadia board's recommendation.
• Expense Reimbursement Cap: $5,000,000, payable by the terminating party in specified termination scenarios.
• No-Shop Provision: Cascadia will be subject to customary non-solicitation covenants with a fiduciary out permitting the Cascadia board to respond to unsolicited superior proposals, subject to a 4-business-day match right in favor of Northgate prior to any change in the Cascadia board's recommendation or termination by Cascadia to accept a superior proposal.
• Material Adverse Effect Definition: The Merger Agreement will include a customary Material Adverse Effect definition with standard carve-outs for general economic conditions, industry-wide conditions, changes in law or accounting standards, and the effects of the announcement of the Transaction, among others.
Lead: Andrew Fitzpatrick (primary drafter), with Oliver Mackenzie providing review and approval of all principal documents.
Estimated Hours (Workstream Total): 650–750
B. Workstream 2: Due Diligence
Scope. This workstream encompasses all legal due diligence activities undertaken by C&H on behalf of Northgate in connection with the Transaction. The principal activities include:
(a) Preparation and issuance of a comprehensive due diligence request list to WKB covering all material legal aspects of Cascadia's business, operations, assets, and liabilities.
(b) Organization, review, and analysis of all documents and information produced by Cascadia and WKB through the virtual data room.
(c) Preparation of a comprehensive legal due diligence report summarizing material findings, identified risks, and recommendations.
(d) Preparation of specialized memoranda addressing areas of particular significance or complexity, including a change of control analysis memorandum, an intellectual property diligence memorandum, and an employment and benefits diligence summary.
Key Target Areas. Based on the Firm's preliminary understanding of Cascadia's business and organizational structure, the following areas are expected to be of particular focus in the due diligence review:
• Corporate Organization. Cascadia is a Delaware corporation (Delaware File No. 5197843, EIN 45-6128937). The due diligence review will cover Cascadia's certificate of incorporation, bylaws, corporate minute books, board and stockholder resolutions, and subsidiary structure, if any. We will confirm good standing in the state of incorporation and all jurisdictions in which Cascadia is qualified to do business.
• Capitalization. Cascadia's capitalization includes approximately 47.5 million fully diluted shares of common stock, with the following approximate equity ownership breakdown: Timberline Growth Partners (42.3%), founders and management (28.1%), Ridgecrest Venture Fund III (17.8%), and other stockholders (11.8%). The diligence review will encompass the equity incentive plan, all outstanding stock options and restricted stock units, any anti-dilution protections, and any preemptive or contractual rights affecting the capitalization.
• FCC Licenses and Regulatory Compliance. Cascadia holds an international Section 214 authorization from the FCC and state public utility commission certifications in Oregon, Washington, Idaho, and Nevada. The diligence review will assess the current status, transferability, and compliance history of all such licenses and authorizations.
• Fiber Network Infrastructure. Cascadia operates approximately 4,800 route miles of fiber optic network across four states. The diligence review will cover the ownership structure of the network infrastructure (owned vs. leased vs. IRU), rights-of-way, easements, and any encumbrances affecting the fiber assets.
• Change of Control Consents. A number of Cascadia's material agreements contain change of control provisions that will be triggered by the Transaction. The change of control analysis memorandum will address, at a minimum, the following agreements: the Pacific Ridge Data Centers master services agreement (representing approximately $22 million in annual revenue), the Clearpath Internet Services IRU agreement, and the Oregon Municipal Broadband Cooperative Agreement. The analysis will identify consent requirements, notice obligations, cure periods, and the consequences of a failure to obtain required consents.
• Existing Indebtedness. Cascadia's existing indebtedness consists of an approximately $82.6 million term loan with Elkhorn Capital Markets and approximately $12.3 million in capital leases, for a total of approximately $94.9 million. The diligence review will assess the terms of the Elkhorn facility, including change of control and mandatory prepayment provisions, and the capital lease obligations.
• Equity Incentive Plan Acceleration. The Cascadia Fiber Networks, Inc. 2019 Equity Incentive Plan contains provisions for the acceleration of unvested equity awards upon a change of control. The due diligence review will quantify the acceleration obligations and assess any tax implications, including potential Section 280G parachute payment issues.
• Material Contracts, Litigation, Environmental, Real Property, and Other. Standard due diligence categories will also be reviewed, including all material customer and vendor contracts, pending and threatened litigation, environmental compliance and liabilities, owned and leased real property, and all other matters material to Cascadia's business and operations.
