CONFIDENTIAL — SUBJECT TO CONTRACT
TERM SHEET — EXECUTIVE EMPLOYMENT AGREEMENT
Chief Executive Officer — Northgate Telecommunications PLC
Prepared by: Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171
Date: June 10, 2024
Matter Reference: 1022-00004
PARTIES:
Employer: Northgate Telecommunications US, Inc. ("NTP US"), a corporation organized and existing under the laws of the State of Delaware and a wholly-owned subsidiary of Northgate Telecommunications PLC ("Northgate" or "NTP"), a public limited company incorporated in England and Wales (registered number 07381264), the ordinary shares of which are listed on the London Stock Exchange (LON: NTP) and whose American Depositary Receipts are listed on the New York Stock Exchange (NYSE: NTPC).
Executive: Marcus Elliot Harding ("Executive").
NON-BINDING NATURE OF THIS TERM SHEET
This term sheet is non-binding and is intended solely for discussion purposes. It does not constitute, and shall not be construed as, an offer of employment, a commitment to enter into any employment arrangement, or a binding agreement of any kind by either party. This term sheet sets forth the principal terms that Calderwood & Harkness LLP, on behalf of Northgate Telecommunications PLC and Northgate Telecommunications US, Inc., proposes as a basis for the negotiation and preparation of a definitive executive employment agreement (the "Definitive Agreement"). All terms remain subject to further negotiation, due diligence, internal board approvals, and the execution of the Definitive Agreement. Neither party shall have any legal obligation to the other with respect to the matters addressed herein unless and until the Definitive Agreement is fully executed and delivered by both parties.
It is anticipated that the Definitive Agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles.
CONFIDENTIALITY: The contents of this term sheet are strictly confidential and proprietary. Neither party shall disclose the existence or contents of this term sheet, or any information relating to the negotiations contemplated herein, to any third party without the prior written consent of the other party, except (i) to such party's legal, financial, and tax advisors who have a need to know and who are bound by obligations of confidentiality, or (ii) as may be required by applicable law, regulation, or legal process.
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Section 1: Position and Duties
1.1 Title. The Executive shall serve as Chief Executive Officer of Northgate Telecommunications PLC and each of its direct and indirect subsidiaries, including, without limitation, Northgate Telecommunications US, Inc. The Executive shall have such duties, responsibilities, and authority as are customary for the chief executive officer of a publicly listed multinational telecommunications company and as may be further specified by the Board of Directors of Northgate Telecommunications PLC (the "Board") from time to time, consistent with such position.
1.2 Reporting. The Executive shall report directly to the Board of Directors of Northgate Telecommunications PLC. No officer of Northgate or any subsidiary shall have supervisory authority over the Executive other than the Board.
1.3 Principal Office Location. The Executive's principal place of business shall be the NTP US Operations Headquarters located at 600 Lexington Avenue, 38th Floor, New York, NY 10022. The Executive shall also maintain a regular presence at Northgate's London headquarters, located at 45 Canary Wharf Tower, One Canada Square, London E14 5AB, United Kingdom, as required by the Executive's duties and responsibilities to the Northgate group.
1.4 Time Allocation. It is anticipated that the Executive will allocate approximately eighty percent (80%) of his working time to US-based duties and approximately twenty percent (20%) of his working time to UK-based duties. The foregoing allocation is a general guideline and may vary from time to time based on business needs, Board requirements, and the Executive's judgment as to the appropriate allocation of his time and attention across the Northgate group's global operations.
1.5 Board Membership. Concurrently with the commencement of the Executive's employment on the Effective Date, the Executive shall be nominated for appointment to the Board of Directors of Northgate Telecommunications PLC as an executive director. The Board and the Nomination Committee shall take all actions necessary to effectuate such appointment as promptly as practicable following the Effective Date, subject to applicable regulatory and governance requirements. During the Executive's employment, Northgate shall use its commercially reasonable efforts to include the Executive on the Board's slate of nominees for election by shareholders at each annual general meeting. Upon the termination of the Executive's employment for any reason, the Executive shall promptly tender his resignation from the Board and from all positions held with Northgate and its subsidiaries, affiliates, and related entities, unless otherwise requested by the Board.
1.6 Outside Activities. During the term of the Executive's employment, the Executive shall devote substantially all of his professional time, energy, and attention to the performance of his duties to Northgate and its subsidiaries. The Executive shall not, without the prior written approval of the Board (or a designated committee thereof), serve on the board of directors of any other for-profit company or engage in any other business activities that would reasonably be expected to interfere with the performance of his duties hereunder. Notwithstanding the foregoing, the Executive may engage in charitable, civic, educational, and professional activities, and may serve on the boards of non-profit organizations, provided that such activities do not create a conflict of interest with or materially interfere with the Executive's duties. Specific provisions regarding permitted outside activities shall be set forth in the Definitive Agreement.
1.7 Regulatory Compliance. The Executive shall comply with all applicable laws, rules, regulations, and governance standards relating to his position, including without limitation the rules and requirements of the Financial Conduct Authority ("FCA") Senior Managers & Certification Regime ("SM&CR") to the extent applicable to Northgate's regulated UK telecommunications operations and the Executive's role thereunder. The Executive shall cooperate fully with all regulatory filings, fitness and propriety assessments, and ongoing compliance obligations associated with his appointment. The Executive shall also comply with all applicable SEC, NYSE, and London Stock Exchange listing rules and regulations.
