PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT
AGENDA — In-Person Principals Meeting
Northgate Telecommunications PLC
CEO Employment Agreement Negotiation
Monday, August 26, 2024
Prepared by: James Underwood, Associate Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171
Date of Preparation: August 23, 2024
Matter Reference: 1022-00004
I. Meeting Logistics
II. Attendees
For Northgate Telecommunications PLC:
• Dame Philippa Thornton-Hale — Chair of the Board
• Geoffrey Stanton — Lead Independent Director; Chair, Remuneration Committee
• Elaine Whitford — SVP & Group General Counsel
• Renata Vasquez — Partner, Calderwood & Harkness LLP (outside counsel to Northgate)
For Marcus Elliot Harding:
• Marcus Elliot Harding — CEO Candidate (currently President & COO, Marlowe Asset Management Digital Holdings, Inc.)
• Victoria Hargrove — Partner, Hargrove & Liddell LLP (personal counsel to Mr. Harding)
Not in Attendance (Available by Phone if Needed):
• James Underwood — Associate, Calderwood & Harkness LLP (notetaker; available by phone for research or drafting questions)
• Nathan Chu — Associate, Hargrove & Liddell LLP (available by phone for research or drafting questions)
III. Background and Purpose of Meeting
Negotiations for the employment agreement between Northgate Telecommunications PLC ("NTP" or the "Company") and Marcus Elliot Harding (the "Candidate") for the position of Chief Executive Officer have been ongoing since late June 2024. To date, the parties have progressed through five rounds of term-sheet negotiation (conducted between June 24 and July 19, 2024), two full drafts of the executive employment agreement (Draft 1 circulated by Calderwood & Harkness on July 22, 2024; Draft 2 circulated by Calderwood & Harkness on August 12, 2024), and two rounds of redlining by Hargrove & Liddell LLP on behalf of the Candidate (88 comments on Draft 1 returned on August 5, 2024; 42 comments on Draft 2 returned on August 19, 2024).
Substantial progress has been made during the course of these negotiations, and the parties have reached agreement on the vast majority of the material economic and governance terms of the proposed engagement. The number of open comments was reduced by more than half between the first and second redlines, reflecting meaningful convergence on many previously contested provisions.
The purpose of this meeting is to address the remaining material open issues at the principals level and to attempt to reach agreement — or, at a minimum, to identify a clear path to resolution — on the two critical impasses identified in the Hargrove & Liddell redline of Draft 2. These two open areas are:
1. Change in Control Severance Provisions — including the definition of "Change in Control," the CIC severance multiplier, Section 280G tax treatment, CIC equity acceleration, and CIC benefit continuation; and
2. Restrictive Covenant Provisions — including the non-compete duration, geographic and activity scope, garden leave arrangements, and non-solicitation terms.
The parties are encouraged to approach this meeting with candor and in good faith, recognizing that resolution of these final issues will permit the preparation of a revised third draft and movement toward definitive execution of the agreement, subject to requisite Board and Remuneration Committee approvals.
IV. Agenda
Agenda Item 1: Opening Remarks and Ground Rules
10:00 a.m. – 10:10 a.m.
Dame Philippa Thornton-Hale will open the meeting on behalf of Northgate Telecommunications PLC. Opening remarks will cover the following:
• Welcome to all participants and introductions, as necessary.
• A statement of the objectives for the meeting: to engage in candid, good-faith discussion of the remaining open items in the proposed CEO Employment Agreement with a view toward reaching definitive agreement on all material terms, or, in the alternative, identifying a concrete path toward resolution of any outstanding impasses in the near term.
• Confirmation that all discussions during this meeting are privileged and confidential and are subject to the protections afforded by attorney-client privilege and the attorney work product doctrine. No statements made during this meeting shall be deemed to constitute binding commitments unless and until reduced to a definitive written agreement executed by all parties.
• Agreement on discussion format and protocol, including the allocation of time to each agenda item, the order of presentation and response for each open issue, and the understanding that each side will have a full opportunity to present its position before responses are offered.
• Confirmation that James Underwood (Calderwood & Harkness LLP) and Nathan Chu (Hargrove & Liddell LLP) are available by phone for any research, drafting, or factual questions that may arise during the course of the meeting.
