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Kane–Spurgeon split (negotiations)

Last updated through CTL6 ch 24.

Chronology of Jonathan Kane ↔ Noel Spurgeon negotiations in Broken Rungs, from the Insider Club leverage fight through the addendum signed in CTL6 ch 24. Dollar terms and dates follow canonical chapter text.

Canonical sources: CTL6_Chapter01.txt through CTL6_Chapter24.txt.

Background (Ch. 1–2, before formal talks)

  • Jan 1, 1985: Jonathan returns from Hawaiʻi; no direct Spurgeon negotiation yet, but he is already aligned with Eric Thiele’s exit plan and Insider Club leverage.
  • Jan 4, 1985 — Insider Club (Glencoe): Noel’s honey-trap scheme (Jiāng is of age; the “underage” story is the trap). Jonathan blinds the mirror camera, keeps Violet’s commitment, records audio, and leaves with proof. That night is the casus belli; talks start Jan 5.

Phase 1 — First cooperative package (Ch. 3, Jan 5, 1985)

Setting: Saturday morning, after a strategy session, in Noel’s study.

Side Terms
Noel (opening demands) How did Jonathan know? No walking away with ~$600M AUM plus Clinton and Clemons. Implied threat to destroy Jonathan.
Jonathan — Offer A (amicable split) $10M to Noel; 0.25% of Jonathan’s 2% management fee for 2 years; 1% of Jonathan’s 20% carry for 5 years; future spin-off announcement on a mutually chosen date; no client poaching 5 years; 2 years pitch priority (first contact wins); Helios Analytics — Research spun off, costs split by AUM, weekly newsletter.
Jonathan — add-on Take any two additional people (no licensed desks).
Noel — counters / conditions No taking licensed desk heads; won’t agree yet; demands source of leak as part of any deal; wants quiet and business as usual.
Jonathan — concession for time Noel sells Jonathan’s mortgage to the fund (removes Spurgeon’s hold). Leak identity only as part of a closed deal. Agrees to silence until resolution.

Noel asks for time; Jonathan returns to work Jan 6 (Monday) as if nothing happened.

Phase 2 — Expanded Helios plan (Ch. 4, Jan 7–13, 1985)

Jan 7: Jonathan completes mortgage transfer into the Cincinnatus Fund (Legal).

Jan 9 — Offer A revised (cooperative, in Noel’s office):

Topic Jonathan proposal
Scope Research + Data Processing → Helios Analytics; shared computing; cheaper space; newsletter; boutique accounting/clearing; six-month lag on sold models.
Ownership C-Corp: 49.5% / 49.5% Jonathan & Noel, 1% neutral CPA or law firm as tie-break (annual dividend on 1%); right of first refusal on share sales.
Capital Secured loans against funds; Helios buys equipment, ~2 years operating runway.
Payment to Noel $10M assigned inside Jonathan’s fund (Noel redeems when he chooses; no lock on redemption).
Timeline Helios effective Sept 1, 1985; Clermont Capital Jan 1, 1986; public optics controlled by Noel until Gulf money comfortable.
Noel Decision by Monday, Jan 13.

Jan 14 — Business plan delivered; leak quid pro quo

Side Terms
Jonathan — new condition “Kabuki” session: accuse Singh, Chau, Thiele; group then individual interrogation so Noel can ID the leaker without Jonathan being the accuser.
Noel Demands name; says plan is too profitable to refuse.
Jonathan Names Eric Thiele.
Noel “Tell me the name, and we have a deal.” (Cooperative track appears closed.)

Jan 15 (morning): Thiele is terminated (kabuki worked). The Jan 14 “deal” does not hold through implementation.

Phase 3 — Firing and 24-hour ceasefire (Ch. 5, Jan 15, 1985)

Afternoon — cooperative talks resume, then collapse

  • Jonathan and Noel align on Helios business plan, CEO search (Tom Hart), professional arbitrator instead of 1% share (Noel suggestion; Jonathan accepts).
  • Jonathan demands salary/bonus data for Research and IBM contracts to build the plan.
  • Noel fires Jonathan (“You’re fired, Kane!”). Jonathan notes he cannot truly be fired as Cincinnatus managing partner or cut off fund-paid comp.
  • 24-hour armistice: neither side acts against the other; status quo.

Jonathan — threat (if war): Afternoon press via Stan Jakes (Trib) and Len Walter (WBBM) — pattern of Gilham, Enderlee, Fletcher, Taylor, Thiele, Kane.

Jonathan — interim offer (before Murray): Until Gulf money lands: $10k/week “rent and services”; Kane, Clemons, Clinton stay on Spurgeon payroll; mutual non-disparagement; no press; after Gulf onboarding, walk and fight in the market.

Murray-brokered armistice MOU (signed that day; Julie notarizes):

Term Detail
Cash / fees $2M cash; ¼ of Jonathan’s 2% management fee for 1985; $15k/week + expenses until Gulf money closes
Exit roster Jonathan leaves with only Kane, Clinton, Clemons, Pérez (four names)
Conduct Non-disparagement; no interference with banks, SEC, IRS; Jonathan may recruit others — Noel may counteroffer
Narrative Early transition to Jonathan running his desk full-time
Other Noel pulls his $10M from Jonathan’s fund; Jonathan pays armistice consideration from fund fees

This MOU is much worse for Jonathan than Offer A (~$10M + revenue share + Helios joint ownership + broader team).

Jan 16–17: Desk move memo; Jonathan works under armistice while incorporating Helios / Clermont with Hart-Lincoln (initially Jonathan sole Helios shareholder via Yūsuke — pre–Feb 2 deal).

