PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MATTER CLOSING MEMORANDUM
CALDERWOOD & HARKNESS LLP 299 Park Avenue, 42nd Floor New York, NY 10171
September 20, 2024
TO: Renata Vasquez, Partner Bernard Crawford, Partner
FROM: James Underwood, Associate
RE: Matter Closing Memorandum — Northgate Telecommunications PLC — CEO Employment Negotiation (Marcus Elliot Harding)
MATTER NUMBER: 1022-00004
MATTER STATUS: CLOSED — TERMINATED
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1. Executive Summary
This memorandum is submitted in connection with the closing of Matter 1022-00004, which has concluded with a status of Closed — Terminated. No definitive agreement was executed during the course of this engagement, and the matter file is now being closed in accordance with firm procedures.
Calderwood & Harkness LLP ("C&H" or the "Firm") was engaged by Northgate Telecommunications PLC ("NTP" or the "Company") to negotiate and draft a comprehensive executive employment agreement for Marcus Elliot Harding ("Harding") as the incoming Chief Executive Officer of NTP, succeeding outgoing CEO Sir Alistair Kemble. The engagement commenced on June 4, 2024, upon execution of the engagement letter by Elaine Whitford, SVP & Group General Counsel of NTP, and continued through September 12, 2024, when the NTP Board of Directors unanimously resolved to terminate negotiations with Harding and directed its executive search firm to resume the CEO search process.
Over the course of the approximately fourteen-week engagement, C&H prepared and circulated initial and revised term sheets, drafted two full versions of the Executive Employment Agreement, coordinated with Moorfield Bates LLP (UK counsel to NTP) on a dual US/UK contract architecture, provided detailed advice on Section 280G parachute payment analysis, restrictive covenant enforceability under New York law, proxy advisory implications, and UK Corporate Governance Code compliance, and conducted five formal negotiation calls and one in-person principals meeting with counterparty counsel Hargrove & Liddell LLP, representing Harding.
Despite substantial progress on numerous compensation and benefit terms — including base salary, annual incentive, sign-on cash and equity, long-term incentive targets, SERP, and perquisites — the negotiations ultimately collapsed at the term-sheet/draft-agreement stage when the parties were unable to reach agreement on two core issues: (1) change in control severance provisions, specifically the multiplier (2.5x vs. 3x), the treatment of Section 280G excise taxes (best-net cutback vs. full tax gross-up), and the scope of the CIC definition (whether to include a Board turnover trigger); and (2) the scope and duration of post-termination restrictive covenant obligations, principally the non-competition covenant (18 months, North America and Western Europe vs. 12 months, limited to scheduled competitors). Harding communicated through his counsel on September 9, 2024 that his positions on these issues were "non-negotiable," and the NTP Board, citing ISS policy concerns, proxy advisor warnings, UK Corporate Governance Code constraints, and shareholder sensitivity, unanimously resolved to terminate negotiations on September 12, 2024.
This memorandum summarizes the complete engagement history, identifies all key deliverables produced during the engagement, documents the proposed compensation terms and the specific points of impasse, sets forth the financial summary and billing history, catalogs the document inventory for the permanent file, and addresses post-termination actions, document retention, privilege considerations, and recommendations for the client going forward.
2. Client and Counterparty Information
2.1 Client. Full Legal Name: Northgate Telecommunications PLC
Registered Number: 07381264 (England and Wales)
Registered Address: 45 Canary Wharf Tower, One Canada Square, London E14 5AB, United Kingdom
US Operations Headquarters: 600 Lexington Avenue, 38th Floor, New York, NY 10022
Entity Type: Public limited company incorporated under the laws of England and Wales
Stock Listings: London Stock Exchange (LON: NTP); New York Stock Exchange (American Depositary Receipts) (NYSE: NTPC). Each ADR represents one ordinary share.
Market Capitalization: Approximately £8.7 billion / $11.1 billion (as of June 2024)
Industry: Telecommunications infrastructure, software, and software-as-a-service (SaaS) platforms
Financial Overview (FY2023): Revenue of £4.26 billion (approximately $5.43 billion); adjusted EBITDA of £1.14 billion (approximately $1.45 billion)
Employees: Approximately 22,500 globally, with operations in the United Kingdom, the United States, continental Europe, the Middle East, and the Asia-Pacific region
Primary Client Contacts:
• Elaine Whitford — Senior Vice President & Group General Counsel. Ms. Whitford served as the primary in-house legal contact for this engagement and was the signatory to the engagement letter on behalf of NTP. All substantive communications regarding negotiation strategy, Board direction, and deal terms were routed through Ms. Whitford.
• Priya Narayanan — Chief People Officer. Ms. Narayanan was consulted on compensation benchmarking, benefit plan design, and integration planning matters. She also served as the primary liaison with Whitmore Hobson LLP, the independent compensation consultant.
• Geoffrey Stanton — Lead Independent Director and Chair of the Remuneration Committee of the NTP Board of Directors. Mr. Stanton provided Remuneration Committee guidance on the permissible parameters for the CEO compensation package, with particular emphasis on ISS and shareholder considerations. He participated in the principals meeting on August 26, 2024, and in the Board call on September 10, 2024.