Agenda Item 2: Summary of Agreed Terms
10:10 a.m. – 10:25 a.m.
Before turning to the open issues, the parties will briefly confirm the terms that have already been agreed upon during prior negotiations, in order to frame the scope of remaining issues and to confirm that all agreed terms remain firm. This recitation is intended to provide context and to underscore the significant progress that has been achieved. The following terms are understood to be agreed unless either party raises an objection at this time:
Cash Compensation:
• Base Salary: $1,750,000 per annum — Agreed.
• Target Annual Incentive: 175% of base salary ($3,062,500) — Agreed.
• Maximum Annual Incentive: 300% of base salary ($5,250,000) — Agreed.
Sign-On and Make-Whole Payments:
• Sign-On Cash Bonus (Make-Whole): $5,000,000, payable within thirty (30) days following the Start Date, subject to a 24-month clawback in the event of voluntary resignation without Good Reason or termination for Cause — Agreed.
• Sign-On Equity (Make-Whole for Forfeited Marlowe Asset Management Equity of $23,400,000):
• RSU Grant: $12,000,000, subject to three-year ratable vesting (one-third on each anniversary of the Start Date) — Agreed.
• PSU Grant: $6,400,000, subject to three-year cliff vesting, with performance metrics to be determined by the Remuneration Committee in consultation with the CEO — Agreed.
• Total Sign-On Equity: $18,400,000 — Agreed.
• The $5,000,000 shortfall between the total make-whole value ($23,400,000 in forfeited Marlowe Asset Management equity) and the sign-on equity ($18,400,000) is offset by the sign-on cash bonus described above — Agreed.
Long-Term Incentive Compensation:
• Annual LTI Target: $9,000,000 per year (60% PSUs / 40% RSUs), with the initial annual LTI grant to be made at the first regularly scheduled annual grant cycle following the Start Date — Agreed.
Total Target Annual Compensation:
• Total Target Annual Compensation: $13,812,500 (comprising base salary of $1,750,000, target annual incentive of $3,062,500, and annual LTI target of $9,000,000) — Agreed.
Retirement Benefits:
• 401(k) Plan: Participation in the Company's 401(k) plan with a 6% employer matching contribution — Agreed.
• Supplemental Executive Retirement Plan (SERP): $250,000 per year Company contribution to an unfunded SERP — Agreed.
Perquisites:
• Car allowance of $25,000 per annum — Agreed.
• Participation in the Company's executive health program — Agreed.
• Supplemental life insurance coverage of $2,000,000 — Agreed.
• Financial and tax planning reimbursement of up to $35,000 per annum — Agreed.
Employment Term:
• Initial Employment Term: Five (5) years from the Start 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 — Agreed.
Governing Law and Structure:
• Governing Law: New York law shall govern the primary employment agreement; the laws of England and Wales shall govern the secondary UK service agreement — Agreed.
• Dual Employment Structure: The Candidate will be employed under a primary New York–governed employment agreement with Northgate Telecommunications US, Inc. and a secondary UK service agreement with Northgate Telecommunications PLC. The anticipated time split between the United States and the United Kingdom is approximately 80% US / 20% UK — Agreed in principle. Moorfield Bates LLP (Simon Aldridge, Partner) is advising on the specific details of the UK service agreement, which will be finalized following agreement on the primary US employment agreement.
Change in Control Severance — Structural Framework:
• Double-Trigger Structure: Both parties agree in principle that CIC severance shall be structured on a "double-trigger" basis, requiring both (i) a Change in Control and (ii) a qualifying termination of employment (by the Company without Cause or by the Executive for Good Reason) within a specified window following the CIC — Agreed in principle. The specific terms of the CIC severance provisions remain open and are addressed in Agenda Item 3 below.
Non-Disparagement:
• Mutual, perpetual non-disparagement obligations, with standard carve-outs for statements made in the course of legal proceedings, regulatory inquiries, and as required by applicable law — Agreed.
