CALL NOTES — CONFIDENTIAL / ATTORNEY-CLIENT PRIVILEGED
Matter: Northgate Telecommunications PLC — CEO Employment Negotiation
Matter Number: 1022-00004
Subject: Term Sheet Negotiation Call #5
Date of Call: July 19, 2024
Time of Call: 2:00 p.m. – 3:45 p.m. EDT
Format: Telephone conference
Prepared by: James Underwood, Associate, Calderwood & Harkness LLP
Date of Notes: July 19, 2024
ATTENDEES
For Northgate Telecommunications PLC ("NTP" / "Employer"):
• Renata Vasquez — Partner, Calderwood & Harkness LLP (Responsible Partner, Labor & Employment)
• James Underwood — Associate, Calderwood & Harkness LLP (Lead Associate, Labor & Employment)
• Devon Archer — Associate, Calderwood & Harkness LLP (Working Associate, Labor & Employment)
• Elaine Whitford — SVP & Group General Counsel, Northgate Telecommunications PLC (joined for first 30 minutes; departed at approximately 2:30 p.m. EDT)
• Priya Narayanan — Chief People Officer, Northgate Telecommunications PLC (joined for first 30 minutes; departed at approximately 2:30 p.m. EDT)
For Marcus Elliot Harding ("Harding" / "Candidate"):
• Victoria Hargrove — Partner, Hargrove & Liddell LLP (Lead Counsel)
• Nathan Chu — Associate, Hargrove & Liddell LLP
PURPOSE OF CALL
This was the fifth and final term-sheet-stage negotiation call between counsel for Northgate Telecommunications PLC and counsel for Marcus Elliot Harding in connection with Mr. Harding's proposed appointment as Chief Executive Officer of NTP. The call followed up on Term Sheet Negotiation Call #4, which took place on July 12, 2024.
The primary objectives of the call were as follows:
1. Confirm the agreed-upon compensation terms that were settled during prior calls (principally Calls #3 and #4);
2. Determine the path forward on the two principal areas of disputed terms — namely, the change in control provisions and the restrictive covenant provisions;
3. Agree on the process and timeline for converting the current term sheet (v4, dated July 10, 2024) into a full draft executive employment agreement; and
4. Discuss the transition timeline and proposed start date for Mr. Harding's employment with NTP.
SUMMARY OF DISCUSSION
1. Confirmation of Agreed Compensation Terms
Vasquez opened the call by thanking all participants for their continued engagement and proposing that the group begin by walking through the compensation terms that had been agreed during Call #3 (July 8, 2024) and confirmed during Call #4 (July 12, 2024), in order to ensure that both sides are aligned on all settled terms before proceeding to address the remaining disputed provisions. Hargrove agreed that this was an efficient approach and indicated her readiness to confirm.
Vasquez proceeded to recap each agreed compensation term, with Hargrove confirming agreement on behalf of Mr. Harding in each instance, as follows:
Base Salary. Base salary of $1,750,000 per annum. Confirmed by both sides without further discussion.
Target Annual Incentive (Bonus). Target annual incentive opportunity equal to 175% of base salary, yielding a target annual bonus of $3,062,500. Confirmed by both sides.
Maximum Annual Incentive. Maximum annual incentive opportunity equal to 300% of base salary, yielding a maximum annual bonus of $5,250,000, payable upon achievement of maximum performance thresholds to be set by the Remuneration Committee. Confirmed by both sides.
Sign-On Cash Bonus (Make-Whole). A sign-on cash bonus of $5,000,000 in the nature of a make-whole payment, payable within 30 calendar days of Mr. Harding's start date, subject to a 24-month clawback provision in the event of Mr. Harding's voluntary resignation without Good Reason during the first 24 months of employment. Confirmed by both sides.
Sign-On Equity (Make-Whole for Forfeited Marlowe Asset Management Digital Holdings Equity). Sign-on equity grants in the aggregate amount of $18,400,000, structured as follows:
• Restricted Stock Unit ("RSU") grant with a grant-date value of $12,000,000, vesting ratably in equal one-third increments on each of the first three anniversaries of the grant date (i.e., 1/3 per year over three years); and
• Performance Stock Unit ("PSU") grant with a grant-date value of $6,400,000, cliff-vesting at the conclusion of a three-year performance period, subject to achievement of performance hurdles based on relative total shareholder return ("TSR") and revenue growth metrics to be determined by the Remuneration Committee.
The total sign-on equity of $18,400,000 was confirmed by both sides.