2.2 Counterparty (CEO Candidate)
Name: Marcus Elliot Harding
Current Title: President & Chief Operating Officer, Marlowe Asset Management Digital Holdings, Inc. (NYSE: VDHI)
Residence: 14 Gramercy Park South, Apt. 12A, New York, NY 10003
Counterparty Counsel: Victoria Hargrove, Partner, and Nathan Chu, Associate, at Hargrove & Liddell LLP, 51 Madison Avenue, 30th Floor, New York, NY 10010. Ms. Hargrove acted as lead negotiator on all material terms on behalf of Harding. Mr. Chu handled drafting and markup responsibilities.
Harding is currently employed by Marlowe Asset Management Digital Holdings, Inc. pursuant to an existing employment agreement that includes, among other terms, total target compensation of approximately $11,125,000 per annum, unvested equity awards valued at approximately $23,400,000 as of the date of analysis, a twelve-month post-termination non-competition covenant governed by New York law, and change in control severance at a 3x multiplier with full vesting acceleration. A detailed analysis of the Harding/Marlowe Asset Management agreement was prepared by the undersigned on June 9, 2024, and is included in the file.
2.3 Employing Entity (Proposed)
The proposed employing entity for the primary US employment agreement was Northgate Telecommunications US, Inc. ("NTP US"), a Delaware corporation and wholly-owned subsidiary of NTP. NTP US is the holding company for NTP's North American operations, with approximately 6,800 employees in the United States, Canada, and Mexico. The primary employment agreement was to be governed by New York law.
In addition, a secondary UK service agreement was to be entered into directly between Harding and Northgate Telecommunications PLC, reflecting Harding's anticipated allocation of approximately 20% of his time and duties to UK and European operations and his role as a statutory director of the parent company. The UK service agreement was being developed by Moorfield Bates LLP in coordination with C&H and was to be governed by the laws of England and Wales. This dual-contract architecture was designed to address cross-border employment, tax, and regulatory considerations, including compliance with the Financial Conduct Authority's Senior Managers and Certification Regime (SM&CR) and the UK-US Totalization Agreement for social security purposes.
3. Engagement Details
3.1 Engagement Team
The following attorneys at Calderwood & Harkness LLP constituted the engagement team for this matter:
Responsible Partner: Renata Vasquez, Partner, Labor & Employment Practice Group, New York office. Ms. Vasquez served as the lead partner and primary client contact for the engagement, conducted all substantive negotiations with counterparty counsel, attended the principals meeting, and participated in Board calls.
Billing Partner: Bernard Crawford, Partner, Labor & Employment Practice Group, New York office. Mr. Crawford provided strategic oversight, reviewed all major deliverables, participated in internal strategy discussions, and reviewed and approved all invoices and the final billing summary.
Lead Associate: James Underwood, Associate, Labor & Employment Practice Group, New York office. The undersigned served as the lead associate responsible for day-to-day management of the engagement, including preparation of research memoranda, analysis of counterparty positions, drafting and revision of term sheets and the employment agreement, coordination with UK counsel and other advisors, preparation of client correspondence and Board materials, and preparation of all closing documents including this memorandum.
Working Associate: Devon Archer, Associate, Labor & Employment Practice Group, New York office. Mr. Archer contributed to research and drafting, with particular focus on non-compete enforceability analysis, Section 280G calculations, cross-border structuring issues, change in control market survey, and document retention and privilege log preparation.
3.2 Engagement Terms
Engagement Letter Executed: June 4, 2024. The engagement letter was executed by Elaine Whitford, SVP & Group General Counsel, on behalf of Northgate Telecommunications PLC.
Conflicts Cleared: June 3, 2024. Comprehensive conflicts checks were run across all relevant parties, including Northgate Telecommunications PLC and its subsidiaries, Marcus Elliot Harding (individually), Marlowe Asset Management Digital Holdings, Inc. (Harding's current employer), and Hargrove & Liddell LLP (counterparty counsel). No conflicts were identified. The conflicts clearance was reviewed and approved by both Ms. Vasquez and Mr. Crawford. A formal Conflicts Check Clearance Memorandum was prepared and is included in the file.
Fee Arrangement: The engagement was conducted on an hourly billing basis at the following standard rates:
Billing Frequency: Monthly, with invoices rendered on a calendar-month basis.
Retainer: A retainer of $75,000 was received from NTP on June 5, 2024, and was deposited into the firm's client trust account (IOLA). The retainer was applied as a credit to the final invoice (Invoice No. 1022-00004-004, September 2024).
Governing Law of Engagement: The engagement letter is governed by the laws of the State of New York.