Section 2: Term
2.1 Effective Date. The Executive's employment shall commence on October 1, 2024 (the "Effective Date"), subject to the satisfaction or waiver of any conditions precedent set forth in the Definitive Agreement and subject to the Executive's orderly transition from his current employer, Marlowe Asset Management Digital Holdings, Inc. ("Marlowe Asset Management"). The parties acknowledge that the proposed start date of October 1, 2024 has been selected to allow sufficient time for the Executive's transition from Marlowe Asset Management and compliance with any post-employment obligations the Executive may have to Marlowe Asset Management.
2.2 Initial Term. The initial term of the Executive's employment shall be a period of five (5) years, commencing on the Effective Date and expiring on September 30, 2029, unless earlier terminated in accordance with the termination provisions set forth herein or in the Definitive Agreement (the "Initial Term").
2.3 Renewal. Following the expiration of the Initial Term, the Executive's employment shall automatically renew for successive one (1)-year periods (each, a "Renewal Term," and together with the Initial Term, the "Employment Term"), unless either party provides the other with written notice of non-renewal not less than one hundred eighty (180) days prior to the expiration of the then-current term. For the avoidance of doubt, a non-renewal by the Employer shall be treated as a termination without Cause for purposes of the severance provisions set forth herein.
2.4 Transition from Current Employer. The parties acknowledge that the Executive is currently employed by Marlowe Asset Management Digital Holdings, Inc. and that the commencement of the Executive's employment hereunder is contingent upon the Executive's separation from Marlowe Asset Management in a manner consistent with the Executive's contractual obligations to Marlowe Asset Management. The Employer agrees to cooperate with the Executive in facilitating a smooth transition, as further described in Section 19 below.
Section 3: Dual Employment Structure
3.1 Primary Employment Relationship. The Executive's primary employment relationship shall be with Northgate Telecommunications US, Inc. under a New York-governed employment agreement (the Definitive Agreement). NTP US shall be the Executive's employer of record for US federal, state, and local tax purposes and for purposes of US benefit plan participation.
3.2 Secondary UK Service Agreement. In addition to the Definitive Agreement, the Executive shall enter into a secondary service agreement with Northgate Telecommunications PLC (the "UK Service Agreement") to govern the Executive's UK board duties, UK-based activities, and UK regulatory compliance obligations. The UK Service Agreement shall be governed by and construed in accordance with the laws of England and Wales and shall be coordinated with the Definitive Agreement to avoid duplication of benefits and to ensure consistency of terms. The UK Service Agreement shall be prepared in coordination with Moorfield Bates LLP, Northgate's UK employment counsel, and reviewed by the Executive's UK legal advisors.
3.3 Tax Equalization. The Definitive Agreement and the UK Service Agreement shall include tax equalization provisions designed to ensure that the Executive does not bear a greater aggregate income tax burden as a result of the dual employment structure and the allocation of duties between the United States and the United Kingdom than he would bear if all compensation were subject solely to US federal and state income taxation. Northgate shall engage a qualified international tax advisory firm to administer the tax equalization program and to prepare or assist with the Executive's US, UK, and any other applicable tax returns during the Employment Term.
3.4 Social Security. The parties intend that the Executive's social security obligations shall be administered in accordance with the Agreement between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland on Social Security (the "US-UK Totalization Agreement"), such that the Executive shall generally be subject to the social security system of only one country during any given period. Certificates of coverage shall be obtained as necessary to implement this arrangement.
3.5 Immigration and Work Authorization. Northgate shall, at its expense, take all steps necessary to ensure that the Executive maintains appropriate work authorization in both the United States and the United Kingdom throughout the Employment Term, including sponsorship of any required visas, work permits, or other immigration-related filings.
Section 4: Base Salary
4.1 Amount. The Executive's annual base salary shall be One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) per annum (the "Base Salary").
4.2 Payment. The Base Salary shall be payable in accordance with NTP US's standard executive payroll practices, which currently provide for semi-monthly payments, less applicable withholdings and deductions required by law.
4.3 Annual Review. The Base Salary shall be reviewed annually by the Remuneration Committee of the Board of Directors of Northgate Telecommunications PLC (the "Remuneration Committee"). Any increases to the Base Salary shall be in the sole discretion of the Remuneration Committee. During the Initial Term, the Base Salary shall not be decreased below the amount set forth in Section 4.1 without the Executive's prior written consent. Following any increase in the Base Salary, the increased amount shall become the new "Base Salary" for all purposes of the Definitive Agreement.
Section 5: Annual Incentive Compensation (Bonus)
5.1 Target Annual Incentive. The Executive shall be eligible to receive an annual cash incentive bonus with respect to each fiscal year during the Employment Term (the "Annual Incentive"). The target Annual Incentive shall be one hundred seventy-five percent (175%) of the Executive's Base Salary, which, based on the initial Base Salary set forth in Section 4.1, equals Three Million Sixty-Two Thousand Five Hundred Dollars ($3,062,500) (the "Target Annual Incentive").
