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MEMORANDUM

PRIVILEGED & CONFIDENTIAL / ATTORNEY WORK PRODUCT

TO: Renata Vasquez, Partner

FROM: James Underwood, Associate

DATE: August 21, 2024

RE: Analysis of Hargrove & Liddell LLP Redline of Draft 2 Executive Employment Agreement — Remaining Open Issues

MATTER: Northgate Telecommunications PLC — CEO Employment Negotiation (Marcus Elliot Harding) — 1022-00004

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I. Executive Summary

This memorandum analyzes the forty-two (42) comments contained in the redline of Draft 2 of the Executive Employment Agreement (the "Agreement") between Northgate Telecommunications US, Inc. ("NTP US") and Marcus Elliot Harding ("Harding" or the "Executive"), as delivered by Hargrove & Liddell LLP ("H&L"), counsel for Harding, on August 19, 2024 (the "Draft 2 Redline"). Draft 2 of the Agreement was circulated to H&L on August 12, 2024, and incorporated Northgate Telecommunications PLC's ("NTP" or "Northgate" or the "Company") responses to the eighty-eight (88) comments H&L had raised in its redline of Draft 1, received on August 5, 2024.

The reduction from 88 comments in the Draft 1 Redline to 42 comments in the Draft 2 Redline reflects meaningful progress on non-material and mid-tier issues throughout the course of the negotiation. Nonetheless, the two core impasses that have been present since the outset of these negotiations remain entirely unresolved:

(1) Change in Control Severance Provisions — Section 7 of the Agreement; and

(2) Restrictive Covenant Obligations — Section 9 of the Agreement.

Of the 42 remaining H&L comments, the distribution is as follows:

• Eight (8) comments relate to the change in control ("CIC") provisions set forth in Section 7;

• Eleven (11) comments relate to the restrictive covenant provisions set forth in Section 9; and

• Twenty-three (23) comments relate to other sections of the Agreement that are either non-material in nature or readily resolvable through modest concessions, clarifications, or minor drafting adjustments.

Recommendation. The 23 non-material and readily resolvable comments (designated as "Category B" below) can be addressed in a revised draft within two to three business days and should not, in my assessment, present any impediment to reaching a final agreement. The 19 comments touching Sections 7 and 9 (designated as "Category C" below), however, represent fundamental disagreements on both economic terms and structural governance principles. These require either Board-level resolution by the Remuneration Committee or, more likely, a principals meeting between Board representatives, NTP management, and Harding and his counsel, Victoria Hargrove.

This memorandum provides a detailed analysis of each category of open issues, quantifies the financial gaps where applicable, and offers recommendations for next steps. It should be read in conjunction with the supporting memoranda cross-referenced herein, including Devon Archer's June 6 New York non-compete analysis, my own June 8 restrictive covenant memorandum, Devon Archer's July 25 Section 280G detailed analysis, and my August 7 analysis of the Draft 1 Redline.

II. Categorization of Remaining Comments

For purposes of this memorandum, I have organized the 42 remaining H&L comments into three categories, consistent with the framework employed in my August 7 analysis of the Draft 1 Redline:

Category A — Resolved or Accepted (For Tracking Completeness). Draft 2 resolved 46 of the 88 original comments raised in the Draft 1 Redline, either by accepting H&L's proposed language in full or by reaching compromise language that H&L has not challenged further. These 46 comments are no longer open and are not analyzed in this memorandum. They are included, however, in the comment-by-comment index appended hereto as Appendix A for purposes of tracking completeness and to maintain a comprehensive record of the negotiation history for the file.

Category B — Non-Material / Easily Resolvable (23 Comments). This category encompasses issues where the parties' positions are sufficiently close that resolution requires only minor drafting adjustments, modest economic concessions, or clarifications to existing language. None of the Category B issues, individually or in the aggregate, should present a meaningful obstacle to the execution of a final agreement. I address these in summary fashion in Section V below.

Category C — Critical / Board-Level (19 Comments). This category encompasses the 8 comments directed at the CIC provisions of Section 7 and the 11 comments directed at the restrictive covenant provisions of Section 9. On each of these issues, the parties remain fundamentally apart. The positions are, in several instances, binary in nature — meaning that no middle ground has been identified, and one side or the other must yield. I address these in detail in Sections III and IV below.

The table below provides a high-level overview of the comment distribution:

III. Category C — Critical Open Issues: Change in Control Provisions (Section 7)

The eight open H&L comments on Section 7 are analyzed below in order of significance. The first three — the Board turnover trigger (Section 7.1(d)), the CIC severance multiplier (Section 7.2(a)), and the Section 280G tax treatment (Section 7.2(c)) — represent the most intractable points of disagreement in the entire negotiation. The remaining five comments, while categorized as critical because they relate to Section 7, are either negotiable in principle or resolvable through standard compromise language.

III.A. CIC Definition — Board Turnover Trigger (Section 7.1(d))

H&L Comment. Harding continues to demand the inclusion of a fourth trigger in the definition of "Change in Control" — specifically, a change in the composition of the Board of Directors of NTP whereby a majority of the directors then serving are replaced within any twelve (12) month period by directors whose appointment or nomination was not endorsed by a majority of the directors in office immediately prior to the commencement of such twelve-month period (the "Board Turnover Trigger").

Draft 2 Position. The NTP definition of "Change in Control" in Section 7.1 of Draft 2 includes three triggers only:

(a) the acquisition by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of more than fifty percent (50%) of the combined voting power of the outstanding voting securities of NTP;

(b) a merger, consolidation, or similar business combination transaction involving NTP, following which the shareholders of NTP immediately prior to such transaction hold less than fifty percent (50%) of the combined voting power of the surviving or resulting entity; and

(c) a sale, lease, exchange, or other transfer of all or substantially all of the assets of NTP and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions.

This three-trigger formulation is consistent with the definition approved by the Remuneration Committee and reflects the standard approach taken in comparable UK-listed, US-operating company executive agreements that we have reviewed.

H&L Rationale. H&L's redline marginalia explain that Harding views Board turnover as a proxy for a de facto change in strategic direction of the Company, even absent a change in share ownership or a formal business combination. Harding's concern is that an activist campaign resulting in the replacement of a majority of directors could fundamentally alter the strategic direction of the Company and the executive leadership team, effectively creating a CIC scenario without triggering any of the three conventional definitions. H&L further notes that Harding's existing employment agreement with Marlowe Asset Management Digital Holdings ("Marlowe Asset Management") includes a Board turnover trigger, and that the omission of such a trigger from the NTP Agreement would represent a diminution of Harding's existing protections.

Northgate / Board Position. The Board, through Elaine Whitford's August 9, 2024 email conveying the direction of Geoffrey Stanton (Remuneration Committee Chair) and the Remuneration Committee as a whole, has explicitly rejected the inclusion of a Board Turnover Trigger. The Board's position is that:

(i) Board turnover triggers are inconsistent with the principles of orderly Board refreshment enshrined in the UK Corporate Governance Code 2024 (the "UKCGC"), which contemplates regular Board renewal and diversity of Board composition as hallmarks of good governance;

(ii) inclusion of such a trigger could inadvertently penalize routine succession planning, annual Board refreshment, or compliance with the UKCGC's recommendations regarding tenure limits for non-executive directors;

(iii) the trigger could be activated by entirely benign governance changes (e.g., a planned refreshment cycle coinciding with the retirement of several long-serving directors), creating CIC severance obligations without any actual change in ownership or strategic direction; and

(iv) the inclusion of a Board turnover trigger is increasingly uncommon in new public-company CEO agreements, and its presence would attract scrutiny from institutional shareholders and proxy advisory firms.

Analysis. Board turnover triggers were more prevalent in US executive compensation practice during the 2000s and early 2010s, but their inclusion in new agreements has declined significantly over the past decade. A review of the most recent proxy filings of the 25 public telecommunications companies in the S&P 500 and FTSE 100 reveals that only three (3) include a Board turnover trigger in their CEO employment agreements — and in each case, the trigger predates 2015 and was grandfathered from prior agreements. Neither ISS nor Tarrant Partners LLC requires or recommends the inclusion of Board turnover triggers, and their "best practices" guidance is silent on the issue, suggesting it is not a material consideration in proxy advisory evaluations. The UKCGC, as noted, contemplates orderly Board refreshment as a positive governance practice, and the inclusion of a trigger that could penalize such refreshment is inconsistent with the governance framework to which NTP is subject as a London-listed company.

Assessment. This remains a binary disagreement. No middle ground has been identified. Harding has identified the Board Turnover Trigger as "non-negotiable" in H&L's redline commentary. The Board has explicitly rejected it. One side must yield, and at present neither side has shown any willingness to do so. I note that in Negotiation Call #3 (July 2, 2024), Victoria Hargrove stated that the Board Turnover Trigger was a "personal priority" for Harding based on his experience at Marlowe Asset Management, where an activist campaign in 2022 resulted in significant Board disruption. This personal dimension may make it particularly difficult to resolve through economic concessions alone.

III.B. CIC Severance Multiplier (Section 7.2(a))

H&L Comment. Harding demands a CIC severance multiplier of three times (3x) the sum of his annual base salary and target annual incentive bonus, yielding a lump sum CIC severance payment of:

3 × ($1,750,000 + $3,062,500) = 3 × $4,812,500 = $14,437,500

Draft 2 Position. NTP's Draft 2 provides for a CIC severance multiplier of two and one-half times (2.5x) the sum of annual base salary and target annual incentive bonus, yielding:

2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250

Gap. The financial gap between the parties' positions is:

$14,437,500 − $12,031,250 = $2,406,250

Context. H&L's position is grounded in two related arguments. First, Harding's current employment agreement with Marlowe Asset Management Digital Holdings provides for a 3x CIC severance multiplier, and H&L contends that anything less than parity with Harding's existing package creates a "step-down" that is unreasonable given the career risk Harding assumes in departing a known role for a new position. Second, H&L argues that the 3x multiplier is within the range of market practice for CEO-level CIC severance at companies of comparable size and complexity, citing agreements at three comparator companies (Meridian Communications Group, Apex Global Networks, and Triton Digital Infrastructure Partners — although H&L did not provide specific terms for comparison).

Northgate Position. The Remuneration Committee — comprising Geoffrey Stanton (Chair), Dame Philippa Thornton-Hale, Lucinda Farrow, and Dr. Tomás Herrera — has directed that the maximum CIC severance multiplier is 2.5x. This ceiling was established following a comprehensive market benchmarking analysis conducted by Veltrano Proxy Advisors (Sandra Kolb, Managing Director) and an internal review by NTP's Head of Total Rewards, Claire Whitfield-Nakamura. The Remuneration Committee's rationale for the 2.5x ceiling includes the following considerations:

(i) Veltrano Proxy Advisors advised that a 3x CIC multiplier, particularly when combined with a full Section 280G gross-up (discussed in Section III.C below), would likely trigger a negative say-on-pay recommendation from ISS. This assessment is consistent with ISS's published policy guidelines, which flag 3x or greater CIC multiples as a potential "problematic pay practice" warranting closer scrutiny.

(ii) NTP received 87.4% say-on-pay support at the April 18, 2024 Annual General Meeting — a strong result that the Board is reluctant to jeopardize. A decline in say-on-pay support below 80% would trigger mandatory Board engagement with dissenting shareholders under NTP's stated governance commitments and would be perceived negatively by the institutional investor community.

(iii) The 2.5x multiplier is consistent with the terms offered to NTP's other Named Executive Officers, and the Remuneration Committee believes that a 3x multiplier for the incoming CEO would create internal equity concerns and set a precedent that could increase costs across the executive team.

(iv) The Remuneration Committee has emphasized that the total compensation package being offered to Harding — including base salary of $1,750,000, target annual incentive of $3,062,500 (175% of base), annual long-term incentive awards valued at $9,000,000, and sign-on equity of approximately $15,400,000 — is, in the aggregate, at or above the 75th percentile of the comparator group, and that the 2.5x CIC multiplier should be viewed in the context of this overall package.

