PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP
7 Finsbury Square, London EC2A 1AF, United Kingdom 450 Lexington Avenue, New York, NY 10017 1201 North Market Street, Suite 1400, Wilmington, DE 19801
MEMORANDUM
Matter No.: 1022-00003
April 14, 2023
TO: Priya Nandakumar, General Counsel & Corporate Secretary, Northgate Telecommunications PLC Members of the Special Committee of the Board of Directors of Northgate Telecommunications PLC
FROM: Angela Fontaine, Partner, and Marcus Leung, Senior Associate, Calderwood & Harkness LLP
RE: Structuring and Fiduciary Duty Analysis for Proposed Settlement with Greystone Capital Partners LP
CONFIDENTIALITY NOTICE: This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees in connection with the pending activism matter involving Greystone Capital Partners LP. It contains confidential legal analysis and strategic advice prepared in anticipation of litigation and for the purpose of rendering legal counsel. Do not distribute, forward, copy, or otherwise disseminate this memorandum, in whole or in part, without prior written authorization from Calderwood & Harkness LLP.
I. Executive Summary
The purpose of this memorandum is to advise the Special Committee of the Board of Directors of Northgate Telecommunications PLC ("NTP" or the "Company") and NTP's General Counsel on the fiduciary duty framework governing the Board's consideration and potential approval of a proposed settlement — in the form of a cooperation agreement (the "Cooperation Agreement") — with Greystone Capital Partners LP ("Greystone"), and to evaluate the reasonableness of the principal settlement terms currently under discussion between the parties. This memorandum is intended to serve as a comprehensive guide for the Special Committee's deliberations and to establish a defensible record of the Board's informed decision-making process.
By way of context, Greystone filed a Schedule 13D with the Securities and Exchange Commission ("SEC") on February 14, 2023, disclosing beneficial ownership of 28,016,000 shares of NTP common stock, representing approximately 6.8% of the 412,000,000 shares of common stock outstanding. Greystone's Schedule 13D was followed, on February 22, 2023, by a public letter to NTP's Board of Directors (the "Public Letter"), signed by Dominic Ferraro, Managing Partner of Greystone, and Lena Ostrowski, Portfolio Manager for the NTP position. The Public Letter set forth four principal demands: (i) the appointment of two Greystone-designated directors to NTP's Board, (ii) the formation of an operational excellence committee, (iii) a strategic review of NTP's Enterprise Software Division ("ESD"), and (iv) a $500 million accelerated share repurchase program. Subsequently, on March 8, 2023, Greystone filed an advance notice of director nominations pursuant to NTP's Bylaws, nominating Catherine "Kate" Sinclair-Moreau and marshall Henning for election at NTP's 2023 Annual General Meeting (the "2023 AGM").
Private negotiations between the parties commenced on March 15, 2023, and have progressed toward a non-binding term sheet stage. This memorandum precedes the finalization of the term sheet and is designed to inform the Special Committee's framework for evaluating the principal terms under active discussion and to provide guidance on structuring those terms in a manner that is consistent with the Board's fiduciary obligations under Delaware law.
The following additional contextual facts are material to the analysis:
• NTP's 2023 Annual General Meeting is scheduled for July 12, 2023. The advance notice deadline for stockholder nominations was April 12, 2023 — two days prior to the date of this memorandum.
• NTP's market capitalization as of the date of Greystone's Schedule 13D filing (February 14, 2023) was approximately $14.2 billion, based on 412,000,000 shares outstanding and a closing share price of $34.51 per share.
• NTP reported fiscal year 2022 revenue of $6.38 billion, of which the Enterprise Software Division contributed $1.82 billion, or approximately 28.5% of total revenue. The ESD is therefore a material business segment whose strategic disposition has significant implications for stockholder value.
Based on our analysis of the applicable fiduciary duty framework, the terms currently under negotiation, and relevant market precedent, it is our overall recommendation that the Board has both the legal authority and, on the current terms as described herein, sound fiduciary grounds to settle with Greystone by:
(a) expanding the Board from 11 to 12 directors and appointing one Greystone-designated nominee — Catherine "Kate" Sinclair-Moreau — to fill the newly created directorship;
(b) agreeing to mutual standstill obligations that restrict both parties from engaging in specified activities for a defined period; and
(c) committing to conduct a strategic review of the Enterprise Software Division, to be completed by December 31, 2023, with the assistance of Esterline Partners LLC,
all in exchange for Greystone's withdrawal of its second nominee (Marshall Henning), Greystone's voting support for NTP's director nominees and Board-recommended proposals during the Standstill Period, and Greystone's standstill commitments as described more fully herein.
The analysis that follows addresses each element of the proposed settlement in detail and is organized as follows: Section II sets forth the background and procedural history of the Greystone activism campaign; Section III describes NTP's governance framework; Section IV analyzes the Delaware fiduciary duty framework applicable to the settlement; Section V evaluates each material term of the proposed settlement; Section VI addresses disclosure obligations; Section VII provides process recommendations for the Special Committee; and Section VIII sets forth our conclusions and recommendations.
II. Background and Procedural History
A. Greystone's Share Accumulation and Public Campaign
Greystone Capital Partners LP is a Delaware limited partnership that operates as an activist-oriented investment fund. Its general partner is Greystone Capital Management LLC, a Delaware limited liability company. Greystone is led by Dominic Ferraro, who serves as Managing Partner of Greystone Capital Management LLC, and the NTP investment position is managed day-to-day by Lena Ostrowski, a Portfolio Manager at Greystone.
Greystone commenced its accumulation of NTP shares during the period from approximately September 2022 through January 2023, acquiring shares in open-market transactions and, we understand, through certain privately negotiated block purchases. Greystone crossed the 5% beneficial ownership threshold on January 9, 2023, triggering its obligation under Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to file a Schedule 13D with the SEC within ten days thereof.
