PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT PRIVILEGED
INTERNAL MEMORANDUM
June 9, 2024
FROM: Renata Vasquez, Partner, Calderwood & Harkness LLP
TO: Bernard Crawford, Partner, Calderwood & Harkness LLP
RE: Negotiation Strategy and Positioning — CEO Employment Agreement for Marcus Elliot Harding, Northgate Telecommunications PLC (Matter No. 1022-00004)
COPIES: None. Strictly limited distribution. This memorandum is not to be shared outside the engagement team without my prior written approval.
I. Purpose and Background
A. Purpose
The purpose of this memorandum is to set forth our recommended negotiation strategy, opening positions, anticipated counterparty demands, proposed fallback positions, and identified red lines for the negotiation of an executive employment agreement between Northgate Telecommunications PLC ("NTP" or the "Company") and Marcus Elliot Harding ("Harding") for the position of Chief Executive Officer of NTP. This memorandum is intended solely for internal use by the engagement team at Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. It reflects our candid assessment of the negotiation landscape, the relative strengths and vulnerabilities of each side's position, and our recommended tactical approach for achieving the optimal outcome for our client.
B. Engagement Background
This engagement was opened on June 4, 2024, and the engagement letter was executed on the same date. A conflicts check was cleared on June 3, 2024. Calderwood & Harkness LLP serves as lead outside counsel to NTP on the negotiation and drafting of the primary U.S. employment agreement for the incoming CEO. Moorfield Bates LLP (London), led by Simon Aldridge and Hannah Carmichael, is advising NTP on the parallel UK service agreement. Our focus in this memorandum is exclusively on the primary U.S. employment agreement.
C. Client Overview
Our client is Northgate Telecommunications PLC, a public limited company organized under the laws of England and Wales, with registered number 07381264. NTP is headquartered at 45 Canary Wharf Tower, One Canada Square, London E14 5AB, United Kingdom. Its U.S. operations headquarters is located at 600 Lexington Avenue, 38th Floor, New York, NY 10022. NTP is listed on the London Stock Exchange under the ticker symbol LON: NTP, and its American Depositary Receipts are listed on the New York Stock Exchange under the symbol NYSE: NTPC.
NTP's current market capitalization is approximately £8.7 billion, equivalent to approximately $11.1 billion at current exchange rates. For the fiscal year ended December 31, 2023, NTP reported revenue of £4.26 billion (approximately $5.43 billion) and EBITDA of £1.14 billion (approximately $1.45 billion). The company employs approximately 22,500 people globally, with operations across the United Kingdom, the United States, Western Europe, and select markets in the Asia-Pacific region. NTP operates as a diversified telecommunications and enterprise technology company, with significant business lines in fixed and mobile telecommunications infrastructure, enterprise SaaS platforms serving telecom operators, and managed network services.
D. Client Contacts
Our principal client contacts on this matter are:
• Elaine Whitford, Senior Vice President and Group General Counsel
• Priya Narayanan, Chief People Officer
• Geoffrey Stanton, Lead Independent Director and Chair of the Remuneration Committee
All three have been briefed on the engagement scope and are available for consultation as negotiations progress. Board-level decisions on red-line items will be routed through Stanton in his capacity as Remuneration Committee Chair, with final authority resting with the full Board.
E. Counterparty Overview
The counterparty to this negotiation is Marcus Elliot Harding, age 52, who currently serves as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"), a Delaware corporation headquartered at 200 Technology Way, Suite 4000, San Jose, California 95110. Marlowe Asset Management is listed on the New York Stock Exchange under the ticker symbol NYSE: VDHI, with a current market capitalization of approximately $34 billion. Harding has held the President and COO role at Marlowe Asset Management since 2017. Prior to Marlowe Asset Management, he served as Executive Vice President of Global Operations at Meridian Wireless Corp. from 2010 to 2017. In total, Harding has a 28-year career in the telecommunications and technology sectors, and he is widely regarded as one of the most accomplished operational executives in the industry.
Harding is represented in this negotiation by Victoria Hargrove, Partner, at Hargrove & Liddell LLP, located at 51 Madison Avenue, 30th Floor, New York, NY 10010. Hargrove is a named partner of her firm and a well-known specialist in C-suite employment negotiations. She has represented Harding since at least 2017, when she negotiated his COO package at Marlowe Asset Management. Nathan Chu, an associate at Hargrove & Liddell, is also on the team. Hargrove's reputation is that of an experienced, thorough, and aggressive negotiator. We should expect sophisticated, well-researched counterproposals anchored firmly to Harding's existing Pemberton Investors package and prevailing market data.
F. Timeline Context
The negotiation of this agreement arises against the following timeline:
• March 1, 2024: NTP retained Kensington Partners Ltd., an executive search firm led by Antonia Blythe, to conduct a CEO search.
• May 15, 2024: Sir Alistair Kemble, NTP's current Chief Executive Officer, publicly announced his retirement, effective December 31, 2024.