Note on Hargrove's July 12, 2024 Proposal. During Negotiation Call #4 on July 12, 2024, Victoria Hargrove floated a potential compromise of 2.75x ($13,234,375), which would have split the difference between the parties' positions. You took this proposal under advisement but did not accept it. When you subsequently presented it to the Remuneration Committee, the Committee declined to approve the 2.75x figure. Geoffrey Stanton's response, conveyed through Elaine Whitford, was that the Committee "has set 2.5x as the ceiling and is not prepared to move above it."

Assessment. The $2,406,250 gap remains fully open. The Board has set 2.5x as its firm ceiling, and Harding has consistently maintained his demand for 3x. Hargrove's 2.75x compromise proposal was the only attempt to bridge this gap, and it was rejected by the Remuneration Committee. Unless the Board is prepared to revisit its position — which would require a formal Remuneration Committee meeting and a revised recommendation from Veltrano — this issue cannot be resolved at the working level.

III.C. Section 280G Tax Treatment (Section 7.2(c))

H&L Comment. Harding demands a full Section 280G excise tax gross-up — meaning that in the event any payments or benefits provided under the Agreement constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code and are subject to the 20% excise tax imposed by Section 4999, NTP would be obligated to make an additional payment to Harding in an amount sufficient to place him in the same after-tax position as if no excise tax had been imposed.

Draft 2 Position. NTP's Draft 2 provides for a "best-net" safe harbor cutback — meaning that if any payments or benefits would constitute "excess parachute payments" under Section 280G, such payments would be reduced to the safe harbor limit (i.e., three times Harding's "base amount" minus one dollar) if, and only if, such reduction would result in a greater after-tax benefit to the Executive than receiving the full payment and bearing the excise tax. Under this approach, the Executive receives whichever treatment — cutback or full payment plus excise tax — yields the better after-tax result.

Financial Analysis. The following analysis is based on Devon Archer's July 25 memorandum and the supporting calculations prepared by Dr. Rachel Whitmore of Whitmore Hobson LLC:

• Harding's Section 280G Base Amount: $7,840,000 (calculated as the average of Harding's annualized W-2 compensation at Marlowe Asset Management Digital Holdings for the five taxable years preceding the year of the CIC, covering 2019 through 2023).

• Safe Harbor Limit: (3 × $7,840,000) − $1 = $23,519,999. Parachute payments at or below this amount would not trigger the excise tax.

• Estimated Total Parachute Payments Under Harding's 3x Proposal: Approximately $38,200,000, comprising the 3x cash severance ($14,437,500), the value of accelerated equity ($18,400,000 estimated), benefit continuation ($1,162,500 estimated), and other payments that may be characterized as parachute payments under Section 280G.

• Estimated Excess Parachute Payment: $38,200,000 − $7,840,000 = $30,360,000.

• Estimated Excise Tax (20%): $30,360,000 × 0.20 = $6,072,000.

• Estimated Gross-Up Cost to NTP: $4,200,000 to $6,800,000. The range reflects uncertainty in the final parachute payment calculations (which depend on actual equity values at the time of the CIC and other variables), the interaction with applicable federal and state marginal tax rates, and the "gross-up on the gross-up" effect (i.e., the gross-up payment itself is taxable income, requiring an iterative calculation).

Whitmore Hobson Analysis. Dr. Rachel Whitmore's detailed best-net analysis demonstrates that the cutback and full-payment-plus-excise-tax outcomes are roughly equivalent for Harding under a range of plausible CIC scenarios. Under most modeled scenarios, the cutback to the safe harbor amount actually yields a slightly better after-tax result for Harding than receiving the full payment and bearing the excise tax, because the excise tax rate (20%) applies to the gross excess parachute payment while the benefit of the additional payment is eroded by combined federal, state, and local income taxes. This means that the gross-up demand is largely one of principle and optics for Harding, rather than one of genuine economic necessity. H&L's insistence on the gross-up appears to reflect Harding's view that a CEO of his stature should not bear the risk of adverse tax consequences arising from a CIC event over which he has no control.

ISS / Veltrano Guidance. Tax gross-ups on excess parachute payments are classified as a "problematic pay practice" under current ISS policy guidelines. ISS's position is that gross-ups represent a transfer of economic risk from the executive to shareholders and are inconsistent with the principle that executive compensation should align executive and shareholder interests. Veltrano Proxy Advisors (Sandra Kolb) confirmed in a July 30, 2024 written advisory that the inclusion of a Section 280G gross-up would weigh heavily and negatively in any say-on-pay assessment, and that the combination of a 3x CIC multiplier with a full gross-up would, in Veltrano's view, "virtually ensure" a negative ISS recommendation.

Assessment. The Board has firmly rejected the gross-up demand. H&L's position appears equally entrenched. This is another binary disagreement with no middle ground identified to date. The Whitmore Hobson analysis may provide a useful framework for a principals-level discussion, as it demonstrates that Harding's actual economic exposure under the best-net cutback approach is minimal. However, if Harding's demand is driven by principle rather than economics, the financial analysis alone may not be sufficient to resolve the issue.

III.D. CIC Equity Acceleration — PSU Vesting Level (Section 7.2(b))

H&L Comment. H&L demands that, upon a qualifying CIC termination (i.e., a termination without cause or resignation for good reason within 24 months following a CIC), all unvested performance stock units ("PSUs") should vest at the target performance level (100% of target), regardless of actual performance as of the date of termination.

Draft 2 Position. Draft 2 provides that, upon a qualifying CIC termination, PSUs vest at the level of actual performance achieved through the date of termination, as determined by the Remuneration Committee in good faith, or at target if the applicable performance period has not yet commenced as of the date of termination. This approach ensures that PSU vesting reflects actual Company performance to the extent measurable, while providing a reasonable default for grants where performance data is not yet available.

Gap Analysis. The difference between target vesting of the full PSU grant and actual or pro-rata performance vesting is inherently variable, depending on actual Company performance at the time of a hypothetical CIC event. However, the potential financial impact is significant given the magnitude of Harding's PSU awards:

• Sign-On PSU Grant: $6,400,000 (representing approximately 403,275 shares at the current share price of $15.87). If actual performance were at 50% of target at the time of CIC, the difference between target vesting and actual vesting would be approximately $3,200,000.

• Annual LTI PSU Component: $5,400,000 per year (representing 60% of the $9,000,000 annual LTI, with the remaining 40% allocated to restricted stock units ("RSUs")). The annual PSU grant is approximately 340,264 shares per year at the current share price.

• Under a scenario in which a CIC occurs 18 months into Harding's tenure (during the first PSU performance period), with actual performance at 75% of target, the incremental value of target vesting versus actual vesting could be approximately $2,950,000.

Assessment. This issue is negotiable in principle and represents a lower-priority item for the Board. The Remuneration Committee's primary concern regarding the CIC provisions is focused on the multiplier and the gross-up, not on the PSU vesting mechanics. I believe this issue could be conceded as part of a broader package deal in which the principal CIC multiplier and gross-up issues are resolved in Northgate's favor. If the Board were to accept target PSU vesting in exchange for Harding's acceptance of the 2.5x multiplier and best-net cutback, the economic trade would likely be favorable to NTP under most scenarios.

III.E. CIC Benefit Continuation Period (Section 7.2(d))

H&L Comment. H&L demands thirty-six (36) months of continued health, dental, and vision benefit coverage following a qualifying CIC termination, at NTP's expense and at the same coverage levels and contribution rates as in effect immediately prior to the termination.

Draft 2 Position. Draft 2 provides for twenty-four (24) months of COBRA continuation coverage at NTP's expense, plus a $50,000 lump sum payment for outplacement services.

Gap. The gap is twelve (12) months of additional benefit continuation. The estimated incremental cost to NTP of providing the additional 12 months of benefits is approximately $35,000 to $50,000, depending on the applicable plan costs and Harding's elected coverage level at the time of a hypothetical CIC termination.

Assessment. This is a relatively modest financial issue in the context of the overall negotiation. The incremental cost represents a small fraction of the total CIC severance package under either party's proposal. I recommend that this issue be available as a concession item if needed to facilitate resolution of the more significant CIC issues. Conceding 36 months of benefit continuation in exchange for meaningful progress on the multiplier or gross-up would represent a highly favorable trade for NTP.

III.F. Additional CIC Comments (3 Comments)

H&L's redline includes three additional comments on Section 7 that, while categorized as critical due to their location in the CIC provisions, are relatively minor in nature and should be resolvable through standard compromise language:

(i) Timing of CIC Payments. H&L requests that CIC severance payments be made in a lump sum within 10 business days of the effective date of the Executive's release of claims, rather than the 30 business days provided in Draft 2. The difference is primarily a matter of timing, not amount. A compromise of 15 business days following the release effective date would be reasonable and consistent with market practice.

(ii) Release Execution Period. H&L requests that the Executive be given 60 days (rather than the 45 days provided in Draft 2) to execute the release of claims required as a condition to the receipt of CIC severance benefits. While a 45-day period is standard in many executive agreements, the 60-day period requested by H&L is not uncommon and, when combined with a 7-day revocation period, would result in a maximum delay of 67 days before payments commence. I recommend accepting the 60-day period, as it is within the range of market practice and is unlikely to present any practical issue.

(iii) Form of Separation Agreement Exhibit. H&L has requested that the form of the separation agreement and release be attached to the Agreement as an exhibit and negotiated concurrently with the Agreement, rather than being left to post-termination negotiation. This is a reasonable request and is increasingly the standard approach in CEO agreements, as it provides certainty to both parties. I recommend accepting this request and circulating a draft separation agreement exhibit for H&L's review.

Assessment. All three of these comments are resolvable and should not present any obstacle to a final agreement. I recommend addressing them in the next draft regardless of the status of the principal CIC issues, as doing so demonstrates good faith and narrows the open item count.

IV. Category C — Critical Open Issues: Restrictive Covenant Provisions (Section 9)

The eleven open H&L comments on Section 9 are analyzed below. While the restrictive covenant issues involve less aggregate dollar exposure than the CIC provisions, they present complex structural and enforceability considerations that are of significant strategic importance to NTP. The non-compete, in particular, is critical to NTP's protection of its competitive position during the post-departure period, given Harding's expected deep familiarity with NTP's strategic plans, customer relationships, technology roadmap, and competitive intelligence.

IV.A. Non-Compete Duration (Section 9.1(a))

H&L Comment. H&L demands a twelve (12) month post-termination non-competition period, which matches the duration of Harding's current non-compete obligation under his employment agreement with Marlowe Asset Management Digital Holdings.

Draft 2 Position. Draft 2 provides for an eighteen (18) month post-termination non-competition period. This represents a reduction from the twenty-four (24) month period included in Draft 1, which the Board authorized us to reduce to 18 months in response to H&L's Draft 1 comment. The authorization to reduce from 24 to 18 months was communicated by Elaine Whitford on August 9, 2024, following consultation with Geoffrey Stanton.

Gap. Six (6) months.

Context. H&L's position is that NTP should not impose non-compete restrictions more onerous than those that Harding currently faces at Marlowe Asset Management. Harding's existing Marlowe Asset Management non-compete is 12 months in duration with a US geographic scope only. H&L argues that requiring Harding to accept a longer non-compete as a condition of joining NTP — particularly one with broader geographic scope — effectively penalizes him for changing employers and creates an unreasonable burden on his future career mobility.

NTP's position, as articulated by the Remuneration Committee, is that 18 months is the minimum period necessary to protect the Company's legitimate business interests, given (i) the typical duration of NTP's strategic planning cycle (3 years, with annual updates), (ii) the sensitivity of the competitive intelligence to which the CEO will have access, and (iii) the lead time required for NTP to execute a CEO succession if Harding were to depart and immediately join a competitor.

Assessment. There is room for compromise on this issue. The gap of six months is within the range of negotiating flexibility, and several potential resolution paths exist:

• Agreement on 15 months as a split-the-difference outcome;

• Agreement on 12 months with an enhanced garden leave provision running concurrently (see Section IV.D below); or

• Agreement on 18 months with a more narrowly defined scope of prohibited competitive activity (see Section IV.C below), which would moderate the practical impact of the longer duration.

The interaction between non-compete duration and garden leave terms is significant and must be considered holistically. I discuss this interaction further in Section IV.D below.

IV.B. Non-Compete Geographic Scope (Section 9.1(b))

H&L Comment. H&L demands that the non-compete be limited in geographic scope to North America and Western Europe only.

