1022-00004 · Northgate Telecommunications PLC · Research & Strategy

memo-restrictive-covenant-drafting.docx DOCUMENT Labor & Employment

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE

MEMORANDUM

Date: June 8, 2024

To: Renata Vasquez, Partner, Calderwood & Harkness LLP

From: James Underwood, Associate, Calderwood & Harkness LLP

Re: Restrictive Covenant Drafting Considerations for C-Suite Telecom Executives — Northgate Telecommunications PLC CEO Employment Agreement (Marcus Elliot Harding)

Matter No.: 1022-00004

This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of the addressee in connection with the referenced matter and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

I. Executive Summary

The purpose of this memorandum is to survey the restrictive covenant drafting considerations specific to C-suite telecom executives in connection with the proposed employment agreement between Northgate Telecommunications US, Inc. ("NTP US" or "Northgate") and Marcus Elliot Harding ("Harding") for the position of Group Chief Executive Officer. This memorandum is intended to provide a comprehensive framework for the restrictive covenant package to be included in the proposed CEO employment agreement, including analysis of market practice, enforceability considerations, anticipated counterparty positions, and recommended drafting strategies.

The proposed employment agreement will be governed by the laws of the State of New York. Harding will be based at Northgate's principal US offices at 600 Lexington Avenue, 38th Floor, New York, NY 10022. It is anticipated that approximately eighty percent (80%) of Harding's duties will be performed in the United States, with approximately twenty percent (20%) performed in the United Kingdom at Northgate PLC's London headquarters located at 45 Canary Wharf Tower, One Canada Square, London E14 5AB. This split in duties between the US and UK, and the dual-contract structure it necessitates, has significant implications for the drafting and enforceability of restrictive covenants, which are addressed throughout this memorandum and specifically in Section X.

The key restrictive covenant provisions that must be addressed in the employment agreement are as follows:

(a) Non-Competition — restrictions on Harding's ability to work for or provide services to competitors of Northgate following termination of his employment;

(b) Non-Solicitation — restrictions on Harding's ability to solicit Northgate employees and customers following termination;

(d) Garden Leave — a mechanism permitting Northgate to place Harding on paid leave during his notice period while restricting his activities; and

(e) Confidentiality and Proprietary Information — perpetual obligations restricting Harding's use and disclosure of Northgate's confidential and proprietary information.

A significant consideration in this engagement is the existence of Harding's current restrictive covenants at Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management" or "VDHI"), headquartered at 200 Technology Way, Suite 4000, San Jose, CA 95110 (NYSE: VDHI). Harding's current Marlowe Asset Management employment agreement includes a twelve-month post-termination non-compete limited in geographic scope to the United States. This existing covenant will serve as an important benchmark in negotiations, as Harding's personal counsel, Victoria Hargrove of Hargrove & Liddell LLP ("H&L"), can be expected to use the Marlowe Asset Management non-compete as a reference point and to resist any Northgate restrictive covenant that is materially more expansive in duration, geographic scope, or scope of activity.

This memorandum should be read in conjunction with the companion memorandum on the enforceability of non-compete agreements under New York law, prepared by Devon Archer of this office and dated June 6, 2024. That memorandum addresses in detail the current state of New York law regarding non-compete enforceability, pending legislative developments, and the specific enforceability risks associated with each element of the proposed restrictive covenant package. A separate memorandum analyzing Harding's existing Marlowe Asset Management employment agreement and the potential applicability of his Marlowe Asset Management restrictive covenants to the proposed transition to Northgate is being prepared and is expected to be completed on or about June 9, 2024.

II. Context: Northgate's Business, Harding's Profile, and the Competitive Landscape

A full understanding of the factual context is essential to drafting restrictive covenants that are both commercially appropriate and legally enforceable. The scope and enforceability of restrictive covenants under New York law are evaluated by reference to the employer's legitimate business interests, the executive's role and access to confidential information, and the competitive landscape in which the parties operate. This section sets out the relevant background.

A. Northgate's Business and Competitive Position

Northgate Telecommunications PLC ("NTP" or "Northgate") is a UK-headquartered publicly traded telecommunications and software-as-a-service ("SaaS") company. NTP is dual-listed on the London Stock Exchange (LON: NTP) and the New York Stock Exchange (ADR: NYSE: NTPC). As of June 2024, NTP's market capitalization is approximately £8.7 billion (approximately $11.1 billion at current exchange rates). For the fiscal year ended December 31, 2023, NTP reported revenue of approximately £4.26 billion ($5.43 billion) and EBITDA of approximately £1.14 billion ($1.45 billion). NTP employs approximately 22,500 people globally across its various business lines and geographies.

NTP's business operations span three principal segments, each of which is critical to defining the competitive landscape that the restrictive covenants must address:

(a) Telecommunications Services — NTP provides wireline and wireless telecommunications services to enterprise and consumer customers, primarily in the United Kingdom, Western Europe, and, through its US subsidiary NTP US, in North America. This segment includes managed network services, voice and data connectivity, and unified communications solutions.

(b) Telecommunications Infrastructure — NTP designs, builds, operates, and maintains telecommunications infrastructure, including fiber-optic networks, data center facilities serving telecom operators, and network equipment. This segment serves both NTP's own telecommunications services business and third-party telecom operators.

(c) Enterprise SaaS Platforms Serving Telecom Operators — NTP develops and markets enterprise SaaS platforms that provide billing, operations support systems ("OSS"), business support systems ("BSS"), network management, and customer experience management solutions to telecommunications operators globally. This segment has been a key growth driver for NTP and represents a significant portion of the company's strategic value.

These three categories define the competitive landscape that the restrictive covenants must address. Any definition of "competing business" or "restricted activity" in the non-compete provision should encompass all three segments, as a CEO-level executive would have access to confidential information and strategic plans across the entire business.

NTP maintains dual US/UK operations, with its primary US operations headquartered in New York. The company has significant customer relationships and competitive activity in North America and Western Europe, as well as an emerging and growing presence in the Asia-Pacific region, where NTP has been expanding through a combination of organic growth and strategic acquisitions. The breadth of NTP's geographic footprint is directly relevant to the geographic scope of the proposed non-compete covenant.

B. Harding's Profile and Competitive Sensitivity

Marcus Elliot Harding is fifty-two years old and has a twenty-eight-year career spanning the telecommunications and technology sectors. His career trajectory and the depth and breadth of his experience make him one of the most sought-after executive candidates in the global telecom industry, which in turn creates significant competitive sensitivity around his prospective appointment and subsequent departure from Northgate.

Harding currently serves as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. (NYSE: VDHI), a US-based technology and telecommunications conglomerate with a market capitalization of approximately $34 billion. At Marlowe Asset Management, Harding is widely credited with leading the company's strategic pivot from legacy telecommunications services to enterprise SaaS, a transformation that resulted in growth of 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 is directly relevant to his prospective role at Northgate, where the enterprise SaaS segment is a central part of the company's growth strategy.

Prior to his tenure at Marlowe Asset Management, Harding served as Executive Vice President of Global Operations at Meridian Wireless Corp. from 2010 to 2017, where he was responsible for overseeing network operations, infrastructure development, and enterprise client relationships across North America and Europe.

As the prospective Group Chief Executive Officer of Northgate, Harding would occupy the most senior executive position in the organization and would have access to the most sensitive competitive information across all business lines and geographies. This information would include, but would not be limited to:

• Strategic plans and long-range business strategy across all three business segments;

• Pricing methodologies, bid strategies, and customer-specific pricing arrangements;

• Customer relationships, including the identity of key customers, the terms of customer contracts, customer pipeline data, and the status of ongoing customer negotiations;

• Technology roadmaps, product development timelines, and intellectual property strategies;

• Financial projections, budgets, and non-public financial performance data;

• M&A pipeline, including potential acquisition targets, valuation analyses, and deal terms under negotiation;

• Personnel information, including compensation data, talent assessments, and succession plans for senior executives;

• Board-level deliberations and strategies communicated to or formulated by the CEO.

The breadth and sensitivity of a CEO's access to confidential information is qualitatively different from that of even the most senior subordinate executives. This distinction is well-recognized in the case law and justifies more expansive restrictive covenants — in terms of duration, geographic scope, and scope of activity — than would be appropriate for lower-tier executives. As discussed in Devon Archer's companion memorandum, New York courts have consistently recognized that the unique nature of a CEO's role and access to information supports broader and longer-duration restrictive covenants.

C. Harding's Existing Restrictive Covenants at Marlowe Asset Management

Harding's current employment agreement with Marlowe Asset Management Digital Holdings, Inc. includes a twelve-month post-termination non-compete with geographic scope limited to the United States. Based on our preliminary review, the Marlowe Asset Management non-compete restricts Harding from engaging in activities competitive with Marlowe Asset Management's business within the United States for a period of twelve months following termination of his employment, regardless of the reason for termination. The precise scope of the activity restriction and any carve-outs in the Marlowe Asset Management agreement are being analyzed in the separate memorandum on Harding's existing Marlowe Asset Management agreement, which is expected to be completed on June 9, 2024.

The existence and terms of the Marlowe Asset Management non-compete have two significant implications for the Northgate negotiations:

First, Harding's personal counsel, Victoria Hargrove of Hargrove & Liddell LLP, can be expected to use the Marlowe Asset Management non-compete as a benchmark and to resist any Northgate restrictive covenant that is materially more expansive in duration or scope. From Harding's perspective, the fact that he accepted a twelve-month, US-only non-compete at a company with a market capitalization of approximately $34 billion — more than three times the size of Northgate — establishes a precedent that Northgate's covenant should be no broader. We should be prepared to counter this argument by distinguishing the scope of the CEO role at Northgate (which is global, unlike the COO role at Marlowe Asset Management) and by emphasizing the broader geographic footprint of Northgate's competitive activity.

Second, the Marlowe Asset Management non-compete must be analyzed for its potential applicability to Harding's transition to Northgate. If the Marlowe Asset Management non-compete is triggered by Harding's departure from Marlowe Asset Management, and if Northgate's business is deemed competitive with Marlowe Asset Management's business within the United States, the Pemberton Investors could theoretically restrict Harding from assuming the CEO role at Northgate for up to twelve months following his departure from Marlowe Asset Management. This analysis is being conducted separately and is addressed in the forthcoming memorandum on Harding's existing Marlowe Asset Management agreement.

III. Non-Competition Covenant

The non-competition covenant is the most significant, most scrutinized, and most heavily negotiated restrictive covenant in any C-suite employment agreement. It is also the provision most likely to face an enforceability challenge if the employment relationship ends in a disputed termination. The following subsections address the key drafting considerations for the non-compete provision in the Harding employment agreement, organized by duration, geographic scope, scope of prohibited activities, and carve-outs.

A. Duration: Market Practice for C-Suite Telecom Executives

1. General Market Range. Non-competition periods for public company CEOs in the US telecommunications sector typically range from twelve to twenty-four months following termination of employment. The appropriate duration in any given case depends on a combination of factors, including the nature and sensitivity of the confidential information to which the executive has access, the pace of change and innovation in the relevant industry (which affects the "shelf life" of confidential information), the geographic scope and competitive intensity of the employer's business, the executive's bargaining position, and market norms within the relevant industry and peer group.