Hargrove acknowledged on the record that the total sign-on equity of $18,400,000 leaves a shortfall of approximately $5,000,000 against Mr. Harding's estimated $23,400,000 in forfeited unvested equity with Marlowe Asset Management Digital Holdings, Inc. However, Hargrove confirmed on behalf of Mr. Harding that the $5,000,000 sign-on cash bonus is accepted as offsetting this gap, and that Mr. Harding considers the combined sign-on package of $23,400,000 ($18,400,000 equity plus $5,000,000 cash) to be an acceptable make-whole arrangement. Vasquez noted this confirmation for the record.
Annual Long-Term Incentive ("LTI") Target. Annual long-term incentive target of $9,000,000 per year, allocated 60% to performance stock units and 40% to restricted stock units, granted under NTP's Omnibus Incentive Plan (as may be amended from time to time), with the first annual LTI grant to be made at or promptly following the commencement of Mr. Harding's employment. Confirmed by both sides.
Total Target Annual Compensation. Vasquez noted that the total target annual compensation, calculated as the sum of base salary ($1,750,000), target annual incentive ($3,062,500), and annual LTI target ($9,000,000), amounts to $13,812,500 per annum. Both sides acknowledged this as the reference figure for benchmarking and disclosure purposes.
Supplemental Executive Retirement Plan ("SERP"). An annual supplemental executive retirement contribution of $250,000 per year, to be credited to Mr. Harding's account under NTP's nonqualified deferred compensation plan. Confirmed by both sides.
401(k) Plan. Participation in the Northgate Telecommunications US, Inc. 401(k) plan, with an employer matching contribution equal to 6% of eligible compensation, subject to applicable Internal Revenue Service annual contribution limits under Sections 402(g) and 415 of the Internal Revenue Code. Confirmed by both sides.
Perquisites. The following executive perquisites were confirmed by both sides:
• Company car allowance of $25,000 per year;
• Participation in NTP's executive health program;
• Supplemental life insurance coverage in the amount of $2,000,000;
• Financial and tax planning reimbursement of up to $35,000 per year.
Initial Employment Term. An initial employment term of five (5) years, commencing on the agreed start date, with automatic one-year renewals thereafter unless either party provides at least 180 days' written notice of non-renewal. Confirmed by both sides.
Both Vasquez and Hargrove indicated satisfaction that the foregoing terms are settled and should be reflected as clean (non-bracketed) provisions in the draft employment agreement.
2. Non-CIC Severance Terms
Vasquez noted that the non-CIC severance terms — that is, the severance payable upon a termination of employment by the Company without Cause or by Mr. Harding for Good Reason, in each case outside the context of a Change in Control — remain bracketed on the current term sheet (Version 4, dated July 10, 2024). She summarized the respective positions of the parties as follows:
Northgate's Position:
• Cash severance equal to 2x the sum of base salary plus target annual bonus (2 × $4,812,500 = $9,625,000), payable in a lump sum or in accordance with Section 409A requirements;
• Pro-rata bonus for the fiscal year in which termination occurs, based on actual performance;
• Eighteen (18) months of continued group health benefits via COBRA, with NTP subsidizing the employer portion of the premium;
• Twelve (12) months of accelerated vesting of unvested time-based equity awards outstanding at the time of termination.
Harding's Position (per Hargrove):
• Cash severance equal to 2.5x the sum of base salary plus target annual bonus (2.5 × $4,812,500 = $12,031,250);
• Full acceleration of all unvested equity awards (both time-based and performance-based) outstanding at the time of termination;
• Twenty-four (24) months of continued COBRA coverage.
Hargrove stated that this is an important issue for Mr. Harding and that he considers the 2.5x multiplier to be consistent with market practice for incoming CEOs at companies of NTP's size and complexity. However, Hargrove acknowledged that Mr. Harding views the non-CIC severance issue as secondary to the change in control provisions, and indicated her client's willingness to defer further negotiation of the non-CIC severance terms to the full draft stage rather than attempting to resolve the matter on the current call.
Vasquez agreed with this approach and proposed that the draft employment agreement reflect Northgate's position on non-CIC severance terms in the operative text, with brackets or marginal commentary noting Hargrove's counter-position, so that the issue can be addressed through the redline exchange process. Hargrove confirmed her agreement with this procedural approach.
3. Status of Disputed Terms — Change in Control Provisions
Vasquez acknowledged that the change in control provisions remain the most significant area of disagreement between the parties, as has been the case throughout the negotiation process beginning with Call #1 (June 24, 2024). She noted that while meaningful progress has been achieved on other aspects of the term sheet, the CIC provisions continue to present fundamental differences in position that were not resolved on Call #4 and that the parties needed to determine a path forward.