Lead: Naomi Petersen (primary reviewer), with Andrew Fitzpatrick providing oversight and leading the preparation of the legal due diligence report.
Estimated Hours (Workstream Total): 400–500
C. Workstream 3: Regulatory Approvals
Scope. This workstream encompasses all regulatory filings, notifications, and approvals required in connection with the consummation of the Transaction. The principal regulatory workstreams are as follows:
(a) HSR Act Premerger Notification. The Transaction is reportable under the HSR Act. The applicable filing fee is $250,000, based on the 2025 threshold for transactions valued between $500 million and $1 billion. The filing fee is to be borne by Northgate as the acquiring person. We are targeting the filing of the premerger notification form within 10 business days following the signing of the Merger Agreement (approximately April 21, 2025). The initial 30-day waiting period would expire approximately May 21, 2025, absent early termination or the issuance of a request for additional information (a "Second Request"). Based on our preliminary analysis of the competitive landscape in the fiber telecommunications sector, we do not anticipate significant antitrust concerns, but we will prepare a detailed competitive analysis in connection with the filing.
(b) FCC Transfer of Control Application. The Transaction will require FCC consent to the transfer of control of Cascadia's international Section 214 authorization. We are targeting the filing of the transfer of control application within 15 business days following the signing of the Merger Agreement (approximately April 28, 2025). The FCC's review period for transfer of control applications is typically 90 to 180 days, depending on the complexity of the application and whether any third-party objections are filed. Given Northgate's foreign ownership, we anticipate that the FCC may refer the application to the Executive Branch agencies (including the Departments of Justice, Homeland Security, and Defense) for national security review under the Team Telecom process, which could extend the review timeline.
(c) CFIUS Voluntary Notice. Given Northgate's domicile in the United Kingdom and Cascadia's reported proximity to certain government and Department of Defense customer sites, we recommend that the parties file a voluntary joint notice with CFIUS. Although we assess the national security risk as low — the United Kingdom is a Five Eyes ally and a longstanding partner in intelligence-sharing arrangements — a proactive CFIUS filing is advisable to eliminate post-closing uncertainty and to demonstrate the parties' good-faith engagement with the national security review process. CFIUS's initial review period is 45 days, with the possibility of an additional 45-day investigation period if CFIUS determines that further review is warranted.
(d) State PUC Notifications. Cascadia holds state public utility commission certifications in Oregon, Washington, Idaho, and Nevada. We will prepare and file notification letters or, where required, formal applications with the Oregon Public Utility Commission, the Washington Utilities and Transportation Commission, the Idaho Public Utilities Commission, and the Public Utilities Commission of Nevada. The requirements and timelines for state PUC approvals vary by jurisdiction, and we will conduct a jurisdiction-by-jurisdiction analysis to ensure timely compliance with all applicable requirements.
Estimated Regulatory Timeline. Based on our experience with comparable transactions in the telecommunications sector, we estimate that the aggregate regulatory approval process will require approximately 90 to 150 days from the signing of the Merger Agreement, with the FCC transfer of control process and any CFIUS review being the most likely sources of delay.
Lead: Howard Bellamy
Estimated Hours (Workstream Total): 200–280
D. Workstream 4: Financing
Scope. This workstream encompasses all activities related to the acquisition financing for the Transaction. The principal activities are as follows:
(a) Commitment Letter Analysis. Pinnacle Atlantic Bank has delivered a commitment letter (Reference No. PAB-CL-2025-03102, dated March 10, 2025) committing to provide the acquisition financing, subject to customary conditions. C&H will conduct a detailed analysis of the commitment letter, including the conditions to funding, the flex provisions, the market out provisions, and the documentary requirements.
(b) Credit Agreement. C&H will review and negotiate the definitive senior secured credit agreement, which is expected to provide for a $500 million facility consisting of a $300 million Term Loan A and a $200 million Revolving Credit Facility. Key terms are expected to include: 5-year maturity; interest rate of SOFR plus 225 basis points; commitment fee of 37.5 basis points per annum on the undrawn portion of the Revolving Credit Facility; and financial covenants including a Total Net Leverage Ratio not to exceed 4.50x (stepping down to 3.75x by Year 3) and an Interest Coverage Ratio of not less than 2.50x.