Based on our review of publicly disclosed CEO employment agreements at US-listed and dual-listed telecommunications and technology companies, we observe the following market trends:

• Twelve months is the most common duration for large-cap public company CEOs and is increasingly the market norm, particularly for companies with a significant UK governance overlay. A twelve-month period aligns with the prevailing expectation in the institutional shareholder community that executive employment terms should be reasonable and not unduly restrict executive mobility. Companies including Camberwell Enterprises, Northgate Enterprises, and Tarrant Corporation have adopted twelve-month CEO non-competes in recent agreements.

• Twenty-four months is at the upper end of market practice and is more commonly seen in private equity-backed, founder-led, or mid-cap companies where the CEO's departure poses a heightened competitive risk. Twenty-four months remains defensible for public company CEOs, particularly those in highly competitive industries such as telecommunications and SaaS, where the CEO's knowledge of technology roadmaps, pricing strategies, and M&A plans may retain competitive value for an extended period. However, twenty-four-month covenants face increasing scrutiny from proxy advisory firms and institutional shareholders, and from courts evaluating enforceability.

• Eighteen months represents a middle-ground position that has gained traction in recent years as a compromise between the employer's desire for robust competitive protection and the executive's interest in mobility. Several recent CEO agreements at dual-listed telecommunications companies — including agreements at companies of comparable size and complexity to Northgate — have adopted eighteen-month non-compete periods.

2. UK Corporate Governance Code Considerations. As a company listed on the London Stock Exchange, Northgate is subject to the UK Corporate Governance Code (the "Code"). While the Code does not have the force of law, it operates on a "comply or explain" basis, and non-compliance with its provisions can draw adverse attention from institutional shareholders, proxy advisory firms, and the financial press.

The UK Corporate Governance Code 2024, Provision 40, provides that executive notice periods should be set at twelve months or less, and that remuneration committees should avoid longer notice periods except where circumstances justify a departure from this norm. While Provision 40 does not directly regulate post-termination restrictive covenants — it addresses notice periods during ongoing employment — proxy advisory firms and institutional shareholders increasingly view post-termination restrictive covenants through the same lens. A post-termination non-compete that significantly exceeds the notice period may be perceived as inconsistent with the spirit of the Code, even if it does not technically violate any provision.

For a company like Northgate, cross-listed on both the London Stock Exchange and the NYSE, the Remuneration Committee — chaired by Geoffrey Stanton — must consider the reaction of both US and UK institutional shareholders to the proposed restrictive covenant package. NTP's top institutional shareholders 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 UK-based investors in this group — particularly Caledonian, Pemberton, and Thornbury, which collectively hold approximately 20.1% of outstanding shares — will be particularly sensitive to restrictive covenants that appear inconsistent with UK governance norms. While these shareholders are unlikely to object to a reasonable non-compete in the range of twelve to eighteen months, a twenty-four-month non-compete could attract adverse commentary, particularly if it is viewed as being coupled with a generous severance package.

Additionally, the proxy advisory firms ISS (Thackeray Health IT) and Tarrant Partners LLC, which provide voting recommendations to institutional shareholders, do not specifically cap non-compete duration in their guidelines. However, both firms evaluate the overall reasonableness of severance and restrictive covenant packages in the context of their "say on pay" and executive compensation analyses. An aggressive non-compete, when combined with other elements of the total compensation package, could contribute to a negative say-on-pay recommendation.

3. New York Enforceability Considerations. Under New York law, non-competition agreements are enforceable only to the extent that they are reasonable in duration, geographic scope, and scope of activity, and are necessary to protect the employer's legitimate business interests. The recognized legitimate business interests under New York law include: (a) the protection of trade secrets and confidential information; (b) the protection of customer relationships; (c) the protection of the employer's investment in the employee's unique or extraordinary services; and (d) the prevention of unfair competition.

For a CEO-level executive in the telecommunications and SaaS sector, New York courts have generally upheld non-competition agreements of up to twenty-four months, though each case is analyzed on its own facts and circumstances. The courts consider the totality of the circumstances, including the executive's role, the sensitivity of the information to which the executive had access, the pace of change in the relevant industry, and the scope of the restriction in relation to the employer's actual competitive activity.

A significant enforceability risk arises from pending New York legislation that would impose an outright ban on non-competition agreements. This legislation, if enacted, could render any non-compete provision in the Harding agreement unenforceable as a matter of New York law. The legislation was vetoed once by the Governor but is expected to be reintroduced. As of June 2024, the status of this legislation remains uncertain. This risk is addressed in detail in Devon Archer's companion memorandum dated June 6, 2024. We note that, even if such legislation is enacted, it may include exceptions for senior executives, or it may include a grandfather provision for agreements entered into before the effective date. However, given the uncertainty, we recommend that the agreement be drafted with this risk in mind.

From a drafting perspective, we recommend the following measures to maximize enforceability:

• Include a severability/blue-pencil clause expressly authorizing any court of competent jurisdiction to modify (rather than void) any restrictive covenant found to be unreasonably broad in duration, geographic scope, or scope of activity. New York courts have the authority to blue-pencil restrictive covenants, and the inclusion of an express authorization in the agreement facilitates this remedy. See Section VIII.E below.

• Include a choice-of-law provision designating New York law as the governing law for the employment agreement and all restrictive covenants contained therein. This ensures that the covenants are analyzed under a consistent legal framework and prevents Harding from forum-shopping in a more restrictive jurisdiction.

• Tie the restrictive covenants to specific, identified legitimate business interests — in particular, the protection of trade secrets and confidential information, customer relationships, and NTP's investment in Harding's unique services as Group CEO.

• Where possible, condition the enforcement of the non-compete on NTP's continued payment of consideration (such as severance or garden leave compensation) during the restricted period, as discussed in Sections III.D and VI below.

4. Recommendation on Duration. Based on the foregoing analysis of market practice, UK governance considerations, and New York enforceability principles, we recommend the following positions on non-compete duration:

Opening position: Twenty-four (24) months post-termination. This represents the maximum defensible duration and provides the strongest protection for Northgate's competitive interests, particularly given the extraordinary breadth and depth of confidential information to which a Group CEO would have access. The twenty-four-month period accounts for the extended "shelf life" of strategic, M&A, and technology roadmap information in the telecom/SaaS sector.

Anticipated counterparty position: Harding and H&L will almost certainly demand twelve (12) months, mirroring the Marlowe Asset Management non-compete. They will argue that twelve months is the prevailing market standard for large-cap public company CEOs, that it is consistent with UK governance expectations, and that it is the duration Harding accepted at a much larger company (Marlowe Asset Management, with a market capitalization approximately three times that of NTP). H&L may also reference the pending New York non-compete ban legislation as a reason to minimize the duration.

Recommended fallback: Eighteen (18) months. This duration balances Northgate's legitimate protective interests with enforceability concerns and Harding's anticipated resistance. An eighteen-month non-compete is well within the range upheld by New York courts for CEO-level executives and can be positioned as a reasonable middle ground. When paired with a garden leave mechanism (see Section VI below), an eighteen-month non-compete can create a total effective restricted period that provides robust protection while offering Harding partial compensation during the initial months of restriction.

B. Geographic Scope

1. Worldwide vs. Limited Geographic Scope. The geographic scope of the non-compete provision is a critical enforceability variable. Under New York law, the geographic scope of a non-compete must bear a reasonable relationship to the employer's business operations and the competitive activity from which the employer seeks protection. A geographic scope that extends beyond the employer's actual area of competitive activity will be viewed as overreaching and may be narrowed or voided by a court.

We have considered three alternative formulations for the geographic scope of the Harding non-compete:

Option 1: Worldwide. A worldwide non-compete is the most protective formulation and is appropriate where the employer's business operations and competitive activity are truly global. NTP operates across multiple continents, serves customers worldwide, and competes with global telecommunications and SaaS companies in markets spanning North America, Western Europe, and the Asia-Pacific region. These facts support a worldwide scope. However, a worldwide non-compete faces the greatest enforceability risk under New York law. Courts will scrutinize whether the employer's operations and competitive activity genuinely extend to all geographic areas covered by the restriction. A court may conclude that NTP's competitive presence in certain regions (e.g., Sub-Saharan Africa, Latin America, Eastern Europe) is too attenuated to justify restricting Harding from competing in those markets. Moreover, a worldwide restriction is more likely to be perceived as a punitive restraint on Harding's mobility rather than a targeted protection of NTP's legitimate interests.

Option 2: North America and Western Europe. This formulation covers the vast majority of NTP's revenue base and competitive activity. NTP's primary US operations are headquartered in New York, and the company maintains significant customer relationships and competitive presence throughout North America and Western Europe. This geographic scope is substantially more defensible under New York law because it is closely tailored to NTP's actual competitive footprint, while still providing meaningful protection in the markets where NTP is most vulnerable to competitive harm from Harding's departure.

Option 3: Functional definition. A third alternative defines the geographic scope by reference to NTP's actual business presence rather than by naming specific regions: e.g., "any geography in which Northgate or any of its affiliates derives revenue from, or conducts business operations related to, any of the Restricted Activities." This formulation is self-updating — it automatically expands or contracts as NTP's geographic footprint evolves — and is tied directly to NTP's actual competitive interests. However, it introduces uncertainty for Harding (who cannot determine ex ante the precise scope of the restriction), which may reduce enforceability and will certainly be resisted by H&L.

2. Anticipated Counterparty Position. Harding's existing Marlowe Asset Management non-compete is limited in geographic scope to the United States. Hargrove & Liddell can be expected to resist any expansion beyond this scope, arguing that: (a) the United States is the primary market for NTP's US subsidiary, which is the contracting entity; (b) a broader geographic scope is inconsistent with Harding's existing covenant and market practice; and (c) to the extent NTP seeks protection in the UK and Europe, those interests should be addressed in the UK service agreement governed by English law.

Harding may also propose a scheduled-competitor approach (identifying a list of specific companies) in lieu of or in addition to geographic limitations. This approach is discussed in Section C below.

3. Recommendation on Geographic Scope. Opening position: Worldwide. This is consistent with NTP's global operations and the Group CEO's access to confidential information concerning all geographic markets in which NTP operates. Even if ultimately modified, starting with a worldwide scope establishes NTP's position and provides negotiating room.

Recommended fallback: North America and Western Europe. This formulation covers NTP's core markets and the geographies where competitive harm from Harding's departure would be most acute. It is substantially more defensible under New York law than a worldwide restriction while still providing meaningful protection beyond the US-only scope of the Pemberton Investors. If H&L insists on narrowing further to the United States alone, we should resist strenuously on the ground that the Group CEO role is fundamentally different from the US-focused COO role at Marlowe Asset Management, and that NTP's European operations and competitive activity make a US-only restriction inadequate.

C. Scope of Prohibited Activities (Activity-Based Restrictions)

In addition to defining the geographic scope and duration of the non-compete, the agreement must define the scope of prohibited activities — i.e., the types of business activities with which Harding is restricted from competing. This is often the most complex and contentious element of the non-compete provision.