5.2 Maximum Annual Incentive. The maximum Annual Incentive payable with respect to any fiscal year shall be three hundred percent (300%) of the Executive's Base Salary, which, based on the initial Base Salary, equals Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) (the "Maximum Annual Incentive"). There shall be no minimum or guaranteed bonus; the actual Annual Incentive may range from zero to the Maximum Annual Incentive based on performance.
5.3 Performance Metrics. The performance metrics, targets, and weightings applicable to each fiscal year's Annual Incentive shall be established by the Remuneration Committee in consultation with the Executive, and shall be based on a combination of financial, operational, and strategic objectives aligned with Northgate's annual operating plan and strategic priorities. The specific metrics and weightings shall be determined and communicated to the Executive as early as practicable in each fiscal year, and in no event later than ninety (90) days following the commencement of such fiscal year.
5.4 Payment Timing. The Annual Incentive, to the extent earned, shall be paid to the Executive within seventy-five (75) days following the end of the applicable fiscal year, subject to the Executive's continued employment through the last day of the fiscal year (except as otherwise provided in the termination provisions set forth herein). Payment shall be subject to applicable withholdings and deductions.
5.5 Pro-Rata Bonus for Initial Year. For the period from the Effective Date through the end of the fiscal year in which the Effective Date occurs, the Executive shall be eligible to receive a pro-rata Annual Incentive, calculated based on the number of days in such partial year relative to the total number of days in the full fiscal year, and otherwise determined in accordance with the terms set forth in this Section 5.
Section 6: Sign-On Compensation (Make-Whole)
The compensation set forth in this Section 6 is intended to provide the Executive with partial make-whole compensation in recognition of the unvested equity awards and other compensation that the Executive will forfeit in connection with his separation from Marlowe Asset Management Digital Holdings, Inc. The Executive has represented that his estimated forfeiture of unvested equity awards at Marlowe Asset Management is approximately Twenty-Three Million Four Hundred Thousand Dollars ($23,400,000) based on current valuations.
6.1 Sign-On Cash Bonus
Amount. The Executive shall receive a one-time sign-on cash bonus in the amount of Five Million Dollars ($5,000,000) (the "Sign-On Cash Bonus").
Payment. The Sign-On Cash Bonus shall be paid to the Executive in a lump sum within thirty (30) days following the Effective Date, subject to applicable withholdings and deductions. The Sign-On Cash Bonus is intended as partial make-whole compensation for the forfeiture of unvested equity and other compensation at the Executive's current employer, Marlowe Asset Management Digital Holdings, Inc.
Clawback. The Sign-On Cash Bonus shall be subject to full repayment by the Executive to the Employer if the Executive voluntarily resigns from employment (other than a resignation for Good Reason, as defined in the Definitive Agreement) within twenty-four (24) months of the Effective Date. The Definitive Agreement shall include provisions permitting the Employer to offset the repayment obligation against any amounts otherwise owed to the Executive, to the extent permitted by applicable law.
6.2 Sign-On Equity Awards
All sign-on equity awards described in this Section 6.2 shall be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan (the "2022 Plan"), and shall be subject to the terms and conditions of the 2022 Plan and the applicable award agreements.
Reference data: NTP ordinary share price as of June 4, 2024: £12.45; ADR price: $15.87 (1 ADR = 1 ordinary share). Shares remaining available for issuance under the 2022 Plan: 14,200,000.
(a) Restricted Stock Units (RSUs)
Grant-Date Value. The Executive shall receive a sign-on grant of Restricted Stock Units ("RSUs") with an aggregate grant-date fair market value of Twelve Million Dollars ($12,000,000), with the number of RSUs determined by dividing the grant-date value by the volume-weighted average closing price of Northgate ADRs on the NYSE over the five (5) trading days immediately preceding the Effective Date.
Vesting. The sign-on RSUs shall vest ratably over three (3) years from the Effective Date, with one-third (1/3) of the RSUs vesting on each of the first, second, and third anniversaries of the Effective Date, subject to the Executive's continued employment through each applicable vesting date, except as otherwise provided in the termination provisions set forth herein.
(b) Performance Stock Units (PSUs)
Grant-Date Value. The Executive shall receive a sign-on grant of Performance Stock Units ("PSUs") with an aggregate grant-date target fair market value of Six Million Four Hundred Thousand Dollars ($6,400,000), with the number of target PSUs determined by dividing the grant-date value by the volume-weighted average closing price of Northgate ADRs on the NYSE over the five (5) trading days immediately preceding the Effective Date.
Vesting. The sign-on PSUs shall cliff vest at the end of a three (3)-year performance period commencing on the Effective Date and ending on September 30, 2027, subject to the Executive's continued employment through the end of the performance period, except as otherwise provided in the termination provisions set forth herein.
Performance Conditions. The number of PSUs that ultimately vest shall be determined based on the achievement of performance conditions established by the Remuneration Committee, which are expected to include total shareholder return ("TSR") relative to a peer group of telecommunications companies and absolute revenue growth hurdles. The payout range shall be from zero percent (0%) to two hundred percent (200%) of the target number of PSUs, with the specific performance scales to be determined and set forth in the applicable award agreement.