(c) Guaranty Agreement. C&H will review and negotiate the guaranty agreement to be entered into by Northgate and its U.S. holding subsidiary in favor of the lenders under the credit agreement.
(d) Security and Pledge Agreement. C&H will review and negotiate the security and pledge agreement providing for a first-priority lien on substantially all of Cascadia's assets (post-closing) and a pledge of the equity interests in Cascadia, in favor of the lenders under the credit agreement.
(e) Elkhorn Payoff. C&H will prepare and/or review the payoff letter for Cascadia's existing Elkhorn Capital Markets credit facility, which has approximately $82.6 million in outstanding principal and is subject to a 1.0% prepayment premium of approximately $826,000. The Elkhorn facility will be retired in full at the closing.
(f) Coordination with Lender's Counsel. C&H will coordinate and negotiate with Hargreaves & Liddell LLP (Victoria Penn, partner), which has been engaged as counsel to the Pinnacle Atlantic Bank syndicate. The definitive credit agreement and related security documents are expected to be prepared by H&L in the first instance, with C&H reviewing and negotiating on behalf of Northgate.
Syndicate Composition. The acquisition financing syndicate is comprised of the following lenders, with the following anticipated commitment amounts:
Note Regarding Elkhorn Capital Markets' Dual Role. As noted above, Elkhorn Capital Markets serves in a dual capacity in this Transaction: it is both Cascadia's existing lender under the term loan being retired at closing and a participant in the syndicate providing the new acquisition financing. This dual role has been flagged in the Firm's internal conflict check memorandum. We have concluded that Elkhorn's dual role does not create an impermissible conflict for C&H, as we represent Northgate (the acquirer) and not either Cascadia (the borrower under the existing facility) or any member of the lending syndicate. However, the Firm's team should be mindful of the information barriers that may need to be maintained within Elkhorn between its role as a legacy lender to Cascadia and its role as a syndicate lender, and should coordinate with Mr. Mackenzie on any communications that may implicate this issue.
Lead: Andrew Fitzpatrick (primary), with Oliver Mackenzie providing review and strategic direction.
Estimated Hours (Workstream Total): 250–320
E. Workstream 5: Insurance
Scope. This workstream encompasses two principal insurance-related matters:
(a) Representations and Warranties Insurance. A representations and warranties insurance policy is being placed through Gresham Underwriting Group, Ltd. (London) and underwritten by Marlowe Asset Management Specialty Insurance Co. (New York). The key terms of the policy are as follows:
• Policy Limit: $75,000,000 (representing 10% of the aggregate deal value).
• Retention: $7,500,000 (dropping to $3,750,000 after 12 months following the closing date).
• Estimated Premium: $2,625,000 (representing a 3.5% rate on the policy limit).
C&H's work on this sub-workstream will consist of a thorough review of the R&W insurance policy, with particular focus on coverage gaps and exclusions relative to the indemnification provisions of the Merger Agreement. The objective is to ensure that the R&W insurance policy provides effective supplemental coverage for the representations and warranties set forth in the Merger Agreement, and that any gaps or exclusions are identified, understood, and, where possible, addressed through negotiation with the underwriter or reflected in the structuring of the Merger Agreement's indemnification provisions.
(b) D&O Tail Insurance. The Merger Agreement is expected to require Northgate to cause the surviving corporation to maintain directors' and officers' liability insurance coverage for Cascadia's pre-closing directors and officers for a period of six years following the closing. A tail policy is being provided by Pemberton D&O Assurance, Ltd. (London), with a $25,000,000 aggregate limit. C&H will review the terms of the D&O tail policy and confirm that the coverage satisfies the requirements of the Merger Agreement.
Lead: Andrew Fitzpatrick
Estimated Hours (Workstream Total): 40–60
F. Workstream 6: Closing & Post-Closing
Scope. This workstream encompasses all activities related to the preparation for and consummation of the closing of the Transaction, as well as any post-closing matters requiring C&H's involvement. The principal activities are as follows:
(a) Pre-Closing Checklist and Closing Agenda. C&H will prepare a comprehensive pre-closing checklist and closing agenda identifying all conditions to closing, required deliverables, required consents and approvals, and the sequencing of closing actions. The closing agenda will be circulated to all parties and their respective counsel in advance of the closing.