D&O Indemnification and Insurance:
• The Candidate will be covered under Northgate's existing directors and officers liability insurance policy underwritten by Ashdown Surety & Insurance Co. (Policy No. ASI-D&O-NTP-2024-4471), providing coverage of $50,000,000 per occurrence and $100,000,000 in the aggregate, together with standard contractual indemnification from the Company to the fullest extent permitted by applicable law — Agreed in principle.
The foregoing summary is intended to confirm the status of agreed terms as of the date of this meeting. Any corrections or clarifications should be raised at this time. Following confirmation, the meeting will proceed to discussion of the two remaining open issues.
Agenda Item 3: Open Issue #1 — Change in Control Severance Provisions
10:25 a.m. – 11:25 a.m.
This is one of the two critical impasses remaining in the negotiation. The CIC severance provisions encompass several interrelated sub-issues, each of which is addressed separately below. Sixty (60) minutes of discussion and negotiation time has been allocated to this agenda item.
3(a): Definition of "Change in Control". The parties have reached agreement on three of the four constituent elements of the proposed definition of "Change in Control." The agreed elements are as follows:
(a) Acquisition of Voting Securities: The acquisition by any person or group (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) of more than fifty percent (50%) of the combined voting power of the Company's then-outstanding voting securities — Agreed.
(b) Merger or Consolidation: A merger, consolidation, or similar business combination transaction following which the Company's shareholders immediately prior to the transaction hold less than fifty percent (50%) of the combined voting power of the surviving or resulting entity's outstanding voting securities — Agreed.
(c) Sale of Substantially All Assets: The sale, lease, exchange, or other transfer of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any person or group — Agreed.
Disputed Element:
(d) Board Turnover Trigger: Whether the definition of "Change in Control" should include a change in the composition of the Board of Directors such that a majority of directors are replaced within any twelve (12) month period (other than directors whose election or nomination for election was approved by a majority of the then-incumbent directors).
Position of Mr. Harding / Hargrove & Liddell LLP: The Board turnover trigger should be included as a fourth element of the CIC definition. Ms. Hargrove's redline comments characterize this as a standard protective provision commonly found in CEO employment agreements at comparable US-listed companies. The inclusion of a board turnover trigger provides meaningful protection against a creeping change in control that would not otherwise satisfy the acquisition or merger thresholds but would nevertheless result in a fundamental shift in the governance environment under which the Candidate agreed to serve. Mr. Harding views this provision as essential to ensuring that the protections afforded by the double-trigger CIC severance structure are not rendered illusory by a gradual reconstitution of the Board.
Position of Northgate / Calderwood & Harkness LLP: The Board turnover trigger is rejected. Northgate's position is that this provision is inconsistent with UK corporate governance norms, under which annual board re-election is the standard practice for FTSE-listed companies. The Board views the inclusion of a turnover trigger as overreach, given that the normal course of board succession — including the annual re-election of directors at the AGM — could inadvertently satisfy the trigger. Additionally, the Board has raised concerns that a board turnover trigger may be in tension with the provisions of the UK Corporate Governance Code 2024, which emphasize board independence and regular refreshment. The Remuneration Committee has specifically flagged this provision as one that could attract scrutiny from institutional shareholders and proxy advisory firms.
3(b): CIC Severance Multiplier. Northgate's Position (per Draft 2): CIC severance equal to two and one-half times (2.5×) the sum of the Candidate's base salary and target annual incentive, calculated as follows:
• Base salary: $1,750,000
• Target annual incentive: $3,062,500
• Sum: $4,812,500
• CIC severance (2.5×): $12,031,250
Mr. Harding's Position (per Draft 2 Redline): CIC severance equal to three times (3×) the sum of the Candidate's base salary and target annual incentive, calculated as follows:
• Base salary: $1,750,000
• Target annual incentive: $3,062,500
• Sum: $4,812,500
• CIC severance (3×): $14,437,500
Cash Gap Between Positions: $14,437,500 − $12,031,250 = $2,406,250
Discussion Points:
• Market Benchmarking Data: Whitmore Hobson LLP (Dr. Rachel Whitmore, Senior Partner) has prepared a compensation benchmarking analysis comparing the proposed CIC severance to the arrangements at a peer group of comparable companies. The peer-group comparison data should be referenced during this discussion. Both sides should be prepared to address whether a 2.5× or 3× multiplier is more closely aligned with market practice at companies of comparable size, industry, and complexity.