On February 14, 2023, Greystone filed its Schedule 13D with the SEC (SEC file number SC 13D/005-91482), disclosing beneficial ownership of 28,016,000 shares of NTP common stock, representing approximately 6.8% of the 412,000,000 shares then outstanding. The Schedule 13D disclosed an average cost basis of approximately $31.47 per share, implying a total position cost of approximately $881.5 million. The filing further disclosed Greystone's intent to engage with NTP's Board and management regarding certain operational and governance matters, and reserved Greystone's right to take further actions, including the nomination of directors for election at NTP's next annual meeting of stockholders.
On February 22, 2023 — eight days following the Schedule 13D filing — Greystone issued its Public Letter to the Board of Directors of NTP. The Public Letter was signed by both Dominic Ferraro and Lena Ostrowski and was simultaneously filed with the SEC as an exhibit to an amended Schedule 13D and posted on a purpose-built campaign website. The Public Letter set forth the following four demands:
(i) Appointment of Two Greystone-Designated Directors. Greystone demanded the immediate appointment of two directors designated by Greystone to NTP's Board, asserting that the Board would benefit from fresh perspectives with operational expertise in the telecommunications and technology sectors.
(ii) Formation of an Operational Excellence Committee. Greystone called for the establishment of a new Board-level committee, to be called the "Operational Excellence Committee," charged with reviewing NTP's cost structure, capital allocation, and operational efficiency across all business segments.
(iii) Strategic Review of the Enterprise Software Division. Greystone demanded that the Board engage an independent financial advisor to conduct a strategic review of the Enterprise Software Division, including an evaluation of potential separation alternatives (sale, spin-off, or IPO of the division), asserting that ESD was "an undervalued asset trapped within an organizational structure that masks its true potential."
(iv) $500 Million Accelerated Share Repurchase Program. Greystone urged the Board to authorize and execute a $500 million accelerated share repurchase ("ASR") program, funded from NTP's existing cash reserves and revolving credit facility, arguing that NTP's stock was significantly undervalued and that a substantial repurchase would deliver immediate value to stockholders.
The Public Letter was written in an assertive but measured tone. It praised NTP's technology portfolio and workforce while criticizing what Greystone characterized as a "decade of strategic drift" and "a governance structure that insulates management from accountability." The letter was widely covered by financial media, including the Granite Harbor Corporation, Wall Street Journal, and Westmark Services Inc., and was the subject of reports by several equity research analysts covering NTP.
Greystone is advised in this matter by Whitaker, Drummond & Chase LLP, a law firm with a well-established shareholder activism practice, led in this engagement by Jonathan Whitaker, the firm's founding partner. Greystone's financial advisor is Veltrano Advisors LLC, an independent advisory firm, led in this engagement by Peter Lundgren. Both firms are experienced in the prosecution of activist campaigns and in the negotiation of cooperation agreements.
B. NTP's Response and Advisor Engagement
Upon receipt of the Public Letter, NTP's General Counsel, Priya Nandakumar, promptly contacted Calderwood & Harkness LLP. The matter was opened at this firm on February 27, 2023, and an engagement letter was executed on February 28, 2023, following authorization by Sir Edmund Prumvane, Chairman of the Board and Chair of the Nominating and Governance Committee, and Ms. Nandakumar. The engagement encompasses advice on the Company's defense against and response to Greystone's activism campaign, including any potential settlement or cooperation arrangement.
The Calderwood & Harkness engagement team comprises the following:
• Angela Fontaine, Partner (Responsible Partner), resident in the firm's London and New York offices, specializing in shareholder activism defense, corporate governance, and M&A;
• Renata Vasquez, Partner (Billing Partner), resident in the firm's Wilmington office, specializing in Delaware corporate law and fiduciary duty matters;
• Marcus Leung, Senior Associate (Lead Associate), resident in the firm's New York office, specializing in shareholder activism, proxy contests, and corporate governance;
• Sophie Tremblay, Associate (Working Associate), resident in the firm's New York office, specializing in SEC disclosure and corporate transactions.
In addition to Calderwood & Harkness, NTP engaged the following advisors:
• Hargrove Advisory Group LLC, retained as proxy solicitor, with Dennis Hargrove serving as lead advisor. Hargrove Advisory Group has extensive experience in contested proxy situations and is advising NTP on stockholder outreach, vote projections, and campaign strategy.
• Esterline Partners LLC, retained as financial advisor to the Board of Directors, with Victoria Chen-Halsted, Managing Director, serving as lead banker. Esterline Partners' engagement terms include a quarterly retainer of $750,000 and a completion fee of $3.0 million payable upon resolution of the activism matter (whether by settlement, withdrawal of Greystone's nominations, or conclusion of a contested proxy fight). Esterline Partners is providing financial analysis related to the settlement terms, the ESD strategic review, and the value implications of Greystone's demands.
For reference, NTP's common stock closed at $35.12 per share on February 27, 2023, the date the matter was opened at Calderwood & Harkness. This compared to a 52-week high of $41.20 per share and a 52-week low of $28.63 per share, reflecting the volatility in NTP's share price over the preceding twelve months due to broader sector headwinds and concerns about ESD's competitive positioning.
C. Greystone's Director Nominations
On March 8, 2023, Greystone filed an advance notice of director nominations with NTP's Corporate Secretary pursuant to Article II, Section 12 of NTP's Amended and Restated Bylaws. The advance notice nominated two individuals for election to NTP's Board of Directors at the 2023 AGM:
(i) Catherine "Kate" Sinclair-Moreau, age 48. Ms. Sinclair-Moreau is the former Chief Operating Officer of Ridgeline Networks Inc., a Delaware corporation operating in the telecommunications and networking infrastructure sector. She currently serves as an independent non-executive director at Brindoval Data Holdings Corp. and Arden Communications Group Inc. Ms. Sinclair-Moreau holds a Bachelor of Science in Electrical Engineering from the Massachusetts Institute of Technology and a Master of Business Administration from INSEAD. She has over twenty years of operational experience in the telecommunications and technology industries.