(b) Funds Flow Memorandum. C&H will prepare a detailed funds flow memorandum setting forth the sources and uses of funds at closing. Based on the current Transaction structure and financing arrangements, the anticipated funds flow is as follows:
Sources of Funds:
Uses of Funds:
Note: The funds flow memorandum will be finalized closer to the anticipated closing date, once all sources and uses are confirmed, including final transaction expense amounts.
(c) Closing Deliverables. C&H will coordinate the assembly, execution, and delivery of all closing deliverables, including executed originals of all Transaction documents, officer's and secretary's certificates, good standing certificates, legal opinions (if required), and evidence of satisfaction of all conditions to closing.
(d) Signature Pages. C&H will coordinate the collection and assembly of signature pages for all Transaction documents from all parties, their respective counsel, and any third-party signatories (including Clearfield Escrow Services, Trident Transfer Agency, and the stockholder representative).
(e) Delaware Filing. C&H will coordinate the filing of the certificate of merger with the Secretary of State of the State of Delaware, including pre-clearing the filing and arranging for expedited processing as necessary to ensure that the merger becomes effective at the agreed-upon effective time.
(f) Proxy Solicitation Coordination. C&H will coordinate with Alderman Proxy Advisors, LLC, the proxy solicitor retained for the Cascadia stockholder vote, with respect to the preparation and dissemination of proxy materials and the monitoring of voting compliance under the voting and support agreements.
(g) Post-Closing Integration Support. Following the closing, C&H will provide post-closing integration support as reasonably needed, including assistance with post-closing filings, working capital adjustment mechanics, and any immediate post-closing corporate housekeeping matters. Any post-closing disputes, including indemnification claims and working capital adjustment disputes, would be addressed as a separate engagement and matter.
Lead: Andrew Fitzpatrick and Naomi Petersen
Estimated Hours (Workstream Total): 100–140
IV. Aggregate Hours Summary
The following table summarizes the estimated hours and fees for each member of the engagement team across all workstreams:
The hourly rates reflected above are the standard rates set forth in the Firm's rate schedule for the 2025 calendar year, as communicated to the client in the engagement letter dated February 26, 2025. The rate for "Paralegals / Support" reflects a blended rate applicable to the mix of senior and junior paralegals expected to be deployed on the matter.
As noted above, the sum of estimated hours by workstream may not precisely equal the aggregate hours for each individual team member, as certain team members contribute to multiple workstreams and workstream-level estimates include contributions from all allocated team members. The per-person estimates in this table represent the best estimate of each individual's total hours commitment across all workstreams.
V. Projected Budget Summary
A. Professional Fees
Based on the estimated hours and rates set forth in Section IV above, the projected range for C&H's professional fees is as follows:
• Low Estimate: $1,638,000
• High Estimate: $1,990,250
• Mid-Point Estimate: approximately $1,814,000
These estimates assume that the Transaction proceeds on the current timeline — with a target signing date of April 7, 2025, and a target closing date in August 2025 — without material regulatory complications (such as an HSR Act Second Request or extended CFIUS investigation), without significant re-negotiation of the principal deal terms following the initial exchange of merger agreement drafts, and without the emergence of significant due diligence findings that would require substantial additional legal analysis or the restructuring of the Transaction.
B. Disbursements and Expenses (Estimated)
In addition to professional fees, the Firm will incur or advance certain out-of-pocket disbursements and expenses on behalf of the client. The following categories of disbursements are anticipated:
• Filing Fees. Filing fees include the HSR Act filing fee ($250,000, to be borne by Northgate); Delaware Secretary of State filing fees for the certificate of merger; FCC application fees; and state PUC application or notification fees. Regulatory filing fees are client direct costs and will be passed through to Northgate at cost without markup.
• Travel. Estimated travel expenses include round-trip travel between New York and Portland, Oregon, for on-site due diligence visits and negotiation sessions, as well as potential travel to London for meetings with the Northgate board of directors or senior management. Estimated range: $25,000–$40,000.
• Data Room Access, Copying, and Document Production. Costs associated with access to and administration of the virtual data room platform, as well as document reproduction and production costs. Estimated range: $5,000–$10,000.
• Closing and Signing Logistics. Costs associated with the logistical arrangements for signing and closing, including overnight courier and delivery services, notarization fees, and related administrative expenses. Estimated range: $5,000–$8,000.
• Outside Vendor Costs. If it is determined that contract attorney review is needed to supplement the core team's capacity for data room document review, estimated costs for outside temporary staffing would range from $0 (if not needed) to $50,000, depending on the volume of materials produced by Cascadia and the duration of the review engagement. Estimated range: $0–$50,000.