(c) Total Sign-On Equity
The aggregate grant-date target value of the sign-on equity awards is as follows:
Make-Whole Context. The Executive's estimated forfeiture of unvested equity at Marlowe Asset Management Digital Holdings, Inc. is approximately $23,400,000. The shortfall of approximately Five Million Dollars ($5,000,000) between the sign-on equity value ($18,400,000) and the estimated forfeiture ($23,400,000) is intended to be offset by the Sign-On Cash Bonus described in Section 6.1 above.
Section 7: Long-Term Incentive Compensation (Annual)
7.1 Annual LTI Target. During each year of the Employment Term, the Executive shall be eligible to receive annual long-term incentive ("LTI") equity awards with a target aggregate grant-date fair market value of Nine Million Dollars ($9,000,000) per year (the "Annual LTI Target"). The actual grant-date value of each annual LTI award shall be determined by the Remuneration Committee, which shall consider the Annual LTI Target as the baseline for each annual grant, subject to adjustment based on individual and company performance.
7.2 Annual LTI Mix. Each annual LTI award shall consist of the following mix of equity instruments:
(a) Performance Stock Units (PSUs): Sixty percent (60%) of the Annual LTI Target ($5,400,000 at the initial target level), with performance metrics and vesting periods to be established annually by the Remuneration Committee.
(b) Restricted Stock Units (RSUs): Forty percent (40%) of the Annual LTI Target ($3,600,000 at the initial target level), vesting ratably over three (3) years from the applicable grant date, with one-third (1/3) of the RSUs vesting on each of the first, second, and third anniversaries of the grant date.
7.3 First Annual LTI Grant. The first annual LTI grant shall be made within thirty (30) days following the Effective Date, and shall be in addition to the sign-on equity awards described in Section 6.2 above.
7.4 Plan Terms. All annual LTI awards shall be granted under the Northgate Telecommunications PLC 2022 Omnibus Incentive Plan and shall be subject to the terms and conditions of the 2022 Plan and the applicable award agreements.
Section 8: Total Target Annual Compensation (Summary)
The following table summarizes the Executive's total target annual compensation (exclusive of sign-on compensation, benefits, and perquisites):
Note: The amounts set forth above represent target levels and do not reflect the maximum amounts payable under the Annual Incentive or the potential range of PSU payouts. The table excludes sign-on compensation (Section 6), benefits (Section 9), and perquisites (Section 10).
Section 9: Benefits
9.1 Retirement
401(k) Plan. The Executive shall be eligible to participate in the NTP US 401(k) retirement savings plan on the same terms and conditions as are generally available to NTP US employees, subject to applicable plan terms and IRS annual contribution limits. NTP US shall make an employer matching contribution equal to six percent (6%) of the Executive's eligible compensation contributed to the plan, subject to the IRS annual limits applicable to 401(k) plans (currently $23,000 in employee contributions and $69,000 in total contributions for 2024, for participants under age 50).
Supplemental Executive Retirement Plan (SERP). In addition to the 401(k) plan, NTP US shall make an annual contribution of Two Hundred Fifty Thousand Dollars ($250,000) to a supplemental executive retirement plan or nonqualified deferred compensation arrangement for the benefit of the Executive (the "SERP Contribution"). The SERP Contribution shall be made within sixty (60) days following the end of each calendar year during the Employment Term and shall be subject to the vesting and distribution terms set forth in the applicable plan documents, which shall be designed in compliance with Section 409A of the Internal Revenue Code.
9.2 Health and Welfare
The Executive and the Executive's eligible dependents shall be entitled to participate in the health and welfare benefit plans maintained by NTP US for its executive employees, including medical, dental, and vision insurance coverage. The Executive shall be eligible for coverage effective as of the Effective Date, without application of any waiting period, to the extent permitted by the applicable plan terms.
In addition, the Executive shall be eligible to participate in NTP US's executive health program, which provides comprehensive annual physical examinations and concierge health services through a designated executive health provider. The cost of such program shall be borne by NTP US.
9.3 Life Insurance
NTP US shall provide the Executive with supplemental life insurance coverage in the amount of Two Million Dollars ($2,000,000), in addition to any basic group life insurance coverage provided to NTP US employees generally. The premiums for such supplemental coverage shall be paid by NTP US. The Executive shall have the right to designate the beneficiary or beneficiaries of such coverage.
9.4 D&O Insurance and Indemnification
Directors' and Officers' Insurance. The Executive shall be covered under Northgate's directors' and officers' liability insurance program throughout the Employment Term and for such additional period following the termination of employment as shall be specified in the Definitive Agreement. The current D&O insurance carrier is Ashdown Surety & Insurance Co. under policy number ASI-D&O-NTP-2024-4471, which provides coverage of Fifty Million Dollars ($50,000,000) per occurrence and One Hundred Million Dollars ($100,000,000) in the aggregate. Northgate shall maintain D&O coverage at levels not less favorable than those in effect as of the Effective Date throughout the Employment Term.
Indemnification. Northgate and NTP US shall indemnify the Executive to the fullest extent permitted by applicable law, including, without limitation, the laws of the State of Delaware (as applicable to NTP US), the laws of the State of New York, and the laws of England and Wales (as applicable to Northgate PLC), and by Northgate's articles of association and NTP US's certificate of incorporation and bylaws. The Definitive Agreement shall include an indemnification provision that provides for advancement of expenses and other customary protections for senior executives and directors.
Tail Coverage. Upon the termination of the Executive's employment for any reason, Northgate shall procure directors' and officers' liability insurance tail coverage for the benefit of the Executive for a period of not less than six (6) years (or such longer period as shall be specified in the Definitive Agreement), with coverage levels no less favorable than those in effect at the time of termination.
Section 10: Perquisites
10.1 Automobile Allowance. The Executive shall receive an annual automobile allowance of Twenty-Five Thousand Dollars ($25,000), payable in equal monthly installments.
10.2 Financial and Tax Planning. NTP US shall reimburse the Executive for reasonable expenses incurred for personal financial planning and tax advisory services in an amount not to exceed Thirty-Five Thousand Dollars ($35,000) per year. Such reimbursement shall be payable upon submission of appropriate documentation and shall include, without limitation, fees for US and UK income tax return preparation, estate planning, and financial advisory services.
10.3 Relocation. No relocation benefits are contemplated, as the Executive's current residence at 14 Gramercy Park South, New York, New York is proximate to the NTP US Operations Headquarters at 600 Lexington Avenue, New York, New York.
Section 11: Termination Provisions — Without Cause or for Good Reason (Non-Change in Control)
In the event the Executive's employment is terminated by the Employer without Cause (as defined in the Definitive Agreement) or the Executive resigns for Good Reason (as defined in the Definitive Agreement), in each case outside of the Change in Control Period (as defined in Section 12), the Executive shall be entitled to the following severance benefits, in addition to any accrued but unpaid compensation through the date of termination:
11.1 Severance Payment
The Executive shall receive a cash severance payment equal to the sum of the Executive's Base Salary and Target Annual Incentive:
The severance payment shall be paid in a lump sum within thirty (30) days following the date on which the Release (as described in Section 11.5) becomes effective and irrevocable, subject to any delay required by Section 409A of the Internal Revenue Code.
11.2 Pro-Rata Bonus
The Executive shall receive a pro-rata Annual Incentive for the fiscal year in which the termination occurs, determined based on actual performance for such fiscal year (as determined by the Remuneration Committee following the end of the fiscal year) and prorated for the number of days elapsed in such fiscal year through the date of termination. The pro-rata Annual Incentive shall be paid at the time annual incentives are normally paid to other senior executives of Northgate, but in no event later than seventy-five (75) days following the end of the applicable fiscal year.
11.3 Equity Acceleration
11.4 Benefits Continuation
The Employer shall pay or reimburse the cost of COBRA continuation coverage for the Executive and the Executive's eligible dependents for a period of following the date of termination, or, if earlier, until the Executive becomes eligible for comparable group health insurance coverage through a subsequent employer.
11.5 Conditions
The severance benefits set forth in this Section 11 shall be conditioned upon (i) the Executive's execution and non-revocation of a general release of claims in favor of Northgate, NTP US, and their respective affiliates, officers, and directors, substantially in the form to be attached as an exhibit to the Definitive Agreement (the "Release"), within sixty (60) days following the date of termination, and (ii) the Executive's continued compliance with the restrictive covenant obligations set forth in Section 14 of this term sheet and the Definitive Agreement. In the event the Executive breaches any material restrictive covenant obligation, the Employer's obligation to make further severance payments shall cease and the Executive may be required to repay severance amounts previously received, as further specified in the Definitive Agreement.
Section 12: Termination Provisions — Change in Control
12.1 Definition of "Change in Control"
For purposes of this term sheet, a "Change in Control" shall be defined in the Definitive Agreement to include the following events:
(a) Acquisition of Voting Securities. The acquisition by any person, entity, or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of more than fifty percent (50%) of the combined voting power of the then-outstanding voting securities of Northgate Telecommunications PLC entitled to vote generally in the election of directors;
(b) Merger or Consolidation. The consummation of a merger, consolidation, scheme of arrangement, or similar business combination transaction involving Northgate, in which the shareholders of Northgate immediately prior to such transaction hold, directly or indirectly, less than fifty percent (50%) of the combined voting power of the voting securities of the surviving or resulting entity (or its ultimate parent) immediately following such transaction; or
(c) Sale of Assets. The sale, transfer, or other disposition of all or substantially all of the assets of Northgate Telecommunications PLC and its subsidiaries, taken as a whole, to any person, entity, or group that is not a direct or indirect subsidiary of
The precise definition of Change in Control in the Definitive Agreement will include customary exclusions, carve-outs, and additional detail consistent with market practice for UK-listed companies with US-traded ADRs.
12.2 Double-Trigger Mechanism
Severance benefits under this Section 12 shall be payable only if, during the twenty-four (24)-month period following a Change in Control (the "Change in Control Period"), the Executive's employment is terminated by the Employer without Cause or the Executive resigns for Good Reason (the "Double Trigger"). For the avoidance of doubt, the occurrence of a Change in Control alone, without a qualifying termination of employment, shall not entitle the Executive to severance benefits under this Section 12.
12.3 CIC Severance Payment
In the event of a qualifying Double Trigger termination within the Change in Control Period, the Executive shall receive a cash severance payment equal to the sum of the Executive's Base Salary and Target Annual Incentive:
The severance payment shall be paid in a lump sum within thirty (30) days following the date on which the Release becomes effective and irrevocable, subject to any delay required by Section 409A of the Internal Revenue Code.
12.4 Equity Acceleration
Upon a qualifying Double Trigger termination within the Change in Control Period, all unvested equity awards (including RSUs and PSUs) outstanding as of the date of termination shall become fully vested and exercisable (as applicable) as of the date of termination. PSUs shall vest at the target performance level (100% of target), without regard to actual performance.
12.5 Benefits Continuation
The Employer shall pay or reimburse the cost of COBRA continuation coverage for the Executive and the Executive's eligible dependents for a period of following the date of termination, or, if earlier, until the Executive becomes eligible for comparable group health insurance coverage through a subsequent employer.
12.6 Outplacement
The Employer shall provide the Executive with executive outplacement services through a nationally recognized outplacement firm of the Executive's choice, at a cost not to exceed Fifty Thousand Dollars ($50,000), for a period of up to twelve (12) months following the date of termination.
12.7 Section 280G — Tax Treatment
Preliminary 280G Analysis. Based on a preliminary analysis conducted by Calderwood & Harkness LLP and Northgate's tax advisors, the Executive's "base amount" for purposes of Section 280G is estimated at Seven Million Eight Hundred Forty Thousand Dollars ($7,840,000), calculated as the average of the Executive's W-2 compensation at Marlowe Asset Management Digital Holdings, Inc. for the five calendar years ending December 31, 2023 (i.e., 2019 through 2023). The "safe harbor" limit — i.e., three times the base amount, reduced by one dollar — is therefore estimated at:
(3 × $7,840,000) − $1 = $23,519,999
The foregoing estimates are preliminary and will be refined in connection with the preparation of the Definitive Agreement and in consultation with the Executive's tax advisors. The Definitive Agreement will include detailed procedures for the calculation and application of the
Section 13: Termination — Other Scenarios
13.1 Termination for Cause
In the event the Executive's employment is terminated by the Employer for Cause, the Executive shall not be entitled to any severance payments, pro-rata bonus, or equity acceleration. All unvested equity awards shall be forfeited as of the date of termination. "Cause" shall be defined in the Definitive Agreement and shall include customary grounds such as (i) conviction of, or plea of guilty or nolo contendere to, a felony or crime of moral turpitude; (ii) willful and material breach of the Executive's duties or obligations under the Definitive Agreement; (iii) fraud, embezzlement, or misappropriation of funds or property; (iv) gross negligence or willful misconduct in the performance of duties; and (v) material violation of Northgate's code of conduct or compliance policies. The Definitive Agreement shall include customary notice and cure provisions where applicable.
13.2 Resignation Without Good Reason
In the event the Executive voluntarily resigns from employment without Good Reason, the Executive shall not be entitled to any severance payments or equity acceleration. All unvested equity awards shall be forfeited as of the date of termination. In addition, if such resignation occurs within twenty-four (24) months of the Effective Date, the Sign-On Cash Bonus shall be subject to full repayment by the Executive as described in Section 6.1.
13.3 Death or Disability
In the event of the Executive's death or Disability (as defined in the Definitive Agreement) during the Employment Term, the Executive (or his estate or beneficiaries, as applicable) shall be entitled to:
(a) A pro-rata Annual Incentive for the fiscal year in which the termination occurs, determined based on actual performance (or, at the Remuneration Committee's discretion, target performance) and prorated for the number of days elapsed in such fiscal year through the date of termination, paid at the time annual incentives are normally paid;
(b) Full accelerated vesting of all unvested equity awards (RSUs and PSUs) outstanding as of the date of termination, with PSUs vesting at target performance level;
(c) In the case of Disability, continuation of the Executive's Base Salary for a period of twelve (12) months following the date of termination, payable in accordance with NTP US's normal payroll practices; and
(d) In the case of death, payment of life insurance proceeds under the supplemental life insurance policy described in Section 9.3, in addition to any basic group life insurance benefits.
13.4 Non-Renewal by Employer
In the event the Employer provides notice of non-renewal of the Employment Term in accordance with Section 2.3, the termination of the Executive's employment at the end of the then-current term shall be treated as a termination without Cause for purposes of the severance provisions set forth in Section 11 (or Section 12, if occurring within the Change in Control Period), and the Executive shall be entitled to the severance benefits described therein, subject to satisfaction of the conditions set forth in Section 11.5.
Section 14: Restrictive Covenants
14.1 Non-Competition
Duration. For a period of following the termination of the Executive's employment for any reason (the "Restricted Period"), the Executive shall be subject to non-competition restrictions.
Geographic Scope. The non-competition restrictions shall apply
Activity Restriction. During the Restricted Period, the Executive shall not, directly or indirectly,
Note: Calderwood & Harkness LLP will conduct a comprehensive enforceability analysis of the non-competition provisions under New York law, including consideration of pending New York state legislation that may impose additional restrictions on the enforceability of non-compete covenants. The scope and duration of the non-competition covenant may require adjustment based on the results of such analysis and developments in applicable law prior to execution of the Definitive Agreement.