(ii) marshall Henning, age 55. Mr. Henning is the former Chief Financial Officer of Lakeshore Broadband Corp., a regional broadband and fiber-optic provider. He previously served in senior financial roles at several mid-cap technology companies. Mr. Henning holds a Bachelor of Arts in Economics from the University of Michigan and is a Certified Public Accountant (inactive).
The advance notice deadline for stockholder nominations for the 2023 AGM was April 12, 2023, which falls 90 days prior to the July 12, 2023 AGM date, consistent with the advance notice provisions set forth in NTP's Bylaws. Greystone's nominations were filed well within the prescribed notice window. Calderwood & Harkness reviewed the advance notice for procedural compliance with NTP's Bylaws (as last amended November 3, 2022) and confirmed that the nominations were procedurally compliant in all material respects, including with respect to the required information regarding the nominees, Greystone's beneficial ownership, and the representations and agreements specified in the Bylaws.
D. Negotiation Process
Following a period of public positioning by both parties — during which NTP issued a statement acknowledging receipt of Greystone's Public Letter and affirming the Board's commitment to acting in the best interests of all stockholders — private negotiations between the parties commenced on March 15, 2023.
The negotiations have been conducted principally between Calderwood & Harkness (on behalf of NTP) and Whitaker, Drummond & Chase LLP (on behalf of Greystone), with direct involvement at key junctures of Priya Nandakumar and Sir Edmund Prumvane on the NTP side and Dominic Ferraro on the Greystone side. The financial advisors — Esterline Partners for NTP and Veltrano Advisors for Greystone — have participated in sessions addressing the economic terms, including the scope of the ESD strategic review and the expense reimbursement cap.
As of the date of this memorandum, the parties have made substantial progress and are approaching agreement on the principal terms of a non-binding term sheet, which we anticipate will be circulated in the coming weeks. This memorandum is being prepared at this stage in order to provide the Special Committee with a comprehensive fiduciary duty framework and term-by-term analysis in advance of the term sheet's finalization, so that the Special Committee may evaluate the proposed terms on a fully informed basis and provide direction to NTP's negotiating team.
III. NTP's Governance Framework
An understanding of NTP's governance framework is essential to the analysis of the proposed settlement terms and the Board's authority to implement them. This Section summarizes the key provisions of NTP's organizational documents and describes the current Board composition and stockholder base.
A. Certificate of Incorporation and Bylaws
Northgate Telecommunications PLC is incorporated under the laws of the State of Delaware. Its Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") was last amended on May 14, 2021, and its Amended and Restated Bylaws (the "Bylaws") were last amended on November 3, 2022. The following provisions of these organizational documents are relevant to the proposed settlement:
Classified Board Structure. NTP's Certificate of Incorporation provides for a classified board of directors, divided into three classes — Class I, Class II, and Class III — with each class serving staggered three-year terms. At each annual meeting of stockholders, the directors whose terms expire at that meeting stand for election to a new three-year term. This classified board structure has significant implications for the proposed settlement, as it determines the tenure and election timing of any newly appointed director.
Board Size. The Certificate of Incorporation provides that the number of directors constituting the full Board of Directors shall be fixed from time to time by resolution of the Board of Directors. Accordingly, the Board has the unilateral authority to increase or decrease the number of directors without stockholder approval. The current board size is 11 directors. The proposed settlement contemplates expanding the Board to 12 directors.
Filling of Vacancies and Newly Created Directorships. Under NTP's Certificate of Incorporation and consistent with Section 142 of the Delaware General Corporation Law ("DGCL"), any newly created directorship resulting from an increase in the authorized number of directors may be filled by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director. A director so appointed shall hold office until the next annual meeting of stockholders at which the class to which such director has been assigned stands for election, and until his or her successor is duly elected and qualified, or until his or her earlier resignation, removal, or death.
Advance Notice Provisions. Article II, Section 12 of the Bylaws sets forth the advance notice requirements for stockholder nominations of persons for election to the Board of Directors. Stockholders seeking to nominate persons for election at an annual meeting must deliver written notice to NTP's Corporate Secretary not later than 90 calendar days prior to the anniversary date of the immediately preceding annual meeting of stockholders. The Bylaws specify in detail the information that must be provided in such notice, including biographical information about the nominee, a description of any arrangements between the nominating stockholder and the nominee, and representations regarding the stockholder's intent with respect to the solicitation of proxies. As noted in Section II.C above, Greystone's advance notice was procedurally compliant with these requirements.
Exclusive Forum Provision. NTP's Certificate of Incorporation includes an exclusive forum provision designating the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) as the exclusive forum for certain specified categories of corporate litigation, including claims of breach of fiduciary duty. This provision is relevant to the governing law and dispute resolution terms of the Cooperation Agreement, as discussed in Section V.I below.
B. Current Board Composition
NTP's Board of Directors currently consists of 11 directors, 10 of whom are independent within the meaning of the applicable NYSE listing standards and SEC rules. The sole management director is Fiona Caldwell, age 54, who has served as NTP's Chief Executive Officer since 2020. The current Board composition is as follows:
Sir Edmund Prumvane, age 68, has served as independent non-executive Chairman since 2018. He brings extensive experience in the European telecommunications industry, having previously served as Chief Executive Officer of Meridian Telecom Group PLC from 2005 to 2016. The Board's committee structure includes four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, and the Technology and Strategy Committee, each of which is composed entirely of independent directors.
The Class II directors — Elaine Beaumont-Cross, Lorraine Duplessis, and Margaret Liu — are the directors whose terms will next expire at the 2025 AGM. This is significant because the proposed settlement contemplates classifying Ms. Sinclair-Moreau as a Class II director, meaning she would stand for election at the 2025 AGM along with the other Class II directors.
C. Shareholder Base and Greystone's Position
NTP has 412,000,000 shares of common stock outstanding, listed on the New York Stock Exchange under the ticker symbol "NTP." NTP's transfer agent is Pinnacle Trust Company, N.A., located at 6201 15th Avenue, Brooklyn, NY 11219.
