Annex E
Copy of a letter from
Mr David James, Executive Chairman, NMEC, to Mr Guy Hands, Dome
Europe PLC
Although I recognise that you have now withdrawn
your interest in acquiring the Dome and its operating assets,
I still feel it appropriate to comment on the issues raised in
your letter of 11 September 2000 to John Walker. I refer to your
own paragraph numbering.
1. It was identified early in the process
that the NMEC financial records are not supported by a detailed
asset register allowing recognition of individual assets. In the
clarificatory correspondence it was agreed that a list would be
compiled by your advisors for identification purposes only.
You are now seeking to include this listing
in the contractual documents and to adjust value if all identified
assets are not handed over to you at Completion. This would be
a variation to the Heads of Terms agreed between the parties.
NMEC have expressed concern at this as the list
is very detailed (800 pages) and an extensive checking exercise
would be required before NMEC could contractually underwrite its
accuracy. NMEC did, however, indicate a willingness to provide
such comfort if Dome Europe would provide NMEC with the list of
values corresponding to the asset list, so that NMEC can focus
its limited resources onto areas of high value.
This request was faxed to your office on Friday
8 September. Despite having teams working at NMEC and available
to your staff throughout the weekend, we have not yet received
any response to this constructive suggestion for a way forward.
The real issue here is the Dome was set up as
a temporary exhibition and some of the content was obtained on
licence on that basis. Your bid was predicated on an intention
to replace 70 per cent of the Dome content. Over recent weeks
your intention has changed such that you now wish to retain most
of the existing content. We have been working with you to achieve
this.
2. The uncertainty regarding intellectual
property has been recognised by both NMEC and Dome Europe. In
a meeting with myself and John Darlington last Thursday 7 September,
you indicated a willingness to accept the risk associated with
this, provided that NMEC used reasonable endeavours to identify
and secure transfer of all intellectual property rights.
Following that meeting I immediately drafted
in a team of five professionals from Simmons and Simmons to accelerate
NMEC's activity to resolve this question.
I am disappointed that your latest position
reflects neither the discussions we had nor the actions I have
taken in response.
3. We have explained to you that the major
part of the contracts excluded from the first-round data room
can be explained by:
(i) Construction contracts which have no
relevance for the transaction being contemplated.
(ii) Sub-contracts to the main agreements
previously disclosed.
You have been aware of this for several weeks,
and yet only requested information two days ago.
4. Your fear that you cannot rely on rights
under the construction contracts because of potential breaches
of these contracts by NMEC are unfounded. Your specific concern
relates, I believe, to repairs undertaken to the roof fabric of
the Dome.
David Trench CBE, our Site, Structures and Transport
Director has confirmed that we have complied with the contract
with Birdair and that a 12-year warranty against defects and latent
defects is in force. He has written a detailed report on this
matter which is available for inspection by your team.
5. We have disclosed details of the current
position with each of the sponsors, and have made you aware of
provisions created against receivables.
At our meeting last night you referred to a
£3 million shortfall against amounts contracted with one
specific sponsor. You are wrong on this point—the £3
million has been received in full.
Assets owned by the sponsors have been fully
disclosed on the Excluded Asset Listing; again, this is not news.
6. PY has advised me that he last met with
Dome Europe on 30 August 2000. At that meeting he stated that,
whilst the internal management target remained at 6 million RGV's
this year, a more realistic forecast would be 4.75 million.
(Note: in the interests of prudence, the most
recent grant application was predicated on 4.5 million RGV's but
the NMEC forecast is still 4.75 million).
Pricing was discussed also at that meeting.
PY indicated the need for ongoing promotional activity. He felt
that this position had been both understood and supported by Dome
Europe.
You should note also that your team have been
informed weekly of actual visitor numbers by e-mail. It is surprising,
therefore, that you have only recently identified this as an issue.
At yesterday's meeting you referred to a "discrepancy"
of £2 million in the revenue calculations disclosed to your
team by NMEC. We have not been able to identify any such difference.
7. We have not formally disclosed the PricewaterhouseCoopers
report to you as it is currently being considered by the National
Audit Office, and it would be incorrect for us to disclose it
before the process of review and presentation to the PAC is completed.
