1022-00004 · Northgate Telecommunications PLC · Engagement & Conflicts

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CALDERWOOD & HARKNESS LLP Attorneys at Law

299 Park Avenue, 42nd Floor New York, New York 10171

Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

MEMORANDUM

June 5, 2024

TO: Elaine Whitford, Senior Vice President & Group General Counsel Northgate Telecommunications PLC 600 Lexington Avenue, 38th Floor New York, New York 10022

FROM: Renata Vasquez, Partner Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, New York 10171

RE: Scope of Engagement — Negotiation and Drafting of CEO Employment Agreement for Marcus Elliot Harding

Matter No.: 1022-00004

1. Purpose

This memorandum confirms the scope of Calderwood & Harkness LLP's engagement by Northgate Telecommunications PLC ("Northgate," "NTP," or the "Company") in connection with the negotiation and drafting of a definitive executive employment agreement (the "Employment Agreement") for Marcus Elliot Harding ("Harding"), who has been selected as the preferred candidate for the position of Chief Executive Officer of Northgate. The terms and conditions of our engagement are as set forth in the engagement letter executed by the parties on June 4, 2024, a copy of which has been retained in our files and is incorporated herein by reference.

The purpose of this memorandum is to provide a detailed description of the work streams, deliverables, and coordination responsibilities that we anticipate will be required in connection with this engagement, so as to ensure alignment between Calderwood & Harkness as outside counsel and the Company's in-house legal team. We believe that clarity on these matters at the outset of the engagement will facilitate efficient execution and minimize the risk of misunderstandings as the negotiation process unfolds.

In addition, this memorandum identifies the key legal issues that Calderwood & Harkness anticipates addressing in the course of the engagement, including certain areas where we expect meaningful negotiation with Harding's counsel and where the Company's Board of Directors (the "Board") and Remuneration Committee may need to establish clear parameters and red lines in advance of the negotiation process.

For reference, this engagement has been assigned Calderwood & Harkness matter number 1022-00004. The firm's conflicts clearance process was completed on June 3, 2024, and no conflicts of interest were identified that would preclude our representation of Northgate in this matter.

2. Background

2.1 The Company

Northgate Telecommunications PLC (registered number 07381264) is a public limited company incorporated in England and Wales. The Company's ordinary shares are listed on the London Stock Exchange under the ticker symbol LON: NTP. In addition, Northgate is cross-listed on the New York Stock Exchange through an American Depositary Receipt ("ADR") program under the ticker symbol NYSE: NTPC. As of June 2024, Northgate has an approximate market capitalization of £8.7 billion (approximately $11.1 billion at prevailing exchange rates). For the fiscal year ended December 31, 2023 ("FY2023"), Northgate reported consolidated revenue of £4.26 billion (approximately $5.43 billion). The Company employs approximately 22,500 individuals globally across its operations in the United Kingdom, the United States, Continental Europe, and select markets in the Asia-Pacific region.

2.2 CEO Transition

On May 15, 2024, Sir Alistair Kemble, the Company's Chief Executive Officer since January 2014, announced his intention to retire from the CEO role effective December 31, 2024, following eleven years of service in that capacity. Sir Alistair's retirement announcement set in motion a CEO succession process that had been in preliminary planning stages for some time.

Kensington Partners Ltd. ("Kensington"), an executive search firm, was retained by the Board on March 1, 2024 to conduct a comprehensive CEO search. On May 22, 2024, Kensington presented a final shortlist of three candidates to the Nomination Committee of the Board, which is chaired by Lucinda Farrow. Following interviews and deliberations, on May 28, 2024, the Nomination Committee recommended Marcus Elliot Harding as the preferred candidate for the CEO role, and the Board unanimously concurred with this recommendation.

Dame Philippa Thornton-Hale, Chair of the Board of Directors, extended an informal verbal offer to Harding on May 30, 2024. Harding expressed strong interest in the position, subject to agreement on definitive employment terms.

2.3 The Candidate

Harding, age 52, is currently serving as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"), a Delaware corporation headquartered at 200 Technology Way, Suite 4000, San Jose, California 95110. Marlowe Asset Management's common stock is publicly traded on the New York Stock Exchange under the ticker symbol NYSE: VDHI. Harding has an extensive career spanning approximately 28 years in the telecommunications and technology sectors, during which time he has held a series of progressively senior leadership positions.

2.4 Candidate's Legal Representation

Harding is represented by personal counsel Victoria Hargrove of Hargrove & Liddell LLP, located at 51 Madison Avenue, 30th Floor, New York, New York 10010. We understand that Ms. Hargrove has represented Harding in connection with his employment arrangements since 2017. All negotiations with respect to the Employment Agreement will be conducted with Ms. Hargrove's office.

3. Scope of Engagement

The following sections describe the specific work streams and deliverables encompassed within Calderwood & Harkness's engagement. Each section identifies the substantive legal issues that we anticipate addressing, as well as areas where coordination with other advisors or Company stakeholders will be required.

3.1 Primary Engagement: Negotiation and Drafting of Executive Employment Agreement

Calderwood & Harkness will serve as lead outside counsel to Northgate for the negotiation and drafting of a definitive executive employment agreement between Northgate Telecommunications US, Inc. (a wholly-owned subsidiary of Northgate Telecommunications PLC, incorporated in the State of Delaware) as employer, and Marcus Elliot Harding as executive. The use of the US subsidiary as the employing entity reflects the fact that Harding will be based primarily in the Company's New York offices and will be a US tax resident. The Employment Agreement will be governed by the laws of the State of New York, without regard to principles of conflicts of laws.

The Employment Agreement is expected to cover a proposed initial term of five (5) years, commencing on October 1, 2024 (or such other start date as the parties may agree), with automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least one hundred eighty (180) days prior to the expiration of the then-current term. The terms of engagement, renewal, and notice periods are expected to be subject to negotiation with Harding's counsel.

Calderwood & Harkness will negotiate directly with Hargrove & Liddell LLP on behalf of Northgate at all stages of the negotiation process, subject to client direction. We will not take any material negotiation positions or make any concessions without prior authorization from the Company, as further described in Section 6 of this memorandum.

The deliverables under this primary engagement include:

(a) An initial term sheet setting forth the Company's proposed economic and material non-economic terms, suitable for circulation to Harding's counsel as the opening negotiation position;

(b) Subsequent revised term sheets, as necessary, reflecting the evolution of negotiations and incorporating agreed-upon terms as the parties reach consensus on specific issues;

(c) A full draft Employment Agreement, incorporating all agreed-upon terms and reflecting best practices for executive employment agreements at the CEO level of a publicly traded multinational corporation;

(d) Redline responses to counterproposals received from Hargrove & Liddell LLP, together with explanatory cover correspondence as appropriate;

(e) Final execution versions of the Employment Agreement and all ancillary documents necessary to effectuate the hire, including but not limited to equity award agreements, restrictive covenant agreements (if maintained as separate documents), indemnification agreements, and any required corporate authorizations or consents; and

(f) Such internal memoranda, negotiation strategy documents, and issue-analysis papers as may be requested by the Company's in-house legal team or the Remuneration Committee in the course of the engagement.

3.2 Compensation and Benefits Structuring

A significant component of this engagement will involve advising Northgate on the structuring and negotiation of Harding's overall compensation package. The compensation architecture involves multiple elements, each of which presents distinct legal, tax, accounting, and corporate governance considerations. We anticipate that the compensation package will include the following elements, all of which are subject to negotiation:

Base Salary. The Company proposes an annual base salary of $1,750,000 per annum, payable in accordance with Northgate's standard payroll practices. This represents a premium of approximately $300,000 (approximately 20.7%) over Harding's current base salary of $1,450,000 at Marlowe Asset Management.

Annual Incentive / Bonus. The Company proposes that Harding participate in Northgate's annual incentive program, with a target bonus opportunity of 175% of base salary, equating to a target annual bonus of $3,062,500. The maximum annual bonus opportunity would be 300% of base salary, equating to a maximum of $5,250,000. Performance metrics, weightings, and payout curves will be determined by the Remuneration Committee in its discretion, consistent with the applicable remuneration policy. Harding's current annual target bonus at Marlowe Asset Management is $2,175,000 (150% of base salary); the proposed NTP target represents a meaningful increase in both percentage terms and absolute dollars.

Long-Term Incentive Program. Harding will participate in the Company's annual long-term incentive ("LTI") program, with an annual target LTI value of $9,000,000. The proposed mix of award types is 60% performance share units ("PSUs") and 40% restricted stock units ("RSUs"), to be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "Omnibus Plan"). PSU vesting will be subject to performance conditions to be determined by the Remuneration Committee. Harding's current annual LTI target at Marlowe Asset Management is $7,500,000; the proposed NTP target of $9,000,000 represents a $1,500,000 (20.0%) increase.

Sign-On Cash Bonus. The Company proposes a one-time sign-on cash bonus of $5,000,000, payable upon commencement of employment (or in such installments as may be agreed). This sign-on bonus is designed principally as a make-whole component to partially compensate Harding for compensation forfeited in connection with his departure from Marlowe Asset Management. The sign-on bonus will be subject to clawback provisions requiring full repayment in the event of Harding's voluntary resignation without good reason within twenty-four (24) months of his start date.

Sign-On Equity Grants. In addition to the sign-on cash bonus, the Company proposes one-time sign-on equity grants intended to compensate Harding for the estimated $23,400,000 in Marlowe Asset Management equity compensation (including unvested RSUs and in-the-money stock options) that Harding will forfeit upon his departure from Marlowe Asset Management. The proposed sign-on equity package consists of:

(i) A restricted stock unit grant with an aggregate grant-date value of $12,000,000, subject to three-year ratable vesting (i.e., one-third vesting on each of the first three anniversaries of the grant date); and

(ii) A performance share unit grant with an aggregate grant-date target value of $6,400,000, subject to three-year cliff vesting, with the number of shares earned determined by performance against total shareholder return ("TSR") and revenue growth hurdles to be established by the Remuneration Committee.

The total proposed sign-on equity value of $18,400,000, when combined with the $5,000,000 sign-on cash bonus, yields an aggregate sign-on package of $23,400,000, which is designed to fully offset the estimated value of Harding's forfeited Marlowe Asset Management equity. We note that the estimated forfeiture value of $23,400,000 is based on Marlowe Asset Management's stock price and equity plan data as of May 2024, and may fluctuate; we will work with the Company to develop appropriate mechanisms for addressing any material changes in the forfeiture estimate prior to execution of the Employment Agreement.

Retirement Benefits. Harding will be eligible to participate in the Company's US 401(k) retirement savings plan, with an employer matching contribution of 6% of eligible compensation (subject to applicable IRS contribution limits under Sections 401(a)(17) and 415 of the Internal Revenue Code). In addition, the Company proposes an annual supplemental executive retirement plan ("SERP") contribution of $250,000 per year, to be credited to a nonqualified deferred compensation account on Harding's behalf, subject to Section 409A compliance as further described in Section 3.10 below.

Perquisites. The proposed perquisite package includes: (a) an annual car allowance of $25,000; (b) participation in the Company's executive health program; (c) supplemental life insurance coverage with a benefit of $2,000,000; and (d) reimbursement for personal financial planning and tax preparation services in an amount not to exceed $35,000 per year.

