letter-vasquez-to-hargrove-final-cover.docx

1022-00004 · Northgate Telecommunications PLC · Final Proposal & Termination

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CALDERWOOD & HARKNESS LLP Attorneys at Law 299 Park Avenue, 42nd Floor New York, NY 10171 Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com

September 3, 2024

VIA HAND DELIVERY AND EMAIL

Victoria Hargrove, Esq. Hargrove & Liddell LLP 51 Madison Avenue, 30th Floor New York, NY 10010

Re: Proposed Executive Employment Agreement — Marcus Elliot Harding and Northgate Telecommunications PLC Matter No. 1022-00004 CONFIDENTIAL

Dear Ms. Hargrove:

I. Purpose of This Letter

This letter accompanies the enclosed Revised Term Sheet (v5-Final) dated September 3, 2024 (the "Revised Term Sheet"), which sets forth Northgate Telecommunications PLC's ("Northgate" or the "Company") final compromise proposal for the employment of Marcus Elliot Harding ("Mr. Harding") as Chief Executive Officer of Northgate.

I wish to emphasize at the outset that the enclosed proposal has been duly authorized by the full Board of Directors of Northgate (the "Board"), following careful and extensive deliberation by the Remuneration Committee, chaired by Geoffrey Stanton, and by the Board Chair, Dame Philippa Thornton-Hale. This authorization was confirmed by unanimous written consent of the Board dated September 2, 2024. The enclosed Revised Term Sheet represents Northgate's best-and-final offer and reflects the furthest extent to which the Board is prepared to move on the remaining open terms. As such, the positions set forth herein should be understood as the Board's considered and definitive positions, arrived at after weighing the recommendations of its independent advisors and its obligations to Northgate's shareholders.

I also wish to acknowledge, on behalf of both Northgate and its counsel, the extensive and good-faith negotiations that have been conducted over the course of this engagement. As you know, the parties have exchanged five rounds of term-sheet negotiation, commencing with the initial proposal circulated on June 24, 2024, and proceeding through successive revisions dated June 28, July 8, July 15, and July 19, 2024. Following the completion of the term-sheet phase, two full drafts of the Executive Employment Agreement were prepared and circulated — Draft 1 on July 22, 2024, and Draft 2 on August 12, 2024 — each incorporating detailed markup and commentary from your office. Additionally, the principals meeting held on August 26, 2024, at 600 Lexington Avenue, New York, at which Mr. Harding, Dame Philippa Thornton-Hale, Mr. Stanton, and the parties' respective counsel were present, provided a valuable opportunity for direct dialogue on the key open issues.

Despite the substantial progress achieved through these efforts — and the genuine spirit of compromise that both sides have demonstrated — two core areas remain unresolved. These are: (1) the change in control severance provisions, including the definition of "change in control," the severance multiplier, and the tax treatment of parachute payments; and (2) the scope and duration of the restrictive covenant obligations that will apply following any termination of Mr. Harding's employment.

The purpose of this letter is to explain, in detail, Northgate's rationale for its final positions on each of these two areas, so that Mr. Harding and his advisors may evaluate the proposal with a full understanding of the considerations that have informed the Board's decision-making. We hope that this transparency will facilitate resolution of the remaining open terms and the timely execution of a definitive agreement.

II. Summary of Agreed Terms

Before turning to the two unresolved areas, it is important to place those issues in context by recognizing the breadth and depth of the agreement already reached between the parties. The parties have arrived at consensus on the substantial majority of the economic and structural terms of Mr. Harding's proposed employment. These agreed terms are summarized below and are reflected in the Revised Term Sheet:

Base Compensation and Annual Incentive:

• Base Salary: $1,750,000 per annum, subject to annual review by the Remuneration Committee with no reduction below this floor absent Mr. Harding's written consent.

• Target Annual Incentive: 175% of base salary, equaling $3,062,500 at target performance levels.

• Maximum Annual Incentive: 300% of base salary, equaling $5,250,000 at maximum performance levels, with payout determined by achievement against performance metrics to be established annually by the Remuneration Committee.

Sign-On Compensation:

• Sign-On Cash Bonus (Make-Whole): $5,000,000, payable within thirty (30) days of Mr. Harding's start date, subject to a twenty-four (24) month clawback in the event of voluntary resignation without good reason.

• Sign-On Equity Grant (Make-Whole for Forfeited Marlowe Asset Management Digital Holdings Equity): In recognition of the equity compensation forfeited by Mr. Harding upon departure from Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"), estimated at approximately $23,400,000 in aggregate, Northgate will grant: (i) a restricted stock unit ("RSU") award with a grant date value of $12,000,000, vesting ratably over three years (one-third per year); and (ii) a performance stock unit ("PSU") award with a grant date value of $6,400,000, vesting in full at the end of a three-year performance period, subject to achievement of performance goals to be established by the Remuneration Committee. Together, these sign-on equity awards total $18,400,000 in grant date value. The remaining $5,000,000 equity shortfall (i.e., the difference between the estimated $23,400,000 in forfeited Marlowe Asset Management equity and the $18,400,000 in sign-on equity) is addressed by the sign-on cash bonus referenced above.

Annual Long-Term Incentive:

• Annual LTI Target: $9,000,000 per year, allocated 60% to PSUs and 40% to RSUs, to be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "Omnibus Plan"). PSUs will vest at the end of a three-year performance period based on metrics established by the Remuneration Committee, and RSUs will vest ratably over three years.

Total Target Annual Compensation:

• When combining base salary ($1,750,000), target annual incentive ($3,062,500), and annual LTI target ($9,000,000), Mr. Harding's total target annual compensation is $13,812,500. This figure represents a significant premium over Mr. Harding's current total target compensation at Marlowe Asset Management Digital Holdings, which we understand to be approximately $11,125,000.

Retirement Benefits:

• 401(k) plan participation with a 6% employer matching contribution, consistent with Northgate's standard program for U.S.-based senior executives.

• Supplemental Executive Retirement Plan ("SERP") contribution of $250,000 per year, credited to a non-qualified deferred compensation account.

Perquisites:

• Annual car allowance of $25,000.

• Participation in Northgate's executive health program.

• Supplemental life insurance coverage in the amount of $2,000,000.

• Financial and tax planning reimbursement of up to $35,000 per year.

Employment Term:

• Initial term of five (5) years from the commencement date, with automatic one-year renewals thereafter unless either party provides written notice of non-renewal at least 180 days prior to the expiration of the then-current term.

Dual-Contract Architecture:

• Consistent with Northgate's cross-border operating structure, Mr. Harding's employment will be governed by a dual-contract arrangement: a primary employment agreement governed by New York law between Mr. Harding and Northgate Telecommunications US, Inc. (the Company's principal U.S. subsidiary), and a secondary UK service agreement between Mr. Harding and Northgate Telecommunications PLC. The respective scope, obligations, and compensation allocation between these two agreements have been agreed in principle, as reflected in Annex B to the Revised Term Sheet.

D&O Indemnification and Insurance:

• Mr. Harding will be entitled to indemnification and advancement of expenses to the fullest extent permitted by applicable law and Northgate's governing documents, and will be covered under Northgate's directors' and officers' liability insurance policy maintained with Ashdown Surety & Insurance Co. (current policy limits: $50,000,000 per occurrence and $100,000,000 in the aggregate). Such coverage will extend for a period of not less than six (6) years following the termination of Mr. Harding's employment for any reason.

Section 409A Compliance:

• The agreement will contain standard provisions to ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, including six-month delay provisions for specified employees where applicable.

Non-Disparagement:

• Mutual perpetual non-disparagement obligations applicable to both Mr. Harding and Northgate, with appropriate carve-outs for statements made in the course of legal proceedings, regulatory filings, and other protected communications.

The agreement reached on these terms reflects the genuine commitment of both parties to make this arrangement work. The total compensation package — encompassing an annual target of $13,812,500, sign-on cash of $5,000,000, and sign-on equity of $18,400,000 — is among the most competitive packages offered in the telecommunications sector and has been carefully designed to recruit Mr. Harding away from his current position at Marlowe Asset Management, compensate him for the substantial equity he would forfeit, and align his interests with those of Northgate's shareholders over the long term. We trust that the significance of these agreed terms will not be lost as the parties evaluate the remaining areas of disagreement.

III. Change in Control Severance Provisions — Northgate's Final Position and Rationale

The change in control ("CIC") severance provisions have been the subject of extensive discussion throughout the negotiation, and the gap between the parties' positions has narrowed considerably. Nevertheless, material differences remain with respect to four elements: (a) the CIC definition, (b) the severance multiplier, (c) the tax treatment of parachute payments, and (d) the duration of benefit continuation. We address each below.

A. Northgate's Final Proposal on Change in Control Severance

Northgate's final proposal on CIC severance is as follows:

• Double-Trigger Mechanism: CIC severance will be payable only upon the occurrence of both (i) a Change in Control Event (as defined below) and (ii) a Qualifying Termination — defined as a termination of Mr. Harding's employment by the Company without Cause, or a resignation by Mr. Harding for Good Reason — occurring within twenty-four (24) months following the Change in Control Event. No CIC severance will be payable solely by reason of the occurrence of a Change in Control Event absent a Qualifying Termination. This double-trigger structure is consistent with prevailing best practice and with the approach taken in the Omnibus Plan.