• May 22, 2024: Kensington Partners presented a final shortlist of candidates to NTP's Nomination Committee, chaired by Lucinda Farrow.
• May 28, 2024: The Nomination Committee recommended Harding as the preferred candidate, and the Board unanimously concurred.
• May 30, 2024: Dame Philippa Thornton-Hale, Board Chair, extended an informal verbal offer to Harding. Harding expressed strong interest, subject to the negotiation and execution of definitive employment terms.
• June 3–4, 2024: Calderwood & Harkness LLP cleared conflicts and executed the engagement letter.
• June 6–9, 2024: Research memoranda prepared by James Underwood and Devon Archer covering relevant legal and market issues (described below).
• June 10, 2024: Target date for circulation of the initial term sheet to Hargrove & Liddell LLP.
The proposed start date for Harding is October 1, 2024, although it is acknowledged that a start date of November 1, 2024 may be necessary to accommodate the transition of Harding's responsibilities at Marlowe Asset Management and to address any notice period or cooperation obligations under his existing Marlowe Asset Management agreement.
G. Research Foundation
This memorandum is informed by the comprehensive research memoranda prepared by James Underwood (senior associate) and Devon Archer (associate) between June 6 and June 9, 2024. Those memoranda address the following topics:
• New York executive employment law, including relevant case law on enforceability of employment agreement provisions;
• Non-compete enforceability under New York law, including the current reasonableness framework and the status of pending New York legislation proposing a ban on non-compete agreements;
• Internal Revenue Code Section 280G analysis and change-in-control parachute payment considerations;
• Change-in-control severance market practices among comparable publicly traded companies;
• Restrictive covenant drafting best practices for C-suite executives;
• UK Corporate Governance Code 2024 implications for executive remuneration;
• Cross-border dual-contract structuring considerations for executives serving in both U.S. and UK capacities; and
• Detailed analysis of Harding's existing Marlowe Asset Management Digital Holdings employment agreement (based on publicly available proxy statement disclosures and information obtained from Whitmore Hobson LLP's benchmarking database).
The analysis and recommendations in this memorandum draw heavily on the foregoing research.
II. Harding's Current Compensation at Marlowe Asset Management — Baseline for Negotiation
Understanding Harding's existing compensation at Marlowe Asset Management is essential to framing our negotiation strategy. Harding and his counsel will anchor their demands to his current package, and any offer from NTP must represent a meaningful improvement to induce Harding to leave a well-compensated, high-profile role at a significantly larger company. The following summary is based on Marlowe Asset Management's most recent proxy statement (filed April 12, 2024), supplemented by information provided by Whitmore Hobson LLP's compensation benchmarking analysis.
A. Annual Compensation
Harding's actual bonus payouts over the past three fiscal years have ranged from 130% to 185% of his target, reflecting Marlowe Asset Management's strong operational performance during the period of its enterprise SaaS pivot. His LTI grants have been delivered in a mix of approximately 50% performance-based stock units (PSUs, vesting based on relative total shareholder return and revenue growth metrics) and 50% time-based restricted stock units (RSUs, vesting ratably over four years).
B. Unvested Equity
Harding's estimated unvested equity at Marlowe Asset Management, based on proxy disclosures and current market pricing, is approximately $23,400,000. This figure represents the aggregate value of unvested RSUs and PSUs (the latter valued at target) that Harding would forfeit upon his departure from Marlowe Asset Management. This forfeiture amount will be the primary driver of the make-whole / sign-on component of the NTP package and represents a significant economic barrier to Harding's departure that must be addressed in full.
C. Change-in-Control Provisions
Harding's existing Marlowe Asset Management employment agreement provides for change-in-control severance of 3x (base salary plus target annual bonus), with full acceleration of all unvested equity awards upon a qualifying termination in connection with a change in control. These provisions represent the most generous end of the market range for COO-level executives and will serve as Harding's baseline expectation — indeed, as his floor — in negotiating CIC protections with NTP. We should anticipate that Harding and Hargrove will argue that a CEO role at a dual-listed, $11 billion market cap company warrants CIC protections at least as favorable as those Harding enjoys as a COO at Marlowe Asset Management.
D. Existing Restrictive Covenants
Harding's current Marlowe Asset Management non-compete is 12 months post-termination, with a geographic scope limited to the United States. This is a relatively modest covenant for an executive at Harding's level, and it will serve as Hargrove's anchor point in resisting any expansion of scope or duration in the NTP agreement.
E. Career Background and Leverage Assessment
Harding's 28-year career in telecommunications and technology includes the following key milestones:
• Various operational leadership roles early in his career (details available in Kensington Partners' candidate briefing);
• Executive Vice President of Global Operations at Meridian Wireless Corp., from 2010 to 2017, where he oversaw the integration of Meridian's European and Asian operations following the Meridian-Nexus Communications merger;
• President and Chief Operating Officer of Marlowe Asset Management Digital Holdings since 2017, where he is credited with leading Marlowe Asset Management's strategic pivot from legacy hardware and licensing revenue to enterprise SaaS, growing Marlowe Asset Management's SaaS annual recurring revenue (ARR) from approximately $120 million to approximately $1.8 billion over a seven-year period.