Hargrove agreed with this characterization and indicated that the CIC provisions are the most important protective terms for Mr. Harding, particularly given that he is leaving a secure and well-compensated COO position at Marlowe Asset Management Digital Holdings to assume the chief executive role at a company undergoing a leadership transition.
The following sub-issues were discussed in turn:
3a. CIC Definition. Vasquez reviewed the agreed and disputed elements of the proposed Change in Control definition:
Agreed elements of the CIC definition:
(a) Acquisition by any person or group of persons of more than 50% of the outstanding voting securities of Northgate Telecommunications PLC;
(b) Consummation of a merger, consolidation, or similar business combination involving NTP, in 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 immediately following the transaction; and
(c) Sale, transfer, or disposition of all or substantially all of the assets of NTP and its subsidiaries, taken as a whole.
Disputed element: Mr. Harding has demanded the inclusion of a fourth trigger:
(d) A change in the composition of the Board of Directors of NTP such that a majority of the directors serving on the Board are replaced within any 12-month period by directors whose appointment or election was not endorsed by a majority of the Board prior to such replacement (the "Board Turnover Trigger").
Vasquez reiterated that Northgate's Board of Directors, per direction received from Geoffrey Stanton, Chair of the Remuneration Committee, has firmly rejected the inclusion of the Board Turnover Trigger. The Board's position is that such a provision is inconsistent with UK corporate governance norms and, in particular, with the principles set forth in the UK Corporate Governance Code 2024, which emphasizes shareholder primacy in board composition decisions. The Board is concerned that a Board Turnover Trigger could create perverse incentives and entrench management in a manner that conflicts with the Board's fiduciary obligations to shareholders.
Hargrove responded that Mr. Harding considers the Board Turnover Trigger to be an essential element of his change in control protection. She cited the following in support of Mr. Harding's position:
• Mr. Harding's current employment agreement with Marlowe Asset Management Digital Holdings includes a substantially identical Board composition trigger, and asking him to accept lesser protection is a meaningful concession;
• Changes in Board composition can represent a fundamental shift in the strategic direction and governance philosophy of a company, and such changes may not trigger any of the other CIC definitions (i.e., there may be no acquisition of voting securities, no merger, and no asset sale);
• From Mr. Harding's perspective, a Board that is substantially reconstituted may not share the same commitment to the strategy and leadership agenda he was hired to execute, and the absence of this trigger creates a gap in his protective arrangements.
Neither side moved from its position on this point. Vasquez indicated that the draft agreement would not include the Board Turnover Trigger, and that Hargrove & Liddell could propose it in their redline. Hargrove confirmed that she would do so.
3b. CIC Severance Multiplier. The parties' respective positions on the CIC severance multiplier were reviewed as follows:
• Northgate's position: 2.5x the sum of base salary plus target annual bonus (2.5 × $4,812,500 = $12,031,250), payable upon a qualifying termination within the CIC protection period (double trigger);
• Harding's position: 3x the sum of base salary plus target annual bonus (3 × $4,812,500 = $14,437,500), payable upon a qualifying termination within the CIC protection period (double trigger);
• Dollar gap: $2,406,250.
Both sides confirmed agreement on the double-trigger structure, meaning that CIC severance would be payable only upon an involuntary termination without Cause or a resignation for Good Reason occurring within a specified window (to be defined in the draft agreement) following or in anticipation of a Change in Control. No single-trigger acceleration was requested or discussed.
Hargrove referenced Call #4 (July 12, 2024), at which she had proposed a compromise multiplier of 2.75x as a middle ground. Vasquez confirmed that she had presented this compromise proposal to the client following Call #4.
Vasquez reported that Northgate's Remuneration Committee considered the 2.75x compromise proposal at its meeting on July 16 but ultimately declined to accept it. The Committee's reasoning was twofold:
First, the Committee consulted with Sandra Kolb of Veltrano Proxy Advisors, Inc., NTP's proxy advisory consultant, who provided an assessment that any CIC severance multiplier at or above 3x would likely trigger a negative say-on-pay recommendation from Thackeray Health IT ("ISS") under ISS's current executive compensation evaluation methodology. Ms. Kolb further advised that even a 2.75x multiplier is at the edge of what ISS considers acceptable and could draw scrutiny, particularly in the context of Mr. Harding's overall compensation package, which is already at the higher end of the peer group range.
