REVISED TERM SHEET (v5-Final) — BEST AND FINAL PROPOSAL
Proposed Executive Employment Agreement
Between:
Northgate Telecommunications US, Inc. (a wholly-owned subsidiary of Northgate Telecommunications PLC) ("Employer" or "Company")
and
Marcus Elliot Harding ("Executive")
Date: September 3, 2024
Prepared by: Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171
On behalf of Northgate Telecommunications PLC and Northgate Telecommunications US, Inc.
Engagement Reference: 1022-00004
STATUS: This term sheet constitutes Northgate's best-and-final proposal, authorized by the full Board of Directors of Northgate Telecommunications PLC on August 30, 2024. This term sheet is non-binding and is subject to negotiation, execution, and delivery of a definitive Employment Agreement.
CONFIDENTIALITY: This term sheet and its contents are subject to mutual confidentiality obligations between the parties and their respective counsel. This document is not for public disclosure and may not be shared with any third party other than the parties' respective legal, tax, and financial advisors without the prior written consent of the other party.
GOVERNING LAW: The definitive Employment Agreement contemplated by this term sheet shall be governed by the laws of the State of New York, without regard to conflicts-of-law principles, except as otherwise expressly noted herein with respect to the secondary UK service agreement.
RESPONSE REQUESTED BY: September 9, 2024. The Company respectfully requests that Executive's counsel, Hargrove & Liddell LLP, provide written comments or confirmation of acceptance of this term sheet on or before September 9, 2024, in order to permit the drafting and execution of a definitive Employment Agreement in advance of the proposed October 1, 2024 Start Date.
PREAMBLE AND BACKGROUND
Northgate Telecommunications PLC ("NTP" or the "Parent"), a company incorporated and registered in England and Wales under registered number 07381264, with its registered office at 45 Canary Wharf Tower, One Canada Square, London E14 5AB, United Kingdom, and whose ordinary shares are listed on the London Stock Exchange (LON: NTP) and whose American Depositary Receipts are listed on the New York Stock Exchange (NYSE: NTPC), seeks to engage Marcus Elliot Harding as its incoming Chief Executive Officer.
Executive currently serves as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. (NYSE: VDHI), a publicly traded technology and communications holding company headquartered at 200 Technology Way, Suite 4000, San Jose, California 95110.
The primary employment relationship contemplated by this term sheet shall be between Executive and Northgate Telecommunications US, Inc. ("NTP US"), a corporation organized under the laws of the State of Delaware and a wholly-owned subsidiary of NTP, headquartered at 600 Lexington Avenue, 38th Floor, New York, New York 10022. NTP US serves as the operational headquarters for NTP's North American telecommunications and enterprise SaaS businesses.
In addition to the primary Employment Agreement with NTP US, a secondary service agreement shall be entered into between Northgate Telecommunications PLC and Executive to govern Executive's UK board duties, UK regulatory compliance obligations, and related matters. The secondary service agreement shall be governed by the laws of England and Wales and shall be prepared with input from Moorfield Bates LLP (Simon Aldridge, Partner; Hannah Carmichael, Associate; 1 Moorgate, London EC2R 6AB). The terms of the secondary service agreement are not set forth in detail in this term sheet but shall be consistent with the principles outlined herein.
This term sheet (v5-Final) supersedes all prior term sheets (v1 through v4) and reflects the full course of negotiations conducted between the parties and their respective counsel from June 10, 2024 through the date hereof. For reference, the negotiation history is summarized as follows:
• June 10, 2024: Initial term sheet (v1) transmitted by Calderwood & Harkness LLP on behalf of Northgate to Hargrove & Liddell LLP on behalf of Executive.
• June 17, 2024: Hargrove & Liddell LLP redline of initial term sheet (v1) received.
• June 24, 2024 – July 19, 2024: Five rounds of negotiation calls between counsel (Calderwood & Harkness LLP and Hargrove & Liddell LLP) and, as appropriate, principals, addressing compensation quantum, severance multiples, restrictive covenants, change-in-control provisions, and equity plan mechanics.
• July 22, 2024: Draft 1 of the definitive Employment Agreement circulated by Calderwood & Harkness LLP.
• August 5, 2024: Hargrove & Liddell LLP redline of Draft 1 received, reflecting approximately 147 substantive comments and proposed revisions.
• August 12, 2024: Draft 2 of the definitive Employment Agreement circulated by Calderwood & Harkness LLP, incorporating agreed revisions and reflecting counter-proposals on remaining open items.
• August 19, 2024: Hargrove & Liddell LLP redline of Draft 2 received, narrowing open items to those identified in Section 18 of this term sheet.
• August 26, 2024: Principals meeting among Dame Philippa Thornton-Hale (NTP Board Chair), Geoffrey Stanton (Remuneration Committee Chair), Marcus Elliot Harding, and Victoria Hargrove (Hargrove & Liddell LLP), during which the Company's positions on remaining open items were discussed and the Board's authorization of a best-and-final proposal was confirmed.
This term sheet sets forth the Company's final positions on all material terms of Executive's proposed employment, including the Company's final concessions on those items identified as "Open" in Section 18 below. The Company believes that this term sheet, taken as a whole, represents a fair and competitive package that appropriately balances the interests of both parties and positions Northgate for a successful leadership transition.
SECTION 1: POSITION, TITLE, AND DUTIES
1.1 Title. Executive shall hold the title of Chief Executive Officer of Northgate Telecommunications PLC and Chief Executive Officer of Northgate Telecommunications US, Inc. Executive shall be the most senior executive officer of the Company and its global group of subsidiaries and affiliates.
1.2 Reporting. Executive shall report directly and exclusively to the Board of Directors of Northgate Telecommunications PLC. The current Chair of the Board is Dame Philippa Thornton-Hale. No other officer or employee of the Company shall have authority to direct or supervise Executive's activities, except as may be determined by the Board in the exercise of its fiduciary duties.