• ISS Proxy Advisory Guidance: Thackeray Health IT (ISS) generally flags CIC severance multiples exceeding 3× total cash compensation as a concern in its proxy voting guidelines. While a 3× multiplier is at the boundary of the ISS threshold, the combination of a 3× multiplier with other CIC-related payments (including equity acceleration and, potentially, a Section 280G excise tax gross-up) could push the total CIC severance package above the level at which ISS would issue a negative recommendation. Veltrano Proxy Advisors (Sandra Kolb, Managing Director) has advised Northgate that a 3× multiplier combined with a full excise tax gross-up would likely trigger a negative say-on-pay recommendation from Veltrano.
• UK Corporate Governance Code 2024, Provision 40: Provision 40 of the UK Corporate Governance Code 2024 provides guidance on limiting severance payments for departing directors. The prevailing market norm for UK-listed companies is a severance multiplier in the range of 1× to 2× base salary and benefits. Although the Candidate's CIC severance arrangement under the US employment agreement is not directly subject to the UK Corporate Governance Code, the Remuneration Committee is mindful that the overall package will be disclosed in NTP's remuneration report and will be subject to shareholder scrutiny under UK governance standards.
• 2024 AGM Say-on-Pay Vote: Northgate's most recent say-on-pay vote at the 2024 Annual General Meeting (held April 18, 2024) received 87.4% shareholder support. While this level of support is solid, the Board is mindful of the risk of shareholder backlash at the 2025 AGM if the incoming CEO's compensation package is perceived as exceeding governance norms. A binding remuneration policy vote will be required at the 2025 AGM, and a package perceived as excessive could jeopardize the requisite shareholder approval.
• Impact on Institutional Shareholders: NTP's top institutional shareholders, whose support will be critical to the passage of the binding remuneration policy vote, include:
• Caledonian Asset Management — 8.3% of outstanding shares
• Pemberton Capital Group — 6.7% of outstanding shares
• Thornbury Investment Trust — 5.1% of outstanding shares
• Regis Global Equity Fund — 4.4% of outstanding shares
• Atlas Pension Fund — 3.2% of outstanding shares
The views and governance expectations of these shareholders should be taken into account when assessing the appropriate level of CIC severance.
3(c): Section 280G Tax Treatment. Northgate's Position: Best-net safe harbor cutback. Under this approach, no excise tax gross-up would be provided. Instead, in the event that any payments or benefits payable to the Candidate in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, such payments would be reduced to the maximum amount that could be paid without triggering the excise tax imposed by Section 4999, but only if such reduction would result in a greater after-tax benefit to the Candidate than receipt of the full payment and payment of the excise tax. The parachute payment safe harbor limit for Mr. Harding has been calculated as follows:
• 280G base amount (average W-2 compensation from Marlowe Asset Management Digital Holdings, 2019–2023): $7,840,000
• Safe harbor limit: (3 × $7,840,000) − $1 = $23,519,999
Mr. Harding's Position: Full Section 280G excise tax gross-up. Under this approach, in the event that any payments or benefits payable to the Candidate in connection with a Change in Control are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the Company would make an additional payment (the "Gross-Up Payment") sufficient to ensure that, after payment of all applicable excise taxes and income taxes on the Gross-Up Payment itself, the Candidate retains the full after-tax amount that he would have received had no excise tax been imposed.
Key Financial Analysis:
• Harding's 280G Base Amount: $7,840,000 (calculated as the average of the Candidate's W-2 compensation from Marlowe Asset Management Digital Holdings, Inc. for the five taxable years preceding the year of the anticipated Change in Control, i.e., 2019–2023).
• Estimated Total Parachute Payments Under Mr. Harding's 3× Proposal: Approximately $38,200,000 (inclusive of CIC severance, accelerated equity, and other payments contingent on the Change in Control).
