Dear Renata,
Thank you for transmitting the initial term sheet on June 10 on behalf of Northgate Telecommunications PLC for the proposed CEO employment of Marcus Elliot Harding. My team and I have now had an opportunity to conduct a preliminary review and to discuss the proposal with Mr. Harding.
At the outset, I want to acknowledge the constructive tone of the proposal, and we appreciate the thoughtfulness that clearly went into its preparation. Certain elements reflect a reasonable starting point for continued discussions. Specifically, the base salary of $1,750,000, the target annual incentive at 175% of base, the annual long-term incentive target of $9,000,000, and the sign-on cash bonus of $5,000,000 are all within a range that Mr. Harding is prepared to discuss further. We also recognize the proposed sign-on equity award of $18,400,000 as a good-faith effort toward a make-whole for forfeited compensation, though I would note that it leaves a significant gap against Mr. Harding's estimated $23,400,000 in unvested equity that he would forfeit at Marlowe Asset Management Digital Holdings, Inc. — a delta of approximately $5,000,000 that we will need to address in our redline.
That said, our initial review has identified three principal areas of concern that I want to flag now so that you and your client can begin considering them in advance of our detailed markup.
**1. Change in Control Severance**
The proposed CIC severance multiplier of 2.5x (base plus target bonus) falls below what Mr. Harding currently has in place at Marlowe Asset Management Digital Holdings, where he benefits from a 3x multiplier on base plus bonus with full acceleration of all unvested equity. Mr. Harding is being asked to leave a CEO role at a company with a market capitalization of approximately $34 billion, where he holds substantial change in control protections that were extensively negotiated. The Northgate proposal must, at a minimum, be commensurate with his current arrangements. Mr. Harding will be seeking a 3x multiplier on change in control, which is consistent not only with his existing protections but also with prevailing market practice for CEO-level hires at companies of Northgate's scale and profile.
I also want to flag the absence of a Section 280G excise tax gross-up as a significant concern. The "best-net" cutback approach proposed in the term sheet could, in practice, result in Mr. Harding bearing the full economic burden of an excise tax in a change in control scenario. Given the magnitude of the potential parachute payments at the compensation levels under discussion, this outcome is not acceptable, and Mr. Harding will be seeking a full gross-up.
Additionally, Mr. Harding will seek inclusion of a Board composition change trigger — specifically, the replacement of a majority of the Board of Directors within any 12-month period — in the definition of "change in control." As you know, this is not an uncommon provision in the U.S. public company context and reflects a meaningful protective interest for a CEO. I would note that double-trigger vesting acceleration is acceptable to Mr. Harding in principle.
**2. Restrictive Covenant Provisions**
We have serious concerns about the proposed 24-month post-termination non-compete with worldwide geographic scope. Mr. Harding's existing non-compete at Marlowe Asset Management Digital Holdings is 12 months and limited to the United States. The Northgate proposal effectively doubles the duration and expands the geographic restriction to the entire world — a significant departure that raises both substantive and enforceability concerns.
On enforceability, I would draw your attention to the evolving legislative landscape in New York regarding non-compete restrictions, which introduces meaningful uncertainty around the enforceability of a 24-month worldwide non-compete, particularly one of this breadth.
Mr. Harding's position will be a 12-month non-compete, with the geographic scope limited to North America and Western Europe, and with the activity restriction narrowed to a defined schedule of direct competitors rather than the broad revenue-based test set out in the current term sheet. We will propose the specific competitor schedule in our redline.
Regarding garden leave, the proposed 6-month period at base salary only is inadequate. Mr. Harding will seek garden leave at full compensation — base salary plus pro-rata target bonus — with the garden leave period running concurrently with the non-compete period rather than as an additional pre-competition restriction.
I would also flag that the proposed 24-month non-solicitation covering both employees and customers is overbroad. Mr. Harding will seek an 18-month non-solicitation limited to employees, which is more consistent with market norms at this level.
**3. Non-CIC Severance**
Briefly, the proposed non-CIC severance of 2x base plus target bonus — totaling approximately $9,625,000 — is below what Mr. Harding will require. He will be seeking a 2.5x multiplier on base plus target bonus, together with full acceleration of all unvested equity upon any termination without cause or resignation for good reason. We will also be seeking 24-month COBRA continuation rather than the 18-month period currently proposed.
**Additional Observations**
On timing, the proposed start date of October 1, 2024, may need to be adjusted to November 1, 2024. Mr. Harding takes his obligations to his current employer seriously and will want to ensure an appropriate and professional transition at Marlowe Asset Management Digital Holdings. We trust Northgate will appreciate the significance of that commitment.
On more positive notes, Mr. Harding appreciates the proposed 5-year initial term and the overall structure of the dual U.S./U.K. contract architecture. These are areas where the parties appear to be broadly aligned, and we look forward to working through the details.
**Next Steps**
We will provide a full marked-up redline of the term sheet with detailed comments by early next week, targeting delivery by Monday, June 17. Once you and your client have had an opportunity to review the redline, we would welcome a call to discuss the path forward. We are happy to work around your schedule.
I want to reiterate that Mr. Harding remains very interested in the Northgate opportunity and views this as a compelling next chapter. We are confident the parties can work through these issues constructively, and we look forward to the continued dialogue.
Best regards,
Victoria Hargrove Partner Hargrove & Liddell LLP 51 Madison Avenue, 30th Floor New York, NY 10010 Tel: (212) 555-4100 vhargrove@hargroveliddell.com