Renata,
Thank you for forwarding Victoria Hargrove's email earlier today. I appreciate you getting it to me promptly.
I cannot say the rejection was unexpected — the trajectory of these negotiations over the past three months has made this a real possibility — but it is still disappointing after the considerable effort all sides have invested since we opened the engagement on June 4. In any event, we now need to move quickly.
I have briefed both Dame Philippa Thornton-Hale and Geoffrey Stanton on the substance of Hargrove's response.
**Board Call — September 10**
A Board call has been scheduled for tomorrow, **September 10, at 3:00 p.m. BST / 10:00 a.m. EDT** to accommodate participants in London and New York. Expected attendees are:
- Dame Philippa Thornton-Hale (Board Chair) - Geoffrey Stanton (Lead Independent Director / Remuneration Committee Chair) - Lucinda Farrow (Nomination Committee Chair) - Dr. Tomás Herrera - Myself - You
To be clear, Sir Alistair Kemble will not participate, nor will Jonathan Briggs or Priya Narayanan. This is a Board and committee-level decision, and we are keeping participation appropriately narrow. A calendar invitation with dial-in details will follow separately.
I would ask that you prepare a brief oral summary for the Board covering the negotiation history and the specific deal-breakers that brought us to this point. Nothing elaborate — ten minutes or so to ensure all directors are working from the same factual foundation.
**Stanton's Preliminary View**
I spoke with Geoffrey immediately after receiving the rejection. His preliminary view is clear: the Board should **terminate negotiations** with Marcus Harding.
His reasoning, which I think is sound:
Harding's stated "non-negotiable" demands — the 3x change in control multiplier ($14,437,500 versus our 2.5x position at $12,031,250), a full Section 280G tax gross-up (estimated exposure of $4.2 million to $6.8 million, with excise tax alone estimated at approximately $6,072,000), and the Board turnover trigger in the change in control definition — are fundamentally incompatible with the governance framework within which this Board must operate.
Geoffrey specifically referenced the warnings we received from Sandra Kolb at Veltrano Proxy Advisors. A package combining a 3x CIC multiplier with a full tax gross-up would very likely trigger a negative say-on-pay recommendation from ISS and potentially Tarrant Partners LLC. We cannot ignore that.
On the shareholder side, Northgate received 87.4% support on say-on-pay at the April 18 AGM — respectable, but not an overwhelming margin that gives us room to push boundaries. Geoffrey's view, and I share it, is that approving a package on Harding's terms would risk a significant decline in support at the 2025 AGM, where the new CEO's remuneration policy would be subject to a binding shareholder vote under UK rules. That is a risk the Remuneration Committee simply cannot take.
He also noted that the proposed terms substantially exceed UK market norms — Provision 40 of the UK Corporate Governance Code provides clear guidance on notice periods and severance — and that the Remuneration Committee cannot in good conscience recommend terms it believes will draw shareholder opposition.
What makes this particularly frustrating, as Geoffrey pointed out, is that Dr. Rachel Whitmore at Whitmore Hobson had previously advised that the "best net" cutback approach we proposed actually leaves Harding in a roughly equivalent after-tax position to a full gross-up. The gross-up demand is largely a matter of principle and optics rather than economic substance. An impasse over optics is a difficult way to lose a preferred candidate, but here we are.
The restrictive covenant gap — Harding's insistence on a 12-month non-compete limited to scheduled competitors versus our final position of 18 months covering North America and Western Europe — is secondary but reinforcing.
Geoffrey expects the Board will reach a unanimous decision to terminate but wants the formal call and resolution process followed properly, which I fully support.
**Anticipated Next Steps**
If the Board authorizes termination on September 10, I anticipate asking Calderwood & Harkness to handle the following:
1. **Termination letter** — Prepare and send a formal termination letter to Victoria Hargrove at Hargrove & Liddell LLP, 51 Madison Avenue, 30th Floor, New York, NY 10010. I would like to target delivery by September 12.
2. **Board resolution** — Draft a formal Board resolution authorizing the termination of negotiations with Harding.
3. **Kensington Partners** — Notify Antonia Blythe at Kensington Partners Ltd. that the search must be resumed. As you know, the third tranche of the £1,200,000 search fee was never paid, and Kensington will need to re-engage.
4. **Document handling and confidentiality** — Address all document handling and confidentiality obligations vis-à-vis Harding and Hargrove & Liddell.
We will also need to turn our attention to interim CEO arrangements given that Sir Alistair's retirement remains effective December 31, but that is a discussion for after the Board call.
One additional item: could you advise whether any public disclosure obligation is triggered by the termination of negotiations — under SEC, NYSE, or FCA rules? I would like to address this promptly, ideally before or during the Board call tomorrow.
**Finally**
I want to express my appreciation for the work you, James Underwood, and Devon Archer have put into this engagement. The effort has been thorough and professional throughout. This is a disappointing outcome, but I believe the Board is making the right decision in the interests of Northgate's shareholders.
I will speak with you in the morning before the call. Please ring me on my mobile if anything arises overnight.
Best regards,
Elaine Whitford Senior Vice President & Group General Counsel Northgate Telecommunications PLC ewhitford@northgatetelecom.com
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