Coordination with Compensation Consultant. Calderwood & Harkness will coordinate with Whitmore Hobson LLP (Dr. Rachel Whitmore, Managing Partner), the independent compensation consultant retained by the Remuneration Committee (chaired by Geoffrey Stanton), with respect to peer-group benchmarking, pay-ratio analysis, and the overall market positioning of the proposed compensation package. Whitmore Hobson's analyses will be important in supporting the Remuneration Committee's deliberations and in providing a defensible basis for the compensation quantum in anticipation of the binding remuneration policy vote at the 2025 Annual General Meeting.

Comparative Compensation Summary. For reference, Harding's current total target annual compensation at Marlowe Asset Management is approximately $11,125,000, comprised of base salary of $1,450,000, target annual bonus of $2,175,000 (150% of base), and annual LTI target of $7,500,000. The proposed NTP total target annual compensation of $13,812,500 (base salary of $1,750,000 plus target bonus of $3,062,500 plus LTI target of $9,000,000) represents a premium of approximately $2,687,500 (approximately 24.2%) over Harding's current total target compensation, which we believe is appropriate given the scope and complexity of the CEO role at a company of Northgate's scale and global footprint.

3.3 Termination and Severance Provisions

Calderwood & Harkness will draft and negotiate comprehensive termination provisions addressing all scenarios under which the Employment Agreement may be terminated, including:

(a) Termination by the Company without Cause;

(b) Resignation by Harding for Good Reason (constructive termination);

(d) Resignation by Harding without Good Reason (voluntary resignation);

(e) Termination due to death or Disability;

(f) Expiration of the initial term or any renewal term following timely notice of non-renewal; and

(g) Termination in connection with a Change in Control (addressed separately in Section 3.4 below).

The definitions of "Cause" and "Good Reason" will be critical components of the Employment Agreement and are expected to be subjects of negotiation. Calderwood & Harkness will draft these definitions with appropriate specificity, incorporating customary cure periods and procedural requirements. With respect to Good Reason, we anticipate that the definition will include, among other triggers, material diminution in title, duties, authority, or reporting relationship; material reduction in base salary or target bonus opportunity; relocation of Harding's principal office beyond a specified radius; and material breach by the Company of the Employment Agreement.

Non-CIC Severance. In the event of a termination by the Company without Cause or a resignation by Harding for Good Reason, in each case occurring outside of the Change in Control period (as discussed in Section 3.4), Northgate's proposed severance package is as follows:

(i) A lump-sum cash severance payment equal to two times (2x) the sum of base salary and target annual bonus, equating to $9,625,000 (i.e., 2 × ($1,750,000 + $3,062,500));

(ii) A pro-rata annual bonus for the fiscal year in which the termination occurs, based on actual performance as determined by the Remuneration Committee following the end of the applicable performance period, payable at the same time as bonuses are paid to similarly situated active executives;

(iii) Continued health and welfare benefits (including COBRA continuation coverage) for a period of eighteen (18) months following the date of termination, at the Company's expense; and

(iv) Twelve (12) months of accelerated vesting of unvested equity awards (including RSUs and PSUs, with PSU vesting based on target performance), with all vested stock options remaining exercisable for a period of ninety (90) days following the termination date (or such longer period as may be provided in the applicable award agreement).

We anticipate that Harding, through Ms. Hargrove, will seek enhanced severance terms relative to the Company's proposed position. We note that Harding's current employment agreement with Marlowe Asset Management provides for non-CIC severance of 2x base plus target bonus with 18 months of benefits continuation and 12 months of equity acceleration. We further note that his Marlowe Asset Management CIC severance is set at 3x base plus bonus with full vesting acceleration, and we expect Harding to use his existing Marlowe Asset Management provisions as a baseline for negotiation. Calderwood & Harkness will advise the Company on market positioning of the proposed severance terms and on the parameters within which the Company may negotiate without creating undue risk from a corporate governance or shareholder perspective.

All severance payments will be conditioned upon Harding's execution and non-revocation of a general release of claims in a form satisfactory to the Company, as well as Harding's continued compliance with all post-employment restrictive covenants.

3.4 Change in Control Provisions

Calderwood & Harkness anticipates that the change in control ("CIC") provisions of the Employment Agreement will constitute one of the most significant and complex areas of negotiation with Harding's counsel. CIC provisions involve substantial financial exposure for the Company, attract significant scrutiny from proxy advisory firms and institutional shareholders, and implicate important tax and accounting considerations.

Definition of Change in Control. Calderwood & Harkness proposes that the Employment Agreement include a "change in control" definition encompassing the following triggering events:

(a) The acquisition by any person or group of beneficial ownership of more than 50% of the combined voting power of the Company's outstanding voting securities (the "Acquisition Trigger");

(b) The consummation of a merger, consolidation, or similar business combination transaction after which the Company's shareholders immediately prior to the transaction hold less than 50% of the combined voting power of the surviving or resulting entity (the "Merger Trigger"); and

We have deliberately excluded a Board turnover trigger (i.e., a change in the composition of the Board where a majority of directors are replaced within any twelve-month period) from the Company's proposed definition, for reasons discussed below.

CIC Severance Terms. Northgate's proposed position on CIC severance, applicable in the event of a qualifying termination (termination without Cause or resignation for Good Reason) occurring within the twenty-four (24) month period following a Change in Control (i.e., a "double trigger" arrangement), is as follows:

(i) A lump-sum cash severance payment equal to two and one-half times (2.5x) the sum of base salary and target annual bonus, equating to $12,031,250 (i.e., 2.5 × ($1,750,000 + $3,062,500));

(ii) Full acceleration of all unvested equity awards (including RSUs and PSUs, with PSU vesting based on target performance or, if determinable and higher, actual performance through the date of the Change in Control);

(iii) Continued health and welfare benefits (including COBRA continuation coverage) for a period of twenty-four (24) months following the date of termination, at the Company's expense;

(iv) A lump-sum outplacement services benefit of $50,000; and

(v) A "best-net" safe harbor provision under Section 280G of the Internal Revenue Code, meaning that if any payments to Harding would constitute "excess parachute payments" within the meaning of Section 280G, such payments will be reduced to the safe harbor limit only if and to the extent that such reduction would result in a greater after-tax benefit to Harding than receipt of the full payments subject to excise tax. Importantly, Northgate's proposed position is that no tax gross-up will be provided with respect to any excise tax liability arising under Section 4999 of the Internal Revenue Code.

Anticipated Counterproposals from Harding. Based on our review of Harding's current Marlowe Asset Management employment agreement (as publicly disclosed in Marlowe Asset Management's most recent proxy statement) and our assessment of market trends for CEO-level CIC provisions, we anticipate that Harding, through Ms. Hargrove, will push for the following enhanced CIC terms:

(a) A 3x multiplier (rather than 2.5x), which would yield a CIC cash severance payment of $14,437,500 (i.e., 3 × ($1,750,000 + $3,062,500)). Harding's current Marlowe Asset Management CIC multiplier is 3x;

(b) A full 280G excise tax gross-up, rather than a best-net safe harbor. Harding's existing Marlowe Asset Management agreement provides for a full gross-up. While full gross-up provisions have fallen significantly out of favor among institutional shareholders and proxy advisory firms, this remains a point that Ms. Hargrove can be expected to raise;

(c) Inclusion of a Board turnover trigger in the Change in Control definition, such that a change in the composition of the Board where a majority of directors are replaced within any twelve-month period would itself constitute a Change in Control. This trigger is present in Harding's current Marlowe Asset Management agreement. We note that Board turnover triggers are disfavored by ISS and Tarrant Partners LLC, and their inclusion could create complications in the context of Northgate's corporate governance profile.

Proxy Advisory and Shareholder Considerations. Calderwood & Harkness will coordinate closely with Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director) regarding the sensitivity of proxy advisory firms—specifically Thackeray Health IT ("ISS") and Westmark Solutions—to CIC multipliers, tax gross-up provisions, and Board turnover triggers. Both ISS and Tarrant Partners LLC have adopted policies that may result in negative vote recommendations on say-on-pay proposals where CIC multiples exceed 3x, where excise tax gross-ups are provided, or where single-trigger equity acceleration is employed. Negative recommendations from these firms could have a meaningful adverse impact on the Company's remuneration policy vote at the 2025 AGM. Veltrano's advice will be critical in calibrating the Company's CIC negotiation strategy.

Board Guidance Requested. We strongly recommend that the Remuneration Committee and the Board establish clear red lines on the CIC multiplier and tax treatment (i.e., gross-up vs. best-net) early in the negotiation process, before Calderwood & Harkness circulates the initial term sheet to Harding's counsel. Establishing these parameters in advance will enable us to negotiate with greater credibility and efficiency.

3.5 Section 280G Parachute Payment Analysis

Given the significance of the Section 280G / Section 4999 issues implicated by the CIC provisions, Calderwood & Harkness will prepare a detailed Section 280G analysis for the Company's review. This analysis will encompass the following components:

Base Amount Calculation. We will calculate Harding's "base amount" under Section 280G(b)(3) of the Internal Revenue Code, which is defined as the average annualized includable compensation payable by the "disqualified individual's" employer for the five most recent taxable years ending before the date of the change in control. Based on publicly available information regarding Harding's W-2 compensation from Marlowe Asset Management for the period 2019 through 2023, we estimate his average annualized compensation (the "base amount") at approximately $7,840,000. We note that this figure will need to be verified through information provided by Harding or his counsel and may be subject to adjustment.

Safe Harbor Limit. Based on the estimated base amount of $7,840,000, the safe harbor limit under Section 280G would be (3 × $7,840,000) − $1 = $23,519,999. Parachute payments to Harding that exceed this threshold would be classified as "excess parachute payments," subjecting Harding to a 20% excise tax under Section 4999 and causing the Company to lose its deduction for the excess payments under Section 280G.

Scenario Modeling. Calderwood & Harkness will model the estimated total parachute payments to Harding under various CIC severance scenarios, including:

(a) The Company's proposed 2.5x CIC severance, with best-net safe harbor;

(b) Harding's anticipated 3x CIC severance demand, without any 280G mitigation;

(c) A 3x CIC severance scenario with best-net safe harbor (i.e., payments reduced to the safe harbor limit if such reduction results in a greater after-tax benefit to Harding); and

(d) A 3x CIC severance scenario with full excise tax gross-up.

Comparative Analysis. For each scenario, Calderwood & Harkness will prepare a comparative analysis of the financial impact to both Harding and the Company, including: (i) the amount of estimated excess parachute payments; (ii) the estimated excise tax liability to Harding; (iii) the estimated after-tax benefit to Harding under each approach (best-net cutback, full payment with excise tax, or full payment with gross-up); and (iv) the total cost to the Company under each approach, including the gross-up cost and the lost deduction under Section 280G.

Based on preliminary estimates, if Harding's total parachute payments under a 3x CIC scenario were approximately $30,360,000, the excess parachute payments would be approximately $30,360,000 minus $7,840,000 (the base amount), or $22,520,000, and the excise tax under Section 4999 would be approximately $6,072,000 (assuming a combined federal/state marginal income tax rate and a 20% excise rate applied to the excess). The gross-up cost to the Company to make Harding whole for the excise tax, including the gross-up on the gross-up, could be substantially higher than the excise tax itself, depending on applicable marginal tax rates. We will present this analysis in detail once the final compensation terms are further defined.

Accounting Coordination. Calderwood & Harkness will coordinate with Galloway & Partners (Clive Warburton, audit partner), Northgate's external auditors, on the accounting treatment of equity compensation under ASC 718 (US GAAP) and IFRS 2 (as applicable to the parent company's consolidated financial statements), including the accounting for sign-on equity grants and annual LTI awards. Proper accounting treatment of these awards is important for financial reporting purposes and for the Company's compliance with its disclosure obligations.

