1022-00004 · Northgate Telecommunications PLC · Research & Strategy

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 299 Park Avenue, 42nd Floor New York, NY 10171

June 8, 2024

MEMORANDUM

TO: Renata Vasquez, Partner

FROM: James Underwood, Associate

RE: UK Corporate Governance Code 2024 — Implications for CEO Remuneration and Severance for Northgate Telecommunications PLC

MATTER: Northgate Telecommunications PLC — CEO Employment Negotiation (1022-00004)

This memorandum constitutes Attorney Work Product and is protected by the attorney-client privilege and the work product doctrine. It is prepared for the exclusive use of the attorneys and client representatives identified above in connection with pending and anticipated legal matters. Distribution, copying, or disclosure without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.

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I. Purpose and Scope

This memorandum analyzes the implications of the United Kingdom Corporate Governance Code 2024 (the "Code"), as issued by the Financial Reporting Council (the "FRC"), and related proxy advisory guidelines for the proposed CEO employment agreement between Northgate Telecommunications PLC ("NTP" or "Northgate") and Marcus Elliot Harding ("Harding"). The memorandum is intended to inform the ongoing negotiation of the employment terms and to provide guidance to the Remuneration Committee of the NTP Board of Directors regarding the governance and shareholder dimensions of the proposed package.

The analysis focuses specifically on the following areas:

(a) Provision 40 of the Code, which addresses notice periods, contract terms, and severance caps for executive directors of UK-listed companies;

(b) the broader Code guidance on remuneration philosophy and structure, including provisions relating to equity compensation, post-vesting holding periods, and clawback and malus arrangements;

(c) current Thackeray Health IT ("ISS") and Westmark Solutions ("Tarrant Partners LLC") policies on change in control ("CIC") severance multipliers and excise tax gross-ups under Section 280G of the United States Internal Revenue Code of 1986, as amended (the "IRC"); and

(d) the interaction of the proposed package with NTP's recent say-on-pay history and institutional shareholder profile.

By way of background, NTP is a public limited company incorporated in England and Wales (registered number 07381264), with its registered office at 14 Blackfriars Square, London EC4V 6DB. NTP's ordinary shares are listed on the London Stock Exchange (LON: NTP) and NTP is cross-listed on the New York Stock Exchange via a Level III American Depositary Receipt program (NYSE: NTPC), with each ADR representing four ordinary shares. As of June 2024, NTP has an approximate market capitalization of £8.7 billion (approximately $11.1 billion at current exchange rates). For the fiscal year ended December 31, 2023, NTP reported revenue of £4.26 billion ($5.43 billion), EBITDA of £1.14 billion ($1.45 billion), and net income of £482 million ($615 million). NTP employs approximately 22,500 persons globally, with significant operations in the United Kingdom, the United States, Canada, Germany, and Singapore.

Although the proposed employment agreement will be a US-governed (New York law) contract between Harding and Northgate Telecommunications US, Inc. ("NTP US"), a Delaware corporation and wholly-owned subsidiary of NTP, NTP's status as a UK-listed company means that its executive remuneration practices are subject to the Code on a "comply or explain" basis. Moreover, the directors' remuneration policy of NTP is subject to a binding shareholder vote under Part 15 of the UK Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Consequently, the substance of Harding's compensation — regardless of the legal entity through which it is paid — will be subject to full transparency and shareholder scrutiny under UK reporting and governance standards.

This memorandum should be read in conjunction with the following companion memoranda prepared by the Calderwood & Harkness team:

• Memorandum re: New York Law Governing Executive Employment Agreements (1022-00004-002)

• Memorandum re: Non-Compete Enforceability Under New York Law (1022-00004-003)

• Memorandum re: Section 280G Parachute Payment Analysis (1022-00004-004)

• Memorandum re: Change in Control Market Survey (1022-00004-005)

• Memorandum re: Restrictive Covenant Drafting Considerations (1022-00004-006)

• Memorandum re: Cross-Border Dual-Contract Architecture (1022-00004-007)

II. Overview of the UK Corporate Governance Code 2024 — Remuneration Provisions

A. Principles and Philosophy

The Code establishes a comprehensive framework of principles governing executive remuneration for UK-listed companies. The 2024 edition, which applies to financial years beginning on or after January 1, 2025 (with early adoption encouraged), consolidates and refines the remuneration principles set forth in prior editions. The Code's overarching remuneration principles require that directors' remuneration be designed to promote the long-term sustainable success of the company and that remuneration structures be aligned with the company's purpose, values, and strategy.

The Code identifies six characteristics that remuneration arrangements should exhibit: clarity, simplicity, risk mitigation, predictability, proportionality, and alignment to culture. In particular:

• Clarity — Remuneration arrangements should be transparent and capable of being understood by both internal and external stakeholders;

• Simplicity — Remuneration structures should avoid unnecessary complexity and should be straightforward to communicate;

• Risk Mitigation — Remuneration arrangements should include appropriate mechanisms to mitigate the risk of rewarding poor performance or encouraging excessive risk-taking;

• Predictability — The range of possible values of rewards should be identifiable and capable of assessment prior to implementation;

• Proportionality — The link between individual awards, the delivery of strategy, and long-term performance should be clear, and outcomes should not reward poor performance; and

• Alignment to Culture — Incentive schemes should be consistent with the company's culture and should drive behaviors that promote the long-term health and success of the enterprise.

The Code further provides that the Remuneration Committee should exercise independent judgment in determining appropriate levels of remuneration and should avoid paying more than is necessary to attract, retain, and motivate executives of the quality required to run the company successfully. This "no more than necessary" principle is a cornerstone of the UK approach to executive remuneration and stands in some tension with the competitive market-driven approach that predominates in the United States.

At NTP, the Remuneration Committee is chaired by Geoffrey Stanton, an independent non-executive director with extensive experience in telecommunications and financial services. The current members of the Remuneration Committee include Dame Philippa Thornton-Hale (Senior Independent Director), Lucinda Farrow (independent non-executive director), and Dr. Tomás Herrera (independent non-executive director). Under the Code, the Remuneration Committee must comprise at least three independent non-executive directors, and the Chair of the Board may serve as a member (but not chair) of the Committee if they were considered independent on appointment. NTP's Committee composition satisfies these requirements.

The Remuneration Committee's terms of reference, as adopted by the NTP Board in March 2022 and most recently amended in January 2024, require the Committee to have delegated responsibility for setting remuneration for all executive directors and the Chair of the Board, including salary, annual incentives, long-term incentive awards, pension rights, and any compensation payments. The Committee is also responsible for recommending and monitoring the level and structure of remuneration for senior management below the Board level. These terms of reference explicitly require the Committee to take into account the provisions of the Code, the views of ISS and Tarrant Partners LLC, and the expectations of the company's institutional shareholder base.

B. Provision 40 — Notice Periods and Severance

Provision 40 of the Code addresses the duration of notice periods and the quantum of severance payments for executive directors. It provides as follows:

"Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period."

The accompanying guidance to Provision 40 further states that compensation commitments in directors' terms of appointment in the event of early termination should reflect the departing director's obligation to mitigate loss. The Code's clear expectation is that severance payments should not reward failure and should be limited in quantum so as to avoid excessive termination payments that are disconnected from performance.

The practical implication of Provision 40 is that, for UK-listed companies, ex gratia severance — that is, severance payments beyond contractual notice entitlements — should generally not exceed one year's salary and benefits. This has become the normative standard for FTSE-listed companies, and deviations from this norm attract scrutiny from institutional shareholders, proxy advisors, and the Investment Association's Institutional Voting Information Service ("IVIS").

The application of Provision 40 to the proposed Harding employment agreement raises important considerations. The proposed initial term of five years (October 1, 2024 through September 30, 2029) is permissible as a fixed-term employment contract and does not, in and of itself, contravene the Code. However, notice periods within that fixed term, and any severance on early termination of the contract (whether before or after the expiry of the initial term), must be calibrated against the one-year principle articulated in Provision 40.

The current state of the Harding negotiation contemplates notice periods and severance arrangements that significantly exceed the Provision 40 norm. Specifically, the negotiation involves a non-CIC severance multiple ranging from 2x (NTP's current offer position) to 2.5x (Harding's demand), and a CIC severance multiple ranging from 2.5x (NTP's current offer position) to 3x (Harding's demand). As discussed in greater detail in Section III below, these multiples substantially exceed the one-year severance norm established by Provision 40, and the Remuneration Committee will need to consider the "comply or explain" implications of any agreed quantum.

It is worth noting that the Code operates on a "comply or explain" basis, meaning that a UK-listed company is not legally prohibited from exceeding the one-year severance norm, but must disclose and explain any deviation in its annual report and accounts. The FRC has indicated that it expects explanations for non-compliance to be specific, substantive, and capable of satisfying a reasonable shareholder that the departure from the Code is justified in the circumstances. Generic or boilerplate explanations are likely to attract adverse commentary from the FRC's Corporate Governance and Stewardship team and negative attention from institutional shareholders.

C. Provision 41 — Remuneration Policy Approval

Provision 41, read together with the requirements of Part 15 of the UK Companies Act 2006, mandates that UK-listed companies submit their directors' remuneration policy to a binding shareholder vote at least every three years. Any material change to the remuneration policy outside the three-year cycle requires the company to seek a new shareholder resolution authorizing the amended policy.

NTP's current directors' remuneration policy was approved at the company's Annual General Meeting ("AGM") held on April 20, 2023, with 92.1% of votes cast in favor. The current policy is therefore in effect until the 2026 AGM at the latest, although the Remuneration Committee may elect (or be required) to seek approval of a new or amended policy at the 2025 AGM if the incoming CEO's remuneration package contains elements not contemplated by the current policy.

If Harding is appointed as a statutory director of NTP PLC (which is anticipated, given that the CEO is customarily a member of the PLC Board), his remuneration package must fall within the parameters of the approved remuneration policy. If it does not — for example, because the policy does not contemplate tax gross-up provisions, or because the maximum CIC severance multiple exceeds the policy cap — a new binding shareholder vote will be required. This creates a governance risk that must be carefully managed, because a failed binding remuneration policy vote would effectively prevent the company from implementing the proposed package.

The Remuneration Committee should therefore undertake a detailed gap analysis between the proposed Harding package and the current approved remuneration policy at the earliest opportunity. Calderwood & Harkness has separately advised the Remuneration Committee's legal counsel, Pryor & Dalmqvist LLP ("HSF"), regarding the specific policy parameters, and we understand that HSF is preparing a compliance matrix for the Committee's consideration.

D. Provisions on Equity Compensation and Holding Periods

The Code encourages UK-listed companies to impose post-vesting holding periods on share awards granted to executive directors, such that the total vesting and holding period is five years or more. The rationale for this provision is to ensure that executives' interests remain aligned with long-term shareholder value and to reduce the risk of executives profiting from short-term share price movements that may not reflect sustainable performance.

This provision has direct relevance to the equity compensation elements of the proposed Harding package. Specifically:

• Sign-On RSU Grant: The proposed sign-on restricted stock unit ("RSU") grant of $12,000,000 (based on the closing price of NTP ADRs on the grant date) would vest ratably over three years (one-third on each anniversary of the vesting commencement date). Under the Code, an additional post-vesting holding period should be considered to bring the total vesting-plus-holding period to five years or more. This could be implemented as a two-year post-vesting holding period, which would result in the final tranche of the sign-on RSUs being subject to restrictions through year five.

• Sign-On PSU Grant: The proposed sign-on performance stock unit ("PSU") grant of $6,400,000 would vest on a three-year cliff basis, subject to achievement of performance conditions tied to total shareholder return relative to the STOXX Europe 600 Telecommunications Index and revenue growth targets. Again, a two-year post-vesting holding period would be consistent with the Code's expectations.