• Excess Parachute Payment: $38,200,000 − $7,840,000 = $30,360,000
• Estimated 20% Excise Tax (Section 4999): $30,360,000 × 0.20 = $6,072,000
• Estimated Gross-Up Cost to Northgate: $4,200,000 – $6,800,000, depending on marginal income tax rate assumptions, state and local tax treatment, and the precise methodology used to calculate the total parachute payments. This range reflects uncertainty in the application of Q&A-22 through Q&A-24 of the Section 280G regulations and the treatment of certain equity acceleration amounts.
Whitmore Hobson Analysis: Whitmore Hobson LLP has prepared a financial analysis comparing the Candidate's after-tax position under the best-net cutback approach versus the full gross-up approach. Under the best-net cutback methodology, the Candidate's after-tax position is roughly equivalent to — and, in certain scenarios, marginally more favorable than — the position that would result from receipt of the full payment plus payment of the excise tax. This analysis suggests that the excise tax gross-up is largely a matter of principle and optics rather than one of meaningful economic consequence to the Candidate.
ISS Policy: ISS proxy voting guidelines characterize excise tax gross-ups as "problematic" pay practices that weigh against favorable say-on-pay recommendations. The inclusion of a gross-up provision in the CEO's employment agreement would be highlighted in ISS's proxy analysis and could contribute to a negative voting recommendation.
3(d): CIC Equity Acceleration. Northgate's Position: Full acceleration of all unvested time-based equity awards (RSUs) upon a qualifying termination in connection with a Change in Control. Both sides are effectively in agreement on this point with respect to time-based RSUs.
Mr. Harding's Position: Full acceleration of all unvested equity upon CIC termination, including performance-based equity awards (PSUs), with PSUs deemed earned at target level performance. Critically, Mr. Harding's position is that PSUs should vest at target irrespective of the portion of the applicable performance period that has elapsed at the time of the Change in Control — that is, without pro-ration for elapsed performance period.
Discussion Point: The treatment of PSUs upon a CIC termination is a significant economic issue given the value of the sign-on PSU grant ($6,400,000) and the ongoing annual LTI PSU grants (60% of $9,000,000 = $5,400,000 per year). The parties should discuss whether target-level vesting without pro-ration is consistent with market practice and whether any middle-ground approaches (e.g., greater-of-target-or-actual vesting for completed performance periods, with target-level vesting for incomplete periods) may be acceptable.
3(e): CIC Benefit Continuation. Northgate's Position: Following a qualifying CIC termination, the Company will provide:
• Twenty-four (24) months of continued medical, dental, and vision coverage through COBRA, with the Company paying the employer-portion of premiums; and
• Up to $50,000 in outplacement services through a provider selected by the Company.
Mr. Harding's Position: Following a qualifying CIC termination:
• Thirty-six (36) months of full benefit continuation (medical, dental, vision, life insurance, and disability coverage) at active-employee rates, not limited to COBRA; and
• Outplacement services at a level and with a provider to be selected by the Candidate.
Gap: The primary gap is twelve (12) months of additional benefit continuation (36 months versus 24 months) and the scope of benefits covered (full benefit continuation versus COBRA-only). The parties should discuss whether a compromise on duration and/or scope is achievable.
Total Discussion and Negotiation Time Allocated to Agenda Item 3: 60 minutes.
Agenda Item 4: Open Issue #2 — Restrictive Covenant Provisions
11:25 a.m. – 12:15 p.m.
This is the second of the two critical impasses remaining in the negotiation. The restrictive covenant provisions encompass five interrelated sub-issues, addressed separately below. Fifty (50) minutes of discussion and negotiation time has been allocated to this agenda item.
4(a): Non-Compete Duration. Northgate's Position (per Draft 2): Eighteen (18) months post-termination. This represents a concession from Northgate's initial proposal of a twenty-four (24) month post-termination non-compete, which was contained in Draft 1 and reduced to eighteen (18) months in Draft 2 in response to comments raised by Hargrove & Liddell in their redline of Draft 1.
Mr. Harding's Position: Twelve (12) months post-termination. Mr. Harding has noted that his current employment agreement with Marlowe Asset Management Digital Holdings, Inc. contains a twelve (12) month post-termination non-compete, and he is not willing to accept a non-compete duration that exceeds his current obligations to Marlowe Asset Management.