Greystone holds 28,016,000 shares of NTP common stock, representing approximately 6.8% of shares outstanding. Based on the Schedule 13D filing, Greystone is the beneficial owner of these shares, with sole voting and dispositive power. Greystone's general partner, Greystone Capital Management LLC, is a Delaware limited liability company controlled by Dominic Ferraro.
NTP's stockholder base is diversified and predominantly institutional. Based on the most recent proxy filings and 13F data available to us, NTP's largest institutional stockholders (other than Greystone) include several large index funds and actively managed institutional investors. The composition of the stockholder base is relevant to the proxy fight analysis being conducted by Hargrove Advisory Group, which we anticipate will be presented to the Special Committee as part of its evaluation of the settlement.
IV. Delaware Fiduciary Duty Framework Applicable to Settlement of an Activism Campaign
This Section analyzes the legal standards under Delaware law that govern the Board's consideration and approval of the proposed Cooperation Agreement. Delaware law provides the fiduciary framework because NTP is incorporated in Delaware. The principal standards at issue are the business judgment rule, the enhanced scrutiny standard articulated in Unocal Corp. v. Mesa Petroleum Co., the Blasius standard concerning interference with the stockholder franchise, and the general duties of good faith and loyalty.
A. Business Judgment Rule — General Standard
Under well-established Delaware law, the actions of a board of directors in managing the business and affairs of a corporation are presumed to be taken in good faith, on an informed basis, and in the honest belief that the action is in the best interests of the company and its stockholders. This foundational principle — known as the "business judgment rule" — has been recognized and consistently applied by the Delaware courts for over a century, most notably in Aronson v. Lewis, 473 A.2d 805 (Del. 1984), and its progeny.
The business judgment rule operates as both a standard of conduct and a standard of judicial review. As a standard of conduct, it directs that directors must exercise their business judgment in a manner that they reasonably believe to be in the best interests of the corporation. As a standard of judicial review, it establishes a presumption that a board's decision will not be second-guessed by a court so long as the directors can demonstrate that they acted on a fully informed basis, in good faith, and in the honest belief that the decision was in the corporation's best interests. A plaintiff seeking to overcome the business judgment presumption bears the burden of proving that the directors breached their fiduciary duties by acting in bad faith, with a conflict of interest, or on a grossly uninformed basis.
The business judgment rule applies to a board's decision to settle a proxy contest or activism campaign, just as it applies to other board decisions in the management of the corporation's business and affairs. The settlement of an activism campaign is, at its core, a business decision: the Board must weigh the costs and risks of a contested proxy fight against the terms of the proposed settlement and determine whether the settlement serves the best interests of the corporation and all of its stockholders. A court will not disturb such a decision if the Board's process was adequate and its judgment was exercised in good faith.
The adequacy of the Board's process is a critical element of the business judgment analysis. Courts look to whether the Board took the following steps, among others:
• Retained independent advisors. The engagement of independent legal counsel (Calderwood & Harkness LLP), a financial advisor (Esterline Partners LLC), and a proxy solicitor (Hargrove Advisory Group LLC) demonstrates that the Board sought and obtained the benefit of expert advice in evaluating the activism campaign and the proposed settlement terms. The involvement of experienced, independent advisors is a hallmark of a well-informed decision-making process.
• Established a Special Committee. The formation of a Special Committee of independent, non-conflicted directors to oversee the negotiation process and evaluate the settlement terms provides an additional layer of process protection. The Special Committee structure insulates the decision from any potential argument that the full Board — which includes the CEO and other directors who might be perceived as having a personal interest in the outcome of the proxy contest — was conflicted.
• Documented deliberations. The maintenance of detailed minutes of Special Committee meetings, the preservation of advisor presentations and analyses, and the adoption of resolutions reciting the factors considered by the Board are all indicia of a thorough and informed process that courts consider favorably.
• Avoided conflicts of interest. The absence of disclosed conflicts of interest among the members of the Special Committee, and the Board's attention to identifying and managing any such conflicts, reinforces the integrity of the decision-making process.
On the basis of the process undertaken to date and as further recommended in Section VII of this memorandum, we believe the Board's decision to approve the proposed settlement will be entitled to the protections of the business judgment rule, assuming the Board continues to act on a fully informed basis and in good faith.
B. Unocal Enhanced Scrutiny — Applicability to Defensive Measures
While the business judgment rule provides the baseline standard of review, certain elements of the proposed Cooperation Agreement — particularly the standstill provisions — may be subject to the heightened standard of review articulated in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and its progeny, including Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995).
Under Unocal, when a board of directors adopts defensive measures in response to a perceived threat to corporate policy and effectiveness, the court applies a two-pronged enhanced scrutiny test:
Prong One — Threat Identification. The board must demonstrate that it had reasonable grounds for believing that a danger to corporate policy and effectiveness existed. This determination is evaluated in the context of the totality of the circumstances, including the nature of the activist's demands, the composition and credibility of the activist's slate, the potential impact of the activist's proposals on the corporation's long-term strategy, and the risk of disruption to the corporation's operations. The board is not required to demonstrate that the threat was certain or imminent — only that it had reasonable grounds for its belief.
Prong Two — Proportionality. The defensive measure must be reasonable in relation to the threat posed. Under Unitrin, a defensive measure will fail this prong if it is "coercive" (i.e., it forces stockholders to accept a particular result against their will) or "preclusive" (i.e., it makes it "mathematically impossible or realistically unattainable" for the activist to succeed with its proposal or proxy contest). If the defensive measure is neither coercive nor preclusive, it will be evaluated under the traditional business judgment rule — i.e., the court will determine whether the board's response falls "within a range of reasonableness."
The Unocal framework is relevant to the proposed Cooperation Agreement because the agreement includes standstill provisions that restrict Greystone's ability to engage in proxy solicitations, consent solicitations, "vote no" campaigns, special meeting requests, public proposals for extraordinary transactions, and group formation under Section 13(d)(3) of the Exchange Act during the Standstill Period. These restrictions function as defensive measures because they constrain a stockholder's exercise of its franchise and other rights, and they provide the incumbent Board with a period of protection from further activist challenge by Greystone.