This track record — particularly the Marlowe Asset Management SaaS transformation, which is widely viewed in the industry as a landmark operational achievement — gives Harding significant personal credibility and negotiating leverage. He is not a candidate who needs this role; he has a strong and well-compensated position at Marlowe Asset Management and can afford to be selective. This dynamic will inform every aspect of the negotiation.
Assessment: Harding is a high-value, high-leverage candidate. Combined with Hargrove's experience and aggressiveness as a negotiator, we should expect sophisticated, well-researched counterproposals that are firmly anchored to Harding's existing Marlowe Asset Management package and that seek a meaningful premium to reflect the CEO role, the cross-border complexity of NTP, and the competitive dynamics of the executive market.
III. Employment Structure Overview
A. Dual-Contract Architecture
Given NTP's status as a UK-incorporated, dual-listed company with significant U.S. operations, we propose a dual-contract architecture for Harding's employment:
1. Primary Employment Agreement: This agreement will be entered into between Harding and Northgate Telecommunications US, Inc. (the wholly-owned Delaware subsidiary of NTP through which NTP conducts its U.S. operations), and will be governed by New York law. This agreement will contain the core economic terms — base salary, bonus, LTI grants, severance, change-in-control protections, restrictive covenants, and related provisions. Northgate Telecommunications US, Inc. will be the employing entity for U.S. tax and employment law purposes.
2. Secondary UK Service Agreement: This agreement will be entered into between Harding and Northgate Telecommunications PLC directly, and will be governed by the laws of England and Wales. This agreement will govern Harding's duties as a director of NTP PLC, his Board-related obligations, and any UK-specific regulatory compliance requirements. Moorfield Bates LLP (Simon Aldridge and Hannah Carmichael) is advising NTP on the preparation and negotiation of this agreement.
B. Time and Duty Split
The proposed allocation of Harding's time and duties is approximately 80% U.S. (based at the New York headquarters at 600 Lexington Avenue) and 20% UK (based at NTP's London headquarters at 45 Canary Wharf Tower). This split reflects NTP's operational reality — the majority of its revenue-generating activities and senior management team are based in the United States — while ensuring adequate Board-level presence in London to satisfy UK governance expectations and regulatory requirements.
C. Tax Considerations
Harding will be a U.S. tax resident for all relevant purposes. Key tax considerations include:
• UK Social Security Exemption: Harding should qualify for an exemption from UK National Insurance contributions under the U.S.-UK Totalization Agreement (Social Security), provided that a Certificate of Coverage is obtained from the U.S. Social Security Administration. Confirmation from NTP's tax advisors is pending.
• Tax Equalization: NTP will provide tax equalization for any UK-source income arising from Harding's duties performed in the United Kingdom, ensuring that Harding does not bear an incremental tax burden as a result of the cross-border nature of the role.
• Section 409A: All deferred compensation elements of the agreement must comply with Section 409A of the Internal Revenue Code. This is a technical drafting exercise that we do not anticipate will generate negotiation friction, but it must be addressed carefully in the documentation.
D. UK Regulatory Compliance
NTP holds regulated telecommunications licenses in the United Kingdom, and Harding's appointment as CEO will require compliance with the FCA Senior Managers & Certification Regime (SM&CR) to the extent applicable. The details of SM&CR compliance will be addressed in the UK service agreement being prepared by Moorfield Bates.
E. Scope of This Memorandum
Our focus in this memorandum is on the primary U.S. employment agreement governed by New York law. This is where the core economic terms, severance provisions, change-in-control protections, and restrictive covenants will be negotiated, and where the most significant points of contention are expected to arise. The UK service agreement, while important, is expected to be largely a compliance and governance document with limited economic content beyond what is necessary for UK corporate governance purposes.
IV. Anticipated Counterparty Demands
Based on our analysis of Harding's existing compensation, Hargrove's negotiating history and style, and prevailing market practices for CEO-level employment agreements at comparable companies, we anticipate the following demands from the counterparty. Understanding these anticipated positions is essential to preparing effective counterpositions and identifying areas where concessions may be made without compromising NTP's core interests.
A. Compensation
Harding's counsel will benchmark all compensation demands against Harding's current total target compensation at Marlowe Asset Management of $11,125,000. We anticipate that Hargrove will seek a meaningful premium — likely in the range of 20% to 30% — to reflect the following factors: (a) the step-up from a COO to a CEO role; (b) the increased complexity and visibility of leading a dual-listed, cross-border public company; (c) the relocation and lifestyle disruption associated with the transition from Marlowe Asset Management's San Jose headquarters to NTP's New York and London operations; and (d) the competitive market for CEO talent in the telecommunications and technology sectors.