3.3 Scope of Engagement
The scope of the engagement, as set forth in the engagement letter and further detailed in the Scope of Engagement Memorandum dated June 5, 2024, encompassed the following matters:
(a) Negotiation and drafting of a comprehensive executive employment agreement for the appointment of Marcus Elliot Harding as Chief Executive Officer of Northgate Telecommunications PLC, including all related ancillary agreements, exhibits, and schedules;
(b) Coordination with Moorfield Bates LLP (Simon Aldridge, Partner; Hannah Carmichael, Associate; 1 Moorgate, London EC2R 6AB) on the preparation of a UK service agreement, cross-border employment structuring, and compliance with the Financial Conduct Authority's Senior Managers and Certification Regime (SM&CR);
(c) Advice on Section 280G parachute payment analysis, including calculation of the base amount, safe harbor limit, estimated excess parachute payments, estimated excise tax exposure, and the relative merits of best-net cutback versus full tax gross-up approaches;
(d) Advice on the enforceability of post-termination restrictive covenants, including non-competition, non-solicitation, and non-disparagement provisions, under New York law, with particular attention to pending legislative developments;
(e) Advice on corporate governance and proxy advisory implications of the proposed compensation package, including analysis of ISS and Tarrant Partners LLC guidelines, UK Corporate Governance Code 2024 requirements, and anticipated shareholder reaction; and
(f) Such other related matters as may arise in connection with the foregoing.
The engagement did not extend to tax advice (NTP's tax advisors were separately engaged), UK employment law advice (handled by Moorfield Bates LLP), or compensation consulting (handled by Whitmore Hobson LLP). C&H's role was limited to legal advice in connection with the negotiation and documentation of the employment arrangement.
4. Other Advisors and Third Parties Engaged
The following advisors and third parties were involved in the engagement or were consulted in connection with the proposed CEO appointment. Their roles and the nature of C&H's interaction with each are summarized below for the permanent file.
Moorfield Bates LLP — UK employment counsel to NTP. Lead partner: Simon Aldridge; Associate: Hannah Carmichael. Office: 1 Moorgate, London EC2R 6AB. Moorfield Bates was responsible for drafting the UK service agreement between Harding and NTP PLC, advising on the dual-contract architecture from a UK employment law perspective, addressing England and Wales governing law considerations, and advising on FCA SM&CR compliance requirements applicable to Harding in his capacity as a senior manager of a UK-regulated entity. C&H coordinated regularly with Mr. Aldridge and Ms. Carmichael throughout the engagement, including on cross-border structuring, tax equalization provisions, and the interplay between the US and UK termination provisions. C&H's coordination with Moorfield Bates was conducted under a joint representation understanding, and privilege implications are addressed in Section 13 of this memorandum.
Whitmore Hobson LLP — Independent compensation consultant to the NTP Remuneration Committee. Lead consultant: Dr. Rachel Whitmore. Office: 120 Broadway, Suite 3510, New York, NY 10271. Whitmore Hobson has served as the Committee's independent compensation consultant pursuant to a standing engagement since 2021. For purposes of this engagement, Dr. Whitmore provided peer-group benchmarking analysis for CEO compensation at comparable telecommunications and technology companies, pay-ratio analysis, and a detailed comparison of after-tax outcomes under the best-net cutback and full gross-up approaches to Section 280G parachute payment treatment. C&H reviewed and relied upon Whitmore Hobson's analyses in preparing the Section 280G framework memorandum and in formulating negotiation positions on the CIC severance provisions.
Galloway & Partners — NTP's independent auditors. Lead audit partner: Clive Warburton. Office: 1 New Street Square, London EC4A 3HQ. Galloway & Partners was consulted on the equity compensation accounting treatment of the proposed sign-on and annual LTI grants under both ASC 718 (US GAAP) and IFRS 2 (International Financial Reporting Standards), given NTP's dual listing and dual reporting obligations. The accounting analysis is summarized in Section 12 of this memorandum.
Veltrano Proxy Advisors, Inc. — Proxy advisory and governance consultant. Lead consultant: Sandra Kolb. Office: 1401 K Street NW, Suite 800, Washington, DC 20005. Veltrano was retained by NTP to assess shareholder sensitivity to the quantum and structure of the proposed CEO compensation package, with particular focus on the CIC severance provisions. Veltrano provided an informal assessment of likely ISS and Tarrant Partners LLC reactions to various CIC multiplier and tax gross-up scenarios. Veltrano's analysis materially informed the Remuneration Committee's and the Board's determination that the 3x CIC multiplier and full tax gross-up demanded by Harding would create unacceptable risk of a negative say-on-pay recommendation at the 2025 AGM.
Kensington Partners Ltd. — Executive search firm. Lead consultant: Antonia Blythe. London office: 33 St James's Square, London SW1Y 4JS. New York office: 590 Madison Avenue, 26th Floor, New York, NY 10022. Kensington Partners was retained by the NTP Nomination Committee (chaired by Lucinda Farrow) effective March 1, 2024, to conduct the CEO search. The total search fee was £1,200,000, payable in three tranches. The third tranche was never paid due to the collapse of the Harding negotiation and the resumption of the search. C&H had limited direct interaction with Kensington Partners during the engagement, but prepared the notification letter to Kensington on September 13, 2024, instructing the firm to resume the search.
Ashdown Surety & Insurance Co. — NTP's primary directors' and officers' liability insurer. Office: 70 Pine Street, New York, NY 10005. Policy No. ASI-D&O-NTP-2024-4471, providing $50 million per occurrence and $100 million aggregate coverage. Ashdown was consulted during the drafting process regarding the indemnification and D&O tail coverage provisions to be included in the employment agreement for the incoming CEO, specifically the scope of advancement of defense costs, the run-off period for claims arising during Harding's tenure, and the interaction between the proposed contractual indemnification and the existing D&O policy terms.
