Select Committee on Standards and Privileges Seventh Report

Annex I

Letter to Mr Kevin Maxwell

from Mr Michael Stoney, Pergamon AGB plc


In line with my recommendation to you of 10 April 1990 in respect of the above, I propose that:

1.  The agreement will be for a period of 2 years;

2.  Transtec should receive a flat fee of, say, £150k per annum (rather than 30% of the net profits of Lock);

3.  Transtec should also receive an incentive based on the audited profits of the business as follows:
a. Year 1Profit up to £750k 10%
Profit in excess of £750k 15%
b. Year 2Profit up to £750k nil
Profit between £750k to £1.25m 5%
Profit between £1.25m to £2.0m 10%
Profit in excess of £2m 15%

The structure of the share in Year 2 is designed to provide a considerable incentive to ensure the profits show a substantial increase over Year 1.

4.  Geoffrey proposes that the Balance Sheets of both Lock International and Lock Inc should be "cleaned up". I have already received a proposal from to:

    a.   transfer approximately £0.5m of provisions and contingencies from Lock into Hollis Industries plc;

    b. Lock will pay no senior debt;

    c.   Lock will pay no dividends.

I need to carry out further work on the effect of these proposals on Hollis Industries' Balance Sheet as there is a considerable danger that these proposals will make Hollis Industries (the company) insolvent.

I will write to you further on this.

15 May 1990

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