Renata,
Thank you for your thorough summary on June 20 setting out Hargrove & Liddell's marked-up term sheet positions. I convened a call with the Remuneration Committee earlier today to work through each of the open issues in light of your analysis and recommendations.
Geoffrey Stanton chaired the discussion, with Dame Philippa Thornton-Hale, Lucinda Farrow, and Dr. Tomás Herrera all participating. The Committee reviewed Calderwood & Harkness's analysis alongside Dr. Rachel Whitmore's compensation benchmarking from Whitmore Hobson LLP and the informal read we received from Sandra Kolb at Veltrano Proxy Advisors. What follows is the Committee's issue-by-issue direction for Monday's call.
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**1. Change in Control Severance Multiplier — Hold at 2.5x**
The Committee's position is firm: **2.5x (base salary + target bonus)**, yielding $12,031,250 (2.5 × $4,812,500). We will not authorize the 3x multiplier that Harding and Hargrove & Liddell are demanding.
Geoffrey's view — which the full Committee shares — is that a 3x CIC multiplier would almost certainly trigger a negative recommendation from ISS on the say-on-pay vote at the 2025 AGM. As you know, we will be putting a binding remuneration policy vote to shareholders at that meeting for the new CEO package, and we cannot afford an adverse ISS recommendation going into that process. NTP received 87.4% say-on-pay support at the April 18, 2024 AGM, and the Committee is unwilling to jeopardize that level of shareholder confidence.
Sandra Kolb at Veltrano confirmed informally that ISS generally flags CIC severance exceeding 3x as problematic, and that even 2.5x sits at the upper end of what proxy advisors find acceptable for a dual-listed company subject to the UK Corporate Governance Code. For additional context, while UK Corporate Governance Code 2024 Provision 40 focuses specifically on notice periods (12 months or less), the broader governance environment counsels restraint on CIC multiples — the UK-listed peer group norm runs 1x to 2x. We are already above that range at 2.5x.
This is not a point on which we have room to move.
**2. Section 280G Tax Treatment — Best-Net (Modified Cutback); No Gross-Up**
The Committee insists on a **best-net (modified cutback) approach**. We will not provide a full 280G excise tax gross-up under any circumstances.
Geoffrey views a full gross-up as a governance red flag that ISS explicitly calls out as problematic under current policy, and the Committee agrees unanimously. Whitmore Hobson's analysis confirmed that a full gross-up could cost NTP an estimated $4.2 million to $6.8 million, depending on the parachute payment calculation, with Harding's base amount at $7,840,000 and the safe harbor at $23,519,999. Dr. Whitmore's benchmarking further shows that the trend among public companies has moved decisively away from gross-ups and toward best-net cutbacks — this is no longer a defensible feature in a new executive agreement.
Importantly, Whitmore Hobson's preliminary analysis suggests that Harding's after-tax position under a best-net cutback versus full payment plus excise tax is roughly equivalent, with the cutback slightly favored. So this is more a matter of optics and principle than actual economic difference for Harding. If Hargrove & Liddell push back, you may want to walk them through that math.
The Committee's position is clear: if this is the issue that breaks the deal, so be it. They will not approve a gross-up.
**3. Board Turnover Trigger — Rejected**
The Committee **unanimously declined** to include a change in Board composition trigger (i.e., majority of directors replaced within a 12-month period) in the definition of "change in control."
Geoffrey and Dame Philippa both view this as inconsistent with UK corporate governance norms and an overreach that could create perverse incentives. The agreed CIC definition should remain limited to:
(a) acquisition of more than 50% of voting securities; (b) merger or consolidation where NTP shareholders hold less than 50% of the combined entity post-transaction; and (c) sale of substantially all assets.
This is a firm position with no flexibility. Please do not leave any ambiguity on this point during Monday's call.
**4. Restrictive Covenant / Non-Compete**
This is an area where the Committee is prepared to show **more flexibility** in order to bridge the overall gap, provided the CIC terms described above are held.