Specifically, we anticipate the following demands:
• Base Salary: Likely in the range of $1,750,000 to $2,000,000, representing a 20.7% to 37.9% premium over Harding's current $1,450,000 base at Marlowe Asset Management.
• Target Annual Bonus: At least 150% of base salary (matching Marlowe Asset Management), and possibly 175% to 200% of base salary, to reflect the CEO role and dual-listed company complexity.
• Annual LTI Target: In the range of $8,000,000 to $10,000,000 per year, reflecting a premium over Marlowe Asset Management's $7,500,000 annual LTI target and the increased scope of the CEO role.
These compensation demands, while significant, are within the range of market practice for CEO roles at companies of NTP's size and complexity, and we anticipate that the basic compensation framework will be one of the less contentious areas of the negotiation.
B. Make-Whole / Sign-On
Harding forfeits an estimated $23,400,000 in unvested Marlowe Asset Management equity upon his departure. This forfeiture represents the single largest economic barrier to Harding's acceptance of the NTP role, and we anticipate that Hargrove will demand a full dollar-for-dollar make-whole — or more — to compensate Harding for this loss.
We anticipate the following specific demands:
• Total Make-Whole Value: A total make-whole package with an aggregate value of at least $23,400,000, and potentially more, to account for the time value of money and the risk that replacement equity may not appreciate at the same rate as Marlowe Asset Management equity.
• Delivery Mechanism: A combination of sign-on cash and sign-on equity grants. Hargrove will likely push for a higher proportion of cash versus equity, as cash provides immediate and certain value, while equity is subject to vesting schedules, performance conditions, and market risk.
• Favorable Vesting Schedules: Harding will insist on accelerated or front-loaded vesting schedules for any replacement equity grants, designed to replicate the timing of the Marlowe Asset Management equity tranches that would have vested had he remained at Marlowe Asset Management. This is a reasonable demand from the executive's perspective but creates risk for NTP if Harding departs shortly after the equity vests.
• Clawback Minimization: Hargrove will contest any clawback provisions on the sign-on cash component and will seek to minimize or entirely eliminate clawback triggers. She will argue that a clawback on make-whole compensation is fundamentally inconsistent with the purpose of the make-whole — which is to compensate Harding for equity he has already earned but not yet received — and that subjecting make-whole compensation to clawback converts it from a true make-whole into a retention tool with different economic characteristics.
C. Change-in-Control Severance
This will be the most heavily negotiated area of the agreement, and the area where the interests of NTP and Harding are most divergent. Harding currently enjoys 3x (base salary plus target annual bonus) CIC severance at Marlowe Asset Management, with full acceleration of all unvested equity, and he will view these terms as his absolute floor for the NTP negotiation. Hargrove will argue — with considerable force — that a CEO of a $11.1 billion market cap, dual-listed, global telecommunications company warrants CIC protections that are at least as favorable as those of a COO at a smaller, single-listed domestic company.
We anticipate the following specific demands:
• CIC Multiplier: 3x applied to base salary plus target annual bonus. At our proposed base of $1,750,000 and target bonus of $3,062,500, this would yield CIC cash severance of 3 × $4,812,500 = $14,437,500.
• Equity Acceleration: Full acceleration of all unvested equity, including performance-based stock units (PSUs) at target performance level (not at pro-rata or actual performance). Harding will resist any structure that pro-rates PSU vesting based on actual performance through the termination date.
• Section 280G Tax Gross-Up: Full excise tax gross-up (sometimes referred to as a "modified gross-up" or simply a "gross-up"), rather than a "best-net" cutback approach. Under a full gross-up, NTP would reimburse Harding for the 20% excise tax imposed under Section 4999 of the Internal Revenue Code on "excess parachute payments" under Section 280G, plus the income and employment taxes on the gross-up payment itself. This is among the most expensive and controversial provisions that Hargrove is likely to demand, and it runs counter to the prevailing market trend, which has shifted strongly toward best-net cutback approaches and away from gross-ups.
• Broad CIC Definition: Hargrove will seek a broad definition of "change in control" that includes not only the standard triggers (acquisition of majority voting securities, merger/consolidation, asset sale) but also a Board turnover trigger — specifically, a change in the composition of a majority of the Board of Directors within any 12-month period, whether or not such change results from a hostile takeover, contested election, or other transaction. This trigger effectively gives the executive the right to claim CIC protections based on normal Board rotation, refreshment, or governance changes.
• Extended Benefit Continuation: 36 months of continued health, dental, vision, and other welfare benefits following a CIC-related qualifying termination, at the same cost-sharing levels as during active employment.
