Victoria,
I hope this message finds you well. I am writing to transmit Northgate Telecommunications PLC's final compromise proposal on the proposed CEO Employment Agreement for Marcus Elliot Harding (Matter No. 1022-00004).
**Attachments**
Please find enclosed the following two documents:
1. **Revised Term Sheet (v5-Final)**, dated September 3, 2024, reflecting Northgate's best-and-final positions on all outstanding terms; and
2. **Formal Cover Letter**, dated September 3, 2024, from me to you on Calderwood & Harkness letterhead, setting forth in detail the rationale for Northgate's positions on the remaining open issues — in particular, the change in control severance provisions and the restrictive covenant terms.
I would encourage you and your client to review the cover letter carefully, as it provides a comprehensive explanation of the Board's reasoning on each of these points.
**Procedural Background**
As you know, the parties have been engaged in extensive and good-faith negotiations since the initial term sheet was circulated on June 10, 2024. Over the course of the past nearly three months, we have exchanged multiple rounds of term sheet markups, conducted five negotiation calls between June 24 and July 19, exchanged two full drafts of the employment agreement (Draft 1 on July 22 and Draft 2 on August 12), and held an in-person principals meeting on August 26, 2024, at 600 Lexington Avenue. I want to acknowledge the constructive spirit in which these discussions have been conducted on both sides.
Through that process, the parties have reached agreement on the vast majority of the economic and structural terms of the arrangement, including base salary ($1,750,000), target bonus (175% of base salary), maximum bonus (300% of base salary), sign-on cash bonus ($5,000,000), sign-on equity grant ($18,400,000), annual long-term incentive target ($9,000,000), supplemental executive retirement plan contributions ($250,000 per year), perquisites, and other compensation elements. The two remaining areas of disagreement are: (1) the change in control severance terms, and (2) the restrictive covenant provisions, specifically non-compete duration, scope, and garden leave.
**Summary of Final Proposal — Key Terms**
The enclosed term sheet (v5-Final) represents the final positions authorized by the full Board of Directors of Northgate Telecommunications PLC, following careful deliberation by the Remuneration Committee, chaired by Geoffrey Stanton, and consultation with the Board Chair, Dame Philippa Thornton-Hale.
The key terms are summarized below for ease of reference.
*Change in Control Severance*
- **CIC Severance Multiplier:** 2.5× base salary plus target bonus (2.5 × $4,812,500 = $12,031,250) - **Trigger Structure:** Double-trigger — both a change in control event and a qualifying termination are required - **CIC Definition:** (a) acquisition of more than 50% of outstanding voting securities; (b) merger or consolidation in which NTP shareholders hold less than 50% of the combined entity post-transaction; and (c) sale of substantially all assets. Board turnover is not included as a triggering event; Northgate's position on this point is explained at length in the cover letter - **Tax Treatment:** Best-net cutback (Section 280G safe harbor) — no excise tax gross-up - **Equity Acceleration:** Full acceleration of all unvested equity awards upon a qualifying CIC termination - **COBRA Continuation:** 24 months - **Outplacement Assistance:** $50,000
*Non-CIC Severance (Confirmed)*
For reference and confirmation of previously agreed terms:
- **Severance Multiplier:** 2× base salary plus target bonus ($9,625,000) - **Pro-Rata Bonus:** For the fiscal year of termination - **COBRA Continuation:** 18 months - **Equity Acceleration:** 12 months of accelerated vesting of unvested equity
*Restrictive Covenants*
- **Non-Compete:** 18 months post-termination; geographic scope limited to North America and Western Europe; activity scope narrowed to employment by, or provision of services to, companies deriving more than 15% of revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecom operators - **Garden Leave:** 6 months at full base salary, running concurrently with the first 6 months of the non-compete period - **Non-Solicitation:** 24 months post-termination, covering both employees and customers/clients - **Non-Disparagement:** Mutual and perpetual, as previously agreed in principle
**Finality of This Proposal**
Victoria, I want to be direct and transparent: this proposal represents Northgate's best-and-final offer. The Board has given careful and thorough consideration to the positions Mr. Harding expressed at the August 26 principals meeting, as well as the redlines your firm submitted to Draft 1 and Draft 2 of the employment agreement. Northgate has moved meaningfully from its initial positions over the course of these negotiations — particularly on non-compete duration, which has been reduced from 24 months to 18 months, and on geographic scope, which has been narrowed from worldwide to North America and Western Europe. The Board believes the proposal as a whole reflects a fair, competitive, and market-appropriate package for a chief executive of Mr. Harding's caliber.
I would also note that the Board's positions on the CIC multiplier and tax treatment are informed by important corporate governance considerations, including the UK Corporate Governance Code, ISS proxy advisory guidance, and Northgate's obligations to its shareholders. These considerations are discussed in further detail in the cover letter.
**Requested Response Date**
We respectfully request that Hargrove & Liddell provide Mr. Harding's response to this proposal by **Monday, September 9, 2024**. We very much hope that the proposal provides a basis for the parties to reach final agreement and move forward to execution. I remain available, of course, to discuss any questions you or Nathan may have about the proposal or the reasoning set forth in the cover letter. I do want to be clear, however, that the substantive terms reflected in the enclosed term sheet represent the Board's final positions.
Victoria, I want to close by expressing my sincere appreciation for the professional and constructive engagement you, Nathan, and Mr. Harding have brought to this process throughout. It has been a pleasure working with you on this matter, and I look forward to hearing from you.
With best regards,
Renata Vasquez Partner, Labor & Employment Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171 T: (212) 558-4000 E: rvasquez@calderwoodharkness.com
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