5. Chronological Engagement History
This section sets forth a detailed chronological history of the engagement from the pre-engagement background through the termination of negotiations and the closing of the matter.
5.1 Pre-Engagement Background
The following events occurred prior to the formal engagement of Calderwood & Harkness LLP but are relevant to understanding the context in which the engagement arose.
March 1, 2024: The NTP Nomination Committee, chaired by Lucinda Farrow (Independent Non-Executive Director), retained Kensington Partners Ltd. to conduct a comprehensive search for a new Chief Executive Officer to succeed Sir Alistair Kemble, who had communicated privately to the Board his intention to retire after eleven years of service.
April 18, 2024: NTP held its 2024 Annual General Meeting. The advisory say-on-pay vote received 87.4% shareholder support, representing a decline from 91.2% support at the 2023 AGM. While still above the threshold that would typically trigger enhanced shareholder engagement under institutional investor guidelines, the downward trend was noted by the Remuneration Committee as a factor counseling restraint in structuring the incoming CEO's compensation package.
May 15, 2024: Sir Alistair Kemble publicly announced his retirement as Chief Executive Officer, effective December 31, 2024, by way of a Regulatory News Service (RNS) announcement on the London Stock Exchange and a corresponding Form 6-K filing with the SEC. The announcement noted that the Board had commenced a formal search process and expected to announce a successor in due course.
May 22, 2024: Kensington Partners presented a final shortlist of three candidates to the Nomination Committee. Following interviews and detailed reference checks, the Committee's preferred candidate was Marcus Elliot Harding, President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc.
May 28, 2024: The Nomination Committee formally recommended Marcus Elliot Harding as the preferred CEO candidate. The full Board of Directors unanimously concurred with this recommendation at a special Board meeting convened for that purpose.
May 30, 2024: Dame Philippa Thornton-Hale, Chair of the Board, extended an informal verbal offer to Harding during a private dinner in New York. Harding expressed strong interest in the role subject to agreement on definitive terms, including compensation, change in control protections, and restrictive covenants. Dame Philippa communicated Harding's conditional acceptance to Ms. Whitford, who then initiated the process of engaging outside counsel to negotiate and document the employment arrangement.
5.2 Engagement Opening (June 3–5, 2024)
June 3, 2024: Comprehensive conflicts checks were cleared. The conflicts database was searched for Northgate Telecommunications PLC and all known subsidiaries, Marcus Elliot Harding (individually), Marlowe Asset Management Digital Holdings, Inc. (Harding's current employer), and Hargrove & Liddell LLP (identified as Harding's anticipated personal counsel). No conflicts were identified. The clearance was reviewed and approved by Ms. Vasquez and Mr. Crawford.
June 4, 2024: The engagement letter was executed by Elaine Whitford on behalf of NTP. Matter 1022-00004 was opened in the firm's matter management system. The new matter intake form was completed and filed.
June 5, 2024: Ms. Vasquez sent the Scope of Engagement Memorandum to Ms. Whitford, confirming the scope, deliverables, fee arrangements, and team composition. On the same date, the $75,000 retainer was received by wire transfer and deposited into the firm's client trust account (IOLA). A retainer receipt and trust account confirmation was prepared and transmitted to the client.
5.3 Initial Research and Strategy (June 6–9, 2024)
During the initial days of the engagement, the C&H team undertook extensive research and preparation to build the analytical foundation for the negotiation. The following research memoranda were prepared:
June 6, 2024:
• New York Executive Employment Law Memorandum (Underwood) — A comprehensive overview of the legal framework governing executive employment agreements under New York law, including at-will employment principles, enforceability of term provisions, compensation and benefit requirements, statutory protections, and fiduciary duty considerations.
• New York Non-Compete Enforceability Memorandum (Archer) — Analysis of the enforceability of post-employment non-competition covenants under New York law, including the reasonableness test (geographic scope, temporal duration, scope of restricted activities, and hardship to the employee), recent judicial developments, and an assessment of pending legislation that could further restrict non-compete enforceability.
June 7, 2024:
• Section 280G Preliminary Framework Memorandum (Underwood) — Preliminary analysis of the Section 280G parachute payment framework as applied to the proposed Harding engagement, including calculation of the base amount at $7,840,000 (based on Harding's average annual W-2 compensation from Marlowe Asset Management over the applicable five-year lookback period), the safe harbor limit of $23,519,999 (2.99 times the base amount), and the general framework for analyzing whether proposed CIC severance payments would constitute "excess parachute payments" subject to the 20% excise tax under Section 4999 of the Internal Revenue Code.
• Change in Control Market Survey Memorandum (Archer) — Survey of CIC severance provisions in recent CEO employment agreements at comparable telecommunications and technology companies, including analysis of multiplier ranges (median 2.5x–3x for large-cap tech/telecom), prevalence of tax gross-ups (declining sharply; present in approximately 12% of S&P 500 agreements as of 2023, down from approximately 50% in 2010), and prevalence of Board turnover triggers in CIC definitions.