1.3 Board Seat. Promptly following the Start Date, Executive shall be appointed to the Board of Directors of Northgate Telecommunications PLC as an executive director. Executive shall be expected to stand for re-election by the shareholders of NTP at each annual general meeting in accordance with NTP's Articles of Association and the UK Corporate Governance Code, which requires annual re-election of all directors. The Company shall nominate Executive for re-election at each such annual general meeting during the term of Executive's employment and shall use commercially reasonable efforts to support Executive's re-election. In the event that Executive is not re-elected by the shareholders at any annual general meeting, the parties shall discuss in good faith the implications for Executive's continued service, and any failure of re-election shall constitute an event entitling Executive to resign for Good Reason (as defined in Section 9.4 below).
1.4 Duties. Executive shall devote substantially all of Executive's working time, attention, and energies to the full-time executive leadership of the Company's global operations. The Company's operations encompass telecommunications services, telecommunications infrastructure, and enterprise SaaS platforms serving telecommunications operators and related industries, with approximately 22,500 employees globally across operations in the United States, United Kingdom, Western Europe, and selected other markets. Executive's duties shall include, without limitation, overall strategic direction, operational management, capital allocation, organizational leadership, investor relations, government and regulatory affairs, and such other duties as are customarily performed by the chief executive officer of a publicly listed multinational telecommunications company.
1.5 Location. Executive's primary place of business shall be the NTP US Operations Headquarters, located at 600 Lexington Avenue, 38th Floor, New York, New York 10022. Executive shall also maintain a secondary presence at the NTP UK Headquarters, located at 45 Canary Wharf Tower, One Canada Square, London E14 5AB, United Kingdom, for purposes of attending Board meetings, engaging with UK regulators, overseeing UK operations, and fulfilling such other duties as may reasonably require Executive's presence in the United Kingdom.
1.6 Time Split. It is anticipated that Executive shall spend approximately eighty percent (80%) of Executive's working time on US-based duties and approximately twenty percent (20%) of Executive's working time on UK-based duties. The precise allocation may vary from time to time based on business needs, Board meeting schedules, and regulatory requirements. The parties acknowledge that the time-split allocation has implications for tax residency, tax equalization, and social security, as addressed in Section 12 below.
1.7 Regulatory Compliance. Executive acknowledges that NTP holds regulated UK telecommunications licenses and that Executive's role as Chief Executive Officer of NTP may subject Executive to the Financial Conduct Authority's Senior Managers & Certification Regime (SM&CR), including applicable fitness and propriety requirements, regulatory references, and ongoing compliance obligations. Executive agrees to comply with all such requirements and to complete any certifications, filings, or notifications required in connection therewith. The Company shall provide Executive with reasonable support and resources to facilitate compliance with SM&CR requirements.
1.8 Exclusivity and Outside Activities. Executive shall devote full-time and exclusive service to the Company during the term of employment. Executive shall not engage in any other business or commercial activity, whether as an employee, officer, director, consultant, advisor, or investor, without the prior written consent of the Board, except that:
(a) Executive may engage in reasonable civic and charitable activities, including service on the boards of non-profit organizations, provided that such activities do not materially interfere with Executive's duties to the Company;
(b) Executive may continue to manage personal and family investments, including passive investments in publicly traded securities, provided that no individual investment (other than investments in NTP securities) exceeds two percent (2%) of the outstanding equity of any publicly traded company; and
(c) With the prior written consent of the Board (not to be unreasonably withheld), Executive may serve on the board of directors of one (1) public company that does not compete with the Company. As of the date hereof, Executive does not currently serve on any outside public company board, and any future appointment shall be subject to the Board's review and approval.
SECTION 2: TERM
2.1 Start Date. Executive's employment shall commence on October 1, 2024 (the "Start Date"), subject to the mutual agreement of the parties to defer the Start Date to November 1, 2024 if additional time is needed to accommodate Executive's transition from and satisfaction of any remaining obligations to Marlowe Asset Management Digital Holdings, Inc., including any applicable notice period under Executive's current Marlowe Asset Management employment agreement. Any deferral of the Start Date shall not affect the duration of the Initial Term, which shall be measured from the actual Start Date.
2.2 Initial Term. The initial term of Executive's employment shall be five (5) years, commencing on the Start Date and expiring on September 30, 2029 (the "Initial Term"), unless earlier terminated in accordance with the provisions of the definitive Employment Agreement.
2.3 Renewal. Following the expiration of the Initial Term, Executive's employment shall automatically renew for successive one-year periods (each, a "Renewal Term"), unless either party provides written notice of non-renewal to the other party at least one hundred eighty (180) days prior to the end of the then-current term (whether the Initial Term or any Renewal Term). For the avoidance of doubt, a notice of non-renewal by the Company shall be treated as a termination without Cause for purposes of the severance provisions set forth in Section 9, and a notice of non-renewal by Executive shall be treated as a voluntary resignation without Good Reason.
2.4 Predecessor. Executive shall succeed Sir Alistair Kemble, the outgoing Chief Executive Officer of NTP, who is retiring from the position effective December 31, 2024. The Company anticipates a transition period of approximately three months (from the Start Date through December 31, 2024) during which Executive and Sir Alistair will work together to ensure an orderly transition of leadership responsibilities. The nature and scope of the transition arrangements shall be determined by the Board in consultation with Executive and Sir Alistair.
SECTION 3: BASE SALARY
3.1 Annual Base Salary. Executive's annual base salary shall be One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) (the "Base Salary"), payable in accordance with NTP US's standard payroll practices as in effect from time to time (currently semi-monthly). The Base Salary shall be subject to applicable withholding and deductions.
3.2 Annual Review. The Base Salary shall be reviewed annually by the Remuneration Committee of the Board of Directors of NTP (currently chaired by Geoffrey Stanton), in its discretion, taking into account individual performance, company performance, market conditions, and other relevant factors. Any increase in the Base Salary shall become the new minimum Base Salary for purposes of the Employment Agreement.