1. Revenue-Based Test vs. Scheduled Competitors. There are two principal approaches to defining the scope of prohibited competitive activity, each with distinct advantages and disadvantages:

Revenue-based test. A common formulation restricts the executive from employment by or provision of services to any entity that derives more than a specified percentage (typically ten to twenty percent) of its consolidated revenue from defined business activities. For example, the non-compete might prohibit Harding from providing services to any entity that derives more than fifteen percent (15%) of its annual consolidated revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecommunications operators. This approach casts a broader protective net and is self-updating: as the competitive landscape evolves and new competitors emerge, the restriction automatically applies to any entity meeting the revenue threshold, without the need to amend the agreement or update a list. The revenue-based test is generally favored by employers because it provides comprehensive and forward-looking protection.

Scheduled-competitor approach. Under this approach, the parties negotiate a fixed list of named competitors (typically eight to fifteen companies), and the non-compete restricts Harding's employment or service only with respect to those listed entities and their affiliates. This approach is narrower and is favored by executives because it provides certainty and limits the non-compete's practical reach. Harding can determine, at the time of signing, exactly which companies are covered and can make informed career decisions accordingly. The principal disadvantage of the scheduled-competitor approach is that the list can become stale quickly: new competitors may emerge through organic growth or M&A, existing competitors may be restructured, renamed, or acquired, and the competitive landscape may shift in ways that render the original list incomplete. Additionally, a scheduled list may be under-inclusive at the time of signing if the parties fail to identify all relevant competitors.

Hybrid approach. A hybrid formulation combines elements of both approaches: a scheduled list of named competitors, plus a catch-all provision covering any entity that derives more than a specified percentage of its revenue from the defined business activities. This approach provides the certainty of a named list while preserving the comprehensiveness and adaptability of the revenue-based test.

2. Defining the Relevant Business Activities. For Northgate, the relevant business activities that define the competitive landscape should encompass the three principal segments of NTP's business:

(a) Telecommunications services — including wireline and wireless telecommunications services, managed network services, voice and data connectivity, unified communications, and related services provided to enterprise or consumer customers;

(b) Telecommunications infrastructure — including the design, construction, operation, and maintenance of network equipment, fiber-optic networks, data center facilities serving telecom operators, and related infrastructure;

(c) Enterprise SaaS platforms serving telecommunications operators — including billing platforms, operations support systems, business support systems, network management solutions, customer experience management platforms, and related enterprise software provided to telecommunications operators or enterprises on a SaaS or cloud-based delivery model.

The definition of restricted activities must be drafted with care. It must be precise enough to survive an enforceability challenge — a New York court will not uphold a restriction that is vague or that sweeps in activities unrelated to the employer's legitimate competitive interests. At the same time, the definition must be broad enough to cover the competitive threats that NTP actually faces. Overly broad formulations such as "technology," "communications," "software," or "digital services" should be avoided, as they could sweep in non-competing businesses (e.g., social media companies, consumer software companies, general-purpose cloud providers) and invite an enforceability challenge.

3. Limitation on Role. An important drafting choice is whether the non-compete should restrict all employment by or service to a competitor, or only employment in roles where Harding could use Northgate's confidential information or compete directly with NTP's business.

Narrower formulations — for example, restricting only C-suite, advisory, board, or consulting roles at competitors — reduce enforceability risk because they are more closely tailored to the legitimate interest in preventing the executive from deploying confidential information in a senior decision-making capacity. However, narrower role-based restrictions provide less protection because they permit Harding to join a competitor in a nominally subordinate role while still bringing to bear the knowledge, relationships, and strategic insights acquired at NTP.

For a CEO-level executive, a broader restriction on any employment, service, advisory, or consulting relationship with a competitor is generally appropriate and defensible. The Group CEO's access to confidential information and strategic knowledge is so comprehensive that it cannot be compartmentalized — Harding would be in a position to apply NTP's confidential information regardless of his formal title or role at a competing entity. We recommend a broad restriction that covers employment, service as an officer, director, employee, consultant, advisor, partner, or agent of any competing entity, subject to the carve-outs discussed in Section D below.

4. Anticipated Counterparty Position. Harding and Hargrove & Liddell are likely to propose a scheduled list of approximately eight to ten named competitors, and to resist the revenue-based test on the grounds that it is overly broad, uncertain in application, and could restrict Harding from employment at companies that are only tangentially competitive with NTP. H&L may argue that a revenue-based test effectively gives NTP unilateral control over the scope of the non-compete, because NTP's entry into new business lines could expand the definition of restricted activities without Harding's consent.

H&L may also push for specific carve-outs, including: (a) a passive investment exception allowing Harding to own less than two percent (2%) of the outstanding equity of any publicly traded competitor; and (b) an exception permitting Harding to serve on the boards of directors of companies that are not competitors, without requiring NTP's prior consent.

5. Recommendation on Activity Scope. Opening position: Revenue-based test. The non-compete should restrict Harding from employment by or provision of services to any entity that derives more than fifteen percent (15%) of its consolidated annual revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecom operators, within the defined geographic scope and during the restricted period.

Recommended fallback: Revenue-based test with a narrower activity definition and a lower revenue threshold (e.g., ten percent (10%)), combined with a scheduled list of named competitors to provide clarity and certainty. The scheduled list would be attached as an exhibit to the agreement and would identify the principal competitors as of the date of execution. The revenue-based catch-all would apply in addition to the scheduled list to capture competitors not named on the list. Standard carve-outs for passive investments below two percent (2%) of outstanding public company shares should be included.

D. Carve-Outs and Exceptions

Regardless of the duration, geographic scope, and activity scope of the non-compete, the provision should include customary carve-outs and exceptions that are standard in CEO-level agreements and that improve enforceability by demonstrating that the restriction is tailored to NTP's legitimate interests:

Passive investments. The non-compete should include a standard carve-out permitting Harding to own less than two percent (2%) of the outstanding equity of any publicly traded company, including companies that would otherwise fall within the definition of a competitor. This carve-out is virtually universal in CEO-level non-competes and will not be contentious.

Board service. Consideration should be given to whether the non-compete permits Harding to serve on the boards of directors of non-competing companies during the restricted period. If such service is permitted, we recommend that it be conditioned on Harding's obtaining NTP's prior written consent, which consent shall not be unreasonably withheld. Board service at competing companies should remain prohibited during the restricted period.

Charitable, academic, and civic activities. A standard carve-out should be included permitting Harding to engage in charitable, academic, and civic activities — including service on the boards of charitable organizations, teaching, speaking engagements, and civic engagement — provided that such activities do not interfere with Harding's obligations under the non-compete and do not involve the disclosure of NTP's confidential information.

Government service. A carve-out for government employment or advisory roles should be included. Regulatory considerations may make it impractical or undesirable to restrict a former CEO from accepting government service, and such a restriction could face enforceability challenges on public policy grounds.

Termination without cause / resignation for good reason. In many modern public company CEO agreements, the enforceability of the non-compete is conditioned on the employer's continued payment of severance or other compensation during the restricted period. Specifically, if NTP terminates Harding without cause or Harding resigns for good reason, the non-compete may be conditioned on NTP's continued payment of the severance amount (or a specified portion thereof) during the non-compete period, effectively converting the non-compete into a paid restriction. This approach — sometimes referred to as a "pay-for-play" non-compete — is increasingly common in public company CEO agreements and offers several advantages:

• It improves enforceability by providing ongoing consideration for the non-compete obligation;

• It reduces the economic hardship on the executive, which is a factor courts consider in evaluating reasonableness;

• It gives NTP the option to release Harding from the non-compete (and stop paying severance) if NTP determines that the competitive risk no longer justifies the cost; and

• It aligns the restrictive covenant with the compensating severance payment, which is consistent with the expectations of institutional shareholders and proxy advisory firms.

We recommend including a "pay-for-play" mechanism as part of the non-compete structure, with the specific terms to be coordinated with the severance provisions of the employment agreement.

IV. Non-Solicitation Covenant

In addition to the non-competition covenant, the Harding employment agreement should include non-solicitation provisions restricting Harding's ability to solicit NTP's employees and customers following his departure. Non-solicitation covenants serve a distinct protective function from non-competes: they target the specific competitive harm that arises when a departing executive uses knowledge of the employer's workforce and customer base to recruit key employees or divert business relationships to a new employer or venture.

A. Non-Solicitation of Employees

1. Duration. Market practice for CEO-level employee non-solicitation covenants ranges from twelve to twenty-four months post-termination. Twenty-four months is common for senior executives and is generally enforceable under New York law, even in cases where a longer non-compete might be questioned. This is because employee non-solicitation covenants are viewed as less restrictive than non-competes: they do not prevent the executive from working in any particular industry or for any particular employer, but only restrict the executive from actively recruiting the former employer's employees.

Harding's existing Marlowe Asset Management employment agreement likely includes an employee non-solicitation provision of comparable duration, though the specific terms must be confirmed from the detailed analysis of the Marlowe Asset Management agreement in the separate memorandum being prepared for June 9, 2024.

2. Scope. The employee non-solicitation covenant should cover the direct or indirect solicitation, hiring, engagement, or recruitment of NTP employees (including full-time and part-time employees, as well as independent contractors and consultants) who were employed by or engaged by NTP or any of its affiliates during the final twelve (12) months of Harding's employment with NTP. The covenant should prohibit Harding from soliciting such individuals to leave NTP's employ or to terminate their consulting or contracting relationships with NTP.

To ensure enforceability and to reflect market practice, the following carve-outs should be included:

(a) General solicitations. The non-solicitation should not apply to general solicitations of employment that are not specifically directed at NTP employees — for example, job postings on publicly available job boards, advertisements in industry publications, or general recruitment campaigns conducted by a search firm on behalf of Harding's future employer. This carve-out is standard and recognizes that an executive cannot reasonably be expected to prevent NTP employees from responding to general job postings.

(b) Involuntarily separated employees. The non-solicitation should not apply to individuals who were involuntarily separated from NTP (i.e., terminated by NTP without cause or as part of a reduction in force) prior to the date of the solicitation. Once NTP has terminated the employment relationship, the employer's interest in protecting that relationship is substantially diminished, and a restriction on the executive's ability to hire such individuals is unlikely to be enforced.

3. Recommendation. Opening position: Twenty-four (24) months post-termination, covering all employees, consultants, and independent contractors of NTP and its affiliates. This duration is well within the range upheld by New York courts for senior executive non-solicitation covenants and provides robust protection for NTP's workforce during the critical transition period following a CEO departure.

Anticipated counterparty position: Harding and H&L may seek to reduce the duration to eighteen (18) months and to narrow the scope to cover only employees (excluding consultants and independent contractors). They may also seek to limit the covered population to employees who reported directly or indirectly to Harding or with whom Harding had material contact during his employment.

We note that the employee non-solicitation covenant is generally less contentious than the non-compete, and we believe that a twenty-four-month period is defensible and achievable in negotiations, even if the non-compete duration is ultimately shortened.