June 8, 2024:
• Restrictive Covenant Drafting Memorandum (Underwood) — Analysis of best practices for drafting post-employment restrictive covenants for C-suite executives in the telecommunications industry, with attention to geographic scope, temporal duration, activity restrictions, scheduled-competitor versus revenue-based definitions of competition, and garden leave provisions.
• UK Corporate Governance Code 2024 Memorandum (Underwood) — Analysis of the 2024 UK Corporate Governance Code provisions relevant to executive remuneration, with particular focus on Provision 40 (limiting notice periods to one year or less), the Code's principles on CIC and severance payments, and the Remuneration Committee's obligations in respect of pay quantum and structure.
June 9, 2024:
• Cross-Border Dual Contract Architecture Memorandum (Archer) — Analysis of the proposed dual US/UK contract structure, including the rationale for using NTP US as the employing entity for the primary agreement, the scope and purpose of the secondary UK service agreement, tax equalization considerations, the US-UK Totalization Agreement for social security purposes, and FCA SM&CR compliance requirements.
• Harding Marlowe Asset Management Agreement Analysis Memorandum (Underwood) — Detailed analysis of Harding's existing employment agreement with Marlowe Asset Management Digital Holdings, Inc., including current total target compensation of approximately $11,125,000 per annum, unvested equity awards valued at approximately $23,400,000, existing twelve-month US non-competition covenant, and change in control severance provisions (3x multiplier with full vesting acceleration). This analysis informed the C&H team's understanding of Harding's current contractual protections and the baseline against which Harding and his counsel would evaluate the NTP proposal.
June 7, 2024: Ms. Vasquez sent a detailed email to Ms. Whitford outlining the initial negotiation strategy, identifying the key issues expected to arise in negotiations, and flagging the areas where NTP's and Harding's positions were likely to diverge (CIC provisions, restrictive covenants, and equity make-whole).
June 9, 2024: Ms. Vasquez prepared an internal strategy memorandum addressed to Mr. Crawford, setting forth the recommended negotiation positioning for NTP, identifying proposed "red lines" (items on which NTP should not make concessions), and distinguishing items of genuine flexibility from items of strategic importance. This memorandum was discussed between Ms. Vasquez and Mr. Crawford and informed the development of the initial term sheet.
5.4 Term Sheet Negotiation (June 10 – July 19, 2024)
June 10, 2024: The initial term sheet (version 1) was circulated by C&H to Hargrove & Liddell LLP. The term sheet set forth NTP's proposed terms for the Harding employment, including the following key provisions:
• Base salary: $1,750,000 per annum
• Target annual bonus: 175% of base salary ($3,062,500)
• Sign-on cash bonus: $5,000,000 (paid within 30 days of start date; subject to 24-month clawback upon voluntary resignation)
• Sign-on equity grant: $18,400,000 ($12,000,000 in RSUs vesting ratably over 3 years; $6,400,000 in PSUs with 3-year cliff vesting)
• Annual long-term incentive target: $9,000,000 per year (60% PSUs / 40% RSUs)
• CIC severance: 2.5x (base salary + target bonus) with best-net cutback under Section 280G
• Post-termination non-competition: 24 months, worldwide
• Garden leave: 6 months
• Governing law: New York
• Proposed start date: October 1, 2024
June 13, 2024: Hargrove & Liddell acknowledged receipt of the initial term sheet. In a preliminary email, Ms. Hargrove previewed significant concerns on three issues: (i) the CIC multiplier, which Harding viewed as insufficient given his existing 3x CIC at Marlowe Asset Management; (ii) the absence of a Section 280G tax gross-up, which Harding considered essential; and (iii) the scope and duration of the proposed non-competition covenant, which Harding viewed as unreasonably broad and long.
June 17, 2024: Hargrove & Liddell returned a marked-up version of the term sheet (version 2) containing material counterproposals on substantially all provisions. The key counterproposals included:
• CIC multiplier: 3x (base salary + target bonus), an increase from NTP's proposed 2.5x
• Section 280G treatment: full tax gross-up in lieu of best-net cutback
• CIC definition: addition of a Board turnover trigger (change in a majority of the Board within a 24-month period, excluding Board-approved nominees)
• Non-competition: 12 months, limited to North America and Western Europe, with restrictions limited to a scheduled list of eight named competitors
• Garden leave: 12 months at full compensation (base salary, bonus, and benefits), running concurrently with the non-competition period
• Non-CIC severance: 2.5x (base salary + target bonus), an increase from NTP's proposed 2x
• Equity acceleration: full acceleration of all outstanding equity awards (RSUs and PSUs at target) upon termination without cause or resignation for good reason, regardless of whether a CIC has occurred
June 19, 2024: The undersigned prepared a detailed analysis memorandum on the H&L redline, cataloging each counterproposal, assessing its significance, identifying recommended responses, and flagging items requiring client or Remuneration Committee direction.
June 20–22, 2024: Ms. Vasquez communicated the counterparty positions to Ms. Whitford in a series of calls and emails. Ms. Whitford relayed the matter to the Remuneration Committee and reported back the Committee's guidance: NTP should hold firm on the 2.5x CIC multiplier, maintain the best-net cutback approach (no gross-up), and reject the Board turnover trigger in the CIC definition. The Committee expressed flexibility to reduce the non-competition period to 18 months as a fallback position if necessary. Mr. Stanton's view, as communicated by Ms. Whitford, was that ISS policy concerns and the need to maintain strong shareholder support were paramount considerations that should override the desire to accommodate Harding's demands.