3.3 No Reduction. The Base Salary shall not be reduced below the initial level of $1,750,000 per annum (or such higher level as may be established following any annual increase) without Executive's prior written consent. Any reduction in Base Salary below the initial level without Executive's consent shall constitute an event giving rise to Good Reason for resignation, as set forth in Section 9.4.
3.4 Benchmarking Context. For reference, Executive's current base salary at Marlowe Asset Management Digital Holdings, Inc. is One Million Four Hundred Fifty Thousand Dollars ($1,450,000). The proposed NTP Base Salary of $1,750,000 represents an increase of $300,000, or approximately 20.7%, over Executive's current Marlowe Asset Management base salary. This level is consistent with the median of base salaries for chief executive officers of peer group companies identified in the Whitmore Hobson LLP compensation benchmarking analysis (Appendix D).
SECTION 4: ANNUAL INCENTIVE COMPENSATION (BONUS)
4.1 Target Annual Incentive. Executive shall be eligible to receive an annual incentive bonus (the "Annual Incentive") with a target opportunity equal to one hundred seventy-five percent (175%) of Base Salary, which equals Three Million Sixty-Two Thousand Five Hundred Dollars ($3,062,500) at the initial Base Salary level (the "Target Annual Incentive").
4.2 Maximum Annual Incentive. The maximum Annual Incentive payable to Executive shall be three hundred percent (300%) of Base Salary, which equals Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) at the initial Base Salary level (the "Maximum Annual Incentive"). Achievement of the Maximum Annual Incentive shall require performance significantly in excess of target levels, as determined by the Remuneration Committee.
4.3 Performance Metrics. The specific performance metrics, weightings, threshold/target/maximum performance levels, and other terms applicable to each year's Annual Incentive shall be established by the Remuneration Committee in consultation with Executive within the first ninety (90) days of each fiscal year (or, for the first partial year of employment, within thirty (30) days following the Start Date). Performance metrics may include, without limitation, revenue, adjusted EBITDA, free cash flow, total shareholder return, customer growth, network reliability, strategic objectives, and individual performance goals.
4.4 Payment Timing. The Annual Incentive, if earned, shall be paid in cash no later than March 15 of the calendar year following the year to which the Annual Incentive relates, consistent with the payment timing applicable to other senior executives of the Company.
4.5 Pro-Rata Bonus for First Year. For the first partial fiscal year of Executive's employment (October 1, 2024 through December 31, 2024, or November 1, 2024 through December 31, 2024 if the Start Date is deferred), Executive shall be eligible to receive a pro-rata Annual Incentive, calculated by multiplying the Annual Incentive that would have been earned for the full fiscal year by a fraction, the numerator of which is the number of days of Executive's employment during such fiscal year and the denominator of which is 365.
4.6 Benchmarking Context. Executive's current target annual incentive at Marlowe Asset Management Digital Holdings, Inc. is 150% of base salary, which equals Two Million One Hundred Seventy-Five Thousand Dollars ($2,175,000) at Executive's current Marlowe Asset Management base salary. The proposed NTP Target Annual Incentive of 175% of base salary represents an uplift of twenty-five (25) percentage points in the target rate and an increase in the target dollar amount of $887,500 over Executive's current Marlowe Asset Management target bonus opportunity.
SECTION 5: SIGN-ON COMPENSATION (MAKE-WHOLE)
The Company recognizes that Executive will forfeit significant unvested equity compensation and other economic benefits upon departure from Marlowe Asset Management Digital Holdings, Inc. To induce Executive to accept employment with NTP and to provide an appropriate make-whole for such forfeiture, the Company shall provide the following sign-on compensation:
5.1 Sign-On Cash Bonus
Amount. Executive shall receive a sign-on cash bonus in the amount of Five Million Dollars ($5,000,000) (the "Sign-On Cash Bonus").
Payment. The Sign-On Cash Bonus shall be paid in a single lump-sum payment within thirty (30) days following the Start Date, subject to applicable withholding and deductions.
Clawback. The Sign-On Cash Bonus shall be subject to repayment (net of applicable taxes withheld on such amount) if Executive voluntarily resigns from employment with the Company (other than for Good Reason, as defined in Section 9.4) within twenty-four (24) months of the Start Date. In the event of a triggering resignation, Executive shall repay the full net amount of the Sign-On Cash Bonus to the Company within sixty (60) days following the date of such resignation. For the avoidance of doubt, no repayment shall be required if Executive's employment is terminated by the Company without Cause, if Executive resigns for Good Reason, or if Executive's employment terminates due to death or disability.
Purpose. The Sign-On Cash Bonus is intended to serve as a partial make-whole for the forfeiture of unvested equity compensation at Marlowe Asset Management Digital Holdings and to offset transition costs associated with Executive's change of employment.
5.2 Sign-On Equity Grant
Total Sign-On Equity Value. Executive shall receive a sign-on equity grant with a total target grant-date value of Eighteen Million Four Hundred Thousand Dollars ($18,400,000) (the "Sign-On Equity Grant"), consisting of the following components:
RSU Component. Twelve Million Dollars ($12,000,000) in restricted stock units ("Sign-On RSUs"), with the following terms:
• Vesting: The Sign-On RSUs shall vest ratably over three (3) years from the Start Date, with one-third (1/3) of the Sign-On RSUs vesting on each of the first, second, and third anniversaries of the Start Date, subject to Executive's continued employment through each applicable vesting date.
• Plan: The Sign-On RSUs shall be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "Plan"), subject to the terms and conditions thereof.
• Number of Shares: The number of NTP ordinary shares (represented by American Depositary Receipts) underlying the Sign-On RSUs shall be determined by dividing $12,000,000 by the closing price of NTP ADRs on the New York Stock Exchange on the grant date. For reference, the closing price of NTP ADRs on June 4, 2024 was $15.87 per ADR, which would yield approximately 755,830 RSUs at that reference price. The actual number of shares will be determined based on the grant-date closing price.