Threat Identification. In the context of the proposed settlement, the threat posed by Greystone's activism campaign may be articulated as follows:
• Expense and Distraction. A contested proxy fight would impose significant costs on NTP, including the engagement of additional advisors, the printing and distribution of proxy materials, and the time and attention of management and directors, which would otherwise be devoted to the Company's business operations and strategic planning. Based on our experience and Esterline Partners' preliminary estimates, the direct costs of a contested proxy fight could range from $15 million to $25 million.
• Uncertainty of Outcome. A contested election introduces uncertainty into the governance of the corporation. Even if NTP were to prevail in the proxy contest, the process itself could create public disagreement about the Company's strategic direction that unsettles investors, customers, and employees.
• Risk of Short-Termism. Greystone's demands — including a $500 million ASR and a strategic review explicitly contemplating a sale or separation of ESD — reflect an investment thesis focused on near-term stock price appreciation. If adopted without adequate deliberation and Board oversight, these measures could compromise NTP's long-term strategic positioning. The election of two Greystone-designated directors (representing approximately 16.7% of a 12-member board) would give Greystone a disproportionate voice in Board deliberations relative to its 6.8% ownership stake.
• Potential for Further Escalation. Absent a settlement, Greystone has the resources and demonstrated willingness to escalate its campaign, including through additional public communications, solicitation of proxy advisory firm support, and outreach to other large stockholders.
We believe these factors, individually and collectively, provide reasonable grounds for the Board to believe that a danger to corporate policy and effectiveness existed, satisfying the first prong of the Unocal analysis.
Proportionality. The settlement terms must be proportionate to the identified threat and must not be coercive or preclusive. We analyze the proportionality of the specific standstill provisions in detail in Section V.B below, but offer the following general observations here:
• The standstill is of limited duration (approximately two years, expiring 30 days prior to the advance notice deadline for the 2025 AGM), which is within the range of market practice for cooperation agreements involving a single director appointment.
• The standstill includes a reasonable carve-out permitting Greystone to vote in its discretion on Extraordinary Transactions (defined as transactions involving consideration in excess of 25% of NTP's market capitalization), preserving Greystone's rights as a significant stockholder to exercise independent judgment on transformative transactions.
• The standstill is accompanied by meaningful concessions by NTP — including a board seat for Ms. Sinclair-Moreau, a commitment to include her on NTP's slate for reelection at the 2025 AGM, and a strategic review of ESD — that provide Greystone with tangible benefits in exchange for the restrictions it accepts.
• The standstill is mutual in nature: NTP also accepts obligations, including non-disparagement, a board size cap, and the slate commitment.
• The standstill does not preclude other stockholders from nominating directors, exercising their franchise rights, or engaging with the Board. It restricts only Greystone's activities, and only for a limited period.
For these reasons, we believe the standstill provisions, as currently structured, are proportionate to the identified threat and would satisfy the second prong of the Unocal analysis.
The *Blasius* Standard. A separate but related line of Delaware authority — originating in Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988) — holds that when a board of directors acts for the "primary purpose" of interfering with the effectiveness of a stockholder vote, the board must demonstrate a "compelling justification" for its actions. This is a more demanding standard than Unocal and is applied only where the evidence demonstrates that the board's primary motivation was to thwart the stockholder franchise.
We do not believe the Blasius standard applies to the proposed settlement for several reasons. First, the settlement context is fundamentally distinguishable from the Blasius paradigm: here, the Board is expanding the franchise (by adding a stockholder-designated director) rather than restricting it. The Board is voluntarily appointing a Greystone nominee and committing to support her reelection, which enhances rather than diminishes stockholder influence on the composition of the Board. Second, the standstill provisions restrict only Greystone's ability to engage in proxy solicitations and other activist activities — they do not interfere with the ability of NTP's stockholders generally to exercise their franchise rights. Third, the settlement is the product of good-faith negotiations between the parties, not a unilateral defensive action by the Board designed to suppress stockholder action.
That said, we note that the standstill restrictions on Greystone's proxy solicitation and consent solicitation rights do implicate franchise concerns that a court could examine if the settlement were challenged. To mitigate this risk, the standstill provisions should be — and, as currently structured, are — reasonable in scope and duration, coupled with meaningful concessions by NTP, and narrowly tailored to the specific threat posed by Greystone's campaign.
We are not aware of any Delaware Court of Chancery decision striking down the standstill provisions in a cooperation agreement negotiated at arm's length between a board and an activist stockholder, and the considerable body of precedent involving such agreements reflects judicial deference to boards that engage in a good-faith negotiation process and reach terms that are balanced and proportionate.
C. Board Authority to Expand Size and Appoint Directors
The proposed settlement contemplates that the Board will expand its size from 11 to 12 directors and appoint Ms. Sinclair-Moreau to fill the newly created directorship. The Board's authority to take these actions derives from both the DGCL and NTP's organizational documents.
Under Section 141(b) of the DGCL, the number of directors constituting the Board of Directors "shall be fixed by, or in the manner provided in, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the certificate." NTP's Certificate of Incorporation provides that the number of directors constituting the full Board shall be determined from time to time by resolution adopted by the Board of Directors. Accordingly, the Board may expand its size from 11 to 12 directors by adopting a resolution to that effect, without the need for stockholder approval.
The Board's authority to fill the newly created directorship follows from NTP's Certificate of Incorporation, which provides that any newly created directorship resulting from any increase in the authorized number of directors may be filled by a majority vote of the directors then in office. This is consistent with Section 223 of the DGCL. The appointment of Ms. Sinclair-Moreau would be effected by a resolution of the Board, adopted by the affirmative vote of a majority of directors then in office at a meeting at which a quorum is present (or by unanimous written consent).