• Annual LTI Awards: The annual long-term incentive target of $9,000,000 per year (allocated 60% to PSUs and 40% to RSUs) would similarly need to be structured with post-vesting holding requirements to satisfy the Code. The Remuneration Committee's standard practice for existing NTP executive directors is to require a two-year post-vesting holding period on all LTIP awards, and there is no principled basis for departing from this practice for the incoming CEO.

Calderwood & Harkness recommends that the employment agreement include a provision requiring Harding to comply with NTP's share retention and post-vesting holding policies as in effect from time to time, and that the specific holding requirements be set forth in the award agreements rather than the employment agreement itself. This approach provides flexibility for the Remuneration Committee to adjust holding requirements in response to evolving governance expectations without requiring amendments to the employment agreement.

E. Clawback and Malus Provisions

The Code requires that remuneration arrangements include provisions that enable the company to recover or withhold the payment of variable remuneration where justified by the circumstances. This includes both "malus" provisions (the ability to reduce or cancel unvested awards) and "clawback" provisions (the ability to recover previously paid or vested variable remuneration).

The proposed Harding package includes a sign-on cash bonus of $5,000,000, payable in a lump sum within thirty days following the commencement of employment. The current draft includes a 24-month repayment obligation if Harding voluntarily resigns without Good Reason prior to the second anniversary of his start date. This voluntary-resignation clawback is consistent with the Code's expectations and with standard UK market practice for buyout or make-whole payments.

However, Calderwood & Harkness recommends that the clawback provisions be broadened to include additional triggers beyond voluntary resignation, consistent with both the Code and the enhanced clawback requirements adopted by the NYSE under SEC Rule 10D-1 (the "Dodd-Frank Clawback Rule"). Specifically, the following additional clawback triggers should be considered:

(i) material misstatement of the company's financial results requiring a restatement (mandatory under Dodd-Frank for incentive-based compensation received during the three-year lookback period);

(ii) gross misconduct by the executive;

(iii) material failure of risk management attributable to the executive;

(iv) conduct resulting in significant reputational damage to the company; and

(v) a material error in the calculation of performance metrics on which variable pay was based.

NTP's existing clawback policy, adopted in October 2023 to comply with both the Dodd-Frank Clawback Rule and the Code, already covers items (i) through (v) above for all executive directors. The employment agreement should expressly reference and incorporate this policy, and the sign-on cash bonus should be included within its scope, at minimum with respect to the existing 24-month voluntary-resignation trigger and with respect to gross misconduct.

III. Severance Multiples — UK Market Practice for Listed Companies

A. Market Norms

UK market practice for FTSE 100 and FTSE 250 companies reflects a consistent and well-established norm: severance payments on termination without cause (or constructive termination for Good Reason) are typically limited to one year's base salary plus a pro-rata annual bonus for the year of termination, consistent with the one-year notice period contemplated by Provision 40 of the Code. In certain cases, the pro-rata bonus may be subject to the achievement of performance conditions through the termination date, further limiting the quantum of the payment.

Morriven Ashford CPAs LLP's 2024 survey of FTSE 100 directors' remuneration reports found that 94% of FTSE 100 companies have notice periods of twelve months or less for executive directors, and that 88% cap contractual severance entitlements at no more than one year's base salary and benefits (excluding any pro-rata bonus and any statutory entitlements). Only three FTSE 100 companies in 2023 disclosed severance arrangements with contractual multiples exceeding 1x, and in each case, the payments related to externally recruited executives with buyout or make-whole elements that were separately disclosed and justified.

In rare cases involving the external recruitment of a CEO from outside the UK market — particularly from the United States, where severance multiples of 2x to 3x are commonplace — UK-listed companies have made buyout or make-whole payments to compensate the incoming executive for the forfeiture of compensation from the prior employer. These payments are typically structured as one-time sign-on awards (in cash, equity, or a combination thereof) rather than as ongoing contractual severance entitlements. This distinction is important because sign-on or buyout payments can be justified as a cost of recruitment, whereas ongoing severance multiples exceeding 1x are more difficult to reconcile with the Code's expectation that termination payments should not reward failure.

Severance multiples of 2x or higher are uncommon in the UK-listed company context and typically draw significant scrutiny from institutional shareholders, proxy advisory firms, and the Investment Association's IVIS. The Investment Association's Principles of Remuneration expressly recommend that notice periods should be twelve months or less, and that severance payments should be strictly limited to the contractual notice entitlement. The IVIS "Red Top" alert system, which flags remuneration practices that deviate from the Investment Association's guidelines, would be triggered by a severance multiple significantly in excess of 1x.

B. Cross-Border Considerations

The proposed structure for the Harding engagement involves a US-governed (New York law) employment agreement between Harding and NTP US, a Delaware corporation. Harding will be based in New York and will perform the majority of his day-to-day duties from NTP's US headquarters at 1400 Broadway, Suite 3200, New York, NY 10018. He will also maintain a regular presence at NTP's London headquarters at 14 Blackfriars Square and will travel to NTP's other principal offices as required.

As a formal legal matter, the contractual severance provisions in the NTP US employment agreement are governed by New York law, and the enforceability of those provisions would be assessed under New York law principles. New York law does not impose any statutory cap on executive severance, and severance multiples of 2x, 2.5x, or even 3x are commonplace in the employment agreements of publicly listed US companies.

However, the Code applies to NTP PLC on a "comply or explain" basis, and the directors' remuneration report — which must be prepared in accordance with the UK Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) — requires disclosure of all payments and benefits made to or receivable by each director during the relevant financial year, regardless of the entity through which such payments are made. Section 420 of the Companies Act 2006 requires that the directors' remuneration report cover the "total amount of emoluments" paid to or receivable by each director from the company or any of its subsidiaries. Accordingly, any severance payments made by NTP US to Harding under the US employment agreement would be fully disclosed in NTP's directors' remuneration report and would be subject to the advisory say-on-pay vote and the binding remuneration policy vote.

The practical implication is that, even though New York law would govern the enforceability and interpretation of the contractual severance provisions, the quantum and structure of the severance must be defensible under UK governance standards. The "comply or explain" framework does not give NTP a free pass to adopt US-style severance multiples simply because the contract is governed by US law. The Remuneration Committee will need to provide a credible explanation for any deviation from the Provision 40 norm, and the explanation must be sufficient to withstand the scrutiny of ISS, Tarrant Partners LLC, IVIS, and NTP's institutional shareholder base.

C. Application to Current Negotiation

The current negotiation with Harding involves the following severance terms, which must be assessed against the UK governance framework described above:

Non-CIC Severance (Termination Without Cause or Resignation for Good Reason, absent a Change in Control):

• NTP's current offer: 2x (base salary + target annual bonus) = 2 × ($1,750,000 + $3,062,500) = $9,625,000, payable in a lump sum (subject to execution and non-revocation of a general release of claims and continued compliance with restrictive covenants).

• Harding's demand: 2.5x (base salary + target annual bonus) = 2.5 × ($1,750,000 + $3,062,500) = $12,031,250, payable in a lump sum on the same conditions.

Even the lower figure of $9,625,000 (representing a 2x multiple) significantly exceeds the UK norm of approximately 1x (which, for Harding, would be approximately $4,812,500). The Remuneration Committee should be advised that a 2x non-CIC severance multiple will require a robust "comply or explain" justification, and that a 2.5x multiple would be even more difficult to defend. The justification would need to be centered on the competitive dynamics of recruiting a US-based executive from a US-headquartered company (Marlowe Asset Management Digital Holdings, Inc., or "Marlowe Asset Management"), where 2x non-CIC severance is within the mainstream range for S&P 500 CEO contracts. The Committee should be prepared to articulate specific reasons why the UK norm is insufficient to attract Harding and why the higher multiple is necessary to complete the recruitment.

CIC Severance (Termination Without Cause or Resignation for Good Reason within 24 months following a Change in Control):

• NTP's current offer: 2.5x (base salary + target annual bonus) = 2.5 × ($1,750,000 + $3,062,500) = $12,031,250, payable in a lump sum.

• Harding's demand: 3x (base salary + target annual bonus) = 3 × ($1,750,000 + $3,062,500) = $14,437,500, payable in a lump sum, plus a full Section 280G excise tax gross-up.

The CIC severance is discussed in detail in Section IV below, together with the ISS and Tarrant Partners LLC analysis.

IV. ISS and Tarrant Partners LLC Policies on CIC Severance and Tax Gross-Ups

A. ISS Proxy Advisory Policies (2024)

ISS's 2024 Benchmark Policy Guidelines address CIC severance arrangements in the context of both US-listed and non-US-listed companies. For US-listed companies, ISS's quantitative pay-for-performance framework generally flags CIC severance exceeding 3x base salary plus target bonus as a significant concern that weighs against a positive say-on-pay recommendation. However, ISS recognizes that a 3x multiple, standing alone, is not automatically disqualifying and considers the overall package in context.

For UK-listed companies, ISS applies stricter standards that are aligned with the Code and with the expectations of the UK institutional investor community. ISS's UK and Ireland Proxy Voting Guidelines note that notice periods should be twelve months or less, that severance should not exceed one year's pay, and that any payments exceeding these norms require clear justification and should be disclosed with specificity. ISS's UK-focused analysts are generally less tolerant of multi-year severance multiples than their US counterparts, reflecting the different governance norms in the two markets.

With respect to excise tax gross-ups under Section 280G of the IRC, ISS policy treats such provisions as "problematic" and as a factor that will weigh against a positive say-on-pay recommendation. ISS has consistently recommended against companies that maintain or introduce new excise tax gross-up provisions in executive employment agreements, on the grounds that such provisions insulate executives from the tax consequences of excessive parachute payments and increase the total cost to shareholders of a change in control transaction. ISS's 2024 guidelines state:

"The inclusion of excise tax gross-ups in new or materially amended employment agreements or change in control arrangements is considered a problematic pay practice. Companies that have eliminated gross-up provisions in favor of 'best net' cutback provisions or modified gross-up provisions are viewed favorably."

ISS evaluates the overall cost of CIC provisions holistically, considering the combination of cash severance, the value of accelerated equity awards, the value of continued benefits, and the cost of any tax gross-up. ISS's "golden parachute" analysis calculates the total estimated CIC-related payments as a multiple of the executive's compensation, and multiples that significantly exceed market norms are flagged for negative commentary.

ISS also considers whether equity acceleration upon a change in control is "single trigger" (i.e., acceleration occurs solely upon the consummation of the CIC event, without requiring a subsequent qualifying termination of employment) or "double trigger" (i.e., acceleration requires both the occurrence of the CIC event and a subsequent qualifying termination within a specified period). ISS considers single-trigger acceleration a negative factor, as it allows executives to realize the full value of unvested equity awards without being terminated and may create a windfall that is not aligned with the long-term interests of shareholders. Double-trigger acceleration — requiring both a CIC and a qualifying termination — is the expected standard under ISS policy and is consistent with the Code's expectation that remuneration arrangements should not reward failure.

B. Tarrant Partners LLC Policies (2024)

Tarrant Partners LLC's 2024 Proxy Voting Guidelines similarly scrutinize excessive CIC packages and generally recommend against say-on-pay proposals where CIC severance multiples appear disproportionate to market norms or where the total cost of CIC-related payments is excessive in light of the company's size, performance, and competitive context.

Tarrant Partners LLC specifically opposes excise tax gross-ups in new or amended employment agreements. Tarrant Partners LLC's guidelines state that excise tax gross-ups "transfer the burden of the excise tax from the executive to shareholders and increase the total cost of the change in control transaction" and that "companies should adopt 'best net' or 'cutback' provisions that cap the executive's total parachute payments at the safe harbor limit under Section 280G, unless the executive would be better off on an after-tax basis by receiving the full payment and paying the excise tax."