3.6 Restrictive Covenant Provisions

Calderwood & Harkness will draft and negotiate comprehensive restrictive covenant provisions applicable to Harding, both during and following the term of his employment. Restrictive covenants are essential to protecting the Company's legitimate business interests, including its trade secrets, proprietary information, customer relationships, and employee workforce. At the same time, we recognize that the enforceability of such provisions—particularly non-compete covenants—is subject to significant legal uncertainty under evolving state and federal law, and that this area is expected to be a significant point of disagreement with Harding's counsel.

Non-Competition. Northgate's proposed position is a twenty-four (24) month post-termination non-compete, worldwide in geographic scope, prohibiting Harding from accepting employment with, rendering services to, or otherwise engaging in any business activities on behalf of any company deriving more than 15% of its consolidated revenue from (i) telecommunications services, (ii) telecommunications infrastructure, or (iii) enterprise software-as-a-service ("SaaS") platforms serving telecommunications operators. The scope of this non-compete is designed to cover not only Northgate's direct competitors in the traditional telecom space, but also companies in adjacent sectors (such as enterprise SaaS and infrastructure) that may be positioned to compete with Northgate's expanding digital and platform-based service offerings.

Non-Solicitation. Northgate's proposed position is a twenty-four (24) month post-termination non-solicitation covenant, covering both (a) the solicitation of employees (including officers, directors, and independent contractors) of the Company and its affiliates, and (b) the solicitation of customers, clients, and business partners of the Company and its affiliates for the purpose of diverting or redirecting business away from the Company.

Non-Disparagement and Confidentiality. Calderwood & Harkness will include mutual non-disparagement provisions (subject to customary carve-outs for legally compelled disclosures and cooperation with governmental investigations) and comprehensive confidentiality obligations that survive the termination of the Employment Agreement indefinitely. The confidentiality provisions will include appropriate carve-outs for information that becomes publicly available through no fault of Harding and for disclosures required by law or legal process.

Garden Leave. Northgate proposes a six (6) month paid garden leave period, during which Harding would remain an employee of the Company (and thus subject to all contractual obligations, including the restrictive covenants) but would not be required or permitted to perform active duties. During the garden leave period, Harding would continue to receive his base salary only (i.e., no bonus or LTI grants would be made during the garden leave period). The garden leave provision is intended to provide the Company with a mechanism to restrict Harding's competitive activities during a transition period while preserving the enforceability of the post-termination non-compete.

Enforceability Analysis. Calderwood & Harkness will prepare a memorandum analyzing the enforceability of the proposed restrictive covenant provisions under New York law, including:

(a) The reasonableness test applied by New York courts to post-employment non-compete agreements, assessing the duration (24 months), geographic scope (worldwide), and scope of restricted activity against the standards established by the New York Court of Appeals and the Appellate Division;

(b) The "blue-penciling" doctrine, under which New York courts may, in their discretion, sever or narrow overbroad restrictive covenant provisions rather than invalidating them in their entirety, and the implications of this doctrine for the drafting of the restrictive covenants;

(c) The current status of pending New York legislation proposing a comprehensive ban on non-compete agreements (Senate Bill S3100 and Assembly Bill A1278, which were vetoed by the Governor in November 2023 but which have been reintroduced in the current legislative session), and the risk that such legislation, if enacted, could affect the enforceability of the non-compete provisions; and

(d) The potential applicability of the Federal Trade Commission's final rule banning non-compete clauses (published April 23, 2024, with a proposed effective date of September 4, 2024), including the rule's exemption for "senior executives" (individuals earning more than $151,164 annually who are in policy-making positions), which would likely exempt Harding from the ban. We note that the FTC rule is currently subject to legal challenges (Ryan LLC v. FTC, N.D. Texas) and its future applicability remains uncertain.

Anticipated Counterproposals from Harding. Harding's existing Marlowe Asset Management non-compete is limited to twelve (12) months post-termination with a geographic scope limited to the United States. We anticipate that Harding, through Ms. Hargrove, will resist any non-compete provision that is materially more restrictive than his current arrangement, and will seek to narrow the duration from 24 months to 12 months, limit the geographic scope to the United States, and narrow the scope of restricted activities. Given the significant gap between the Company's proposed position and Harding's anticipated counteroffer, the restrictive covenant provisions are expected to require substantial negotiation.

3.7 Cross-Border Coordination: UK Service Agreement

Given Northgate's status as a UK-incorporated public limited company with significant operations in the United Kingdom, and the expectation that Harding will devote a portion of his time to duties performed in the UK, Calderwood & Harkness will coordinate with Moorfield Bates LLP, the Company's UK employment counsel, on the preparation of a secondary UK service agreement between Northgate Telecommunications PLC (the UK parent) and Harding.

UK Counsel. The Moorfield Bates LLP team consists of Simon Aldridge (partner) and Hannah Carmichael (associate), based at the firm's offices at 1 Moorgate, London EC2R 6AB.

Dual-Contract Structure. The proposed arrangement contemplates a dual-contract structure, under which:

(a) The primary employment agreement will be between Northgate Telecommunications US, Inc. (the US subsidiary) and Harding, governed by New York law, covering approximately 80% of Harding's time and duties, with his principal office located at the Company's US headquarters in New York; and

(b) A secondary UK service agreement will be between Northgate Telecommunications PLC (the UK parent) and Harding, governed by the laws of England and Wales, covering approximately 20% of Harding's time and duties, with services performed at the Company's London headquarters at 45 Canary Wharf Tower, One Canada Square, London E14 5AB.

This dual-contract structure is designed to reflect the operational reality of the CEO role, which requires significant time in both jurisdictions, while providing a clear legal framework for the employment relationship in each country.

Moorfield Bates Responsibilities. Moorfield Bates LLP will take the lead on the following matters relating to the UK service agreement:

(a) Compliance with the UK Corporate Governance Code 2024, including Provision 40 (which provides that notice periods for executive directors should be set at one year or less, and that the Remuneration Committee should consider what compensation commitments their directors' terms of appointment would entail in the event of early termination);

(b) Compliance with the Financial Conduct Authority's Senior Managers & Certification Regime ("SM&CR"), which applies to Northgate by virtue of its regulated telecommunications licenses in the United Kingdom, and which may require Harding to be approved by the FCA as a Senior Manager;

(c) UK employment law implications, including compliance with the Employment Rights Act 1996, the Equality Act 2010, and other applicable UK employment legislation; and

(d) UK tax and social security considerations, including Harding's potential UK income tax liability, National Insurance obligations, and the availability of relief under the US-UK Income Tax Treaty.

Tax Considerations. Harding will remain a US tax resident for federal income tax purposes. The Company will seek a certificate of coverage under the US-UK Totalization Agreement (the Agreement on Social Security between the United States and the United Kingdom) to exempt Harding from UK National Insurance contributions during the period of his secondment to the UK. The Company proposes to provide Harding with tax equalization for any UK-source income, such that Harding's overall tax burden is no greater than it would be if all of his income were US-source.

Scope Limitation. Calderwood & Harkness's role with respect to the UK service agreement is limited to coordination and to ensuring consistency between the US and UK agreements in terms of economic provisions, termination triggers, and restrictive covenant obligations. Primary UK employment law advice will be provided by Moorfield Bates LLP.

3.8 Indemnification and D&O Insurance

Calderwood & Harkness will draft indemnification provisions for inclusion in the Employment Agreement (or in a separate indemnification agreement, as the Company may prefer), providing Harding with indemnification and advancement of expenses in his capacity as Chief Executive Officer and, as applicable, as a director of Northgate Telecommunications PLC and its subsidiaries, to the fullest extent permitted by applicable law (including the laws of the State of Delaware, which govern Northgate Telecommunications US, Inc., and the Companies Act 2006, which governs the UK parent company).

In addition, Calderwood & Harkness will coordinate with Ashdown Surety & Insurance Co. regarding directors' and officers' ("D&O") insurance coverage for the incoming CEO. Northgate's current D&O policy (policy number ASI-D&O-NTP-2024-4471) provides coverage with limits of $50,000,000 per occurrence and $100,000,000 in the aggregate. We will confirm that the existing policy covers Harding upon his appointment and will review the policy's tail provisions to ensure adequate protection for Harding in the event of a Change in Control or other corporate transaction that could affect the Company's ongoing obligation to maintain D&O coverage. We anticipate that Harding's counsel will request contractual commitments from the Company regarding the maintenance of D&O coverage at specified minimum levels throughout his tenure and for a specified tail period following his departure.

3.9 Corporate Governance Advisory

Calderwood & Harkness will advise Northgate on the corporate governance implications of the proposed CEO compensation package, with a particular focus on the following areas:

UK Corporate Governance Code 2024. The Company is subject to the UK Corporate Governance Code 2024 on a "comply or explain" basis as a premium-listed company on the London Stock Exchange. The Remuneration Committee's remuneration policy, including the terms of the CEO's employment agreement, must be disclosed in the Company's annual report and is subject to a binding shareholder vote at least every three years. Calderwood & Harkness will advise on the alignment of the proposed compensation package with the principles and provisions of the Code, including the provisions relating to executive remuneration, alignment of pay with performance, and the exercise of discretion by the Remuneration Committee.

Say-on-Pay Considerations. Northgate received 87.4% support on its advisory say-on-pay vote at the Annual General Meeting held on April 18, 2024. While this level of support is above the thresholds at which ISS and Tarrant Partners LLC typically recommend against say-on-pay proposals, it is below the 90% level that many companies target and reflects a degree of shareholder concern regarding the Company's current remuneration practices. Any new CEO compensation package will be subject to a binding remuneration policy vote at the 2025 AGM, and the terms of the Employment Agreement will need to be designed with this vote in mind.

Proxy Advisory Coordination. Calderwood & Harkness will coordinate with Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director) on the anticipated reaction of ISS and Tarrant Partners LLC to the compensation quantum, CIC provisions, and restrictive covenant terms of the proposed Employment Agreement. Veltrano will also advise on shareholder engagement strategy in advance of the 2025 AGM.

Institutional Shareholder Considerations. In developing the compensation structure and negotiation strategy, Calderwood & Harkness will be mindful of the perspectives and known preferences of Northgate's top institutional shareholders, which include:

(a) Caledonian Asset Management — 8.3% ownership;

(b) Pemberton Capital Group — 6.7% ownership;

(d) Regis Global Equity Fund — 4.4% ownership; and

(e) Atlas Pension Fund — 3.2% ownership.

Several of these shareholders have publicly stated governance preferences regarding executive compensation, including opposition to excise tax gross-ups, preferences for performance-based vesting on LTI awards, and expectations regarding post-employment restrictive covenants. Calderwood & Harkness will work with Veltrano and the Company's investor relations team to ensure that the final Employment Agreement terms are defensible in the context of shareholder engagement and the 2025 AGM vote.

3.10 Section 409A Compliance

Calderwood & Harkness will ensure that all deferred compensation elements of the Employment Agreement comply with the requirements of Section 409A of the Internal Revenue Code and the regulations promulgated thereunder. Section 409A imposes strict requirements on the timing of deferrals and distributions of nonqualified deferred compensation, and failure to comply can result in the immediate inclusion in income of all deferred amounts, together with a 20% additional tax and interest penalties.