Gap: Six (6) months. The parties should discuss whether the gap can be bridged through compromise on duration alone or whether the resolution of this sub-issue is linked to the garden leave provisions discussed in Section 4(d) below.
4(b): Non-Compete Geographic Scope. Northgate's Position (per Draft 2): North America and Western Europe. Northgate's initial proposal in Draft 1 sought a worldwide non-compete restriction. In Draft 2, Northgate revised its position and limited the geographic scope to North America and Western Europe as a concession in response to comments from Hargrove & Liddell.
Mr. Harding's Position: Limited to North America and Western Europe.
Status: The parties are now aligned on geographic scope as a result of Northgate's concession in Draft 2. No further discussion of this sub-issue is anticipated unless either party wishes to revisit.
4(c): Non-Compete Activity Scope. Northgate's Position: The non-compete restriction would prohibit the Candidate from accepting employment by, or providing consulting or advisory services to, any company that derives more than fifteen percent (15%) of its consolidated annual revenues from (i) telecommunications services, (ii) telecommunications infrastructure (including network construction, operation, or maintenance), or (iii) enterprise SaaS platforms serving telecommunications operators. Northgate believes this revenue-based test provides a clear, objective, and readily administrable standard for determining whether a prospective employer or client falls within the scope of the restriction.
Mr. Harding's Position: The non-compete restriction should be narrowed to prohibit only employment by, or provision of services to, "direct competitors" of Northgate, as identified on a negotiated schedule to be attached to the employment agreement. Mr. Harding has proposed a schedule listing eight (8) named companies. In the event that any listed company ceases to be a direct competitor of Northgate (e.g., through divestiture, change in business focus, or similar event), such company would automatically be removed from the schedule. The Candidate's position is that the revenue-based test proposed by Northgate is overbroad and would prevent him from accepting employment at a wide range of diversified technology companies whose telecommunications-related revenues may exceed the 15% threshold but whose core business activities do not directly compete with Northgate.
Discussion Points:
• The relative merits of a revenue-based test versus a scheduled-competitor approach. The revenue-based test offers objectivity and administrability but may sweep more broadly than necessary to protect Northgate's legitimate business interests. The scheduled-competitor approach offers specificity and predictability but may be under-inclusive (e.g., if a new competitor enters the market after execution) and requires agreement on the identity of the named companies.
• Enforceability considerations under New York law: Under New York law, restrictive covenants in employment agreements are subject to a reasonableness analysis, considering (among other factors) the duration of the restriction, the geographic scope, the scope of prohibited activities, and the extent to which the restriction serves a legitimate protectable interest of the employer (such as protection of trade secrets, confidential information, or customer relationships). Calderwood & Harkness's internal assessment is that a twenty-four (24) month worldwide non-compete (as initially proposed in Draft 1) would face significant enforceability challenges under current New York law. The revised eighteen (18) month restriction limited to North America and Western Europe (as set forth in Draft 2) presents a more favorable enforceability profile, though the scope of prohibited activities remains relevant to the analysis.
• Pending New York legislation: The parties should be aware that the New York legislature is considering proposed legislation that would impose a broad prohibition on non-compete agreements in employment contracts. While the current status of this legislation is uncertain, its potential enactment would have significant implications for the enforceability of any non-compete provision included in the agreement. The parties may wish to discuss the inclusion of a savings clause or alternative restrictive covenant structure (e.g., enhanced non-solicitation) that would provide Northgate with meaningful protection in the event that the non-compete provision is rendered unenforceable by a change in law.
4(d): Garden Leave. Northgate's Position: Six (6) months of paid garden leave following notice of termination, during which the Candidate would continue to receive base salary only (no bonus or incentive compensation). The garden leave period would run concurrently with the first six (6) months of the eighteen (18) month non-compete period. The practical effect of this structure is that, following the completion of the six-month garden leave period, the Candidate would remain subject to the non-compete restriction for an additional twelve (12) months.
Mr. Harding's Position: Twelve (12) months of garden leave at full compensation (base salary plus pro-rata annual incentive bonus). The garden leave period and the non-compete period would run fully concurrently, such that the entirety of the twelve (12) month non-compete restriction proposed by Mr. Harding would be served during the garden leave period. Under this structure, Mr. Harding would have zero additional months of post-separation non-compete restriction following the expiration of the garden leave period.