Because NTP has a classified board, Ms. Sinclair-Moreau must be assigned to one of the three classes. The proposed classification of Ms. Sinclair-Moreau as a Class II director means that her initial appointment would run until the next election of Class II directors, which will occur at the 2025 AGM. At that time, she would stand for election by the stockholders for a full three-year term. The NTP Cooperation Agreement would include a commitment by NTP to include Ms. Sinclair-Moreau on its director nominee slate for the 2025 AGM, thereby ensuring that she has the Board's support for reelection.
To ensure procedural regularity, the Board should ensure that: (i) the resolution expanding the Board from 11 to 12 directors is adopted by the affirmative vote of a majority of the full Board (i.e., at least six directors) at a meeting at which a quorum is present, or by unanimous written consent; (ii) the resolution appointing Ms. Sinclair-Moreau to the newly created Class II directorship is similarly adopted; and (iii) the resolutions are properly documented and reflected in the corporate minutes.
D. Good Faith and Duty of Loyalty Considerations
The duties of good faith and loyalty are the foundational obligations of corporate directors under Delaware law. In the context of the proposed settlement, these duties require that each director exercise his or her judgment in the honest belief that the settlement is in the best interests of NTP and all of its stockholders — not for the purpose of entrenching the incumbent directors or appeasing Greystone at the expense of the broader stockholder base.
Merits-Based Evaluation. The settlement should be evaluated on its merits. The Special Committee should consider, among other factors, whether the settlement: (a) avoids the substantial costs and management distraction of a contested proxy fight; (b) results in the addition of a qualified, independent director who brings relevant skills and experience to the Board; (c) preserves the Board's ability to manage the Company's long-term strategy without undue constraint; (d) addresses, in a proportionate and responsible manner, legitimate concerns raised by Greystone regarding the strategic positioning of the Enterprise Software Division; and (e) is fair to all stockholders, not just Greystone.
Conflicts of Interest. Based on our discussions with NTP's General Counsel and our review of the relevant director questionnaires, we are not aware of any member of the Special Committee or the current Board who has a disclosed financial interest, business relationship, or personal relationship that is adverse to NTP in connection with the proposed settlement. No current director has a relationship with Greystone, Dominic Ferraro, Lena Ostrowski, or any of Greystone's advisors that would give rise to a conflict. Each director has an obligation to disclose promptly any facts or circumstances that could create the appearance of a conflict, and we recommend that the Special Committee confirm at each meeting that no such conflicts have arisen.
Entrenchment Concerns. The standstill provisions contained in the Cooperation Agreement warrant careful consideration from an entrenchment perspective. By restricting Greystone's ability to nominate directors, solicit proxies, or publicly advocate for changes in NTP's governance or strategy during the Standstill Period, the agreement effectively insulates the incumbent Board from further challenge by Greystone for a period of approximately two years. A critic might argue that these provisions serve the personal interests of incumbent directors in retaining their positions, rather than the interests of the corporation and its stockholders.
Several mitigating factors substantially reduce the entrenchment risk:
(a) Limited Duration. The standstill expires 30 days prior to the advance notice deadline for the 2025 AGM, which provides a defined and reasonable endpoint. Greystone will have the opportunity, at the conclusion of the standstill, to resume activist activities if it is dissatisfied with the Company's performance or governance.
(b) Board Seat Concession. Greystone is receiving a seat on the Board through the appointment of Ms. Sinclair-Moreau, which gives Greystone a voice in the boardroom and ensures that the Board benefits from the perspective of a director associated with a significant stockholder.
(c) Mutual Obligations. The standstill is not one-sided. NTP is also accepting obligations — including non-disparagement, a board size cap, and a slate commitment for Ms. Sinclair-Moreau — that constrain the Board's freedom of action and demonstrate that the agreement is a genuine compromise, not a tool of entrenchment.
(d) Other Stockholders Unaffected. The standstill restricts only Greystone. All other NTP stockholders retain the full ability to nominate directors, solicit proxies, submit stockholder proposals, and exercise their franchise rights in the ordinary course. The agreement does not diminish the stockholder franchise generally.
For these reasons, we believe the settlement, as currently structured, is defensible against an entrenchment challenge and reflects a good-faith exercise of the Board's business judgment.
V. Analysis of Proposed Settlement Terms
In this Section, we analyze each material term of the proposed Cooperation Agreement in detail, assessing its reasonableness, its consistency with market practice, and its alignment with the Board's fiduciary obligations.
A. Board Expansion and Director Appointment
1. One Director vs. Two Directors
Greystone's initial demand, as set forth in the Public Letter and reflected in its advance notice of director nominations, was for two board seats — one for Ms. Sinclair-Moreau and one for Mr. Henning. The proposed settlement contemplates the appointment of one Greystone-designated director — Ms. Sinclair-Moreau — with Mr. Henning's nomination to be withdrawn.
The reasonableness of a one-director settlement can be evaluated both in absolute terms and by reference to market benchmarks:
Proportionality to Ownership. At its current 6.8% ownership stake, Greystone's appointment of one director on a 12-member board would give it approximately 8.3% representation on the Board (1 out of 12 directors). This is roughly proportionate to Greystone's economic interest in the Company. By contrast, two directors on a 12-member board would yield approximately 16.7% representation — nearly two and a half times Greystone's ownership percentage. While there is no rigid mathematical formula for determining the "right" number of board seats in an activist settlement, proportionality between ownership and board representation is a widely recognized principle and a factor that courts and stockholders consider in evaluating the fairness of a settlement.
Market Benchmarks. A review of publicly disclosed activist settlements involving sub-10% ownership positions over the past three years confirms that one director on an expanded board is the median outcome in comparable situations. Two-director settlements are more typical where the activist holds a 10% or greater ownership stake, where the campaign involves allegations of significant operational failures or governance deficiencies, or where the board is substantially larger (e.g., 14 or more directors). In the present case, none of these factors is present: Greystone holds less than 7% of outstanding shares, NTP's operational and governance track record — while the subject of Greystone's criticism — does not present the kind of egregious failures that have supported two-director settlements in other contexts, and NTP's current 11-member board is of moderate size.