• CIC Severance Multiplier: 2.5x the sum of (i) Mr. Harding's base salary and (ii) his target annual bonus. At the proposed compensation levels, this yields: 2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250 in cash severance, payable in a lump sum within sixty (60) days following the Qualifying Termination (subject to execution and non-revocation of a release of claims).

• Full Equity Acceleration: Upon a Qualifying Termination within twenty-four (24) months following a Change in Control Event, all unvested equity awards held by Mr. Harding — including RSUs and PSUs — will vest in full. PSUs will vest at target performance levels, consistent with the CIC acceleration provisions of the Omnibus Plan.

• Benefit Continuation: Twenty-four (24) months of continued health and welfare benefits on the same terms as active employees (or, if COBRA continuation is elected, Company-paid COBRA premiums for up to twenty-four (24) months).

• Outplacement Services: The Company will provide outplacement services through a provider selected by Mr. Harding, at a cost not to exceed $50,000.

• Tax Treatment — Best-Net Safe Harbor: In lieu of an excise tax gross-up, the agreement will contain a "best-net" provision under Section 280G of the Internal Revenue Code. Under this approach, if any payments or benefits to Mr. Harding would constitute "parachute payments" within the meaning of Section 280G and would be subject to the excise tax imposed by Section 4999, then such payments and benefits will be either (x) delivered in full, or (y) reduced to the safe-harbor limit (i.e., the amount that does not give rise to the excise tax), whichever approach results in the greater after-tax benefit to Mr. Harding after taking into account all applicable federal, state, and local income and employment taxes, and the excise tax under Section 4999. In no event will the Company provide a gross-up payment for any excise tax.

B. Definition of "Change in Control"

The parties have reached agreement on the following three triggers within the definition of "Change in Control Event":

(a) Acquisition of Voting Securities: The acquisition by any person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 thereunder) of more than 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;

(b) Merger or Consolidation: The consummation of a merger, consolidation, or similar business combination involving Northgate Telecommunications PLC, unless immediately following such transaction, the shareholders of Northgate immediately prior to the transaction hold, directly or indirectly, at least 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity; or

(c) Asset Sale: The sale, lease, exchange, 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 an affiliate of Northgate.

However, Northgate's position is that the Board Turnover Trigger — defined by Mr. Harding as the replacement of a majority of the incumbent directors of Northgate's Board of Directors within any twelve (12) month period without the approval of the incumbent Board — is not included in the definition of "Change in Control Event."

Northgate's rationale for excluding the Board turnover trigger is as follows:

First, the inclusion of a board turnover trigger is inconsistent with UK corporate governance norms. Under the UK Corporate Governance Code 2024, board refreshment is actively encouraged, and the regular rotation of non-executive directors is considered a hallmark of good governance rather than an indication of a change in corporate control. The Northgate Board is currently in the process of implementing a planned succession program that may result in the appointment of several new independent directors over the next eighteen months. Including a board turnover trigger in the CEO's employment agreement would create the anomalous situation in which routine board refreshment — undertaken in the ordinary course and in compliance with the Company's governance obligations — could constitute a "change in control" entitling the CEO to severance payments in excess of $12 million.

Second, the board turnover trigger could be activated by shareholder activism that does not represent a true change in control of the enterprise. In recent years, several Northgate shareholders have exercised their rights to propose director candidates through Northgate's nomination procedures. A board turnover trigger would mean that successful shareholder engagement — again, a core principle of UK governance — could trigger massive severance obligations, creating perverse incentives and potentially entrenching incumbent management.

Third, the board turnover trigger is not included in the definition of "Change in Control" used in the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan, which governs equity awards for all executive officers and senior management of the Company. Introducing a different and more expansive definition solely for the CEO would create internal inconsistency within the Company's compensation framework and set a precedent that other senior executives would inevitably seek to replicate.

Fourth, inclusion of a board turnover trigger would create a potential conflict of interest in which the CEO has a direct, material personal financial interest in opposing changes to the composition of the Board of Directors — an outcome that is antithetical to sound corporate governance and to the Board's ability to discharge its fiduciary duties.

For all of these reasons, the Board has concluded that the exclusion of the board turnover trigger is appropriate and necessary, and this position is not subject to further negotiation.

C. Rationale for 2.5x Multiplier (vs. Harding's Demanded 3x)

Mr. Harding has requested a CIC severance multiplier of 3x base salary plus target annual bonus, which would yield cash severance of 3 × $4,812,500 = $14,437,500. Northgate's final proposal is a 2.5x multiplier, yielding $12,031,250. The difference between the two positions is $2,406,250. While Northgate acknowledges that this is a meaningful amount, the Board has concluded that the 2.5x multiplier represents the appropriate balance between competitiveness and governance considerations, for the following reasons:

Market Practice. The 2.5x multiplier is at the upper end of market practice for chief executive officers of publicly listed companies. This conclusion is supported by the analysis of Northgate's independent compensation consultant, Whitmore Hobson LLP, led by Dr. Rachel Whitmore. Dr. Whitmore's analysis of CEO CIC severance terms at Northgate's peer group of twenty publicly traded telecommunications and enterprise technology companies found that the median CIC severance multiplier was 2.0x, the 75th percentile was 2.5x, and only two companies in the peer group provided a 3x multiplier. Northgate's proposed 2.5x multiplier thus positions Mr. Harding at the top quartile of the peer group — a competitive posture that is consistent with Mr. Harding's caliber and the importance of the role.

Proxy Advisory Scrutiny. A 3x CIC multiplier would place Mr. Harding's severance package at or above the threshold that triggers heightened scrutiny from proxy advisory firms. Cobalt Ridge Solutions ("ISS") generally flags CIC severance exceeding 3x as a significant concern in its evaluation of executive compensation practices, and packages at or near the 3x level receive enhanced scrutiny — particularly when combined with other features such as tax gross-ups, single-trigger equity acceleration, or benefit continuation exceeding twenty-four months.

Proxy Advisor Analysis. Northgate's proxy governance advisor, Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director), has provided a detailed analysis concluding that a 3x CIC multiplier, combined with a full excise tax gross-up of the kind demanded by Mr. Harding, would likely trigger a negative recommendation from ISS (and potentially from Tarrant Partners LLC) on Northgate's say-on-pay resolution at the 2025 Annual General Meeting. The say-on-pay vote is advisory in nature under U.S. securities law but will be a binding vote on the Company's directors' remuneration policy under UK law. A negative recommendation from one or both major proxy advisory firms could have a material adverse effect on the outcome of that vote.

Shareholder Sensitivity. Northgate received 87.4% support on its say-on-pay resolution at the April 18, 2024 Annual General Meeting. While this level of support is solid, it does not provide unlimited latitude for the Board to approve aggressive severance terms that depart from market norms. The Board is acutely aware that the introduction of a new CEO compensation package represents a moment of particular scrutiny, and that a significant increase in CEO severance arrangements relative to those of Sir Alistair Kemble could erode the shareholder support that has been carefully cultivated over recent years.

UK Corporate Governance Standards. Under the UK Corporate Governance Code 2024, Provision 40, the Remuneration Committee is expected to ensure that service contracts and severance terms reflect best practice and avoid rewarding poor performance or providing excessive payments on departure. Aggressive CIC multiples are viewed unfavorably by UK institutional shareholders as inconsistent with these principles. Northgate's shareholder base includes significant UK institutional holders — including Caledonian Asset Management (8.3% of outstanding shares), Pemberton Capital Group (6.7%), and Thornbury Investment Trust (5.1%) — who are particularly attentive to UK governance standards. The Company's U.S. institutional holders, including Regis Global Equity Fund (4.4%), and the Atlas Pension Fund (the NTP employee pension scheme, holding 3.2%), similarly expect the Board to exercise discipline in this area.

Compromise Position. The 2.5x multiplier represents a genuine and substantial compromise from Northgate's initial position, which was 2.0x. In moving from 2.0x to 2.5x, the Board has added $2,406,250 in potential CIC severance — an increase of 25%. This movement was undertaken in recognition of the importance of the CEO role and the strength of Mr. Harding's candidacy. Moreover, the 2.5x multiplier is a meaningful increase over the CIC severance terms currently in place for Sir Alistair Kemble, whose existing agreement provides a 2.0x multiplier.

For all of these reasons, the Board has determined that a 2.5x multiplier is both competitive and responsible, and that a move to 3x cannot be justified in the current governance environment.

