Contract analysis

From: Renata Vasquez <rvasquez@calderwoodharkness.com> To: Victoria Hargrove <vhargrove@hargroveliddell.com> Cc: Nathan Chu <nchu@hargroveliddell.com> Date: Mon, 12 Aug 2024 04:47:00 -0000 Subject: Northgate Telecommunications PLC — CEO Employment Agreement: Draft 2 and Summary of Positions

I hope this message finds you well. On behalf of our client, Northgate Telecommunications PLC ("Northgate" or "NTP"), I am writing to transmit the attached revised draft of the Executive Employment Agreement between Northgate Telecommunications US, Inc. and Marcus Elliot Harding (the "Agreement" or "Draft 2"), dated August 12, 2024. For your convenience, I have also attached a blackline comparing Draft 1 (dated July

We received and have carefully reviewed the detailed redline of Draft 1 that Hargrove & Liddell circulated on August 5, which contained 88 comments and proposed revisions. Draft 2 reflects Northgate's responses to each of those 88 comments. As I discuss in greater detail below, a substantial number of your proposed changes have been accepted or accommodated, and we hope the breadth of those concessions on non-materia

Northgate has accepted a substantial number of Hargrove & Liddell's proposed revisions on matters that are non-material or that represent reasonable refinements to the Agreement. Without attempting an exhaustive listing, the categories of accepted changes include: clarifications to key definitions throughout the Agreement; refinements to the duties, responsibilities, and reporting provisions; adjustments to perquisit

**II. Change in Control Severance (Section 7)**

This remains, as I am sure you would agree, the most significant area of disagreement between the parties. I want to address each sub-issue in turn, together with the rationale underlying Northgate's position, so that Mr. Harding and your team have full visibility into the considerations driving the Board's direction on these points.

*CIC Definition.* Draft 2 maintains Northgate's position that the change in control definition encompasses three triggering events: (a) the acquisition of more than 50% of NTP's outstanding voting securities; (b) a merger or consolidation in which NTP shareholders hold less than 50% of the voting power of the surviving entity immediately following the transaction; and (c) a sale of substantially all of NTP's assets.

*CIC Severance Multiplier.* Draft 2 maintains the 2.5x multiplier, yielding a CIC severance payment of $12,031,250 (calculated as 2.5 × ($1,750,000 base salary + $3,062,500 target annual incentive)). Northgate acknowledges Mr. Harding's preference for a 3x multiplier ($14,437,500) but is unable to move above 2.5x. There are several reasons for this. Veltrano Proxy Advisors, which Northgate has retained to assess shar

*Tax Treatment — Section 280G.* Draft 2 retains the best-net cutback (safe harbor) approach rather than the full excise tax gross-up that Mr. Harding has requested. Full gross-up provisions are increasingly disfavored by institutional shareholders and the major proxy advisory firms, and Northgate's Board does not believe it is prudent to include one in light of the 2025 AGM remuneration policy vote. Moreover, Whitmor

*Double Trigger.* I am pleased to confirm that both sides remain in agreement on the double-trigger structure — i.e., the requirement that both a change in control and a qualifying termination occur before CIC severance becomes payable.

*Equity Acceleration on CIC.* Draft 2 provides for full acceleration of all unvested equity awards — both RSUs and PSUs — upon a qualifying CIC termination, with PSUs vesting at target performance levels. This is consistent with Mr. Harding's request on this sub-point.

**III. Restrictive Covenant Provisions (Section 9)**

The restrictive covenant provisions represent the second major area of disagreement, and Draft 2 reflects what Northgate considers to be significant movement from its initial position.

*Non-Compete Duration and Scope.* In response to your comments, Northgate has made the following concessions: the non-compete duration has been reduced from 24 months to 18 months post-termination; the geographic scope has been narrowed from worldwide to North America and Western Europe; and the activity definition has been refined so that it covers employment by, or the provision of services to, any company that der

*Garden Leave.* Draft 2 provides for six months of paid garden leave at Mr. Harding's base salary rate ($1,750,000 per annum), running concurrently with the first six months of the 18-month non-compete period. This structure effectively reduces the post-employment non-compete restraint to 12 months following the completion of garden leave. Northgate acknowledges Mr. Harding's request for 12 months of garden leave at

*Non-Solicitation.* Draft 2 maintains a 24-month non-solicitation restriction covering both employees and customers of Northgate and its affiliates. Northgate considers the customer non-solicitation provision essential given the nature of the CEO role and the breadth and depth of the customer relationships that Mr. Harding would be expected to develop.

*Non-Disparagement.* I am pleased to confirm that both sides remain in agreement on a mutual, perpetual non-disparagement covenant, with appropriate carve-outs for legal proceedings and legally compelled disclosures.

For completeness, I would note that all agreed compensation terms remain as established during the term-sheet negotiations and are reflected without change in Draft 2:

- Base salary: $1,750,000 - Target annual incentive: 175% of base salary ($3,062,500) - Maximum annual incentive: 300% of base salary ($5,250,000) - Sign-on cash bonus: $5,000,000 (subject to a 24-month clawback in the event of voluntary resignation) - Sign-on equity: $18,400,000 ($12,000,000 in RSUs vesting ratably over three years; $6,400,000 in PSUs cliff vesting at the end of year three) - Annual long-term incent

With respect to non-CIC severance (i.e., termination without cause or resignation for good reason), Draft 2 provides for 2x the sum of base salary and target annual incentive ($9,625,000), plus a pro-rata bonus for the year of termination, 18 months of COBRA continuation coverage, and 12 months of accelerated equity vesting.

The Agreement provides for an initial term of five years, with a proposed start date of October 1, 2024, running through September 30, 2029, and automatic one-year renewals thereafter unless either party provides at least 180 days' advance notice of non-renewal. We understand that Mr. Harding may need additional time to complete his transition from Marlowe Asset Management Digital Holdings, and Northgate is willing t

The Agreement is governed by New York law. I would also note that the UK service agreement — which will be prepared in coordination with Moorfield Bates LLP as NTP's UK counsel — will be addressed separately once the parties have finalized the primary employment agreement.

We would welcome your and Mr. Harding's review of Draft 2 and the accompanying blackline at your earliest convenience. Northgate continues to have a strong interest in bringing Mr. Harding on board as its next Chief Executive Officer, and the Board is eager to move forward toward a definitive agreement. We hope that the significant movement reflected in Draft 2 — particularly with respect to the restrictive covenant

I am happy to schedule a call at a mutually convenient time to discuss any questions or to work through the outstanding issues. If you and Nathan believe an in-person meeting would be more productive in advancing discussions, we are very willing to arrange that as well.

Thank you, Victoria. We look forward to hearing from you.

Renata Vasquez Partner Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171 Tel: (212) 558-4000 Direct: (212) 558-4187 Email: rvasquez@calderwoodharkness.com

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