Second, the Committee noted that NTP received 87.4% say-on-pay support at its Annual General Meeting on April 18, 2024, and the Board is unwilling to risk any erosion of that shareholder support level by adopting a CEO compensation package that draws negative proxy advisor commentary or recommendations. The Committee views maintaining strong say-on-pay support as essential to the Board's credibility and to Mr. Harding's own standing with the shareholder base at the outset of his tenure.
Hargrove expressed disappointment with this outcome. She noted that a 2.5x CIC multiplier is below the 3x multiplier that Mr. Harding currently has under his employment agreement with Marlowe Asset Management Digital Holdings, and that asking him to accept a diminished level of CIC protection — in the context of taking on a more senior role with greater risk and visibility — represents a significant concession on Mr. Harding's part. Hargrove indicated that Mr. Harding may ultimately accept a 2.5x multiplier but would need to evaluate it in the context of the full package, including the other disputed CIC provisions.
No resolution was reached on this point. Vasquez confirmed that the draft agreement would reflect Northgate's position at 2.5x, with Mr. Harding's position at 3x to be noted as an outstanding item for continued negotiation through the redline process.
3c. Section 280G Tax Treatment. The parties turned to the disputed treatment of potential excise taxes under Sections 280G and 4999 of the Internal Revenue Code:
• Northgate's position: Best-net (modified cutback) approach. Under this approach, if any payments or benefits to Mr. Harding in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G, such payments would be reduced to the safe harbor limit (i.e., 2.99 times the "base amount") only if the net-after-tax result to Mr. Harding under the reduced payments would be better than the net-after-tax result of receiving the full payments and bearing the 20% excise tax imposed under Section 4999, plus any applicable income taxes. If the full-payment scenario produces a better after-tax result, no reduction would be made.
• Harding's position: Full Section 280G tax gross-up. Under this approach, NTP would reimburse Mr. Harding for any excise tax imposed under Section 4999 in connection with a Change in Control, as well as any income taxes and additional excise taxes attributable to the gross-up payment itself, such that Mr. Harding would be made whole on an after-tax basis.
Vasquez provided the following quantitative analysis, which had been prepared by Calderwood & Harkness in coordination with NTP's tax department:
• Mr. Harding's "base amount" under Section 280G, calculated as the average of his W-2 compensation from Marlowe Asset Management Digital Holdings for the five calendar years 2019 through 2023, is approximately $7,840,000;
• The safe harbor limit is therefore approximately $23,519,999 (i.e., 2.99 × $7,840,000);
• Under Mr. Harding's proposed terms (3x CIC severance multiplier, full acceleration of all unvested equity, and 36 months of benefits continuation), estimated total parachute payments would be approximately $38,200,000;
• Estimated excess parachute payments (i.e., the amount exceeding the base amount of $7,840,000) would be approximately $30,360,000;
• The resulting excise tax liability under Section 4999 at the 20% rate would be approximately $6,072,000.
Vasquez noted that Dr. Rachel Whitmore of Whitmore Hobson LLP, the independent compensation consultant retained by the Remuneration Committee, had analyzed the best-net cutback scenario and concluded that Mr. Harding's after-tax position under the cutback approach is roughly equivalent to his after-tax position under the full-payment-plus-excise-tax scenario. This is because the cutback would reduce total payments to the safe harbor limit, thereby avoiding both the 20% excise tax and the loss of the employer's deduction, while the full-payment scenario would subject Mr. Harding to the $6,072,000 excise tax (which is non-deductible to Mr. Harding). Dr. Whitmore's analysis suggested that the gross-up is largely a matter of principle and optics rather than one conferring a meaningful incremental economic benefit on the executive.
Hargrove pushed back on this characterization, arguing the following:
• Full Section 280G gross-up protection is standard for CEO-level hires, particularly where, as here, the executive is leaving a position that includes a full gross-up;
• Mr. Harding's current Marlowe Asset Management Digital Holdings employment agreement includes a full gross-up provision, and the elimination of this protection is another example of NTP asking Mr. Harding to accept less favorable terms than he currently enjoys;
• The gross-up is a matter of principle for Mr. Harding: he should not bear the economic cost of punitive tax provisions that are triggered by a transaction over which he has no control and from which NTP's shareholders (rather than Mr. Harding) are the primary beneficiaries;
• The "rough equivalence" analysis is sensitive to assumptions about marginal tax rates, the composition of parachute payments, and the timing of equity vesting, and may not hold under all scenarios.