D. Rationale for Best-Net Cutback (vs. Harding's Demanded Full 280G Tax Gross-Up)

Mr. Harding has demanded that the agreement include a full gross-up for any excise tax imposed under Section 4999 of the Internal Revenue Code as a result of payments or benefits constituting "excess parachute payments" under Section 280G. Northgate's final position is that the agreement will contain a best-net safe harbor provision in lieu of a gross-up. The rationale for this position is as follows:

Section 280G Framework. Under Section 280G of the Internal Revenue Code, payments to a "disqualified individual" (which would include Mr. Harding as CEO) that are contingent upon a change in control and that exceed three times the individual's "base amount" are treated as "parachute payments." The portion of such payments exceeding the base amount is subject to a non-deductible 20% excise tax under Section 4999, in addition to ordinary income taxes, and the payor loses its tax deduction for the excess amount under Section 280G. Mr. Harding's base amount — calculated as his average annual W-2 compensation from Marlowe Asset Management Digital Holdings over the five-year period from 2019 through 2023 — is approximately $7,840,000. The safe-harbor limit (i.e., three times the base amount, less $1) is therefore approximately $23,519,999.

Estimated Exposure. Under Mr. Harding's demanded terms (a 3x severance multiplier, full acceleration of all unvested equity, and thirty-six months of benefit continuation), the estimated total parachute payments would be approximately $38,200,000. This would result in excess parachute payments of approximately $30,360,000 (i.e., $38,200,000 less $7,840,000), generating an estimated Section 4999 excise tax of approximately $6,072,000.

Cost of a Full Gross-Up. To make Mr. Harding whole for this excise tax liability on a fully grossed-up basis — taking into account the taxes on the gross-up payment itself — Northgate would be required to pay an additional estimated $4,200,000 to $6,800,000, depending on the final calculation of parachute payments and applicable tax rates. This cost would be borne entirely by the Company and its shareholders, with no corresponding benefit to the enterprise. Moreover, because Section 280G disallows the payor's deduction for excess parachute payments, the Company would also lose the tax benefit of the deduction for the affected amounts — further increasing the effective cost to shareholders.

Market Trend. The trend in executive compensation has moved decisively away from excise tax gross-ups. Fewer than 10% of S&P 500 companies now include gross-up provisions in new CEO employment agreements, and the proportion continues to decline with each proxy season. Proxy advisory firms — including ISS — specifically identify excise tax gross-ups as a problematic governance practice and factor the presence of such provisions into their voting recommendations on say-on-pay resolutions and director elections.

Economic Equivalence. Under the best-net approach, the analysis performed by Whitmore Hobson LLP indicates that Mr. Harding's after-tax economic position under the cutback scenario and under the full-payment-with-excise-tax scenario are roughly equivalent, with the cutback approach in fact slightly favoring Mr. Harding. This is because, in many CIC scenarios, the reduction of payments to the safe-harbor limit eliminates the 20% excise tax entirely, producing a net result that is comparable to — or even better than — the result of receiving the full payment and bearing the excise tax (even with a gross-up, given the additional tax on the gross-up amount). The demand for a full gross-up is therefore largely a matter of principle and optics rather than economic substance.

Board Determination. The Board, informed by the guidance of Geoffrey Stanton as Chair of the Remuneration Committee and supported by the analyses of Whitmore Hobson LLP and Veltrano Proxy Advisors, Inc., has concluded that inclusion of a full excise tax gross-up would be inconsistent with Northgate's commitment to sound corporate governance, would not reflect current best practice, and would create unacceptable risk of negative say-on-pay outcomes. This position is firm.

IV. Restrictive Covenant Terms — Northgate's Final Position and Rationale

The second area of disagreement concerns the restrictive covenant provisions that will govern Mr. Harding's post-termination activities. These provisions — encompassing a non-compete covenant, a non-solicitation covenant, and garden leave — are of critical importance to Northgate given the level of access that Mr. Harding, as CEO, would have to the Company's most sensitive strategic, commercial, financial, and technological information.

A. Non-Compete: Northgate's Final Proposal

Northgate's final proposal on the non-competition covenant is as follows:

• Duration: Eighteen (18) months following the effective date of termination of Mr. Harding's employment, for any reason.

• Geographic Scope: North America (United States and Canada) and Western Europe (defined as the member states of the European Union, the United Kingdom, Switzerland, and Norway). This represents a significant reduction from Northgate's initial proposal of a worldwide restriction.

• Activity Scope: During the restricted period, Mr. Harding will not, directly or indirectly, accept employment with, serve as a consultant or advisor to, or otherwise provide services to, any business enterprise that derives more than 15% of its consolidated annual revenue from (i) telecommunications services, (ii) telecommunications infrastructure, or (iii) enterprise SaaS platforms serving telecommunications operators. This revenue-based test provides an objective, measurable standard for determining the scope of the restriction.

• Garden Leave: The first six (6) months of the non-compete period will be served as paid garden leave, during which Mr. Harding will receive his base salary ($1,750,000 × 6/12 = $875,000) and will remain an employee of the Company but will not be required to perform any duties. The garden leave period runs concurrently with the first six months of the eighteen-month non-compete period, with the result that the effective post-departure restriction — during which Mr. Harding will not be receiving any compensation from Northgate — is twelve (12) months.

The combination of garden leave and non-compete is designed to balance the protection of Northgate's legitimate business interests with appropriate respect for Mr. Harding's future employability and professional freedom.

B. Rationale for 18-Month Duration (vs. Harding's Demanded 12 Months)

Mr. Harding has requested that the non-compete duration be limited to twelve (12) months. Northgate's final position is eighteen (18) months, for the following reasons:

Scope of Access. Mr. Harding, as Chief Executive Officer of a global telecommunications and enterprise SaaS company with approximately 22,500 employees, £4.26 billion (approximately $5.4 billion) in annual revenue, and operations spanning North America, Western Europe, and the Asia-Pacific region, would have access to the most sensitive and competitively valuable information of the enterprise. This includes, without limitation, long-range strategic plans, M&A pipeline and valuation analyses, customer pricing and contract terms, network infrastructure deployment strategies, proprietary technology roadmaps, and workforce planning data. The competitive half-life of this information — particularly strategic plans and M&A targets — extends well beyond twelve months.

Concentrated Competitive Landscape. The competitive landscape in telecommunications and enterprise SaaS is highly concentrated, with a limited number of global players competing for the same customer base. The potential competitive harm from Mr. Harding's early engagement with a direct competitor is therefore significant and long-lasting. A twelve-month restriction, given the pace of deal cycles and strategic planning horizons in the telecommunications industry, is insufficient to protect Northgate's interests.

Functional Parity with Current Obligations. We understand that Mr. Harding is currently subject to an eighteen-month non-compete covenant under his existing employment agreement with Marlowe Asset Management Digital Holdings, which includes a six-month paid notice period running concurrently with the first six months of the restriction. The effective post-departure restriction under that agreement is therefore twelve (12) months of uncompensated non-compete. Northgate's proposal replicates precisely this structure — eighteen months total with six months of paid garden leave, yielding an effective post-departure restriction of twelve months. There is, accordingly, no basis for Mr. Harding to argue that Northgate's proposal is more burdensome than his existing obligations.

Reasonable in Light of Consideration. The non-compete obligation is supported by substantial consideration, including not only the garden leave payment of $875,000 but also the sign-on bonus and equity grants, the annual compensation package, and the severance protections available upon termination without cause.

C. Rationale for Geographic and Activity Scope

Northgate's proposed geographic and activity scope reflects a considered compromise:

Geographic Reduction. The reduction from a worldwide restriction to North America and Western Europe represents a significant concession on Northgate's part, acknowledging that a worldwide restriction may face enforceability challenges in certain jurisdictions and is broader than necessary to protect Northgate's core competitive interests in its primary markets. Northgate's principal operations and revenue sources are concentrated in North America and Western Europe, and it is in these markets that the competitive harm from Mr. Harding's engagement with a rival would be most acute.

Revenue-Based Activity Test. The 15% revenue test provides an objective, measurable standard for determining whether a prospective employer falls within the scope of the restriction. Rather than relying on a subjective "direct competitor" determination — which would invite disputes over classification — or a blanket industry prohibition — which would be overbroad and potentially unenforceable — the revenue-based test offers certainty and proportionality. It captures enterprises whose telecommunications or telecom-adjacent activities are sufficiently material to pose a genuine competitive threat to Northgate, while excluding enterprises that may have incidental or de minimis activities in the telecommunications space.

Rejection of Scheduled-Competitor Approach. Northgate has carefully considered but ultimately declined Mr. Harding's alternative proposal to define the scope of the restriction by reference to a fixed schedule of eight named companies. Such an approach suffers from several fundamental deficiencies: (i) a static list would not capture future competitors that may emerge through market entry, corporate reorganization, or technological convergence; (ii) named companies may undergo structural changes — including mergers, spin-offs, or divestitures — that render the schedule meaningless or misleading; (iii) new market entrants in the rapidly evolving telecommunications and SaaS landscape could become significant competitors within months, yet would fall entirely outside a fixed schedule; and (iv) a scheduled-competitor approach would require ongoing amendment by mutual agreement to remain relevant, creating an administrative burden and the risk of impasse.