These demands, taken together, represent the most aggressive end of the market range for CIC protections and will create the most significant friction with the NTP Board and, in particular, the Remuneration Committee. Geoffrey Stanton, as Remuneration Committee Chair, has expressed strong reservations about the optics and governance implications of a 3x multiplier with a full gross-up, and the Board has informally communicated that these provisions represent the highest-priority area for cost containment and governance compliance.
D. Restrictive Covenants
Harding's current Marlowe Asset Management non-compete is only 12 months post-termination, limited geographically to the United States. Hargrove will use this existing covenant as the starting point for her resistance to any expansion of restrictive covenants in the NTP agreement. We anticipate the following demands:
• Non-Compete Duration: Limited to 12 months post-termination, matching Harding's current Pemberton Investors.
• Geographic Scope: Limited to the United States, or at most, North America. Hargrove will resist any worldwide or Europe-inclusive scope as overbroad and unenforceable.
• Activity Restriction: Narrowed to a scheduled list of specifically named direct competitors (e.g., BT Group, Meridian Holdings, Northgate Enterprises, Charter, Camberwell Enterprises, and a defined list of enterprise SaaS competitors), rather than a broad functional or industry-based definition. A closed list gives the executive certainty about what is and is not permitted, while a functional definition creates ambiguity.
• Garden Leave: A 12-month garden leave period at full compensation (base salary plus pro-rata target bonus), running concurrently with the non-compete period. If garden leave runs concurrently with the full 12-month non-compete, the effective post-garden-leave restriction is zero — meaning that from the moment Harding stops being paid by NTP, he is free to compete. This is an increasingly common structure advocated by executive-side counsel.
• Non-Solicitation: Limited to 18 months post-termination, covering employees only (no customer non-solicitation). Hargrove will argue that customer non-solicitation is duplicative of the non-compete and imposes an unreasonable burden on the executive's ability to pursue career opportunities in a different segment of the industry.
• New York Enforceability Arguments: Hargrove will raise enforceability concerns under New York law, noting pending New York State legislation proposing a comprehensive ban on non-compete agreements. While this legislation has not yet been enacted, its pendency creates uncertainty, and Hargrove will argue that aggressive covenants — particularly those exceeding 12 months or extending beyond the United States — will not withstand judicial scrutiny under the existing New York reasonableness framework, much less under any future statutory ban.
E. Non-CIC Severance
We anticipate the following demands for severance upon termination without cause or resignation for good reason outside the change-in-control context:
• Severance Multiplier: 2.5x (base salary plus target annual bonus), yielding cash severance of 2.5 × $4,812,500 = $12,031,250.
• Equity Acceleration: Full acceleration of all unvested equity (RSUs and PSUs at target) upon any qualifying termination, whether or not in connection with a CIC event.
• Benefit Continuation: 24 months of COBRA continuation at employer cost.
• Pro-Rata Bonus: A pro-rata bonus for the fiscal year of termination, based on actual performance.
• Broad Good Reason Definition: Hargrove will seek a definition of "good reason" that includes: (a) any material reduction in base salary, target bonus opportunity, or LTI target; (b) any material diminution of duties, authority, or reporting relationships (including a requirement that the CEO report to anyone other than the Board); (c) relocation of the executive's principal place of employment by more than 25 miles; (d) failure of NTP to nominate Harding for election to the Board of Directors; and (e) any material breach of the agreement by NTP. A broad good reason definition gives the executive significant optionality and, in effect, allows the executive to resign with full severance if conditions change materially.
V. Recommended Opening Positions (Initial Term Sheet)
The following sections set forth our recommended opening positions on each major term of the employment agreement. These positions are designed to be defensible, credible, and consistent with market practice, while also establishing appropriate negotiating room on the terms that we anticipate will be most heavily contested. The initial term sheet reflecting these positions should be circulated to Hargrove & Liddell by June 10, 2024.
A. Compensation — Expected to Be Agreed Quickly
We recommend the following compensation terms in the initial term sheet:
• Base Salary: $1,750,000 per annum. This represents a 20.7% premium over Harding's current $1,450,000 base salary at Marlowe Asset Management. It is appropriate for a CEO role at a larger, more complex, dual-listed organization and is consistent with the peer-group benchmarking analysis prepared by Whitmore Hobson LLP (Dr. Rachel Whitmore). The base salary positions Harding at approximately the 60th percentile of the peer group, which is appropriate given Harding's experience and the scope of the role.
• Target Annual Bonus: 175% of base salary, equal to $3,062,500 per annum. This represents a meaningful increase from Harding's current 150% target at Marlowe Asset Management and reflects the greater scope and complexity of the NTP CEO role. The maximum annual bonus would be set at 300% of base salary ($5,250,000), providing significant upside for exceptional performance. Actual bonus amounts would be determined by the Remuneration Committee based on pre-established performance criteria.