Vasquez responded that the market trend is moving decisively away from Section 280G gross-ups, that ISS identifies gross-up provisions as "problematic pay practices" in its proxy voting guidelines, and that Veltrano Proxy Advisors has specifically advised that the inclusion of a gross-up provision in Mr. Harding's employment agreement could serve as a basis for a negative proxy advisory recommendation. The Remuneration Committee views a gross-up as inconsistent with current governance best practices and is not prepared to include one.
No resolution was reached on this point. Vasquez confirmed that the draft agreement would be prepared at Northgate's best-net (modified cutback) position.
3d. CIC Equity Acceleration and Benefit Continuation. Equity Acceleration. Both sides confirmed agreement that all unvested equity awards (both RSUs and PSUs) held by Mr. Harding would fully accelerate upon a qualifying CIC termination (i.e., an involuntary termination without Cause or a resignation for Good Reason within the applicable CIC protection period — double trigger). This point is settled.
However, a disagreement remains regarding the treatment of PSUs upon acceleration:
• Northgate's position: PSUs that accelerate in connection with a CIC termination would vest at the "target" level of performance (i.e., 100% of the target number of shares);
• Harding's position (per Hargrove): PSUs that accelerate in connection with a CIC termination would vest at the "greater of target or actual performance through the date of the Change in Control" — meaning that if actual performance through the CIC date exceeds target, Mr. Harding would receive the benefit of that above-target performance rather than being capped at the target level.
This issue was not resolved on the call and was deferred to the draft agreement for further negotiation. Vasquez noted that this provision has meaningful economic implications depending on NTP's actual TSR and revenue performance during the performance period.
Benefit Continuation. There is a disagreement on the duration of post-CIC-termination benefit continuation:
• Northgate's position: 24 months of continued COBRA coverage following a qualifying CIC termination;
• Harding's position: 36 months of continued COBRA coverage.
This issue was also deferred to the draft agreement for further negotiation. No significant substantive discussion took place beyond the restatement of positions.
4. Status of Disputed Terms — Restrictive Covenant Provisions
Vasquez noted that the restrictive covenant provisions constitute the second major area of significant disagreement between the parties, alongside the CIC provisions. She observed that the parties' positions on restrictive covenants remain far apart and that resolving these provisions may require substantial further negotiation at the draft stage.
4a. Non-Compete Duration and Scope. The parties' respective positions on the post-termination non-competition covenant were reviewed as follows:
Northgate's current position (which represents a revision from NTP's original proposal of a 24-month worldwide non-compete with a broader activity scope):
• Duration: 24 months post-termination;
• Geographic scope: Worldwide;
• Activity scope: Employment by, or provision of services (whether as an employee, consultant, director, advisor, or otherwise) to, any company deriving more than 15% of its annual consolidated revenue from (i) telecommunications services, (ii) telecommunications infrastructure, or (iii) enterprise SaaS platforms serving telecommunications operators.
Harding's position (per Hargrove):
• Duration: 12 months post-termination, which matches Mr. Harding's existing 12-month US non-compete obligation under his employment agreement with Marlowe Asset Management Digital Holdings;
• Geographic scope: Limited to North America and Western Europe;
• Activity scope: Narrowed to prohibit employment by or provision of services to only "direct competitors" of NTP, as identified on a schedule of eight (8) named companies to be mutually agreed upon by the parties and attached to the employment agreement. Hargrove did not identify the proposed companies on this call but indicated she would include a proposed schedule in the redline.
Hargrove reiterated that Mr. Harding views a 24-month non-compete as excessive, particularly in light of the following considerations:
• Enforceability concerns under New York law (the proposed employment agreement would be governed by New York law), where courts have historically applied a reasonableness standard and have been reluctant to enforce non-competes of extended duration or overbroad geographic or activity scope;
• Pending New York legislation (S.3100/A.1278, as most recently introduced) that, if enacted, may restrict or entirely ban the enforcement of non-compete agreements in the state, creating additional uncertainty;
• The practical impact of a 24-month worldwide non-compete on a CEO-level executive, which effectively forecloses substantially all comparable employment opportunities for an extended period.
Vasquez acknowledged the enforceability considerations raised by Hargrove and indicated that Calderwood & Harkness's analysis of applicable New York law had been taken into account. However, she stated that Northgate's position reflects the company's legitimate need to protect its global competitive position, given that the CEO would have access to the most sensitive strategic, customer, financial, and technology information across all of NTP's markets worldwide. A narrower non-compete, whether in terms of duration, geography, or activity scope, would leave significant gaps in the company's ability to protect its competitive interests.