Draft 2 Position. Draft 2 already provides for a geographic scope limited to North America and Western Europe, having been revised from the worldwide scope included in Draft 1 per Board authorization.

Status. This issue appears to be substantively agreed — the parties' positions on geographic scope are aligned following the revision in Draft 2. However, H&L's redline contains a specific comment requesting that "Western Europe" be defined on a precise country-by-country basis through a schedule or exhibit appended to the Agreement, rather than relying on the general term. H&L's concern is that "Western Europe" is not a universally defined geographic designation and could give rise to disputes regarding the inclusion or exclusion of particular countries (H&L specifically notes potential ambiguity regarding the classification of Turkey, Greece, and the Baltic states).

Assessment. This is a resolvable drafting issue. I recommend the inclusion of a schedule defining "Western Europe" by reference to a specific list of countries. Based on NTP's existing operational footprint and the countries in which its principal competitors maintain operations, I would suggest the following list: United Kingdom, Ireland, France, Germany, Spain, Portugal, Italy, the Netherlands, Belgium, Luxembourg, Switzerland, Austria, Denmark, Norway, Sweden, Finland, and Iceland. This list captures the core Western European telecommunications markets and is consistent with common industry usage of the term.

IV.C. Non-Compete Activity Definition (Section 9.1(c))

H&L Comment. H&L demands the replacement of the revenue-based test currently set forth in Draft 2 with a scheduled-competitor approach. Under H&L's proposal, the non-compete would prohibit Harding from being employed by, or providing services to, eight (8) specifically named companies (the "Scheduled Competitors"), rather than any company meeting the revenue-based definition. H&L's proposed Scheduled Competitors are not identified in the redline marginalia, but H&L has indicated that the list would include NTP's most direct competitors in the US and UK telecommunications markets.

Draft 2 Position. Draft 2 defines "Competitive Activity" as employment by, or the provision of services to, any person or entity that derives more than fifteen percent (15%) of its consolidated annual revenue from "telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecom operators." The phrase "serving telecom operators" was added to the enterprise SaaS category in Draft 2 in response to H&L's Draft 1 comment that the prior definition was overbroad in its inclusion of general enterprise SaaS platforms.

H&L Argument. H&L contends that the revenue-based test, even as narrowed in Draft 2, remains overbroad for several reasons:

(i) The 15% revenue threshold could capture large, diversified companies with only de minimis telecommunications operations — for example, a major technology conglomerate that derives 16% of its revenue from telecom infrastructure but whose primary business is in an entirely different sector.

(ii) The test creates practical uncertainty at the time Harding needs to assess whether a prospective employer falls within the non-compete's scope. Revenue figures are not always publicly available on a disaggregated basis, and the characterization of revenue as "telecommunications services" or "telecommunications infrastructure" may be subject to interpretation.

(iii) The addition of "enterprise SaaS platforms serving telecom operators" captures a broad swath of the technology sector, given the convergence between telecommunications and SaaS.

NTP Argument. NTP's position, as communicated by Elaine Whitford, is that the scheduled-competitor approach is fundamentally under-inclusive:

(i) A static list of eight competitors does not account for new market entrants, startup competitors, or existing companies that expand into the telecommunications sector during the non-compete period. The telecommunications industry is undergoing significant consolidation and convergence, and the competitive landscape could change materially during an 18-month restriction period.

(ii) A scheduled-competitor list would need to be negotiated and agreed at the time of execution of the Agreement, and any subsequent additions would require Harding's consent — effectively giving Harding a veto over the scope of his own non-compete.

(iii) The 15% revenue threshold is designed to capture only those companies for which telecommunications is a material line of business, and the threshold is generous relative to comparable non-compete provisions in other CEO agreements.

Assessment. This is a substantive drafting disagreement that reflects legitimate concerns on both sides. A potential compromise could involve a hybrid approach that combines elements of both proposals:

(a) A primary list of Scheduled Competitors, identified by name, to which the non-compete would apply regardless of revenue composition;

(b) A secondary revenue-based catch-all applicable to any company not on the Scheduled Competitor list, but at a higher revenue threshold (e.g., 25% of consolidated annual revenue from telecommunications services and infrastructure) to address H&L's overbreadth concerns; and

(c) A mechanism for NTP to update the Scheduled Competitor list on an annual basis (e.g., additions to be effective upon 30 days' written notice to the Executive), subject to a reasonableness cap (e.g., no more than 12 companies at any time).

This hybrid approach would provide certainty for Harding with respect to the principal competitors while preserving NTP's ability to capture new entrants through the revenue-based catch-all. I recommend presenting this framework in the next draft, subject to Board approval.

IV.D. Garden Leave — Duration and Compensation (Section 9.2)

H&L Comment. H&L demands a twelve (12) month garden leave period at full compensation — defined as the Executive's base salary plus a pro-rata portion of his target annual incentive bonus — with the garden leave period running concurrently with the non-compete period. Under H&L's proposal, during the garden leave period, Harding would remain an employee of NTP US, would continue to receive his full compensation and benefits, and would be relieved of all active duties while remaining subject to existing contractual obligations (including confidentiality and non-competition obligations). Upon the expiration of the garden leave period, the post-termination non-compete would take effect, but the concurrent running of the two periods would effectively reduce the duration of the non-compete to the extent it exceeds the garden leave period.

Draft 2 Position. Draft 2 provides for a six (6) month garden leave period at base salary only (i.e., $1,750,000 annualized, or $875,000 for the six-month period), with the garden leave period running concurrently with the first six months of the non-compete period. This means that, under Draft 2, the effective post-garden-leave non-compete period would be 12 months (18 months total non-compete minus 6 months of concurrent garden leave).

Gaps. The parties' positions diverge on three interconnected dimensions:

(1) Garden Leave Duration: H&L proposes 12 months; Draft 2 provides 6 months. Gap: 6 months.

(2) Garden Leave Compensation: H&L proposes full compensation (base salary + pro-rata target bonus, totaling approximately $4,812,500 annualized, or $4,812,500 for a 12-month period). Draft 2 provides base salary only ($1,750,000 annualized, or $875,000 for 6 months). Gap: Approximately $3,937,500 for the full 12-month period versus $875,000 for the 6-month period, a difference of approximately $3,062,500.

(3) Concurrency Implications: The interaction between garden leave duration and non-compete duration is critical:

• Under NTP's Draft 2 proposal (18-month non-compete, 6-month concurrent garden leave): effective post-garden-leave non-compete = 12 months.

• Under H&L's proposal (12-month non-compete, 12-month concurrent garden leave): effective post-garden-leave non-compete = 0 months. Harding would be free to join a competitor immediately upon the expiration of the garden leave period with no additional restriction.

• Under a compromise of 15-month non-compete with 12-month concurrent garden leave: effective post-garden-leave non-compete = 3 months.

Assessment. The garden leave provision is the most structurally significant of the restrictive covenant issues, because it determines the practical effectiveness of the non-compete. Under H&L's proposal, the combination of a 12-month non-compete and 12-month concurrent garden leave would eliminate any meaningful post-departure restriction on Harding's competitive activity: he would continue to receive full compensation from NTP during the garden leave period, but would be free to join a competitor on the very first day after the garden leave expires.

From NTP's perspective, the purpose of the non-compete is to provide a buffer period after the Executive's departure during which the Company can implement strategic changes, reassign customer relationships, and mitigate the competitive risk of the Executive's departure. A non-compete with zero effective post-garden-leave restriction would not serve this purpose. Accordingly, I recommend that any resolution of the garden leave provision must result in an effective post-garden-leave non-compete period of at least six months — which could be achieved through various combinations of non-compete and garden leave durations (e.g., 18-month non-compete with 12-month garden leave, or 15-month non-compete with 9-month garden leave).

The compensation component of the garden leave is also significant. Including target bonus in the garden leave compensation would substantially increase the cost of the garden leave to NTP — from $875,000 (6 months of base salary) under Draft 2 to approximately $4,812,500 (12 months of full compensation) under H&L's proposal. If a longer garden leave is conceded, I recommend limiting compensation to base salary only, which is the prevailing approach in the UK (where garden leave is more common) and is consistent with the principle that garden leave is a protective mechanism for the employer, not an economic benefit for the employee.

IV.E. Non-Solicitation Scope (Section 9.3)

H&L Comment. H&L demands that the non-solicitation covenant be limited to the non-solicitation of employees only. H&L rejects the customer non-solicitation clause included in Draft 2.

Draft 2 Position. Draft 2 includes a twenty-four (24) month post-termination non-solicitation covenant covering both employees and customers of NTP and its subsidiaries. The employee non-solicitation prohibits the Executive from soliciting, recruiting, or inducing any employee of NTP to terminate their employment. The customer non-solicitation prohibits the Executive from soliciting, diverting, or taking away any customer or prospective customer of NTP with whom the Executive had a material business relationship during the last 24 months of his employment.

H&L Argument. H&L contends that the customer non-solicitation clause is unnecessary in light of the non-compete — if Harding is prohibited from working for a competitor, the question of customer solicitation is moot. H&L further argues that the customer non-solicitation is overbroad for a CEO who will have relationships with thousands of enterprise customers across multiple geographies, and that the practical effect of the clause would be to prohibit Harding from having any business contact with a vast universe of companies, even if he were to join a non-competing enterprise.

Assessment. Customer non-solicitation clauses are standard in C-suite employment agreements and are generally viewed as a reasonable and enforceable protection for the employer's business relationships. However, H&L's argument has some practical force in this context: if the non-compete is sufficiently robust in scope and duration, the incremental protective value of a separate customer non-solicitation may be limited, because the non-compete would already prohibit Harding from working in a capacity where he could meaningfully solicit NTP's customers for a competing product or service.

I recommend that the customer non-solicitation be considered as a potential negotiating chip. If conceding the customer non-solicitation would facilitate a resolution of the non-compete duration and garden leave issues on terms favorable to NTP (e.g., an 18-month non-compete with a meaningful post-garden-leave restriction period), the trade could be advantageous. Conversely, if the non-compete is significantly shortened (e.g., to 12 months with substantial concurrent garden leave), the customer non-solicitation becomes more important as a supplementary protection.

IV.F. Non-Solicitation Duration (Section 9.3)

H&L Comment. H&L proposes an eighteen (18) month non-solicitation period, limited to employee non-solicitation only.

Draft 2 Position. Draft 2 provides for a twenty-four (24) month non-solicitation period covering both employees and customers.

Gap. Six (6) months on duration, plus the scope difference discussed in Section IV.E above.

Assessment. The duration gap is modest and likely resolvable. If the customer non-solicitation is conceded (per the analysis in Section IV.E), a compromise on employee non-solicitation duration of 18 or 21 months would be reasonable and within the range of market practice for comparable CEO agreements.

IV.G. Enforceability Concerns — New York Law (Section 9 Generally)

H&L Redline Comment. H&L includes a general comment in its redline noting that the restrictive covenant provisions as drafted may face enforceability challenges under New York law. The comment cites the reasonableness analysis applicable to non-compete agreements under New York case law (referencing Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382 (1999), among other authorities) and notes the pending New York state legislation that would impose a comprehensive ban on non-compete agreements (Senate Bill S3100A, as amended). H&L suggests that these enforceability risks should inform NTP's approach to the duration, geographic scope, and activity scope of the restrictive covenants, and that a more narrowly tailored set of restrictions would be more likely to be upheld if challenged.

Draft 2 Position. The Agreement is governed by New York law (Section 11.1). Section 9 includes a severability clause and a "blue-pencil" provision, which authorizes a court to modify (rather than void) any restrictive covenant found to be unreasonable in scope, duration, or geographic extent, so as to render it enforceable to the maximum extent permitted by law.

Internal Assessment. Devon Archer's June 6 memorandum on New York non-compete enforceability reached the following conclusions:

(i) A 24-month worldwide non-compete, as included in Draft 1, would likely face a significant enforceability challenge under New York law, particularly if Harding were to relocate to a jurisdiction outside North America and Western Europe.