B. Non-Solicitation of Customers

1. Duration and Scope. Customer non-solicitation covenants are common in CEO employment agreements at service companies and are an important complement to the non-compete. A customer non-solicitation provision restricts the executive from soliciting, diverting, or servicing the employer's customers or prospective customers for a specified period following termination.

For the Harding agreement, we recommend a customer non-solicitation covenant of twenty-four (24) months post-termination, covering:

(a) Customers — any person or entity that was a customer of NTP or any of its affiliates during the final twelve (12) months of Harding's employment; and

(b) Prospective customers — any person or entity with whom NTP or any of its affiliates was engaged in active discussions, negotiations, or pursuit of a business relationship during the final twelve (12) months of Harding's employment.

Customer non-solicitation covenants are generally viewed more favorably by New York courts than non-competes because they target a narrower interest — the protection of specific customer relationships rather than the prohibition of competitive activity generally. A customer non-solicit permits the executive to work for a competitor; it simply prevents the executive from using knowledge of NTP's customer relationships to divert business away from NTP. This narrower scope makes customer non-solicits easier to enforce and supports a longer duration.

2. Anticipated Counterparty Position. Harding and H&L may push back on the customer non-solicitation covenant in several ways:

First, H&L may argue that the customer non-solicit is unnecessary in the CEO context. Unlike a sales executive or a regional manager who maintains personal customer relationships, a CEO of a publicly traded telecommunications company with thousands of enterprise customers does not maintain the kind of individual, personal customer relationships that a non-solicitation covenant is designed to protect. H&L may contend that any customer relationships Harding develops as CEO are institutional rather than personal, and that NTP's customer relationships will survive Harding's departure without the need for a restrictive covenant.

Second, if H&L accepts a customer non-solicit in principle, they may seek to shorten the duration to twelve to eighteen months and to narrow the scope to customers with whom Harding had direct, material personal contact during his employment — as opposed to the broader universe of all NTP customers.

Third, H&L may argue that the non-compete, if in effect, already adequately protects NTP's customer relationships, and that a separate customer non-solicit is redundant and unnecessary.

3. Recommendation. Opening position: Twenty-four (24) months; covering customers and prospective customers of NTP and its affiliates.

Recommended fallback: Eighteen (18) months; limited to customers with whom Harding had material personal contact or over whom Harding exercised direct oversight during the final twelve (12) months of his employment. This narrower formulation addresses H&L's likely objection regarding the institutional nature of CEO-level customer relationships while still providing meaningful protection for NTP's most significant customer relationships — those that Harding, as CEO, would have personally cultivated or overseen.

V. Non-Disparagement Covenant

A. Typical Structure

The non-disparagement covenant is a standard provision in C-suite employment agreements and serves to protect the reputational interests of both parties following the termination of the employment relationship. The provision should be structured as a mutual, perpetual obligation: both NTP (acting through its officers, directors, and authorized spokespersons) and Harding agree not to make, publish, or cause to be made or published any disparaging, defamatory, or derogatory statements, whether oral or written, about the other party.

The non-disparagement provision should include the following standard carve-outs:

(a) Legally compelled statements. Truthful statements required by applicable law, regulation, or legal process, including testimony provided under oath or pursuant to a subpoena, court order, or regulatory inquiry. Neither party should be restricted from providing truthful testimony or complying with legal obligations.

(b) Statements in connection with legal proceedings. Statements made in connection with any legal proceeding, arbitration, or dispute resolution process between the parties. This carve-out is necessary to preserve the parties' ability to litigate or arbitrate disputes without the non-disparagement obligation being used as a sword to suppress relevant evidence or legal arguments.

(c) Internal communications. Internal communications by NTP's officers, directors, and employees in the ordinary course of business. NTP must be able to discuss Harding's departure and the circumstances surrounding it with its board, management team, investors, and advisors without triggering a non-disparagement claim.

B. Anticipated Agreement

The non-disparagement covenant is typically the least contested restrictive covenant provision in C-suite negotiations. Both sides have strong reputational incentives to agree to a mutual non-disparagement obligation: Harding has an interest in ensuring that NTP does not publicly characterize his departure in a negative light, and NTP has an interest in preventing Harding from making statements that could damage the company's reputation, stock price, or business relationships. In our experience, non-disparagement provisions in CEO agreements are typically agreed in principle at the term sheet stage with minimal negotiation, and the drafting process involves only routine wordsmithing.

C. Recommendation. We recommend drafting the non-disparagement covenant as a mutual, perpetual obligation with the standard carve-outs described above for legal proceedings, regulatory requirements, and truthful testimony. We anticipate that this provision will be agreed upon without significant negotiation, and we do not expect it to be a contentious point in discussions with H&L.

VI. Garden Leave Provisions

A. Purpose and Structure

Garden leave is a mechanism by which the employer, upon giving or receiving notice of termination, places the executive on paid leave for all or a portion of the notice period. During the garden leave period, the executive remains employed by the company and continues to receive compensation and benefits, but is relieved of active duties, is excluded from the workplace, is required to remain available to provide transition assistance if requested, and is restricted from working for or providing services to any other employer.

In the United Kingdom, garden leave is the primary mechanism for post-notice restriction of executive activity and is well-established in law and market practice. In US CEO agreements, garden leave is less commonly used as a standalone provision, but it is increasingly incorporated in cross-border executive arrangements — particularly at companies with dual US/UK operations, where the US and UK employment agreements must be coordinated. NTP's dual-listed, dual-headquarters structure makes garden leave a natural component of the Harding employment agreement.

Garden leave can serve as a partial substitute for, or complement to, a post-termination non-compete. Because the executive is still employed (and compensated) during garden leave, the restriction on competitive activity during that period does not face the same enforceability challenges as a post-termination non-compete. From a practical standpoint, if Harding is placed on garden leave for six months and is then subject to a twelve-month post-termination non-compete, the total effective restricted period is eighteen months — with the first six months being a paid restriction and the final twelve months being an unpaid (or severance-funded) restriction. This structure can improve the overall enforceability of the restrictive covenant package by demonstrating that NTP is providing consideration for the restriction and is not imposing an undue economic hardship on the executive.

B. Key Drafting Considerations

1. Duration. The market range for garden leave duration in CEO-level agreements is three to twelve months. For a CEO at a company of NTP's scale, six months is within the mainstream of market practice and represents a reasonable period during which confidential information may retain its most acute competitive sensitivity and during which an orderly transition of the CEO role can be effected. Twelve months is aggressive and at the upper end of market practice; it is more commonly seen in the UK for very senior executives but is unusual in US agreements.

2. Compensation During Garden Leave. The treatment of compensation during garden leave is a critical negotiation point and has significant cost implications for NTP. There are three principal approaches:

(a) Base salary only. The executive receives only base salary during the garden leave period, with no bonus, equity vesting, or benefits continuation. This approach minimizes NTP's cost but creates an economic penalty for the executive and may be resisted.

(b) Base salary plus benefits. The executive receives base salary and continuation of employment benefits (health insurance, retirement contributions, etc.) during the garden leave period. This is the market norm for CEO-level garden leave and represents a reasonable middle ground.

(c) Full compensation. The executive receives full compensation during the garden leave period, including base salary, a pro-rata bonus (or a guaranteed minimum bonus), benefits continuation, and continued vesting of long-term incentive awards. This approach is the most generous to the executive and the most costly to NTP.

NTP's interest is to limit garden leave compensation to base salary only, to control costs and to preserve negotiating leverage on other elements of the compensation package. Harding's interest is to receive full compensation during garden leave, to avoid any economic penalty for the restricted period. The market norm for CEO-level garden leave at companies of NTP's size is base salary plus benefits continuation; bonus eligibility during garden leave is typically the subject of negotiation and may depend on whether the garden leave period runs concurrently with the non-compete period.

3. Concurrent vs. Sequential Running with Non-Compete. The relationship between the garden leave period and the post-termination non-compete period is a significant structural decision:

Concurrent running. If the garden leave period runs concurrently with the first portion of the post-termination non-compete, the total restricted period is not extended beyond the non-compete duration. For example, if the non-compete is eighteen months and garden leave is six months, the executive is on paid garden leave for the first six months of the eighteen-month non-compete period, and is then subject to an unpaid non-compete for the remaining twelve months. This approach is economically efficient for the employer (it pays garden leave compensation but receives restrictive coverage during that period) and is preferred by the executive (because it does not extend the total restricted period beyond the non-compete duration).

Sequential running. If the garden leave period runs sequentially — i.e., the garden leave period expires first, and the non-compete period then begins to run — the total restricted period is extended. For example, if garden leave is six months and the non-compete is eighteen months, the total restricted period is twenty-four months. This approach is more protective for the employer but may face enforceability challenges if the combined period is viewed as unreasonable. It is also more likely to be resisted by the executive.

We recommend concurrent running for the Harding agreement. The concurrent structure allows NTP to argue that the total restricted period is limited to the duration of the non-compete (e.g., eighteen months), with the added benefit that the first six months of restriction are compensated through garden leave. This structure is more defensible, more palatable to the executive, and more consistent with the approach taken in UK garden leave arrangements.

4. Interaction with UK Service Agreement. The garden leave provisions in the US employment agreement must be coordinated with the UK service agreement being prepared by Moorfield Bates LLP. Simon Aldridge (partner) and Hannah Carmichael (associate) at Moorfield Bates (1 Moorgate, London EC2R 6AB) are advising NTP on the UK service agreement and should be consulted on garden leave provisions to ensure consistency between the US and UK arrangements.

Under English law, garden leave is well-established and enforceable, provided that the employer has an express contractual right to place the executive on garden leave. The UK service agreement should contain its own garden leave clause, triggered by NTP's giving of notice, that is consistent with the garden leave provisions in the US employment agreement. The two agreements should be coordinated to avoid any gap or inconsistency in coverage — for example, if Harding is placed on garden leave under the US agreement, the UK service agreement should provide for a corresponding suspension of duties under the UK arrangement.

C. Anticipated Counterparty Position

Harding and H&L will likely demand a garden leave structure that maximizes the executive's economic protection while minimizing the effective duration of the post-garden-leave unpaid non-compete. Specifically, we anticipate that H&L will propose:

• Twelve (12) months of garden leave at full compensation (base salary plus pro-rata bonus plus benefits continuation), running concurrently with any non-compete;

• If the non-compete is twelve months and garden leave is twelve months (concurrent), the effect is that Harding is compensated during the entire restricted period and the net post-garden-leave unpaid non-compete is zero.

This framing allows Harding to argue that he is accepting a "twelve-month non-compete" (matching the Marlowe Asset Management benchmark) while ensuring that he is compensated throughout the restricted period. It is an economically attractive position for the executive and a commercially challenging one for NTP, as it eliminates any meaningful economic consequence for Harding during the restricted period.