Hargrove then raised the issue of garden leave, noting that if the non-compete and garden leave periods were to run concurrently rather than consecutively, the practical restraint imposed on Mr. Harding could be significantly reduced. She offered that Mr. Harding would agree to a 12-month non-compete duration if the garden leave period and the non-compete period were structured to run concurrently, such that the effective post-garden-leave period of competitive restriction would be reduced or eliminated.
No resolution was reached on the duration or scope of the non-compete. This issue was deferred to the draft agreement for further negotiation.
4b. Garden Leave. The parties' respective positions on the garden leave provision were reviewed as follows:
Northgate's position:
• Six (6) months of paid garden leave at base salary only ($1,750,000 × 6/12 = $875,000);
• Garden leave to be treated as a period separate from and additional to the post-termination non-compete period (i.e., running consecutively, not concurrently).
Harding's position (per Hargrove):
• Twelve (12) months of paid garden leave at full compensation, including base salary and a pro-rata portion of the target annual bonus;
• Garden leave and the non-compete period to run concurrently, such that if the non-compete were set at 12 months, the effective post-garden-leave non-compete period would be zero.
Vasquez noted that Northgate views the garden leave and the non-compete as serving distinct purposes and that the garden leave is intended to facilitate an orderly transition of responsibilities, whereas the non-compete is intended to provide ongoing protection of NTP's competitive interests after the employment relationship has fully concluded. The company's position is that these periods should run consecutively, not concurrently.
Hargrove disagreed, arguing that concurrent treatment of garden leave and non-compete periods is standard practice in the United Kingdom and is consistent with the approach contemplated by the UK Corporate Governance Code, which Mr. Harding's dual-contract structure (including a UK service agreement with NTP PLC) would implicate. She noted that requiring an executive to endure both a 12-month garden leave and a subsequent 24-month non-compete would amount to an aggregate restraint of 36 months, which is commercially unreasonable and almost certainly unenforceable.
This issue was deferred to the draft agreement for continued negotiation.
4c. Non-Solicitation. Northgate's position:
• 24 months post-termination;
• Covering both the solicitation or hiring of NTP employees and the solicitation of NTP customers.
Harding's position (per Hargrove):
• 18 months post-termination;
• Covering only the solicitation or hiring of NTP employees (no customer non-solicitation provision).
The discussion on this point was relatively brief. Hargrove argued that a customer non-solicitation provision, as applied to a CEO, is functionally equivalent to a non-compete because, given the CEO's role in managing the company's most significant customer relationships, a prohibition on soliciting customers would effectively prevent Mr. Harding from working for any competitor that serves the same customer base. In Hargrove's view, the customer non-solicitation is overly broad and redundant with the non-compete provision.
Vasquez stated that Northgate views customer protection as essential and that the customer non-solicitation serves a different and complementary purpose to the non-compete, particularly in situations where the non-compete may be narrowed in scope or duration through further negotiation. She noted that customers of NTP are cultivated over years through significant investment, and that a CEO who departs with knowledge of NTP's customer relationships, pricing structures, and strategic priorities poses a distinct competitive risk that a non-compete alone may not fully address.
This issue was deferred to the draft agreement for continued negotiation.
4d. Non-Disparagement. Both sides agreed in principle to a mutual, perpetual non-disparagement covenant. The provision would apply to both Mr. Harding and NTP (and its officers and directors), and would include appropriate carve-outs for statements made in the context of legal proceedings, governmental investigations, and legally compelled disclosures.
No remaining issues were identified with respect to the non-disparagement provision. The specific language will be drafted in the full employment agreement.
5. Decision to Proceed to Full Draft Agreement
Following the discussion of the disputed CIC and restrictive covenant provisions, both sides acknowledged that the term sheet negotiation process had reached its natural conclusion. Both Vasquez and Hargrove agreed that further iterations of the term sheet would not resolve the remaining disputes on change in control and restrictive covenant provisions, and that the most productive path forward would be to move from the term sheet to a full draft employment agreement.
The following process and timeline were agreed upon:
1. Draft Preparation. Calderwood & Harkness will prepare a full draft Executive Employment Agreement (referred to herein as "Draft 1") incorporating Northgate's positions on all terms, including all disputed terms.
2. Contracting Parties. The agreement will be entered into between Northgate Telecommunications US, Inc. (as the employer entity) and Marcus Elliot Harding (as the executive). The agreement will be governed by the laws of the State of New York.
