Douglas,
I hope this finds you well. I wanted to reach out ahead of our in-person negotiation session on June 1 at our New York office (600 Lexington Avenue, 30th Floor) to lay the groundwork for a productive meeting. I have reviewed Cedarpoint's May 19 counter-redline thoroughly with the Northgate team, and I think we have made meaningful progress since our second draft went out on May 5. That said, a handful of substantive gaps remain, and my goal with this email is to identify each of them clearly so that both sides can come to the table on June 1 with the appropriate decision-makers and sufficient authority to close them out. If we can resolve these items at the session, I believe we should be in a position to move to final agreement and target execution promptly thereafter.
On our side, the following individuals will attend: Colette Whitman (Calderwood & Harkness), myself, Deirdre Kwan (VP of Procurement, Northgate Americas), and Katrina Bosch (VP of Network Operations, Northgate Americas). Could you confirm the attendee list from the Cedarpoint/WGM side? We anticipate Nadia Okafor and Philip Hargreaves from Cedarpoint in addition to WGM counsel, but please let us know if that has changed.
Set forth below are the open items as we see them, organized for discussion:
**1. Most Favored Nation Pricing — Audit Cost Allocation**
The parties have reached agreement on the substantive MFN framework, including the comparable volume threshold of ≥200 managed nodes, the trailing 12-month benchmark period, and the >3% pricing differential trigger for retroactive credits (within 45 days) and prospective adjustment (within 30 days). The remaining open point is cost allocation for the annual MFN audit. Northgate's position is that the audit should be conducted at Cedarpoint's cost if a violation is found and at Northgate's cost if no violation is found. Cedarpoint's counter-redline proposed that each party bear its own costs regardless of outcome. This remains a gap, and we would ask that your team come prepared to discuss a reasonable allocation mechanism.
**2. Indemnification — Aggregate Cap Percentage**
We are aligned on the structure of mutual indemnification obligations and the categories of covered claims (IP infringement, data breach, bodily injury/property damage, and regulatory penalties on Cedarpoint's side; misuse and content claims on Northgate's side). We have also agreed on the carve-outs from the aggregate cap — IP infringement, willful misconduct, data breach, and confidentiality breach will remain uncapped. The open issue is the cap percentage itself. Northgate's position is that Cedarpoint's aggregate indemnification cap should be set at 200% of trailing 12-month fees paid (i.e., $30,000,000 in Year 1), with Northgate's cap at 100% ($15,000,000). Cedarpoint's May 19 counter-redline proposed reducing Cedarpoint's cap to 150%. Northgate views the 200% figure as appropriate given the scope of services being provided, the embedded ArcMesh platform license component, and the fact that the agreed uncapped carve-outs already narrow Cedarpoint's tail risk considerably. We would appreciate Cedarpoint's team coming prepared to address this gap.
**3. Change of Control — Board-Turnover Prong**
We have reached agreement on three of the four prongs of the change of control definition: (i) acquisition of >50% of voting equity, (ii) non-surviving merger, consolidation, or reorganization, and (iii) sale of all or substantially all assets. The open issue is prong (iv) — a change in a majority of Cedarpoint's board of directors within any 12-month period, other than changes approved by the then-existing board. Cedarpoint's counter-redline sought to delete this prong entirely. Northgate views the board-turnover prong as important given Ridgeline Capital Partners' 62% ownership stake in Cedarpoint and the realistic possibility of a future exit or recapitalization that could effectuate a de facto change of control through board reconstitution without a direct equity transfer. For context, the remaining ownership is held by Rajiv Sundaram (18%), Teresa Cho (12%), and other holders (8%), and Northgate needs assurance that the governance protections are not limited to scenarios involving a direct transfer of shares.
The remaining mechanics around change of control are agreed: 90-day advance written notice from Cedarpoint, a 60-day election period for Northgate (to consent to the assignment or elect to terminate on 180 days' notice), transition assistance at no additional cost, pro-rata refund of prepaid fees, and escrow release. The anti-assignment provision (any assignment without prior written consent is void) is also agreed. We would ask that Cedarpoint bring a decision-maker authorized to resolve this point at the session.
**4. SLA Credit Cap**
We are in agreement on the tiered credit structure: a 5% credit at 99.90%–99.94% monthly uptime ($62,500/month), 10% at 99.50%–99.89% ($125,000/month), 20% below 99.50% ($250,000/month), and the material breach trigger after three consecutive months below 99.50%. The open point is the annual aggregate SLA credit cap. Northgate's position is that the cap should be set at 30% of annual managed network services fees ($10,500,000 × 30% = $3,150,000). Cedarpoint's counter-redline proposed capping aggregate credits at 20% ($10,500,000 × 20% = $2,100,000). Northgate believes 30% is the appropriate figure given the 99.95% uptime commitment across 340 managed nodes and the critical nature of the network infrastructure to Northgate's operations.
**5. Escrow Release Mechanics**
We have agreed on the wind-down escrow structure: a $750,000 annual deposit (5% of the $15,000,000 ACV) to Dravello National Bank (account FNB-ESC-2023-07742), with an aggregate cap of $3,750,000 over the 5-year initial term. The remaining open point is the conditions and timing for release of escrowed funds. Northgate's position is that the escrow should be released to Northgate upon (a) termination due to a change of control event, (b) termination for Cedarpoint's material breach, or (c) at natural expiration of the term, but only after satisfactory completion of all transition and wind-down obligations — and in all cases, Cedarpoint must complete transition assistance before any release occurs. Cedarpoint's counter-redline proposed automatic release to Cedarpoint upon natural expiration regardless of transition status, and pro-rata release upon any termination. I would suggest both sides come to the session prepared with specific proposed language on release conditions so we can work toward a resolution in the room.
**6. Transition Assistance Scope**
We are aligned that the migration from Greystone Network Solutions' legacy MPLS infrastructure will occur in three phases over 18 months. The open issue is the scope of transition assistance Cedarpoint must provide upon termination of the MSA, whether for change of control or other cause. Northgate's position is that Cedarpoint must provide comprehensive transition assistance — including cooperation with a successor vendor, data migration, knowledge transfer, and continued service during the wind-down period — at no additional cost. Cedarpoint's counter-redline proposed that transition assistance beyond the first 90 days be subject to additional professional services fees at Cedarpoint's then-current rates. Northgate views no-cost transition assistance as essential given the complexity of the managed network (340 nodes across 28 U.S. states and 3 Canadian provinces) and the deeply embedded nature of the ArcMesh platform (v4.2), which would make any transition inherently time-intensive and operationally sensitive.
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For planning purposes, I would propose a 10:00 AM ET start time for the June 1 session, and we will arrange a conference room and working lunch here at the office. I am happy to circulate a formal agenda in advance of the meeting once we have confirmed attendees and any preliminary calls.
If you or Simone would like to schedule a brief call early next week to narrow any of these items before the session, I am available and would welcome the opportunity. Otherwise, I look forward to seeing everyone on June 1.
Thank you, Douglas, and enjoy the long weekend.
Best regards,
Christy Bauer Associate, intellectual Property Group Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 T: (212) 554-7183 E: cbauer@calderwoodharkness.com
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