Colette,
Thank you for joining and leading the session today at our offices (600 Lexington, 30th Floor). We ran about five hours, but it was well worth it. For the record, attendees were as follows:
- **Northgate side:** Colette Whitman and Christy Bauer (Calderwood & Harkness); Deirdre Kwan (VP of Procurement, Northgate Americas); Katrina Bosch (VP of Network Operations, Northgate Americas). - **Cedarpoint side:** Douglas Fenn and Simone Alvarez (Whitfield Graves & Morrow LLP); Nadia Okafor (General Counsel, Cedarpoint); Philip Hargreaves (CFO, Cedarpoint).
The good news is that all major open issues have been resolved and the parties reached agreement on final terms across the board. Below is a detailed summary for the record and to guide my preparation of the execution version. I'll also update the negotiation issues tracker accordingly.
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**1. Most Favored Nation Pricing — Resolved**
Cedarpoint accepted the MFN pricing provision as proposed. The key parameters are:
- **Comparable customer volume threshold:** customers with ≥200 managed nodes. - **Benchmark comparison period:** trailing 12 months. - **Pricing differential trigger:** >3%. If an MFN audit reveals that Cedarpoint's per-unit pricing to Northgate exceeds the lowest comparable-customer pricing by more than 3%, Cedarpoint must issue a retroactive credit within 45 days of the determination and adjust prospective pricing within 30 days. - **Audit frequency:** Northgate has the right to conduct one MFN audit per calendar year. - **Cost allocation on audit:** Cedarpoint bears the audit cost if a violation is found; Northgate bears the cost if no violation is found. This was the key sticking point — Cedarpoint initially wanted Northgate to bear audit costs in all cases, but Douglas Fenn ultimately conceded after we pointed to market practice and the fact that Northgate's network comprises 340 managed nodes, well above the 200-node threshold.
Cedarpoint's earlier request for a mutual MFN (raised in their May 19 counter-redline) was definitively rejected. Deirdre was firm on this point and WGM did not push back further.
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**2. Indemnification — Resolved**
- **Cedarpoint's aggregate indemnification cap:** 200% of aggregate fees paid during the 12 months preceding the claim (Year 1 cap = $30,000,000, based on 2 × $15,000,000 ACV). Cedarpoint had proposed in their May 19 counter-redline to reduce this to 150%. After discussion, Nadia Okafor agreed to retain the 200% cap, largely because we agreed to keep Northgate's reciprocal cap at 100% of trailing 12-month fees ($15,000,000 per year) without further adjustment. I think this was a fair trade that preserves meaningful asymmetry in our favor.
- **Carve-outs from the cap** (i.e., uncapped categories): IP infringement, willful misconduct, data breach, and confidentiality breach — all confirmed. These apply to Cedarpoint's obligations only.
- **Cedarpoint's indemnification obligations cover:** - (a) Third-party IP infringement claims arising from the ArcMesh platform; - (b) Data breaches caused by Cedarpoint's negligence or willful misconduct; - (c) Bodily injury or property damage from Cedarpoint personnel on Northgate premises; and - (d) Regulatory penalties arising from Cedarpoint's failure to comply with applicable telecom regulations.
- **Northgate's indemnification obligations cover:** - (a) Misuse of ArcMesh outside the licensed scope; and - (b) Third-party claims relating to Northgate-provided data or content transmitted over the managed network.
- **Insurance requirements** confirmed as drafted in Exhibit F: cyber liability at $25,000,000 per occurrence / $50,000,000 aggregate; technology E&O at $20,000,000 per occurrence / $40,000,000 aggregate; CGL at $5,000,000 per occurrence / $10,000,000 aggregate. Philip Hargreaves confirmed that Cedarpoint's carrier, Braeburn Mutual Insurance Company, can deliver certificates within the closing timeline.
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**3. Change of Control — Resolved**
The four-prong definition of change of control was retained in full, which was an important win:
- (i) Acquisition by any person or group of more than 50% of Cedarpoint's voting equity; - (ii) Merger, consolidation, or reorganization in which Cedarpoint is not the surviving entity; - (iii) Sale of all or substantially all of Cedarpoint's assets; - (iv) Change in a majority of Cedarpoint's board of directors within any 12-month period (other than changes approved by existing directors).