Specific 409A compliance considerations that we anticipate addressing in connection with the Employment Agreement include:

(a) Separation from Service. Ensuring that all severance payments and benefits conditioned on a termination of employment are tied to a "separation from service" within the meaning of Section 409A, and that the definition of separation from service in the Employment Agreement is consistent with the regulatory default or the Company's elected alternative definition;

(b) Specified Employee Delay. Because Northgate Telecommunications US, Inc. is a subsidiary of a publicly traded company, Harding will likely qualify as a "specified employee" under Section 409A. Accordingly, any nonqualified deferred compensation payable upon separation from service must be delayed for a period of six (6) months following the separation from service (the "specified employee delay"), with all delayed payments made in a lump sum on the first business day following the expiration of the delay period. We will include appropriate specified employee provisions in the Employment Agreement and in all equity award agreements;

(c) Permissible Payment Triggers. Ensuring that all payment triggers in the Employment Agreement (including severance payments, bonus payments, and equity settlement) fall within the categories of permissible distribution events under Section 409A (separation from service, death, disability, change in control, fixed date, or unforeseeable emergency), and that the definition of "change in control" for 409A purposes conforms to the requirements of Treasury Regulation § 1.409A-3(i)(5); and

(d) SERP Contributions. Ensuring that the supplemental executive retirement contributions proposed in Section 3.2 above are structured in compliance with Section 409A, including proper election timing, permissible distribution triggers, and the prohibition on accelerated distributions.

4. Engagement Team

The following attorneys at Calderwood & Harkness LLP will staff this engagement:

Renata Vasquez will serve as the Responsible Partner for this engagement. She will have overall responsibility for the direction and quality of all work product, will lead all significant negotiation sessions with Hargrove & Liddell LLP, and will serve as the primary point of contact for the Remuneration Committee and the Board on matters requiring Board-level input or authorization.

Bernard Crawford will serve as the Billing Partner and will provide strategic oversight of the engagement. Mr. Crawford will be available for key negotiation calls and Board-level discussions, and will serve as a resource for Ms. Vasquez on complex compensation structuring and corporate governance issues. Mr. Crawford has extensive experience advising FTSE 100 and S&P 500 companies on CEO-level employment arrangements.

James Underwood will serve as the Lead Associate, functioning as the primary drafter of all work product, including the term sheet, the Employment Agreement, all ancillary agreements, and research memoranda. Mr. Underwood will serve as the day-to-day point of contact for the Company's in-house legal team on substantive legal work and will manage the document drafting and revision process.

Devon Archer will serve as the Working Associate, responsible for research memoranda, the Section 280G analysis, preparation of call notes and negotiation summaries, and drafting support as directed by Ms. Vasquez and Mr. Underwood.

If it becomes necessary to involve additional attorneys or professionals (for example, tax specialists or ERISA counsel) in connection with specific issues arising during the engagement, Calderwood & Harkness will seek the Company's prior approval before expanding the engagement team, and will advise the Company of the applicable billing rates.

5. Fee Arrangement

This engagement will be billed on an hourly basis at the rates set forth in Section 4 above, as specified in the engagement letter dated June 4, 2024. These rates are effective for the 2024 calendar year and may be adjusted annually in accordance with the firm's standard rate-setting process, subject to prior notice to the Company.

Invoices will be rendered on a monthly billing cycle and are payable within thirty (30) days of the date of the invoice. Each invoice will include a detailed description of the services rendered, the identity of the timekeepers who performed the work, the hours billed, and the applicable rates.

A retainer in the amount of $75,000 was received by Calderwood & Harkness and deposited into the firm's client trust account, as confirmed on June 5, 2024. This retainer will be held in trust and applied against the final invoice upon the conclusion of the engagement. In the event that the retainer exceeds the final invoice amount, the balance will be returned to the Company promptly upon conclusion of the matter.

Disbursements and out-of-pocket expenses, including travel, electronic research charges, courier services, and other costs incurred in connection with the engagement, will be billed at cost and included in monthly invoices.

6. Coordination and Communication Protocol

Effective coordination between Calderwood & Harkness and the Company's in-house legal team is essential to the efficient and successful execution of this engagement. Accordingly, the parties have agreed to the following communication and decision-making protocols:

Primary Client Contact. Elaine Whitford, Senior Vice President and Group General Counsel, will serve as the primary client contact for all day-to-day instructions, approvals, and communications. All requests for direction, confirmations of negotiation authority, and substantive work product will be channeled through Ms. Whitford unless she designates an alternative contact for specific matters.

Negotiation Authority. Calderwood & Harkness understands that significant negotiation positions and concessions—including any deviation from the Company's proposed positions as set forth in the initial term sheet—will require the approval of the Remuneration Committee (chaired by Geoffrey Stanton) or, for matters of particular significance, Board-level authorization. Calderwood & Harkness will clearly flag any proposed concessions or negotiation positions that, in our judgment, fall outside the parameters established by the Company, and will not make such concessions without prior written authorization.

Communications with Opposing Counsel. Calderwood & Harkness will communicate with Hargrove & Liddell LLP directly on all negotiation matters. Ms. Whitford will be copied on all substantive correspondence with opposing counsel, including emails, letters, and drafts of the term sheet and Employment Agreement. Calderwood & Harkness will provide Ms. Whitford with a summary of all telephonic and in-person negotiation discussions within twenty-four (24) hours of such discussions.

Coordination with UK Counsel. Calderwood & Harkness will coordinate with Moorfield Bates LLP (Simon Aldridge and Hannah Carmichael) on all matters relating to the UK service agreement and UK-specific legal, regulatory, and tax issues. Ms. Whitford and Priya Narayanan, the Company's Chief People Officer, will be included in correspondence and calls with Moorfield Bates as appropriate to ensure alignment between the US and UK work streams.

Coordination with Other Advisors. All substantive communications with the following advisors will be coordinated through Ms. Whitford to ensure consistency of messaging and to preserve applicable privileges:

(a) Whitmore Hobson LLP (Dr. Rachel Whitmore, Managing Partner) — independent compensation consultant to the Remuneration Committee;

(b) Galloway & Partners (Clive Warburton, audit partner) — external auditors;

(d) Ashdown Surety & Insurance Co. — D&O insurance carrier.

7. Matters Excluded from Scope

The following matters are expressly excluded from the scope of Calderwood & Harkness's engagement under this matter number and will not be undertaken by this firm absent a separate engagement letter:

(a) Securities Law Advice. Any advice regarding the Company's disclosure obligations under applicable US or UK securities laws and regulations (including the Securities Exchange Act of 1934, the UK Market Abuse Regulation, and the FCA's Disclosure Guidance and Transparency Rules) in connection with the announcement of Harding's appointment or the terms of his compensation. Such advice should be obtained from the Company's standing outside securities counsel;

(b) UK Tax Advisory Services. Any advice regarding UK tax matters, including Harding's UK income tax liability, National Insurance obligations, and structuring of the UK service agreement for UK tax efficiency. Such advice will be handled by Moorfield Bates LLP or the Company's UK tax advisors, as applicable;

(c) Sir Alistair Kemble Retirement Arrangements. Any negotiation or drafting of agreements with Sir Alistair Kemble relating to his retirement from the CEO role, including separation agreements, consulting arrangements, or retirement benefit determinations;

(d) CEO Search Process. Any advice relating to the CEO search process conducted by Kensington Partners Ltd., including the search engagement agreement, candidate evaluation, or the Nomination Committee's deliberations. The Kensington search engagement predates this matter and is not within the scope of our retention; and

(e) Marlowe Asset Management Departure Matters. Any litigation, dispute resolution, or advisory services arising from Harding's departure from Marlowe Asset Management Digital Holdings, Inc., including any claims by Marlowe Asset Management for breach of Harding's existing employment agreement or restrictive covenants, or any claims by Harding against Marlowe Asset Management. If such matters arise, they would need to be addressed under a separate engagement letter, subject to conflicts clearance.

8. Anticipated Timeline

Calderwood & Harkness proposes the following target timeline for the key milestones in this engagement:

We note that Harding's proposed start date of October 1, 2024 is subject to the timeline for Harding's transition out of his current role at Marlowe Asset Management Digital Holdings, Inc. Depending on the notice period required under Harding's existing Marlowe Asset Management employment agreement and the progress of Marlowe Asset Management's own succession planning, an adjustment of the start date to November 1, 2024 may be necessary. Calderwood & Harkness will work with Ms. Hargrove to understand any constraints on Harding's availability and will advise the Company accordingly.

We wish to note candidly that the proposed timeline is aggressive given the complexity of the anticipated negotiations, particularly with respect to the change in control provisions (Section 3.4) and the restrictive covenant terms (Section 3.6). Both of these areas present significant gaps between the Company's proposed positions and Harding's likely counterpositions, and achieving consensus may require multiple rounds of negotiation and Board-level deliberation. We will monitor the timeline closely and will advise the Company promptly if it appears that material delays are likely, so that contingency planning—including potential adjustments to Harding's start date or interim transition arrangements—can be considered.

9. Closing

Calderwood & Harkness LLP is grateful for the confidence that Northgate Telecommunications PLC has placed in our firm by entrusting us with this engagement. The appointment of a new Chief Executive Officer is among the most consequential decisions any board of directors makes, and we appreciate the significance of this matter to the Company, its shareholders, and its broader stakeholder community. We are confident that our engagement team possesses the experience, judgment, and technical expertise required to deliver a best-in-class Employment Agreement that protects the Company's interests while securing the services of a highly talented executive.

We would welcome the opportunity to schedule an initial call with you at your earliest convenience to discuss the Company's negotiation strategy, the Board-approved parameters and red lines for the key terms (particularly the CIC multiplier, tax treatment, and restrictive covenant duration and scope), and the priorities that should be reflected in the initial term sheet. Establishing this strategic foundation before circulating the term sheet to Hargrove & Liddell will ensure that our opening position is calibrated to achieve the Company's objectives while leaving appropriate room for negotiation.

Please do not hesitate to reach out to me directly at any time. I can be reached at:

Renata Vasquez Partner, Labor & Employment Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, New York 10171 Direct: (212) 506-7142 Mobile: (917) 843-2261

Email: rvasquez@calderwoodharkness.com

We look forward to working with you and your team on this important matter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Renata Vasquez Partner

cc: Bernard Crawford, Partner, Calderwood & Harkness LLP

This memorandum is a privileged and confidential attorney-client communication. It is intended solely for the use of the addressee and any individuals to whom the addressee has authorized disclosure. Any unauthorized review, use, disclosure, or distribution is prohibited. If you have received this memorandum in error, please contact Calderwood & Harkness LLP immediately at (212) 506-7000.