Enforceability under New York Law. The proposed non-compete is reasonable in scope, duration, and geographic reach, and is supported by legitimate protectable interests including trade secrets, confidential business information, and customer and employee relationships. These are the well-established bases for enforcement of restrictive covenants under New York law. See Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382 (1999); Scott, Stackrow & Co., C.P.A.'s, P.C. v. Skavina, 9 A.D.3d 805 (3d Dep't 2004). We note that New York has not enacted the restrictive covenant reforms that have been adopted in some other jurisdictions, and the proposed restriction falls well within the parameters that New York courts have upheld in the context of senior executive employment.

D. Non-Solicitation: Northgate's Final Proposal

Northgate's final proposal on non-solicitation is as follows:

• Duration: Twenty-four (24) months following the effective date of termination.

• Scope: Mr. Harding will not, directly or indirectly, solicit, recruit, or induce (i) any employee of Northgate or any of its affiliates to leave the employ of Northgate or its affiliates, or (ii) any customer, client, or business partner of Northgate or any of its affiliates to cease or reduce its business relationship with Northgate or its affiliates.

The inclusion of customer non-solicitation is appropriate and necessary for the following reasons:

As Chief Executive Officer, Mr. Harding would develop deep, personal relationships with Northgate's most significant enterprise and governmental customers. These relationships are among the Company's most valuable assets. Permitting Mr. Harding to solicit Northgate's customers immediately upon departure would expose the Company to material revenue risk — particularly with respect to large, multi-year enterprise contracts that are negotiated at the C-suite level and in which personal relationships are a decisive factor.

We note that Mr. Harding's counter-demand — eighteen months, limited to employees only, with no customer non-solicitation — is below market standard for C-suite executives in the telecommunications sector. The Whitmore Hobson analysis of peer group practices found that twenty of twenty peer companies included customer non-solicitation provisions for CEO-level officers, and the median duration was twenty-four months.

E. Garden Leave

Northgate's final proposal on garden leave is six (6) months at base salary ($875,000), concurrent with the first six months of the non-compete period. This is Northgate's definitive position.

Northgate declines Mr. Harding's demand for twelve (12) months of garden leave at full compensation (base salary plus pro-rata target annual bonus). Such an arrangement would effectively create a guaranteed bonus payment of approximately $1,531,250 (i.e., 12/12 × $3,062,500 × 6/12, or if calculated as a full-year pro-rata, potentially higher), in addition to twelve months of base salary, without any corresponding service obligation. This outcome is inconsistent with the fundamental purpose of garden leave — which is to facilitate a transition period while protecting the employer's interests — and would exceed the twelve-month notice period limitation contemplated by Provision 40 of the UK Corporate Governance Code 2024. Moreover, a twelve-month paid garden leave at full compensation would represent a form of guaranteed severance that the Board considers incompatible with its governance obligations and its commitment to pay-for-performance principles.

V. Summary of Remaining Gaps

For the convenience of both parties, the following table summarizes the remaining areas of disagreement and the gap between the parties' respective positions:

These gaps, while significant in isolation, should be considered in the context of the overall value of the compensation package and the substantial terms on which agreement has already been reached. The total value of the agreed economic terms — including annual compensation, sign-on payments, sign-on equity, retirement contributions, and perquisites — represents a package of extraordinary scale and competitiveness, and the remaining open items represent a fraction of the total arrangement.

VI. Board's Perspective and Path Forward

I wish to reiterate, in the strongest possible terms, that the enclosed Revised Term Sheet represents the best-and-final terms authorized by the Northgate Board of Directors. The positions set forth herein are the product of extensive deliberation by the Remuneration Committee and the full Board, informed by the expert advice of the Company's independent compensation consultant (Whitmore Hobson LLP), its proxy governance advisor (Veltrano Proxy Advisors, Inc.), and its outside legal counsel (Calderwood & Harkness LLP and Moorfield Bates LLP, the Company's UK solicitors).

The Board remains genuinely and enthusiastically supportive of Mr. Harding's candidacy and believes that he is uniquely qualified to lead Northgate through its next phase of growth. Mr. Harding's track record at Marlowe Asset Management Digital Holdings — where he oversaw the successful integration of three major acquisitions, grew recurring revenue by 43%, and led the company's expansion into the enterprise SaaS market — positions him exceptionally well to build on the strong foundation established by Sir Alistair Kemble during his distinguished tenure. The Board views Mr. Harding's appointment as a transformative opportunity for Northgate and its shareholders, and it is for precisely this reason that the Board has approved a compensation package of the scale and generosity reflected in the Revised Term Sheet.

At the same time, the Board has a fiduciary obligation to Northgate's shareholders to ensure that the CEO compensation package is both competitive and consistent with sound corporate governance principles. The Board must also ensure that the terms of Mr. Harding's employment do not jeopardize shareholder confidence or the outcome of the binding remuneration policy vote that will be put before shareholders at the 2025 Annual General Meeting. The Board has a responsibility to balance its desire to secure Mr. Harding's services with its obligation to avoid terms that could expose the Company to governance risk, reputational harm, or adverse proxy advisory recommendations. The positions set forth in the Revised Term Sheet reflect the Board's careful and conscientious effort to strike that balance.

We respectfully urge Mr. Harding and his advisors to give the enclosed proposal their fullest and most careful consideration, and to recognize that the overall package — with total target annual compensation of $13,812,500, sign-on cash of $5,000,000, and sign-on equity of $18,400,000 — represents a compelling, highly competitive, and governance-compliant offer that reflects the Board's genuine regard for Mr. Harding and its determination to make this appointment a success.

VII. Request for Response

We request that Hargrove & Liddell LLP provide its response to the enclosed final compromise proposal by no later than Monday, September 9, 2024. Given the timeline considerations discussed below, we would appreciate your adherence to this deadline.

Northgate is prepared to discuss any remaining questions or clarifications that the Revised Term Sheet or this letter may raise. If Mr. Harding or his advisors wish to schedule a further telephone call or in-person meeting to facilitate resolution, we are happy to accommodate such a request on an expedited basis.

We feel compelled to note, however, that if the parties are unable to reach agreement on the remaining open terms within a reasonable timeframe, the Board will need to consider its options regarding the CEO succession process. As you are aware, Sir Alistair Kemble's retirement is effective December 31, 2024. The Board has a responsibility to ensure a smooth and orderly leadership transition, and the timeline for completing the negotiation, executing definitive documentation, and managing the public announcement and regulatory notifications is increasingly compressed. The Board's strong preference is to conclude this process with Mr. Harding, but it must preserve optionality in the event that agreement proves unattainable.

VIII. Enclosure

Enclosed with this letter, please find the following document:

Revised Term Sheet (v5-Final) — Proposed Executive Employment Agreement, Marcus Elliot Harding and Northgate Telecommunications PLC, dated September 3, 2024 (31 pages, including Annexes A through D).

IX. Confidentiality

We remind you that the enclosed Revised Term Sheet, this letter, and all prior correspondence and drafts exchanged in connection with this negotiation remain subject to the confidentiality obligations set forth in the Mutual Non-Disclosure Agreement dated June 17, 2024, between Northgate Telecommunications PLC and Mr. Harding, and the Counsel Confidentiality Letter Agreement dated June 20, 2024, between Calderwood & Harkness LLP and Hargrove & Liddell LLP. Neither this letter nor the enclosed Revised Term Sheet may be disclosed to any third party without the prior written consent of Northgate Telecommunications PLC.

We appreciate the professionalism and diligence that you and your colleagues have brought to this negotiation, and we look forward to your prompt response.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Renata Vasquez Partner 299 Park Avenue, 42nd Floor New York, NY 10171 Telephone: (212) 506-7214

Email: rvasquez@calderwoodharkness.com

cc: Elaine Whitford, SVP & Group General Counsel, Northgate Telecommunications PLC cc: Geoffrey Stanton, Chair, Remuneration Committee, Northgate Telecommunications PLC (by separate cover) cc: Bernard Crawford, Partner, Calderwood & Harkness LLP cc: James Underwood, Associate, Calderwood & Harkness LLP

Encl: Revised Term Sheet (v5-Final) — Proposed Executive Employment Agreement, Marcus Elliot Harding (September 3, 2024)

Term	Northgate's Final Proposal	Harding's Position	Gap / Delta
CIC Severance Multiplier	2.5x ($12,031,250)	3x ($14,437,500)	$2,406,250
CIC Tax Treatment	Best-net safe harbor (no gross-up)	Full 280G excise tax gross-up	Est. $4,200,000–$6,800,000
CIC Definition — Board Turnover Trigger	Excluded	Included	Structural
CIC Benefit Continuation	24 months	36 months	12 months
Non-Compete Duration	18 months (with 6-month garden leave)	12 months (with 12-month garden leave)	6 months
Non-Compete Activity Scope	Revenue-based test (15% threshold)	Scheduled-competitor approach (8 named cos.)	Definitional
Garden Leave Duration / Compensation	6 months at base salary ($875,000)	12 months at full compensation (~$2,406,250)	~$1,531,250