Considers the totality of termination-related payments in assessing reasonableness, including the estimated value of accelerated equity awards, continued health and welfare benefits, pension enhancements, and any other payments or benefits triggered by the CIC and/or the subsequent termination. Tarrant Partners LLC also considers the company's overall pay-for-performance alignment, the company's total shareholder return relative to its peers, and the degree to which the CIC provisions have been subject to prior shareholder scrutiny and approval.

For UK-listed companies, Tarrant Partners LLC's analysis is informed by the Code and by the expectations of UK institutional investors. Tarrant Partners LLC's UK guidelines note that "the one-year norm for notice periods and severance payments under the UK Corporate Governance Code provides an important benchmark for assessing the reasonableness of termination-related payments" and that "deviations from this norm should be clearly justified and should not result in a transfer of value from shareholders to executives that is disproportionate to the competitive context."

C. Veltrano Proxy Advisors Analysis

NTP retained Veltrano Proxy Advisors, Inc. ("Veltrano"), a specialist proxy solicitation and governance advisory firm, to provide an informal assessment of the likely ISS and Tarrant Partners LLC reactions to the proposed CEO package. Sandra Kolb, Managing Director of Veltrano's governance practice, conducted the analysis and provided her preliminary findings to the Remuneration Committee in early June 2024.

Veltrano's preliminary assessment, based on its experience with ISS and Tarrant Partners LLC analyst teams and its review of recent precedent cases involving cross-border CEO hires by UK-listed companies, can be summarized as follows:

• A CIC multiplier of 2.5x with a best-net cutback provision (i.e., no excise tax gross-up) would be at the upper end of the defensible range but would likely be supportable if the Remuneration Committee provides a clear and detailed justification in the directors' remuneration report, including specific reference to the competitive dynamics of recruiting a US-based CEO from a US-headquartered company. Veltrano rated this scenario as "likely supportable" with proactive shareholder engagement.

• A CIC multiplier of 3x, even with a best-net cutback (no gross-up), would be significantly more difficult to defend and would likely trigger a negative say-on-pay recommendation from ISS, with a meaningful probability (estimated at 40-60%) of a negative recommendation from Tarrant Partners LLC as well. Veltrano rated this scenario as "high risk."

• A CIC multiplier of 3x combined with a full Section 280G excise tax gross-up would almost certainly trigger negative say-on-pay recommendations from both ISS and Tarrant Partners LLC. Veltrano rated this scenario as "very high risk / near-certain negative recommendation."

Veltrano's specific recommendations were as follows:

(i) Cap the CIC severance multiplier at no more than 2.99x (base salary + target bonus) to avoid exceeding the 3x threshold that triggers automatic concern under ISS's quantitative framework;

(ii) Adopt a best-net cutback provision rather than an excise tax gross-up, such that total parachute payments are reduced to the safe harbor limit under Section 280G if the reduction would result in a greater after-tax benefit to the executive, and the full payment is made only if the executive would be better off on an after-tax basis by receiving the full amount and paying the excise tax;

(iii) Ensure that all equity acceleration is on a double-trigger basis (CIC + qualifying termination);

(iv) Engage proactively with NTP's largest institutional shareholders prior to the 2025 AGM to pre-socialize the proposed package and to solicit informal feedback; and

(v) Prepare a comprehensive "comply or explain" narrative for inclusion in the directors' remuneration report, addressing the cross-border competitive context and the specific factors that justify the deviation from the one-year UK norm.

D. Application to the Harding Negotiation

Harding's demands on the CIC severance provisions — a 3x multiplier ($14,437,500) plus a full Section 280G excise tax gross-up — represent the most significant governance risk in the proposed package. The estimated potential cost of the gross-up, based on the Section 280G analysis prepared by Calderwood & Harkness's tax group (see Memorandum 1022-00004-004), ranges from approximately $4,200,000 to $6,800,000, with a point estimate of approximately $6,072,000.

The Section 280G analysis is based on the following key inputs:

• Harding's "base amount" for purposes of Section 280G is $7,840,000, calculated as his average annualized W-2 compensation from Marlowe Asset Management Digital Holdings, Inc. for the five calendar years 2019 through 2023.

• The "safe harbor" limit under Section 280G is $23,519,999, calculated as three times the base amount ($7,840,000 × 3 = $23,520,000), minus one dollar ($1).

• Harding's estimated total "parachute payments" under his demands (including the 3x cash severance of $14,437,500, the estimated value of accelerated equity awards, the estimated value of continued benefits, and any other payments contingent on the CIC) are approximately $38,200,000.

• The "excess parachute payments" (total parachute payments minus the base amount) are approximately $30,360,000.

• The excise tax under Section 4999 of the IRC, applied at a rate of 20% to the excess parachute payments, would be approximately $6,072,000.

• In addition to the 20% excise tax, Harding would lose the income tax deduction under Section 280G for the excess parachute payments, increasing the effective marginal tax rate on those amounts. A full gross-up would compensate Harding for both the excise tax and the income tax and payroll tax on the gross-up payment itself, resulting in a total gross-up cost to NTP that could be significantly higher than the point estimate, potentially reaching $8,500,000 to $10,200,000 on a fully grossed-up basis (depending on Harding's marginal federal and state income tax rates).

Under ISS standards, accepting Harding's demands (3x multiplier plus full excise tax gross-up) would almost certainly result in a negative say-on-pay recommendation for NTP. This is particularly significant given NTP's dual listing on the London Stock Exchange and the NYSE — ISS issues recommendations for both the UK and US constituencies, and a negative recommendation in either market would be visible to the other. Moreover, a negative ISS recommendation would be likely to influence the voting behavior of the significant UK institutional shareholders identified in Section V below, many of which follow ISS recommendations closely.

NTP's proposed alternative — a 2.5x CIC multiplier with a best-net cutback provision — is on the high end of the defensible range but, based on Veltrano's assessment, is likely supportable if accompanied by appropriate disclosure and shareholder engagement. Calderwood & Harkness recommends that NTP maintain this position in the negotiation, and that the team resist Harding's demand for a higher multiplier and/or a gross-up.

It is worth noting that the Whitmore Hobson analysis (discussed in Section VIII below) demonstrates that the after-tax outcomes of the best-net cutback and the full gross-up are roughly equivalent for Harding, meaning that the gross-up is largely a matter of principle and optics rather than a material economic benefit. This analysis strengthens NTP's negotiating position and provides a compelling basis for rejecting the gross-up: if the gross-up does not materially improve Harding's after-tax outcome, it cannot reasonably be characterized as necessary to recruit or retain him, and its inclusion would create significant governance risk for no commensurate benefit.

V. NTP's Say-on-Pay History and Shareholder Context

A. 2024 AGM Results

At NTP's 2024 Annual General Meeting, held on April 18, 2024, at the Harborline Enterprises London Bankside, the advisory resolution on the directors' remuneration report for the fiscal year ended December 31, 2023 received the support of 87.4% of votes cast (approximately 421.6 million shares voting in favor, 60.8 million shares voting against, and 16.3 million shares abstaining). The resolution was advisory in nature and was not binding on the Board.

While the 87.4% vote in favor constitutes a passing result, it is materially below the approximately 95% or higher level of support that well-regarded FTSE companies typically achieve on their say-on-pay resolutions. The Investment Association's IVIS system issues an "amber top" alert when a say-on-pay resolution receives between 10% and 20% opposition, and a "red top" alert when opposition exceeds 20%. The 12.6% dissent at the 2024 AGM places NTP in the "amber top" range and indicates meaningful shareholder sensitivity to remuneration issues.

The relatively elevated level of dissent at the 2024 AGM is understood to reflect, in part, shareholder concerns about the total remuneration package of the outgoing CEO, Sir Alistair Kemble, and specifically about the vesting outcome of Sir Alistair's 2021 LTIP award, which vested at 127% of target despite NTP's total shareholder return underperforming the STOXX Europe 600 Telecommunications Index by approximately 350 basis points over the three-year performance period. The Remuneration Committee exercised its discretion to adjust the TSR performance condition to reflect what it characterized as "the impact of exogenous macroeconomic factors on NTP's share price that did not reflect the company's underlying operational performance." This exercise of discretion was criticized by several institutional shareholders and by ISS, which issued an "against" recommendation on the say-on-pay resolution.

Any new CEO package that materially increases the total quantum of CEO remuneration or introduces provisions not present in the current remuneration policy — such as excise tax gross-ups or elevated CIC severance multiples — risks further erosion of say-on-pay support at the 2025 AGM. Given the existing 87.4% baseline, a further decline of even 5-8 percentage points could bring the say-on-pay vote dangerously close to the 80% threshold, below which the Investment Association typically expects the Board to make a formal statement to shareholders outlining the actions it proposes to take in response. A failed say-on-pay vote (below 50%) — while unlikely given the composition of NTP's shareholder register — cannot be ruled out if the proposed package is perceived as excessively generous.

B. Institutional Shareholder Profile

NTP's shareholder register is dominated by large institutional investors, many of which are UK-based and hold governance expectations aligned with the Code. The following are NTP's top institutional shareholders as of the most recent public filings:

The four UK-based institutional shareholders listed above collectively hold approximately 23.3% of NTP's outstanding shares. These shareholders tend to follow ISS and Tarrant Partners LLC recommendations closely, particularly on remuneration-related resolutions, and are generally more sensitive to governance concerns around excessive executive pay than US-based funds. Caledonian Asset Management, in particular, has a well-established stewardship program and has publicly advocated for restraint in executive pay at UK-listed companies. Pemberton Capital Group's proxy voting guidelines expressly state that Pemberton will "generally vote against say-on-pay resolutions where the total remuneration of executive directors significantly exceeds market norms or where the remuneration structure is misaligned with the principles of the UK Corporate Governance Code."

Regis Global Equity Fund, the largest US-based holder, is generally more permissive on executive compensation matters but does follow ISS recommendations in approximately 80% of cases involving non-US companies, based on Veltrano's analysis of Regis's historical voting record.

The Atlas Pension Fund, as the NTP employee pension trust, holds shares for the benefit of NTP employees and retirees. The Fund's trustees have an independent governance committee that makes proxy voting decisions and has historically supported the Board on remuneration matters, but the trustees' fiduciary obligations could lead them to vote against a package that is perceived as disproportionate, particularly in the context of any company-wide cost-reduction or restructuring initiatives.

The significance of the institutional shareholder profile is clear: a contested or failed say-on-pay vote at the 2025 AGM would have serious reputational and governance consequences for the Board and the Remuneration Committee, and could undermine the credibility of the incoming CEO's appointment. Proactive engagement with the major shareholders is essential to mitigating this risk.

C. Binding Remuneration Policy Vote

Under Part 15 of the Companies Act 2006, NTP is required to submit its directors' remuneration policy to a binding shareholder vote at least every three years. If the incoming CEO's remuneration package (assuming Harding is appointed to the PLC Board) includes terms that are not within the parameters of the current approved remuneration policy, a new or amended policy must be submitted for binding shareholder approval at the 2025 AGM.

This is a critical governance gate. Unlike the advisory say-on-pay vote, the binding remuneration policy vote has legal effect: if the policy is not approved by shareholders, the company is limited to paying remuneration in accordance with the most recently approved policy. This means that, if the proposed Harding package includes a CIC multiplier exceeding the cap in the current policy, or if it includes a tax gross-up provision not contemplated by the current policy, and if the shareholders reject the amended policy, NTP would be legally unable to implement those terms.

The Remuneration Committee should therefore assess, as a threshold matter, whether the current approved remuneration policy can accommodate the proposed Harding package. If it cannot, the Committee must determine whether it is prepared to seek a new binding shareholder vote at the 2025 AGM, with the attendant risk that the vote may fail or may pass only with a low level of support. Calderwood & Harkness recommends that this assessment be completed before the employment agreement is finalized, so that any policy constraints can be reflected in the negotiated terms.