Key Issues for Discussion:
• Whether the garden leave period should count toward, run concurrently with, or be separate from the non-compete period. This is the central structural question.
• The level of compensation during the garden leave period: base salary only (Northgate's position) versus full compensation including pro-rata bonus (Mr. Harding's position).
• The economic cost to Northgate of the competing proposals. Under Northgate's proposal, garden leave compensation would be approximately $875,000 (six months of base salary). Under Mr. Harding's proposal, garden leave compensation would be approximately $4,812,500 (twelve months of base salary plus target annual incentive), a difference of approximately $3,937,500.
• The practical enforceability implications of the competing structures. A garden leave arrangement in which the executive continues to receive full compensation may enhance the enforceability of the overall restrictive covenant package by demonstrating that the employer is providing adequate consideration for the restriction.
4(e): Non-Solicitation. Northgate's Position: A twenty-four (24) month post-termination non-solicitation covenant covering both (i) employees of Northgate and its affiliates and (ii) customers and clients of Northgate and its affiliates. The employee non-solicitation would prohibit the Candidate from directly or indirectly soliciting, recruiting, or hiring any employee of Northgate who holds the title of Vice President or above (or any employee with whom the Candidate had material contact during the twelve (12) months preceding termination). The customer non-solicitation would prohibit the Candidate from directly or indirectly soliciting or diverting any customer or client with whom Northgate maintained a material business relationship during the twelve (12) months preceding termination.
Mr. Harding's Position: An eighteen (18) month post-termination non-solicitation covenant limited to employees only. Mr. Harding's position is that a customer non-solicitation covenant is unnecessary given the nature of Northgate's enterprise customer base and that such a restriction would be overbroad and commercially unreasonable.
Gap: The gap has two dimensions:
• Duration: Six (6) months (24 months versus 18 months).
• Scope: Inclusion or exclusion of customer non-solicitation. Northgate seeks a covenant covering both employees and customers; Mr. Harding is willing to accept an employee non-solicitation covenant only.
Total Discussion and Negotiation Time Allocated to Agenda Item 4: 50 minutes.
Agenda Item 5: Transition Timeline and Start Date
12:15 p.m. – 12:30 p.m.
The following transition and start date matters will be discussed:
• Originally Proposed Start Date: October 1, 2024. This date was set forth in the initial term sheet and has been carried forward into both Draft 1 and Draft 2 of the employment agreement.
• Potential Delay to November 1, 2024: Mr. Harding has indicated that, depending on the outcome of discussions with Marlowe Asset Management Digital Holdings regarding his separation, a start date of November 1, 2024 may be necessary to accommodate an orderly transition from his current role as President and COO of Marlowe Asset Management. The parties should discuss whether a one-month delay is acceptable to Northgate and, if so, what accommodations (if any) would need to be made to the employment agreement terms.
• Marlowe Asset Management Non-Compete Analysis: Mr. Harding is currently subject to a twelve (12) month post-termination non-compete covenant under his existing employment agreement with Marlowe Asset Management Digital Holdings, Inc. An analysis has been conducted to determine whether Mr. Harding's assumption of the CEO role at Northgate Telecommunications PLC would trigger the Marlowe Asset Management non-compete. The scope of the Marlowe Asset Management non-compete, the definition of "competing business" contained therein, and the overlap (if any) between Marlowe Asset Management's and Northgate's business activities are relevant to this analysis. The status of any waiver discussions between Mr. Harding (or his counsel) and Marlowe Asset Management should be reported.
• Sir Alistair Kemble's Retirement Date: Sir Alistair Kemble, the current CEO of Northgate Telecommunications PLC, has announced his intention to retire effective December 31, 2024. Regardless of whether Mr. Harding's start date is October 1 or November 1, there will be a period of overlap during which both Sir Alistair and Mr. Harding will be present at the Company. The nature and structure of this transition period — including the allocation of responsibilities, reporting lines, and internal and external communications — should be discussed.