Total Estimated Disbursements (Excluding Regulatory Filing Fees): $35,000–$108,000
C. Total Estimated Budget (Fees + Disbursements, Excluding Filing Fees)
The total estimated budget for the engagement, inclusive of professional fees and disbursements but exclusive of regulatory filing fees (principally the $250,000 HSR Act filing fee), is as follows:
• Low Estimate: approximately $1,673,000
• High Estimate: approximately $2,098,250
Regulatory filing fees, principally the HSR Act filing fee of $250,000, are client direct costs and are not included in the C&H fee estimates set forth above. These fees will be advanced by the Firm on behalf of the client and invoiced as a separate line item, or, if the client prefers, may be paid directly by Northgate.
VI. Billing Arrangements and Invoice Cadence
The engagement is governed by the rate schedule and terms of engagement set forth in the engagement letter dated February 26, 2025, delivered to and countersigned by Philippa Ashworth, General Counsel of Northgate Telecommunications PLC.
Billing Number. All time entries and disbursements for the engagement will be recorded under C&H Billing No. 78432.001. Team members are reminded to use this billing number for all time entries and to include a brief but informative description of the work performed in each time entry narrative.
Invoice Cadence. Invoices will be prepared and submitted on a monthly basis, with each invoice covering all professional fees and disbursements incurred during the preceding calendar month. Invoices will reflect the Firm's standard format, including detailed time entry narratives, billing rates, and disbursement itemization.
Invoice Delivery. Monthly invoices will be sent to:
Philippa Ashworth General Counsel Northgate Telecommunications PLC 14 Broadwick Place London W1F 8HN United Kingdom
with a courtesy copy to:
Liam Sutherland Vice President, Corporate Development Northgate Telecommunications PLC 14 Broadwick Place London W1F 8HN United Kingdom
Payment Terms. Invoices are due and payable within 30 days of the invoice date (Net 30).
Alternative Fee Arrangements. To the extent that any alternative fee arrangement or success fee has been discussed with the client in connection with this engagement, such arrangement will be documented separately and referenced herein upon finalization. As of the date of this memorandum, no alternative fee arrangement has been agreed.
VII. Key Assumptions and Risk Factors Affecting Budget
The budget estimates set forth in this memorandum are based on a number of assumptions regarding the course of the Transaction and the scope of legal work required. To the extent that actual conditions deviate from these assumptions, actual fees and disbursements may differ materially from the estimates. The key assumptions and risk factors are as follows:
Single Signing and Single Closing. The budget assumes a single signing event (target: April 7, 2025) and a single closing event (target: August 2025), without material delays in either event. Any postponement of signing due to protracted negotiations or unresolved diligence issues, or any delay in closing due to regulatory complications or failure to satisfy closing conditions, could result in additional hours being incurred, particularly by the partner team (for extended client advisory and negotiation responsibilities) and the associate team (for extended document maintenance and closing preparation activities).
Regulatory Approvals. The budget assumes that all required regulatory approvals are obtained within the estimated 90-to-150-day window without extraordinary complications. In particular:
• If the FTC or DOJ issues a Second Request under the HSR Act, the regulatory workstream hours — particularly Howard Bellamy's hours — could increase significantly, potentially by 80 to 120 additional partner hours and a corresponding increase in associate and paralegal support hours. We recommend maintaining a contingency buffer of 80–120 additional partner hours in the event of a Second Request.
• If CFIUS determines that an extended 45-day investigation period is warranted beyond the initial 45-day review period, additional hours will be incurred for the preparation of supplemental filings and the management of the CFIUS process.
Merger Agreement Negotiations. The budget assumes a reasonable pace of negotiations with WKB, with the expectation that the principal deal terms have been agreed in principle and that the merger agreement markup process will involve a typical number of rounds of redline exchange. If WKB's initial markup of the merger agreement is significantly adverse or if the negotiations require substantially more rounds of revision than anticipated, the transaction documentation hours could increase by 15% to 25% relative to the estimates set forth herein.
Due Diligence Findings. The budget assumes that the due diligence review does not uncover material issues requiring extensive additional legal analysis, restructuring of the Transaction, or significant renegotiation of the deal terms. If significant issues surface late in the due diligence process, associate hours could increase substantially, and additional partner time may be required for strategic advisory and negotiation.