VI. Change in Control Definition — Board Turnover Trigger

A. Harding's Demand

In addition to his demands regarding the CIC severance multiplier and the tax gross-up, Harding has demanded the inclusion of a "Board turnover trigger" in the definition of "Change in Control" in the employment agreement. Specifically, Harding proposes that a Change in Control be deemed to have occurred if, within any 12-month period, a majority of the members of NTP's Board of Directors are replaced by directors whose appointment or election was not endorsed or recommended by a majority of the Board as constituted immediately prior to the commencement of such 12-month period.

This Board turnover trigger would operate as a fourth CIC trigger, in addition to the three triggers that are currently agreed between the parties:

(a) the acquisition by any person or group of persons (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) of more than 50% of the combined voting power of NTP's outstanding voting securities;

(b) the consummation of a merger, consolidation, or similar business combination transaction involving NTP, following which the shareholders of NTP immediately prior to the transaction hold less than 50% of the combined voting power of the surviving or resulting entity; and

Harding has argued that the Board turnover trigger is a standard provision in US CEO employment agreements and is necessary to protect him against a "creeping change in control" scenario in which an activist shareholder or hostile acquirer gradually replaces the Board without crossing the 50% ownership threshold. Harding has cited precedent from his current Marlowe Asset Management employment agreement, which includes a similar Board turnover provision.

B. UK Corporate Governance Concerns

The Board turnover trigger raises serious concerns under UK corporate governance principles. Under Section 168 of the UK Companies Act 2006, shareholders have a statutory right to remove any director by ordinary resolution, with special notice. This right is considered fundamental to the UK governance model and reflects the principle that directors serve at the pleasure of the shareholders and are accountable to them for their stewardship of the company.

A contractual provision that triggers substantial severance payments — potentially amounting to $12,031,250 or more, plus accelerated equity vesting — merely because shareholders exercise their statutory right to reconstitute the Board would be widely perceived as an entrenchment mechanism. Such a provision effectively penalizes shareholders for changing the composition of the Board, which is antithetical to the Code's emphasis on Board refreshment, independence, and accountability.

The Code states that the Board should consider the length of service of the Board as a whole and plan for the orderly succession and refreshment of directors. Provision 18 of the Code states that all directors of FTSE 350 companies should be subject to annual re-election by shareholders. These provisions reflect the expectation that Board turnover is a normal and healthy feature of good governance, not an event that should trigger change in control protections.

ISS and Tarrant Partners LLC generally view Board turnover triggers negatively in the context of CIC provisions. ISS's 2024 guidelines note that Board composition change triggers "may deter legitimate shareholder activism and Board refreshment, and may result in windfall payments to executives that are not warranted by the circumstances." Tarrant Partners LLC's guidelines similarly characterize Board turnover triggers as "potentially entrenching and inconsistent with shareholder rights."

The NTP Board, acting through Dame Philippa Thornton-Hale (Senior Independent Director) and Geoffrey Stanton (Remuneration Committee Chair), has rejected the Board turnover trigger as inconsistent with the Board's governance philosophy and the expectations of UK institutional shareholders. Calderwood & Harkness concurs with and supports this position.

C. Recommendation. Calderwood & Harkness recommends that NTP maintain its position of rejecting the Board turnover trigger in the Change in Control definition. This position is well-supported by the Code, ISS and Tarrant Partners LLC policy, UK corporate law principles, and prevailing UK market practice. The inclusion of such a trigger would be viewed as an entrenchment mechanism, would be inconsistent with the shareholders' statutory right to remove directors under Section 168 of the Companies Act 2006, and would significantly increase the governance risk associated with the proposed package.

If Harding insists on retaining this provision as a condition of his engagement, the Remuneration Committee should be advised that the Board turnover trigger, standing alone, could attract negative attention from ISS, Tarrant Partners LLC, and the UK institutional shareholder base, independent of the CIC multiplier and tax gross-up issues discussed above. The cumulative effect of including the Board turnover trigger alongside a 2.5x or 3x CIC multiplier would be to create a very challenging governance profile for the package as a whole.

VII. Garden Leave and Restrictive Covenant Interaction with Code

A. Garden Leave Under UK Practice

UK employment practice commonly uses garden leave — a period during which the employee remains employed and continues to receive salary and contractual benefits but is relieved of all duties and excluded from the workplace — as a mechanism for enforcing post-termination restrictions. During garden leave, the employee remains bound by all contractual obligations, including the implied duty of good faith and fidelity, and is effectively prevented from working for a competitor without breaching the employment contract.

The Code's one-year notice period norm aligns with a maximum 12-month garden leave period. In practice, most FTSE 100 and FTSE 250 companies provide for notice periods of twelve months, with the right to place the departing executive on garden leave for all or part of the notice period. This approach has the advantage of providing both protection for the company (by keeping the executive off the market during the garden leave period) and a built-in severance mechanism (by paying the executive through the notice period), without the need for additional severance payments beyond the contractual notice entitlement.

For the proposed dual-contract structure — under which Harding will have a primary employment agreement with NTP US governed by New York law, and a secondary service agreement (or letter of appointment as a director) with NTP PLC governed by English law — the garden leave provisions should be carefully coordinated across both agreements. The garden leave provision in the NTP US agreement should be drafted to work in tandem with any notice period in the NTP PLC service agreement, so as to avoid a situation in which the garden leave obligations conflict or in which Harding is able to circumvent the garden leave by terminating one agreement while remaining employed under the other.

Calderwood & Harkness and HSF are jointly addressing the drafting of the coordinated garden leave provisions, and a separate memorandum (1022-00004-007) addresses the cross-border dual-contract architecture in detail.

B. Non-Compete Duration

The non-compete restriction is a significant point of contention in the current negotiation. The positions are as follows:

• NTP's initial proposal: 24-month worldwide non-compete following termination of employment.

• Board-authorized fallback (per Remuneration Committee guidance from Geoffrey Stanton, May 22, 2024): 18-month non-compete, limited to North America and Western Europe.

• Harding's demand: 12-month non-compete, with no geographic limitation specified but with the practical effect of a worldwide restriction, matching his current non-compete under the Marlowe Asset Management employment agreement.

Under the Code, restrictive covenants are not directly regulated, but they are viewed through the lens of proportionality. The Code's overarching principle that remuneration arrangements should not pay more than necessary extends, by implication, to post-termination restrictions: a restriction that is broader or longer than necessary to protect the company's legitimate business interests may be viewed as part of an excessively generous termination package, particularly if the executive receives full or near-full pay during a garden leave period that overlaps with, or is credited against, the non-compete period.

The proportionality concern is heightened where the non-compete is accompanied by a substantial severance payment. If Harding receives a 2x or 2.5x non-CIC severance payment upon termination, the total value of the termination package — including the severance, the garden leave pay, and the value of accelerated or continued equity awards — must be assessed holistically against the Code's expectation of proportionality and the avoidance of rewarding failure.

It should be noted that this memorandum addresses only the governance and shareholder optics dimension of the non-compete issue. Separate Calderwood & Harkness memoranda address the enforceability of the non-compete under New York law (1022-00004-003) and the drafting considerations applicable to the restrictive covenant provisions (1022-00004-006).

VIII. Whitmore Hobson LLP Benchmarking Context

Whitmore Hobson LLP ("Whitmore Hobson"), under the leadership of Dr. Rachel Whitmore, Managing Partner, serves as the independent compensation consultant to NTP's Remuneration Committee. Whitmore Hobson has been engaged under a standing retainer since 2021 and provides benchmarking analysis, market data, and advisory services on all aspects of executive remuneration for NTP. Whitmore Hobson has no other consulting relationship with NTP or its management, and the Remuneration Committee has confirmed Whitmore Hobson's independence in accordance with the Code.

Whitmore Hobson is in the process of completing a comprehensive peer-group benchmarking analysis for the CEO hire, which will inform multiple elements of the Remuneration Committee's decision-making process, including:

(i) the competitive positioning of the proposed total compensation package relative to NTP's designated peer group (a blended UK/US peer group of telecommunications and technology companies with revenues between £2 billion and £10 billion);

(ii) the pay-ratio analysis comparing the incoming CEO's total remuneration to the median employee compensation at NTP, as required to be disclosed under The Companies (Miscellaneous Reporting) Regulations 2018;

(iii) the "comply or explain" justification for any deviation from the Code's norms on severance, holding periods, and other remuneration elements; and

(iv) the assessment of CIC provisions and tax gross-up approaches relative to UK and US market practice.

With respect to the overall quantum of the proposed package, the total target annual compensation of $13,812,500 (comprising $1,750,000 base salary, $3,062,500 target annual bonus at 175% of base salary, and $9,000,000 in annual long-term incentive awards) represents a meaningful uplift from the outgoing CEO Sir Alistair Kemble's total target annual compensation of approximately £5,600,000 (approximately $7,140,000 at current exchange rates). The increase reflects the competitive requirements of recruiting a US-based CEO from a US-headquartered company, where compensation levels are substantially higher than in the UK market, but the magnitude of the increase — approximately 93% in dollar terms — will be a focus of shareholder attention and will need to be clearly justified in the directors' remuneration report.

Of particular relevance to this memorandum, Whitmore Hobson has conducted a "best net" analysis of the Section 280G cutback versus the full payment plus excise tax for Harding's proposed CIC package. The analysis models the after-tax outcomes for Harding under two scenarios: (a) a full payment of all parachute payments, with Harding bearing the 20% excise tax and losing the Section 280G income tax deduction; and (b) a cutback of total parachute payments to the safe harbor limit of $23,519,999, with no excise tax. Whitmore Hobson's analysis, using reasonable assumptions about Harding's marginal federal and state income tax rates (federal 37%, New York State 10.9%, New York City 3.876%), concludes that the after-tax outcomes under the two scenarios are roughly equivalent, with the cutback slightly favored — meaning that Harding would receive approximately the same after-tax benefit whether he receives the full payment (and pays the excise tax) or the reduced payment (and avoids the excise tax).

This finding significantly undermines the case for including a full excise tax gross-up in the employment agreement. If the gross-up does not materially improve Harding's after-tax position, it cannot reasonably be characterized as necessary for recruitment purposes, and its inclusion would create significant governance risk for NTP — including the near-certainty of a negative ISS recommendation and the strong likelihood of a negative Tarrant Partners LLC recommendation — for no commensurate benefit. Calderwood & Harkness recommends that the Whitmore Hobson analysis be shared with Harding's counsel (Stillwell & Padilla LLP) as part of the negotiation, to support NTP's position that the best-net cutback is the appropriate approach and that the gross-up is unnecessary.

IX. Summary of Recommendations

Based on the foregoing analysis, Calderwood & Harkness makes the following recommendations to the engagement team and to the Remuneration Committee:

1. CIC Multiplier. We recommend that NTP hold at a 2.5x multiple of base salary plus target annual bonus, producing a CIC cash severance payment of $12,031,250. A 3x multiple ($14,437,500), as demanded by Harding, is very likely to attract negative proxy advisory recommendations from both ISS and Tarrant Partners LLC and to generate significant shareholder opposition, particularly in light of the existing 87.4% say-on-pay result at the April 2024 AGM. The 2.5x multiple, while at the high end of the defensible range for a UK-listed company, is supportable with appropriate disclosure and shareholder engagement, given the cross-border competitive dynamics of the recruitment.