- **Duration:** The Committee's preference remains 24 months, but it is willing to consider **18 months as a fallback** if needed to reach agreement. We recognize that Harding's current Marlowe Asset Management non-compete is only 12 months (US scope) and that a significant increase may be difficult to achieve.
- **Geographic scope:** The Committee is willing to discuss limiting the scope to **North America and Western Europe** rather than worldwide, if necessary to secure agreement on duration. However, we would prefer not to concede both duration and geography simultaneously — please use these as sequenced concessions if at all possible.
- **Activity definition:** The Committee is open to refining the activity-based restriction but is **reluctant to adopt Harding's proposed scheduled-competitor approach** (the list of 8 named companies). We view that as too narrow and easily gamed. Our preference is to retain a revenue-based test — companies deriving more than 15% of revenue from telecom services, telecom infrastructure, or enterprise SaaS platforms serving telecom operators — but the Committee is open to narrowing the revenue threshold or refining the activity categories if Calderwood & Harkness believes that would improve enforceability without materially diluting the protection.
- **Garden leave:** **6-month paid garden leave at base salary** is acceptable. The Committee will not agree to 12 months at full compensation (base + pro-rata bonus) as Harding demands.
As a general matter, the non-compete is a secondary priority relative to the CIC package. The Committee is pragmatic here and wants you to have enough room to negotiate effectively.
**5. Non-Solicitation**
The Committee is comfortable with the proposed **24-month non-solicitation** covering both employees and customers. If necessary, we could consider reducing to 18 months as a concession, but we would resist dropping the customer non-solicitation entirely, which is what Harding's side has demanded.
**6. Non-CIC Severance**
The Committee is comfortable with **2x (base + target bonus) = $9,625,000**, plus pro-rata bonus, 18-month COBRA continuation, and 12-month accelerated vesting. We will not go to 2.5x on the non-CIC side as Harding demands.
**7. Double Trigger**
Both sides have agreed in principle to double trigger for CIC severance. This is positive common ground and should be confirmed early in Monday's discussion to establish constructive momentum.
**8. Other Compensation Items — Confirmed as Agreed**
The Committee is comfortable that the following items should be treated as agreed or substantively close to agreed and **should not be reopened**:
- Base salary: $1,750,000 - Target bonus: 175% of base - Maximum bonus: 300% of base - Sign-on cash: $5,000,000 (with 24-month clawback) - Sign-on equity: $18,400,000 ($12M RSUs + $6.4M PSUs) - Annual LTI: $9,000,000 (60/40 PSU/RSU mix) - SERP: $250,000/year - Perquisites package as outlined
We acknowledge that the total sign-on equity of $18,400,000 falls $5,000,000 short of Harding's $23,400,000 in forfeited Marlowe Asset Management equity, but the sign-on cash bonus is intended to bridge that gap. The Committee views the total make-whole of $23,400,000 ($18.4M equity + $5M cash) as fully covering the forfeiture, and we do not intend to revisit this.
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**Logistics for June 24 Call**
You are authorized to present the positions outlined above during Monday's negotiation call with Hargrove & Liddell. Any further concessions beyond what is described in this email would need to come back to the Committee before being offered — please do not go beyond these parameters without prior approval.
Geoffrey Stanton will be available by phone during the call window if you need real-time Board-level input on any point that arises. I will also be joining the call.
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Renata, the Committee and I have full confidence in how Calderwood & Harkness has been handling this matter. Geoffrey's overarching view — which I want to underscore — is that ISS and shareholder concerns must be paramount throughout this negotiation. NTP cannot afford to set a precedent with this package that undermines the binding remuneration policy vote at the 2025 AGM. That is the lens through which every concession should be evaluated.
Please don't hesitate to call me or Geoffrey over the weekend if you have any questions before Monday's session. For your records, the engagement number is 1022-00004.
Best regards,
Elaine Whitford General Counsel & Company Secretary Northgate Telecom plc +1 (212) 555-0184 (mobile) ewhitford@northgatetelecom.com