• Annual Long-Term Incentive (LTI) Target: $9,000,000 per annum, allocated 60% to performance-based stock units (PSUs) and 40% to time-based restricted stock units (RSUs). This represents a 20% premium over Harding's current $7,500,000 annual LTI target at Marlowe Asset Management and aligns incentives with long-term shareholder value creation. PSUs would vest based on a combination of relative total shareholder return (TSR) and revenue growth metrics over a three-year performance period. RSUs would vest ratably over three years (one-third per year).
• Total Target Annual Compensation: $13,812,500, calculated as $1,750,000 base + $3,062,500 target bonus + $9,000,000 LTI target. This represents a 24.2% premium over Harding's current total target annual compensation of $11,125,000 at Marlowe Asset Management.
Assessment: These compensation elements should be agreeable relatively early in the negotiation. They reflect a meaningful and credible increase over Harding's current package across all major components and are consistent with market benchmarks for CEO roles at companies of comparable size and complexity. While Hargrove may seek modest adjustments — for example, an increase in the LTI target to $9,500,000 or $10,000,000, or an increase in the maximum bonus opportunity from 300% to 350% of base — we do not anticipate protracted dispute on these core compensation items. Any minor adjustments in this area can be accommodated without significant cost to NTP and may serve as useful goodwill gestures early in the negotiation.
B. Perquisites and Benefits — Expected to Be Agreed Quickly
We recommend the following perquisites and benefits package:
• Automobile allowance of $25,000 per year;
• Enrollment in NTP's executive health program, including annual comprehensive physical examinations;
• Supplemental life insurance with a death benefit of $2,000,000;
• Reimbursement of financial, tax, and estate planning expenses, up to $35,000 per year;
• Participation in NTP's 401(k) retirement savings plan, with a 6% employer matching contribution (subject to applicable IRS limitations), resulting in an estimated annual employer contribution of up to $105,000;
• Supplemental Executive Retirement Plan (SERP) contribution of $250,000 per year, vesting over three years.
Assessment: These are standard perquisites and benefits for a CEO role at a company of NTP's size and are consistent with the benefits provided to other members of NTP's executive leadership team. Minor adjustments may be requested — for example, an increase in the financial planning reimbursement to $50,000 per year or the inclusion of a club membership benefit — but these are unlikely to be deal-breakers. These items can be used strategically as "give" items in exchange for holds on more critical provisions such as CIC severance and restrictive covenants.
C. Make-Whole / Sign-On — Likely Moderate Negotiation
We recommend the following make-whole / sign-on package to compensate Harding for the forfeiture of approximately $23,400,000 in unvested Marlowe Asset Management equity:
• Sign-On Cash Bonus: $5,000,000, payable within 30 days of the start date, subject to a 24-month clawback provision requiring full repayment if Harding voluntarily resigns without good reason within 24 months of the start date.
• Sign-On RSU Grant: $12,000,000, vesting one-third per year over three years from the start date. The number of shares granted would be determined based on the 30-day volume-weighted average closing price of NTP ADR shares as of the grant date.
• Sign-On PSU Grant: $6,400,000, cliff vesting at the end of three years, subject to the achievement of TSR and revenue growth performance hurdles established by the Remuneration Committee. PSUs would vest at 0% to 200% of target based on actual performance.
• Total Sign-On Equity: $18,400,000 ($12,000,000 RSUs + $6,400,000 PSUs).
• Total Make-Whole Value: $23,400,000 ($5,000,000 cash + $18,400,000 equity), exactly matching Harding's estimated forfeited Marlowe Asset Management equity.
Share Pool and Dilution Analysis: The combined sign-on equity plus first-year LTI grant would total $18,400,000 + $9,000,000 = $27,400,000. At the current ADR price of approximately $15.87 per share, this would represent approximately 1,726,529 shares, or approximately 0.25% of NTP's approximately 699 million outstanding shares. This is well within the 14.2 million shares remaining available for grant under the NTP 2022 Omnibus Incentive Plan and should not raise dilution concerns with institutional shareholders.
Accounting Treatment: We have confirmed with Galloway & Partners (Clive Warburton, NTP's external auditors and accounting advisors on equity compensation) the following accounting treatment: the sign-on RSU grant ($12,000,000) would create approximately $4,000,000 per year in compensation expense over its three-year vesting period under ASC 718 (U.S. GAAP) and IFRS 2 (which NTP uses for its primary financial statements). The sign-on PSU grant ($6,400,000) would be expensed over its three-year performance period at grant-date fair value, with subsequent adjustments only to reflect changes in the number of PSUs expected to vest (not changes in market value).
Assessment: The total make-whole value matches the estimated forfeiture amount on a dollar-for-dollar basis, which is the defensible and market-standard approach. However, the structure of the make-whole — with equity heavily weighted toward three-year vesting and a relatively modest $5,000,000 cash component bridging the gap — may be contested by Hargrove. We anticipate that she will push for one or more of the following adjustments: (a) an increase in the cash component (e.g., from $5,000,000 to $8,000,000 or more) at the expense of the equity component; (b) accelerated or front-loaded vesting for the sign-on RSUs (e.g., 50% in year one, 25% in year two, 25% in year three); (c) additional equity above the $23,400,000 make-whole amount to account for the time value of money or the risk differential between NTP and Marlowe Asset Management shares; and (d) elimination or significant reduction of the 24-month clawback provision on the sign-on cash. With the total quantum at parity with the forfeiture amount, however, this component should ultimately be resolvable through negotiation of the structure rather than the total amount.