2. Tax Gross-Up. We strongly recommend the adoption of a best-net cutback approach rather than a full Section 280G excise tax gross-up. Both ISS and Tarrant Partners LLC view excise tax gross-ups as "problematic" pay practices, and the inclusion of a gross-up in a new or materially amended employment agreement is a factor that weighs against a positive say-on-pay recommendation. The Whitmore Hobson analysis demonstrates that the cutback and the gross-up produce roughly equivalent after-tax outcomes for Harding, meaning that the gross-up is largely a matter of principle and optics rather than a material economic benefit. The estimated cost of the gross-up ($6,072,000 point estimate, with a range of $4,200,000 to $6,800,000,

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 299 Park Avenue, 42nd Floor New York, NY 10171
June 8, 2024
MEMORANDUM
TO: Renata Vasquez, Partner
FROM: James Underwood, Associate
RE: UK Corporate Governance Code 2024 — Implications for CEO Remuneration and Severance for Northgate Telecommunications PLC
MATTER: Northgate Telecommunications PLC — CEO Employment Negotiation (1022-00004)
This memorandum constitutes Attorney Work Product and is protected by the attorney-client privilege and the work product doctrine. It is prepared for the exclusive use of the attorneys and client representatives identified above in connection with pending and anticipated legal matters. Distribution, copying, or disclosure without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.
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I. Purpose and Scope
This memorandum analyzes the implications of the United Kingdom Corporate Governance Code 2024 (the "Code"), as issued by the Financial Reporting Council (the "FRC"), and related proxy advisory guidelines for the proposed CEO employment agreement between Northgate Telecommunications PLC ("NTP" or "Northgate") and Marcus Elliot Harding ("Harding"). The memorandum is intended to inform the ongoing negotiation of the employment terms and to provide guidance to the Remuneration Committee of the NTP Board of Directors regarding the governance and shareholder dimensions of the proposed package.
The analysis focuses specifically on the following areas:
(a) Provision 40 of the Code, which addresses notice periods, contract terms, and severance caps for executive directors of UK-listed companies;
(b) the broader Code guidance on remuneration philosophy and structure, including provisions relating to equity compensation, post-vesting holding periods, and clawback and malus arrangements;
(c) current Thackeray Health IT ("ISS") and Westmark Solutions ("Tarrant Partners LLC") policies on change in control ("CIC") severance multipliers and excise tax gross-ups under Section 280G of the United States Internal Revenue Code of 1986, as amended (the "IRC"); and
(d) the interaction of the proposed package with NTP's recent say-on-pay history and institutional shareholder profile.
By way of background, NTP is a public limited company incorporated in England and Wales (registered number 07381264), with its registered office at 14 Blackfriars Square, London EC4V 6DB. NTP's ordinary shares are listed on the London Stock Exchange (LON: NTP) and NTP is cross-listed on the New York Stock Exchange via a Level III American Depositary Receipt program (NYSE: NTPC), with each ADR representing four ordinary shares. As of June 2024, NTP has an approximate market capitalization of £8.7 billion (approximately $11.1 billion at current exchange rates). For the fiscal year ended December 31, 2023, NTP reported revenue of £4.26 billion ($5.43 billion), EBITDA of £1.14 billion ($1.45 billion), and net income of £482 million ($615 million). NTP employs approximately 22,500 persons globally, with significant operations in the United Kingdom, the United States, Canada, Germany, and Singapore.
Although the proposed employment agreement will be a US-governed (New York law) contract between Harding and Northgate Telecommunications US, Inc. ("NTP US"), a Delaware corporation and wholly-owned subsidiary of NTP, NTP's status as a UK-listed company means that its executive remuneration practices are subject to the Code on a "comply or explain" basis. Moreover, the directors' remuneration policy of NTP is subject to a binding shareholder vote under Part 15 of the UK Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Consequently, the substance of Harding's compensation — regardless of the legal entity through which it is paid — will be subject to full transparency and shareholder scrutiny under UK reporting and governance standards.
This memorandum should be read in conjunction with the following companion memoranda prepared by the Calderwood & Harkness team:
•  Memorandum re: New York Law Governing Executive Employment Agreements (1022-00004-002)
•  Memorandum re: Non-Compete Enforceability Under New York Law (1022-00004-003)
•  Memorandum re: Section 280G Parachute Payment Analysis (1022-00004-004)
•  Memorandum re: Change in Control Market Survey (1022-00004-005)
•  Memorandum re: Restrictive Covenant Drafting Considerations (1022-00004-006)
•  Memorandum re: Cross-Border Dual-Contract Architecture (1022-00004-007)
II. Overview of the UK Corporate Governance Code 2024 — Remuneration Provisions
A. Principles and Philosophy
The Code establishes a comprehensive framework of principles governing executive remuneration for UK-listed companies. The 2024 edition, which applies to financial years beginning on or after January 1, 2025 (with early adoption encouraged), consolidates and refines the remuneration principles set forth in prior editions. The Code's overarching remuneration principles require that directors' remuneration be designed to promote the long-term sustainable success of the company and that remuneration structures be aligned with the company's purpose, values, and strategy.
The Code identifies six characteristics that remuneration arrangements should exhibit: clarity, simplicity, risk mitigation, predictability, proportionality, and alignment to culture. In particular:
•  Clarity — Remuneration arrangements should be transparent and capable of being understood by both internal and external stakeholders;
•  Simplicity — Remuneration structures should avoid unnecessary complexity and should be straightforward to communicate;
•  Risk Mitigation — Remuneration arrangements should include appropriate mechanisms to mitigate the risk of rewarding poor performance or encouraging excessive risk-taking;
•  Predictability — The range of possible values of rewards should be identifiable and capable of assessment prior to implementation;
•  Proportionality — The link between individual awards, the delivery of strategy, and long-term performance should be clear, and outcomes should not reward poor performance; and
•  Alignment to Culture — Incentive schemes should be consistent with the company's culture and should drive behaviors that promote the long-term health and success of the enterprise.
The Code further provides that the Remuneration Committee should exercise independent judgment in determining appropriate levels of remuneration and should avoid paying more than is necessary to attract, retain, and motivate executives of the quality required to run the company successfully. This "no more than necessary" principle is a cornerstone of the UK approach to executive remuneration and stands in some tension with the competitive market-driven approach that predominates in the United States.
At NTP, the Remuneration Committee is chaired by Geoffrey Stanton, an independent non-executive director with extensive experience in telecommunications and financial services. The current members of the Remuneration Committee include Dame Philippa Thornton-Hale (Senior Independent Director), Lucinda Farrow (independent non-executive director), and Dr. Tomás Herrera (independent non-executive director). Under the Code, the Remuneration Committee must comprise at least three independent non-executive directors, and the Chair of the Board may serve as a member (but not chair) of the Committee if they were considered independent on appointment. NTP's Committee composition satisfies these requirements.
The Remuneration Committee's terms of reference, as adopted by the NTP Board in March 2022 and most recently amended in January 2024, require the Committee to have delegated responsibility for setting remuneration for all executive directors and the Chair of the Board, including salary, annual incentives, long-term incentive awards, pension rights, and any compensation payments. The Committee is also responsible for recommending and monitoring the level and structure of remuneration for senior management below the Board level. These terms of reference explicitly require the Committee to take into account the provisions of the Code, the views of ISS and Tarrant Partners LLC, and the expectations of the company's institutional shareholder base.
B. Provision 40 — Notice Periods and Severance
Provision 40 of the Code addresses the duration of notice periods and the quantum of severance payments for executive directors. It provides as follows:
"Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period."
The accompanying guidance to Provision 40 further states that compensation commitments in directors' terms of appointment in the event of early termination should reflect the departing director's obligation to mitigate loss. The Code's clear expectation is that severance payments should not reward failure and should be limited in quantum so as to avoid excessive termination payments that are disconnected from performance.
The practical implication of Provision 40 is that, for UK-listed companies, ex gratia severance — that is, severance payments beyond contractual notice entitlements — should generally not exceed one year's salary and benefits. This has become the normative standard for FTSE-listed companies, and deviations from this norm attract scrutiny from institutional shareholders, proxy advisors, and the Investment Association's Institutional Voting Information Service ("IVIS").
The application of Provision 40 to the proposed Harding employment agreement raises important considerations. The proposed initial term of five years (October 1, 2024 through September 30, 2029) is permissible as a fixed-term employment contract and does not, in and of itself, contravene the Code. However, notice periods within that fixed term, and any severance on early termination of the contract (whether before or after the expiry of the initial term), must be calibrated against the one-year principle articulated in Provision 40.
The current state of the Harding negotiation contemplates notice periods and severance arrangements that significantly exceed the Provision 40 norm. Specifically, the negotiation involves a non-CIC severance multiple ranging from 2x (NTP's current offer position) to 2.5x (Harding's demand), and a CIC severance multiple ranging from 2.5x (NTP's current offer position) to 3x (Harding's demand). As discussed in greater detail in Section III below, these multiples substantially exceed the one-year severance norm established by Provision 40, and the Remuneration Committee will need to consider the "comply or explain" implications of any agreed quantum.
It is worth noting that the Code operates on a "comply or explain" basis, meaning that a UK-listed company is not legally prohibited from exceeding the one-year severance norm, but must disclose and explain any deviation in its annual report and accounts. The FRC has indicated that it expects explanations for non-compliance to be specific, substantive, and capable of satisfying a reasonable shareholder that the departure from the Code is justified in the circumstances. Generic or boilerplate explanations are likely to attract adverse commentary from the FRC's Corporate Governance and Stewardship team and negative attention from institutional shareholders.
C. Provision 41 — Remuneration Policy Approval
Provision 41, read together with the requirements of Part 15 of the UK Companies Act 2006, mandates that UK-listed companies submit their directors' remuneration policy to a binding shareholder vote at least every three years. Any material change to the remuneration policy outside the three-year cycle requires the company to seek a new shareholder resolution authorizing the amended policy.
NTP's current directors' remuneration policy was approved at the company's Annual General Meeting ("AGM") held on April 20, 2023, with 92.1% of votes cast in favor. The current policy is therefore in effect until the 2026 AGM at the latest, although the Remuneration Committee may elect (or be required) to seek approval of a new or amended policy at the 2025 AGM if the incoming CEO's remuneration package contains elements not contemplated by the current policy.
If Harding is appointed as a statutory director of NTP PLC (which is anticipated, given that the CEO is customarily a member of the PLC Board), his remuneration package must fall within the parameters of the approved remuneration policy. If it does not — for example, because the policy does not contemplate tax gross-up provisions, or because the maximum CIC severance multiple exceeds the policy cap — a new binding shareholder vote will be required. This creates a governance risk that must be carefully managed, because a failed binding remuneration policy vote would effectively prevent the company from implementing the proposed package.
The Remuneration Committee should therefore undertake a detailed gap analysis between the proposed Harding package and the current approved remuneration policy at the earliest opportunity. Calderwood & Harkness has separately advised the Remuneration Committee's legal counsel, Pryor & Dalmqvist LLP ("HSF"), regarding the specific policy parameters, and we understand that HSF is preparing a compliance matrix for the Committee's consideration.
D. Provisions on Equity Compensation and Holding Periods
The Code encourages UK-listed companies to impose post-vesting holding periods on share awards granted to executive directors, such that the total vesting and holding period is five years or more. The rationale for this provision is to ensure that executives' interests remain aligned with long-term shareholder value and to reduce the risk of executives profiting from short-term share price movements that may not reflect sustainable performance.
This provision has direct relevance to the equity compensation elements of the proposed Harding package. Specifically:
•  Sign-On RSU Grant: The proposed sign-on restricted stock unit ("RSU") grant of $12,000,000 (based on the closing price of NTP ADRs on the grant date) would vest ratably over three years (one-third on each anniversary of the vesting commencement date). Under the Code, an additional post-vesting holding period should be considered to bring the total vesting-plus-holding period to five years or more. This could be implemented as a two-year post-vesting holding period, which would result in the final tranche of the sign-on RSUs being subject to restrictions through year five.