PSU Component. Six Million Four Hundred Thousand Dollars ($6,400,000) in performance stock units ("Sign-On PSUs"), with the following terms:
• Vesting: The Sign-On PSUs shall cliff vest at the end of three (3) years from the Start Date, subject to Executive's continued employment through the end of the three-year performance period and the achievement of applicable performance hurdles.
• Performance Hurdles: The performance conditions applicable to the Sign-On PSUs shall include (i) total shareholder return ("TSR") of NTP relative to a peer group to be established by the Remuneration Committee, and (ii) revenue growth targets, in each case measured over the three-year performance period. The specific metrics, weightings, and threshold/target/maximum performance levels shall be established by the Remuneration Committee promptly following the Start Date.
• Payout Range: The payout range for the Sign-On PSUs shall be zero percent (0%) to one hundred fifty percent (150%) of the target number of PSUs, depending on the level of achievement of the applicable performance hurdles. If threshold performance is not achieved, no Sign-On PSUs shall vest.
• Plan: The Sign-On PSUs shall be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan, subject to the terms and conditions thereof.
5.3 Make-Whole Analysis
The Sign-On Cash Bonus and Sign-On Equity Grant are designed, in the aggregate, to provide a full make-whole for Executive's estimated forfeited unvested equity at Marlowe Asset Management Digital Holdings, Inc. The make-whole analysis is summarized as follows:
• Executive's estimated forfeited unvested equity at Marlowe Asset Management Digital Holdings, Inc. (based on Marlowe Asset Management's closing stock price as of June 4, 2024 and the vesting schedules applicable to Executive's outstanding Marlowe Asset Management equity awards): $23,400,000
• Total sign-on equity value (Sign-On RSUs + Sign-On PSUs): $18,400,000
• Equity shortfall ($23,400,000 − $18,400,000): $5,000,000
• Sign-On Cash Bonus to offset equity shortfall: $5,000,000
• Total make-whole package: $18,400,000 + $5,000,000 = $23,400,000
The Company believes that this make-whole structure, which combines equity and cash to equal the full estimated value of Executive's forfeited Marlowe Asset Management equity, is fair and appropriate and is consistent with market practice for CEO-level lateral hires in the telecommunications sector.
5.4 Equity Plan Capacity
The Remuneration Committee has confirmed that the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan has sufficient capacity to accommodate the Sign-On Equity Grant and Executive's first-year annual long-term incentive award. The relevant data is as follows:
• Remaining shares available for issuance under the Plan as of the date hereof: approximately 14,200,000 shares
• Estimated shares required for Sign-On Equity Grant ($18,400,000) plus first-year annual LTI award ($9,000,000), based on the June 4, 2024 reference price of $15.87 per ADR: approximately 1,726,529 shares ($27,400,000 ÷ $15.87)
• Such amount represents approximately 0.25% of NTP's approximately 699,000,000 shares outstanding, well within the dilution parameters established by the Remuneration Committee and ISS share plan guidelines
SECTION 6: ANNUAL LONG-TERM INCENTIVE AWARDS
6.1 Annual LTI Target Value. Commencing with the fiscal year beginning on January 1, 2025 (or, if applicable, from the Start Date for the first partial fiscal year), Executive shall be eligible to receive annual long-term incentive equity awards with a target grant-date value of Nine Million Dollars ($9,000,000) per year (the "Annual LTI Target").
6.2 Mix. The Annual LTI awards shall be delivered in the following mix, consistent with NTP's standard equity grant practices for senior executives:
• Performance Stock Units (PSUs): Sixty percent (60%) of the Annual LTI Target = $5,400,000 per year in PSUs.
• Restricted Stock Units (RSUs): Forty percent (40%) of the Annual LTI Target = $3,600,000 per year in RSUs.
6.3 PSU Vesting. Annual LTI PSUs shall cliff vest at the end of a three-year performance period, subject to Executive's continued employment through the end of the performance period and the achievement of performance conditions established by the Remuneration Committee at the time of grant. Performance conditions may include relative total shareholder return, revenue growth, adjusted EBITDA growth, return on invested capital, and such other metrics as the Remuneration Committee may determine. The payout range for annual LTI PSUs shall be zero percent (0%) to one hundred fifty percent (150%) of target, consistent with the payout range applicable to Sign-On PSUs.
6.4 RSU Vesting. Annual LTI RSUs shall vest ratably over three (3) years from the date of grant, with one-third (1/3) vesting on each of the first, second, and third anniversaries of the grant date, subject to Executive's continued employment through each applicable vesting date.
6.5 Plan. All Annual LTI awards shall be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan, subject to the terms and conditions thereof.
6.6 Remuneration Committee Approval. Annual LTI awards shall be subject to annual approval by the Remuneration Committee of the Board, which retains discretion over the specific terms of each year's grants, including the selection of performance metrics, peer groups, and grant dates. Notwithstanding the foregoing, the Annual LTI Target shall not be reduced below $9,000,000 during the Initial Term without Executive's prior written consent. Any reduction in the Annual LTI Target below $9,000,000 during the Initial Term without Executive's consent shall constitute an event giving rise to Good Reason for resignation, as set forth in Section 9.4.
6.7 Benchmarking Context. Executive's current annual long-term incentive target at Marlowe Asset Management Digital Holdings, Inc. is $7,500,000. The proposed NTP Annual LTI Target of $9,000,000 represents an increase of $1,500,000, or twenty percent (20%), over Executive's current Marlowe Asset Management annual LTI target.
