Dear Renata,
Thank you for transmitting Northgate's final compromise proposal (Term Sheet v5-Final) and the accompanying cover letter dated September 3, 2024. I have reviewed the proposal thoroughly with my client, Marcus Elliot Harding, and I am writing to convey his response.
**Acknowledgment of the Negotiation Process**
At the outset, I want to recognize the extensive and good-faith negotiations in which both sides have engaged since the initial term sheet was circulated on June 10, 2024. Over nearly three months of dialogue — including five negotiation calls, two full drafts of the employment agreement, an in-person principals meeting on August 26 at 600 Lexington Avenue, and multiple rounds of markup — the parties have made meaningful progress and reached agreement on many significant terms. These include base salary ($1,750,000), target annual incentive (175% of base), maximum annual incentive (300% of base), sign-on cash bonus ($5,000,000), sign-on equity ($18,400,000), annual LTI target ($9,000,000), SERP contribution ($250,000/year), perquisites, and numerous other provisions.
Mr. Harding and I wish to express our sincere appreciation for the professionalism demonstrated by Dame Philippa Thornton-Hale, Geoffrey Stanton, and Elaine Whitford throughout this process. Their engagement has been constructive at every stage, and we do not take that for granted.
**Rejection of Final Proposal — Change in Control Provisions**
Despite the considerable progress on other terms, Mr. Harding is unable to accept Northgate's final proposal. The principal reason is that the change in control provisions remain fundamentally misaligned with his requirements. Specifically, Mr. Harding's position on the following three elements is non-negotiable:
*1. CIC Severance Multiplier.* Northgate's final proposal offers a 2.5x multiplier (2.5 × ($1,750,000 + $3,062,500) = $12,031,250). Mr. Harding's minimum requirement is a 3x multiplier (3 × $4,812,500 = $14,437,500). A 3x CIC multiplier is consistent with Mr. Harding's existing arrangement at Marlowe Asset Management Digital Holdings, where he currently benefits from 3x base plus bonus change in control protection. Mr. Harding views this as a baseline, not an aspirational term. Asking him to accept a material step-down from his current CIC protections is not a reasonable basis on which to recruit him away from his current position.
*2. Section 280G Tax Treatment — Full Gross-Up.* Northgate's proposal for a best-net/safe-harbor cutback under Section 280G is not acceptable. Mr. Harding requires a full excise tax gross-up. Without a gross-up, the effective value of the CIC protections could be substantially diminished — potentially by millions of dollars — in the very scenario where those protections matter most. Mr. Harding currently benefits from full gross-up protection at Marlowe Asset Management Digital Holdings and is not prepared to accept a diminution in this regard.
*3. Board Turnover Trigger in Change in Control Definition.* Mr. Harding requires that the definition of "change in control" include a Board composition/turnover trigger — specifically, that a change in control be deemed to occur if a majority of directors are replaced within any 12-month period. This protection is standard in many US public company CEO agreements and is essential to Mr. Harding's view of appropriate governance protections. Northgate's categorical refusal to include this trigger leaves Mr. Harding without protection in a scenario that, from an executive's perspective, is functionally equivalent to a change in control.
**Rejection of Final Proposal — Restrictive Covenant Provisions**
In addition to the change in control impasse, Mr. Harding cannot accept Northgate's proposed restrictive covenant terms.
Northgate's proposal of an 18-month non-compete covering North America and Western Europe remains too broad in both duration and geographic scope. Mr. Harding's position has been consistent throughout these negotiations: a 12-month post-termination non-compete (matching his current Marlowe Asset Management Digital Holdings non-compete), with competition defined by reference to a scheduled list of direct competitors rather than a revenue-based test. The proposed 6-month garden leave at base salary only, running concurrently with the first 6 months of the non-compete, does not adequately compensate for the extended restriction.
These restrictive covenant positions are also non-negotiable.
**Conclusion**
Given the foregoing, and having given this matter careful and thorough consideration, Mr. Harding has concluded that the parties are unable to bridge the remaining gaps on these fundamental terms. He has instructed Hargrove & Liddell to communicate that he is declining Northgate's final proposal.
I want to convey Mr. Harding's genuine regret in reaching this conclusion. He has great respect for Northgate, its Board, and the opportunity that was presented to him, and he is disappointed that the terms could not be reconciled. However, this represents Mr. Harding's final position, and further negotiation on these points would not be productive.
**Confidentiality and Housekeeping**
As a reminder, all materials exchanged during the negotiation process remain subject to the confidentiality undertakings previously agreed between the parties. We would appreciate confirmation of Northgate's intentions regarding the handling and return or destruction of confidential materials exchanged during the process. Hargrove & Liddell is prepared to cooperate fully on any orderly wind-down matters.
Renata, I appreciate the collegiality with which you have handled this matter throughout. Please do not hesitate to reach out if there is anything further we can address on the administrative side.
With personal regards,
Victoria Hargrove Partner Hargrove & Liddell LLP 51 Madison Avenue, 30th Floor New York, NY 10010 T: (212) 551-4200 E: vhargrove@hargroveliddell.com