Annex I
Letter to Mr Kevin Maxwell
from Mr Michael Stoney, Pergamon AGB plc
RE:
GEOFFREY
ROBINSON—PROPOSAL
FOR
TRANSTEC/LOCK
INTERNATIONAL
MANAGEMENT
AGREEMENT
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 1 | Profit up to £750k
| 10% |
| Profit in excess of £750k
| 15% | |
| b. Year 2 | Profit 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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