SECTION 7: TOTAL TARGET COMPENSATION SUMMARY
The following table summarizes Executive's proposed total target annual compensation at NTP, exclusive of sign-on compensation:
For comparison purposes, Executive's current total target annual compensation at Marlowe Asset Management Digital Holdings, Inc. is as follows:
The proposed NTP total target annual compensation of $13,812,500 represents an increase of $2,687,500, or approximately 24.2%, over Executive's current Marlowe Asset Management total target annual compensation. The Remuneration Committee has reviewed the proposed compensation package in the context of the Whitmore Hobson LLP peer group benchmarking analysis (Appendix D) and has determined that the package is positioned between the median and the 75th percentile of total compensation for chief executive officers of comparable companies, which the Remuneration Committee considers appropriate given Executive's qualifications, experience, and the scope and complexity of NTP's global operations.
SECTION 8: BENEFITS, RETIREMENT, AND PERQUISITES
8.1 Health and Welfare Benefits
Executive shall be eligible to participate in all health and welfare benefit plans maintained by NTP US for the benefit of its employees and senior executives, on terms no less favorable than those available to other senior executives of NTP US. Such plans currently include medical, dental, and vision insurance, short-term and long-term disability insurance, basic life insurance, and accidental death and dismemberment insurance.
In addition, Executive shall be eligible to participate in NTP US's executive health program, which provides for comprehensive annual physical examinations, health risk assessments, and related preventive health services through NTP US's designated executive health provider.
8.2 Retirement. 401(k) Plan. Executive shall be eligible to participate in NTP US's tax-qualified 401(k) retirement savings plan on the same terms as other eligible employees. NTP US currently provides an employer matching contribution equal to six percent (6%) of eligible compensation. Applied to Executive's Base Salary, the annual employer matching contribution would equal One Hundred Five Thousand Dollars ($105,000), subject to applicable Internal Revenue Code contribution limits (including the annual elective deferral limit under Section 402(g) and the annual additions limit under Section 415). To the extent that applicable IRS contribution limits reduce the employer matching contribution, such reduction shall be addressed through the supplemental executive retirement plan contribution described below.
Supplemental Executive Retirement Plan (SERP). The Company shall make an annual supplemental executive retirement contribution of Two Hundred Fifty Thousand Dollars ($250,000) on behalf of Executive to a nonqualified deferred compensation arrangement maintained by NTP US. Such contributions shall be subject to a vesting schedule to be determined by the Remuneration Committee, and the nonqualified deferred compensation arrangement shall be designed and administered in compliance with Section 409A of the Internal Revenue Code. The SERP contribution is intended to supplement the 401(k) employer match and to provide Executive with a retirement benefit commensurate with Executive's total compensation level.
8.3 Perquisites. Executive shall be entitled to the following perquisites during the term of employment:
Car Allowance. An annual car allowance of Twenty-Five Thousand Dollars ($25,000), payable in monthly installments, in lieu of a Company-provided vehicle.
Supplemental Life Insurance. The Company shall provide Executive with supplemental life insurance coverage in the amount of Two Million Dollars ($2,000,000), in addition to any basic life insurance coverage provided under NTP US's standard employee benefit plans.
Financial and Tax Planning. The Company shall reimburse Executive for the cost of personal financial planning, tax preparation, and tax advisory services incurred by Executive, up to a maximum of Thirty-Five Thousand Dollars ($35,000) per calendar year. Such reimbursement shall include, without limitation, fees paid to accountants, financial advisors, and tax counsel in connection with personal tax compliance, investment planning, and estate planning.
Tax Equalization. The Company shall provide Executive with tax equalization for UK-source income arising from Executive's UK duties (estimated at approximately 20% of Executive's working time). The specific terms and mechanics of the tax equalization arrangement shall be set forth in the secondary UK service agreement and in a tax equalization policy to be prepared by NTP's global mobility tax advisors. The tax equalization arrangement shall ensure that Executive bears no additional tax cost by reason of Executive's UK duties beyond the US federal and state income tax that Executive would have owed had all of Executive's compensation been US-source income.
8.4 Directors' and Officers' Insurance and Indemnification
Indemnification. The Company shall indemnify Executive to the fullest extent permitted by the Delaware General Corporation Law (with respect to NTP US) and by NTP's Articles of Association (with respect to NTP PLC). Executive shall be entitled to indemnification for all costs, expenses (including reasonable attorneys' fees), judgments, fines, penalties, and settlement amounts incurred in connection with any action, suit, proceeding, or investigation arising from or related to Executive's service as an officer or director of the Company or any of its affiliates, to the fullest extent permitted by applicable law.
D&O Insurance. Executive shall be covered under NTP's directors' and officers' liability insurance policy, currently maintained with Ashdown Surety & Insurance Co. (policy number ASI-D&O-NTP-2024-4471), which provides coverage of Fifty Million Dollars ($50,000,000) per occurrence and One Hundred Million Dollars ($100,000,000) in the aggregate. Executive shall be covered on terms no less favorable than those provided to other directors and officers of NTP and its subsidiaries. The Company shall maintain such D&O insurance coverage (or equivalent replacement coverage) throughout the term of Executive's employment.
Tail Coverage. Following the cessation of Executive's service as an officer or director of the Company (for any reason), the Company shall maintain tail D&O insurance coverage for a period of six (6) years, on terms no less favorable than the D&O coverage in effect at the time of cessation of service, to protect Executive against claims arising from acts or omissions occurring during Executive's period of service.
SECTION 9: TERMINATION PROVISIONS — NON-CHANGE IN CONTROL
9.1 Termination Without Cause or Resignation for Good Reason (Non-CIC)
In the event that Executive's employment is terminated by the Company without Cause (as defined in Section 9.5) or Executive resigns for Good Reason (as defined in Section 9.4), in either case outside of the Change-in-Control Protection Period (as defined in Section 10.2), Executive shall be entitled to the following separation benefits, subject to Executive's execution and non-revocation of a general release of claims in favor of the Company and its affiliates within sixty (60) days following the date of termination:
Severance Payment. A lump-sum cash severance payment equal to two times (2x) the sum of (i) Executive's Base Salary and (ii) Executive's Target Annual Incentive, calculated as follows:
2 × ($1,750,000 + $3,062,500) = 2 × $4,812,500 = $9,625,000
The severance payment shall be paid in a single lump sum within sixty (60) days following the date of termination, subject to Executive's timely execution and non-revocation of the release of claims and subject to compliance with Section 409A of the Internal Revenue Code (including the six-month delay applicable to specified employees, if applicable).