June 24, 2024: A revised term sheet (version 3) was circulated to Hargrove & Liddell, reflecting NTP's responses to the counterproposals. On the same date, Negotiation Call #1 was conducted by telephone, with Ms. Vasquez, the undersigned, and Mr. Archer on behalf of NTP, and Ms. Hargrove and Mr. Chu on behalf of Harding. The discussion focused on the CIC multiplier, non-compete duration, and garden leave provisions. Ms. Hargrove reiterated Harding's position that a 3x CIC multiplier and full tax gross-up were essential, given his existing protections at Marlowe Asset Management. Ms. Vasquez explained the constraints imposed by the Remuneration Committee, including ISS policy considerations and the UK Corporate Governance Code. No resolution was reached on the disputed items, but both sides agreed to continue negotiating.
July 1, 2024: Negotiation Call #2 was conducted. The discussion focused on the non-compete geographic scope, the definition of "competitive activity" (scheduled-competitor list versus a revenue-based test), and the customer non-solicitation provision. Some progress was made on ancillary compensation elements, but the core disputes regarding CIC and restrictive covenants remained unresolved.
July 8, 2024: Negotiation Call #3 was conducted. The parties reached agreement on a number of significant terms:
• Base salary: $1,750,000 (agreed)
• Target annual bonus: 175% of base salary (agreed)
• Maximum annual bonus: 300% of base salary (agreed)
• Sign-on cash bonus: $5,000,000 (agreed)
• Annual LTI target: $9,000,000 (agreed)
• SERP: $250,000 per year (agreed)
• Perquisites package (agreed)
The CIC and non-compete issues were deferred. The parties agreed to proceed to a full draft employment agreement, with the disputed provisions presented in bracketed alternatives reflecting each side's position.
July 10, 2024: A revised term sheet (version 4) was circulated, reflecting all agreed terms and including bracketed alternatives for the disputed CIC and non-compete provisions.
July 12, 2024: Negotiation Call #4 was conducted. Ms. Hargrove proposed a compromise of 2.75x for the CIC multiplier, representing a split-the-difference approach. Ms. Vasquez took the proposal under advisement and agreed to present it to the client for Remuneration Committee consideration. The non-compete scope was also discussed, with Hargrove proposing a 12-month restriction limited to North America and Western Europe (consistent with her prior position). No final agreement was reached.
July 19, 2024: Negotiation Call #5 was conducted. Following consultation with Ms. Whitford and Mr. Stanton, Ms. Vasquez communicated that the Remuneration Committee could not authorize a CIC multiplier above 2.5x, and accordingly the 2.75x compromise was not accepted. The parties agreed to proceed with the preparation of a full draft employment agreement incorporating NTP's positions on the disputed terms, with the understanding that counterparty would have the opportunity to mark up the draft and that further negotiation would continue. The parties also discussed a revised transition timeline, with a possible start date pushed from October 1 to November 1, 2024, to accommodate the extended negotiation period. The sign-on equity of $18,400,000 was confirmed as agreed.
5.5 Draft Employment Agreement (July 22 – August 22, 2024)
July 22, 2024: Draft 1 of the Executive Employment Agreement between Northgate Telecommunications US, Inc. and Marcus Elliot Harding was circulated by C&H to Hargrove & Liddell. The draft was a comprehensive agreement of approximately 65 pages, containing the following substantive sections:
• Article I: Definitions
• Article II: Term of Employment (5-year initial term, October 1, 2024 through September 30, 2029, with automatic one-year renewals upon 180 days' prior notice)
• Article III: Position, Duties, and Reporting
• Article IV: Compensation (base salary, annual bonus, sign-on cash, equity awards)
• Article V: Equity Awards and Long-Term Incentive Participation
• Article VI: Benefits, Perquisites, and Retirement Plans
• Article VII: Termination of Employment and Change in Control Severance (Section 7 — CIC at 2.5x with best-net cutback)
• Article VIII: Section 409A Compliance
• Article IX: Restrictive Covenants (Section 9 — 24-month worldwide non-compete; non-solicitation; non-disparagement; confidentiality)
• Article X: Indemnification and D&O Insurance
• Article XI: Section 280G Parachute Payment Provisions
• Article XII: General Provisions (governing law, dispute resolution, entire agreement, amendment, waiver, assignment, notices, counterparts)
• Exhibit A: Form of RSU Award Agreement
• Exhibit B: Form of PSU Award Agreement
• Exhibit C: Scheduled Competitor List (placeholder)
July 22, 2024: On the same date, the undersigned prepared an annotated comparison document showing the relationship between term sheet version 4 and Draft 1, identifying each term sheet provision and its corresponding location in the draft agreement.