Cedarpoint's May 19 counter-redline had proposed eliminating prong (iv) (board turnover). Douglas Fenn argued it was overly broad, but we emphasized the significance given Ridgeline Capital Partners' 62% ownership stake — a private equity sponsor exit (whether by secondary sale, recapitalization, or IPO) could result in board reconstitution without a direct equity transfer, and Northgate needs protection against that scenario. WGM ultimately accepted prong (iv) with the carve-out for changes approved by existing directors, which is a reasonable concession on our part.
For reference, current Cedarpoint ownership: Ridgeline Capital Partners, LP — 62%; Rajiv Sundaram — 18%; Teresa Cho — 12%; other employees/early investors — 8%.
Notification and election mechanics:
- **90-day advance written notice** obligation on Cedarpoint for any anticipated change of control. - **60-day election period** for Northgate upon receipt of notice: either (a) consent to assignment (not to be unreasonably withheld) or (b) terminate the MSA with 180 days' notice. - **Upon termination for change of control:** Cedarpoint provides transition assistance at no additional cost, Northgate receives a pro-rata refund of prepaid fees, and the wind-down escrow is released to Northgate. - **Anti-assignment provision confirmed:** any assignment without Northgate's prior written consent is void.
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**4. SLA Credits — Resolved**
- **Network availability SLA:** 99.95% monthly uptime, measured per node. - **Tiered service credit structure:**
| Uptime
- **Material breach trigger:** Three consecutive months below 99.50% constitutes a material breach entitling Northgate to terminate for cause. - **Annual SLA credit cap:** 30% of annual managed services fees = $3,150,000 (30% × $10,500,000). Cedarpoint had pushed for 20% in their counter-redline; we held at 30% and prevailed.
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**5. Escrow — Resolved**
- **Annual wind-down escrow deposit:** $750,000 per year (5% of ACV of $15,000,000), funded over the 5-year initial term, for an aggregate escrow cap of $3,750,000. - **Escrow agent:** Dravello National Bank; escrow account reference FNB-ESC-2023-07742. - **Release conditions** (change of control termination, material breach termination, natural expiration) confirmed as drafted in the escrow agreement. - Cedarpoint had proposed a shorter escrow release timeline in the May 19 counter-redline; resolved by agreeing to standard release mechanics tied to the MSA's termination and wind-down provisions.
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**6. Other Confirmed Terms**
For completeness, the following terms are confirmed without further changes:
- **TCV:** $75,000,000 over the 5-year initial term (June 9, 2023 through June 8, 2028). - **ACV:** $15,000,000; monthly run-rate $1,250,000. - **Fee breakdown:** managed network services $10,500,000/yr (70%); ArcMesh platform license and maintenance $3,000,000/yr (20%); professional services $1,500,000/yr (10%). - **Renewal:** Two automatic 2-year renewals unless either party provides 180 days' written notice of non-renewal. - **Scope:** managed WAN across 340 nodes in 28 US states and 3 Canadian provinces; SD-WAN deployment using ArcMesh v4.2; 24×7 NOC monitoring from Reston, VA and Winnipeg, MB; migration from Greystone Network Solutions' legacy MPLS infrastructure in 3 phases over 18 months. - **Governing law:** State of New York.
Garrett — note that the tax provisions (sales/use tax, Canadian GST/HST, gross-up and cooperation clauses) were confirmed as drafted per your memorandum. No further changes from WGM.
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**7. Next Steps and Execution Timeline**
- I will prepare the final execution version of the MSA incorporating all agreed changes and circulate to WGM by **Monday, June 5**. - **Target execution/signing date: June 9, 2023.** Signing and closing will be simultaneous per MSA Section 2.1, with services commencing on the same date. - **Closing deliverables to be tracked:** - Officer's certificates from both parties - Secretary's certificate from Cedarpoint (board resolutions, incumbency) - Legal opinion from Whitfield Graves & Morrow - Certificates of insurance from Braeburn Mutual Insurance Company - Initial escrow deposit confirmation from Dravello National Bank - The **transition services side letter** (migration from Greystone Network Solutions) will be finalized in parallel. - **Formal close-out target:** all deliverables confirmed by June 20, 2023. - I will update the closing checklist and circulate it to the team early next week.
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Happy to walk through any of the above in more detail. I'm available over the weekend if needed to finalize the execution draft — just let me know.
Best,
Christy
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**Christy Bauer** Associate Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 T: (212) 554-7183 E: cbauer@calderwoodharkness.com