The senior partner from PwC, Richard Boys-Stones,
has provided your team with a full and detailed explanation of
the matters contained therein, and also the consequences of your
financial modelling and business planning. The PwC report does
not identify any areas where ongoing costs have been materially
mis-stated.
8. You have alleged that you are receiving
calls on a daily basis from suppliers claiming ownership of certain
assets used in the Dome. You have not provided NMEC with any specific
information to allow us to investigate these claims.
As I indicated last night, I do not believe
that any of the information provided constitutes a material change
to the business proposition. I am surprised and disappointed that
you have elected to withdraw from the transaction, particularly
in view of our response to your request for an improved flow of
information.
David N James
Executive Chairman
For the New Millennium Experience Company
12 September 2000
Copy of a letter from
Mr Guy Hands, Dome Europe PLC, to Mr John Walker, Competition
Director, English Partnership
As you know over the last six weeks, both verbally
and in writing, I have expressed the continuing commitment and
willingness of Dome Europe to move forward and to exchange contracts
to acquire the Dome. As you are aware we have had a team of some
200 people from 40 different partner organisations at a cost that
is now in the vicinity of £10 million working enthusiastically
to achieve the Dome Europe vision.
However, the following issues cause me deep
concern.
1. The fact that there is no New Millennium
Experience Company asset register or agreement with NMEC on exactly
what assets are owned by them and, accordingly, no comfort for
us that we are able to buy the assets that comprise the Dome business
as a leisure attraction. In fact NMEC has now said they cannot
agree the asset register we have compiled being included as part
of the contract nor can they give any form of title guarantee
with regard to the assets, even though this has always been on
offer.
2. The fact that there is no register of
intellectual property associated with the various elements of
the NMEC and that NMEC will provide no indemnity for any claims
that could arise because of this. Consequently, there is no comfort
that we will be able to continue to operate the assets that make
up the leisure attraction.
3. The fact that 1,100 contracts were disclosed
to us in the data room. We now understand there are in the vicinity
of 2,800 and new contracts continue to be disclosed to us.
4. New information has come to light indicating
that potentially we cannot rely on rights under the construction
contracts because of potential breaches by NMEC of those contracts
or a failure to comply with agreed maintenance and repair procedures.
5. The fact that we now understand there
are disputes with various sponsors and the sponsors could have
claims relating to various assets of the Dome, including items
core to the project.
6. The fact that visitor numbers have been
misrepresented to us, even as recently as two weeks ago when PY
Gerbeau said the Dome will still have around six million paying
visitors this year. Furthermore, NMEC's undertakings to Dome Europe
on ticket price discounting have been broken thus undermining
the value of the on-going business.
7. The fact of the PriceWaterhouseCoopers
report, which clearly reveals critical new information about the
costs and liabilities of the Dome on which we have had a verbal
briefing but which we have not seen, even though David James has
stated to us "we don't trust anything given to us in this
place".
8. The fact that we are receiving calls
on a daily basis from suppliers of equipment to the Dome informing
us in their view they own certain assets used in the Dome and
to the extent that we wish to continue using these assets we will
be required to pay separately for them.
Taken together, these facts leave me with no
alternative but to withdraw from the process and allow you to
look elsewhere for alternative solutions to the situation. Whilst
we continue to believe a successful leisure attraction can be
operated at the Dome, we have failed to obtain the necessary level
of openness and help from NMEC in order to provide us with the
necessary comfort needed to take over the leisure attraction that
is the Dome, on schedule. Our current belief is the earliest we
could reopen based on full co-operation from NMEC is next June.
We had a clear vision for taking this project
forward and providing a sustainable leisure attraction in Greenwich.
It is a matter of deep sadness and regret to me that I am writing
this letter to you after over nine months of total commitment
and hard work by my team. However, I am accountable to my shareholders
and on business grounds, I am left now with no choice.
I would like to take this opportunity to thank
you personally and your direct advisors and English Partnerships
for your help and enthusiasm in sharing our vision for the Dome.
Guy Hands
Dome Europe PLC
11 September 2000
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