Elaine,
Thank you again for moving quickly on the engagement letter, which we executed on June 4 (matter 1022-00004). Over the past few days, our team — Bernard Crawford, James Underwood, Devon Archer, and I — has been working through the materials your team provided, including the detailed breakdown of Marcus Harding's current compensation at Marlowe Asset Management Digital Holdings and the terms of his existing employment agreement. We have now completed our preliminary analysis and are in a position to outline the key negotiation issues as we see them and to recommend a process for establishing the Board's approved parameters before we circulate an initial term sheet to Harding's counsel, Victoria Hargrove at Hargrove & Liddell LLP.
What follows is our initial assessment, organized by issue area. I want to emphasize that several of these topics are interrelated — the make-whole package, the change in control severance structure, and the restrictive covenant terms will all influence one another in the negotiation, and Hargrove is experienced enough to trade across them. Getting our internal red lines right before we open the conversation will be critical.
---
**1. Make-Whole Equity and Sign-On Package**
Harding's current total target compensation at Marlowe Asset Management Digital Holdings is approximately $11,125,000, broken down as follows: base salary of $1,450,000, target annual bonus of $2,175,000 (150% of base), and long-term incentive target of $7,500,000.
The critical issue, however, is not his ongoing compensation but the equity he will forfeit upon departure. Our preliminary estimate of Harding's unvested equity forfeiture at Marlowe Asset Management is approximately $23,400,000. This is a significant number, and Hargrove will undoubtedly insist on a robust make-whole as a threshold condition of any deal. From her perspective, Harding is walking away from vested expectations, and Northgate needs to bridge that gap to bring him across.
Our preliminary thinking on the make-whole structure is a combination of a sign-on cash bonus and sign-on equity grants — specifically, restricted stock units with ratable vesting over three to four years and performance share units with cliff vesting tied to performance hurdles aligned with Northgate's existing LTI framework. A full dollar-for-dollar make-whole delivered entirely through equity would require a substantial grant and concentrate dilution; we recommend blending cash and equity to manage both the optics and the share pool impact.
We will need direction from the Remuneration Committee on the total make-whole budget. Our suggestion is that the sign-on equity be designed to approximate — but not necessarily replicate in full — the $23,400,000 forfeiture, with the shortfall addressed through a cash sign-on bonus subject to a clawback period (we would propose 18 to 24 months, with forfeiture upon voluntary resignation without good reason). This gives Harding meaningful protection while ensuring Northgate retains some leverage during the critical early tenure period.
On peer benchmarking, I would recommend that Dr. Rachel Whitmore at Whitmore Hobson LLP be engaged early to provide market data on sign-on packages of this magnitude for incoming public-company CEOs. Having independent benchmarking in hand will strengthen Northgate's position in the negotiation and, equally importantly, will support the narrative to shareholders when the package is disclosed.
A note on the equity pool: the NTP 2022 Omnibus Incentive Plan has approximately 14.2 million shares remaining in the authorized pool. Harding's sign-on equity, combined with his first-year annual LTI grant, could consume roughly 1.7 million shares, or approximately 0.25% of the roughly 699 million shares outstanding. This is within a reasonable range for a CEO hire of this profile, but we should flag it for Clive Warburton at Galloway & Partners for early analysis of the ASC 718 / IFRS 2 accounting treatment and the resulting compensation expense impact. For reference, NTP's share price as of our engagement date was £12.45 / $15.87 per ADR (1 ADR = 1 ordinary share).
---
**2. Change in Control Severance — Multiplier and Tax Treatment**
This will be the most significant and contentious area of the negotiation. I want to walk through the various dimensions in some detail because the financial exposure and governance implications are substantial.
*CIC Multiplier*
Harding's existing Marlowe Asset Management agreement provides a 3x (base plus bonus) change in control severance with full equity vesting acceleration. His counsel will almost certainly anchor at or above this level, framing it as a baseline protection that Harding already has and should not be asked to give up.
Devon Archer's preliminary research on change in control severance practices tells a more nuanced story. While 3x CIC multiples certainly exist — particularly among large-cap US companies — the trend, especially among dual-listed UK/US companies, is moving toward 2x to 2.5x. ISS and Tarrant Partners LLC have been increasingly flagging 3x multiples as excessive, and we have seen several recent proxy contests and say-on-pay challenges where CIC severance was a focal point.
The UK governance dimension is equally important. The UK Corporate Governance Code 2024, Provision 40, limits notice periods to 12 months. While this provision technically addresses notice and severance on termination rather than change in control specifically, CIC multiples of 2.5x or 3x significantly exceed UK market norms, where 1x to 2x is typical for FTSE-listed companies. Northgate received 87.4% say-on-pay support at its April 18, 2024 AGM — solid, but not overwhelming, and an aggressive CEO package could erode that support at the 2025 AGM, where the new CEO's package would be subject to a binding remuneration policy vote under the UK framework. A failed or narrowly passed remuneration vote would be a damaging start for Harding's tenure.
I would recommend engaging Sandra Kolb at Veltrano Proxy Advisors for an informal, off-the-record assessment of the likely ISS and Tarrant Partners LLC reaction to various CIC multiplier levels (2x, 2.5x, 3x) in the context of Northgate's dual listing and shareholder base composition. This intelligence will be invaluable in calibrating the offer and in advising the Remuneration Committee on risk tolerance.
*Section 280G Tax Treatment*
The tax treatment of change in control payments is a critical sub-issue. Harding's "base amount" under Section 280G of the Internal Revenue Code — calculated as the average of his W-2 compensation at Marlowe Asset Management over the 2019–2023 period — is approximately $7,840,000. The safe harbor limit under Section 280G is therefore $23,519,999 (three times $7,840,000, minus one dollar). Under a 3x CIC proposal with full equity acceleration, total parachute payments could substantially exceed the safe harbor, triggering the 20% excise tax under Section 4999.
There are two standard approaches to this exposure:
(a) **Full 280G gross-up**, under which the company absorbs the excise tax. Our preliminary estimate of the gross-up cost, depending on the final parachute calculation, is in the range of $4.2 million to $6.8 million. This is a meaningful additional cost that would need to be disclosed, and it would almost certainly draw negative attention from proxy advisory firms. Gross-ups are increasingly disfavored — the trend over the past decade has been decisively away from them, and very few new CEO agreements at large public companies include them.
(b) **Best-net cutback**, under which payments are reduced to the safe harbor amount if the executive is better off on an after-tax basis with the reduced payment than with the full payment plus excise tax. This is the prevailing market approach and is far more defensible from a governance perspective.
*Our Recommendation*
We recommend that Northgate's opening position be a 2.5x CIC multiplier (base plus target bonus), with a best-net cutback (no gross-up) and a double-trigger structure — meaning both a change in control event and a qualifying termination (involuntary termination without cause or resignation for good reason within 24 months following the change in control) are required before any enhanced severance is payable.
We should anticipate that Harding and Hargrove will push hard for 3x with a full gross-up. To put the financial gap in perspective: the difference in CIC cash severance alone between 2.5x and 3x, based on anticipated base salary and target bonus at Northgate, is likely in the range of $2 million to $2.5 million. But the gross-up exposure adds another $4 million to $7 million of potential cost. The total difference between Northgate's recommended opening position and Harding's likely ask could therefore be $6 million to $9.5 million — a meaningful number that warrants careful Board deliberation.
Before the term sheet goes out, the Board and Remuneration Committee need to settle two fundamental questions: (i) Will Northgate go above 2.5x, and if so, what is the ceiling? (ii) Will Northgate consider any form of gross-up, even a modified or capped version? These are red-line positions that should not be negotiated in real time.
*CIC Definition*
One additional point: we should anticipate that Harding may seek a "board turnover trigger" in the change in control definition — that is, a provision treating a change of a majority of the Board within any 12-month period as a change in control event. We recommend against including this trigger. It is inconsistent with UK governance norms, it gives the executive significant leverage in the context of normal board refreshment, and it can create perverse incentives. The standard triggers — acquisition of more than 50% of voting securities, a merger or consolidation where NTP shareholders hold less than 50% of the surviving entity, and sale of substantially all assets — should be sufficient.
---
**3. Restrictive Covenants — Non-Compete Duration and Scope**
This is the second critical area, and one where the gap between Harding's existing protections and Northgate's legitimate interests is significant.
Harding's current Marlowe Asset Management non-compete is 12 months, limited to the United States. Hargrove will undoubtedly argue that any restrictive covenant at Northgate should not exceed these terms — and may, in fact, push to narrow them further, particularly given Harding's position that he is taking on greater responsibilities at a larger, more complex organization and should not be subject to more onerous restrictions.
From Northgate's perspective, however, the calculus is different. Harding will be the global CEO of a company with operations spanning the UK, the US, and multiple international markets. He will have access to highly sensitive commercial, strategic, and technological information across all of those geographies. A 12-month, US-only non-compete is plainly insufficient to protect Northgate's interests.
We recommend opening with a 24-month worldwide non-compete, with restricted activity defined as employment by, or the provision of services to, any company deriving more than 15% of its revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS products serving telecom operators. This definition is designed to be broad enough to capture the core competitive landscape while avoiding an overbreadth challenge.
That said, I want to flag the enforceability question candidly. The proposed employment agreement will be governed by New York law. Under current New York precedent, non-competes must satisfy a reasonableness test that weighs duration, geographic scope, and the scope of restricted activity against the employer's legitimate protectable interests and the hardship to the employee. A 24-month worldwide non-compete, even for a global CEO, may face enforceability challenges — courts have sustained such provisions, but they have also struck them down when the scope is deemed disproportionate. Additionally, there is pending New York legislation that would ban non-compete agreements entirely. The bill's ultimate fate is uncertain, but it adds a layer of risk to any non-compete strategy. James Underwood is finalizing a detailed research memo on New York non-compete enforceability, which we will circulate to you shortly.
To enhance the practical enforceability and immediate effectiveness of the restrictive covenant package, we recommend proposing a 6-month paid garden leave period at base salary, running concurrently with the first 6 months of the non-compete period. Garden leave provides Northgate with immediate, highly enforceable protection during the transition — Harding would remain technically employed, with all fiduciary and contractual obligations intact — while reducing the effective post-separation period of restriction to 18 months.
As a fallback position, if 24 months proves untenable in the negotiation, we recommend that the team have authority to negotiate down to 18 months, with geographic scope limited to North America and Western Europe, and a somewhat narrower activity definition, paired with the 6-month concurrent garden leave period. We would not recommend going below 18 months for a CEO of this profile.
On non-solicitation, we recommend 24 months for both employee non-solicitation and customer non-solicitation. We anticipate less resistance on the employee side, though Harding may push back on customer non-solicitation, particularly if it extends to customers with whom he did not have a direct relationship. This is a point where we have room to make reasonable concessions without sacrificing core protections.
The Remuneration Committee and Board should provide guidance on how aggressively Northgate wants to hold on restrictive covenant duration and scope. This is an area where Harding will feel strongly — restrictions on his post-employment freedom are personal in a way that compensation numbers are not — and it may be a point where strategic flexibility yields disproportionate goodwill.
---
**4. Other Key Items**
I want to briefly flag several additional issues that will need to be addressed but that we expect to be less contentious:
- **Compensation fundamentals:** We are working with anticipated figures of approximately $1,750,000 in base salary, a target annual bonus of 175% of base, and an annual LTI grant of approximately $9,000,000. These represent a meaningful step-up from Harding's current Marlowe Asset Management package across all elements and are likely to be agreed relatively quickly once the headline numbers are confirmed by Whitmore Hobson's peer benchmarking analysis.
- **Non-CIC severance:** We recommend opening at 2x (base plus target bonus) with a pro-rata bonus for the year of termination, 18 months of COBRA continuation, and limited equity acceleration (pro-rata vesting of time-based awards, forfeiture of unvested PSUs). We anticipate Hargrove will push for 2.5x.
- **Dual employment structure:** Given Harding's anticipated 80/20 US/UK time split, the cross-border contract architecture will require careful coordination. Simon Aldridge at Moorfield Bates is handling the UK service agreement and FCA SM&CR compliance matters. Devon Archer is preparing a memo on the cross-border structuring, including the interplay between the US employment agreement and the UK service agreement, tax equalization considerations, and regulatory obligations.
- **Harding's existing Marlowe Asset Management non-compete:** Harding is currently subject to a 12-month, US-scope non-compete at Marlowe Asset Management. We need to confirm the timing carefully — if Harding departs Marlowe Asset Management and the non-compete begins to run, Northgate should ensure that Harding's proposed start date of October 1, 2024 accommodates the restriction period, or alternatively, that Harding's activities during any overlap period are structured to avoid a breach. This needs further analysis and likely a review of the Marlowe Asset Management agreement's specific terms regarding what constitutes competitive activity.
- **D&O indemnification:** We will need to address indemnification provisions and Ashdown Surety D&O coverage for Harding in his capacity as CEO and director. This is generally not controversial, but the specific provisions — including advancement of expenses, tail coverage, and the interplay between Northgate's indemnification obligations and the D&O policy — should be tailored rather than left to boilerplate.
- **Section 409A compliance:** The employment agreement must be carefully structured to comply with Section 409A of the Internal Revenue Code. All deferred compensation elements, separation pay provisions, and reimbursement arrangements will need review to ensure they fall within an applicable exemption or satisfy the Section 409A requirements. We will build this into the drafting process from the outset.
---
**5. Process Recommendation and Next Steps**
Before Calderwood & Harkness circulates the initial term sheet to Hargrove & Liddell, we recommend that the Remuneration Committee, under Geoffrey Stanton's chairmanship, formally approve the following parameters:
1. The maximum change in control multiplier the Board will accept (our recommendation: open at 2.5x, with authority to go to [Board to confirm ceiling]). 2. The Board's position on 280G tax gross-up versus best-net cutback (our recommendation: best-net cutback, no gross-up). 3. The make-whole equity budget, including the total sign-on package ceiling (cash plus equity combined). 4. Restrictive covenant parameters — specifically, the maximum and minimum acceptable non-compete duration, geographic scope, and activity definition.
I would suggest a brief call with you and Geoffrey Stanton early next week to walk through these red lines and secure the Committee's direction. If the Committee can provide guidance by Sunday or Monday — June 9 or 10 — we can have the initial term sheet ready for circulation to Hargrove & Liddell by the end of day Monday, June 10.
On the supporting work streams: the internal memos on New York non-compete enforceability, the Section 280G preliminary framework, the CIC market survey, and the cross-border structuring architecture are all being finalized by James Underwood and Devon Archer and will be circulated to you shortly. I expect you will have the full package by early next week.
I would also recommend looping in Sandra Kolb at Veltrano Proxy Advisors and Dr. Whitmore at Whitmore Hobson as early in the process as possible. Their input on shareholder sensitivity and peer benchmarking, respectively, will be critical to calibrating the initial offer and to building a defensible record for the remuneration policy vote.
---
Elaine, I want to close by saying that I am confident there is a deal to be made here at terms that are reasonable for both sides. Harding is a strong candidate, and the compensation and governance framework at Northgate can support a competitive package. That said, the gap between Harding's current Marlowe Asset Management change in control protections — 3x with full acceleration — and what Northgate's governance framework and shareholder base can comfortably support will require careful management. Getting our positions right at the outset, and presenting a term sheet that is both competitive and defensible, will set the tone for the entire negotiation.
I am available to discuss at your convenience over the weekend or on Monday. Please don't hesitate to reach out by phone or email.
Best regards,
**Renata Vasquez** Partner Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171 T: +1 (212) 506-7200 E: rvasquez@calderwoodharkness.com
---
*CONFIDENTIALITY NOTICE: This email and any attachments are intended solely for the use of the individual or entity to whom it is addressed and may contain information that is privileged, confidential, and exempt from disclosure under applicable law, including attorney-client privileged communication and attorney work product. If you are not the intended recipient, or the employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution, copying, or other use of this communication or its contents is strictly prohibited. If you have received this communication in error, please notify the sender immediately by reply email and permanently delete the original message and all copies. Thank you.*