D. Recommendation. Opening position: Six (6) months of garden leave at base salary only, running concurrently with the first six months of a twenty-four-month non-compete

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE
MEMORANDUM
Date: June 8, 2024
To: Renata Vasquez, Partner, Calderwood & Harkness LLP
From: James Underwood, Associate, Calderwood & Harkness LLP
Re: Restrictive Covenant Drafting Considerations for C-Suite Telecom Executives — Northgate Telecommunications PLC CEO Employment Agreement (Marcus Elliot Harding)
Matter No.: 1022-00004
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of the addressee in connection with the referenced matter and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
I. Executive Summary
The purpose of this memorandum is to survey the restrictive covenant drafting considerations specific to C-suite telecom executives in connection with the proposed employment agreement between Northgate Telecommunications US, Inc. ("NTP US" or "Northgate") and Marcus Elliot Harding ("Harding") for the position of Group Chief Executive Officer. This memorandum is intended to provide a comprehensive framework for the restrictive covenant package to be included in the proposed CEO employment agreement, including analysis of market practice, enforceability considerations, anticipated counterparty positions, and recommended drafting strategies.
The proposed employment agreement will be governed by the laws of the State of New York. Harding will be based at Northgate's principal US offices at 600 Lexington Avenue, 38th Floor, New York, NY 10022. It is anticipated that approximately eighty percent (80%) of Harding's duties will be performed in the United States, with approximately twenty percent (20%) performed in the United Kingdom at Northgate PLC's London headquarters located at 45 Canary Wharf Tower, One Canada Square, London E14 5AB. This split in duties between the US and UK, and the dual-contract structure it necessitates, has significant implications for the drafting and enforceability of restrictive covenants, which are addressed throughout this memorandum and specifically in Section X.
The key restrictive covenant provisions that must be addressed in the employment agreement are as follows:
(a) Non-Competition — restrictions on Harding's ability to work for or provide services to competitors of Northgate following termination of his employment;
(b) Non-Solicitation — restrictions on Harding's ability to solicit Northgate employees and customers following termination;
(c) Non-Disparagement — mutual obligations prohibiting disparaging statements;
(d) Garden Leave — a mechanism permitting Northgate to place Harding on paid leave during his notice period while restricting his activities; and
(e) Confidentiality and Proprietary Information — perpetual obligations restricting Harding's use and disclosure of Northgate's confidential and proprietary information.
A significant consideration in this engagement is the existence of Harding's current restrictive covenants at Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management" or "VDHI"), headquartered at 200 Technology Way, Suite 4000, San Jose, CA 95110 (NYSE: VDHI). Harding's current Marlowe Asset Management employment agreement includes a twelve-month post-termination non-compete limited in geographic scope to the United States. This existing covenant will serve as an important benchmark in negotiations, as Harding's personal counsel, Victoria Hargrove of Hargrove & Liddell LLP ("H&L"), can be expected to use the Marlowe Asset Management non-compete as a reference point and to resist any Northgate restrictive covenant that is materially more expansive in duration, geographic scope, or scope of activity.
This memorandum should be read in conjunction with the companion memorandum on the enforceability of non-compete agreements under New York law, prepared by Devon Archer of this office and dated June 6, 2024. That memorandum addresses in detail the current state of New York law regarding non-compete enforceability, pending legislative developments, and the specific enforceability risks associated with each element of the proposed restrictive covenant package. A separate memorandum analyzing Harding's existing Marlowe Asset Management employment agreement and the potential applicability of his Marlowe Asset Management restrictive covenants to the proposed transition to Northgate is being prepared and is expected to be completed on or about June 9, 2024.
II. Context: Northgate's Business, Harding's Profile, and the Competitive Landscape
A full understanding of the factual context is essential to drafting restrictive covenants that are both commercially appropriate and legally enforceable. The scope and enforceability of restrictive covenants under New York law are evaluated by reference to the employer's legitimate business interests, the executive's role and access to confidential information, and the competitive landscape in which the parties operate. This section sets out the relevant background.
A. Northgate's Business and Competitive Position
Northgate Telecommunications PLC ("NTP" or "Northgate") is a UK-headquartered publicly traded telecommunications and software-as-a-service ("SaaS") company. NTP is dual-listed on the London Stock Exchange (LON: NTP) and the New York Stock Exchange (ADR: NYSE: NTPC). As of June 2024, NTP's market capitalization is approximately £8.7 billion (approximately $11.1 billion at current exchange rates). For the fiscal year ended December 31, 2023, NTP reported revenue of approximately £4.26 billion ($5.43 billion) and EBITDA of approximately £1.14 billion ($1.45 billion). NTP employs approximately 22,500 people globally across its various business lines and geographies.
NTP's business operations span three principal segments, each of which is critical to defining the competitive landscape that the restrictive covenants must address:
(a) Telecommunications Services — NTP provides wireline and wireless telecommunications services to enterprise and consumer customers, primarily in the United Kingdom, Western Europe, and, through its US subsidiary NTP US, in North America. This segment includes managed network services, voice and data connectivity, and unified communications solutions.
(b) Telecommunications Infrastructure — NTP designs, builds, operates, and maintains telecommunications infrastructure, including fiber-optic networks, data center facilities serving telecom operators, and network equipment. This segment serves both NTP's own telecommunications services business and third-party telecom operators.
(c) Enterprise SaaS Platforms Serving Telecom Operators — NTP develops and markets enterprise SaaS platforms that provide billing, operations support systems ("OSS"), business support systems ("BSS"), network management, and customer experience management solutions to telecommunications operators globally. This segment has been a key growth driver for NTP and represents a significant portion of the company's strategic value.
These three categories define the competitive landscape that the restrictive covenants must address. Any definition of "competing business" or "restricted activity" in the non-compete provision should encompass all three segments, as a CEO-level executive would have access to confidential information and strategic plans across the entire business.
NTP maintains dual US/UK operations, with its primary US operations headquartered in New York. The company has significant customer relationships and competitive activity in North America and Western Europe, as well as an emerging and growing presence in the Asia-Pacific region, where NTP has been expanding through a combination of organic growth and strategic acquisitions. The breadth of NTP's geographic footprint is directly relevant to the geographic scope of the proposed non-compete covenant.
B. Harding's Profile and Competitive Sensitivity
Marcus Elliot Harding is fifty-two years old and has a twenty-eight-year career spanning the telecommunications and technology sectors. His career trajectory and the depth and breadth of his experience make him one of the most sought-after executive candidates in the global telecom industry, which in turn creates significant competitive sensitivity around his prospective appointment and subsequent departure from Northgate.
Harding currently serves as President and Chief Operating Officer of Marlowe Asset Management Digital Holdings, Inc. (NYSE: VDHI), a US-based technology and telecommunications conglomerate with a market capitalization of approximately $34 billion. At Marlowe Asset Management, Harding is widely credited with leading the company's strategic pivot from legacy telecommunications services to enterprise SaaS, a transformation that resulted in growth of 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 is directly relevant to his prospective role at Northgate, where the enterprise SaaS segment is a central part of the company's growth strategy.
Prior to his tenure at Marlowe Asset Management, Harding served as Executive Vice President of Global Operations at Meridian Wireless Corp. from 2010 to 2017, where he was responsible for overseeing network operations, infrastructure development, and enterprise client relationships across North America and Europe.
As the prospective Group Chief Executive Officer of Northgate, Harding would occupy the most senior executive position in the organization and would have access to the most sensitive competitive information across all business lines and geographies. This information would include, but would not be limited to:
•  Strategic plans and long-range business strategy across all three business segments;
•  Pricing methodologies, bid strategies, and customer-specific pricing arrangements;
•  Customer relationships, including the identity of key customers, the terms of customer contracts, customer pipeline data, and the status of ongoing customer negotiations;
•  Technology roadmaps, product development timelines, and intellectual property strategies;
•  Financial projections, budgets, and non-public financial performance data;
•  M&A pipeline, including potential acquisition targets, valuation analyses, and deal terms under negotiation;
•  Personnel information, including compensation data, talent assessments, and succession plans for senior executives;
•  Board-level deliberations and strategies communicated to or formulated by the CEO.
The breadth and sensitivity of a CEO's access to confidential information is qualitatively different from that of even the most senior subordinate executives. This distinction is well-recognized in the case law and justifies more expansive restrictive covenants — in terms of duration, geographic scope, and scope of activity — than would be appropriate for lower-tier executives. As discussed in Devon Archer's companion memorandum, New York courts have consistently recognized that the unique nature of a CEO's role and access to information supports broader and longer-duration restrictive covenants.
C. Harding's Existing Restrictive Covenants at Marlowe Asset Management
Harding's current employment agreement with Marlowe Asset Management Digital Holdings, Inc. includes a twelve-month post-termination non-compete with geographic scope limited to the United States. Based on our preliminary review, the Marlowe Asset Management non-compete restricts Harding from engaging in activities competitive with Marlowe Asset Management's business within the United States for a period of twelve months following termination of his employment, regardless of the reason for termination. The precise scope of the activity restriction and any carve-outs in the Marlowe Asset Management agreement are being analyzed in the separate memorandum on Harding's existing Marlowe Asset Management agreement, which is expected to be completed on June 9, 2024.
The existence and terms of the Marlowe Asset Management non-compete have two significant implications for the Northgate negotiations:
First, Harding's personal counsel, Victoria Hargrove of Hargrove & Liddell LLP, can be expected to use the Marlowe Asset Management non-compete as a benchmark and to resist any Northgate restrictive covenant that is materially more expansive in duration or scope. From Harding's perspective, the fact that he accepted a twelve-month, US-only non-compete at a company with a market capitalization of approximately $34 billion — more than three times the size of Northgate — establishes a precedent that Northgate's covenant should be no broader. We should be prepared to counter this argument by distinguishing the scope of the CEO role at Northgate (which is global, unlike the COO role at Marlowe Asset Management) and by emphasizing the broader geographic footprint of Northgate's competitive activity.
Second, the Marlowe Asset Management non-compete must be analyzed for its potential applicability to Harding's transition to Northgate. If the Marlowe Asset Management non-compete is triggered by Harding's departure from Marlowe Asset Management, and if Northgate's business is deemed competitive with Marlowe Asset Management's business within the United States, the Pemberton Investors could theoretically restrict Harding from assuming the CEO role at Northgate for up to twelve months following his departure from Marlowe Asset Management. This analysis is being conducted separately and is addressed in the forthcoming memorandum on Harding's existing Marlowe Asset Management agreement.
III. Non-Competition Covenant
The non-competition covenant is the most significant, most scrutinized, and most heavily negotiated restrictive covenant in any C-suite employment agreement. It is also the provision most likely to face an enforceability challenge if the employment relationship ends in a disputed termination. The following subsections address the key drafting considerations for the non-compete provision in the Harding employment agreement, organized by duration, geographic scope, scope of prohibited activities, and carve-outs.
A. Duration: Market Practice for C-Suite Telecom Executives
1. General Market Range.  Non-competition periods for public company CEOs in the US telecommunications sector typically range from twelve to twenty-four months following termination of employment. The appropriate duration in any given case depends on a combination of factors, including the nature and sensitivity of the confidential information to which the executive has access, the pace of change and innovation in the relevant industry (which affects the "shelf life" of confidential information), the geographic scope and competitive intensity of the employer's business, the executive's bargaining position, and market norms within the relevant industry and peer group.