Pro-Rata Bonus. A pro-rata annual incentive for the fiscal year in which termination occurs, calculated based on actual performance for the full fiscal year and prorated based on the number of days of Executive's employment during such fiscal year. The pro-rata bonus shall be payable at the same time that annual incentive bonuses are paid to other senior executives of the Company for the applicable fiscal year, but in no event later than March 15 of the year following the year of termination.
Equity Treatment. Twelve (12) months of accelerated vesting of all unvested restricted stock units (including Sign-On RSUs and Annual LTI RSUs) and any other time-based equity awards held by Executive as of the date of termination. With respect to performance stock units (including Sign-On PSUs and Annual LTI PSUs), a pro-rata portion of such PSUs shall remain outstanding and eligible to vest based on actual performance through the end of the applicable performance period, with the pro-rata portion determined based on the number of days elapsed in the performance period through the date of termination divided by the total number of days in the performance period.
Benefits Continuation. The Company shall pay Executive's COBRA premiums for continued health insurance coverage (medical, dental, and vision) for Executive and Executive's eligible dependents for a period of eighteen (18) months following the date of termination, or until Executive becomes eligible for comparable coverage from a subsequent employer, whichever is earlier.
Outplacement. The Company shall provide Executive with executive outplacement services through a nationally recognized outplacement firm selected by the Company, at a cost not to exceed Fifty Thousand Dollars ($50,000).
9.2 Termination for Cause or Voluntary Resignation Without Good Reason
In the event that Executive's employment is terminated by the Company for Cause (as defined in Section 9.5) or Executive voluntarily resigns without Good Reason, Executive shall not be entitled to any severance payments or benefits and shall be entitled only to the following accrued obligations:
(a) earned but unpaid Base Salary through the date of termination;
(b) any earned but unpaid annual incentive for any completed fiscal year ending prior to the date of termination;
(c) vested equity awards, which shall be treated in accordance with their terms;
(d) accrued but unused vacation pay, to the extent required by applicable law or Company policy; and
(e) any other benefits to which Executive is entitled under the terms of any applicable employee benefit plan or arrangement.
In addition, if Executive voluntarily resigns without Good Reason within twenty-four (24) months of the Start Date, the Sign-On Cash Bonus clawback provision set forth in Section 5.1 shall apply.
9.3 Death or Disability
In the event of Executive's death or Executive's termination of employment due to Disability (as defined in the definitive Employment Agreement, consistent with the definition in NTP US's long-term disability plan), Executive (or Executive's estate or beneficiaries, as applicable) shall be entitled to the following:
(a) a pro-rata target annual incentive for the fiscal year in which death or disability occurs, based on the Target Annual Incentive (rather than actual performance), prorated based on the number of days of Executive's employment during such fiscal year;
(b) twelve (12) months of accelerated vesting of all unvested equity awards (including RSUs, PSUs, and other equity awards);
(c) life insurance and disability benefits payable in accordance with the terms of the applicable Company benefit plans; and
(d) all accrued obligations as described in Section 9.2 above.
9.4 Definition of Good Reason
"Good Reason" shall mean the occurrence of any of the following events without Executive's prior written consent:
(a) a material reduction in Executive's duties, title, authority, or responsibilities, including a change in Executive's reporting relationship such that Executive no longer reports directly to the Board of Directors of NTP;
(b) a reduction in Executive's Base Salary below the initial level of $1,750,000 (or such higher level as may have been established following any annual increase), or a reduction in Executive's target bonus opportunity below 175% of Base Salary, or a reduction in Executive's Annual LTI Target below $9,000,000;
(c) the relocation of Executive's principal office to a location more than fifty (50) miles from 600 Lexington Avenue, New York, New York 10022, without Executive's consent;
(d) a material breach by the Company of the Employment Agreement or any other material agreement between the Company and Executive; or
(e) the failure of the Company to nominate Executive for re-election to the Board of Directors of NTP at any annual general meeting, or the removal of Executive from the Board of Directors of NTP (other than in connection with a termination for Cause).
Executive must provide the Company with written notice of the existence of a Good Reason condition within ninety (90) days following the initial existence of such condition. The Company shall have a cure period of thirty (30) days following receipt of such written notice to remedy the condition. If the Company fails to cure the condition within the thirty-day cure period, Executive may resign for Good Reason within sixty (60) days following the expiration of the cure period.
9.5 Definition of Cause
"Cause" shall mean:
(a) Executive's willful misconduct or gross negligence in the performance of Executive's duties to the Company;
(b) Executive's conviction of, or plea of guilty or nolo contendere to, a felony or any crime involving moral turpitude;
(c) Executive's material breach of the Employment Agreement, including any breach of the restrictive covenant provisions set forth in Section 11;
(d) Executive's commission of fraud, embezzlement, or misappropriation of Company funds or assets;
(e) Executive's willful failure to cooperate with a lawful investigation by any governmental authority or regulatory body, or Executive's willful failure to cooperate with any internal investigation authorized by the Board; or
(f) Executive's willful and continued failure to perform Executive's duties (other than as a result of Disability), after receipt of written notice from the Board specifying the nature of such failure.
With respect to any condition described in clauses (a), (c), (e), or (f) above that is capable of cure, the Company shall provide Executive with written notice specifying the nature of the Cause condition, and Executive shall have a period of thirty (30) days following receipt of such notice to cure the condition. If Executive cures the condition within the thirty-day cure period, the Company shall not be entitled to terminate Executive's employment for Cause on the basis of such condition.