Strategic Considerations. From a strategic perspective, a one-director settlement preserves the Board's cohesion and minimizes the risk that Greystone will have outsized influence on Board deliberations. A single director designated by Greystone can serve as a constructive voice in the boardroom and a conduit for stockholder perspectives without creating a voting bloc that could disrupt the Board's consensus-driven decision-making process.
Recommendation. We recommend that the Special Committee approve the one-director settlement. The appointment of Ms. Sinclair-Moreau is a proportionate and defensible response to Greystone's campaign, and the withdrawal of Mr. Henning's nomination represents a meaningful concession by Greystone.
2. Qualifications of Catherine "Kate" Sinclair-Moreau
The selection of the specific individual to serve as Greystone's designated director is a critical component of the settlement. The Board has both the right and the fiduciary obligation to satisfy itself that the designated nominee is qualified, independent, and capable of serving in the best interests of all stockholders — not merely as a representative of Greystone's interests.
Based on our review of publicly available information and materials provided by Whitaker, Drummond & Chase LLP, Ms. Sinclair-Moreau's qualifications are strong:
• Operational Experience. Ms. Sinclair-Moreau served as Chief Operating Officer of Ridgeline Networks Inc., a Delaware corporation in the telecommunications and networking infrastructure sector. In that role, she oversaw the company's day-to-day operations, including manufacturing, supply chain, and go-to-market functions, during a period of significant growth and competitive transformation. This experience is directly relevant to NTP's business, which spans telecommunications infrastructure, enterprise software, and managed services.
• Board Experience. Ms. Sinclair-Moreau currently serves as an independent non-executive director at two public companies — Brindoval Data Holdings Corp. and Arden Communications Group Inc. — providing her with governance experience across the technology and communications sectors.
• Educational Background. Ms. Sinclair-Moreau holds a Bachelor of Science in Electrical Engineering from the Massachusetts Institute of Technology and a Master of Business Administration from INSEAD, reflecting a strong technical and business foundation.
• No Disclosed Conflicts. Based on available information, Ms. Sinclair-Moreau does not have any financial interest in Greystone or any employment, consulting, or other business relationship with Greystone or its principals that would compromise her independence under NYSE listing standards (Section 303A.02 of the NYSE Listed Company Manual) or Delaware law. She does not appear to be a partner, officer, or employee of Greystone Capital Partners LP or Greystone Capital Management LLC.
Committee Assignment. The proposed settlement contemplates that Ms. Sinclair-Moreau would be assigned to the Technology & Strategy Committee, which is chaired by Margaret Liu. This assignment is appropriate given Ms. Sinclair-Moreau's operational background in the telecommunications and technology sectors and her potential contribution to the Committee's oversight of NTP's strategic direction, including the forthcoming ESD strategic review.
Classification. Ms. Sinclair-Moreau would be classified as a Class II director. Class II directors' terms expire at the 2025 AGM, at which point Ms. Sinclair-Moreau would stand for election by stockholders. The Cooperation Agreement would include a commitment by NTP to include Ms. Sinclair-Moreau on its director nominee slate for the 2025 AGM, providing her with the Board's endorsement for reelection.
Diligence Requirements. Prior to her appointment, the Board should ensure that Ms. Sinclair-Moreau completes a standard directors' and officers' questionnaire, undergoes a background check consistent with NTP's standard procedures for new directors, and confirms in writing that she meets the independence requirements of the NYSE listing standards and NTP's Corporate Governance Guidelines. The Board should also obtain confirmation that her service on the Brindoval Data Holdings and Arden Communications Group boards does not create any interlocking directorate issues under the Clayton Act or other applicable law.
Recommendation. Ms. Sinclair-Moreau appears to be a well-qualified nominee who would add relevant skills and experience to the Board. Subject to satisfactory completion of the diligence process described above, we recommend that the Special Committee approve her appointment.
3. Board Expansion Mechanics
The mechanics of the Board expansion are straightforward. The Board will adopt a resolution increasing the authorized number of directors from 11 to 12, effective upon execution of the Cooperation Agreement. Concurrently, the Board will adopt a resolution appointing Ms. Sinclair-Moreau to fill the newly created Class II directorship.
No stockholder approval is required for either action. The Board's authority to expand its size is expressly provided for in NTP's Certificate of Incorporation, and the Board's authority to fill newly created directorships is established by both the Certificate of Incorporation and Section 223 of the DGCL.
We recommend that these resolutions be adopted by the unanimous written consent of the full Board (all 11 current directors), rather than by action at a Board meeting, in order to demonstrate the broadest possible support for the settlement and to avoid any argument that the appointment was driven by a narrow majority of directors.
B. Standstill Provisions
The standstill provisions are among the most important terms of the Cooperation Agreement. They define the boundaries of the parties' conduct during the cooperative period and establish the framework within which the relationship will operate. We analyze each element of the standstill below.
1. Duration. The proposed Standstill Period would run from the date of execution of the Cooperation Agreement through 30 calendar days prior to the advance notice deadline for the 2025 Annual General Meeting. Assuming the 2025 AGM is held on a date comparable to the 2023 AGM (mid-July 2025), and applying the 90-day advance notice period, the advance notice deadline would fall in approximately mid-April 2025. The Standstill Period would therefore expire approximately 30 days before that deadline, or in approximately mid-March 2025 — providing a standstill of approximately 22 to 24 months from the anticipated execution date (early to mid-June 2023).
This duration is within the range of market practice for one-director settlements, which typically feature standstills of 18 to 30 months. The approximately two-year duration is calibrated to provide the following benefits:
• It allows the ESD strategic review (deadline: December 31, 2023) to run its course and for the Board to act on its findings without the distraction of ongoing activist pressure from Greystone.
• It encompasses a full annual meeting cycle (the 2024 AGM), during which the voting commitment ensures Board stability.