3. Treatment of Agreed vs. Disputed Terms. Terms that have been agreed by both sides will be reflected as clean, non-bracketed provisions. Terms that remain in dispute — including the CIC multiplier, the 280G gross-up vs. best-net treatment, the Board Turnover Trigger, the non-compete duration and scope, the garden leave structure and concurrent/consecutive treatment, and the non-solicitation scope — will be drafted at Northgate's positions. The draft will not include brackets or internal annotations; rather, it will be presented as a complete agreement reflecting the company's positions, with the understanding that Hargrove & Liddell will propose Mr. Harding's positions through the redline process.
4. Redline Process. Hargrove & Liddell will redline Draft 1 with Mr. Harding's positions on all disputed terms, together with any additional comments, proposed revisions, or supplemental provisions that Hargrove & Liddell may wish to raise.
5. Timeline. Vasquez committed to circulate Draft 1 during the week of July 22, 2024, with a target of delivery by the end of that week (i.e., by Friday, July 26, 2024). Hargrove indicated that Hargrove & Liddell would target a return of the redline within approximately two weeks of receipt, yielding a target date for the redline of approximately Monday, August 5, 2024, depending on the date of actual receipt.
Hargrove noted that she expects to have "significant comments" on the change in control provisions (expected to be Section 7 of the draft agreement) and the restrictive covenant provisions (expected to be Section 9 of the draft agreement). Vasquez acknowledged this expectation and indicated that Calderwood & Harkness would review and respond to the redline promptly following receipt.
6. Cross-Border / Dual Contract Structure
Vasquez noted that Draft 1 would address only the primary US employment agreement. The dual-contract structure that has been discussed throughout the negotiation will require a separate UK service agreement, which will be handled in parallel.
Specifically, Vasquez confirmed the following:
• The primary employment agreement (to be prepared by Calderwood & Harkness) will be a New York-governed agreement between Northgate Telecommunications US, Inc. and Mr. Harding, covering his role as Group Chief Executive Officer. It is anticipated that approximately 80% of Mr. Harding's duties will be performed in the United States and will be governed by this agreement.
• A secondary UK service agreement between Mr. Harding and Northgate Telecommunications PLC (the UK-listed parent company) will be prepared by Moorfield Bates LLP (Simon Aldridge, Partner), in coordination with Calderwood & Harkness. This agreement will address Mr. Harding's UK board duties and UK regulatory compliance obligations, covering approximately 20% of his duties.
Hargrove confirmed that she had no objection to the dual-contract architecture and that the structure was consistent with her understanding of how the arrangement would be documented.
A brief discussion followed regarding compliance with the Financial Conduct Authority's Senior Managers & Certification Regime ("SM&CR"). Mr. Harding's role as Group CEO of a company listed on the London Stock Exchange will require him to be approved under SM&CR, and the UK service agreement will need to address the related regulatory compliance obligations. Vasquez indicated that Moorfield Bates would address SM&CR compliance requirements in a separate memorandum to be circulated to both sides in due course.
Vasquez also noted that the cross-border structure will necessitate tax equalization provisions to address the allocation of income between US and UK tax jurisdictions. As a US tax resident earning UK-source income, Mr. Harding would be subject to double taxation absent appropriate equalization mechanisms. The following tax-related matters will be addressed in either an exhibit or a side letter to the main employment agreement:
• Tax equalization provisions ensuring Mr. Harding is not disadvantaged by having income allocated between two jurisdictions;
• Coordination with the US-UK Totalization Agreement for social insurance purposes (Social Security / National Insurance);
• Tax return preparation and compliance support for both US and UK filings.
Hargrove indicated no objection in principle to the cross-border structure and the proposed approach to addressing tax equalization, but reserved the right to comment on the specific provisions once drafted.
7. Transition Timeline and Start Date
The parties discussed the proposed timeline for Mr. Harding's transition from Marlowe Asset Management Digital Holdings and commencement of employment with NTP.
Original proposed start date: October 1, 2024.
Hargrove raised a timing concern related to Mr. Harding's transition from Marlowe Asset Management Digital Holdings. She noted that Mr. Harding is currently bound by his existing Marlowe Asset Management employment agreement, which requires a minimum of 60 days' prior written notice of resignation. In order to maintain the October 1 start date, Mr. Harding would need to give notice to Marlowe Asset Management by approximately August 1, 2024. However, given the pace of the ongoing employment agreement negotiations with NTP — and the fact that the full draft agreement has not yet been prepared, let alone agreed upon — Hargrove expressed concern that the October 1 timeline may no longer be realistic. Mr. Harding is understandably reluctant to resign from his current position until the NTP employment agreement is either fully executed or sufficiently close to execution that the remaining terms can be finalized with confidence.
