Dear Victoria,
I hope this message finds you well. I am writing in connection with the proposed Executive Employment Agreement between Northgate Telecommunications US, Inc. (as employer) and Marcus Elliot Harding (the "Agreement").
On behalf of Northgate, I want to thank you and your team for the productive term-sheet discussions over the past several weeks. The five negotiation calls from June 24 through July 19 were substantive and constructive, and we believe they have laid a solid foundation for the definitive agreement. With that groundwork in place, Calderwood & Harkness is pleased to transmit, on behalf of Northgate, the first full draft of the Agreement (Draft 1).
**Attachment**
Please find attached the Executive Employment Agreement — Draft 1 (employment-agreement-draft-1.docx), dated July 22, 2024. As discussed, the Agreement is between Northgate Telecommunications US, Inc., the wholly-owned US subsidiary of Northgate Telecommunications PLC, and Mr. Harding, and is governed by New York law. This is consistent with the dual-contract structure we have discussed throughout the term-sheet process. The separate UK service agreement with Northgate Telecommunications PLC is being prepared in coordination with Moorfield Bates LLP and will be provided under separate cover at a later date.
**Summary of Draft Structure**
Draft 1 is a comprehensive employment agreement containing all substantive provisions. For ease of reference, I have summarized the principal terms below:
- **Term (Section 2):** Five-year initial term commencing October 1, 2024 and expiring September 30, 2029, with automatic one-year renewals unless either party provides 180 days' prior written notice of non-renewal.
- **Position and Duties (Section 3):** Group Chief Executive Officer of Northgate Telecommunications PLC and its subsidiaries, reporting to the Board of Directors.
- **Compensation (Section 4):** - Base salary: $1,750,000 per annum. - Target annual incentive: 175% of base salary ($3,062,500), with a maximum payout of 300% of base salary ($5,250,000). - Annual long-term incentive award: $9,000,000 in grant-date value (60% performance share units / 40% restricted stock units).
- **Sign-On Arrangements (Section 5):** Designed to make Mr. Harding whole for forfeited equity at Marlowe Asset Management: - Cash sign-on bonus of $5,000,000, subject to a 24-month repayment clawback. - Sign-on equity grant of $18,400,000 in aggregate grant-date value, consisting of $12,000,000 in RSUs vesting ratably over three years and $6,400,000 in PSUs cliff-vesting at the end of year three.
- **Benefits (Section 6):** 401(k) plan with 6% employer matching contribution; supplemental executive retirement plan contribution of $250,000 per year; and executive perquisites as detailed in the draft.
- **Termination Without Cause / Resignation for Good Reason (Non-CIC) (Section 8):** Severance equal to 2x the sum of base salary and target annual bonus ($9,625,000); pro-rata annual bonus for the year of termination; 18 months of employer-paid COBRA continuation coverage; and 12 months of accelerated vesting of outstanding equity awards.
- **Change in Control (Section 7):** Double-trigger provisions. CIC severance equal to 2.5x the sum of base salary and target annual bonus ($12,031,250); full acceleration of all unvested equity awards; 24 months of employer-paid COBRA continuation coverage; and a best-net cutback under Section 280G of the Internal Revenue Code (no tax gross-up).
- **Restrictive Covenants (Section 9):** 24-month post-termination non-competition covenant (worldwide; activity-based, covering companies deriving more than 15% of revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecommunications operators); 24-month non-solicitation of employees and customers; 6-month garden leave period at base salary; and mutual non-disparagement obligations.
- **Additional Provisions:** Indemnification and D&O insurance coverage; Section 409A compliance provisions; and customary general provisions.
**Positions on Open Items**
I want to be transparent that certain provisions in the draft reflect Northgate's positions on items that remain open from our term-sheet discussions. I would like to flag two in particular:
*Change in Control (Section 7).* The draft incorporates the CIC definition that we reached agreement on during our July 8 call—namely, acquisition of more than 50% of outstanding voting securities, a merger or consolidation in which NTP shareholders retain less than 50% of the surviving entity, or a sale of substantially all assets. However, the draft does not include the Board turnover trigger (i.e., a change in a majority of incumbent directors) that Mr. Harding has requested. Additionally, the CIC severance multiplier is set at 2.5x with a best-net safe harbor cutback under Section 280G rather than the full excise tax gross-up that your client has proposed. These positions reflect the Remuneration Committee's authorized parameters, which are informed by ISS proxy advisory policy guidance and the constraints of the UK Corporate Governance Code applicable to Northgate as a London Stock Exchange premium-listed company. We are, of course, prepared to discuss these items further.
*Restrictive Covenants (Section 9).* The draft maintains a 24-month worldwide non-compete with the activity-based restriction described above, together with the 6-month garden leave at base salary, consistent with Northgate's opening position. We are aware that Hargrove & Liddell has advocated for a shorter non-compete duration of 12 months and a narrower geographic scope, and we understand these remain items for discussion. We look forward to hearing your client's views in the context of the full draft.
I want to emphasize that Draft 1 incorporates all points of agreement reached during our five term-sheet calls, including the agreed compensation elements—base salary, bonus targets and structure, annual LTI, sign-on arrangements, SERP, and perquisites—faithfully and in full.
**Next Steps**
We invite you and your team to review the draft and provide a redline with comments at your convenience. Once Hargrove & Liddell has had an opportunity to complete its review, we would be happy to schedule a call to discuss the draft and work through any open items. Given the proposed October 1, 2024 start date—and the possible adjustment to November 1 that was discussed during our July 19 call—I would suggest that the parties aim to move expeditiously so that we can bring this to a close well in advance of either date.
Northgate remains genuinely enthusiastic about the prospect of Mr. Harding joining as Group CEO and is committed to working constructively toward a definitive agreement that works for all parties. Please do not hesitate to reach out if you or Nathan have any questions in the meantime. I am available by phone or email at any time.
With best regards,
**Renata Vasquez** Partner, Labor & Employment Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171 T: (212) 558-4000
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