• It expires in time for Greystone to submit a new nomination notice for the 2025 AGM if it chooses not to extend the cooperative relationship. This "off-ramp" feature is important because it ensures that the standstill does not indefinitely deprive Greystone of its ability to exercise its rights as a stockholder.
From a proportionality perspective, the duration is reasonable in relation to the threat. It is not so long as to effectively lock Greystone out of the governance process indefinitely, nor so short as to provide insufficient stability for the Board to implement its strategic agenda. We believe a court would find this duration reasonable under the Unocal framework.
Recommendation. The proposed Standstill Period duration is reasonable and defensible.
2. Greystone's Standstill Obligations
The proposed Cooperation Agreement would impose the following obligations on Greystone during the Standstill Period:
Ownership Cap at 9.9%. Greystone would agree not to beneficially own more than 9.9% of NTP's outstanding shares of common stock during the Standstill Period. At 412,000,000 shares outstanding, 9.9% represents approximately 40,788,000 shares. Given Greystone's current position of 28,016,000 shares (6.8%), this cap provides headroom of approximately 12,772,000 shares (approximately $440 million at the current share price), allowing Greystone to increase its investment in NTP modestly but preventing the accumulation of a position large enough to facilitate a hostile takeover bid, trigger a poison pill threshold (if NTP were to adopt a rights plan), or create a blocking position in stockholder votes on significant transactions.
The 9.9% cap is a widely used threshold in cooperation agreements. It is derived from the common poison pill trigger of 10% or 15% and is designed to keep the activist's ownership below a level that would create undue leverage or control concerns. We note that the cap does not restrict Greystone from disposing of shares — it addresses only the upper boundary of ownership.
Recommendation. The 9.9% ownership cap is standard and reasonable.
No Proxy Solicitations, Consent Solicitations, or "Vote No" Campaigns. Greystone would agree not to, directly or indirectly, (a) solicit proxies or consents from NTP stockholders, (b) initiate or participate in any "vote no" or "withhold" campaign against NTP's director nominees, or (c) become a "participant" in any proxy solicitation (as defined in Regulation 14A under the Exchange Act) with respect to NTP, other than as permitted by the Cooperation Agreement. These restrictions are standard in cooperation agreements and prevent Greystone from using proxy solicitation or consent solicitation mechanisms to circumvent the governance framework established by the Cooperation Agreement.
No Seeking to Call Special Meetings. Greystone would agree not to call, or seek to call, a special meeting of NTP stockholders, and not to submit a written request for a special meeting under NTP's Bylaws or the DGCL. This restriction prevents Greystone from using the special meeting mechanism to force corporate actions (such as the removal of directors or the adoption of bylaw amendments) outside the ordinary annual meeting cycle.
No Public Proposals for Extraordinary Transactions. Greystone would agree not to make, or cause to be made, any public proposal or public statement with respect to any merger, consolidation, business combination, tender offer, exchange offer, recapitalization, restructuring, liquidation, dissolution, or similar extraordinary transaction involving NTP or any of its subsidiaries. This restriction preserves the Board's prerogative to evaluate and pursue (or decline to pursue) strategic alternatives on its own timeline and in its own judgment, free from public pressure by Greystone. Notably, this restriction does not prevent Greystone from communicating privately with the Board regarding such matters.
No Formation of a "Group" Under Section 13(d)(3) of the Exchange Act. Greystone would agree not to form, join, or participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with any other person for the purpose of acquiring, holding, voting, or disposing of NTP securities. This restriction prevents Greystone from coordinating with other stockholders to amass collective voting power that could be used to circumvent the standstill obligations or to exert influence disproportionate to Greystone's individual ownership position.
No Disparaging Public Statements. Greystone would agree not to make or cause to be made any public statement that disparages, criticizes, defames, or is otherwise detrimental to NTP, its Board of Directors, or its management team. This restriction protects NTP's reputation and the morale of its employees and management during the cooperative period.
Proportionality Assessment. Taken as a whole, the restrictions on Greystone are customary in scope and are proportionate to the threat posed by Greystone's activism campaign. They do not preclude Greystone from: (a) selling its NTP shares at any time; (b) voting its shares at stockholder meetings (subject to the voting commitments discussed in Section V.C); (c) engaging privately with the Board and management on any topic, including governance, strategy, and operations; or (d) exercising any rights expressly preserved by the Cooperation Agreement, including the Extraordinary Transaction voting carve-out. The restrictions are narrowly tailored to prevent further activist escalation while preserving Greystone's legitimate rights as a significant stockholder.
Recommendation. The proposed standstill obligations imposed on Greystone are reasonable, customary, and defensible under the Unocal proportionality standard.
3. NTP's Reciprocal Standstill Obligations
The mutuality of the standstill is a critical feature of the Cooperation Agreement. NTP's reciprocal obligations include the following:
Non-Disparagement. NTP would agree not to make or cause to be made any public statement that disparages, criticizes, defames, or is otherwise detrimental to Greystone or its principals. This is a standard reciprocal commitment that ensures both parties maintain a constructive public posture during the cooperative period.
Slate Commitment. NTP would commit to include Ms. Sinclair-Moreau on its director nominee slate for reelection at the 2025 AGM. This commitment is an important concession by NTP because it ensures that Greystone's designated director is not marginalized or denied the Board's support at the next election. It provides Greystone with a reasonable assurance that its investment in the settlement — including the withdrawal of Mr. Henning's nomination and the acceptance of standstill restrictions — will be honored through at least the 2025 election cycle.
Board Size Cap. NTP would agree not to expand the Board beyond 12 directors during the Standstill Period without Greystone's prior written consent, such consent not to be unreasonably withheld. This provision prevents NTP from diluting Greystone's board representation (currently projected at 1 out of 12, or 8.3%) by unilaterally adding additional directors. Without this cap, NTP could theoretically expand the Board to 15 or more directors, reducing Greystone's representation to less than 7% and underminin