CALDERWOOD & HARKNESS LLP Attorneys at Law 299 Park Avenue, 42nd Floor New York, NY 10171 Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com
September 3, 2024
VIA HAND DELIVERY AND EMAIL
Victoria Hargrove, Esq. Hargrove & Liddell LLP 51 Madison Avenue, 30th Floor New York, NY 10010
Re: Proposed Executive Employment Agreement — Marcus Elliot Harding and Northgate Telecommunications PLC Matter No. 1022-00004 CONFIDENTIAL
Dear Ms. Hargrove:
I. Purpose of This Letter
This letter accompanies the enclosed Revised Term Sheet (v5-Final) dated September 3, 2024 (the "Revised Term Sheet"), which sets forth Northgate Telecommunications PLC's ("Northgate" or the "Company") final compromise proposal for the employment of Marcus Elliot Harding ("Mr. Harding") as Chief Executive Officer of Northgate.
I wish to emphasize at the outset that the enclosed proposal has been duly authorized by the full Board of Directors of Northgate (the "Board"), following careful and extensive deliberation by the Remuneration Committee, chaired by Geoffrey Stanton, and by the Board Chair, Dame Philippa Thornton-Hale. This authorization was confirmed by unanimous written consent of the Board dated September 2, 2024. The enclosed Revised Term Sheet represents Northgate's best-and-final offer and reflects the furthest extent to which the Board is prepared to move on the remaining open terms. As such, the positions set forth herein should be understood as the Board's considered and definitive positions, arrived at after weighing the recommendations of its independent advisors and its obligations to Northgate's shareholders.
I also wish to acknowledge, on behalf of both Northgate and its counsel, the extensive and good-faith negotiations that have been conducted over the course of this engagement. As you know, the parties have exchanged five rounds of term-sheet negotiation, commencing with the initial proposal circulated on June 24, 2024, and proceeding through successive revisions dated June 28, July 8, July 15, and July 19, 2024. Following the completion of the term-sheet phase, two full drafts of the Executive Employment Agreement were prepared and circulated — Draft 1 on July 22, 2024, and Draft 2 on August 12, 2024 — each incorporating detailed markup and commentary from your office. Additionally, the principals meeting held on August 26, 2024, at 600 Lexington Avenue, New York, at which Mr. Harding, Dame Philippa Thornton-Hale, Mr. Stanton, and the parties' respective counsel were present, provided a valuable opportunity for direct dialogue on the key open issues.
Despite the substantial progress achieved through these efforts — and the genuine spirit of compromise that both sides have demonstrated — two core areas remain unresolved. These are: (1) the change in control severance provisions, including the definition of "change in control," the severance multiplier, and the tax treatment of parachute payments; and (2) the scope and duration of the restrictive covenant obligations that will apply following any termination of Mr. Harding's employment.
The purpose of this letter is to explain, in detail, Northgate's rationale for its final positions on each of these two areas, so that Mr. Harding and his advisors may evaluate the proposal with a full understanding of the considerations that have informed the Board's decision-making. We hope that this transparency will facilitate resolution of the remaining open terms and the timely execution of a definitive agreement.
II. Summary of Agreed Terms
Before turning to the two unresolved areas, it is important to place those issues in context by recognizing the breadth and depth of the agreement already reached between the parties. The parties have arrived at consensus on the substantial majority of the economic and structural terms of Mr. Harding's proposed employment. These agreed terms are summarized below and are reflected in the Revised Term Sheet:
Base Compensation and Annual Incentive:
• Base Salary: $1,750,000 per annum, subject to annual review by the Remuneration Committee with no reduction below this floor absent Mr. Harding's written consent.
• Target Annual Incentive: 175% of base salary, equaling $3,062,500 at target performance levels.
• Maximum Annual Incentive: 300% of base salary, equaling $5,250,000 at maximum performance levels, with payout determined by achievement against performance metrics to be established annually by the Remuneration Committee.
Sign-On Compensation:
• Sign-On Cash Bonus (Make-Whole): $5,000,000, payable within thirty (30) days of Mr. Harding's start date, subject to a twenty-four (24) month clawback in the event of voluntary resignation without good reason.
• Sign-On Equity Grant (Make-Whole for Forfeited Marlowe Asset Management Digital Holdings Equity): In recognition of the equity compensation forfeited by Mr. Harding upon departure from Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"), estimated at approximately $23,400,000 in aggregate, Northgate will grant: (i) a restricted stock unit ("RSU") award with a grant date value of $12,000,000, vesting ratably over three years (one-third per year); and (ii) a performance stock unit ("PSU") award with a grant date value of $6,400,000, vesting in full at the end of a three-year performance period, subject to achievement of performance goals to be established by the Remuneration Committee. Together, these sign-on equity awards total $18,400,000 in grant date value. The remaining $5,000,000 equity shortfall (i.e., the difference between the estimated $23,400,000 in forfeited Marlowe Asset Management equity and the $18,400,000 in sign-on equity) is addressed by the sign-on cash bonus referenced above.
Annual Long-Term Incentive:
• Annual LTI Target: $9,000,000 per year, allocated 60% to PSUs and 40% to RSUs, to be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "Omnibus Plan"). PSUs will vest at the end of a three-year performance period based on metrics established by the Remuneration Committee, and RSUs will vest ratably over three years.
Total Target Annual Compensation:
• When combining base salary ($1,750,000), target annual incentive ($3,062,500), and annual LTI target ($9,000,000), Mr. Harding's total target annual compensation is $13,812,500. This figure represents a significant premium over Mr. Harding's current total target compensation at Marlowe Asset Management Digital Holdings, which we understand to be approximately $11,125,000.
Retirement Benefits:
• 401(k) plan participation with a 6% employer matching contribution, consistent with Northgate's standard program for U.S.-based senior executives.
• Supplemental Executive Retirement Plan ("SERP") contribution of $250,000 per year, credited to a non-qualified deferred compensation account.
Perquisites:
• Annual car allowance of $25,000.
• Participation in Northgate's executive health program.
• Supplemental life insurance coverage in the amount of $2,000,000.
• Financial and tax planning reimbursement of up to $35,000 per year.
Employment Term:
• Initial term of five (5) years from the commencement date, with automatic one-year renewals thereafter unless either party provides written notice of non-renewal at least 180 days prior to the expiration of the then-current term.
Dual-Contract Architecture:
• Consistent with Northgate's cross-border operating structure, Mr. Harding's employment will be governed by a dual-contract arrangement: a primary employment agreement governed by New York law between Mr. Harding and Northgate Telecommunications US, Inc. (the Company's principal U.S. subsidiary), and a secondary UK service agreement between Mr. Harding and Northgate Telecommunications PLC. The respective scope, obligations, and compensation allocation between these two agreements have been agreed in principle, as reflected in Annex B to the Revised Term Sheet.
D&O Indemnification and Insurance:
• Mr. Harding will be entitled to indemnification and advancement of expenses to the fullest extent permitted by applicable law and Northgate's governing documents, and will be covered under Northgate's directors' and officers' liability insurance policy maintained with Ashdown Surety & Insurance Co. (current policy limits: $50,000,000 per occurrence and $100,000,000 in the aggregate). Such coverage will extend for a period of not less than six (6) years following the termination of Mr. Harding's employment for any reason.
Section 409A Compliance:
• The agreement will contain standard provisions to ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, including six-month delay provisions for specified employees where applicable.
Non-Disparagement:
• Mutual perpetual non-disparagement obligations applicable to both Mr. Harding and Northgate, with appropriate carve-outs for statements made in the course of legal proceedings, regulatory filings, and other protected communications.
The agreement reached on these terms reflects the genuine commitment of both parties to make this arrangement work. The total compensation package — encompassing an annual target of $13,812,500, sign-on cash of $5,000,000, and sign-on equity of $18,400,000 — is among the most competitive packages offered in the telecommunications sector and has been carefully designed to recruit Mr. Harding away from his current position at Marlowe Asset Management, compensate him for the substantial equity he would forfeit, and align his interests with those of Northgate's shareholders over the long term. We trust that the significance of these agreed terms will not be lost as the parties evaluate the remaining areas of disagreement.
III. Change in Control Severance Provisions — Northgate's Final Position and Rationale
The change in control ("CIC") severance provisions have been the subject of extensive discussion throughout the negotiation, and the gap between the parties' positions has narrowed considerably. Nevertheless, material differences remain with respect to four elements: (a) the CIC definition, (b) the severance multiplier, (c) the tax treatment of parachute payments, and (d) the duration of benefit continuation. We address each below.
A. Northgate's Final Proposal on Change in Control Severance
Northgate's final proposal on CIC severance is as follows:
• Double-Trigger Mechanism: CIC severance will be payable only upon the occurrence of both (i) a Change in Control Event (as defined below) and (ii) a Qualifying Termination — defined as a termination of Mr. Harding's employment by the Company without Cause, or a resignation by Mr. Harding for Good Reason — occurring within twenty-four (24) months following the Change in Control Event. No CIC severance will be payable solely by reason of the occurrence of a Change in Control Event absent a Qualifying Termination. This double-trigger structure is consistent with prevailing best practice and with the approach taken in the Omnibus Plan.