Based on our review of publicly disclosed CEO employment agreements at US-listed and dual-listed telecommunications and technology companies, we observe the following market trends:
•  Twelve months is the most common duration for large-cap public company CEOs and is increasingly the market norm, particularly for companies with a significant UK governance overlay. A twelve-month period aligns with the prevailing expectation in the institutional shareholder community that executive employment terms should be reasonable and not unduly restrict executive mobility. Companies including Camberwell Enterprises, Northgate Enterprises, and Tarrant Corporation have adopted twelve-month CEO non-competes in recent agreements.
•  Twenty-four months is at the upper end of market practice and is more commonly seen in private equity-backed, founder-led, or mid-cap companies where the CEO's departure poses a heightened competitive risk. Twenty-four months remains defensible for public company CEOs, particularly those in highly competitive industries such as telecommunications and SaaS, where the CEO's knowledge of technology roadmaps, pricing strategies, and M&A plans may retain competitive value for an extended period. However, twenty-four-month covenants face increasing scrutiny from proxy advisory firms and institutional shareholders, and from courts evaluating enforceability.
•  Eighteen months represents a middle-ground position that has gained traction in recent years as a compromise between the employer's desire for robust competitive protection and the executive's interest in mobility. Several recent CEO agreements at dual-listed telecommunications companies — including agreements at companies of comparable size and complexity to Northgate — have adopted eighteen-month non-compete periods.
2. UK Corporate Governance Code Considerations.  As a company listed on the London Stock Exchange, Northgate is subject to the UK Corporate Governance Code (the "Code"). While the Code does not have the force of law, it operates on a "comply or explain" basis, and non-compliance with its provisions can draw adverse attention from institutional shareholders, proxy advisory firms, and the financial press.
The UK Corporate Governance Code 2024, Provision 40, provides that executive notice periods should be set at twelve months or less, and that remuneration committees should avoid longer notice periods except where circumstances justify a departure from this norm. While Provision 40 does not directly regulate post-termination restrictive covenants — it addresses notice periods during ongoing employment — proxy advisory firms and institutional shareholders increasingly view post-termination restrictive covenants through the same lens. A post-termination non-compete that significantly exceeds the notice period may be perceived as inconsistent with the spirit of the Code, even if it does not technically violate any provision.
For a company like Northgate, cross-listed on both the London Stock Exchange and the NYSE, the Remuneration Committee — chaired by Geoffrey Stanton — must consider the reaction of both US and UK institutional shareholders to the proposed restrictive covenant package. NTP's top institutional shareholders 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 UK-based investors in this group — particularly Caledonian, Pemberton, and Thornbury, which collectively hold approximately 20.1% of outstanding shares — will be particularly sensitive to restrictive covenants that appear inconsistent with UK governance norms. While these shareholders are unlikely to object to a reasonable non-compete in the range of twelve to eighteen months, a twenty-four-month non-compete could attract adverse commentary, particularly if it is viewed as being coupled with a generous severance package.
Additionally, the proxy advisory firms ISS (Thackeray Health IT) and Tarrant Partners LLC, which provide voting recommendations to institutional shareholders, do not specifically cap non-compete duration in their guidelines. However, both firms evaluate the overall reasonableness of severance and restrictive covenant packages in the context of their "say on pay" and executive compensation analyses. An aggressive non-compete, when combined with other elements of the total compensation package, could contribute to a negative say-on-pay recommendation.
3. New York Enforceability Considerations.  Under New York law, non-competition agreements are enforceable only to the extent that they are reasonable in duration, geographic scope, and scope of activity, and are necessary to protect the employer's legitimate business interests. The recognized legitimate business interests under New York law include: (a) the protection of trade secrets and confidential information; (b) the protection of customer relationships; (c) the protection of the employer's investment in the employee's unique or extraordinary services; and (d) the prevention of unfair competition.
For a CEO-level executive in the telecommunications and SaaS sector, New York courts have generally upheld non-competition agreements of up to twenty-four months, though each case is analyzed on its own facts and circumstances. The courts consider the totality of the circumstances, including the executive's role, the sensitivity of the information to which the executive had access, the pace of change in the relevant industry, and the scope of the restriction in relation to the employer's actual competitive activity.
A significant enforceability risk arises from pending New York legislation that would impose an outright ban on non-competition agreements. This legislation, if enacted, could render any non-compete provision in the Harding agreement unenforceable as a matter of New York law. The legislation was vetoed once by the Governor but is expected to be reintroduced. As of June 2024, the status of this legislation remains uncertain. This risk is addressed in detail in Devon Archer's companion memorandum dated June 6, 2024. We note that, even if such legislation is enacted, it may include exceptions for senior executives, or it may include a grandfather provision for agreements entered into before the effective date. However, given the uncertainty, we recommend that the agreement be drafted with this risk in mind.
From a drafting perspective, we recommend the following measures to maximize enforceability:
•  Include a severability/blue-pencil clause expressly authorizing any court of competent jurisdiction to modify (rather than void) any restrictive covenant found to be unreasonably broad in duration, geographic scope, or scope of activity. New York courts have the authority to blue-pencil restrictive covenants, and the inclusion of an express authorization in the agreement facilitates this remedy. See Section VIII.E below.
•  Include a choice-of-law provision designating New York law as the governing law for the employment agreement and all restrictive covenants contained therein. This ensures that the covenants are analyzed under a consistent legal framework and prevents Harding from forum-shopping in a more restrictive jurisdiction.
•  Tie the restrictive covenants to specific, identified legitimate business interests — in particular, the protection of trade secrets and confidential information, customer relationships, and NTP's investment in Harding's unique services as Group CEO.
•  Where possible, condition the enforcement of the non-compete on NTP's continued payment of consideration (such as severance or garden leave compensation) during the restricted period, as discussed in Sections III.D and VI below.
4. Recommendation on Duration.  Based on the foregoing analysis of market practice, UK governance considerations, and New York enforceability principles, we recommend the following positions on non-compete duration:
Opening position: Twenty-four (24) months post-termination. This represents the maximum defensible duration and provides the strongest protection for Northgate's competitive interests, particularly given the extraordinary breadth and depth of confidential information to which a Group CEO would have access. The twenty-four-month period accounts for the extended "shelf life" of strategic, M&A, and technology roadmap information in the telecom/SaaS sector.
Anticipated counterparty position: Harding and H&L will almost certainly demand twelve (12) months, mirroring the Marlowe Asset Management non-compete. They will argue that twelve months is the prevailing market standard for large-cap public company CEOs, that it is consistent with UK governance expectations, and that it is the duration Harding accepted at a much larger company (Marlowe Asset Management, with a market capitalization approximately three times that of NTP). H&L may also reference the pending New York non-compete ban legislation as a reason to minimize the duration.
Recommended fallback: Eighteen (18) months. This duration balances Northgate's legitimate protective interests with enforceability concerns and Harding's anticipated resistance. An eighteen-month non-compete is well within the range upheld by New York courts for CEO-level executives and can be positioned as a reasonable middle ground. When paired with a garden leave mechanism (see Section VI below), an eighteen-month non-compete can create a total effective restricted period that provides robust protection while offering Harding partial compensation during the initial months of restriction.
B. Geographic Scope
1. Worldwide vs. Limited Geographic Scope.  The geographic scope of the non-compete provision is a critical enforceability variable. Under New York law, the geographic scope of a non-compete must bear a reasonable relationship to the employer's business operations and the competitive activity from which the employer seeks protection. A geographic scope that extends beyond the employer's actual area of competitive activity will be viewed as overreaching and may be narrowed or voided by a court.
We have considered three alternative formulations for the geographic scope of the Harding non-compete:
Option 1: Worldwide. A worldwide non-compete is the most protective formulation and is appropriate where the employer's business operations and competitive activity are truly global. NTP operates across multiple continents, serves customers worldwide, and competes with global telecommunications and SaaS companies in markets spanning North America, Western Europe, and the Asia-Pacific region. These facts support a worldwide scope. However, a worldwide non-compete faces the greatest enforceability risk under New York law. Courts will scrutinize whether the employer's operations and competitive activity genuinely extend to all geographic areas covered by the restriction. A court may conclude that NTP's competitive presence in certain regions (e.g., Sub-Saharan Africa, Latin America, Eastern Europe) is too attenuated to justify restricting Harding from competing in those markets. Moreover, a worldwide restriction is more likely to be perceived as a punitive restraint on Harding's mobility rather than a targeted protection of NTP's legitimate interests.
Option 2: North America and Western Europe. This formulation covers the vast majority of NTP's revenue base and competitive activity. NTP's primary US operations are headquartered in New York, and the company maintains significant customer relationships and competitive presence throughout North America and Western Europe. This geographic scope is substantially more defensible under New York law because it is closely tailored to NTP's actual competitive footprint, while still providing meaningful protection in the markets where NTP is most vulnerable to competitive harm from Harding's departure.
Option 3: Functional definition. A third alternative defines the geographic scope by reference to NTP's actual business presence rather than by naming specific regions: e.g., "any geography in which Northgate or any of its affiliates derives revenue from, or conducts business operations related to, any of the Restricted Activities." This formulation is self-updating — it automatically expands or contracts as NTP's geographic footprint evolves — and is tied directly to NTP's actual competitive interests. However, it introduces uncertainty for Harding (who cannot determine ex ante the precise scope of the restriction), which may reduce enforceability and will certainly be resisted by H&L.
2. Anticipated Counterparty Position.  Harding's existing Marlowe Asset Management non-compete is limited in geographic scope to the United States. Hargrove & Liddell can be expected to resist any expansion beyond this scope, arguing that: (a) the United States is the primary market for NTP's US subsidiary, which is the contracting entity; (b) a broader geographic scope is inconsistent with Harding's existing covenant and market practice; and (c) to the extent NTP seeks protection in the UK and Europe, those interests should be addressed in the UK service agreement governed by English law.
Harding may also propose a scheduled-competitor approach (identifying a list of specific companies) in lieu of or in addition to geographic limitations. This approach is discussed in Section C below.
3. Recommendation on Geographic Scope.  Opening position: Worldwide. This is consistent with NTP's global operations and the Group CEO's access to confidential information concerning all geographic markets in which NTP operates. Even if ultimately modified, starting with a worldwide scope establishes NTP's position and provides negotiating room.
Recommended fallback: North America and Western Europe. This formulation covers NTP's core markets and the geographies where competitive harm from Harding's departure would be most acute. It is substantially more defensible under New York law than a worldwide restriction while still providing meaningful protection beyond the US-only scope of the Pemberton Investors. If H&L insists on narrowing further to the United States alone, we should resist strenuously on the ground that the Group CEO role is fundamentally different from the US-focused COO role at Marlowe Asset Management, and that NTP's European operations and competitive activity make a US-only restriction inadequate.
C. Scope of Prohibited Activities (Activity-Based Restrictions)
In addition to defining the geographic scope and duration of the non-compete, the agreement must define the scope of prohibited activities — i.e., the types of business activities with which Harding is restricted from competing. This is often the most complex and contentious element of the non-compete provision.
1. Revenue-Based Test vs. Scheduled Competitors.  There are two principal approaches to defining the scope of prohibited competitive activity, each with distinct advantages and disadvantages:
Revenue-based test. A common formulation restricts the executive from employment by or provision of services to any entity that derives more than a specified percentage (typically ten to twenty percent) of its consolidated revenue from defined business activities. For example, the non-compete might prohibit Harding from providing services to any entity that derives more than fifteen percent (15%) of its annual consolidated revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecommunications operators. This approach casts a broader protective net and is self-updating: as the competitive landscape evolves and new competitors emerge, the restriction automatically applies to any entity meeting the revenue threshold, without the need to amend the agreement or update a list. The revenue-based test is generally favored by employers because it provides comprehensive and forward-looking protection.
Scheduled-competitor approach. Under this approach, the parties negotiate a fixed list of named competitors (typically eight to fifteen companies), and the non-compete restricts Harding's employment or service only with respect to those listed entities and their affiliates. This approach is narrower and is favored by executives because it provides certainty and limits the non-compete's practical reach. Harding can determine, at the time of signing, exactly which companies are covered and can make informed career decisions accordingly. The principal disadvantage of the scheduled-competitor approach is that the list can become stale quickly: new competitors may emerge through organic growth or M&A, existing competitors may be restructured, renamed, or acquired, and the competitive landscape may shift in ways that render the original list incomplete. Additionally, a scheduled list may be under-inclusive at the time of signing if the parties fail to identify all relevant competitors.
Hybrid approach. A hybrid formulation combines elements of both approaches: a scheduled list of named competitors, plus a catch-all provision covering any entity that derives more than a specified percentage of its revenue from the defined business activities. This approach provides the certainty of a named list while preserving the comprehensiveness and adaptability of the revenue-based test.
2. Defining the Relevant Business Activities.  For Northgate, the relevant business activities that define the competitive landscape should encompass the three principal segments of NTP's business:
(a) Telecommunications services — including wireline and wireless telecommunications services, managed network services, voice and data connectivity, unified communications, and related services provided to enterprise or consumer customers;
(b) Telecommunications infrastructure — including the design, construction, operation, and maintenance of network equipment, fiber-optic networks, data center facilities serving telecom operators, and related infrastructure;
(c) Enterprise SaaS platforms serving telecommunications operators — including billing platforms, operations support systems, business support systems, network management solutions, customer experience management platforms, and related enterprise software provided to telecommunications operators or enterprises on a SaaS or cloud-based delivery model.
The definition of restricted activities must be drafted with care. It must be precise enough to survive an enforceability challenge — a New York court will not uphold a restriction that is vague or that sweeps in activities unrelated to the employer's legitimate competitive interests. At the same time, the definition must be broad enough to cover the competitive threats that NTP actually faces. Overly broad formulations such as "technology," "communications," "software," or "digital services" should be avoided, as they could sweep in non-competing businesses (e.g., social media companies, consumer software companies, general-purpose cloud providers) and invite an enforceability challenge.
3. Limitation on Role.  An important drafting choice is whether the non-compete should restrict all employment by or service to a competitor, or only employment in roles where Harding could use Northgate's confidential information or compete directly with NTP's business.
Narrower formulations — for example, restricting only C-suite, advisory, board, or consulting roles at competitors — reduce enforceability risk because they are more closely tailored to the legitimate interest in preventing the executive from deploying confidential information in a senior decision-making capacity. However, narrower role-based restrictions provide less protection because they permit Harding to join a competitor in a nominally subordinate role while still bringing to bear the knowledge, relationships, and strategic insights acquired at NTP.
For a CEO-level executive, a broader restriction on any employment, service, advisory, or consulting relationship with a competitor is generally appropriate and defensible. The Group CEO's access to confidential information and strategic knowledge is so comprehensive that it cannot be compartmentalized — Harding would be in a position to apply NTP's confidential information regardless of his formal title or role at a competing entity. We recommend a broad restriction that covers employment, service as an officer, director, employee, consultant, advisor, partner, or agent of any competing entity, subject to the carve-outs discussed in Section D below.
4. Anticipated Counterparty Position.  Harding and Hargrove & Liddell are likely to propose a scheduled list of approximately eight to ten named competitors, and to resist the revenue-based test on the grounds that it is overly broad, uncertain in application, and could restrict Harding from employment at companies that are only tangentially competitive with NTP. H&L may argue that a revenue-based test effectively gives NTP unilateral control over the scope of the non-compete, because NTP's entry into new business lines could expand the definition of restricted activities without Harding's consent.
H&L may also push for specific carve-outs, including: (a) a passive investment exception allowing Harding to own less than two percent (2%) of the outstanding equity of any publicly traded competitor; and (b) an exception permitting Harding to serve on the boards of directors of companies that are not competitors, without requiring NTP's prior consent.
5. Recommendation on Activity Scope.  Opening position: Revenue-based test. The non-compete should restrict Harding from employment by or provision of services to any entity that derives more than fifteen percent (15%) of its consolidated annual revenue from telecommunications services, telecommunications infrastructure, or enterprise SaaS platforms serving telecom operators, within the defined geographic scope and during the restricted period.
Recommended fallback: Revenue-based test with a narrower activity definition and a lower revenue threshold (e.g., ten percent (10%)), combined with a scheduled list of named competitors to provide clarity and certainty. The scheduled list would be attached as an exhibit to the agreement and would identify the principal competitors as of the date of execution. The revenue-based catch-all would apply in addition to the scheduled list to capture competitors not named on the list. Standard carve-outs for passive investments below two percent (2%) of outstanding public company shares should be included.
D. Carve-Outs and Exceptions
Regardless of the duration, geographic scope, and activity scope of the non-compete, the provision should include customary carve-outs and exceptions that are standard in CEO-level agreements and that improve enforceability by demonstrating that the restriction is tailored to NTP's legitimate interests:
Passive investments. The non-compete should include a standard carve-out permitting Harding to own less than two percent (2%) of the outstanding equity of any publicly traded company, including companies that would otherwise fall within the definition of a competitor. This carve-out is virtually universal in CEO-level non-competes and will not be contentious.
Board service. Consideration should be given to whether the non-compete permits Harding to serve on the boards of directors of non-competing companies during the restricted period. If such service is permitted, we recommend that it be conditioned on Harding's obtaining NTP's prior written consent, which consent shall not be unreasonably withheld. Board service at competing companies should remain prohibited during the restricted period.
Charitable, academic, and civic activities. A standard carve-out should be included permitting Harding to engage in charitable, academic, and civic activities — including service on the boards of charitable organizations, teaching, speaking engagements, and civic engagement — provided that such activities do not interfere with Harding's obligations under the non-compete and do not involve the disclosure of NTP's confidential information.
Government service. A carve-out for government employment or advisory roles should be included. Regulatory considerations may make it impractical or undesirable to restrict a former CEO from accepting government service, and such a restriction could face enforceability challenges on public policy grounds.
Termination without cause / resignation for good reason. In many modern public company CEO agreements, the enforceability of the non-compete is conditioned on the employer's continued payment of severance or other compensation during the restricted period. Specifically, if NTP terminates Harding without cause or Harding resigns for good reason, the non-compete may be conditioned on NTP's continued payment of the severance amount (or a specified portion thereof) during the non-compete period, effectively converting the non-compete into a paid restriction. This approach — sometimes referred to as a "pay-for-play" non-compete — is increasingly common in public company CEO agreements and offers several advantages:
•  It improves enforceability by providing ongoing consideration for the non-compete obligation;
•  It reduces the economic hardship on the executive, which is a factor courts consider in evaluating reasonableness;
•  It gives NTP the option to release Harding from the non-compete (and stop paying severance) if NTP determines that the competitive risk no longer justifies the cost; and
•  It aligns the restrictive covenant with the compensating severance payment, which is consistent with the expectations of institutional shareholders and proxy advisory firms.
We recommend including a "pay-for-play" mechanism as part of the non-compete structure, with the specific terms to be coordinated with the severance provisions of the employment agreement.
IV. Non-Solicitation Covenant
In addition to the non-competition covenant, the Harding employment agreement should include non-solicitation provisions restricting Harding's ability to solicit NTP's employees and customers following his departure. Non-solicitation covenants serve a distinct protective function from non-competes: they target the specific competitive harm that arises when a departing executive uses knowledge of the employer's workforce and customer base to recruit key employees or divert business relationships to a new employer or venture.
A. Non-Solicitation of Employees
1. Duration.  Market practice for CEO-level employee non-solicitation covenants ranges from twelve to twenty-four months post-termination. Twenty-four months is common for senior executives and is generally enforceable under New York law, even in cases where a longer non-compete might be questioned. This is because employee non-solicitation covenants are viewed as less restrictive than non-competes: they do not prevent the executive from working in any particular industry or for any particular employer, but only restrict the executive from actively recruiting the former employer's employees.
Harding's existing Marlowe Asset Management employment agreement likely includes an employee non-solicitation provision of comparable duration, though the specific terms must be confirmed from the detailed analysis of the Marlowe Asset Management agreement in the separate memorandum being prepared for June 9, 2024.
2. Scope.  The employee non-solicitation covenant should cover the direct or indirect solicitation, hiring, engagement, or recruitment of NTP employees (including full-time and part-time employees, as well as independent contractors and consultants) who were employed by or engaged by NTP or any of its affiliates during the final twelve (12) months of Harding's employment with NTP. The covenant should prohibit Harding from soliciting such individuals to leave NTP's employ or to terminate their consulting or contracting relationships with NTP.
To ensure enforceability and to reflect market practice, the following carve-outs should be included:
(a) General solicitations. The non-solicitation should not apply to general solicitations of employment that are not specifically directed at NTP employees — for example, job postings on publicly available job boards, advertisements in industry publications, or general recruitment campaigns conducted by a search firm on behalf of Harding's future employer. This carve-out is standard and recognizes that an executive cannot reasonably be expected to prevent NTP employees from responding to general job postings.
(b) Involuntarily separated employees. The non-solicitation should not apply to individuals who were involuntarily separated from NTP (i.e., terminated by NTP without cause or as part of a reduction in force) prior to the date of the solicitation. Once NTP has terminated the employment relationship, the employer's interest in protecting that relationship is substantially diminished, and a restriction on the executive's ability to hire such individuals is unlikely to be enforced.
3. Recommendation.  Opening position: Twenty-four (24) months post-termination, covering all employees, consultants, and independent contractors of NTP and its affiliates. This duration is well within the range upheld by New York courts for senior executive non-solicitation covenants and provides robust protection for NTP's workforce during the critical transition period following a CEO departure.
Anticipated counterparty position: Harding and H&L may seek to reduce the duration to eighteen (18) months and to narrow the scope to cover only employees (excluding consultants and independent contractors). They may also seek to limit the covered population to employees who reported directly or indirectly to Harding or with whom Harding had material contact during his employment.