July 25, 2024: Mr. Archer prepared a detailed Section 280G analysis memorandum. The analysis was based on a model provided in coordination with Whitmore Hobson LLP and estimated the following under a hypothetical CIC occurring during the first year of Harding's employment:
• Estimated total parachute payments under Harding's demanded 3x CIC severance: approximately $38,200,000
• Base amount (per the preliminary framework): $7,840,000
• Safe harbor limit (2.99 × base amount): $23,519,999
• Excess parachute payment: approximately $30,360,000
• Estimated Section 4999 excise tax at 20%: approximately $6,072,000
• Under the best-net cutback approach, Harding's after-tax proceeds would be marginally higher with the cutback than with the full payment and no gross-up, because the aggregate excise tax, federal income tax, and state income tax on the excess amount slightly exceeded the value of the excess amount itself
• Whitmore Hobson's analysis confirmed that the cutback was slightly favored from a purely economic standpoint, meaning that the gross-up demand was largely a matter of principle, optics, and protection against changes in Harding's personal tax situation or assumptions
This analysis was shared with Ms. Whitford and formed part of the materials presented to the Remuneration Committee and the Board in connection with their evaluation of the NTP versus Harding positions on CIC severance.
August 5, 2024: Hargrove & Liddell returned their redline of Draft 1, containing eighty-eight (88) comments and proposed revisions. The most material objections were concentrated in Section 7 (Change in Control Severance) and Section 9 (Restrictive Covenants), consistent with the pattern of the term sheet negotiations. The remaining comments addressed a wide range of provisions, including definitions, duty provisions, equity award terms, Section 409A compliance, indemnification, and general provisions.
August 7, 2024: The undersigned prepared a comprehensive analysis of the H&L redline, categorizing all 88 comments into three groups:
(a) Acceptable / Non-Material (34 comments) — Conforming changes, clarifications, typographical corrections, and minor adjustments that could be accepted without client consultation.
(b) Negotiable (38 comments) — Substantive but non-fundamental changes where some compromise was possible and appropriate, subject to client direction. These included, among other things, the scope of the good reason definition, the timing of COBRA subsidies, the annual LTI mix ratio, and certain equity vesting provisions.
(c) Board-Level Decisions Required (16 comments) — Fundamental changes to core economic terms (CIC multiplier, gross-up, Board turnover trigger, non-compete duration and scope, non-CIC severance multiplier, full equity acceleration) that could only be authorized by the Remuneration Committee or the full Board.
August 8–9, 2024: Ms. Vasquez communicated the results of the redline analysis to Ms. Whitford in detail. The key metrics conveyed included: the CIC cash gap of $2,406,250 (the difference between 2.5x and 3x multiplied by the sum of base salary and target bonus), the estimated gross-up exposure of $4.2 million to $6.8 million (depending on assumptions regarding timing and composition of parachute payments), and the non-compete duration gap (24 months worldwide as proposed by NTP versus 12 months in North America and Western Europe as demanded by Harding). Ms. Whitford relayed these materials to the Remuneration Committee and reported back the Board's direction: maximum CIC multiplier of 2.5x, no gross-up, no Board turnover trigger; NTP was willing to reduce the non-compete from 24 months worldwide to 18 months in North America and Western Europe as a final concession on the restrictive covenant issue. The Board authorized preparation of Draft 2 on this basis.
August 12, 2024: Draft 2 of the Executive Employment Agreement was circulated to Hargrove & Liddell. Draft 2 accepted certain non-material comments from the H&L redline, revised the non-competition covenant from 24 months worldwide to 18 months covering North America and Western Europe (with a narrower activity definition based on a hybrid of scheduled competitors and revenue-based criteria), maintained the 2.5x CIC multiplier with best-net cutback, rejected the Board turnover trigger, and added an enhanced garden leave provision providing for payment of base salary for six months concurrent with the first six months of the non-competition period. On the same date, a blackline (marked comparison) of Draft 1 versus Draft 2 was prepared and transmitted to Hargrove & Liddell.
August 19, 2024: Hargrove & Liddell returned their redline of Draft 2, containing forty-two (42) remaining comments. While the number of open items had been reduced by more than half from the previous round, the two core impasses — CIC severance and restrictive covenants — remained unresolved. Harding continued to demand a 3x CIC multiplier, full Section 280G tax gross-up, inclusion of a Board turnover trigger in the CIC definition, and a 12-month non-competition period limited to a scheduled list of eight named competitors.
August 21–22, 2024: The undersigned prepared an analysis confirming that the two core impasses remained, with no material movement by the counterparty on either issue. Ms. Vasquez recommended that the parties proceed to a principals meeting — a face-to-face meeting between the senior principals on each side — in an effort to bridge the gap or, alternatively, to determine whether the gap was truly unbridgeable.
5.6 Principals Meeting and Final Push (August 23 – September 3, 2024)
August 23, 2024: Ms. Vasquez prepared a detailed preparation memorandum for the principals meeting, addressed to Ms. Whitford and Mr. Stanton. The memorandum included talking points, proposed fallback positions, and absolute red lines. The red lines, as authorized by the Board, were: (i) no tax gross-up under any circumstances; and (ii) no Board turnover trigger in the CIC definition.