•  Sign-On PSU Grant: The proposed sign-on performance stock unit ("PSU") grant of $6,400,000 would vest on a three-year cliff basis, subject to achievement of performance conditions tied to total shareholder return relative to the STOXX Europe 600 Telecommunications Index and revenue growth targets. Again, a two-year post-vesting holding period would be consistent with the Code's expectations.
•  Annual LTI Awards: The annual long-term incentive target of $9,000,000 per year (allocated 60% to PSUs and 40% to RSUs) would similarly need to be structured with post-vesting holding requirements to satisfy the Code. The Remuneration Committee's standard practice for existing NTP executive directors is to require a two-year post-vesting holding period on all LTIP awards, and there is no principled basis for departing from this practice for the incoming CEO.
Calderwood & Harkness recommends that the employment agreement include a provision requiring Harding to comply with NTP's share retention and post-vesting holding policies as in effect from time to time, and that the specific holding requirements be set forth in the award agreements rather than the employment agreement itself. This approach provides flexibility for the Remuneration Committee to adjust holding requirements in response to evolving governance expectations without requiring amendments to the employment agreement.
E. Clawback and Malus Provisions
The Code requires that remuneration arrangements include provisions that enable the company to recover or withhold the payment of variable remuneration where justified by the circumstances. This includes both "malus" provisions (the ability to reduce or cancel unvested awards) and "clawback" provisions (the ability to recover previously paid or vested variable remuneration).
The proposed Harding package includes a sign-on cash bonus of $5,000,000, payable in a lump sum within thirty days following the commencement of employment. The current draft includes a 24-month repayment obligation if Harding voluntarily resigns without Good Reason prior to the second anniversary of his start date. This voluntary-resignation clawback is consistent with the Code's expectations and with standard UK market practice for buyout or make-whole payments.
However, Calderwood & Harkness recommends that the clawback provisions be broadened to include additional triggers beyond voluntary resignation, consistent with both the Code and the enhanced clawback requirements adopted by the NYSE under SEC Rule 10D-1 (the "Dodd-Frank Clawback Rule"). Specifically, the following additional clawback triggers should be considered:
(i) material misstatement of the company's financial results requiring a restatement (mandatory under Dodd-Frank for incentive-based compensation received during the three-year lookback period);
(ii) gross misconduct by the executive;
(iii) material failure of risk management attributable to the executive;
(iv) conduct resulting in significant reputational damage to the company; and
(v) a material error in the calculation of performance metrics on which variable pay was based.
NTP's existing clawback policy, adopted in October 2023 to comply with both the Dodd-Frank Clawback Rule and the Code, already covers items (i) through (v) above for all executive directors. The employment agreement should expressly reference and incorporate this policy, and the sign-on cash bonus should be included within its scope, at minimum with respect to the existing 24-month voluntary-resignation trigger and with respect to gross misconduct.
III. Severance Multiples — UK Market Practice for Listed Companies
A. Market Norms
UK market practice for FTSE 100 and FTSE 250 companies reflects a consistent and well-established norm: severance payments on termination without cause (or constructive termination for Good Reason) are typically limited to one year's base salary plus a pro-rata annual bonus for the year of termination, consistent with the one-year notice period contemplated by Provision 40 of the Code. In certain cases, the pro-rata bonus may be subject to the achievement of performance conditions through the termination date, further limiting the quantum of the payment.
Morriven Ashford CPAs LLP's 2024 survey of FTSE 100 directors' remuneration reports found that 94% of FTSE 100 companies have notice periods of twelve months or less for executive directors, and that 88% cap contractual severance entitlements at no more than one year's base salary and benefits (excluding any pro-rata bonus and any statutory entitlements). Only three FTSE 100 companies in 2023 disclosed severance arrangements with contractual multiples exceeding 1x, and in each case, the payments related to externally recruited executives with buyout or make-whole elements that were separately disclosed and justified.
In rare cases involving the external recruitment of a CEO from outside the UK market — particularly from the United States, where severance multiples of 2x to 3x are commonplace — UK-listed companies have made buyout or make-whole payments to compensate the incoming executive for the forfeiture of compensation from the prior employer. These payments are typically structured as one-time sign-on awards (in cash, equity, or a combination thereof) rather than as ongoing contractual severance entitlements. This distinction is important because sign-on or buyout payments can be justified as a cost of recruitment, whereas ongoing severance multiples exceeding 1x are more difficult to reconcile with the Code's expectation that termination payments should not reward failure.
Severance multiples of 2x or higher are uncommon in the UK-listed company context and typically draw significant scrutiny from institutional shareholders, proxy advisory firms, and the Investment Association's IVIS. The Investment Association's Principles of Remuneration expressly recommend that notice periods should be twelve months or less, and that severance payments should be strictly limited to the contractual notice entitlement. The IVIS "Red Top" alert system, which flags remuneration practices that deviate from the Investment Association's guidelines, would be triggered by a severance multiple significantly in excess of 1x.
B. Cross-Border Considerations
The proposed structure for the Harding engagement involves a US-governed (New York law) employment agreement between Harding and NTP US, a Delaware corporation. Harding will be based in New York and will perform the majority of his day-to-day duties from NTP's US headquarters at 1400 Broadway, Suite 3200, New York, NY 10018. He will also maintain a regular presence at NTP's London headquarters at 14 Blackfriars Square and will travel to NTP's other principal offices as required.
As a formal legal matter, the contractual severance provisions in the NTP US employment agreement are governed by New York law, and the enforceability of those provisions would be assessed under New York law principles. New York law does not impose any statutory cap on executive severance, and severance multiples of 2x, 2.5x, or even 3x are commonplace in the employment agreements of publicly listed US companies.
However, the Code applies to NTP PLC on a "comply or explain" basis, and the directors' remuneration report — which must be prepared in accordance with the UK Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) — requires disclosure of all payments and benefits made to or receivable by each director during the relevant financial year, regardless of the entity through which such payments are made. Section 420 of the Companies Act 2006 requires that the directors' remuneration report cover the "total amount of emoluments" paid to or receivable by each director from the company or any of its subsidiaries. Accordingly, any severance payments made by NTP US to Harding under the US employment agreement would be fully disclosed in NTP's directors' remuneration report and would be subject to the advisory say-on-pay vote and the binding remuneration policy vote.
The practical implication is that, even though New York law would govern the enforceability and interpretation of the contractual severance provisions, the quantum and structure of the severance must be defensible under UK governance standards. The "comply or explain" framework does not give NTP a free pass to adopt US-style severance multiples simply because the contract is governed by US law. The Remuneration Committee will need to provide a credible explanation for any deviation from the Provision 40 norm, and the explanation must be sufficient to withstand the scrutiny of ISS, Tarrant Partners LLC, IVIS, and NTP's institutional shareholder base.
C. Application to Current Negotiation
The current negotiation with Harding involves the following severance terms, which must be assessed against the UK governance framework described above:
Non-CIC Severance (Termination Without Cause or Resignation for Good Reason, absent a Change in Control):
•  NTP's current offer: 2x (base salary + target annual bonus) = 2 × ($1,750,000 + $3,062,500) = $9,625,000, payable in a lump sum (subject to execution and non-revocation of a general release of claims and continued compliance with restrictive covenants).
•  Harding's demand: 2.5x (base salary + target annual bonus) = 2.5 × ($1,750,000 + $3,062,500) = $12,031,250, payable in a lump sum on the same conditions.
Even the lower figure of $9,625,000 (representing a 2x multiple) significantly exceeds the UK norm of approximately 1x (which, for Harding, would be approximately $4,812,500). The Remuneration Committee should be advised that a 2x non-CIC severance multiple will require a robust "comply or explain" justification, and that a 2.5x multiple would be even more difficult to defend. The justification would need to be centered on the competitive dynamics of recruiting a US-based executive from a US-headquartered company (Marlowe Asset Management Digital Holdings, Inc., or "Marlowe Asset Management"), where 2x non-CIC severance is within the mainstream range for S&P 500 CEO contracts. The Committee should be prepared to articulate specific reasons why the UK norm is insufficient to attract Harding and why the higher multiple is necessary to complete the recruitment.
CIC Severance (Termination Without Cause or Resignation for Good Reason within 24 months following a Change in Control):
•  NTP's current offer: 2.5x (base salary + target annual bonus) = 2.5 × ($1,750,000 + $3,062,500) = $12,031,250, payable in a lump sum.
•  Harding's demand: 3x (base salary + target annual bonus) = 3 × ($1,750,000 + $3,062,500) = $14,437,500, payable in a lump sum, plus a full Section 280G excise tax gross-up.
The CIC severance is discussed in detail in Section IV below, together with the ISS and Tarrant Partners LLC analysis.
IV. ISS and Tarrant Partners LLC Policies on CIC Severance and Tax Gross-Ups
A. ISS Proxy Advisory Policies (2024)
ISS's 2024 Benchmark Policy Guidelines address CIC severance arrangements in the context of both US-listed and non-US-listed companies. For US-listed companies, ISS's quantitative pay-for-performance framework generally flags CIC severance exceeding 3x base salary plus target bonus as a significant concern that weighs against a positive say-on-pay recommendation. However, ISS recognizes that a 3x multiple, standing alone, is not automatically disqualifying and considers the overall package in context.
For UK-listed companies, ISS applies stricter standards that are aligned with the Code and with the expectations of the UK institutional investor community. ISS's UK and Ireland Proxy Voting Guidelines note that notice periods should be twelve months or less, that severance should not exceed one year's pay, and that any payments exceeding these norms require clear justification and should be disclosed with specificity. ISS's UK-focused analysts are generally less tolerant of multi-year severance multiples than their US counterparts, reflecting the different governance norms in the two markets.
With respect to excise tax gross-ups under Section 280G of the IRC, ISS policy treats such provisions as "problematic" and as a factor that will weigh against a positive say-on-pay recommendation. ISS has consistently recommended against companies that maintain or introduce new excise tax gross-up provisions in executive employment agreements, on the grounds that such provisions insulate executives from the tax consequences of excessive parachute payments and increase the total cost to shareholders of a change in control transaction. ISS's 2024 guidelines state:
"The inclusion of excise tax gross-ups in new or materially amended employment agreements or change in control arrangements is considered a problematic pay practice. Companies that have eliminated gross-up provisions in favor of 'best net' cutback provisions or modified gross-up provisions are viewed favorably."
ISS evaluates the overall cost of CIC provisions holistically, considering the combination of cash severance, the value of accelerated equity awards, the value of continued benefits, and the cost of any tax gross-up. ISS's "golden parachute" analysis calculates the total estimated CIC-related payments as a multiple of the executive's compensation, and multiples that significantly exceed market norms are flagged for negative commentary.
ISS also considers whether equity acceleration upon a change in control is "single trigger" (i.e., acceleration occurs solely upon the consummation of the CIC event, without requiring a subsequent qualifying termination of employment) or "double trigger" (i.e., acceleration requires both the occurrence of the CIC event and a subsequent qualifying termination within a specified period). ISS considers single-trigger acceleration a negative factor, as it allows executives to realize the full value of unvested equity awards without being terminated and may create a windfall that is not aligned with the long-term interests of shareholders. Double-trigger acceleration — requiring both a CIC and a qualifying termination — is the expected standard under ISS policy and is consistent with the Code's expectation that remuneration arrangements should not reward failure.
B. Tarrant Partners LLC Policies (2024)
Tarrant Partners LLC's 2024 Proxy Voting Guidelines similarly scrutinize excessive CIC packages and generally recommend against say-on-pay proposals where CIC severance multiples appear disproportionate to market norms or where the total cost of CIC-related payments is excessive in light of the company's size, performance, and competitive context.
Tarrant Partners LLC specifically opposes excise tax gross-ups in new or amended employment agreements. Tarrant Partners LLC's guidelines state that excise tax gross-ups "transfer the burden of the excise tax from the executive to shareholders and increase the total cost of the change in control transaction" and that "companies should adopt 'best net' or 'cutback' provisions that cap the executive's total parachute payments at the safe harbor limit under Section 280G, unless the executive would be better off on an after-tax basis by receiving the full payment and paying the excise tax."