We note that the employee non-solicitation covenant is generally less contentious than the non-compete, and we believe that a twenty-four-month period is defensible and achievable in negotiations, even if the non-compete duration is ultimately shortened.
B. Non-Solicitation of Customers
1. Duration and Scope.  Customer non-solicitation covenants are common in CEO employment agreements at service companies and are an important complement to the non-compete. A customer non-solicitation provision restricts the executive from soliciting, diverting, or servicing the employer's customers or prospective customers for a specified period following termination.
For the Harding agreement, we recommend a customer non-solicitation covenant of twenty-four (24) months post-termination, covering:
(a) Customers — any person or entity that was a customer of NTP or any of its affiliates during the final twelve (12) months of Harding's employment; and
(b) Prospective customers — any person or entity with whom NTP or any of its affiliates was engaged in active discussions, negotiations, or pursuit of a business relationship during the final twelve (12) months of Harding's employment.
Customer non-solicitation covenants are generally viewed more favorably by New York courts than non-competes because they target a narrower interest — the protection of specific customer relationships rather than the prohibition of competitive activity generally. A customer non-solicit permits the executive to work for a competitor; it simply prevents the executive from using knowledge of NTP's customer relationships to divert business away from NTP. This narrower scope makes customer non-solicits easier to enforce and supports a longer duration.
2. Anticipated Counterparty Position.  Harding and H&L may push back on the customer non-solicitation covenant in several ways:
First, H&L may argue that the customer non-solicit is unnecessary in the CEO context. Unlike a sales executive or a regional manager who maintains personal customer relationships, a CEO of a publicly traded telecommunications company with thousands of enterprise customers does not maintain the kind of individual, personal customer relationships that a non-solicitation covenant is designed to protect. H&L may contend that any customer relationships Harding develops as CEO are institutional rather than personal, and that NTP's customer relationships will survive Harding's departure without the need for a restrictive covenant.
Second, if H&L accepts a customer non-solicit in principle, they may seek to shorten the duration to twelve to eighteen months and to narrow the scope to customers with whom Harding had direct, material personal contact during his employment — as opposed to the broader universe of all NTP customers.
Third, H&L may argue that the non-compete, if in effect, already adequately protects NTP's customer relationships, and that a separate customer non-solicit is redundant and unnecessary.
3. Recommendation.  Opening position: Twenty-four (24) months; covering customers and prospective customers of NTP and its affiliates.
Recommended fallback: Eighteen (18) months; limited to customers with whom Harding had material personal contact or over whom Harding exercised direct oversight during the final twelve (12) months of his employment. This narrower formulation addresses H&L's likely objection regarding the institutional nature of CEO-level customer relationships while still providing meaningful protection for NTP's most significant customer relationships — those that Harding, as CEO, would have personally cultivated or overseen.
V. Non-Disparagement Covenant
A. Typical Structure
The non-disparagement covenant is a standard provision in C-suite employment agreements and serves to protect the reputational interests of both parties following the termination of the employment relationship. The provision should be structured as a mutual, perpetual obligation: both NTP (acting through its officers, directors, and authorized spokespersons) and Harding agree not to make, publish, or cause to be made or published any disparaging, defamatory, or derogatory statements, whether oral or written, about the other party.
The non-disparagement provision should include the following standard carve-outs:
(a) Legally compelled statements. Truthful statements required by applicable law, regulation, or legal process, including testimony provided under oath or pursuant to a subpoena, court order, or regulatory inquiry. Neither party should be restricted from providing truthful testimony or complying with legal obligations.
(b) Statements in connection with legal proceedings. Statements made in connection with any legal proceeding, arbitration, or dispute resolution process between the parties. This carve-out is necessary to preserve the parties' ability to litigate or arbitrate disputes without the non-disparagement obligation being used as a sword to suppress relevant evidence or legal arguments.
(c) Internal communications. Internal communications by NTP's officers, directors, and employees in the ordinary course of business. NTP must be able to discuss Harding's departure and the circumstances surrounding it with its board, management team, investors, and advisors without triggering a non-disparagement claim.
B. Anticipated Agreement
The non-disparagement covenant is typically the least contested restrictive covenant provision in C-suite negotiations. Both sides have strong reputational incentives to agree to a mutual non-disparagement obligation: Harding has an interest in ensuring that NTP does not publicly characterize his departure in a negative light, and NTP has an interest in preventing Harding from making statements that could damage the company's reputation, stock price, or business relationships. In our experience, non-disparagement provisions in CEO agreements are typically agreed in principle at the term sheet stage with minimal negotiation, and the drafting process involves only routine wordsmithing.
C. Recommendation.  We recommend drafting the non-disparagement covenant as a mutual, perpetual obligation with the standard carve-outs described above for legal proceedings, regulatory requirements, and truthful testimony. We anticipate that this provision will be agreed upon without significant negotiation, and we do not expect it to be a contentious point in discussions with H&L.
VI. Garden Leave Provisions
A. Purpose and Structure
Garden leave is a mechanism by which the employer, upon giving or receiving notice of termination, places the executive on paid leave for all or a portion of the notice period. During the garden leave period, the executive remains employed by the company and continues to receive compensation and benefits, but is relieved of active duties, is excluded from the workplace, is required to remain available to provide transition assistance if requested, and is restricted from working for or providing services to any other employer.
In the United Kingdom, garden leave is the primary mechanism for post-notice restriction of executive activity and is well-established in law and market practice. In US CEO agreements, garden leave is less commonly used as a standalone provision, but it is increasingly incorporated in cross-border executive arrangements — particularly at companies with dual US/UK operations, where the US and UK employment agreements must be coordinated. NTP's dual-listed, dual-headquarters structure makes garden leave a natural component of the Harding employment agreement.
Garden leave can serve as a partial substitute for, or complement to, a post-termination non-compete. Because the executive is still employed (and compensated) during garden leave, the restriction on competitive activity during that period does not face the same enforceability challenges as a post-termination non-compete. From a practical standpoint, if Harding is placed on garden leave for six months and is then subject to a twelve-month post-termination non-compete, the total effective restricted period is eighteen months — with the first six months being a paid restriction and the final twelve months being an unpaid (or severance-funded) restriction. This structure can improve the overall enforceability of the restrictive covenant package by demonstrating that NTP is providing consideration for the restriction and is not imposing an undue economic hardship on the executive.
B. Key Drafting Considerations
1. Duration.  The market range for garden leave duration in CEO-level agreements is three to twelve months. For a CEO at a company of NTP's scale, six months is within the mainstream of market practice and represents a reasonable period during which confidential information may retain its most acute competitive sensitivity and during which an orderly transition of the CEO role can be effected. Twelve months is aggressive and at the upper end of market practice; it is more commonly seen in the UK for very senior executives but is unusual in US agreements.
2. Compensation During Garden Leave.  The treatment of compensation during garden leave is a critical negotiation point and has significant cost implications for NTP. There are three principal approaches:
(a) Base salary only. The executive receives only base salary during the garden leave period, with no bonus, equity vesting, or benefits continuation. This approach minimizes NTP's cost but creates an economic penalty for the executive and may be resisted.
(b) Base salary plus benefits. The executive receives base salary and continuation of employment benefits (health insurance, retirement contributions, etc.) during the garden leave period. This is the market norm for CEO-level garden leave and represents a reasonable middle ground.
(c) Full compensation. The executive receives full compensation during the garden leave period, including base salary, a pro-rata bonus (or a guaranteed minimum bonus), benefits continuation, and continued vesting of long-term incentive awards. This approach is the most generous to the executive and the most costly to NTP.
NTP's interest is to limit garden leave compensation to base salary only, to control costs and to preserve negotiating leverage on other elements of the compensation package. Harding's interest is to receive full compensation during garden leave, to avoid any economic penalty for the restricted period. The market norm for CEO-level garden leave at companies of NTP's size is base salary plus benefits continuation; bonus eligibility during garden leave is typically the subject of negotiation and may depend on whether the garden leave period runs concurrently with the non-compete period.
3. Concurrent vs. Sequential Running with Non-Compete.  The relationship between the garden leave period and the post-termination non-compete period is a significant structural decision:
Concurrent running. If the garden leave period runs concurrently with the first portion of the post-termination non-compete, the total restricted period is not extended beyond the non-compete duration. For example, if the non-compete is eighteen months and garden leave is six months, the executive is on paid garden leave for the first six months of the eighteen-month non-compete period, and is then subject to an unpaid non-compete for the remaining twelve months. This approach is economically efficient for the employer (it pays garden leave compensation but receives restrictive coverage during that period) and is preferred by the executive (because it does not extend the total restricted period beyond the non-compete duration).
Sequential running. If the garden leave period runs sequentially — i.e., the garden leave period expires first, and the non-compete period then begins to run — the total restricted period is extended. For example, if garden leave is six months and the non-compete is eighteen months, the total restricted period is twenty-four months. This approach is more protective for the employer but may face enforceability challenges if the combined period is viewed as unreasonable. It is also more likely to be resisted by the executive.
We recommend concurrent running for the Harding agreement. The concurrent structure allows NTP to argue that the total restricted period is limited to the duration of the non-compete (e.g., eighteen months), with the added benefit that the first six months of restriction are compensated through garden leave. This structure is more defensible, more palatable to the executive, and more consistent with the approach taken in UK garden leave arrangements.
4. Interaction with UK Service Agreement.  The garden leave provisions in the US employment agreement must be coordinated with the UK service agreement being prepared by Moorfield Bates LLP. Simon Aldridge (partner) and Hannah Carmichael (associate) at Moorfield Bates (1 Moorgate, London EC2R 6AB) are advising NTP on the UK service agreement and should be consulted on garden leave provisions to ensure consistency between the US and UK arrangements.
Under English law, garden leave is well-established and enforceable, provided that the employer has an express contractual right to place the executive on garden leave. The UK service agreement should contain its own garden leave clause, triggered by NTP's giving of notice, that is consistent with the garden leave provisions in the US employment agreement. The two agreements should be coordinated to avoid any gap or inconsistency in coverage — for example, if Harding is placed on garden leave under the US agreement, the UK service agreement should provide for a corresponding suspension of duties under the UK arrangement.
C. Anticipated Counterparty Position
Harding and H&L will likely demand a garden leave structure that maximizes the executive's economic protection while minimizing the effective duration of the post-garden-leave unpaid non-compete. Specifically, we anticipate that H&L will propose:
•  Twelve (12) months of garden leave at full compensation (base salary plus pro-rata bonus plus benefits continuation), running concurrently with any non-compete;
•  If the non-compete is twelve months and garden leave is twelve months (concurrent), the effect is that Harding is compensated during the entire restricted period and the net post-garden-leave unpaid non-compete is zero.
This framing allows Harding to argue that he is accepting a "twelve-month non-compete" (matching the Marlowe Asset Management benchmark) while ensuring that he is compensated throughout the restricted period. It is an economically attractive position for the executive and a commercially challenging one for NTP, as it eliminates any meaningful economic consequence for Harding during the restricted period.
D. Recommendation.  Opening position: Six (6) months of garden leave at base salary only, running concurrently with the first six months of a twenty-four-month non-compete

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