• CIC Severance Multiplier: 2.5x the sum of (i) Mr. Harding's base salary and (ii) his target annual bonus. At the proposed compensation levels, this yields: 2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250 in cash severance, payable in a lump sum within sixty (60) days following the Qualifying Termination (subject to execution and non-revocation of a release of claims).
• Full Equity Acceleration: Upon a Qualifying Termination within twenty-four (24) months following a Change in Control Event, all unvested equity awards held by Mr. Harding — including RSUs and PSUs — will vest in full. PSUs will vest at target performance levels, consistent with the CIC acceleration provisions of the Omnibus Plan.
• Benefit Continuation: Twenty-four (24) months of continued health and welfare benefits on the same terms as active employees (or, if COBRA continuation is elected, Company-paid COBRA premiums for up to twenty-four (24) months).
• Outplacement Services: The Company will provide outplacement services through a provider selected by Mr. Harding, at a cost not to exceed $50,000.
• Tax Treatment — Best-Net Safe Harbor: In lieu of an excise tax gross-up, the agreement will contain a "best-net" provision under Section 280G of the Internal Revenue Code. Under this approach, if any payments or benefits to Mr. Harding would constitute "parachute payments" within the meaning of Section 280G and would be subject to the excise tax imposed by Section 4999, then such payments and benefits will be either (x) delivered in full, or (y) reduced to the safe-harbor limit (i.e., the amount that does not give rise to the excise tax), whichever approach results in the greater after-tax benefit to Mr. Harding after taking into account all applicable federal, state, and local income and employment taxes, and the excise tax under Section 4999. In no event will the Company provide a gross-up payment for any excise tax.
B. Definition of "Change in Control"
The parties have reached agreement on the following three triggers within the definition of "Change in Control Event":
(a) Acquisition of Voting Securities: The acquisition by any person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 thereunder) of more than 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;
(b) Merger or Consolidation: The consummation of a merger, consolidation, or similar business combination involving Northgate Telecommunications PLC, unless immediately following such transaction, the shareholders of Northgate immediately prior to the transaction hold, directly or indirectly, at least 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity; or
(c) Asset Sale: The sale, lease, exchange, 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 an affiliate of Northgate.
However, Northgate's position is that the Board Turnover Trigger — defined by Mr. Harding as the replacement of a majority of the incumbent directors of Northgate's Board of Directors within any twelve (12) month period without the approval of the incumbent Board — is not included in the definition of "Change in Control Event."
Northgate's rationale for excluding the Board turnover trigger is as follows:
First, the inclusion of a board turnover trigger is inconsistent with UK corporate governance norms. Under the UK Corporate Governance Code 2024, board refreshment is actively encouraged, and the regular rotation of non-executive directors is considered a hallmark of good governance rather than an indication of a change in corporate control. The Northgate Board is currently in the process of implementing a planned succession program that may result in the appointment of several new independent directors over the next eighteen months. Including a board turnover trigger in the CEO's employment agreement would create the anomalous situation in which routine board refreshment — undertaken in the ordinary course and in compliance with the Company's governance obligations — could constitute a "change in control" entitling the CEO to severance payments in excess of $12 million.
Second, the board turnover trigger could be activated by shareholder activism that does not represent a true change in control of the enterprise. In recent years, several Northgate shareholders have exercised their rights to propose director candidates through Northgate's nomination procedures. A board turnover trigger would mean that successful shareholder engagement — again, a core principle of UK governance — could trigger massive severance obligations, creating perverse incentives and potentially entrenching incumbent management.
Third, the board turnover trigger is not included in the definition of "Change in Control" used in the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan, which governs equity awards for all executive officers and senior management of the Company. Introducing a different and more expansive definition solely for the CEO would create internal inconsistency within the Company's compensation framework and set a precedent that other senior executives would inevitably seek to replicate.
Fourth, inclusion of a board turnover trigger would create a potential conflict of interest in which the CEO has a direct, material personal financial interest in opposing changes to the composition of the Board of Directors — an outcome that is antithetical to sound corporate governance and to the Board's ability to discharge its fiduciary duties.
For all of these reasons, the Board has concluded that the exclusion of the board turnover trigger is appropriate and necessary, and this position is not subject to further negotiation.
C. Rationale for 2.5x Multiplier (vs. Harding's Demanded 3x)
Mr. Harding has requested a CIC severance multiplier of 3x base salary plus target annual bonus, which would yield cash severance of 3 × $4,812,500 = $14,437,500. Northgate's final proposal is a 2.5x multiplier, yielding $12,031,250. The difference between the two positions is $2,406,250. While Northgate acknowledges that this is a meaningful amount, the Board has concluded that the 2.5x multiplier represents the appropriate balance between competitiveness and governance considerations, for the following reasons:
Market Practice. The 2.5x multiplier is at the upper end of market practice for chief executive officers of publicly listed companies. This conclusion is supported by the analysis of Northgate's independent compensation consultant, Whitmore Hobson LLP, led by Dr. Rachel Whitmore. Dr. Whitmore's analysis of CEO CIC severance terms at Northgate's peer group of twenty publicly traded telecommunications and enterprise technology companies found that the median CIC severance multiplier was 2.0x, the 75th percentile was 2.5x, and only two companies in the peer group provided a 3x multiplier. Northgate's proposed 2.5x multiplier thus positions Mr. Harding at the top quartile of the peer group — a competitive posture that is consistent with Mr. Harding's caliber and the importance of the role.
Proxy Advisory Scrutiny. A 3x CIC multiplier would place Mr. Harding's severance package at or above the threshold that triggers heightened scrutiny from proxy advisory firms. Cobalt Ridge Solutions ("ISS") generally flags CIC severance exceeding 3x as a significant concern in its evaluation of executive compensation practices, and packages at or near the 3x level receive enhanced scrutiny — particularly when combined with other features such as tax gross-ups, single-trigger equity acceleration, or benefit continuation exceeding twenty-four months.
Proxy Advisor Analysis. Northgate's proxy governance advisor, Veltrano Proxy Advisors, Inc. (Sandra Kolb, Managing Director), has provided a detailed analysis concluding that a 3x CIC multiplier, combined with a full excise tax gross-up of the kind demanded by Mr. Harding, would likely trigger a negative recommendation from ISS (and potentially from Tarrant Partners LLC) on Northgate's say-on-pay resolution at the 2025 Annual General Meeting. The say-on-pay vote is advisory in nature under U.S. securities law but will be a binding vote on the Company's directors' remuneration policy under UK law. A negative recommendation from one or both major proxy advisory firms could have a material adverse effect on the outcome of that vote.
Shareholder Sensitivity. Northgate received 87.4% support on its say-on-pay resolution at the April 18, 2024 Annual General Meeting. While this level of support is solid, it does not provide unlimited latitude for the Board to approve aggressive severance terms that depart from market norms. The Board is acutely aware that the introduction of a new CEO compensation package represents a moment of particular scrutiny, and that a significant increase in CEO severance arrangements relative to those of Sir Alistair Kemble could erode the shareholder support that has been carefully cultivated over recent years.
UK Corporate Governance Standards. Under the UK Corporate Governance Code 2024, Provision 40, the Remuneration Committee is expected to ensure that service contracts and severance terms reflect best practice and avoid rewarding poor performance or providing excessive payments on departure. Aggressive CIC multiples are viewed unfavorably by UK institutional shareholders as inconsistent with these principles. Northgate's shareholder base includes significant UK institutional holders — including Caledonian Asset Management (8.3% of outstanding shares), Pemberton Capital Group (6.7%), and Thornbury Investment Trust (5.1%) — who are particularly attentive to UK governance standards. The Company's U.S. institutional holders, including Regis Global Equity Fund (4.4%), and the Atlas Pension Fund (the NTP employee pension scheme, holding 3.2%), similarly expect the Board to exercise discipline in this area.
Compromise Position. The 2.5x multiplier represents a genuine and substantial compromise from Northgate's initial position, which was 2.0x. In moving from 2.0x to 2.5x, the Board has added $2,406,250 in potential CIC severance — an increase of 25%. This movement was undertaken in recognition of the importance of the CEO role and the strength of Mr. Harding's candidacy. Moreover, the 2.5x multiplier is a meaningful increase over the CIC severance terms currently in place for Sir Alistair Kemble, whose existing agreement provides a 2.0x multiplier.
For all of these reasons, the Board has determined that a 2.5x multiplier is both competitive and responsible, and that a move to 3x cannot be justified in the current governance environment.
D. Rationale for Best-Net Cutback (vs. Harding's Demanded Full 280G Tax Gross-Up)
Mr. Harding has demanded that the agreement include a full gross-up for any excise tax imposed under Section 4999 of the Internal Revenue Code as a result of payments or benefits constituting "excess parachute payments" under Section 280G. Northgate's final position is that the agreement will contain a best-net safe harbor provision in lieu of a gross-up. The rationale for this position is as follows:
Section 280G Framework. Under Section 280G of the Internal Revenue Code, payments to a "disqualified individual" (which would include Mr. Harding as CEO) that are contingent upon a change in control and that exceed three times the individual's "base amount" are treated as "parachute payments." The portion of such payments exceeding the base amount is subject to a non-deductible 20% excise tax under Section 4999, in addition to ordinary income taxes, and the payor loses its tax deduction for the excess amount under Section 280G. Mr. Harding's base amount — calculated as his average annual W-2 compensation from Marlowe Asset Management Digital Holdings over the five-year period from 2019 through 2023 — is approximately $7,840,000. The safe-harbor limit (i.e., three times the base amount, less $1) is therefore approximately $23,519,999.
Estimated Exposure. Under Mr. Harding's demanded terms (a 3x severance multiplier, full acceleration of all unvested equity, and thirty-six months of benefit continuation), the estimated total parachute payments would be approximately $38,200,000. This would result in excess parachute payments of approximately $30,360,000 (i.e., $38,200,000 less $7,840,000), generating an estimated Section 4999 excise tax of approximately $6,072,000.
Cost of a Full Gross-Up. To make Mr. Harding whole for this excise tax liability on a fully grossed-up basis — taking into account the taxes on the gross-up payment itself — Northgate would be required to pay an additional estimated $4,200,000 to $6,800,000, depending on the final calculation of parachute payments and applicable tax rates. This cost would be borne entirely by the Company and its shareholders, with no corresponding benefit to the enterprise. Moreover, because Section 280G disallows the payor's deduction for excess parachute payments, the Company would also lose the tax benefit of the deduction for the affected amounts — further increasing the effective cost to shareholders.
Market Trend. The trend in executive compensation has moved decisively away from excise tax gross-ups. Fewer than 10% of S&P 500 companies now include gross-up provisions in new CEO employment agreements, and the proportion continues to decline with each proxy season. Proxy advisory firms — including ISS — specifically identify excise tax gross-ups as a problematic governance practice and factor the presence of such provisions into their voting recommendations on say-on-pay resolutions and director elections.
Economic Equivalence. Under the best-net approach, the analysis performed by Whitmore Hobson LLP indicates that Mr. Harding's after-tax economic position under the cutback scenario and under the full-payment-with-excise-tax scenario are roughly equivalent, with the cutback approach in fact slightly favoring Mr. Harding. This is because, in many CIC scenarios, the reduction of payments to the safe-harbor limit eliminates the 20% excise tax entirely, producing a net result that is comparable to — or even better than — the result of receiving the full payment and bearing the excise tax (even with a gross-up, given the additional tax on the gross-up amount). The demand for a full gross-up is therefore largely a matter of principle and optics rather than economic substance.
Board Determination. The Board, informed by the guidance of Geoffrey Stanton as Chair of the Remuneration Committee and supported by the analyses of Whitmore Hobson LLP and Veltrano Proxy Advisors, Inc., has concluded that inclusion of a full excise tax gross-up would be inconsistent with Northgate's commitment to sound corporate governance, would not reflect current best practice, and would create unacceptable risk of negative say-on-pay outcomes. This position is firm.
IV. Restrictive Covenant Terms — Northgate's Final Position and Rationale
The second area of disagreement concerns the restrictive covenant provisions that will govern Mr. Harding's post-termination activities. These provisions — encompassing a non-compete covenant, a non-solicitation covenant, and garden leave — are of critical importance to Northgate given the level of access that Mr. Harding, as CEO, would have to the Company's most sensitive strategic, commercial, financial, and technological information.
A. Non-Compete: Northgate's Final Proposal
Northgate's final proposal on the non-competition covenant is as follows:
• Duration: Eighteen (18) months following the effective date of termination of Mr. Harding's employment, for any reason.
• Geographic Scope: North America (United States and Canada) and Western Europe (defined as the member states of the European Union, the United Kingdom, Switzerland, and Norway). This represents a significant reduction from Northgate's initial proposal of a worldwide restriction.
• Activity Scope: During the restricted period, Mr. Harding will not, directly or indirectly, accept employment with, serve as a consultant or advisor to, or otherwise provide services to, any business enterprise that derives more than 15% of its consolidated annual revenue from (i) telecommunications services, (ii) telecommunications infrastructure, or (iii) enterprise SaaS platforms serving telecommunications operators. This revenue-based test provides an objective, measurable standard for determining the scope of the restriction.
• Garden Leave: The first six (6) months of the non-compete period will be served as paid garden leave, during which Mr. Harding will receive his base salary ($1,750,000 × 6/12 = $875,000) and will remain an employee of the Company but will not be required to perform any duties. The garden leave period runs concurrently with the first six months of the eighteen-month non-compete period, with the result that the effective post-departure restriction — during which Mr. Harding will not be receiving any compensation from Northgate — is twelve (12) months.
The combination of garden leave and non-compete is designed to balance the protection of Northgate's legitimate business interests with appropriate respect for Mr. Harding's future employability and professional freedom.
B. Rationale for 18-Month Duration (vs. Harding's Demanded 12 Months)
Mr. Harding has requested that the non-compete duration be limited to twelve (12) months. Northgate's final position is eighteen (18) months, for the following reasons:
Scope of Access. Mr. Harding, as Chief Executive Officer of a global telecommunications and enterprise SaaS company with approximately 22,500 employees, £4.26 billion (approximately $5.4 billion) in annual revenue, and operations spanning North America, Western Europe, and the Asia-Pacific region, would have access to the most sensitive and competitively valuable information of the enterprise. This includes, without limitation, long-range strategic plans, M&A pipeline and valuation analyses, customer pricing and contract terms, network infrastructure deployment strategies, proprietary technology roadmaps, and workforce planning data. The competitive half-life of this information — particularly strategic plans and M&A targets — extends well beyond twelve months.
Concentrated Competitive Landscape. The competitive landscape in telecommunications and enterprise SaaS is highly concentrated, with a limited number of global players competing for the same customer base. The potential competitive harm from Mr. Harding's early engagement with a direct competitor is therefore significant and long-lasting. A twelve-month restriction, given the pace of deal cycles and strategic planning horizons in the telecommunications industry, is insufficient to protect Northgate's interests.
Functional Parity with Current Obligations. We understand that Mr. Harding is currently subject to an eighteen-month non-compete covenant under his existing employment agreement with Marlowe Asset Management Digital Holdings, which includes a six-month paid notice period running concurrently with the first six months of the restriction. The effective post-departure restriction under that agreement is therefore twelve (12) months of uncompensated non-compete. Northgate's proposal replicates precisely this structure — eighteen months total with six months of paid garden leave, yielding an effective post-departure restriction of twelve months. There is, accordingly, no basis for Mr. Harding to argue that Northgate's proposal is more burdensome than his existing obligations.
Reasonable in Light of Consideration. The non-compete obligation is supported by substantial consideration, including not only the garden leave payment of $875,000 but also the sign-on bonus and equity grants, the annual compensation package, and the severance protections available upon termination without cause.
C. Rationale for Geographic and Activity Scope
Northgate's proposed geographic and activity scope reflects a considered compromise:
Geographic Reduction. The reduction from a worldwide restriction to North America and Western Europe represents a significant concession on Northgate's part, acknowledging that a worldwide restriction may face enforceability challenges in certain jurisdictions and is broader than necessary to protect Northgate's core competitive interests in its primary markets. Northgate's principal operations and revenue sources are concentrated in North America and Western Europe, and it is in these markets that the competitive harm from Mr. Harding's engagement with a rival would be most acute.
Revenue-Based Activity Test. The 15% revenue test provides an objective, measurable standard for determining whether a prospective employer falls within the scope of the restriction. Rather than relying on a subjective "direct competitor" determination — which would invite disputes over classification — or a blanket industry prohibition — which would be overbroad and potentially unenforceable — the revenue-based test offers certainty and proportionality. It captures enterprises whose telecommunications or telecom-adjacent activities are sufficiently material to pose a genuine competitive threat to Northgate, while excluding enterprises that may have incidental or de minimis activities in the telecommunications space.
Rejection of Scheduled-Competitor Approach. Northgate has carefully considered but ultimately declined Mr. Harding's alternative proposal to define the scope of the restriction by reference to a fixed schedule of eight named companies. Such an approach suffers from several fundamental deficiencies: (i) a static list would not capture future competitors that may emerge through market entry, corporate reorganization, or technological convergence; (ii) named companies may undergo structural changes — including mergers, spin-offs, or divestitures — that render the schedule meaningless or misleading; (iii) new market entrants in the rapidly evolving telecommunications and SaaS landscape could become significant competitors within months, yet would fall entirely outside a fixed schedule; and (iv) a scheduled-competitor approach would require ongoing amendment by mutual agreement to remain relevant, creating an administrative burden and the risk of impasse.