(ii) An 18-month non-compete limited to North America and Western Europe, with a narrower activity definition, is more defensible but is not without risk. New York courts apply a case-by-case reasonableness analysis that considers the totality of the circumstances, including the nature of the executive's role, the employer's legitimate protectable interests, the geographic scope of the restriction, and the hardship imposed on the executive. While 18 months is within the range that New York courts have upheld for senior executives, it is at the longer end of that range, and a court could conclude that 12 or 15 months is more appropriate under the circumstances.

(iii) The pending New York non-compete ban legislation (S3100A) adds further uncertainty. If enacted in its current form, the legislation would prohibit non-compete agreements for employees earning below a specified threshold (currently proposed at $250,000 annually, though amendments have been proposed to raise this figure). Harding's compensation would almost certainly exceed any enacted threshold, but the legislative environment signals a general hostility toward non-competes that could influence judicial attitudes even for high-earning executives.

(iv) Our internal fallback recommendation has been to accept 18 months, North America and Western Europe, with a narrower activity definition, paired with a 6-month garden leave period running concurrently with the first 6 months of the non-compete. This approach provides a meaningful effective non-compete period (12 months post-garden-leave) while staying within the range of enforceability under current New York law.

Assessment. H&L's comment regarding enforceability has legal merit and should not be dismissed. While it is clearly self-serving (designed to support Harding's negotiating position for shorter and narrower restrictive covenants), the underlying legal analysis is consistent with our own internal assessment. The enforceability concerns reinforce the need for a pragmatic approach to the restrictive covenant terms and support the view that modest concessions on duration or scope — if made in exchange for meaningful progress on the CIC issues or other terms — would not materially compromise NTP's interests.

IV.H. Additional Restrictive Covenant Comments (3 Comments)

H&L's redline includes three additional comments on Section 9 that are categorized as critical due to their location but are resolvable with modest drafting adjustments:

(i) Remedies Clause (Section 9.5). H&L resists the agreed-upon damages provision in Section 9.5, which provides that the Executive agrees that any breach of the restrictive covenants shall entitle NTP to liquidated damages equal to 12 months of base salary, in addition to any equitable relief. H&L's position is that injunctive relief should be the sole remedy available to NTP for a breach of the restrictive covenants, and that the liquidated damages provision is punitive and unenforceable under New York law. This is a legitimate drafting issue — New York courts scrutinize liquidated damages provisions for reasonableness and will not enforce a provision that constitutes a penalty. I recommend removing the liquidated damages provision and relying instead on the availability of injunctive relief (which H&L does not contest) and actual damages (which NTP would retain the right to seek in any event).

(ii) Non-Disparagement Carve-Outs (Section 9.4). H&L requests broader carve-outs to the mutual non-disparagement provision, permitting truthful statements made (a) in the course of legal proceedings, (b) in response to compulsory process, (c) in communications with government regulators, and (d) in private communications with personal legal counsel and immediate family members. Draft 2 includes carve-outs for legal proceedings and compulsory process only. The additional carve-outs requested by H&L are reasonable and consistent with market practice. I recommend acceptance.

(iii) Definition of "Competitive Activity" (Section 9.1(c)). H&L proposes minor wording changes to the definition of "Competitive Activity" in addition to the structural changes discussed in Section IV.C above — specifically, the replacement of "derive" with "generate" in the revenue-based test, and the addition of "directly or indirectly" as a modifier to the prohibition. These are stylistic preferences with no substantive impact and can be accepted.

Assessment. All three of these comments are resolvable through standard drafting adjustments and should be addressed in the next draft.

V. Category B — Non-Material / Readily Resolvable Open Issues (23 Comments)

The 23 Category B comments are summarized below by section. None of these issues, individually or in the aggregate, should impede a final agreement, and I recommend that all of them be addressed in the next draft of the Agreement regardless of the status of the Category C issues, as doing so will demonstrate good faith and further narrow the universe of open items.

V.A. Section 2 — Term and Duties (3 Comments)

Comment 1: Notice Period for Non-Renewal (Section 2.1). H&L requests that the notice period for NTP's election not to renew the Agreement at the end of the initial term or any renewal term be increased to 180 days, while the Executive's notice period for non-renewal be set at 90 days. Draft 2 currently provides for 180 days' notice from either party. The asymmetric notice request is not unreasonable — it reflects the practical reality that an executive needs more lead time to plan for a departure initiated by the company than the company needs to plan for a voluntary departure by the executive. Recommend acceptance of the asymmetric notice periods (180 days from NTP, 90 days from Executive).

Comment 2: Outside Board Service (Section 2.3). H&L requests express permission for the Executive to serve on up to two (2) for-profit outside board seats, without the requirement of prior Board approval. Draft 2 permits outside board service "with the prior written approval of the Board, which shall not be unreasonably withheld." The parties' positions are close. I recommend a compromise under which Harding would be pre-approved for up to two (2) for-profit outside board seats, subject to an initial conflicts review by the General Counsel and the Nominating and Governance Committee. Additional board seats beyond two, or service on the board of any company that could present a conflict of interest, would require prior Board approval.

Comment 3: Reporting Structure (Section 2.2). H&L requests a clarification confirming that the CEO reports directly to the full Board of Directors and not to the Chair of the Board individually. This clarification is acceptable to NTP and consistent with the existing governance framework. The Chair of the Board (currently Sir Alistair Kemble; successor to be appointed) serves as the leader of the Board but does not have an executive function, and the CEO's reporting relationship is properly to the Board as a whole. Recommend acceptance of the clarifying language.

V.B. Section 3 — Base Salary (1 Comment)

Comment 4: Annual Review Floor (Section 3.1). H&L requests the addition of an express statement that the Executive's base salary shall not be reduced below the initial level of $1,750,000 absent the Executive's written consent. Draft 2 provides for annual review by the Remuneration Committee but does not include an express floor. A base salary floor is a standard market provision in CEO employment agreements and is consistent with the NTP Remuneration Committee's practice. I recommend acceptance.

V.C. Section 4 — Annual Incentive (3 Comments)

Comment 5: First-Year Guaranteed Minimum Bonus (Section 4.1). H&L requests a guaranteed minimum bonus of 100% of target ($3,062,500) for the first partial fiscal year of employment. Draft 2 provides a pro-rata target bonus for the first year, payable only if the Executive remains employed through the end of the fiscal year. The difference is that H&L's proposal guarantees the full target amount regardless of actual performance, while Draft 2 ties the first-year bonus to pro-rata target performance with a continued employment condition. This is a meaningful economic request — a guaranteed minimum bonus of $3,062,500 for the first partial year represents a significant commitment. However, first-year guaranteed bonuses are not uncommon for incoming CEOs, particularly where the executive joins mid-year and has limited ability to influence performance outcomes during the initial period. I recommend a compromise: a guaranteed minimum bonus of 75% of pro-rata target for the first partial fiscal year, payable regardless of actual performance, with the actual bonus for the first year being the greater of (i) the guaranteed minimum and (ii) actual performance.

Comment 6: Bonus Payment Timing (Section 4.2). H&L requests that annual incentive bonuses be paid within 60 days following the close of the fiscal year. Draft 2 provides for payment within 75 days. This is a modest timing difference with no material economic impact. I recommend acceptance of the 60-day payment window, subject to the caveat that the Remuneration Committee must certify performance results before bonuses are paid.

Comment 7: Bonus Discretion Language (Section 4.1). H&L resists the language in Draft 2 granting the Remuneration Committee "sole discretion" to determine the level of bonus achievement, and requests the addition of a "good faith" qualifier. This is a reasonable request — the "good faith" qualifier does not materially limit the Remuneration Committee's discretion but provides the Executive with a standard of review in the event of a dispute. Recommend acceptance.

V.D. Section 5 — Equity Awards (4 Comments)

Comment 8: Sign-On RSU Vesting on Non-CIC Termination Without Cause (Section 5.1(a)). H&L requests full acceleration of unvested sign-on RSUs upon any termination without cause, not limited to CIC termination events. Draft 2 provides for 12 months of accelerated vesting of sign-on RSUs on a non-CIC termination without cause, with the remainder forfeited. The gap is between full acceleration and 12 months of accelerated vesting. This issue relates to the broader non-CIC severance discussion addressed in Section V.E below. I recommend that this issue be addressed in the context of the overall non-CIC severance package rather than in isolation.

Comment 9: Sign-On PSU Performance Metrics (Section 5.1(b)). H&L requests that the specific performance metrics for the sign-on PSU grant — including TSR hurdles and revenue growth targets — be negotiated and set forth in an exhibit to the Agreement, rather than being left to the Remuneration Committee's discretion. Draft 2 provides that metrics will be "determined by the Remuneration Committee in its discretion." This is a reasonable request, and I recommend agreement to negotiate an exhibit containing defined metrics. The specific metrics should be coordinated with Claire Whitfield-Nakamura and the Remuneration Committee, but a framework of 50% relative TSR (against the S&P Telecom Select Industry Index) and 50% revenue growth (against budget) would be consistent with NTP's existing LTI design.

Comment 10: Annual LTI Grant Timing (Section 5.2). H&L requests that the first annual LTI grant be made within 30 days of Harding's start date. Draft 2 provides that the first annual LTI grant will be made "at such time as other senior executives receive annual grants" — which would place the first grant in February 2025, approximately five months after the proposed October 1, 2024 start date. The concern is that a five-month delay in the first annual LTI grant would leave Harding without a meaningful ongoing equity stake during the initial period of his tenure. I recommend a compromise: the first annual LTI grant will be made within 60 days of the start date, with subsequent annual grants following the normal cycle.

Comment 11: Anti-Dilution (Section 5.3). H&L requests the inclusion of customary anti-dilution adjustment provisions to protect against the dilutive effect of stock splits, recapitalizations, and similar corporate events on the value and number of Harding's equity awards. This is a standard provision that is included in virtually all equity award agreements and is already addressed in the NTP 2022 Omnibus Incentive Plan. I recommend acceptance of the express anti-dilution language in the Agreement, with a cross-reference to the adjustment provisions of the Plan.

I note for context that the equity pool remaining under the NTP 2022 Omnibus Incentive Plan is 14,200,000 shares. Harding's total sign-on equity ($8,000,000 in RSUs + $6,400,000 in PSUs = $14,400,000 sign-on, plus first-year LTI of $9,000,000, for a total of approximately $23,400,000) translates to approximately 1,474,480 shares at the current price of $15.87 per share, representing approximately 0.21% of NTP's 699,000,000 outstanding shares. No plan amendment is required to accommodate these awards.

V.E. Section 6 — Non-CIC Termination and Severance (5 Comments)

Comment 12: Non-CIC Severance Multiplier (Section 6.1). H&L continues to request a non-CIC severance multiplier of 2.5x (base salary + target bonus), yielding $12,031,250. Draft 2 provides for 2x, yielding $9,625,000. The gap is $2,406,250.

While this is a significant economic issue, it has received less attention in the negotiations than the CIC provisions because Harding has not identified it as a "walk-away" item and has focused his negotiating capital on the CIC terms. It is unlikely that this issue alone would derail the negotiations if the CIC and restrictive covenant issues are resolved. I recommend maintaining the 2x position as the starting point but flagging this as a potential concession item in a package deal — for example, an increase to 2.25x ($10,828,125) in exchange for Harding's acceptance of the best-net cutback on Section 280G.

Comment 13: Full Equity Acceleration on Non-CIC Without-Cause Termination (Section 6.2). H&L demands full acceleration of all unvested equity awards upon a non-CIC termination without cause. Draft 2 provides for 12 months of accelerated vesting. Full acceleration on a non-CIC termination would be unusual and would significantly increase the cost of a termination without cause. I recommend holding the 12-month acceleration position, but this issue could be part of a broader package discussion.

Comment 14: COBRA Continuation (Section 6.3). H&L requests 24 months of COBRA continuation coverage. Draft 2 provides 18 months. The gap is 6 months of additional coverage, with an estimated incremental cost of approximately $17,500 to $25,000. I recommend acceptance of 24 months as a low-cost concession.