SECTION 10: CHANGE IN CONTROL PROVISIONS
10.1 Definition of "Change in Control"
A "Change in Control" shall mean the occurrence of any of the following:
(a) Acquisition of Voting Securities. The acquisition by any person or group (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of the combined voting power of the then-outstanding voting securities of Northgate Telecommunications PLC entitled to vote generally in the election of directors; provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from NTP, (ii) any acquisition by NTP or any of its subsidiaries, (iii) any acquisition by any employee benefit plan or related trust sponsored or maintained by NTP or any of its subsidiaries, or (iv) any acquisition by any entity pursuant to a transaction that does not constitute a Change in Control under clause (b) below.
(b) Merger or Business Combination. The consummation of a merger, consolidation, statutory share exchange, or similar business combination involving Northgate Telecommunications PLC (a "Business Combination"), unless, immediately following such Business Combination, the shareholders of NTP immediately prior to such Business Combination hold at least fifty percent (50%) of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or equivalent governing body) of the surviving or resulting entity (or its ultimate parent entity) immediately following such Business Combination, in substantially the same proportions as their ownership of NTP voting securities immediately prior to such Business Combination.
(c) Sale of Assets. The sale or other disposition of all or substantially all of the assets of Northgate Telecommunications PLC and its subsidiaries, taken as a whole, to any person or group that is not a subsidiary of NTP; provided, however, that a sale or disposition shall not constitute a Change in Control if the shareholders of NTP immediately prior to such sale or disposition hold at least fifty percent (50%) of the combined voting power of the acquiring entity immediately following such sale or disposition.
Board Composition Trigger — Excluded. The Company's definition of Change in Control does not include a Board composition or Board turnover trigger (i.e., a provision treating a change in a majority of the members of the Board of Directors as a Change in Control). The Board of NTP has determined, after consultation with its advisors and in accordance with evolving best practices under the UK Corporate Governance Code 2024, that a change in Board composition trigger is inconsistent with UK corporate governance norms, which emphasize the annual re-election of all directors and the Board's collective authority to determine its own composition. The exclusion of a Board composition trigger from the Change in Control definition represents a final position of the Board and is not subject to further negotiation.
10.2 CIC Severance — Double Trigger
In the event that Executive's employment is terminated by the Company without Cause or Executive resigns for Good Reason (a "Qualifying Termination"), in either case occurring within twenty-four (24) months following a Change in Control (the "Change-in-Control Protection Period"), Executive shall be entitled to the following enhanced separation benefits in lieu of the non-CIC severance benefits described in Section 9.1, subject to Executive's execution and non-revocation of a general release of claims in favor of the Company and its affiliates within sixty (60) days following the date of termination:
CIC Cash Severance. A lump-sum cash severance payment equal to two and one-half times (2.5x) the sum of (i) Executive's Base Salary and (ii) Executive's Target Annual Incentive, calculated as follows:
2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250
The CIC cash severance shall be paid in a single lump sum within sixty (60) days following the date of termination, subject to Executive's timely execution and non-revocation of the release of claims and subject to compliance with Section 409A of the Internal Revenue Code.
Pro-Rata Bonus. A pro-rata target annual incentive for the fiscal year in which termination occurs, calculated based on the Target Annual Incentive (at target, rather than actual performance), prorated based on the number of days of Executive's employment during such fiscal year. The pro-rata bonus shall be paid in a lump sum at the same time as the CIC cash severance.
CIC Equity Acceleration. Full acceleration of all unvested restricted stock units (including Sign-On RSUs and Annual LTI RSUs) and any other time-based equity awards held by Executive as of the date of termination. With respect to performance stock units (including Sign-On PSUs and Annual LTI PSUs), accelerated vesting at the target level, pro-rated for the elapsed portion of the applicable performance period as of the date of termination.
CIC Benefits Continuation. The Company shall pay Executive's COBRA premiums for continued health insurance coverage (medical, dental, and vision) for Executive and Executive's eligible dependents for a period of twenty-four (24) months following the date of termination, or until Executive becomes eligible for comparable coverage from a subsequent employer, whichever is earlier.
Outplacement. The Company shall provide Executive with executive outplacement services through a nationally recognized outplacement firm selected by the Company, at a cost not to exceed Fifty Thousand Dollars ($50,000).
10.3 Section 280G Treatment — Best-Net Cutback
No Excise Tax Gross-Up. No excise tax gross-up payment shall be provided under this agreement or in connection with any Change in Control.
Best-Net Cutback. If any payments or benefits payable to Executive under this agreement or otherwise in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then such payments and benefits shall be either (i) delivered in full or (ii) reduced to the extent necessary so that no portion thereof is subject to the excise tax under Section 4999, whichever of (i) or (ii) would result in the greater after-tax benefit to Executive on a net basis (taking into account all applicable federal, state, and local income taxes, employment taxes, and the excise tax under Section 4999) (the "best-net" approach). In the event of a reduction under clause (ii), the order of reduction shall be as follows: first, any cash severance payments; second, any other cash payments; third, any benefits; and fourth, any equity acceleration, in each case in reverse chronological order (i.e., the payment or benefit with the latest scheduled payment date shall be reduced first).
Reference Data. For purposes of preliminary analysis under Section 280G, the following reference data has been considered:
• Executive's Section 280G "base amount" (average annualized W-2 compensation from Marlowe Asset Management Digital Holdings, Inc. for the five calendar years preceding the year of a Change in Control, based on W-2 data for 2019–2023): $7,840,000
• Safe harbor limit (3 × base amount − $1): $23,519,999 (3 × $7,840,000 − $1)
• Under the Company's proposed 2.5x CIC severance structure, the independent compensation consultant (Whitmore Hobson LLP) has performed a preliminary analysis indicating that the estimated total parachute payments are likely to fall within the range where the best-net cutback approach is approximately equivalent to, or slightly more favorable to, Executive than receiving the full amount and paying the excise tax under Section 4999. A detailed analysis is set forth in Appendix C.