• Interim Arrangements: In the event that the start date is delayed beyond November 1, 2024 (whether due to Marlowe Asset Management transition issues, non-compete complications, or otherwise), the parties should discuss potential interim arrangements, including informal consulting, Board observer status, or other mechanisms to ensure that Mr. Harding is engaged with Northgate during the pre-start period without creating premature employment obligations.
Agenda Item 6: Path to Agreement — Next Steps
12:30 p.m. – 12:50 p.m.
Following the substantive discussions in Agenda Items 3 through 5, the parties will assess whether sufficient progress has been made to resolve the two principal impasses and to identify a clear path to definitive agreement. The following topics will be addressed:
• Assessment of Progress: Have the parties reached agreement on the open terms discussed in Agenda Items 3 and 4? If agreement has been reached on some but not all sub-issues, which items remain open, and what is the expected path to resolution?
• If Agreement Is Reached on Key Terms:
• Timeline for preparation and circulation of a revised third draft of the employment agreement ("Draft 3") by Calderwood & Harkness LLP, reflecting all agreements reached during this meeting.
• Target date for execution of the definitive employment agreement.
• Board approval process: identification of the specific Board and committee actions required to authorize the CEO appointment and the terms of the employment agreement. The Remuneration Committee (chaired by Geoffrey Stanton) must approve the compensation arrangements; the full Board must approve the CEO appointment.
• Remuneration Committee sign-off: scheduling of a special meeting of the Remuneration Committee to review and approve the final terms, if not previously authorized.
• If Agreement Is Not Reached:
• Discussion of whether a final compromise proposal from Northgate would be productive and, if so, the timeline for the preparation and delivery of such a proposal.
• Assessment of whether additional meetings (in-person or telephonic) are needed, and scheduling of any such meetings.
• Discussion of the consequences of continued impasse, including the impact on the transition timeline and Sir Alistair Kemble's retirement.
• Coordination with Outside Advisors:
• Moorfield Bates LLP (Simon Aldridge, Partner): Coordination on finalization of the UK service agreement, which must be consistent with the terms of the primary US employment agreement. Once the US agreement terms are settled, Moorfield Bates will prepare the final UK service agreement for review and execution.
• Galloway & Partners (Clive Warburton, Partner): Coordination on ASC 718 and IFRS 2 accounting treatment for the sign-on equity grants (RSUs and PSUs) and the ongoing annual LTI equity grants. Northgate's finance team and external auditors will need to review the final equity terms to confirm the accounting impact and disclosure requirements.
• Whitmore Hobson LLP (Dr. Rachel Whitmore, Senior Partner): Coordination on final compensation benchmarking, including any updated peer-group analysis required to support the Remuneration Committee's approval and the disclosure in Northgate's remuneration report.
• Shareholder Communication Strategy: If agreement is reached on all material terms, the parties should discuss the strategy for announcing Mr. Harding's appointment as CEO, including the timing and content of the public announcement, regulatory filings (RNS/Stock Exchange announcement; SEC Form 8-K), and shareholder communication materials.
Agenda Item 7: Closing Remarks
12:50 p.m. – 1:00 p.m.
• Summary of any agreements reached during the meeting, including a recitation of the key terms on which consensus was achieved and any compromises or concessions accepted by either party.
• Identification of action items and the parties responsible for each, including drafting assignments, advisor coordination, and any additional analyses or materials to be prepared.
• Establishment of a timeline for the next communication or follow-up meeting, whether by telephone, videoconference, or in-person.
• Closing remarks by Dame Philippa Thornton-Hale on behalf of Northgate Telecommunications PLC.
• Closing remarks by Marcus Elliot Harding.
V. Administrative Notes
Meeting Materials to Be Distributed in Advance:
The following materials will be distributed to all attendees no later than the close of business on Friday, August 23, 2024:
1. Draft 2 of the Executive Employment Agreement (Calderwood & Harkness LLP, dated August 12, 2024).
2. Hargrove & Liddell LLP Redline of Draft 2 (dated August 19, 2024), containing forty-two (42) tracked changes and comments.
3. Summary of Remaining Open Issues memorandum (prepared by Calderwood & Harkness LLP, summarizing the two principal areas of impasse and the parties' respective positions on each sub-issue).
Catering: