Select Committee on Standards and Privileges Seventh Report

Annex H (i)

Letter to Mr Kevin Maxwell

from Mr Michael Stoney, Pergamon AGB plc


I refer to Geoffrey's letter to you of 4 April 1990 in connection with Transtec's proposal for a management contract on the following basis:

1.  An option to buy Lock International for £4 million at any time up to 31 December 1990; or £5 million at any time up to 31 December 1991; or

2.  30% share of the audited combined PBT for the 2 years of the management contract.

I have already advised Geoffrey that the "option to buy" proposal is not acceptable.

I also believe the 30% share of the audited combined PBT for the 2 years provides Transtec with the potential for an uncapped incentive.


1.  As I understand it, Transtec is intending to provide substantial management support to the business including:

    a.    Geoffrey as Executive Chairman;

    b.  Engineering;

    c.    Marketing;

    d.  Management of A M Lock Inc (the US subsidiary).

2.  I would recommend that we obtain from Transtec further details of the support and agree with them a management contract of, say, £150,000 to £360,000 per annum. The amount of the payment will be conditional on the amount of support Transtec is giving.

3.  In addition to the above, Transtec should receive an over-riding 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 that he profits show a substantial increase over Year 1.

20 April 1990

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