Enforceability under New York Law. The proposed non-compete is reasonable in scope, duration, and geographic reach, and is supported by legitimate protectable interests including trade secrets, confidential business information, and customer and employee relationships. These are the well-established bases for enforcement of restrictive covenants under New York law. See Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382 (1999); Scott, Stackrow & Co., C.P.A.'s, P.C. v. Skavina, 9 A.D.3d 805 (3d Dep't 2004). We note that New York has not enacted the restrictive covenant reforms that have been adopted in some other jurisdictions, and the proposed restriction falls well within the parameters that New York courts have upheld in the context of senior executive employment.
D. Non-Solicitation: Northgate's Final Proposal
Northgate's final proposal on non-solicitation is as follows:
• Duration: Twenty-four (24) months following the effective date of termination.
• Scope: Mr. Harding will not, directly or indirectly, solicit, recruit, or induce (i) any employee of Northgate or any of its affiliates to leave the employ of Northgate or its affiliates, or (ii) any customer, client, or business partner of Northgate or any of its affiliates to cease or reduce its business relationship with Northgate or its affiliates.
The inclusion of customer non-solicitation is appropriate and necessary for the following reasons:
As Chief Executive Officer, Mr. Harding would develop deep, personal relationships with Northgate's most significant enterprise and governmental customers. These relationships are among the Company's most valuable assets. Permitting Mr. Harding to solicit Northgate's customers immediately upon departure would expose the Company to material revenue risk — particularly with respect to large, multi-year enterprise contracts that are negotiated at the C-suite level and in which personal relationships are a decisive factor.
We note that Mr. Harding's counter-demand — eighteen months, limited to employees only, with no customer non-solicitation — is below market standard for C-suite executives in the telecommunications sector. The Whitmore Hobson analysis of peer group practices found that twenty of twenty peer companies included customer non-solicitation provisions for CEO-level officers, and the median duration was twenty-four months.
E. Garden Leave
Northgate's final proposal on garden leave is six (6) months at base salary ($875,000), concurrent with the first six months of the non-compete period. This is Northgate's definitive position.
Northgate declines Mr. Harding's demand for twelve (12) months of garden leave at full compensation (base salary plus pro-rata target annual bonus). Such an arrangement would effectively create a guaranteed bonus payment of approximately $1,531,250 (i.e., 12/12 × $3,062,500 × 6/12, or if calculated as a full-year pro-rata, potentially higher), in addition to twelve months of base salary, without any corresponding service obligation. This outcome is inconsistent with the fundamental purpose of garden leave — which is to facilitate a transition period while protecting the employer's interests — and would exceed the twelve-month notice period limitation contemplated by Provision 40 of the UK Corporate Governance Code 2024. Moreover, a twelve-month paid garden leave at full compensation would represent a form of guaranteed severance that the Board considers incompatible with its governance obligations and its commitment to pay-for-performance principles.
V. Summary of Remaining Gaps
For the convenience of both parties, the following table summarizes the remaining areas of disagreement and the gap between the parties' respective positions:
These gaps, while significant in isolation, should be considered in the context of the overall value of the compensation package and the substantial terms on which agreement has already been reached. The total value of the agreed economic terms — including annual compensation, sign-on payments, sign-on equity, retirement contributions, and perquisites — represents a package of extraordinary scale and competitiveness, and the remaining open items represent a fraction of the total arrangement.
VI. Board's Perspective and Path Forward
I wish to reiterate, in the strongest possible terms, that the enclosed Revised Term Sheet represents the best-and-final terms authorized by the Northgate Board of Directors. The positions set forth herein are the product of extensive deliberation by the Remuneration Committee and the full Board, informed by the expert advice of the Company's independent compensation consultant (Whitmore Hobson LLP), its proxy governance advisor (Veltrano Proxy Advisors, Inc.), and its outside legal counsel (Calderwood & Harkness LLP and Moorfield Bates LLP, the Company's UK solicitors).
The Board remains genuinely and enthusiastically supportive of Mr. Harding's candidacy and believes that he is uniquely qualified to lead Northgate through its next phase of growth. Mr. Harding's track record at Marlowe Asset Management Digital Holdings — where he oversaw the successful integration of three major acquisitions, grew recurring revenue by 43%, and led the company's expansion into the enterprise SaaS market — positions him exceptionally well to build on the strong foundation established by Sir Alistair Kemble during his distinguished tenure. The Board views Mr. Harding's appointment as a transformative opportunity for Northgate and its shareholders, and it is for precisely this reason that the Board has approved a compensation package of the scale and generosity reflected in the Revised Term Sheet.
At the same time, the Board has a fiduciary obligation to Northgate's shareholders to ensure that the CEO compensation package is both competitive and consistent with sound corporate governance principles. The Board must also ensure that the terms of Mr. Harding's employment do not jeopardize shareholder confidence or the outcome of the binding remuneration policy vote that will be put before shareholders at the 2025 Annual General Meeting. The Board has a responsibility to balance its desire to secure Mr. Harding's services with its obligation to avoid terms that could expose the Company to governance risk, reputational harm, or adverse proxy advisory recommendations. The positions set forth in the Revised Term Sheet reflect the Board's careful and conscientious effort to strike that balance.
We respectfully urge Mr. Harding and his advisors to give the enclosed proposal their fullest and most careful consideration, and to recognize that the overall package — with total target annual compensation of $13,812,500, sign-on cash of $5,000,000, and sign-on equity of $18,400,000 — represents a compelling, highly competitive, and governance-compliant offer that reflects the Board's genuine regard for Mr. Harding and its determination to make this appointment a success.
VII. Request for Response
We request that Hargrove & Liddell LLP provide its response to the enclosed final compromise proposal by no later than Monday, September 9, 2024. Given the timeline considerations discussed below, we would appreciate your adherence to this deadline.
Northgate is prepared to discuss any remaining questions or clarifications that the Revised Term Sheet or this letter may raise. If Mr. Harding or his advisors wish to schedule a further telephone call or in-person meeting to facilitate resolution, we are happy to accommodate such a request on an expedited basis.
We feel compelled to note, however, that if the parties are unable to reach agreement on the remaining open terms within a reasonable timeframe, the Board will need to consider its options regarding the CEO succession process. As you are aware, Sir Alistair Kemble's retirement is effective December 31, 2024. The Board has a responsibility to ensure a smooth and orderly leadership transition, and the timeline for completing the negotiation, executing definitive documentation, and managing the public announcement and regulatory notifications is increasingly compressed. The Board's strong preference is to conclude this process with Mr. Harding, but it must preserve optionality in the event that agreement proves unattainable.
VIII. Enclosure
Enclosed with this letter, please find the following document:
Revised Term Sheet (v5-Final) — Proposed Executive Employment Agreement, Marcus Elliot Harding and Northgate Telecommunications PLC, dated September 3, 2024 (31 pages, including Annexes A through D).
IX. Confidentiality
We remind you that the enclosed Revised Term Sheet, this letter, and all prior correspondence and drafts exchanged in connection with this negotiation remain subject to the confidentiality obligations set forth in the Mutual Non-Disclosure Agreement dated June 17, 2024, between Northgate Telecommunications PLC and Mr. Harding, and the Counsel Confidentiality Letter Agreement dated June 20, 2024, between Calderwood & Harkness LLP and Hargrove & Liddell LLP. Neither this letter nor the enclosed Revised Term Sheet may be disclosed to any third party without the prior written consent of Northgate Telecommunications PLC.
We appreciate the professionalism and diligence that you and your colleagues have brought to this negotiation, and we look forward to your prompt response.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Renata Vasquez Partner 299 Park Avenue, 42nd Floor New York, NY 10171 Telephone: (212) 506-7214
Email: rvasquez@calderwoodharkness.com
cc: Elaine Whitford, SVP & Group General Counsel, Northgate Telecommunications PLC cc: Geoffrey Stanton, Chair, Remuneration Committee, Northgate Telecommunications PLC (by separate cover) cc: Bernard Crawford, Partner, Calderwood & Harkness LLP cc: James Underwood, Associate, Calderwood & Harkness LLP
Encl: Revised Term Sheet (v5-Final) — Proposed Executive Employment Agreement, Marcus Elliot Harding (September 3, 2024)
Term | Northgate's Final Proposal | Harding's Position | Gap / Delta
CIC Severance Multiplier | 2.5x ($12,031,250) | 3x ($14,437,500) | $2,406,250
CIC Tax Treatment | Best-net safe harbor (no gross-up) | Full 280G excise tax gross-up | Est. $4,200,000–$6,800,000
CIC Definition — Board Turnover Trigger | Excluded | Included | Structural
CIC Benefit Continuation | 24 months | 36 months | 12 months
Non-Compete Duration | 18 months (with 6-month garden leave) | 12 months (with 12-month garden leave) | 6 months
Non-Compete Activity Scope | Revenue-based test (15% threshold) | Scheduled-competitor approach (8 named cos.) | Definitional
Garden Leave Duration / Compensation | 6 months at base salary ($875,000) | 12 months at full compensation (~$2,406,250) | ~$1,531,250

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