Renata,
Thank you for the candid assessment you sent on August 27 following the principals meeting on the 26th. It was extremely helpful in framing the discussion for the Board, and I want you to know it was shared (in substance, not verbatim) with the full group. Your read on where Hargrove & Liddell is likely to push back aligned with what we heard in the room at 600 Lex, and it gave the directors a clear-eyed picture of what we're dealing with.
I wanted to get this to you before the long weekend so you have time to begin drafting. The Board — specifically Dame Philippa Thornton-Hale, Geoffrey Stanton, Lucinda Farrow, and Dr. Tomás Herrera — convened informally this morning to discuss the path forward in light of the impasse we all acknowledged at the principals meeting. Geoffrey, wearing his Remuneration Committee Chair hat, drove the conversation, and the parameters I'm setting out below reflect his views as endorsed by the full group. I've also had the benefit of Underwood's August 28 memorandum summarizing the remaining gaps, which I used as the framework for the Board discussion.
Here is where we've landed.
**Authorization to Transmit Best-and-Final Proposal**
The Board has authorized Calderwood & Harkness to prepare and transmit a final compromise proposal to Hargrove & Liddell on behalf of Marcus Elliot Harding. I want to be unambiguous about this: this is to be understood and communicated as Northgate's **best and final offer**. There is no further room to move. Please prepare a revised term sheet building on v4, together with a formal cover letter explaining Northgate's rationale, for transmission no later than **Tuesday, September 3, 2024**.
**Change in Control Provisions**
*CIC Multiplier:* 2.5x (base salary + target annual bonus), yielding 2.5 × $4,812,500 = $12,031,250. The Board will not go to 3x. Geoffrey was emphatic on this point. He specifically referenced Sandra Kolb's analysis from Veltrano Proxy Advisors back in July, which warned that a 3x multiplier combined with a full gross-up would almost certainly trigger a negative say-on-pay recommendation from ISS and the other proxy advisory firms. We received 87.4% support at the April 2024 AGM, and the Board is simply unwilling to jeopardize that standing at the 2025 AGM — particularly given that any new CEO package will be subject to a binding remuneration policy vote. This is not a point on which the directors are being coy; they've genuinely concluded that 3x is off the table as a matter of governance.
*Tax Treatment:* Best-net cutback under Section 280G. **No full excise tax gross-up.** The Board views a gross-up as inconsistent with evolving market practice, UK Corporate Governance Code expectations, and the guidance Dr. Rachel Whitmore at Whitmore Hobson has provided on peer-group norms. I'd note — and you'll recall this from Whitmore Hobson's analysis — that Harding's after-tax position under the best-net cutback is roughly equivalent to full payment plus excise tax, with the cutback actually slightly favored in most modeling scenarios. So the gross-up is really more a matter of optics and principle than economic substance. But the Board will not concede it, and I think the cover letter should make this economic-equivalence point clearly to take some of the sting out.
*CIC Definition — Board Turnover Trigger:* **Rejected.** The CIC definition will include: (a) acquisition of more than 50% of voting securities; (b) merger or consolidation where NTP shareholders hold less than 50% of the combined entity post-transaction; and (c) sale of substantially all assets. The Board will **not** include a change-in-Board-composition trigger. Dame Philippa and Geoffrey both view this as overreach and fundamentally inconsistent with UK corporate governance norms. This is a firm red line. I would not expect any movement here even if Harding pushes back.
*Double Trigger:* Confirmed. Both sides had agreed in principle on double trigger, and it remains in the proposal.
*Other CIC Terms:* Full acceleration of all unvested equity upon a qualifying CIC termination; 24 months COBRA continuation; $50,000 outplacement assistance. No change from prior position.
**Restrictive Covenant Provisions**
*Non-Compete Duration:* 18 months post-termination. This is a concession from our original 24-month position and represents the Board's final landing point. They will not go to Harding's demanded 12 months.
*Non-Compete Geographic Scope:* Limited to **North America and Western Europe**. This is a meaningful concession from the original worldwide scope, and Geoffrey acknowledged openly that a worldwide non-compete likely faces enforceability challenges — particularly under New York law, as your team had flagged in your internal enforceability memo. I think this is a real concession that should be highlighted in the cover letter.
*Non-Compete Activity Definition:* Narrowed from the original formulation, but not as far as Harding wants. Instead of any company deriving more than 15% of revenue from telecom/SaaS broadly, the activity restriction should be refined to employment by or provision of services to companies that derive more than 15% of revenue from *telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecommunications operators*. However, the Board does not want to adopt Harding's proposed "scheduled competitors" approach — the closed list of 8 named companies is too narrow and too easily gamed. The activity-based test should be somewhat tighter than Draft 1, but it needs to remain a functional, descriptive standard rather than a finite list.
*Garden Leave:* 6 months at **base salary only** ($1,750,000 ÷ 12 × 6 = $875,000), running **concurrently** with the first 6 months of the 18-month non-compete period. I'll note that this effectively means 12 months of post-garden-leave non-compete without compensation, which actually bridges toward Harding's position more than it may appear on its face. Renata, I'd ask you to think about whether there's value in framing it that way in the cover letter — i.e., that the practical restraint period after garden leave is 12 months, which is what Harding has been asking for. It's not quite the same thing, but it may help the optics.
*Non-Solicitation:* 24 months post-termination, covering both employees and customers. No concession here.
**Non-CIC Severance (Confirming Prior Position)**
No change from our existing position: termination without cause or resignation for good reason triggers 2x (base + target bonus) = 2 × $4,812,500 = $9,625,000; pro-rata bonus for the year of termination; 18 months COBRA; and 12 months accelerated vesting of unvested equity.
**All Other Compensation Terms (Confirmed, Unchanged)**
For completeness, and so the revised term sheet can be prepared from this email as a single source:
- Base salary: $1,750,000 - Target annual incentive: 175% of base ($3,062,500) - Maximum annual incentive: 300% of base ($5,250,000) - Annual LTI target: $9,000,000 (60% PSUs / 40% RSUs) - Sign-on cash bonus: $5,000,000 (make-whole; subject to 24-month clawback on voluntary resignation) - Sign-on equity: $18,400,000 total ($12,000,000 RSUs vesting ratably over 3 years + $6,400,000 PSUs cliff vesting at 3 years) - 401(k) with 6% employer match; $250,000/year SERP; perquisites as previously agreed - 5-year initial term; proposed start date October 1, 2024 (or November 1 if needed for the Marlowe Asset Management transition)
**Process and Deadline**
As noted above, I need the final term sheet and cover letter by **Tuesday, September 3**. In the transmittal to Hargrove & Liddell, please set a **response deadline of September 9, 2024** — one week. The Board does not want this to drag any further. We are now three months into this negotiation, and the uncertainty is beginning to affect operational planning.
The cover letter should explain Northgate's rationale clearly and substantively. I'd like it to reference ISS policy on CIC multipliers and gross-ups, the constraints of UK Corporate Governance Code Provision 40, and the broader shareholder governance considerations that come with being a dual-listed public company. The goal is to frame this proposal as genuinely generous within those constraints — which I believe it is — while making clear that we've reached the limit of what the Board can responsibly approve.
**If Harding Rejects**
I should be transparent with you about this: the Board discussed what happens if Harding says no. Geoffrey's preliminary view — and I believe this reflects the consensus — is that the Board should terminate negotiations rather than make further concessions. Lucinda, as Nomination Committee Chair, has already spoken with Antonia Blythe at Kensington Partners about the possibility of resuming the search with the other shortlisted candidates.
If the proposal is rejected, I will convene a formal Board call to pass a resolution to terminate negotiations. In the meantime, I'd ask you to begin thinking through the mechanics of a formal termination — notification letter to Hargrove & Liddell, reminder of confidentiality obligations under the NDA, document return protocols, and anything else we should have ready to go. I'd rather have that in the drawer and not need it.
**Coordination Items**
A few additional items:
First, Priya Narayanan (cc'd) should be kept in the loop on timing. The Board may also want to explore interim CEO arrangements — possibly extending Sir Alistair Kemble's tenure past December 31, 2024, or appointing Jonathan Briggs on an interim basis. Priya, I'll set up time with you next week to discuss contingency planning.
Second, Renata — do you have any updated concerns about the enforceability of the 18-month non-compete as drafted under New York law? I know there's been pending legislation that could affect the analysis. If there's a real risk, should we preemptively address it in the cover letter, or does that weaken our position?
Third, please note that Simon Aldridge at Moorfield Bates should be informed that the UK service agreement work should be paused pending the outcome of this final proposal. I'll send that instruction directly, but if you're in contact with his team on the dual-employment structure, please let them know informally as well.
**Closing Thought**
I recognize this has been a significant effort over the past three months, and not always a rewarding one. The Board is genuinely appreciative of the counsel Calderwood & Harkness has provided throughout — your team's work on the enforceability analysis and the proxy risk framing in particular shaped the discussion today in important ways. Whatever happens next week, we'll be well-positioned.
I'm available over the holiday weekend if you need to discuss anything before finalizing the proposal. Cell is the best way to reach me.
Regards, Elaine
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Elaine Whitford Senior Vice President & Group General Counsel Northgate Telecommunications PLC 600 Lexington Avenue, 38th Floor New York, NY 10022
45 Canary Wharf Tower One Canada Square London E14 5AB
Tel: +1 (212) 555-0194
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