D. Change-in-Control Severance — Opening Position (Most Critical)
This is the single most important and most contentious area of the negotiation. Our opening position must be defensible, consistent with NTP's corporate governance commitments, and responsive to the concerns of proxy advisory firms and institutional shareholders, while also being credible enough to serve as a basis for productive negotiation. We recommend the following opening positions:
1. Definition of "Change in Control"
Our opening position defines "change in control" as the occurrence of any of the following events:
(a) The acquisition by any person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of more than 50% of the outstanding voting securities of NTP;
(b) The consummation of a merger, consolidation, or other business combination involving NTP, unless the holders of NTP's voting securities immediately prior to such transaction continue to hold at least 50% of the combined voting power of the surviving or resulting entity immediately following such transaction; or
(c) The sale, lease, exchange, or other disposition of all or substantially all of the assets of NTP.
Critically, we exclude the Board turnover trigger from our opening CIC definition. A Board turnover trigger — which would define a "change in control" as occurring when the composition of a majority of the Board changes within any 12-month period, regardless of whether such change results from a hostile transaction — is inconsistent with UK corporate governance norms and creates perverse incentives. Geoffrey Stanton has been clear that the Board views this trigger as overreach, as it could be activated by normal Board rotation, refreshment, or governance-driven changes in composition that have nothing to do with a change in corporate control.
2. CIC Severance Amount
Opening position: 2.5x (base salary + target annual bonus).
At our proposed compensation levels, this yields CIC cash severance of:
2.5 × ($1,750,000 + $3,062,500) = 2.5 × $4,812,500 = $12,031,250
For reference, Harding's anticipated demand of 3x at the same compensation levels would yield:
3.0 × $4,812,500 = $14,437,500
The difference between the NTP opening position and the anticipated Harding demand is $2,406,250. While this is a significant absolute dollar amount, it is not the most expensive element of the CIC package — the gross-up question (discussed below) presents a substantially larger potential cost exposure.
3. Double Trigger
The CIC severance would be payable only upon a "double trigger" — that is, both (a) the occurrence of a change-in-control event as defined above, and (b) a qualifying termination of Harding's employment within 24 months following the CIC event. A qualifying termination means termination of employment by NTP without cause, or resignation by Harding for good reason. A single-trigger structure (severance payable upon the CIC event alone, without a qualifying termination) is inconsistent with prevailing best practices, ISS/Tarrant Partners LLC guidelines, and NTP's governance commitments, and we do not anticipate significant pushback on this point.
4. Equity Acceleration on CIC
Full acceleration of all unvested RSUs upon a qualifying CIC termination. PSUs would vest at target performance level (not at maximum or actual performance). We do not propose pro-rata vesting of PSUs based on performance through the termination date, which would be a less favorable position for the executive and likely to be rejected.
5. Benefits Continuation on CIC
24 months of COBRA continuation at employer cost, plus a $50,000 outplacement services allowance.
6. Tax Treatment — Best-Net Cutback
Opening position: Best-net cutback, with no Section 280G excise tax gross-up.
Under the best-net approach, if Harding's total "parachute payments" (as defined in Section 280G of the Internal Revenue Code) exceed the Section 280G safe harbor threshold, NTP's total payments to Harding would be reduced (cut back) to the safe harbor amount, but only if such reduction would result in a better after-tax outcome for Harding compared to receiving the full payments and bearing the 20% excise tax under Section 4999 of the Code. In other words, the executive receives whichever produces the greater after-tax benefit: (a) full payments minus excise tax, or (b) reduced payments with no excise tax.
Based on our preliminary Section 280G analysis, Harding's relevant figures are as follows:
• Base Amount (average W-2 compensation at Marlowe Asset Management, 2019–2023): $7,840,000
• 3× Base Amount (Section 280G threshold): $23,520,000
• Safe Harbor Limit (threshold minus $1): $23,519,999
• Estimated Total Parachute Payments (under Harding's anticipated 3x demand, including CIC cash severance, equity acceleration value, and benefit continuation): approximately $38,200,000
• Excess Parachute Payment: $38,200,000 − $7,840,000 = $30,360,000
• Estimated Excise Tax at 20%: $30,360,000 × 0.20 = $6,072,000
A full gross-up at these levels would cost NTP an estimated $4,200,000 to $6,800,000, depending on the final calculation of parachute payments and the grossing-up of the gross-up itself for income and employment taxes.