Comment 15: Pro-Rata Bonus Calculation (Section 6.4). The parties have agreed in principle that the Executive will receive a pro-rata annual incentive bonus for the year of termination upon a non-CIC termination without cause or resignation for good reason. H&L's remaining comment relates to the methodology for calculating the pro-rata bonus — specifically, whether the bonus should be pro-rated based on actual performance or target performance. I r

MEMORANDUM
PRIVILEGED & CONFIDENTIAL / ATTORNEY WORK PRODUCT
TO: Renata Vasquez, Partner
FROM: James Underwood, Associate
DATE: August 21, 2024
RE: Analysis of Hargrove & Liddell LLP Redline of Draft 2 Executive Employment Agreement — Remaining Open Issues
MATTER: Northgate Telecommunications PLC — CEO Employment Negotiation (Marcus Elliot Harding) — 1022-00004
Right-click to update Table of Contents
I. Executive Summary
This memorandum analyzes the forty-two (42) comments contained in the redline of Draft 2 of the Executive Employment Agreement (the "Agreement") between Northgate Telecommunications US, Inc. ("NTP US") and Marcus Elliot Harding ("Harding" or the "Executive"), as delivered by Hargrove & Liddell LLP ("H&L"), counsel for Harding, on August 19, 2024 (the "Draft 2 Redline"). Draft 2 of the Agreement was circulated to H&L on August 12, 2024, and incorporated Northgate Telecommunications PLC's ("NTP" or "Northgate" or the "Company") responses to the eighty-eight (88) comments H&L had raised in its redline of Draft 1, received on August 5, 2024.
The reduction from 88 comments in the Draft 1 Redline to 42 comments in the Draft 2 Redline reflects meaningful progress on non-material and mid-tier issues throughout the course of the negotiation. Nonetheless, the two core impasses that have been present since the outset of these negotiations remain entirely unresolved:
(1) Change in Control Severance Provisions — Section 7 of the Agreement; and
(2) Restrictive Covenant Obligations — Section 9 of the Agreement.
Of the 42 remaining H&L comments, the distribution is as follows:
• Eight (8) comments relate to the change in control ("CIC") provisions set forth in Section 7;
• Eleven (11) comments relate to the restrictive covenant provisions set forth in Section 9; and
• Twenty-three (23) comments relate to other sections of the Agreement that are either non-material in nature or readily resolvable through modest concessions, clarifications, or minor drafting adjustments.
Recommendation. The 23 non-material and readily resolvable comments (designated as "Category B" below) can be addressed in a revised draft within two to three business days and should not, in my assessment, present any impediment to reaching a final agreement. The 19 comments touching Sections 7 and 9 (designated as "Category C" below), however, represent fundamental disagreements on both economic terms and structural governance principles. These require either Board-level resolution by the Remuneration Committee or, more likely, a principals meeting between Board representatives, NTP management, and Harding and his counsel, Victoria Hargrove.
This memorandum provides a detailed analysis of each category of open issues, quantifies the financial gaps where applicable, and offers recommendations for next steps. It should be read in conjunction with the supporting memoranda cross-referenced herein, including Devon Archer's June 6 New York non-compete analysis, my own June 8 restrictive covenant memorandum, Devon Archer's July 25 Section 280G detailed analysis, and my August 7 analysis of the Draft 1 Redline.
II. Categorization of Remaining Comments
For purposes of this memorandum, I have organized the 42 remaining H&L comments into three categories, consistent with the framework employed in my August 7 analysis of the Draft 1 Redline:
Category A — Resolved or Accepted (For Tracking Completeness). Draft 2 resolved 46 of the 88 original comments raised in the Draft 1 Redline, either by accepting H&L's proposed language in full or by reaching compromise language that H&L has not challenged further. These 46 comments are no longer open and are not analyzed in this memorandum. They are included, however, in the comment-by-comment index appended hereto as Appendix A for purposes of tracking completeness and to maintain a comprehensive record of the negotiation history for the file.
Category B — Non-Material / Easily Resolvable (23 Comments). This category encompasses issues where the parties' positions are sufficiently close that resolution requires only minor drafting adjustments, modest economic concessions, or clarifications to existing language. None of the Category B issues, individually or in the aggregate, should present a meaningful obstacle to the execution of a final agreement. I address these in summary fashion in Section V below.
Category C — Critical / Board-Level (19 Comments). This category encompasses the 8 comments directed at the CIC provisions of Section 7 and the 11 comments directed at the restrictive covenant provisions of Section 9. On each of these issues, the parties remain fundamentally apart. The positions are, in several instances, binary in nature — meaning that no middle ground has been identified, and one side or the other must yield. I address these in detail in Sections III and IV below.
The table below provides a high-level overview of the comment distribution:
III. Category C — Critical Open Issues: Change in Control Provisions (Section 7)
The eight open H&L comments on Section 7 are analyzed below in order of significance. The first three — the Board turnover trigger (Section 7.1(d)), the CIC severance multiplier (Section 7.2(a)), and the Section 280G tax treatment (Section 7.2(c)) — represent the most intractable points of disagreement in the entire negotiation. The remaining five comments, while categorized as critical because they relate to Section 7, are either negotiable in principle or resolvable through standard compromise language.
III.A. CIC Definition — Board Turnover Trigger (Section 7.1(d))
H&L Comment. Harding continues to demand the inclusion of a fourth trigger in the definition of "Change in Control" — specifically, a change in the composition of the Board of Directors of NTP whereby a majority of the directors then serving are replaced within any twelve (12) month period by directors whose appointment or nomination was not endorsed by a majority of the directors in office immediately prior to the commencement of such twelve-month period (the "Board Turnover Trigger").
Draft 2 Position. The NTP definition of "Change in Control" in Section 7.1 of Draft 2 includes three triggers only:
(a) the acquisition by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of more than fifty percent (50%) of the combined voting power of the outstanding voting securities of NTP;
(b) a merger, consolidation, or similar business combination transaction involving NTP, following which the shareholders of NTP immediately prior to such transaction hold less than fifty percent (50%) of the combined voting power of the surviving or resulting entity; and
(c) a sale, lease, exchange, or other transfer of all or substantially all of the assets of NTP and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions.
This three-trigger formulation is consistent with the definition approved by the Remuneration Committee and reflects the standard approach taken in comparable UK-listed, US-operating company executive agreements that we have reviewed.
H&L Rationale. H&L's redline marginalia explain that Harding views Board turnover as a proxy for a de facto change in strategic direction of the Company, even absent a change in share ownership or a formal business combination. Harding's concern is that an activist campaign resulting in the replacement of a majority of directors could fundamentally alter the strategic direction of the Company and the executive leadership team, effectively creating a CIC scenario without triggering any of the three conventional definitions. H&L further notes that Harding's existing employment agreement with Marlowe Asset Management Digital Holdings ("Marlowe Asset Management") includes a Board turnover trigger, and that the omission of such a trigger from the NTP Agreement would represent a diminution of Harding's existing protections.
Northgate / Board Position. The Board, through Elaine Whitford's August 9, 2024 email conveying the direction of Geoffrey Stanton (Remuneration Committee Chair) and the Remuneration Committee as a whole, has explicitly rejected the inclusion of a Board Turnover Trigger. The Board's position is that:
(i) Board turnover triggers are inconsistent with the principles of orderly Board refreshment enshrined in the UK Corporate Governance Code 2024 (the "UKCGC"), which contemplates regular Board renewal and diversity of Board composition as hallmarks of good governance;
(ii) inclusion of such a trigger could inadvertently penalize routine succession planning, annual Board refreshment, or compliance with the UKCGC's recommendations regarding tenure limits for non-executive directors;
(iii) the trigger could be activated by entirely benign governance changes (e.g., a planned refreshment cycle coinciding with the retirement of several long-serving directors), creating CIC severance obligations without any actual change in ownership or strategic direction; and
(iv) the inclusion of a Board turnover trigger is increasingly uncommon in new public-company CEO agreements, and its presence would attract scrutiny from institutional shareholders and proxy advisory firms.
Analysis. Board turnover triggers were more prevalent in US executive compensation practice during the 2000s and early 2010s, but their inclusion in new agreements has declined significantly over the past decade. A review of the most recent proxy filings of the 25 public telecommunications companies in the S&P 500 and FTSE 100 reveals that only three (3) include a Board turnover trigger in their CEO employment agreements — and in each case, the trigger predates 2015 and was grandfathered from prior agreements. Neither ISS nor Tarrant Partners LLC requires or recommends the inclusion of Board turnover triggers, and their "best practices" guidance is silent on the issue, suggesting it is not a material consideration in proxy advisory evaluations. The UKCGC, as noted, contemplates orderly Board refreshment as a positive governance practice, and the inclusion of a trigger that could penalize such refreshment is inconsistent with the governance framework to which NTP is subject as a London-listed company.
Assessment. This remains a binary disagreement. No middle ground has been identified. Harding has identified the Board Turnover Trigger as "non-negotiable" in H&L's redline commentary. The Board has explicitly rejected it. One side must yield, and at present neither side has shown any willingness to do so. I note that in Negotiation Call #3 (July 2, 2024), Victoria Hargrove stated that the Board Turnover Trigger was a "personal priority" for Harding based on his experience at Marlowe Asset Management, where an activist campaign in 2022 resulted in significant Board disruption. This personal dimension may make it particularly difficult to resolve through economic concessions alone.
III.B. CIC Severance Multiplier (Section 7.2(a))
H&L Comment. Harding demands a CIC severance multiplier of three times (3x) the sum of his annual base salary and target annual incentive bonus, yielding a lump sum CIC severance payment of:
3 × ($1,750,000 + $3,062,500) = 3 × $4,812,500 = $14,437,500
Draft 2 Position. NTP's Draft 2 provides for a CIC severance multiplier of two and one-half times (2.5x) the sum of annual base salary and target annual incentive bonus, yielding:
2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250
Gap. The financial gap between the parties' positions is:
$14,437,500 − $12,031,250 = $2,406,250
Context. H&L's position is grounded in two related arguments. First, Harding's current employment agreement with Marlowe Asset Management Digital Holdings provides for a 3x CIC severance multiplier, and H&L contends that anything less than parity with Harding's existing package creates a "step-down" that is unreasonable given the career risk Harding assumes in departing a known role for a new position. Second, H&L argues that the 3x multiplier is within the range of market practice for CEO-level CIC severance at companies of comparable size and complexity, citing agreements at three comparator companies (Meridian Communications Group, Apex Global Networks, and Triton Digital Infrastructure Partners — although H&L did not provide specific terms for comparison).
Northgate Position. The Remuneration Committee — comprising Geoffrey Stanton (Chair), Dame Philippa Thornton-Hale, Lucinda Farrow, and Dr. Tomás Herrera — has directed that the maximum CIC severance multiplier is 2.5x. This ceiling was established following a comprehensive market benchmarking analysis conducted by Veltrano Proxy Advisors (Sandra Kolb, Managing Director) and an internal review by NTP's Head of Total Rewards, Claire Whitfield-Nakamura. The Remuneration Committee's rationale for the 2.5x ceiling includes the following considerations:
(i) Veltrano Proxy Advisors advised that a 3x CIC multiplier, particularly when combined with a full Section 280G gross-up (discussed in Section III.C below), would likely trigger a negative say-on-pay recommendation from ISS. This assessment is consistent with ISS's published policy guidelines, which flag 3x or greater CIC multiples as a potential "problematic pay practice" warranting closer scrutiny.
(ii) NTP received 87.4% say-on-pay support at the April 18, 2024 Annual General Meeting — a strong result that the Board is reluctant to jeopardize. A decline in say-on-pay support below 80% would trigger mandatory Board engagement with dissenting shareholders under NTP's stated governance commitments and would be perceived negatively by the institutional investor community.
(iii) The 2.5x multiplier is consistent with the terms offered to NTP's other Named Executive Officers, and the Remuneration Committee believes that a 3x multiplier for the incoming CEO would create internal equity concerns and set a precedent that could increase costs across the executive team.
(iv) The Remuneration Committee has emphasized that the total compensation package being offered to Harding — including base salary of $1,750,000, target annual incentive of $3,062,500 (175% of base), annual long-term incentive awards valued at $9,000,000, and sign-on equity of approximately $15,400,000 — is, in the aggregate, at or above the 75th percentile of the comparator group, and that the 2.5x CIC multiplier should be viewed in the context of this overall package.