Considers the totality of termination-related payments in assessing reasonableness, including the estimated value of accelerated equity awards, continued health and welfare benefits, pension enhancements, and any other payments or benefits triggered by the CIC and/or the subsequent termination. Tarrant Partners LLC also considers the company's overall pay-for-performance alignment, the company's total shareholder return relative to its peers, and the degree to which the CIC provisions have been subject to prior shareholder scrutiny and approval.
For UK-listed companies, Tarrant Partners LLC's analysis is informed by the Code and by the expectations of UK institutional investors. Tarrant Partners LLC's UK guidelines note that "the one-year norm for notice periods and severance payments under the UK Corporate Governance Code provides an important benchmark for assessing the reasonableness of termination-related payments" and that "deviations from this norm should be clearly justified and should not result in a transfer of value from shareholders to executives that is disproportionate to the competitive context."
C. Veltrano Proxy Advisors Analysis
NTP retained Veltrano Proxy Advisors, Inc. ("Veltrano"), a specialist proxy solicitation and governance advisory firm, to provide an informal assessment of the likely ISS and Tarrant Partners LLC reactions to the proposed CEO package. Sandra Kolb, Managing Director of Veltrano's governance practice, conducted the analysis and provided her preliminary findings to the Remuneration Committee in early June 2024.
Veltrano's preliminary assessment, based on its experience with ISS and Tarrant Partners LLC analyst teams and its review of recent precedent cases involving cross-border CEO hires by UK-listed companies, can be summarized as follows:
•  A CIC multiplier of 2.5x with a best-net cutback provision (i.e., no excise tax gross-up) would be at the upper end of the defensible range but would likely be supportable if the Remuneration Committee provides a clear and detailed justification in the directors' remuneration report, including specific reference to the competitive dynamics of recruiting a US-based CEO from a US-headquartered company. Veltrano rated this scenario as "likely supportable" with proactive shareholder engagement.
•  A CIC multiplier of 3x, even with a best-net cutback (no gross-up), would be significantly more difficult to defend and would likely trigger a negative say-on-pay recommendation from ISS, with a meaningful probability (estimated at 40-60%) of a negative recommendation from Tarrant Partners LLC as well. Veltrano rated this scenario as "high risk."
•  A CIC multiplier of 3x combined with a full Section 280G excise tax gross-up would almost certainly trigger negative say-on-pay recommendations from both ISS and Tarrant Partners LLC. Veltrano rated this scenario as "very high risk / near-certain negative recommendation."
Veltrano's specific recommendations were as follows:
(i) Cap the CIC severance multiplier at no more than 2.99x (base salary + target bonus) to avoid exceeding the 3x threshold that triggers automatic concern under ISS's quantitative framework;
(ii) Adopt a best-net cutback provision rather than an excise tax gross-up, such that total parachute payments are reduced to the safe harbor limit under Section 280G if the reduction would result in a greater after-tax benefit to the executive, and the full payment is made only if the executive would be better off on an after-tax basis by receiving the full amount and paying the excise tax;
(iii) Ensure that all equity acceleration is on a double-trigger basis (CIC + qualifying termination);
(iv) Engage proactively with NTP's largest institutional shareholders prior to the 2025 AGM to pre-socialize the proposed package and to solicit informal feedback; and
(v) Prepare a comprehensive "comply or explain" narrative for inclusion in the directors' remuneration report, addressing the cross-border competitive context and the specific factors that justify the deviation from the one-year UK norm.
D. Application to the Harding Negotiation
Harding's demands on the CIC severance provisions — a 3x multiplier ($14,437,500) plus a full Section 280G excise tax gross-up — represent the most significant governance risk in the proposed package. The estimated potential cost of the gross-up, based on the Section 280G analysis prepared by Calderwood & Harkness's tax group (see Memorandum 1022-00004-004), ranges from approximately $4,200,000 to $6,800,000, with a point estimate of approximately $6,072,000.
The Section 280G analysis is based on the following key inputs:
•  Harding's "base amount" for purposes of Section 280G is $7,840,000, calculated as his average annualized W-2 compensation from Marlowe Asset Management Digital Holdings, Inc. for the five calendar years 2019 through 2023.
•  The "safe harbor" limit under Section 280G is $23,519,999, calculated as three times the base amount ($7,840,000 × 3 = $23,520,000), minus one dollar ($1).
•  Harding's estimated total "parachute payments" under his demands (including the 3x cash severance of $14,437,500, the estimated value of accelerated equity awards, the estimated value of continued benefits, and any other payments contingent on the CIC) are approximately $38,200,000.
•  The "excess parachute payments" (total parachute payments minus the base amount) are approximately $30,360,000.
•  The excise tax under Section 4999 of the IRC, applied at a rate of 20% to the excess parachute payments, would be approximately $6,072,000.
•  In addition to the 20% excise tax, Harding would lose the income tax deduction under Section 280G for the excess parachute payments, increasing the effective marginal tax rate on those amounts. A full gross-up would compensate Harding for both the excise tax and the income tax and payroll tax on the gross-up payment itself, resulting in a total gross-up cost to NTP that could be significantly higher than the point estimate, potentially reaching $8,500,000 to $10,200,000 on a fully grossed-up basis (depending on Harding's marginal federal and state income tax rates).
Under ISS standards, accepting Harding's demands (3x multiplier plus full excise tax gross-up) would almost certainly result in a negative say-on-pay recommendation for NTP. This is particularly significant given NTP's dual listing on the London Stock Exchange and the NYSE — ISS issues recommendations for both the UK and US constituencies, and a negative recommendation in either market would be visible to the other. Moreover, a negative ISS recommendation would be likely to influence the voting behavior of the significant UK institutional shareholders identified in Section V below, many of which follow ISS recommendations closely.
NTP's proposed alternative — a 2.5x CIC multiplier with a best-net cutback provision — is on the high end of the defensible range but, based on Veltrano's assessment, is likely supportable if accompanied by appropriate disclosure and shareholder engagement. Calderwood & Harkness recommends that NTP maintain this position in the negotiation, and that the team resist Harding's demand for a higher multiplier and/or a gross-up.
It is worth noting that the Whitmore Hobson analysis (discussed in Section VIII below) demonstrates that the after-tax outcomes of the best-net cutback and the full gross-up are roughly equivalent for Harding, meaning that the gross-up is largely a matter of principle and optics rather than a material economic benefit. This analysis strengthens NTP's negotiating position and provides a compelling basis for rejecting the gross-up: if the gross-up does not materially improve Harding's after-tax outcome, it cannot reasonably be characterized as necessary to recruit or retain him, and its inclusion would create significant governance risk for no commensurate benefit.
V. NTP's Say-on-Pay History and Shareholder Context
A. 2024 AGM Results
At NTP's 2024 Annual General Meeting, held on April 18, 2024, at the Harborline Enterprises London Bankside, the advisory resolution on the directors' remuneration report for the fiscal year ended December 31, 2023 received the support of 87.4% of votes cast (approximately 421.6 million shares voting in favor, 60.8 million shares voting against, and 16.3 million shares abstaining). The resolution was advisory in nature and was not binding on the Board.
While the 87.4% vote in favor constitutes a passing result, it is materially below the approximately 95% or higher level of support that well-regarded FTSE companies typically achieve on their say-on-pay resolutions. The Investment Association's IVIS system issues an "amber top" alert when a say-on-pay resolution receives between 10% and 20% opposition, and a "red top" alert when opposition exceeds 20%. The 12.6% dissent at the 2024 AGM places NTP in the "amber top" range and indicates meaningful shareholder sensitivity to remuneration issues.
The relatively elevated level of dissent at the 2024 AGM is understood to reflect, in part, shareholder concerns about the total remuneration package of the outgoing CEO, Sir Alistair Kemble, and specifically about the vesting outcome of Sir Alistair's 2021 LTIP award, which vested at 127% of target despite NTP's total shareholder return underperforming the STOXX Europe 600 Telecommunications Index by approximately 350 basis points over the three-year performance period. The Remuneration Committee exercised its discretion to adjust the TSR performance condition to reflect what it characterized as "the impact of exogenous macroeconomic factors on NTP's share price that did not reflect the company's underlying operational performance." This exercise of discretion was criticized by several institutional shareholders and by ISS, which issued an "against" recommendation on the say-on-pay resolution.
Any new CEO package that materially increases the total quantum of CEO remuneration or introduces provisions not present in the current remuneration policy — such as excise tax gross-ups or elevated CIC severance multiples — risks further erosion of say-on-pay support at the 2025 AGM. Given the existing 87.4% baseline, a further decline of even 5-8 percentage points could bring the say-on-pay vote dangerously close to the 80% threshold, below which the Investment Association typically expects the Board to make a formal statement to shareholders outlining the actions it proposes to take in response. A failed say-on-pay vote (below 50%) — while unlikely given the composition of NTP's shareholder register — cannot be ruled out if the proposed package is perceived as excessively generous.
B. Institutional Shareholder Profile
NTP's shareholder register is dominated by large institutional investors, many of which are UK-based and hold governance expectations aligned with the Code. The following are NTP's top institutional shareholders as of the most recent public filings:
The four UK-based institutional shareholders listed above collectively hold approximately 23.3% of NTP's outstanding shares. These shareholders tend to follow ISS and Tarrant Partners LLC recommendations closely, particularly on remuneration-related resolutions, and are generally more sensitive to governance concerns around excessive executive pay than US-based funds. Caledonian Asset Management, in particular, has a well-established stewardship program and has publicly advocated for restraint in executive pay at UK-listed companies. Pemberton Capital Group's proxy voting guidelines expressly state that Pemberton will "generally vote against say-on-pay resolutions where the total remuneration of executive directors significantly exceeds market norms or where the remuneration structure is misaligned with the principles of the UK Corporate Governance Code."
Regis Global Equity Fund, the largest US-based holder, is generally more permissive on executive compensation matters but does follow ISS recommendations in approximately 80% of cases involving non-US companies, based on Veltrano's analysis of Regis's historical voting record.
The Atlas Pension Fund, as the NTP employee pension trust, holds shares for the benefit of NTP employees and retirees. The Fund's trustees have an independent governance committee that makes proxy voting decisions and has historically supported the Board on remuneration matters, but the trustees' fiduciary obligations could lead them to vote against a package that is perceived as disproportionate, particularly in the context of any company-wide cost-reduction or restructuring initiatives.
The significance of the institutional shareholder profile is clear: a contested or failed say-on-pay vote at the 2025 AGM would have serious reputational and governance consequences for the Board and the Remuneration Committee, and could undermine the credibility of the incoming CEO's appointment. Proactive engagement with the major shareholders is essential to mitigating this risk.
C. Binding Remuneration Policy Vote
Under Part 15 of the Companies Act 2006, NTP is required to submit its directors' remuneration policy to a binding shareholder vote at least every three years. If the incoming CEO's remuneration package (assuming Harding is appointed to the PLC Board) includes terms that are not within the parameters of the current approved remuneration policy, a new or amended policy must be submitted for binding shareholder approval at the 2025 AGM.
This is a critical governance gate. Unlike the advisory say-on-pay vote, the binding remuneration policy vote has legal effect: if the policy is not approved by shareholders, the company is limited to paying remuneration in accordance with the most recently approved policy. This means that, if the proposed Harding package includes a CIC multiplier exceeding the cap in the current policy, or if it includes a tax gross-up provision not contemplated by the current policy, and if the shareholders reject the amended policy, NTP would be legally unable to implement those terms.
The Remuneration Committee should therefore assess, as a threshold matter, whether the current approved remuneration policy can accommodate the proposed Harding package. If it cannot, the Committee must determine whether it is prepared to seek a new binding shareholder vote at the 2025 AGM, with the attendant risk that the vote may fail or may pass only with a low level of support. Calderwood & Harkness recommends that this assessment be completed before the employment agreement is finalized, so that any policy constraints can be reflected in the negotiated terms.
VI. Change in Control Definition — Board Turnover Trigger
A. Harding's Demand