Name	Role	Practice Group	Office	Hourly Rate
Renata Vasquez	Responsible Partner	Labor & Employment	New York	$1,650
Bernard Crawford	Billing Partner	Labor & Employment	New York	$1,575
James Underwood	Lead Associate	Labor & Employment	New York	$895
Devon Archer	Working Associate	Labor & Employment	New York	$725
Milestone	Target Date
Initial term sheet circulated to Hargrove & Liddell LLP	On or about June 10, 2024
Conclusion of term-sheet negotiation (economic and key non-economic terms)	Mid-July 2024
First full draft Employment Agreement circulated to Hargrove & Liddell LLP	Late July 2024
Completion of Employment Agreement negotiation and finalization	Mid-September 2024
Target execution of Employment Agreement	Mid-to-late September 2024
Proposed start date for Harding	October 1, 2024

CALDERWOOD & HARKNESS LLP Attorneys at Law
299 Park Avenue, 42nd Floor New York, New York 10171
Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
MEMORANDUM
June 5, 2024
TO: Elaine Whitford, Senior Vice President & Group General Counsel Northgate Telecommunications PLC 600 Lexington Avenue, 38th Floor New York, New York 10022
FROM: Renata Vasquez, Partner Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, New York 10171
RE: Scope of Engagement — Negotiation and Drafting of CEO Employment Agreement for Marcus Elliot Harding
Matter No.: 1022-00004
1. Purpose
This memorandum confirms the scope of Calderwood & Harkness LLP's engagement by Northgate Telecommunications PLC ("Northgate," "NTP," or the "Company") in connection with the negotiation and drafting of a definitive executive employment agreement (the "Employment Agreement") for Marcus Elliot Harding ("Harding"), who has been selected as the preferred candidate for the position of Chief Executive Officer of Northgate. The terms and conditions of our engagement are as set forth in the engagement letter executed by the parties on June 4, 2024, a copy of which has been retained in our files and is incorporated herein by reference.
The purpose of this memorandum is to provide a detailed description of the work streams, deliverables, and coordination responsibilities that we anticipate will be required in connection with this engagement, so as to ensure alignment between Calderwood & Harkness as outside counsel and the Company's in-house legal team. We believe that clarity on these matters at the outset of the engagement will facilitate efficient execution and minimize the risk of misunderstandings as the negotiation process unfolds.
In addition, this memorandum identifies the key legal issues that Calderwood & Harkness anticipates addressing in the course of the engagement, including certain areas where we expect meaningful negotiation with Harding's counsel and where the Company's Board of Directors (the "Board") and Remuneration Committee may need to establish clear parameters and red lines in advance of the negotiation process.
For reference, this engagement has been assigned Calderwood & Harkness matter number 1022-00004. The firm's conflicts clearance process was completed on June 3, 2024, and no conflicts of interest were identified that would preclude our representation of Northgate in this matter.
2. Background
2.1 The Company
Northgate Telecommunications PLC (registered number 07381264) is a public limited company incorporated in England and Wales. The Company's ordinary shares are listed on the London Stock Exchange under the ticker symbol LON: NTP. In addition, Northgate is cross-listed on the New York Stock Exchange through an American Depositary Receipt ("ADR") program under the ticker symbol NYSE: NTPC. As of June 2024, Northgate has an approximate market capitalization of £8.7 billion (approximately $11.1 billion at prevailing exchange rates). For the fiscal year ended December 31, 2023 ("FY2023"), Northgate reported consolidated revenue of £4.26 billion (approximately $5.43 billion). The Company employs approximately 22,500 individuals globally across its operations in the United Kingdom, the United States, Continental Europe, and select markets in the Asia-Pacific region.
2.2 CEO Transition
On May 15, 2024, Sir Alistair Kemble, the Company's Chief Executive Officer since January 2014, announced his intention to retire from the CEO role effective December 31, 2024, following eleven years of service in that capacity. Sir Alistair's retirement announcement set in motion a CEO succession process that had been in preliminary planning stages for some time.
Kensington Partners Ltd. ("Kensington"), an executive search firm, was retained by the Board on March 1, 2024 to conduct a comprehensive CEO search. On May 22, 2024, Kensington presented a final shortlist of three candidates to the Nomination Committee of the Board, which is chaired by Lucinda Farrow. Following interviews and deliberations, on May 28, 2024, the Nomination Committee recommended Marcus Elliot Harding as the preferred candidate for the CEO role, and the Board unanimously concurred with this recommendation.
Dame Philippa Thornton-Hale, Chair of the Board of Directors, extended an informal verbal offer to Harding on May 30, 2024. Harding expressed strong interest in the position, subject to agreement on definitive employment terms.
2.3 The Candidate
Harding, age 52, is currently serving as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"), a Delaware corporation headquartered at 200 Technology Way, Suite 4000, San Jose, California 95110. Marlowe Asset Management's common stock is publicly traded on the New York Stock Exchange under the ticker symbol NYSE: VDHI. Harding has an extensive career spanning approximately 28 years in the telecommunications and technology sectors, during which time he has held a series of progressively senior leadership positions.
2.4 Candidate's Legal Representation
Harding is represented by personal counsel Victoria Hargrove of Hargrove & Liddell LLP, located at 51 Madison Avenue, 30th Floor, New York, New York 10010. We understand that Ms. Hargrove has represented Harding in connection with his employment arrangements since 2017. All negotiations with respect to the Employment Agreement will be conducted with Ms. Hargrove's office.
3. Scope of Engagement
The following sections describe the specific work streams and deliverables encompassed within Calderwood & Harkness's engagement. Each section identifies the substantive legal issues that we anticipate addressing, as well as areas where coordination with other advisors or Company stakeholders will be required.
3.1 Primary Engagement: Negotiation and Drafting of Executive Employment Agreement
Calderwood & Harkness will serve as lead outside counsel to Northgate for the negotiation and drafting of a definitive executive employment agreement between Northgate Telecommunications US, Inc. (a wholly-owned subsidiary of Northgate Telecommunications PLC, incorporated in the State of Delaware) as employer, and Marcus Elliot Harding as executive. The use of the US subsidiary as the employing entity reflects the fact that Harding will be based primarily in the Company's New York offices and will be a US tax resident. The Employment Agreement will be governed by the laws of the State of New York, without regard to principles of conflicts of laws.
The Employment Agreement is expected to cover a proposed initial term of five (5) years, commencing on October 1, 2024 (or such other start date as the parties may agree), with automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least one hundred eighty (180) days prior to the expiration of the then-current term. The terms of engagement, renewal, and notice periods are expected to be subject to negotiation with Harding's counsel.
Calderwood & Harkness will negotiate directly with Hargrove & Liddell LLP on behalf of Northgate at all stages of the negotiation process, subject to client direction. We will not take any material negotiation positions or make any concessions without prior authorization from the Company, as further described in Section 6 of this memorandum.
The deliverables under this primary engagement include:
(a) An initial term sheet setting forth the Company's proposed economic and material non-economic terms, suitable for circulation to Harding's counsel as the opening negotiation position;
(b) Subsequent revised term sheets, as necessary, reflecting the evolution of negotiations and incorporating agreed-upon terms as the parties reach consensus on specific issues;
(c) A full draft Employment Agreement, incorporating all agreed-upon terms and reflecting best practices for executive employment agreements at the CEO level of a publicly traded multinational corporation;
(d) Redline responses to counterproposals received from Hargrove & Liddell LLP, together with explanatory cover correspondence as appropriate;
(e) Final execution versions of the Employment Agreement and all ancillary documents necessary to effectuate the hire, including but not limited to equity award agreements, restrictive covenant agreements (if maintained as separate documents), indemnification agreements, and any required corporate authorizations or consents; and
(f) Such internal memoranda, negotiation strategy documents, and issue-analysis papers as may be requested by the Company's in-house legal team or the Remuneration Committee in the course of the engagement.
3.2 Compensation and Benefits Structuring
A significant component of this engagement will involve advising Northgate on the structuring and negotiation of Harding's overall compensation package. The compensation architecture involves multiple elements, each of which presents distinct legal, tax, accounting, and corporate governance considerations. We anticipate that the compensation package will include the following elements, all of which are subject to negotiation:
Base Salary. The Company proposes an annual base salary of $1,750,000 per annum, payable in accordance with Northgate's standard payroll practices. This represents a premium of approximately $300,000 (approximately 20.7%) over Harding's current base salary of $1,450,000 at Marlowe Asset Management.
Annual Incentive / Bonus. The Company proposes that Harding participate in Northgate's annual incentive program, with a target bonus opportunity of 175% of base salary, equating to a target annual bonus of $3,062,500. The maximum annual bonus opportunity would be 300% of base salary, equating to a maximum of $5,250,000. Performance metrics, weightings, and payout curves will be determined by the Remuneration Committee in its discretion, consistent with the applicable remuneration policy. Harding's current annual target bonus at Marlowe Asset Management is $2,175,000 (150% of base salary); the proposed NTP target represents a meaningful increase in both percentage terms and absolute dollars.
Long-Term Incentive Program. Harding will participate in the Company's annual long-term incentive ("LTI") program, with an annual target LTI value of $9,000,000. The proposed mix of award types is 60% performance share units ("PSUs") and 40% restricted stock units ("RSUs"), to be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "Omnibus Plan"). PSU vesting will be subject to performance conditions to be determined by the Remuneration Committee. Harding's current annual LTI target at Marlowe Asset Management is $7,500,000; the proposed NTP target of $9,000,000 represents a $1,500,000 (20.0%) increase.
Sign-On Cash Bonus. The Company proposes a one-time sign-on cash bonus of $5,000,000, payable upon commencement of employment (or in such installments as may be agreed). This sign-on bonus is designed principally as a make-whole component to partially compensate Harding for compensation forfeited in connection with his departure from Marlowe Asset Management. The sign-on bonus will be subject to clawback provisions requiring full repayment in the event of Harding's voluntary resignation without good reason within twenty-four (24) months of his start date.
Sign-On Equity Grants. In addition to the sign-on cash bonus, the Company proposes one-time sign-on equity grants intended to compensate Harding for the estimated $23,400,000 in Marlowe Asset Management equity compensation (including unvested RSUs and in-the-money stock options) that Harding will forfeit upon his departure from Marlowe Asset Management. The proposed sign-on equity package consists of:
(i) A restricted stock unit grant with an aggregate grant-date value of $12,000,000, subject to three-year ratable vesting (i.e., one-third vesting on each of the first three anniversaries of the grant date); and
(ii) A performance share unit grant with an aggregate grant-date target value of $6,400,000, subject to three-year cliff vesting, with the number of shares earned determined by performance against total shareholder return ("TSR") and revenue growth hurdles to be established by the Remuneration Committee.
The total proposed sign-on equity value of $18,400,000, when combined with the $5,000,000 sign-on cash bonus, yields an aggregate sign-on package of $23,400,000, which is designed to fully offset the estimated value of Harding's forfeited Marlowe Asset Management equity. We note that the estimated forfeiture value of $23,400,000 is based on Marlowe Asset Management's stock price and equity plan data as of May 2024, and may fluctuate; we will work with the Company to develop appropriate mechanisms for addressing any material changes in the forfeiture estimate prior to execution of the Employment Agreement.
Retirement Benefits. Harding will be eligible to participate in the Company's US 401(k) retirement savings plan, with an employer matching contribution of 6% of eligible compensation (subject to applicable IRS contribution limits under Sections 401(a)(17) and 415 of the Internal Revenue Code). In addition, the Company proposes an annual supplemental executive retirement plan ("SERP") contribution of $250,000 per year, to be credited to a nonqualified deferred compensation account on Harding's behalf, subject to Section 409A compliance as further described in Section 3.10 below.
Perquisites. The proposed perquisite package includes: (a) an annual car allowance of $25,000; (b) participation in the Company's executive health program; (c) supplemental life insurance coverage with a benefit of $2,000,000; and (d) reimbursement for personal financial planning and tax preparation services in an amount not to exceed $35,000 per year.