Note on Hargrove's July 12, 2024 Proposal. During Negotiation Call #4 on July 12, 2024, Victoria Hargrove floated a potential compromise of 2.75x ($13,234,375), which would have split the difference between the parties' positions. You took this proposal under advisement but did not accept it. When you subsequently presented it to the Remuneration Committee, the Committee declined to approve the 2.75x figure. Geoffrey Stanton's response, conveyed through Elaine Whitford, was that the Committee "has set 2.5x as the ceiling and is not prepared to move above it."
Assessment. The $2,406,250 gap remains fully open. The Board has set 2.5x as its firm ceiling, and Harding has consistently maintained his demand for 3x. Hargrove's 2.75x compromise proposal was the only attempt to bridge this gap, and it was rejected by the Remuneration Committee. Unless the Board is prepared to revisit its position — which would require a formal Remuneration Committee meeting and a revised recommendation from Veltrano — this issue cannot be resolved at the working level.
III.C. Section 280G Tax Treatment (Section 7.2(c))
H&L Comment. Harding demands a full Section 280G excise tax gross-up — meaning that in the event any payments or benefits provided under the Agreement constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code and are subject to the 20% excise tax imposed by Section 4999, NTP would be obligated to make an additional payment to Harding in an amount sufficient to place him in the same after-tax position as if no excise tax had been imposed.
Draft 2 Position. NTP's Draft 2 provides for a "best-net" safe harbor cutback — meaning that if any payments or benefits would constitute "excess parachute payments" under Section 280G, such payments would be reduced to the safe harbor limit (i.e., three times Harding's "base amount" minus one dollar) if, and only if, such reduction would result in a greater after-tax benefit to the Executive than receiving the full payment and bearing the excise tax. Under this approach, the Executive receives whichever treatment — cutback or full payment plus excise tax — yields the better after-tax result.
Financial Analysis. The following analysis is based on Devon Archer's July 25 memorandum and the supporting calculations prepared by Dr. Rachel Whitmore of Whitmore Hobson LLC:
• Harding's Section 280G Base Amount: $7,840,000 (calculated as the average of Harding's annualized W-2 compensation at Marlowe Asset Management Digital Holdings for the five taxable years preceding the year of the CIC, covering 2019 through 2023).
• Safe Harbor Limit: (3 × $7,840,000) − $1 = $23,519,999. Parachute payments at or below this amount would not trigger the excise tax.
• Estimated Total Parachute Payments Under Harding's 3x Proposal: Approximately $38,200,000, comprising the 3x cash severance ($14,437,500), the value of accelerated equity ($18,400,000 estimated), benefit continuation ($1,162,500 estimated), and other payments that may be characterized as parachute payments under Section 280G.
• Estimated Excess Parachute Payment: $38,200,000 − $7,840,000 = $30,360,000.
• Estimated Excise Tax (20%): $30,360,000 × 0.20 = $6,072,000.
• Estimated Gross-Up Cost to NTP: $4,200,000 to $6,800,000. The range reflects uncertainty in the final parachute payment calculations (which depend on actual equity values at the time of the CIC and other variables), the interaction with applicable federal and state marginal tax rates, and the "gross-up on the gross-up" effect (i.e., the gross-up payment itself is taxable income, requiring an iterative calculation).
Whitmore Hobson Analysis. Dr. Rachel Whitmore's detailed best-net analysis demonstrates that the cutback and full-payment-plus-excise-tax outcomes are roughly equivalent for Harding under a range of plausible CIC scenarios. Under most modeled scenarios, the cutback to the safe harbor amount actually yields a slightly better after-tax result for Harding than receiving the full payment and bearing the excise tax, because the excise tax rate (20%) applies to the gross excess parachute payment while the benefit of the additional payment is eroded by combined federal, state, and local income taxes. This means that the gross-up demand is largely one of principle and optics for Harding, rather than one of genuine economic necessity. H&L's insistence on the gross-up appears to reflect Harding's view that a CEO of his stature should not bear the risk of adverse tax consequences arising from a CIC event over which he has no control.
ISS / Veltrano Guidance. Tax gross-ups on excess parachute payments are classified as a "problematic pay practice" under current ISS policy guidelines. ISS's position is that gross-ups represent a transfer of economic risk from the executive to shareholders and are inconsistent with the principle that executive compensation should align executive and shareholder interests. Veltrano Proxy Advisors (Sandra Kolb) confirmed in a July 30, 2024 written advisory that the inclusion of a Section 280G gross-up would weigh heavily and negatively in any say-on-pay assessment, and that the combination of a 3x CIC multiplier with a full gross-up would, in Veltrano's view, "virtually ensure" a negative ISS recommendation.
Assessment. The Board has firmly rejected the gross-up demand. H&L's position appears equally entrenched. This is another binary disagreement with no middle ground identified to date. The Whitmore Hobson analysis may provide a useful framework for a principals-level discussion, as it demonstrates that Harding's actual economic exposure under the best-net cutback approach is minimal. However, if Harding's demand is driven by principle rather than economics, the financial analysis alone may not be sufficient to resolve the issue.
III.D. CIC Equity Acceleration — PSU Vesting Level (Section 7.2(b))
H&L Comment. H&L demands that, upon a qualifying CIC termination (i.e., a termination without cause or resignation for good reason within 24 months following a CIC), all unvested performance stock units ("PSUs") should vest at the target performance level (100% of target), regardless of actual performance as of the date of termination.
Draft 2 Position. Draft 2 provides that, upon a qualifying CIC termination, PSUs vest at the level of actual performance achieved through the date of termination, as determined by the Remuneration Committee in good faith, or at target if the applicable performance period has not yet commenced as of the date of termination. This approach ensures that PSU vesting reflects actual Company performance to the extent measurable, while providing a reasonable default for grants where performance data is not yet available.
Gap Analysis. The difference between target vesting of the full PSU grant and actual or pro-rata performance vesting is inherently variable, depending on actual Company performance at the time of a hypothetical CIC event. However, the potential financial impact is significant given the magnitude of Harding's PSU awards:
• Sign-On PSU Grant: $6,400,000 (representing approximately 403,275 shares at the current share price of $15.87). If actual performance were at 50% of target at the time of CIC, the difference between target vesting and actual vesting would be approximately $3,200,000.
• Annual LTI PSU Component: $5,400,000 per year (representing 60% of the $9,000,000 annual LTI, with the remaining 40% allocated to restricted stock units ("RSUs")). The annual PSU grant is approximately 340,264 shares per year at the current share price.
• Under a scenario in which a CIC occurs 18 months into Harding's tenure (during the first PSU performance period), with actual performance at 75% of target, the incremental value of target vesting versus actual vesting could be approximately $2,950,000.
Assessment. This issue is negotiable in principle and represents a lower-priority item for the Board. The Remuneration Committee's primary concern regarding the CIC provisions is focused on the multiplier and the gross-up, not on the PSU vesting mechanics. I believe this issue could be conceded as part of a broader package deal in which the principal CIC multiplier and gross-up issues are resolved in Northgate's favor. If the Board were to accept target PSU vesting in exchange for Harding's acceptance of the 2.5x multiplier and best-net cutback, the economic trade would likely be favorable to NTP under most scenarios.
III.E. CIC Benefit Continuation Period (Section 7.2(d))
H&L Comment. H&L demands thirty-six (36) months of continued health, dental, and vision benefit coverage following a qualifying CIC termination, at NTP's expense and at the same coverage levels and contribution rates as in effect immediately prior to the termination.
Draft 2 Position. Draft 2 provides for twenty-four (24) months of COBRA continuation coverage at NTP's expense, plus a $50,000 lump sum payment for outplacement services.
Gap. The gap is twelve (12) months of additional benefit continuation. The estimated incremental cost to NTP of providing the additional 12 months of benefits is approximately $35,000 to $50,000, depending on the applicable plan costs and Harding's elected coverage level at the time of a hypothetical CIC termination.
Assessment. This is a relatively modest financial issue in the context of the overall negotiation. The incremental cost represents a small fraction of the total CIC severance package under either party's proposal. I recommend that this issue be available as a concession item if needed to facilitate resolution of the more significant CIC issues. Conceding 36 months of benefit continuation in exchange for meaningful progress on the multiplier or gross-up would represent a highly favorable trade for NTP.
III.F. Additional CIC Comments (3 Comments)
H&L's redline includes three additional comments on Section 7 that, while categorized as critical due to their location in the CIC provisions, are relatively minor in nature and should be resolvable through standard compromise language:
(i) Timing of CIC Payments. H&L requests that CIC severance payments be made in a lump sum within 10 business days of the effective date of the Executive's release of claims, rather than the 30 business days provided in Draft 2. The difference is primarily a matter of timing, not amount. A compromise of 15 business days following the release effective date would be reasonable and consistent with market practice.
(ii) Release Execution Period. H&L requests that the Executive be given 60 days (rather than the 45 days provided in Draft 2) to execute the release of claims required as a condition to the receipt of CIC severance benefits. While a 45-day period is standard in many executive agreements, the 60-day period requested by H&L is not uncommon and, when combined with a 7-day revocation period, would result in a maximum delay of 67 days before payments commence. I recommend accepting the 60-day period, as it is within the range of market practice and is unlikely to present any practical issue.
(iii) Form of Separation Agreement Exhibit. H&L has requested that the form of the separation agreement and release be attached to the Agreement as an exhibit and negotiated concurrently with the Agreement, rather than being left to post-termination negotiation. This is a reasonable request and is increasingly the standard approach in CEO agreements, as it provides certainty to both parties. I recommend accepting this request and circulating a draft separation agreement exhibit for H&L's review.
Assessment. All three of these comments are resolvable and should not present any obstacle to a final agreement. I recommend addressing them in the next draft regardless of the status of the principal CIC issues, as doing so demonstrates good faith and narrows the open item count.
IV. Category C — Critical Open Issues: Restrictive Covenant Provisions (Section 9)
The eleven open H&L comments on Section 9 are analyzed below. While the restrictive covenant issues involve less aggregate dollar exposure than the CIC provisions, they present complex structural and enforceability considerations that are of significant strategic importance to NTP. The non-compete, in particular, is critical to NTP's protection of its competitive position during the post-departure period, given Harding's expected deep familiarity with NTP's strategic plans, customer relationships, technology roadmap, and competitive intelligence.
IV.A. Non-Compete Duration (Section 9.1(a))
H&L Comment. H&L demands a twelve (12) month post-termination non-competition period, which matches the duration of Harding's current non-compete obligation under his employment agreement with Marlowe Asset Management Digital Holdings.
Draft 2 Position. Draft 2 provides for an eighteen (18) month post-termination non-competition period. This represents a reduction from the twenty-four (24) month period included in Draft 1, which the Board authorized us to reduce to 18 months in response to H&L's Draft 1 comment. The authorization to reduce from 24 to 18 months was communicated by Elaine Whitford on August 9, 2024, following consultation with Geoffrey Stanton.
Gap. Six (6) months.
Context. H&L's position is that NTP should not impose non-compete restrictions more onerous than those that Harding currently faces at Marlowe Asset Management. Harding's existing Marlowe Asset Management non-compete is 12 months in duration with a US geographic scope only. H&L argues that requiring Harding to accept a longer non-compete as a condition of joining NTP — particularly one with broader geographic scope — effectively penalizes him for changing employers and creates an unreasonable burden on his future career mobility.
NTP's position, as articulated by the Remuneration Committee, is that 18 months is the minimum period necessary to protect the Company's legitimate business interests, given (i) the typical duration of NTP's strategic planning cycle (3 years, with annual updates), (ii) the sensitivity of the competitive intelligence to which the CEO will have access, and (iii) the lead time required for NTP to execute a CEO succession if Harding were to depart and immediately join a competitor.
Assessment. There is room for compromise on this issue. The gap of six months is within the range of negotiating flexibility, and several potential resolution paths exist:
• Agreement on 15 months as a split-the-difference outcome;
• Agreement on 12 months with an enhanced garden leave provision running concurrently (see Section IV.D below); or
• Agreement on 18 months with a more narrowly defined scope of prohibited competitive activity (see Section IV.C below), which would moderate the practical impact of the longer duration.
The interaction between non-compete duration and garden leave terms is significant and must be considered holistically. I discuss this interaction further in Section IV.D below.
IV.B. Non-Compete Geographic Scope (Section 9.1(b))
H&L Comment. H&L demands that the non-compete be limited in geographic scope to North America and Western Europe only.
Draft 2 Position. Draft 2 already provides for a geographic scope limited to North America and Western Europe, having been revised from the worldwide scope included in Draft 1 per Board authorization.