August 26, 2024: The principals meeting was held in person at NTP's US operations headquarters at 600 Lexington Avenue, New York. The attendees were as follows:
For NTP: Dame Philippa Thornton-Hale (Board Chair); Geoffrey Stanton (Lead Independent Director, Chair of Remuneration Committee); Elaine Whitford (SVP & Group General Counsel); Renata Vasquez (Calderwood & Harkness LLP)
For Harding: Marcus Elliot Harding; Victoria Hargrove (Hargrove & Liddell LLP)
The meeting lasted approximately two and one-half hours. During the meeting, Harding personally stated that the 3x CIC multiplier and full Section 280G tax gross-up were "non-negotiable" elements of any employment arrangement, citing his existing 3x CIC protections at Marlowe Asset Management, the significant risk he was assuming in leaving a stable COO role for a CEO position at a different company, and his view that a company of NTP's size and financial position could readily absorb the incremental cost. Mr. Stanton responded by explaining the Board's and the Remuneration Committee's constraints, including the ISS policy framework (which flags CIC multipliers exceeding 3x and considers tax gross-ups "problematic"), the UK Corporate Governance Code's principles on executive remuneration, and the need to maintain the confidence of institutional shareholders in advance of the binding remuneration policy vote at the 2025 AGM. Dame Philippa expressed her personal appreciation for Harding's interest in the role and acknowledged the impasse. The parties agreed to explore one final compromise proposal, with NTP to prepare and transmit its best-and-final offer within the following week.
August 27, 2024: Ms. Vasquez prepared a post-meeting debrief memorandum for Ms. Whitford, assessing the likelihood of reaching agreement as low. The memorandum noted that Harding's body language and tone at the meeting conveyed genuine conviction rather than negotiating posture, and that Ms. Hargrove's failure to signal any flexibility on the core items reinforced the assessment. Ms. Vasquez recommended that the Board authorize a final best-and-final proposal and simultaneously commence contingency planning for alternative candidates or interim CEO arrangements.
August 28, 2024: The undersigned prepared a summary of the remaining gaps between the parties' positions:
• CIC multiplier: NTP 2.5x ($12,031,250) vs. Harding 3x ($14,437,500) — cash gap of $2,406,250
• Section 280G treatment: NTP best-net cutback vs. Harding full gross-up — estimated cost of gross-up $4.2M–$6.8M
• Board turnover trigger: NTP rejected vs. Harding demanded — binary, non-compromisable
• Non-compete duration: NTP 18 months vs. Harding 12 months — 6-month gap
• Non-compete scope: NTP North America + Western Europe (broad activity definition) vs. Harding North America + Western Europe (scheduled competitors only, 8 named companies) — definitional gap
• Garden leave compensation: NTP base salary only vs. Harding full compensation (base, bonus, and benefits) — significant economic gap
August 30, 2024: Ms. Whitford conveyed the Board's authorization for a final compromise proposal, reflecting the Board's best-and-final position:
• CIC multiplier: 2.5x (base salary + target bonus) — unchanged
• Section 280G treatment: best-net cutback — unchanged
• Board turnover trigger: not included — unchanged
• Non-compete: 18 months, North America and Western Europe, with a narrowed activity definition (hybrid of scheduled competitors and revenue-based criteria)
• Garden leave: 6 months at base salary, concurrent with the first six months of the non-competition period
The Board characterized this as its "final offer" and indicated that no further concessions would be authorized.
September 3, 2024: The final compromise term sheet (version 5-Final) was transmitted by Ms. Vasquez to Ms. Hargrove, accompanied by a formal cover letter on C&H letterhead. The cover letter explained the rationale for NTP's positions, citing ISS governance guidelines, UK Corporate Governance Code constraints, and the Board's fiduciary obligation to shareholders. The letter requested a response by September 9, 2024.
5.7 Rejection and Termination (September 9–12, 2024)
September 9, 2024: Ms. Hargrove transmitted a formal response on behalf of Harding, rejecting the final proposal. In her communication, Ms. Hargrove stated that Harding's minimum requirements — a 3x CIC multiplier, full Section 280G tax gross-up, inclusion of a Board turnover trigger in the CIC definition, and a 12-month non-competition period limited to scheduled competitors — were "non-negotiable." Ms. Hargrove expressed regret that the parties were unable to reach agreement and thanked C&H and NTP for the constructive engagement.
September 9, 2024: Ms. Vasquez immediately forwarded the rejection to Ms. Whitford and recommended that the Board formally terminate negotiations. Ms. Whitford confirmed that a Board call had been scheduled for September 10, 2024. Ms. Whitford noted Mr. Stanton's preliminary view that the Board should terminate negotiations given the ISS and Veltrano Proxy Advisors warnings about the likely shareholder reaction to a 3x CIC multiplier with a full tax gross-up.
September 10, 2024: A Board call was convened to discuss the rejection and determine next steps. The attendees included Dame Philippa Thornton-Hale, Geoffrey Stanton, Lucinda Farrow (Nomination Committee Chair), Diego Herrera (Audit Committee Chair), Elaine Whitford, and Renata Vasquez. The Board discussed Harding's rejection, the ISS and shareholder concerns, the Veltrano Proxy Advisors assessment, and the risk of proceeding on Harding's terms. The Board unanimously directed that negotiations with Harding be terminated and that Kensington Partners be instructed to resume the CEO search. The Board directed that a written resolution be formalized by September 12, 2024.