Coordination with Compensation Consultant. Calderwood & Harkness will coordinate with Whitmore Hobson LLP (Dr. Rachel Whitmore, Managing Partner), the independent compensation consultant retained by the Remuneration Committee (chaired by Geoffrey Stanton), with respect to peer-group benchmarking, pay-ratio analysis, and the overall market positioning of the proposed compensation package. Whitmore Hobson's analyses will be important in supporting the Remuneration Committee's deliberations and in providing a defensible basis for the compensation quantum in anticipation of the binding remuneration policy vote at the 2025 Annual General Meeting.
Comparative Compensation Summary. For reference, Harding's current total target annual compensation at Marlowe Asset Management is approximately $11,125,000, comprised of base salary of $1,450,000, target annual bonus of $2,175,000 (150% of base), and annual LTI target of $7,500,000. The proposed NTP total target annual compensation of $13,812,500 (base salary of $1,750,000 plus target bonus of $3,062,500 plus LTI target of $9,000,000) represents a premium of approximately $2,687,500 (approximately 24.2%) over Harding's current total target compensation, which we believe is appropriate given the scope and complexity of the CEO role at a company of Northgate's scale and global footprint.
3.3 Termination and Severance Provisions
Calderwood & Harkness will draft and negotiate comprehensive termination provisions addressing all scenarios under which the Employment Agreement may be terminated, including:
(a) Termination by the Company without Cause;
(b) Resignation by Harding for Good Reason (constructive termination);
(c) Termination by the Company for Cause;
(d) Resignation by Harding without Good Reason (voluntary resignation);
(e) Termination due to death or Disability;
(f) Expiration of the initial term or any renewal term following timely notice of non-renewal; and
(g) Termination in connection with a Change in Control (addressed separately in Section 3.4 below).
The definitions of "Cause" and "Good Reason" will be critical components of the Employment Agreement and are expected to be subjects of negotiation. Calderwood & Harkness will draft these definitions with appropriate specificity, incorporating customary cure periods and procedural requirements. With respect to Good Reason, we anticipate that the definition will include, among other triggers, material diminution in title, duties, authority, or reporting relationship; material reduction in base salary or target bonus opportunity; relocation of Harding's principal office beyond a specified radius; and material breach by the Company of the Employment Agreement.
Non-CIC Severance. In the event of a termination by the Company without Cause or a resignation by Harding for Good Reason, in each case occurring outside of the Change in Control period (as discussed in Section 3.4), Northgate's proposed severance package is as follows:
(i) A lump-sum cash severance payment equal to two times (2x) the sum of base salary and target annual bonus, equating to $9,625,000 (i.e., 2 × ($1,750,000 + $3,062,500));
(ii) A pro-rata annual bonus for the fiscal year in which the termination occurs, based on actual performance as determined by the Remuneration Committee following the end of the applicable performance period, payable at the same time as bonuses are paid to similarly situated active executives;
(iii) Continued health and welfare benefits (including COBRA continuation coverage) for a period of eighteen (18) months following the date of termination, at the Company's expense; and
(iv) Twelve (12) months of accelerated vesting of unvested equity awards (including RSUs and PSUs, with PSU vesting based on target performance), with all vested stock options remaining exercisable for a period of ninety (90) days following the termination date (or such longer period as may be provided in the applicable award agreement).
We anticipate that Harding, through Ms. Hargrove, will seek enhanced severance terms relative to the Company's proposed position. We note that Harding's current employment agreement with Marlowe Asset Management provides for non-CIC severance of 2x base plus target bonus with 18 months of benefits continuation and 12 months of equity acceleration. We further note that his Marlowe Asset Management CIC severance is set at 3x base plus bonus with full vesting acceleration, and we expect Harding to use his existing Marlowe Asset Management provisions as a baseline for negotiation. Calderwood & Harkness will advise the Company on market positioning of the proposed severance terms and on the parameters within which the Company may negotiate without creating undue risk from a corporate governance or shareholder perspective.
All severance payments will be conditioned upon Harding's execution and non-revocation of a general release of claims in a form satisfactory to the Company, as well as Harding's continued compliance with all post-employment restrictive covenants.
3.4 Change in Control Provisions
Calderwood & Harkness anticipates that the change in control ("CIC") provisions of the Employment Agreement will constitute one of the most significant and complex areas of negotiation with Harding's counsel. CIC provisions involve substantial financial exposure for the Company, attract significant scrutiny from proxy advisory firms and institutional shareholders, and implicate important tax and accounting considerations.
Definition of Change in Control. Calderwood & Harkness proposes that the Employment Agreement include a "change in control" definition encompassing the following triggering events:
(a) The acquisition by any person or group of beneficial ownership of more than 50% of the combined voting power of the Company's outstanding voting securities (the "Acquisition Trigger");
(b) The consummation of a merger, consolidation, or similar business combination transaction after which the Company's shareholders immediately prior to the transaction hold less than 50% of the combined voting power of the surviving or resulting entity (the "Merger Trigger"); and
(c) The sale or disposition of all or substantially all of the Company's assets (the "Asset Sale Trigger").
We have deliberately excluded a Board turnover trigger (i.e., a change in the composition of the Board where a majority of directors are replaced within any twelve-month period) from the Company's proposed definition, for reasons discussed below.
CIC Severance Terms. Northgate's proposed position on CIC severance, applicable in the event of a qualifying termination (termination without Cause or resignation for Good Reason) occurring within the twenty-four (24) month period following a Change in Control (i.e., a "double trigger" arrangement), is as follows:
(i) A lump-sum cash severance payment equal to two and one-half times (2.5x) the sum of base salary and target annual bonus, equating to $12,031,250 (i.e., 2.5 × ($1,750,000 + $3,062,500));
(ii) Full acceleration of all unvested equity awards (including RSUs and PSUs, with PSU vesting based on target performance or, if determinable and higher, actual performance through the date of the Change in Control);
(iii) Continued health and welfare benefits (including COBRA continuation coverage) for a period of twenty-four (24) months following the date of termination, at the Company's expense;
(iv) A lump-sum outplacement services benefit of $50,000; and
(v) A "best-net" safe harbor provision under Section 280G of the Internal Revenue Code, meaning that if any payments to Harding would constitute "excess parachute payments" within the meaning of Section 280G, such payments will be reduced to the safe harbor limit only if and to the extent that such reduction would result in a greater after-tax benefit to Harding than receipt of the full payments subject to excise tax. Importantly, Northgate's proposed position is that no tax gross-up will be provided with respect to any excise tax liability arising under Section 4999 of the Internal Revenue Code.
Anticipated Counterproposals from Harding. Based on our review of Harding's current Marlowe Asset Management employment agreement (as publicly disclosed in Marlowe Asset Management's most recent proxy statement) and our assessment of market trends for CEO-level CIC provisions, we anticipate that Harding, through Ms. Hargrove, will push for the following enhanced CIC terms:
(a) A 3x multiplier (rather than 2.5x), which would yield a CIC cash severance payment of $14,437,500 (i.e., 3 × ($1,750,000 + $3,062,500)). Harding's current Marlowe Asset Management CIC multiplier is 3x;
(b) A full 280G excise tax gross-up, rather than a best-net safe harbor. Harding's existing Marlowe Asset Management agreement provides for a full gross-up. While full gross-up provisions have fallen significantly out of favor among institutional shareholders and proxy advisory firms, this remains a point that Ms. Hargrove can be expected to raise;
(c) Inclusion of a Board turnover trigger in the Change in Control definition, such that a change in the composition of the Board where a majority of directors are replaced within any twelve-month period would itself constitute a Change in Control. This trigger is present in Harding's current Marlowe Asset Management agreement. We note that Board turnover triggers are disfavored by ISS and Tarrant Partners LLC, and their inclusion could create complications in the context of Northgate's corporate governance profile.
Proxy Advisory and Shareholder Considerations. Calderwood & Harkness will coordinate closely with Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director) regarding the sensitivity of proxy advisory firms—specifically Thackeray Health IT ("ISS") and Westmark Solutions—to CIC multipliers, tax gross-up provisions, and Board turnover triggers. Both ISS and Tarrant Partners LLC have adopted policies that may result in negative vote recommendations on say-on-pay proposals where CIC multiples exceed 3x, where excise tax gross-ups are provided, or where single-trigger equity acceleration is employed. Negative recommendations from these firms could have a meaningful adverse impact on the Company's remuneration policy vote at the 2025 AGM. Veltrano's advice will be critical in calibrating the Company's CIC negotiation strategy.
Board Guidance Requested. We strongly recommend that the Remuneration Committee and the Board establish clear red lines on the CIC multiplier and tax treatment (i.e., gross-up vs. best-net) early in the negotiation process, before Calderwood & Harkness circulates the initial term sheet to Harding's counsel. Establishing these parameters in advance will enable us to negotiate with greater credibility and efficiency.
3.5 Section 280G Parachute Payment Analysis
Given the significance of the Section 280G / Section 4999 issues implicated by the CIC provisions, Calderwood & Harkness will prepare a detailed Section 280G analysis for the Company's review. This analysis will encompass the following components:
Base Amount Calculation. We will calculate Harding's "base amount" under Section 280G(b)(3) of the Internal Revenue Code, which is defined as the average annualized includable compensation payable by the "disqualified individual's" employer for the five most recent taxable years ending before the date of the change in control. Based on publicly available information regarding Harding's W-2 compensation from Marlowe Asset Management for the period 2019 through 2023, we estimate his average annualized compensation (the "base amount") at approximately $7,840,000. We note that this figure will need to be verified through information provided by Harding or his counsel and may be subject to adjustment.
Safe Harbor Limit. Based on the estimated base amount of $7,840,000, the safe harbor limit under Section 280G would be (3 × $7,840,000) − $1 = $23,519,999. Parachute payments to Harding that exceed this threshold would be classified as "excess parachute payments," subjecting Harding to a 20% excise tax under Section 4999 and causing the Company to lose its deduction for the excess payments under Section 280G.
Scenario Modeling. Calderwood & Harkness will model the estimated total parachute payments to Harding under various CIC severance scenarios, including:
(a) The Company's proposed 2.5x CIC severance, with best-net safe harbor;
(b) Harding's anticipated 3x CIC severance demand, without any 280G mitigation;
(c) A 3x CIC severance scenario with best-net safe harbor (i.e., payments reduced to the safe harbor limit if such reduction results in a greater after-tax benefit to Harding); and
(d) A 3x CIC severance scenario with full excise tax gross-up.
Comparative Analysis. For each scenario, Calderwood & Harkness will prepare a comparative analysis of the financial impact to both Harding and the Company, including: (i) the amount of estimated excess parachute payments; (ii) the estimated excise tax liability to Harding; (iii) the estimated after-tax benefit to Harding under each approach (best-net cutback, full payment with excise tax, or full payment with gross-up); and (iv) the total cost to the Company under each approach, including the gross-up cost and the lost deduction under Section 280G.
Based on preliminary estimates, if Harding's total parachute payments under a 3x CIC scenario were approximately $30,360,000, the excess parachute payments would be approximately $30,360,000 minus $7,840,000 (the base amount), or $22,520,000, and the excise tax under Section 4999 would be approximately $6,072,000 (assuming a combined federal/state marginal income tax rate and a 20% excise rate applied to the excess). The gross-up cost to the Company to make Harding whole for the excise tax, including the gross-up on the gross-up, could be substantially higher than the excise tax itself, depending on applicable marginal tax rates. We will present this analysis in detail once the final compensation terms are further defined.
Accounting Coordination. Calderwood & Harkness will coordinate with Galloway & Partners (Clive Warburton, audit partner), Northgate's external auditors, on the accounting treatment of equity compensation under ASC 718 (US GAAP) and IFRS 2 (as applicable to the parent company's consolidated financial statements), including the accounting for sign-on equity grants and annual LTI awards. Proper accounting treatment of these awards is important for financial reporting purposes and for the Company's compliance with its disclosure obligations.