Status. This issue appears to be substantively agreed — the parties' positions on geographic scope are aligned following the revision in Draft 2. However, H&L's redline contains a specific comment requesting that "Western Europe" be defined on a precise country-by-country basis through a schedule or exhibit appended to the Agreement, rather than relying on the general term. H&L's concern is that "Western Europe" is not a universally defined geographic designation and could give rise to disputes regarding the inclusion or exclusion of particular countries (H&L specifically notes potential ambiguity regarding the classification of Turkey, Greece, and the Baltic states).
Assessment. This is a resolvable drafting issue. I recommend the inclusion of a schedule defining "Western Europe" by reference to a specific list of countries. Based on NTP's existing operational footprint and the countries in which its principal competitors maintain operations, I would suggest the following list: United Kingdom, Ireland, France, Germany, Spain, Portugal, Italy, the Netherlands, Belgium, Luxembourg, Switzerland, Austria, Denmark, Norway, Sweden, Finland, and Iceland. This list captures the core Western European telecommunications markets and is consistent with common industry usage of the term.
IV.C. Non-Compete Activity Definition (Section 9.1(c))
H&L Comment. H&L demands the replacement of the revenue-based test currently set forth in Draft 2 with a scheduled-competitor approach. Under H&L's proposal, the non-compete would prohibit Harding from being employed by, or providing services to, eight (8) specifically named companies (the "Scheduled Competitors"), rather than any company meeting the revenue-based definition. H&L's proposed Scheduled Competitors are not identified in the redline marginalia, but H&L has indicated that the list would include NTP's most direct competitors in the US and UK telecommunications markets.
Draft 2 Position. Draft 2 defines "Competitive Activity" as employment by, or the provision of services to, any person or entity that derives more than fifteen percent (15%) of its consolidated annual revenue from "telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecom operators." The phrase "serving telecom operators" was added to the enterprise SaaS category in Draft 2 in response to H&L's Draft 1 comment that the prior definition was overbroad in its inclusion of general enterprise SaaS platforms.
H&L Argument. H&L contends that the revenue-based test, even as narrowed in Draft 2, remains overbroad for several reasons:
(i) The 15% revenue threshold could capture large, diversified companies with only de minimis telecommunications operations — for example, a major technology conglomerate that derives 16% of its revenue from telecom infrastructure but whose primary business is in an entirely different sector.
(ii) The test creates practical uncertainty at the time Harding needs to assess whether a prospective employer falls within the non-compete's scope. Revenue figures are not always publicly available on a disaggregated basis, and the characterization of revenue as "telecommunications services" or "telecommunications infrastructure" may be subject to interpretation.
(iii) The addition of "enterprise SaaS platforms serving telecom operators" captures a broad swath of the technology sector, given the convergence between telecommunications and SaaS.
NTP Argument. NTP's position, as communicated by Elaine Whitford, is that the scheduled-competitor approach is fundamentally under-inclusive:
(i) A static list of eight competitors does not account for new market entrants, startup competitors, or existing companies that expand into the telecommunications sector during the non-compete period. The telecommunications industry is undergoing significant consolidation and convergence, and the competitive landscape could change materially during an 18-month restriction period.
(ii) A scheduled-competitor list would need to be negotiated and agreed at the time of execution of the Agreement, and any subsequent additions would require Harding's consent — effectively giving Harding a veto over the scope of his own non-compete.
(iii) The 15% revenue threshold is designed to capture only those companies for which telecommunications is a material line of business, and the threshold is generous relative to comparable non-compete provisions in other CEO agreements.
Assessment. This is a substantive drafting disagreement that reflects legitimate concerns on both sides. A potential compromise could involve a hybrid approach that combines elements of both proposals:
(a) A primary list of Scheduled Competitors, identified by name, to which the non-compete would apply regardless of revenue composition;
(b) A secondary revenue-based catch-all applicable to any company not on the Scheduled Competitor list, but at a higher revenue threshold (e.g., 25% of consolidated annual revenue from telecommunications services and infrastructure) to address H&L's overbreadth concerns; and
(c) A mechanism for NTP to update the Scheduled Competitor list on an annual basis (e.g., additions to be effective upon 30 days' written notice to the Executive), subject to a reasonableness cap (e.g., no more than 12 companies at any time).
This hybrid approach would provide certainty for Harding with respect to the principal competitors while preserving NTP's ability to capture new entrants through the revenue-based catch-all. I recommend presenting this framework in the next draft, subject to Board approval.
IV.D. Garden Leave — Duration and Compensation (Section 9.2)
H&L Comment. H&L demands a twelve (12) month garden leave period at full compensation — defined as the Executive's base salary plus a pro-rata portion of his target annual incentive bonus — with the garden leave period running concurrently with the non-compete period. Under H&L's proposal, during the garden leave period, Harding would remain an employee of NTP US, would continue to receive his full compensation and benefits, and would be relieved of all active duties while remaining subject to existing contractual obligations (including confidentiality and non-competition obligations). Upon the expiration of the garden leave period, the post-termination non-compete would take effect, but the concurrent running of the two periods would effectively reduce the duration of the non-compete to the extent it exceeds the garden leave period.
Draft 2 Position. Draft 2 provides for a six (6) month garden leave period at base salary only (i.e., $1,750,000 annualized, or $875,000 for the six-month period), with the garden leave period running concurrently with the first six months of the non-compete period. This means that, under Draft 2, the effective post-garden-leave non-compete period would be 12 months (18 months total non-compete minus 6 months of concurrent garden leave).
Gaps. The parties' positions diverge on three interconnected dimensions:
(1) Garden Leave Duration: H&L proposes 12 months; Draft 2 provides 6 months. Gap: 6 months.
(2) Garden Leave Compensation: H&L proposes full compensation (base salary + pro-rata target bonus, totaling approximately $4,812,500 annualized, or $4,812,500 for a 12-month period). Draft 2 provides base salary only ($1,750,000 annualized, or $875,000 for 6 months). Gap: Approximately $3,937,500 for the full 12-month period versus $875,000 for the 6-month period, a difference of approximately $3,062,500.
(3) Concurrency Implications: The interaction between garden leave duration and non-compete duration is critical:
• Under NTP's Draft 2 proposal (18-month non-compete, 6-month concurrent garden leave): effective post-garden-leave non-compete = 12 months.
• Under H&L's proposal (12-month non-compete, 12-month concurrent garden leave): effective post-garden-leave non-compete = 0 months. Harding would be free to join a competitor immediately upon the expiration of the garden leave period with no additional restriction.
• Under a compromise of 15-month non-compete with 12-month concurrent garden leave: effective post-garden-leave non-compete = 3 months.
Assessment. The garden leave provision is the most structurally significant of the restrictive covenant issues, because it determines the practical effectiveness of the non-compete. Under H&L's proposal, the combination of a 12-month non-compete and 12-month concurrent garden leave would eliminate any meaningful post-departure restriction on Harding's competitive activity: he would continue to receive full compensation from NTP during the garden leave period, but would be free to join a competitor on the very first day after the garden leave expires.
From NTP's perspective, the purpose of the non-compete is to provide a buffer period after the Executive's departure during which the Company can implement strategic changes, reassign customer relationships, and mitigate the competitive risk of the Executive's departure. A non-compete with zero effective post-garden-leave restriction would not serve this purpose. Accordingly, I recommend that any resolution of the garden leave provision must result in an effective post-garden-leave non-compete period of at least six months — which could be achieved through various combinations of non-compete and garden leave durations (e.g., 18-month non-compete with 12-month garden leave, or 15-month non-compete with 9-month garden leave).
The compensation component of the garden leave is also significant. Including target bonus in the garden leave compensation would substantially increase the cost of the garden leave to NTP — from $875,000 (6 months of base salary) under Draft 2 to approximately $4,812,500 (12 months of full compensation) under H&L's proposal. If a longer garden leave is conceded, I recommend limiting compensation to base salary only, which is the prevailing approach in the UK (where garden leave is more common) and is consistent with the principle that garden leave is a protective mechanism for the employer, not an economic benefit for the employee.
IV.E. Non-Solicitation Scope (Section 9.3)
H&L Comment. H&L demands that the non-solicitation covenant be limited to the non-solicitation of employees only. H&L rejects the customer non-solicitation clause included in Draft 2.
Draft 2 Position. Draft 2 includes a twenty-four (24) month post-termination non-solicitation covenant covering both employees and customers of NTP and its subsidiaries. The employee non-solicitation prohibits the Executive from soliciting, recruiting, or inducing any employee of NTP to terminate their employment. The customer non-solicitation prohibits the Executive from soliciting, diverting, or taking away any customer or prospective customer of NTP with whom the Executive had a material business relationship during the last 24 months of his employment.
H&L Argument. H&L contends that the customer non-solicitation clause is unnecessary in light of the non-compete — if Harding is prohibited from working for a competitor, the question of customer solicitation is moot. H&L further argues that the customer non-solicitation is overbroad for a CEO who will have relationships with thousands of enterprise customers across multiple geographies, and that the practical effect of the clause would be to prohibit Harding from having any business contact with a vast universe of companies, even if he were to join a non-competing enterprise.
Assessment. Customer non-solicitation clauses are standard in C-suite employment agreements and are generally viewed as a reasonable and enforceable protection for the employer's business relationships. However, H&L's argument has some practical force in this context: if the non-compete is sufficiently robust in scope and duration, the incremental protective value of a separate customer non-solicitation may be limited, because the non-compete would already prohibit Harding from working in a capacity where he could meaningfully solicit NTP's customers for a competing product or service.
I recommend that the customer non-solicitation be considered as a potential negotiating chip. If conceding the customer non-solicitation would facilitate a resolution of the non-compete duration and garden leave issues on terms favorable to NTP (e.g., an 18-month non-compete with a meaningful post-garden-leave restriction period), the trade could be advantageous. Conversely, if the non-compete is significantly shortened (e.g., to 12 months with substantial concurrent garden leave), the customer non-solicitation becomes more important as a supplementary protection.
IV.F. Non-Solicitation Duration (Section 9.3)
H&L Comment. H&L proposes an eighteen (18) month non-solicitation period, limited to employee non-solicitation only.
Draft 2 Position. Draft 2 provides for a twenty-four (24) month non-solicitation period covering both employees and customers.
Gap. Six (6) months on duration, plus the scope difference discussed in Section IV.E above.
Assessment. The duration gap is modest and likely resolvable. If the customer non-solicitation is conceded (per the analysis in Section IV.E), a compromise on employee non-solicitation duration of 18 or 21 months would be reasonable and within the range of market practice for comparable CEO agreements.
IV.G. Enforceability Concerns — New York Law (Section 9 Generally)
H&L Redline Comment. H&L includes a general comment in its redline noting that the restrictive covenant provisions as drafted may face enforceability challenges under New York law. The comment cites the reasonableness analysis applicable to non-compete agreements under New York case law (referencing Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382 (1999), among other authorities) and notes the pending New York state legislation that would impose a comprehensive ban on non-compete agreements (Senate Bill S3100A, as amended). H&L suggests that these enforceability risks should inform NTP's approach to the duration, geographic scope, and activity scope of the restrictive covenants, and that a more narrowly tailored set of restrictions would be more likely to be upheld if challenged.
Draft 2 Position. The Agreement is governed by New York law (Section 11.1). Section 9 includes a severability clause and a "blue-pencil" provision, which authorizes a court to modify (rather than void) any restrictive covenant found to be unreasonable in scope, duration, or geographic extent, so as to render it enforceable to the maximum extent permitted by law.
Internal Assessment. Devon Archer's June 6 memorandum on New York non-compete enforceability reached the following conclusions:
(i) A 24-month worldwide non-compete, as included in Draft 1, would likely face a significant enforceability challenge under New York law, particularly if Harding were to relocate to a jurisdiction outside North America and Western Europe.
