Select Committee on Standards and Privileges Seventh Report

Annex K

Letter to Mr Geoffrey Robinson MP, Transfer Technology Limited,

from Mr Michael Stoney, Pergamon AGB plc


We had a brief discussion with regard to your proposals of 3 May 1990 in connection with the management agreement between Transtec and Lock International. I have assumed that this agreement would cover both Lock International and A M Lock Inc.

1.  It was agreed by us that an agreement should be for a period of at least 2 years, and should provide an incentive for all parties to return Lock to profitability.

2.  It must also be recognised that the forecasts for this year only envisage that Lock will no more than breakeven.

3.  It would appear therefore more equitable to Transtec if Lock were to pay Transtec a flat fee, inclusive of all expenses, or say, £150K per annum. In addition, Transtec would also receive an incentive based on the net profits (after the fee), perhaps on the following lines:
% of profit
within bands
Year 1Profit up to £500k 10%
Profit in excess of £500k 15%
Year 2Profit up to £500k 5%
Profit between £500k to £750k 10%
Profit between £750k to £1.5m 15%
Profit in excess of £1.5m 17.5%

This compares to your proposal that Transtec would receive 30% of the profits off Lock during the period of the agreement.

4.  Obviously these figures are only ideas at this stage. However, on this basis, if Lock were to achieve profits of £1m in year 2, Transtec would receive approximately £250k.

Perhaps when you have had a chance to consider this we can talk further on this.

23 May 1990

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