Phase 4 — Investor diplomacy (Ch. 7–12, late Jan–early Feb)

Not bilateral Spurgeon talks, but it sets Jonathan’s leverage for Phase 5:

  • Client meetings under NDAs ( 366-day lockup if they leak).
  • Commitments ~$450M AUM (Sierra Nevada Re expected to leave).
  • Jonathan describes a modus vivendi with Noel, not full terms.

Phase 5 — Helios joint venture (Ch. 13, Feb 2, 1985, Glencoe)

Noel “reconsiders the original offer”; Jonathan declares that deal dead after Noel chose war.

Round Terms
Jonathan — Offer B (10-minute ultimatum) Helios 60/40 (Jonathan/Noel); Jonathan chooses CEO; Noel silent partner; C-Corp, 40% shares to Noel with inspection/dividends/ROFR; billing at standard fund rates + $5k/week until Clermont; no other payments; Jonathan moves personal money Spurgeon Select → Cincinnatus; 401(k) transfers fully vested for leavers; 2 non-licensed hires, no poach-back; after both firms up: 366-day no-hire; $10M penalty for licensed poach.
Noel — counter 55/45; $10k/week; full, equal Helios research/analytics access.
Jonathan — final 55/45; $7.5k/week; full access.
Noel Accepts (“Fine”).
Capitalization Noel wires $900,000 (less depreciated transferred equipment) by end of March; Jonathan intended ~$2M total Helios cap.
Staff Joel Steinem and Kendall Roy (not Bo DeWitt). Murray had predicted Steinem/Roy and “no Bo” ($25k Krugerrands bet).

The armistice MOU (walk with four people, $2M + weekly bleed) is superseded by this JV structure for Helios/team, though client and messaging work continues.

Phase 6 — Formal agreement (Ch. 14, mid-Feb 1985)

  • Two-page agreement from Nelson Boyd; Noel and Jonathan sign (notarized).
  • Messaging: Noel controls Helios spin-off story; Jonathan controls Clermont launch (not before Aug 1).
  • CEO Dan Maitland offer follows (not a Noel term sheet round).

Phase 7 — Operations and timing (Ch. 15–17, Feb–Mar 1985)

Bilateral coordination (not new economics):

  • Ch. 15: Target May 1 Helios operations; March public announcement (after Gulf).
  • Ch. 17: Gulf money wired; Noel told; Jonathan recommends March 15 announcement; equipment transfer — Noel pays balance (~$573k after $7M deposit and book value) into Jonathan’s new accounts.

Phase 8 — Press embargo and messaging (Ch. 19, ~Mar 1985)

  • Jonathan briefs Jakes and Walter under embargo until March 15 so his framing leads; aligns with Noel’s announcement plan.

Phase 9 — Final addendum — agreement in Ch. 24

Setting: After Helios/Clermont structure is set; Friday memo pending.

Side Terms
Noel — optics ask Addendum so split looks amicable; public line: Helios ≥50/50 or Noel majority (Jonathan will stay vague).
Jonathan — ask $50M cash investment in Clermont/Cincinnatus, allocated as Jonathan chooses.
Noel Expected higher number (Murray had guessed low); frames as seed when he sponsored Jonathan’s Branch Manager license.
Jonathan — non-negotiable 5-year lockup on $50M principal through 31 Aug 1990; gains redeemable anytime; early principal redemption only at Jonathan’s discretion.
Noel — counter Fee 1 and 10 (not 2 and 20).
Jonathan Accepts.
Deal closed Helios effective May 1; Clermont Sept 1 (operational earlier); Friday memo: Gulf $220M, Helios JV, $50M seed; addendum signed and notarized; cash to Jonathan Aug 30 per later discussion with Jack/Violet.

Public fiction (Ch. 24 staff meeting): “Both firms share equally”; Jonathan seeds narrative without contradicting Noel’s spin.

Summary: offer sequence at a glance

  1. Offer A (Jan 5–14): $10M + fee/carry slices + 5yr no-poach + Helios (later 49.5/49.5/1%) + 2 non-licensed staff + Thiele naming → verbal “deal” Jan 14, broken by firing Jan 15.
  2. Armistice MOU (Jan 15): $2M + ¼ of 2% for 1985 + $15k/week → walk with 4 people only.
  3. Offer B (Feb 2): Helios 55/45, $7.5k/week, full data access, $900k Noel cap, Steinem/Roy, $10M licensed-poach penalty, 366-day no-hire → signed Ch. 14.
  4. Addendum (Ch. 24): Noel $50M at 1 and 10, 5-year principal lockup → final agreement for public launch and memo.

Between rounds (not separate term sheets)

  • Thiele sacrificed Jan 14–15; Jonathan will not hire him.
  • Sierra Nevada Re exits (~$100M); ~$450M stays.
  • Hancock 40th floor for Clermont (thumb in Noel’s eye) — Jonathan tells Noel in Ch. 24.
  • Long game: Jonathan expects Noel to build internal analytics, quit Helios, then Jonathan to squeeze minority valuation (Ch. 23–24, 36–37) — after Ch. 24 deal, not part of the signed addendum text.
  • Post-deal war shots (Ch. 37–38): Prakash Singh poaches Dallas at 1/10 through 1986 (Ch. 37). Noel personally pitches Sierra Nevada Re (not a current client) at 1/10 with lockup plus a throwaway offer to match private terms for anyone there — Lyle tells Jonathan confidentially (Ch. 38); Jonathan treats the personal-terms line as agreement violation and further proof Noel chose war before the Clermont office move.