Contract analysis

From: Victoria Hargrove <vhargrove@hargroveliddell.com> To: Renata Vasquez <rvasquez@calderwoodharkness.com> Cc: Nathan Chu <nchu@hargroveliddell.com> Subject: Re: Northgate Telecommunications PLC — CEO Employment Term Sheet — Marked-Up Version

Thank you for transmitting the initial term sheet dated June 10, 2024, setting forth proposed terms and conditions of employment for Marcus Elliot Harding as Chief Executive Officer of Northgate Telecommunications PLC. As you know, Hargrove & Liddell represents Mr. Harding in connection with this negotiation — we have had the privilege of advising him on executive compensation and governance matters since 2017.

Please find attached our marked-up redline of the term sheet (v2), which reflects Mr. Harding's comments and counterproposals following a thorough review with his financial and tax advisors. While many of the proposed terms provide a strong foundation for the parties to move toward a definitive agreement, there are several areas of material divergence that will need to be addressed before we can do so. I wanted to us

At the outset, I want to acknowledge that the parties appear to be largely aligned on a number of core compensation elements. The proposed base salary of $1,750,000, target annual incentive at 175% of base, maximum annual incentive at 300% of base, annual long-term incentive target of $9,000,000 (with a 60/40 PSU/RSU mix), SERP contributions of $250,000 per year, and the perquisites package are all within a reasonabl

We also acknowledge the sign-on cash bonus of $5,000,000 and the sign-on equity grant of $18,400,000 ($12,000,000 in RSUs and $6,400,000 in PSUs) as a constructive starting point for the make-whole component. I do want to note, however, that the total make-whole of $23,400,000 still falls short of providing Mr. Harding full economic equivalence for the equity he would forfeit at Marlowe Asset Management Digital Holdi

**Change in Control Provisions — Most Significant Area of Disagreement**

The change in control severance provisions represent the most significant area of divergence between the parties, and I want to address several discrete issues.

*CIC Severance Multiplier.* The term sheet proposes a 2.5x multiple of base salary plus target bonus. Mr. Harding's position is that a 3x multiple is appropriate and necessary. This is consistent with his existing arrangement at Marlowe Asset Management Digital Holdings and, in our view, reflective of market practice for a CEO of a company of Northgate's size and complexity — £8.7 billion market cap, approximately 22

*Section 280G Tax Treatment.* The term sheet proposes a "best-net" cutback approach to Section 280G. Mr. Harding requires a full excise tax gross-up. This is a point on which Mr. Harding feels strongly. Given that his estimated Section 280G base amount is derived from his Pemberton Investors history, a best-net cutback could result in a significant and inequitable reduction of parachute payments, effectively penalizi

*CIC Definition — Board Composition Trigger.* The proposed definition of "change in control" omits a board composition change trigger. Mr. Harding requires inclusion of a provision deeming a change in control to have occurred upon the replacement of a majority of the Board of Directors within any 12-month period without the approval of the incumbent Board. This is a meaningful protective mechanism that captures de fa

*Equity Acceleration.* Mr. Harding requires full acceleration of all unvested equity upon a qualifying CIC termination (we agree with the double-trigger structure in principle), with PSUs vesting at target performance levels rather than pro-rata based on actual performance through the date of termination.

*Benefit Continuation.* Mr. Harding's position is 36 months of continued health, welfare, and executive benefits following a CIC termination, rather than the proposed 24 months, consistent with the 3x severance multiplier.

**Restrictive Covenant Provisions — Substantial Revision Required**

The restrictive covenant provisions represent the second critical area requiring substantial revision, and I want to be direct about the extent of Mr. Harding's concerns.

*Non-Compete Duration.* The proposed 24-month post-termination non-competition period is significantly longer than Mr. Harding's existing 12-month non-compete at Marlowe Asset Management Digital Holdings. Mr. Harding's position is 12 months post-termination, which we believe is the prevailing market standard for sitting public company CEOs.

*Non-Compete Geographic Scope.* The worldwide geographic scope is overbroad and, candidly, would likely face enforceability challenges under applicable New York law. Mr. Harding proposes limiting the geographic scope to North America and Western Europe, which captures Northgate's principal operating markets.

*Non-Compete Activity Definition.* The revenue-based activity restriction — covering any company deriving more than 15% of its revenue from telecom services, telecom infrastructure, or enterprise SaaS serving telecom operators — is excessively broad and would effectively preclude Mr. Harding from employment at a wide range of technology and infrastructure companies that are not genuine competitors of Northgate. Mr. H

*Garden Leave.* If any non-compete is to be maintained, Mr. Harding requires 12 months of garden leave at full compensation — base salary plus pro-rata target bonus — rather than the proposed 6 months at base salary only. Garden leave and the non-compete period should run concurrently, which would effectively limit the post-garden-leave competitive restriction to zero additional months beyond the 12-month non-compete

*Non-Solicitation.* Mr. Harding's position is an 18-month non-solicitation period (not 24 months), covering employees only. The customer non-solicitation provision as drafted is overly broad and should be removed. The nature of Northgate's customer relationships — which are institutional and enterprise-level — does not warrant the breadth of the proposed restriction, and this type of provision is uncommon in CEO-leve

Briefly, Mr. Harding's position on non-CIC termination without cause or resignation for good reason is a 2.5x multiple of base salary plus target bonus (rather than the proposed 2x), full acceleration of all unvested equity awards, and 24 months of COBRA continuation. The details are set forth in the redline.

Given the number and significance of the open issues, I would suggest that we schedule a call to discuss the key areas of divergence — particularly the change in control and restrictive covenant provisions — before either side invests substantial time drafting definitive agreement language on contested terms. A focused discussion at this stage will allow us to identify areas where compromise is achievable and narrow

I want to underscore that Mr. Harding remains very enthusiastic about the CEO role and is committed to reaching mutually acceptable terms. I am confident that with good-faith engagement on both sides, the open issues can be bridged. That said, I know we are both mindful of the proposed October 1, 2024 start date and the importance of maintaining momentum given the timeline for Sir Alistair Kemble's retirement at year

Nathan and I are available for a call the week of June 24. Please let us know what works for you and James, and we will circulate a dial-in.

Thank you again for the constructive engagement to date. We look forward to continuing the conversation.

**Victoria Hargrove** Partner Hargrove & Liddell LLP 51 Madison Avenue, 30th Floor New York, NY 10010 Tel: (212) 555-4100 vhargrove@hargroveliddell.com

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