3.6 Restrictive Covenant Provisions
Calderwood & Harkness will draft and negotiate comprehensive restrictive covenant provisions applicable to Harding, both during and following the term of his employment. Restrictive covenants are essential to protecting the Company's legitimate business interests, including its trade secrets, proprietary information, customer relationships, and employee workforce. At the same time, we recognize that the enforceability of such provisions—particularly non-compete covenants—is subject to significant legal uncertainty under evolving state and federal law, and that this area is expected to be a significant point of disagreement with Harding's counsel.
Non-Competition. Northgate's proposed position is a twenty-four (24) month post-termination non-compete, worldwide in geographic scope, prohibiting Harding from accepting employment with, rendering services to, or otherwise engaging in any business activities on behalf of any company deriving more than 15% of its consolidated revenue from (i) telecommunications services, (ii) telecommunications infrastructure, or (iii) enterprise software-as-a-service ("SaaS") platforms serving telecommunications operators. The scope of this non-compete is designed to cover not only Northgate's direct competitors in the traditional telecom space, but also companies in adjacent sectors (such as enterprise SaaS and infrastructure) that may be positioned to compete with Northgate's expanding digital and platform-based service offerings.
Non-Solicitation. Northgate's proposed position is a twenty-four (24) month post-termination non-solicitation covenant, covering both (a) the solicitation of employees (including officers, directors, and independent contractors) of the Company and its affiliates, and (b) the solicitation of customers, clients, and business partners of the Company and its affiliates for the purpose of diverting or redirecting business away from the Company.
Non-Disparagement and Confidentiality. Calderwood & Harkness will include mutual non-disparagement provisions (subject to customary carve-outs for legally compelled disclosures and cooperation with governmental investigations) and comprehensive confidentiality obligations that survive the termination of the Employment Agreement indefinitely. The confidentiality provisions will include appropriate carve-outs for information that becomes publicly available through no fault of Harding and for disclosures required by law or legal process.
Garden Leave. Northgate proposes a six (6) month paid garden leave period, during which Harding would remain an employee of the Company (and thus subject to all contractual obligations, including the restrictive covenants) but would not be required or permitted to perform active duties. During the garden leave period, Harding would continue to receive his base salary only (i.e., no bonus or LTI grants would be made during the garden leave period). The garden leave provision is intended to provide the Company with a mechanism to restrict Harding's competitive activities during a transition period while preserving the enforceability of the post-termination non-compete.
Enforceability Analysis. Calderwood & Harkness will prepare a memorandum analyzing the enforceability of the proposed restrictive covenant provisions under New York law, including:
(a) The reasonableness test applied by New York courts to post-employment non-compete agreements, assessing the duration (24 months), geographic scope (worldwide), and scope of restricted activity against the standards established by the New York Court of Appeals and the Appellate Division;
(b) The "blue-penciling" doctrine, under which New York courts may, in their discretion, sever or narrow overbroad restrictive covenant provisions rather than invalidating them in their entirety, and the implications of this doctrine for the drafting of the restrictive covenants;
(c) The current status of pending New York legislation proposing a comprehensive ban on non-compete agreements (Senate Bill S3100 and Assembly Bill A1278, which were vetoed by the Governor in November 2023 but which have been reintroduced in the current legislative session), and the risk that such legislation, if enacted, could affect the enforceability of the non-compete provisions; and
(d) The potential applicability of the Federal Trade Commission's final rule banning non-compete clauses (published April 23, 2024, with a proposed effective date of September 4, 2024), including the rule's exemption for "senior executives" (individuals earning more than $151,164 annually who are in policy-making positions), which would likely exempt Harding from the ban. We note that the FTC rule is currently subject to legal challenges (Ryan LLC v. FTC, N.D. Texas) and its future applicability remains uncertain.
Anticipated Counterproposals from Harding. Harding's existing Marlowe Asset Management non-compete is limited to twelve (12) months post-termination with a geographic scope limited to the United States. We anticipate that Harding, through Ms. Hargrove, will resist any non-compete provision that is materially more restrictive than his current arrangement, and will seek to narrow the duration from 24 months to 12 months, limit the geographic scope to the United States, and narrow the scope of restricted activities. Given the significant gap between the Company's proposed position and Harding's anticipated counteroffer, the restrictive covenant provisions are expected to require substantial negotiation.
3.7 Cross-Border Coordination: UK Service Agreement
Given Northgate's status as a UK-incorporated public limited company with significant operations in the United Kingdom, and the expectation that Harding will devote a portion of his time to duties performed in the UK, Calderwood & Harkness will coordinate with Moorfield Bates LLP, the Company's UK employment counsel, on the preparation of a secondary UK service agreement between Northgate Telecommunications PLC (the UK parent) and Harding.
UK Counsel. The Moorfield Bates LLP team consists of Simon Aldridge (partner) and Hannah Carmichael (associate), based at the firm's offices at 1 Moorgate, London EC2R 6AB.
Dual-Contract Structure. The proposed arrangement contemplates a dual-contract structure, under which:
(a) The primary employment agreement will be between Northgate Telecommunications US, Inc. (the US subsidiary) and Harding, governed by New York law, covering approximately 80% of Harding's time and duties, with his principal office located at the Company's US headquarters in New York; and
(b) A secondary UK service agreement will be between Northgate Telecommunications PLC (the UK parent) and Harding, governed by the laws of England and Wales, covering approximately 20% of Harding's time and duties, with services performed at the Company's London headquarters at 45 Canary Wharf Tower, One Canada Square, London E14 5AB.
This dual-contract structure is designed to reflect the operational reality of the CEO role, which requires significant time in both jurisdictions, while providing a clear legal framework for the employment relationship in each country.
Moorfield Bates Responsibilities. Moorfield Bates LLP will take the lead on the following matters relating to the UK service agreement:
(a) Compliance with the UK Corporate Governance Code 2024, including Provision 40 (which provides that notice periods for executive directors should be set at one year or less, and that the Remuneration Committee should consider what compensation commitments their directors' terms of appointment would entail in the event of early termination);
(b) Compliance with the Financial Conduct Authority's Senior Managers & Certification Regime ("SM&CR"), which applies to Northgate by virtue of its regulated telecommunications licenses in the United Kingdom, and which may require Harding to be approved by the FCA as a Senior Manager;
(c) UK employment law implications, including compliance with the Employment Rights Act 1996, the Equality Act 2010, and other applicable UK employment legislation; and
(d) UK tax and social security considerations, including Harding's potential UK income tax liability, National Insurance obligations, and the availability of relief under the US-UK Income Tax Treaty.
Tax Considerations. Harding will remain a US tax resident for federal income tax purposes. The Company will seek a certificate of coverage under the US-UK Totalization Agreement (the Agreement on Social Security between the United States and the United Kingdom) to exempt Harding from UK National Insurance contributions during the period of his secondment to the UK. The Company proposes to provide Harding with tax equalization for any UK-source income, such that Harding's overall tax burden is no greater than it would be if all of his income were US-source.
Scope Limitation. Calderwood & Harkness's role with respect to the UK service agreement is limited to coordination and to ensuring consistency between the US and UK agreements in terms of economic provisions, termination triggers, and restrictive covenant obligations. Primary UK employment law advice will be provided by Moorfield Bates LLP.
3.8 Indemnification and D&O Insurance
Calderwood & Harkness will draft indemnification provisions for inclusion in the Employment Agreement (or in a separate indemnification agreement, as the Company may prefer), providing Harding with indemnification and advancement of expenses in his capacity as Chief Executive Officer and, as applicable, as a director of Northgate Telecommunications PLC and its subsidiaries, to the fullest extent permitted by applicable law (including the laws of the State of Delaware, which govern Northgate Telecommunications US, Inc., and the Companies Act 2006, which governs the UK parent company).
In addition, Calderwood & Harkness will coordinate with Ashdown Surety & Insurance Co. regarding directors' and officers' ("D&O") insurance coverage for the incoming CEO. Northgate's current D&O policy (policy number ASI-D&O-NTP-2024-4471) provides coverage with limits of $50,000,000 per occurrence and $100,000,000 in the aggregate. We will confirm that the existing policy covers Harding upon his appointment and will review the policy's tail provisions to ensure adequate protection for Harding in the event of a Change in Control or other corporate transaction that could affect the Company's ongoing obligation to maintain D&O coverage. We anticipate that Harding's counsel will request contractual commitments from the Company regarding the maintenance of D&O coverage at specified minimum levels throughout his tenure and for a specified tail period following his departure.
3.9 Corporate Governance Advisory
Calderwood & Harkness will advise Northgate on the corporate governance implications of the proposed CEO compensation package, with a particular focus on the following areas:
UK Corporate Governance Code 2024. The Company is subject to the UK Corporate Governance Code 2024 on a "comply or explain" basis as a premium-listed company on the London Stock Exchange. The Remuneration Committee's remuneration policy, including the terms of the CEO's employment agreement, must be disclosed in the Company's annual report and is subject to a binding shareholder vote at least every three years. Calderwood & Harkness will advise on the alignment of the proposed compensation package with the principles and provisions of the Code, including the provisions relating to executive remuneration, alignment of pay with performance, and the exercise of discretion by the Remuneration Committee.
Say-on-Pay Considerations. Northgate received 87.4% support on its advisory say-on-pay vote at the Annual General Meeting held on April 18, 2024. While this level of support is above the thresholds at which ISS and Tarrant Partners LLC typically recommend against say-on-pay proposals, it is below the 90% level that many companies target and reflects a degree of shareholder concern regarding the Company's current remuneration practices. Any new CEO compensation package will be subject to a binding remuneration policy vote at the 2025 AGM, and the terms of the Employment Agreement will need to be designed with this vote in mind.
Proxy Advisory Coordination. Calderwood & Harkness will coordinate with Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director) on the anticipated reaction of ISS and Tarrant Partners LLC to the compensation quantum, CIC provisions, and restrictive covenant terms of the proposed Employment Agreement. Veltrano will also advise on shareholder engagement strategy in advance of the 2025 AGM.
Institutional Shareholder Considerations. In developing the compensation structure and negotiation strategy, Calderwood & Harkness will be mindful of the perspectives and known preferences of Northgate's top institutional shareholders, which include:
(a) Caledonian Asset Management — 8.3% ownership;
(b) Pemberton Capital Group — 6.7% ownership;
(c) Thornbury Investment Trust — 5.1% ownership;
(d) Regis Global Equity Fund — 4.4% ownership; and
(e) Atlas Pension Fund — 3.2% ownership.
Several of these shareholders have publicly stated governance preferences regarding executive compensation, including opposition to excise tax gross-ups, preferences for performance-based vesting on LTI awards, and expectations regarding post-employment restrictive covenants. Calderwood & Harkness will work with Veltrano and the Company's investor relations team to ensure that the final Employment Agreement terms are defensible in the context of shareholder engagement and the 2025 AGM vote.
3.10 Section 409A Compliance
Calderwood & Harkness will ensure that all deferred compensation elements of the Employment Agreement comply with the requirements of Section 409A of the Internal Revenue Code and the regulations promulgated thereunder. Section 409A imposes strict requirements on the timing of deferrals and distributions of nonqualified deferred compensation, and failure to comply can result in the immediate inclusion in income of all deferred amounts, together with a 20% additional tax and interest penalties.
Specific 409A compliance considerations that we anticipate addressing in connection with the Employment Agreement include:
(a) Separation from Service. Ensuring that all severance payments and benefits conditioned on a termination of employment are tied to a "separation from service" within the meaning of Section 409A, and that the definition of separation from service in the Employment Agreement is consistent with the regulatory default or the Company's elected alternative definition;
(b) Specified Employee Delay. Because Northgate Telecommunications US, Inc. is a subsidiary of a publicly traded company, Harding will likely qualify as a "specified employee" under Section 409A. Accordingly, any nonqualified deferred compensation payable upon separation from service must be delayed for a period of six (6) months following the separation from service (the "specified employee delay"), with all delayed payments made in a lump sum on the first business day following the expiration of the delay period. We will include appropriate specified employee provisions in the Employment Agreement and in all equity award agreements;
(c) Permissible Payment Triggers. Ensuring that all payment triggers in the Employment Agreement (including severance payments, bonus payments, and equity settlement) fall within the categories of permissible distribution events under Section 409A (separation from service, death, disability, change in control, fixed date, or unforeseeable emergency), and that the definition of "change in control" for 409A purposes conforms to the requirements of Treasury Regulation § 1.409A-3(i)(5); and
(d) SERP Contributions. Ensuring that the supplemental executive retirement contributions proposed in Section 3.2 above are structured in compliance with Section 409A, including proper election timing, permissible distribution triggers, and the prohibition on accelerated distributions.
4. Engagement Team
The following attorneys at Calderwood & Harkness LLP will staff this engagement:
Renata Vasquez will serve as the Responsible Partner for this engagement. She will have overall responsibility for the direction and quality of all work product, will lead all significant negotiation sessions with Hargrove & Liddell LLP, and will serve as the primary point of contact for the Remuneration Committee and the Board on matters requiring Board-level input or authorization.
Bernard Crawford will serve as the Billing Partner and will provide strategic oversight of the engagement. Mr. Crawford will be available for key negotiation calls and Board-level discussions, and will serve as a resource for Ms. Vasquez on complex compensation structuring and corporate governance issues. Mr. Crawford has extensive experience advising FTSE 100 and S&P 500 companies on CEO-level employment arrangements.
James Underwood will serve as the Lead Associate, functioning as the primary drafter of all work product, including the term sheet, the Employment Agreement, all ancillary agreements, and research memoranda. Mr. Underwood will serve as the day-to-day point of contact for the Company's in-house legal team on substantive legal work and will manage the document drafting and revision process.
Devon Archer will serve as the Working Associate, responsible for research memoranda, the Section 280G analysis, preparation of call notes and negotiation summaries, and drafting support as directed by Ms. Vasquez and Mr. Underwood.
If it becomes necessary to involve additional attorneys or professionals (for example, tax specialists or ERISA counsel) in connection with specific issues arising during the engagement, Calderwood & Harkness will seek the Company's prior approval before expanding the engagement team, and will advise the Company of the applicable billing rates.
5. Fee Arrangement
This engagement will be billed on an hourly basis at the rates set forth in Section 4 above, as specified in the engagement letter dated June 4, 2024. These rates are effective for the 2024 calendar year and may be adjusted annually in accordance with the firm's standard rate-setting process, subject to prior notice to the Company.
Invoices will be rendered on a monthly billing cycle and are payable within thirty (30) days of the date of the invoice. Each invoice will include a detailed description of the services rendered, the identity of the timekeepers who performed the work, the hours billed, and the applicable rates.
A retainer in the amount of $75,000 was received by Calderwood & Harkness and deposited into the firm's client trust account, as confirmed on June 5, 2024. This retainer will be held in trust and applied against the final invoice upon the conclusion of the engagement. In the event that the retainer exceeds the final invoice amount, the balance will be returned to the Company promptly upon conclusion of the matter.
Disbursements and out-of-pocket expenses, including travel, electronic research charges, courier services, and other costs incurred in connection with the engagement, will be billed at cost and included in monthly invoices.
6. Coordination and Communication Protocol
Effective coordination between Calderwood & Harkness and the Company's in-house legal team is essential to the efficient and successful execution of this engagement. Accordingly, the parties have agreed to the following communication and decision-making protocols:
Primary Client Contact. Elaine Whitford, Senior Vice President and Group General Counsel, will serve as the primary client contact for all day-to-day instructions, approvals, and communications. All requests for direction, confirmations of negotiation authority, and substantive work product will be channeled through Ms. Whitford unless she designates an alternative contact for specific matters.
Negotiation Authority. Calderwood & Harkness understands that significant negotiation positions and concessions—including any deviation from the Company's proposed positions as set forth in the initial term sheet—will require the approval of the Remuneration Committee (chaired by Geoffrey Stanton) or, for matters of particular significance, Board-level authorization. Calderwood & Harkness will clearly flag any proposed concessions or negotiation positions that, in our judgment, fall outside the parameters established by the Company, and will not make such concessions without prior written authorization.
Communications with Opposing Counsel. Calderwood & Harkness will communicate with Hargrove & Liddell LLP directly on all negotiation matters. Ms. Whitford will be copied on all substantive correspondence with opposing counsel, including emails, letters, and drafts of the term sheet and Employment Agreement. Calderwood & Harkness will provide Ms. Whitford with a summary of all telephonic and in-person negotiation discussions within twenty-four (24) hours of such discussions.
Coordination with UK Counsel. Calderwood & Harkness will coordinate with Moorfield Bates LLP (Simon Aldridge and Hannah Carmichael) on all matters relating to the UK service agreement and UK-specific legal, regulatory, and tax issues. Ms. Whitford and Priya Narayanan, the Company's Chief People Officer, will be included in correspondence and calls with Moorfield Bates as appropriate to ensure alignment between the US and UK work streams.
Coordination with Other Advisors. All substantive communications with the following advisors will be coordinated through Ms. Whitford to ensure consistency of messaging and to preserve applicable privileges:
(a) Whitmore Hobson LLP (Dr. Rachel Whitmore, Managing Partner) — independent compensation consultant to the Remuneration Committee;
(b) Galloway & Partners (Clive Warburton, audit partner) — external auditors;
(c) Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director) — proxy advisory consultant; and
(d) Ashdown Surety & Insurance Co. — D&O insurance carrier.
7. Matters Excluded from Scope
The following matters are expressly excluded from the scope of Calderwood & Harkness's engagement under this matter number and will not be undertaken by this firm absent a separate engagement letter:
(a) Securities Law Advice. Any advice regarding the Company's disclosure obligations under applicable US or UK securities laws and regulations (including the Securities Exchange Act of 1934, the UK Market Abuse Regulation, and the FCA's Disclosure Guidance and Transparency Rules) in connection with the announcement of Harding's appointment or the terms of his compensation. Such advice should be obtained from the Company's standing outside securities counsel;
(b) UK Tax Advisory Services. Any advice regarding UK tax matters, including Harding's UK income tax liability, National Insurance obligations, and structuring of the UK service agreement for UK tax efficiency. Such advice will be handled by Moorfield Bates LLP or the Company's UK tax advisors, as applicable;
(c) Sir Alistair Kemble Retirement Arrangements. Any negotiation or drafting of agreements with Sir Alistair Kemble relating to his retirement from the CEO role, including separation agreements, consulting arrangements, or retirement benefit determinations;
(d) CEO Search Process. Any advice relating to the CEO search process conducted by Kensington Partners Ltd., including the search engagement agreement, candidate evaluation, or the Nomination Committee's deliberations. The Kensington search engagement predates this matter and is not within the scope of our retention; and
(e) Marlowe Asset Management Departure Matters. Any litigation, dispute resolution, or advisory services arising from Harding's departure from Marlowe Asset Management Digital Holdings, Inc., including any claims by Marlowe Asset Management for breach of Harding's existing employment agreement or restrictive covenants, or any claims by Harding against Marlowe Asset Management. If such matters arise, they would need to be addressed under a separate engagement letter, subject to conflicts clearance.
8. Anticipated Timeline
Calderwood & Harkness proposes the following target timeline for the key milestones in this engagement:
We note that Harding's proposed start date of October 1, 2024 is subject to the timeline for Harding's transition out of his current role at Marlowe Asset Management Digital Holdings, Inc. Depending on the notice period required under Harding's existing Marlowe Asset Management employment agreement and the progress of Marlowe Asset Management's own succession planning, an adjustment of the start date to November 1, 2024 may be necessary. Calderwood & Harkness will work with Ms. Hargrove to understand any constraints on Harding's availability and will advise the Company accordingly.
We wish to note candidly that the proposed timeline is aggressive given the complexity of the anticipated negotiations, particularly with respect to the change in control provisions (Section 3.4) and the restrictive covenant terms (Section 3.6). Both of these areas present significant gaps between the Company's proposed positions and Harding's likely counterpositions, and achieving consensus may require multiple rounds of negotiation and Board-level deliberation. We will monitor the timeline closely and will advise the Company promptly if it appears that material delays are likely, so that contingency planning—including potential adjustments to Harding's start date or interim transition arrangements—can be considered.
9. Closing
Calderwood & Harkness LLP is grateful for the confidence that Northgate Telecommunications PLC has placed in our firm by entrusting us with this engagement. The appointment of a new Chief Executive Officer is among the most consequential decisions any board of directors makes, and we appreciate the significance of this matter to the Company, its shareholders, and its broader stakeholder community. We are confident that our engagement team possesses the experience, judgment, and technical expertise required to deliver a best-in-class Employment Agreement that protects the Company's interests while securing the services of a highly talented executive.
We would welcome the opportunity to schedule an initial call with you at your earliest convenience to discuss the Company's negotiation strategy, the Board-approved parameters and red lines for the key terms (particularly the CIC multiplier, tax treatment, and restrictive covenant duration and scope), and the priorities that should be reflected in the initial term sheet. Establishing this strategic foundation before circulating the term sheet to Hargrove & Liddell will ensure that our opening position is calibrated to achieve the Company's objectives while leaving appropriate room for negotiation.
Please do not hesitate to reach out to me directly at any time. I can be reached at:
Renata Vasquez Partner, Labor & Employment Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, New York 10171 Direct: (212) 506-7142 Mobile: (917) 843-2261
Email: rvasquez@calderwoodharkness.com
We look forward to working with you and your team on this important matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Renata Vasquez Partner
cc: Bernard Crawford, Partner, Calderwood & Harkness LLP
This memorandum is a privileged and confidential attorney-client communication. It is intended solely for the use of the addressee and any individuals to whom the addressee has authorized disclosure. Any unauthorized review, use, disclosure, or distribution is prohibited. If you have received this memorandum in error, please contact Calderwood & Harkness LLP immediately at (212) 506-7000.
Name | Role | Practice Group | Office | Hourly Rate
Renata Vasquez | Responsible Partner | Labor & Employment | New York | $1,650
Bernard Crawford | Billing Partner | Labor & Employment | New York | $1,575
James Underwood | Lead Associate | Labor & Employment | New York | $895
Devon Archer | Working Associate | Labor & Employment | New York | $725
Milestone | Target Date
Initial term sheet circulated to Hargrove & Liddell LLP | On or about June 10, 2024
Conclusion of term-sheet negotiation (economic and key non-economic terms) | Mid-July 2024
First full draft Employment Agreement circulated to Hargrove & Liddell LLP | Late July 2024
Completion of Employment Agreement negotiation and finalization | Mid-September 2024
Target execution of Employment Agreement | Mid-to-late September 2024
Proposed start date for Harding | October 1, 2024

CALDERWOOD & HARKNESS LLP Attorneys at Law

MEMORANDUM

CALDERWOOD & HARKNESS LLP

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