In addition to his demands regarding the CIC severance multiplier and the tax gross-up, Harding has demanded the inclusion of a "Board turnover trigger" in the definition of "Change in Control" in the employment agreement. Specifically, Harding proposes that a Change in Control be deemed to have occurred if, within any 12-month period, a majority of the members of NTP's Board of Directors are replaced by directors whose appointment or election was not endorsed or recommended by a majority of the Board as constituted immediately prior to the commencement of such 12-month period.
This Board turnover trigger would operate as a fourth CIC trigger, in addition to the three triggers that are currently agreed between the parties:
(a) the acquisition by any person or group of persons (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) of more than 50% of the combined voting power of NTP's outstanding voting securities;
(b) the consummation of a merger, consolidation, or similar business combination transaction involving NTP, following which the shareholders of NTP immediately prior to the transaction hold less than 50% of the combined voting power of the surviving or resulting entity; and
(c) the sale, transfer, or other disposition of all or substantially all of NTP's assets.
Harding has argued that the Board turnover trigger is a standard provision in US CEO employment agreements and is necessary to protect him against a "creeping change in control" scenario in which an activist shareholder or hostile acquirer gradually replaces the Board without crossing the 50% ownership threshold. Harding has cited precedent from his current Marlowe Asset Management employment agreement, which includes a similar Board turnover provision.
B. UK Corporate Governance Concerns
The Board turnover trigger raises serious concerns under UK corporate governance principles. Under Section 168 of the UK Companies Act 2006, shareholders have a statutory right to remove any director by ordinary resolution, with special notice. This right is considered fundamental to the UK governance model and reflects the principle that directors serve at the pleasure of the shareholders and are accountable to them for their stewardship of the company.
A contractual provision that triggers substantial severance payments — potentially amounting to $12,031,250 or more, plus accelerated equity vesting — merely because shareholders exercise their statutory right to reconstitute the Board would be widely perceived as an entrenchment mechanism. Such a provision effectively penalizes shareholders for changing the composition of the Board, which is antithetical to the Code's emphasis on Board refreshment, independence, and accountability.
The Code states that the Board should consider the length of service of the Board as a whole and plan for the orderly succession and refreshment of directors. Provision 18 of the Code states that all directors of FTSE 350 companies should be subject to annual re-election by shareholders. These provisions reflect the expectation that Board turnover is a normal and healthy feature of good governance, not an event that should trigger change in control protections.
ISS and Tarrant Partners LLC generally view Board turnover triggers negatively in the context of CIC provisions. ISS's 2024 guidelines note that Board composition change triggers "may deter legitimate shareholder activism and Board refreshment, and may result in windfall payments to executives that are not warranted by the circumstances." Tarrant Partners LLC's guidelines similarly characterize Board turnover triggers as "potentially entrenching and inconsistent with shareholder rights."
The NTP Board, acting through Dame Philippa Thornton-Hale (Senior Independent Director) and Geoffrey Stanton (Remuneration Committee Chair), has rejected the Board turnover trigger as inconsistent with the Board's governance philosophy and the expectations of UK institutional shareholders. Calderwood & Harkness concurs with and supports this position.
C. Recommendation.  Calderwood & Harkness recommends that NTP maintain its position of rejecting the Board turnover trigger in the Change in Control definition. This position is well-supported by the Code, ISS and Tarrant Partners LLC policy, UK corporate law principles, and prevailing UK market practice. The inclusion of such a trigger would be viewed as an entrenchment mechanism, would be inconsistent with the shareholders' statutory right to remove directors under Section 168 of the Companies Act 2006, and would significantly increase the governance risk associated with the proposed package.
If Harding insists on retaining this provision as a condition of his engagement, the Remuneration Committee should be advised that the Board turnover trigger, standing alone, could attract negative attention from ISS, Tarrant Partners LLC, and the UK institutional shareholder base, independent of the CIC multiplier and tax gross-up issues discussed above. The cumulative effect of including the Board turnover trigger alongside a 2.5x or 3x CIC multiplier would be to create a very challenging governance profile for the package as a whole.
VII. Garden Leave and Restrictive Covenant Interaction with Code
A. Garden Leave Under UK Practice
UK employment practice commonly uses garden leave — a period during which the employee remains employed and continues to receive salary and contractual benefits but is relieved of all duties and excluded from the workplace — as a mechanism for enforcing post-termination restrictions. During garden leave, the employee remains bound by all contractual obligations, including the implied duty of good faith and fidelity, and is effectively prevented from working for a competitor without breaching the employment contract.
The Code's one-year notice period norm aligns with a maximum 12-month garden leave period. In practice, most FTSE 100 and FTSE 250 companies provide for notice periods of twelve months, with the right to place the departing executive on garden leave for all or part of the notice period. This approach has the advantage of providing both protection for the company (by keeping the executive off the market during the garden leave period) and a built-in severance mechanism (by paying the executive through the notice period), without the need for additional severance payments beyond the contractual notice entitlement.
For the proposed dual-contract structure — under which Harding will have a primary employment agreement with NTP US governed by New York law, and a secondary service agreement (or letter of appointment as a director) with NTP PLC governed by English law — the garden leave provisions should be carefully coordinated across both agreements. The garden leave provision in the NTP US agreement should be drafted to work in tandem with any notice period in the NTP PLC service agreement, so as to avoid a situation in which the garden leave obligations conflict or in which Harding is able to circumvent the garden leave by terminating one agreement while remaining employed under the other.
Calderwood & Harkness and HSF are jointly addressing the drafting of the coordinated garden leave provisions, and a separate memorandum (1022-00004-007) addresses the cross-border dual-contract architecture in detail.
B. Non-Compete Duration
The non-compete restriction is a significant point of contention in the current negotiation. The positions are as follows:
•  NTP's initial proposal: 24-month worldwide non-compete following termination of employment.
•  Board-authorized fallback (per Remuneration Committee guidance from Geoffrey Stanton, May 22, 2024): 18-month non-compete, limited to North America and Western Europe.
•  Harding's demand: 12-month non-compete, with no geographic limitation specified but with the practical effect of a worldwide restriction, matching his current non-compete under the Marlowe Asset Management employment agreement.
Under the Code, restrictive covenants are not directly regulated, but they are viewed through the lens of proportionality. The Code's overarching principle that remuneration arrangements should not pay more than necessary extends, by implication, to post-termination restrictions: a restriction that is broader or longer than necessary to protect the company's legitimate business interests may be viewed as part of an excessively generous termination package, particularly if the executive receives full or near-full pay during a garden leave period that overlaps with, or is credited against, the non-compete period.
The proportionality concern is heightened where the non-compete is accompanied by a substantial severance payment. If Harding receives a 2x or 2.5x non-CIC severance payment upon termination, the total value of the termination package — including the severance, the garden leave pay, and the value of accelerated or continued equity awards — must be assessed holistically against the Code's expectation of proportionality and the avoidance of rewarding failure.
It should be noted that this memorandum addresses only the governance and shareholder optics dimension of the non-compete issue. Separate Calderwood & Harkness memoranda address the enforceability of the non-compete under New York law (1022-00004-003) and the drafting considerations applicable to the restrictive covenant provisions (1022-00004-006).
VIII. Whitmore Hobson LLP Benchmarking Context
Whitmore Hobson LLP ("Whitmore Hobson"), under the leadership of Dr. Rachel Whitmore, Managing Partner, serves as the independent compensation consultant to NTP's Remuneration Committee. Whitmore Hobson has been engaged under a standing retainer since 2021 and provides benchmarking analysis, market data, and advisory services on all aspects of executive remuneration for NTP. Whitmore Hobson has no other consulting relationship with NTP or its management, and the Remuneration Committee has confirmed Whitmore Hobson's independence in accordance with the Code.
Whitmore Hobson is in the process of completing a comprehensive peer-group benchmarking analysis for the CEO hire, which will inform multiple elements of the Remuneration Committee's decision-making process, including:
(i) the competitive positioning of the proposed total compensation package relative to NTP's designated peer group (a blended UK/US peer group of telecommunications and technology companies with revenues between £2 billion and £10 billion);
(ii) the pay-ratio analysis comparing the incoming CEO's total remuneration to the median employee compensation at NTP, as required to be disclosed under The Companies (Miscellaneous Reporting) Regulations 2018;
(iii) the "comply or explain" justification for any deviation from the Code's norms on severance, holding periods, and other remuneration elements; and
(iv) the assessment of CIC provisions and tax gross-up approaches relative to UK and US market practice.
With respect to the overall quantum of the proposed package, the total target annual compensation of $13,812,500 (comprising $1,750,000 base salary, $3,062,500 target annual bonus at 175% of base salary, and $9,000,000 in annual long-term incentive awards) represents a meaningful uplift from the outgoing CEO Sir Alistair Kemble's total target annual compensation of approximately £5,600,000 (approximately $7,140,000 at current exchange rates). The increase reflects the competitive requirements of recruiting a US-based CEO from a US-headquartered company, where compensation levels are substantially higher than in the UK market, but the magnitude of the increase — approximately 93% in dollar terms — will be a focus of shareholder attention and will need to be clearly justified in the directors' remuneration report.
Of particular relevance to this memorandum, Whitmore Hobson has conducted a "best net" analysis of the Section 280G cutback versus the full payment plus excise tax for Harding's proposed CIC package. The analysis models the after-tax outcomes for Harding under two scenarios: (a) a full payment of all parachute payments, with Harding bearing the 20% excise tax and losing the Section 280G income tax deduction; and (b) a cutback of total parachute payments to the safe harbor limit of $23,519,999, with no excise tax. Whitmore Hobson's analysis, using reasonable assumptions about Harding's marginal federal and state income tax rates (federal 37%, New York State 10.9%, New York City 3.876%), concludes that the after-tax outcomes under the two scenarios are roughly equivalent, with the cutback slightly favored — meaning that Harding would receive approximately the same after-tax benefit whether he receives the full payment (and pays the excise tax) or the reduced payment (and avoids the excise tax).
This finding significantly undermines the case for including a full excise tax gross-up in the employment agreement. If the gross-up does not materially improve Harding's after-tax position, it cannot reasonably be characterized as necessary for recruitment purposes, and its inclusion would create significant governance risk for NTP — including the near-certainty of a negative ISS recommendation and the strong likelihood of a negative Tarrant Partners LLC recommendation — for no commensurate benefit. Calderwood & Harkness recommends that the Whitmore Hobson analysis be shared with Harding's counsel (Stillwell & Padilla LLP) as part of the negotiation, to support NTP's position that the best-net cutback is the appropriate approach and that the gross-up is unnecessary.
IX. Summary of Recommendations
Based on the foregoing analysis, Calderwood & Harkness makes the following recommendations to the engagement team and to the Remuneration Committee:
1. CIC Multiplier. We recommend that NTP hold at a 2.5x multiple of base salary plus target annual bonus, producing a CIC cash severance payment of $12,031,250. A 3x multiple ($14,437,500), as demanded by Harding, is very likely to attract negative proxy advisory recommendations from both ISS and Tarrant Partners LLC and to generate significant shareholder opposition, particularly in light of the existing 87.4% say-on-pay result at the April 2024 AGM. The 2.5x multiple, while at the high end of the defensible range for a UK-listed company, is supportable with appropriate disclosure and shareholder engagement, given the cross-border competitive dynamics of the recruitment.
2. Tax Gross-Up. We strongly recommend the adoption of a best-net cutback approach rather than a full Section 280G excise tax gross-up. Both ISS and Tarrant Partners LLC view excise tax gross-ups as "problematic" pay practices, and the inclusion of a gross-up in a new or materially amended employment agreement is a factor that weighs against a positive say-on-pay recommendation. The Whitmore Hobson analysis demonstrates that the cutback and the gross-up produce roughly equivalent after-tax outcomes for Harding, meaning that the gross-up is largely a matter of principle and optics rather than a material economic benefit. The estimated cost of the gross-up ($6,072,000 point estimate, with a range of $4,200,000 to $6,800,000,

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