14.2 Non-Solicitation of Employees
During the the Executive shall not, directly or indirectly, solicit, recruit, or hire, or attempt to solicit, recruit, or hire, any individual who is, or was at any time during the twelve (12)-month period preceding the Executive's termination of employment, an employee of Northgate or any of its subsidiaries, or encourage or induce any such employee to leave the employment of Northgate or any of its subsidiaries. This restriction shall not apply to general advertising or recruitment efforts that are not specifically directed at employees of Northgate or its subsidiaries.
Non-Disparagement
The Executive and Northgate (through its officers and directors) shall each refrain from making any disparaging, defamatory, or derogatory statements about the other party, whether publicly or privately. This non-disparagement obligation shall be mutual and perpetual, surviving the termination of the Executive's employment. Notwithstanding the foregoing, this provision shall not restrict either party from (i) making truthful statements in the course of legal proceedings, arbitration, or regulatory matters; (ii) providing truthful information to any governmental authority, regulatory body, or self-regulatory organization; or (iii) making disclosures required by applicable law, regulation, or legal process.
Confidentiality
The Executive shall maintain the confidentiality of all confidential and proprietary information of Northgate and its subsidiaries and affiliates, including, without limitation, trade secrets, business strategies, financial information, customer and supplier data, technology and product plans, employee information, and all other information that is not generally known to the public and that the Executive acquires or has access to during the course of his employment. This confidentiality obligation shall be perpetual and shall survive the termination of the Executive's employment. Customary carve-outs shall be included in the Definitive Agreement for (i) information that becomes publicly available through no fault of the Executive, (ii) information lawfully obtained by the Executive from a third party not under a confidentiality obligation to Northgate, and (iii) disclosures required by applicable law, regulation, or legal process (subject to prompt notice to Northgate to the extent permitted by law). The Definitive Agreement shall also include a notice regarding the Executive's rights under the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)).
Section 15: Garden Leave
15.1 Employer's Right to Impose Garden Leave. During any notice period prior to the termination of the Executive's employment (whether notice is given by the Employer or the Executive), the Employer shall have the right to place the Executive on "garden leave" for a period of up to During any period of garden leave, the Executive shall remain an employee of the Employer but shall not be required to perform any duties or attend any office of Northgate or its subsidiaries. The Employer may, during the garden leave period, require the Executive to refrain from contacting customers, clients, suppliers, employees, or other business contacts of Northgate and its subsidiaries.
15.2 Compensation During Garden Leave. During any period of garden leave, the Executive shall receive his
15.3 Concurrent Running with Non-Competition Period.
Section 16: Section 409A Compliance
16.1 General. All payments and benefits provided under the Definitive Agreement shall be designed and administered in compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other guidance promulgated thereunder ("Section 409A"). The Definitive Agreement shall include provisions necessary or appropriate to ensure compliance with Section 409A, including without limitation provisions addressing the timing of payments, the definition of "separation from service," and the treatment of installment payments.
16.2 Specified Employee Delay. If the Executive is a "specified employee" within the meaning of Section 409A as of the date of his separation from service, any payments that constitute nonqualified deferred compensation subject to Section 409A that are payable on account of the Executive's separation from service shall be delayed until the date that is six (6) months and one (1) day following the date of the Executive's separation from service (or, if earlier, the date of the Executive's death), to the extent required by Section 409A. Any payments so delayed shall be accumulated and paid in a lump sum on the first business day following the expiration of such six-month period, together with interest at the applicable federal rate.
16.3 Definitive Agreement. The Definitive Agreement shall include such additional Section 409A compliance provisions as Calderwood & Harkness LLP and the Executive's counsel may agree are necessary or advisable.
Section 17: Clawback
17.1 General Clawback Policy. All incentive compensation (whether in cash or equity) paid or granted to the Executive during the Employment Term shall be subject to any clawback, recoupment, or forfeiture policy adopted by Northgate from time to time, including without limitation (i) any policy required by the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), the NYSE, or the London Stock Exchange, including the clawback provisions mandated by Rule 10D-1 under the Securities Exchange Act of 1934 and NYSE Listed Company Manual Section 303A.14, and (ii) any voluntary clawback policy adopted by the Board or the Remuneration Committee. The Executive acknowledges that Northgate has adopted a Compensation Recoupment Policy effective as of October 2, 2023, in compliance with the SEC's final rules, and agrees to be bound by such policy and any amendments thereto.
17.2 Sign-On Clawback. In addition to the general clawback provisions described in Section 17.1, the Sign-On Cash Bonus described in Section 6.1 shall be subject to the twenty-four (24)-month repayment obligation set forth in Section 6.1 in the event the Executive voluntarily resigns without Good Reason within such period.
Section 18: Governing Law and Dispute Resolution
18.1 Governing Law — Primary Agreement. The Definitive Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice or conflict of laws provision or rule that would cause the application of the laws of any other jurisdiction.
18.2 Governing Law — UK Service Agreement. The UK Service Agreement described in Section 3.2 shall be governed by and construed in accordance with the laws of England and Wales.
18.3 Dispute Resolution. The mechanism for the resolution of disputes arising under or in connection with the Definitive Agreement shall be specified in the Definitive Agreement. Northgate proposes that all disputes be resolved by binding arbitration administered by JAMS in New York, New York, before a single arbitrator, in accordance with JAMS Employment Arbitration Rules and Procedures, with limited rights of judicial review. The arbitration provision shall include customary carve-outs permitting either party to seek injunctive or other equitable relief in a court of competent jurisdiction to enforce the restrictive covenant provisions set forth in Section 14. The parties shall share equally in the costs and fees of the arbitrator, with each party bearing its own attorneys' fees and costs except as otherwise provided by applicable law or as may be awarded by the arbitrator.