Rationale for Opening Positions on CIC:
Our CIC opening positions are grounded in the following considerations:
• ISS/Tarrant Partners LLC Sensitivity: A CIC multiplier above 3x is a specific ISS "problematic pay practice" flag. Veltrano Proxy Advisors (Sandra Kolb) has informally advised that a package featuring both a 3x multiplier and a full excise tax gross-up would likely trigger a negative ISS and/or Tarrant Partners LLC recommendation on NTP's say-on-pay vote. While NTP is a UK-incorporated company and the binding shareholder vote on remuneration is governed by UK law, ISS and Tarrant Partners LLC recommendations significantly influence the voting behavior of U.S. and global institutional shareholders, particularly those holding the NYSE-listed ADRs.
• UK Corporate Governance Code 2024, Provision 40: The Code limits notice periods for executive directors to 12 months or less, and the spirit of the Code favors restraint in remuneration practices. While CIC severance is distinct from notice period compensation, a CIC multiplier of 2.5x already significantly exceeds UK market norms (where CIC severance of 1x to 2x is typical). A multiplier of 3x would place NTP as a significant outlier among UK-listed companies and could invite scrutiny from UK institutional shareholders and the Investment Association.
• 2025 AGM Binding Remuneration Policy Vote: NTP's Directors' Remuneration Policy is subject to a binding shareholder vote at the 2025 Annual General Meeting. Any new CEO package will be incorporated into this policy and must secure majority shareholder approval. NTP received 87.4% say-on-pay support at the April 18, 2024 AGM — a healthy result but not an overwhelming one. An aggressive CEO package that departs materially from UK governance norms risks eroding shareholder support and potentially triggering a negative vote at the 2025 AGM.
• Institutional Shareholder Composition: NTP's top five institutional shareholders — Caledonian Asset Management (8.3%), Pemberton Capital Group (6.7%), Thornbury Investment Trust (5.1%), Regis Global Equity Fund (4.4%), and Atlas Pension Fund (3.2%) — collectively hold approximately 27.7% of NTP's outstanding shares and are known to follow ISS and Tarrant Partners LLC voting recommendations closely. A negative proxy advisor recommendation on NTP's remuneration policy could therefore have material consequences.
• No Gross-Up: The market trend has shifted strongly against excise tax gross-ups over the past decade. According to the most recent Whitmore Hobson benchmarking data, fewer than 15% of S&P 500 companies still provide full excise tax gross-ups to new CEO hires, down from over 50% a decade ago. Veltrano Proxy Advisors and Whitmore Hobson both recommend against including a gross-up in the NTP package.
• Board Turnover Trigger: The Board, and particularly Stanton, views the inclusion of a Board turnover trigger in the CIC definition as overreach that is inconsistent with normal Board governance and creates perverse incentives. A Board turnover trigger could allow Harding to claim CIC protection — and thereby trigger substantial severance payments — based on routine Board succession, refreshment, or governance-driven changes in composition that have nothing to do with a hostile acquisition or loss of corporate control. This is a Board-level red line that we should defend firmly.
E. Non-CIC Severance — Opening Position
We recommend the following opening positions on severance for termination without cause or resignation for good reason outside the CIC context:
• Severance Amount: 2x (base salary + target annual bonus) = 2 × $4,812,500 = $9,625,000
• Pro-Rata Bonus: A pro-rata bonus for the fiscal year in which termination occurs, based on actual performance through the termination date
• Benefits Continuation: 18 months of COBRA continuation at employer cost
• Equity Acceleration: 12 months of accelerated vesting of unvested equity (RSUs vest immediately; PSUs remain subject to performance conditions but the service requirement is deemed satisfied for 12 months beyond the termination date)
• Good Reason Definition: Material reduction in base salary or target bonus (greater than 10%); material diminution of duties or authority; relocation of principal place of employment by more than 50 miles; material breach of the agreement by NTP. We recommend excluding "failure to nominate for Board" from the good reason definition in the opening position, as Board nomination is ultimately a matter for the Nomination Committee and should not create a severance trigger.
Assessment: We anticipate that Harding will seek 2.5x severance with full equity acceleration and 24-month COBRA continuation on any qualifying non-CIC termination. This is a negotiable area that can potentially be traded against CIC concessions — for example, if we hold firm on the 2.5x CIC multiplier and the best-net cutback, we may have room to offer a more generous non-CIC severance package (e.g., 2.25x or even 2.5x) as a consolation.
F. Restrictive Covenants — Opening Position (Second Most Critical)
Restrictive covenants represent the second most critical area of negotiation after CIC severance. As CEO of a dual-listed, global telecommunications and enterprise technology company, Harding will have access to highly sensitive strategic, competitive, financial, and customer information across all of NTP's major markets. NTP has a legitimate and compelling interest in protecting this information through appropriately scoped post-employment restrictions.
Our recommended opening positions are as follows:
1. Non-Competition Covenant
• Duration: 24 months post-termination of employment