Vasquez acknowledged this concern and the parties discussed the possibility of pushing the start date to November 1, 2024. A November 1 start date would allow Mr. Harding to provide his full 60-day notice to Marlowe Asset Management at a later date (i.e., by approximately September 1, 2024) and to complete a responsible transition of his Chief Operating Officer duties at Marlowe Asset Management before commencing his CEO role at NTP.
Vasquez noted that the currently serving CEO, Sir Alistair Kemble, has announced his retirement effective December 31, 2024, and that a November 1 start date would still provide approximately two months of overlap for a CEO transition. This overlap period would allow Sir Alistair to work alongside Mr. Harding to facilitate introductions to key stakeholders, customers, regulators, and Board members, and to transfer institutional knowledge before his departure.
Hargrove expressed a clear preference for November 1, 2024, if negotiations continue on the current trajectory. She indicated that this would give Mr. Harding the comfort he needs to resign from Marlowe Asset Management while allowing sufficient time to complete the negotiation and execution of the NTP employment agreement.
Vasquez stated that she would confirm the November 1 alternative start date with the Board but expected no objection. She noted that Whitford, before departing the call at approximately 2:30 p.m. EDT, had indicated informally that Dame Philippa Thornton-Hale (Chair of the Board) and Geoffrey Stanton (Chair of the Remuneration Committee) had previously discussed the possibility of a November 1 start date and had viewed it as acceptable should circumstances require an adjustment from the original October 1 target.
Both sides agreed to proceed on the basis that the start date in Draft 1 would be referenced as "on or about [October 1 / November 1], 2024," with the final date to be confirmed once the employment agreement is closer to execution and Mr. Harding has determined the appropriate timing for giving notice to Marlowe Asset Management.
8. Harding's Existing Marlowe Asset Management Non-Compete
A brief discussion took place regarding Mr. Harding's existing post-termination non-competition obligation under his employment agreement with Marlowe Asset Management Digital Holdings.
Hargrove confirmed the following regarding the scope of the Marlowe Asset Management non-compete:
• Duration: 12 months post-termination of employment with Marlowe Asset Management;
• Geographic scope: United States;
• Activity scope: Employment by or provision of services to any "direct competitor" of Marlowe Asset Management, as defined in the Marlowe Asset Management agreement. The definition of "direct competitor" is limited to domestic US-based telecommunications infrastructure companies.
Hargrove confirmed that the Marlowe Asset Management non-compete would not prevent Mr. Harding from assuming the NTP Group CEO role. Northgate Telecommunications PLC is not a "direct competitor" under the Marlowe Asset Management agreement's definition, which is specifically limited to domestic US-based telecommunications infrastructure companies. NTP, as a UK-headquartered, globally diversified telecommunications company, falls outside this definition. Accordingly, Hargrove represented that Mr. Harding's acceptance of the NTP CEO position would not constitute a breach of the Marlowe Asset Management non-compete.
Vasquez noted for the record that Calderwood & Harkness had independently analyzed the Marlowe Asset Management non-compete provision as part of its due diligence review, as set forth in its memorandum dated June 9, 2024 (addressed to Elaine Whitford and the Remuneration Committee), and that Calderwood & Harkness's analysis concurs with Hargrove's assessment that the NTP CEO role would not trigger the Marlowe Asset Management non-compete.
No further action items were identified on this point.
9. Indemnification and D&O Insurance
The parties briefly discussed the indemnification and directors' and officers' ("D&O") insurance provisions that will be included in Draft 1.
Vasquez confirmed that NTP maintains a comprehensive D&O insurance policy with Ashdown Surety & Insurance Co. under Policy No. ASI-D&O-NTP-2024-4471, which provides coverage of $50 million per occurrence and $100 million in the aggregate. This policy would cover Mr. Harding in his capacity as Group Chief Executive Officer and director of the company upon commencement of employment.
Hargrove requested that the employment agreement include a specific contractual provision requiring NTP to maintain D&O coverage for Mr. Harding for a period of not less than six (6) years following the termination of his employment, regardless of the reason for termination (i.e., tail coverage or run-off coverage). Hargrove explained that this is a standard protection for departing officers and directors, given that claims related to conduct during the executive's tenure may not surface until years after the executive's departure.
Vasquez agreed to include an indemnification and D&O provision in Draft 1. She noted that the specific terms of the provision — including the scope of indemnification, the duration and coverage limits of the tail coverage obligation, and any conditions or exceptions — would be negotiated as part of the draft redline process.