Proxy Advisory Alignment. The best-net cutback approach (without an excise tax gross-up) is consistent with the recommendations of Thackeray Health IT (ISS) and Veltrano Proxy Advisors, Inc. ISS proxy advisory guidelines treat full Section 280G excise tax gross-ups as a "problematic pay practice," and Veltrano Proxy Advisors has advised the Company that a full excise tax gross-up in the context of the proposed compensation package would likely trigger a negative say-on-pay recommendation. The best-net cutback approach avoids this risk while providing Executive with the maximum after-tax benefit consistent with shareholder expectations.
10.4 Governance Context
The Company's CIC severance structure has been designed in consideration of the following governance and shareholder relations factors:
• UK Corporate Governance Code 2024, Provision 40. The UK Corporate Governance Code recommends that notice or contract periods for executive directors should be set at one year or less, and that compensation commitments in the event of early termination should reflect best practice, with a strong presumption against payment for failure. While the UK Code does not impose a hard cap on CIC severance multiples, CIC severance multiples above 2x are generally treated as requiring strong justification for UK-listed companies and are subject to heightened scrutiny by institutional shareholders and proxy advisory firms.
• NTP 2024 AGM Say-on-Pay Vote. NTP's most recent advisory say-on-pay vote, held at the 2024 Annual General Meeting on April 18, 2024, received 87.4% support from shareholders. The Remuneration Committee (Geoffrey Stanton, Chair) has determined that the proposed 2.5x CIC multiplier, combined with the best-net cutback approach and the absence of an excise tax gross-up, represents the maximum level of CIC severance that is consistent with maintaining this level of shareholder support. A higher multiplier (e.g., 3x) or the inclusion of an excise tax gross-up would, in the Remuneration Committee's judgment, materially increase the risk of a significant decline in say-on-pay support at the 2025 AGM.
• ISS and Proxy Advisory Guidelines. ISS generally flags CIC severance exceeding 3x the sum of base salary and bonus as a concern under its pay-for-performance analysis and treats excise tax gross-ups as "problematic." Veltrano Proxy Advisors, Inc. has confirmed to the Remuneration Committee that the proposed 2.5x / best-net structure would not, standing alone, trigger a negative recommendation from Veltrano, whereas a 3x / full gross-up structure would likely do so.
• Institutional Shareholders. NTP's top institutional shareholders have expressed sensitivity to executive pay quantum in their engagement with the Remuneration Committee. The Company's largest shareholders include: Caledonian Asset Management (8.3% of outstanding shares), Pemberton Capital Group (6.7%), Thornbury Investment Trust (5.1%), Regis Global Equity Fund (4.4%), and Atlas Pension Fund (3.2%). The Remuneration Committee has engaged with several of these shareholders regarding the proposed CEO compensation package and believes that the 2.5x / best-net structure is within the range that these shareholders would consider acceptable. Executive's compensation package will be subject to a binding remuneration policy vote at the 2025 Annual General Meeting.
SECTION 11: RESTRICTIVE COVENANTS
11.1 Non-Competition. Duration. For a period of eighteen (18) months following the termination of Executive's employment with the Company (the "Non-Competition Period"), regardless of the reason for such termination (whether by the Company with or without Cause, by Executive with or without Good Reason, or due to death, disability, expiration of the term, or otherwise), Executive shall be bound by the non-competition restrictions set forth below.
Geographic Scope. The non-competition restriction shall apply within North America (the United States, Canada, and Mexico) and Western Europe (the United Kingdom, France, Germany, the Netherlands, Belgium, Luxembourg, Ireland, Spain, Portugal, Italy, Switzerland, Austria, Sweden, Norway, Denmark, and Finland).
Activity Restriction. During the Non-Competition Period, Executive shall not, directly or indirectly, whether as an employee, officer, director, manager, consultant, advisor, independent contractor, partner, member, or principal, become employed by, serve as a director, officer, or consultant to, or hold a material equity interest (defined as ownership of more than two percent (2%) of the outstanding equity securities of any class) in, any company or business entity that derives more than fifteen percent (15%) of its consolidated revenues (determined based on the most recently filed annual report or financial statements) from any of the following lines of business:
(i) telecommunications services, including wireline, wireless, broadband, and fiber-optic communications services;
(ii) telecommunications infrastructure, including the ownership, operation, leasing, or management of telecommunications towers, data centers, fiber-optic networks, or undersea cable systems; or
(iii) enterprise SaaS platforms serving telecommunications operators, including billing, customer relationship management, network management, or operations support systems designed for or primarily marketed to telecommunications service providers.
Narrowing from Initial Proposal. The parties acknowledge that the non-competition restriction set forth above has been narrowed from the Company's initial proposal, which proposed a twenty-four (24) month, worldwide non-competition period with a broader activity definition. The revised eighteen (18) month duration, the limitation of geographic scope to North America and Western Europe, and the adoption of a revenue-based activity definition (rather than a scheduled-competitor approach) reflect the Board's final concession on this issue.
Enforceability. Calderwood & Harkness LLP has advised the Company that this duration and scope are designed to satisfy the reasonableness analysis under New York law (which governs the primary Employment Agreement) and to withstand potential challenge under applicable law, including consideration of pending New York legislation regarding non-compete agreements. The revenue-based activity definition is preferred over a scheduled-competitor approach because it provides objective, measurable criteria and is less susceptible to challenges based on over-breadth or obsolescence.
11.2 Garden Leave
Duration. In the event that either party provides notice of termination of Executive's employment (whether notice of termination by the Company, notice of resignation by Executive, or notice of non-renewal by either party), the Company may, at its sole discretion, require Executive to serve a garden leave period of up to six (6) months (the "Garden Leave Period"), commencing on the date of such notice.