Section 19: Cooperation and Transition
19.1 Transition from Current Employer. The Executive shall cooperate in good faith with Northgate to ensure an orderly and professional transition from his current position at Marlowe Asset Management Digital Holdings, Inc. The Executive shall provide such notice to Marlowe Asset Management as may be required under the Executive's existing employment agreement with Marlowe Asset Management and shall comply with all post-employment obligations owed to Marlowe Asset Management, including any restrictive covenant obligations.
19.2 Marlowe Asset Management Non-Compete. Northgate acknowledges that the Executive is subject to an existing twelve (12)-month post-termination non-competition covenant with Marlowe Asset Management Digital Holdings, Inc., which is limited in geographic scope to the United States. Northgate agrees to work with the Executive and his counsel to ensure that the Executive's commencement of employment with Northgate and the assignment of the Executive's duties do not result in a breach of the Executive's obligations to Marlowe Asset Management. The proposed Effective Date of October 1, 2024 has been selected, in part, to provide sufficient time for the Executive's non-competition obligations to Marlowe Asset Management to expire or to be waived by Marlowe Asset Management, as applicable. The Definitive Agreement shall include appropriate representations by the Executive regarding his post-employment obligations to Marlowe Asset Management and the status of any waiver or release thereof.
19.3 Post-Employment Obligations. The Executive represents and warrants that he shall comply with all post-employment obligations owed to Marlowe Asset Management, including without limitation any obligations relating to confidentiality, non-solicitation, non-competition, return of property, and cooperation. The Executive shall promptly notify Northgate of any claims, demands, or communications from Marlowe Asset Management relating to the Executive's post-employment obligations.
Section 20: Miscellaneous
20.1 Entire Agreement. The Definitive Agreement shall constitute the entire agreement between the parties with respect to the subject matter thereof, and shall supersede all prior and contemporaneous agreements, understandings, representations, and warranties, whether written or oral, with respect to such subject matter.
20.2 Amendment and Waiver. The Definitive Agreement may not be amended, modified, or supplemented except by a written instrument executed by both parties. No waiver of any provision of the Definitive Agreement shall be effective unless made in writing and signed by the waiving party, and no such waiver shall constitute a waiver of any other provision or a continuing waiver of the same provision.
20.3 Assignability. The Employer may assign the Definitive Agreement and its rights and obligations thereunder to any successor to all or substantially all of the business or assets of the Employer, whether by merger, acquisition, reorganization, or otherwise, provided that such successor assumes all obligations of the Employer under the Definitive Agreement. The Executive may not assign the Definitive Agreement or any rights or obligations thereunder without the prior written consent of the Employer, and any purported assignment by the Executive in violation of this provision shall be void and of no force or effect.
20.4 Notices. All notices, requests, demands, and other communications required or permitted under the Definitive Agreement shall be in writing and shall be delivered by hand, by nationally recognized overnight courier, or by certified mail, return receipt requested, to the following addresses (or such other addresses as may be specified by notice from time to time):
If to the Employer: Northgate Telecommunications US, Inc. 600 Lexington Avenue, 38th Floor New York, NY 10022
Attention: General Counsel
If to the Executive: Marcus Elliot Harding At his address on file with the Employer
20.5 Counterparts and Electronic Signatures. The Definitive Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. The Definitive Agreement may be executed and delivered by facsimile, electronic mail (including PDF), or other electronic transmission, and such execution and delivery shall have the same force and effect as delivery of an original executed counterpart.
20.6 Severability. If any provision of the Definitive Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of the Definitive Agreement, and the Definitive Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained therein.
20.7 No Strict Construction. The Definitive Agreement shall not be construed against any party by reason of such party having drafted or prepared the agreement or any provision thereof.
ACKNOWLEDGMENT
This term sheet is non-binding and does not constitute an offer of employment or a contract. It is intended solely as a basis for further negotiation toward a definitive employment agreement between Northgate Telecommunications US, Inc. (and, where applicable, Northgate Telecommunications PLC) and Marcus Elliot Harding.
By signing below, the parties acknowledge receipt of this term sheet and agree that it shall serve as the basis for good-faith negotiations toward the Definitive Agreement. Neither party shall be bound by the terms set forth herein unless and until a Definitive Agreement is fully executed and delivered.
Acknowledged and agreed as a basis for negotiation:
FOR NORTHGATE TELECOMMUNICATIONS PLC:
By: ________
Name: Dame Philippa Thornton-Hale
Title: Chair of the Board of Directors
Date: ________
By: ________
Name: Geoffrey Stanton
Title: Lead Independent Director and Chair, Remuneration Committee
Date: ________
By: ________
Name: Elaine Whitford
Title: SVP & Group General Counsel
Date: ________
PREPARED BY:
Renata Vasquez Partner Calderwood & Harkness LLP 299 Park Avenue, 42nd Floor New York, NY 10171
Date: ________
FOR THE EXECUTIVE:
________________________________________