(ii) An 18-month non-compete limited to North America and Western Europe, with a narrower activity definition, is more defensible but is not without risk. New York courts apply a case-by-case reasonableness analysis that considers the totality of the circumstances, including the nature of the executive's role, the employer's legitimate protectable interests, the geographic scope of the restriction, and the hardship imposed on the executive. While 18 months is within the range that New York courts have upheld for senior executives, it is at the longer end of that range, and a court could conclude that 12 or 15 months is more appropriate under the circumstances.
(iii) The pending New York non-compete ban legislation (S3100A) adds further uncertainty. If enacted in its current form, the legislation would prohibit non-compete agreements for employees earning below a specified threshold (currently proposed at $250,000 annually, though amendments have been proposed to raise this figure). Harding's compensation would almost certainly exceed any enacted threshold, but the legislative environment signals a general hostility toward non-competes that could influence judicial attitudes even for high-earning executives.
(iv) Our internal fallback recommendation has been to accept 18 months, North America and Western Europe, with a narrower activity definition, paired with a 6-month garden leave period running concurrently with the first 6 months of the non-compete. This approach provides a meaningful effective non-compete period (12 months post-garden-leave) while staying within the range of enforceability under current New York law.
Assessment. H&L's comment regarding enforceability has legal merit and should not be dismissed. While it is clearly self-serving (designed to support Harding's negotiating position for shorter and narrower restrictive covenants), the underlying legal analysis is consistent with our own internal assessment. The enforceability concerns reinforce the need for a pragmatic approach to the restrictive covenant terms and support the view that modest concessions on duration or scope — if made in exchange for meaningful progress on the CIC issues or other terms — would not materially compromise NTP's interests.
IV.H. Additional Restrictive Covenant Comments (3 Comments)
H&L's redline includes three additional comments on Section 9 that are categorized as critical due to their location but are resolvable with modest drafting adjustments:
(i) Remedies Clause (Section 9.5). H&L resists the agreed-upon damages provision in Section 9.5, which provides that the Executive agrees that any breach of the restrictive covenants shall entitle NTP to liquidated damages equal to 12 months of base salary, in addition to any equitable relief. H&L's position is that injunctive relief should be the sole remedy available to NTP for a breach of the restrictive covenants, and that the liquidated damages provision is punitive and unenforceable under New York law. This is a legitimate drafting issue — New York courts scrutinize liquidated damages provisions for reasonableness and will not enforce a provision that constitutes a penalty. I recommend removing the liquidated damages provision and relying instead on the availability of injunctive relief (which H&L does not contest) and actual damages (which NTP would retain the right to seek in any event).
(ii) Non-Disparagement Carve-Outs (Section 9.4). H&L requests broader carve-outs to the mutual non-disparagement provision, permitting truthful statements made (a) in the course of legal proceedings, (b) in response to compulsory process, (c) in communications with government regulators, and (d) in private communications with personal legal counsel and immediate family members. Draft 2 includes carve-outs for legal proceedings and compulsory process only. The additional carve-outs requested by H&L are reasonable and consistent with market practice. I recommend acceptance.
(iii) Definition of "Competitive Activity" (Section 9.1(c)). H&L proposes minor wording changes to the definition of "Competitive Activity" in addition to the structural changes discussed in Section IV.C above — specifically, the replacement of "derive" with "generate" in the revenue-based test, and the addition of "directly or indirectly" as a modifier to the prohibition. These are stylistic preferences with no substantive impact and can be accepted.
Assessment. All three of these comments are resolvable through standard drafting adjustments and should be addressed in the next draft.
V. Category B — Non-Material / Readily Resolvable Open Issues (23 Comments)
The 23 Category B comments are summarized below by section. None of these issues, individually or in the aggregate, should impede a final agreement, and I recommend that all of them be addressed in the next draft of the Agreement regardless of the status of the Category C issues, as doing so will demonstrate good faith and further narrow the universe of open items.
V.A. Section 2 — Term and Duties (3 Comments)
Comment 1: Notice Period for Non-Renewal (Section 2.1). H&L requests that the notice period for NTP's election not to renew the Agreement at the end of the initial term or any renewal term be increased to 180 days, while the Executive's notice period for non-renewal be set at 90 days. Draft 2 currently provides for 180 days' notice from either party. The asymmetric notice request is not unreasonable — it reflects the practical reality that an executive needs more lead time to plan for a departure initiated by the company than the company needs to plan for a voluntary departure by the executive. Recommend acceptance of the asymmetric notice periods (180 days from NTP, 90 days from Executive).
Comment 2: Outside Board Service (Section 2.3). H&L requests express permission for the Executive to serve on up to two (2) for-profit outside board seats, without the requirement of prior Board approval. Draft 2 permits outside board service "with the prior written approval of the Board, which shall not be unreasonably withheld." The parties' positions are close. I recommend a compromise under which Harding would be pre-approved for up to two (2) for-profit outside board seats, subject to an initial conflicts review by the General Counsel and the Nominating and Governance Committee. Additional board seats beyond two, or service on the board of any company that could present a conflict of interest, would require prior Board approval.
Comment 3: Reporting Structure (Section 2.2). H&L requests a clarification confirming that the CEO reports directly to the full Board of Directors and not to the Chair of the Board individually. This clarification is acceptable to NTP and consistent with the existing governance framework. The Chair of the Board (currently Sir Alistair Kemble; successor to be appointed) serves as the leader of the Board but does not have an executive function, and the CEO's reporting relationship is properly to the Board as a whole. Recommend acceptance of the clarifying language.
V.B. Section 3 — Base Salary (1 Comment)
Comment 4: Annual Review Floor (Section 3.1). H&L requests the addition of an express statement that the Executive's base salary shall not be reduced below the initial level of $1,750,000 absent the Executive's written consent. Draft 2 provides for annual review by the Remuneration Committee but does not include an express floor. A base salary floor is a standard market provision in CEO employment agreements and is consistent with the NTP Remuneration Committee's practice. I recommend acceptance.
V.C. Section 4 — Annual Incentive (3 Comments)
Comment 5: First-Year Guaranteed Minimum Bonus (Section 4.1). H&L requests a guaranteed minimum bonus of 100% of target ($3,062,500) for the first partial fiscal year of employment. Draft 2 provides a pro-rata target bonus for the first year, payable only if the Executive remains employed through the end of the fiscal year. The difference is that H&L's proposal guarantees the full target amount regardless of actual performance, while Draft 2 ties the first-year bonus to pro-rata target performance with a continued employment condition. This is a meaningful economic request — a guaranteed minimum bonus of $3,062,500 for the first partial year represents a significant commitment. However, first-year guaranteed bonuses are not uncommon for incoming CEOs, particularly where the executive joins mid-year and has limited ability to influence performance outcomes during the initial period. I recommend a compromise: a guaranteed minimum bonus of 75% of pro-rata target for the first partial fiscal year, payable regardless of actual performance, with the actual bonus for the first year being the greater of (i) the guaranteed minimum and (ii) actual performance.
Comment 6: Bonus Payment Timing (Section 4.2). H&L requests that annual incentive bonuses be paid within 60 days following the close of the fiscal year. Draft 2 provides for payment within 75 days. This is a modest timing difference with no material economic impact. I recommend acceptance of the 60-day payment window, subject to the caveat that the Remuneration Committee must certify performance results before bonuses are paid.
Comment 7: Bonus Discretion Language (Section 4.1). H&L resists the language in Draft 2 granting the Remuneration Committee "sole discretion" to determine the level of bonus achievement, and requests the addition of a "good faith" qualifier. This is a reasonable request — the "good faith" qualifier does not materially limit the Remuneration Committee's discretion but provides the Executive with a standard of review in the event of a dispute. Recommend acceptance.
V.D. Section 5 — Equity Awards (4 Comments)
Comment 8: Sign-On RSU Vesting on Non-CIC Termination Without Cause (Section 5.1(a)). H&L requests full acceleration of unvested sign-on RSUs upon any termination without cause, not limited to CIC termination events. Draft 2 provides for 12 months of accelerated vesting of sign-on RSUs on a non-CIC termination without cause, with the remainder forfeited. The gap is between full acceleration and 12 months of accelerated vesting. This issue relates to the broader non-CIC severance discussion addressed in Section V.E below. I recommend that this issue be addressed in the context of the overall non-CIC severance package rather than in isolation.
Comment 9: Sign-On PSU Performance Metrics (Section 5.1(b)). H&L requests that the specific performance metrics for the sign-on PSU grant — including TSR hurdles and revenue growth targets — be negotiated and set forth in an exhibit to the Agreement, rather than being left to the Remuneration Committee's discretion. Draft 2 provides that metrics will be "determined by the Remuneration Committee in its discretion." This is a reasonable request, and I recommend agreement to negotiate an exhibit containing defined metrics. The specific metrics should be coordinated with Claire Whitfield-Nakamura and the Remuneration Committee, but a framework of 50% relative TSR (against the S&P Telecom Select Industry Index) and 50% revenue growth (against budget) would be consistent with NTP's existing LTI design.
Comment 10: Annual LTI Grant Timing (Section 5.2). H&L requests that the first annual LTI grant be made within 30 days of Harding's start date. Draft 2 provides that the first annual LTI grant will be made "at such time as other senior executives receive annual grants" — which would place the first grant in February 2025, approximately five months after the proposed October 1, 2024 start date. The concern is that a five-month delay in the first annual LTI grant would leave Harding without a meaningful ongoing equity stake during the initial period of his tenure. I recommend a compromise: the first annual LTI grant will be made within 60 days of the start date, with subsequent annual grants following the normal cycle.
Comment 11: Anti-Dilution (Section 5.3). H&L requests the inclusion of customary anti-dilution adjustment provisions to protect against the dilutive effect of stock splits, recapitalizations, and similar corporate events on the value and number of Harding's equity awards. This is a standard provision that is included in virtually all equity award agreements and is already addressed in the NTP 2022 Omnibus Incentive Plan. I recommend acceptance of the express anti-dilution language in the Agreement, with a cross-reference to the adjustment provisions of the Plan.
I note for context that the equity pool remaining under the NTP 2022 Omnibus Incentive Plan is 14,200,000 shares. Harding's total sign-on equity ($8,000,000 in RSUs + $6,400,000 in PSUs = $14,400,000 sign-on, plus first-year LTI of $9,000,000, for a total of approximately $23,400,000) translates to approximately 1,474,480 shares at the current price of $15.87 per share, representing approximately 0.21% of NTP's 699,000,000 outstanding shares. No plan amendment is required to accommodate these awards.
V.E. Section 6 — Non-CIC Termination and Severance (5 Comments)
Comment 12: Non-CIC Severance Multiplier (Section 6.1). H&L continues to request a non-CIC severance multiplier of 2.5x (base salary + target bonus), yielding $12,031,250. Draft 2 provides for 2x, yielding $9,625,000. The gap is $2,406,250.
While this is a significant economic issue, it has received less attention in the negotiations than the CIC provisions because Harding has not identified it as a "walk-away" item and has focused his negotiating capital on the CIC terms. It is unlikely that this issue alone would derail the negotiations if the CIC and restrictive covenant issues are resolved. I recommend maintaining the 2x position as the starting point but flagging this as a potential concession item in a package deal — for example, an increase to 2.25x ($10,828,125) in exchange for Harding's acceptance of the best-net cutback on Section 280G.
Comment 13: Full Equity Acceleration on Non-CIC Without-Cause Termination (Section 6.2). H&L demands full acceleration of all unvested equity awards upon a non-CIC termination without cause. Draft 2 provides for 12 months of accelerated vesting. Full acceleration on a non-CIC termination would be unusual and would significantly increase the cost of a termination without cause. I recommend holding the 12-month acceleration position, but this issue could be part of a broader package discussion.
Comment 14: COBRA Continuation (Section 6.3). H&L requests 24 months of COBRA continuation coverage. Draft 2 provides 18 months. The gap is 6 months of additional coverage, with an estimated incremental cost of approximately $17,500 to $25,000. I recommend acceptance of 24 months as a low-cost concession.
Comment 15: Pro-Rata Bonus Calculation (Section 6.4). The parties have agreed in principle that the Executive will receive a pro-rata annual incentive bonus for the year of termination upon a non-CIC termination without cause or resignation for good reason. H&L's remaining comment relates to the methodology for calculating the pro-rata bonus — specifically, whether the bonus should be pro-rated based on actual performance or target performance. I r

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