Summary of the deal

1

Status of the Terms

With the exception of confidentiality and exclusivity, this confirms that the HoT are not binding.  The completion of the Shareholder Agreement is envisaged for the end of August.

The HoT commits BU and BFC to nothing other than confidentiality and exclusivity, but enables us to map out the key principles and a lot of detail of the envisaged deal.  These terms will be transferred into a Shareholders Agreement for signature if the BU members vote supports the motion.

2&3

Proposed Investment

The ordinary shares held by Martin Lange, the Wheatley brothers and associated companies will be sold to MB at face value at the point of signing the Shareholders Agreement.

This provides MB with an immediate minority stake.  BU are very grateful to Martin Lange, Peter Wheatley and Timothy Wheatley, all of whom have a long history of support for Brentford FC, for their support of the deal.

4

The Golden Share held by Martin Lange will stay with him for up to five years, at which point it will transfer to BU.  It is agreed that “the purpose of the Golden Share is to protect the status of BFC as a local professional football club with ownership and control over its stadium as a significant asset, and to enable a bona fide move to a new stadium which meets all reasonable requirements of BFC.   The purpose is to prevent the selling of the stadium to the long term disadvantage of BFC and for short term gain to the shareholders.”  The exercise of this right to veto by BU must a) be put to a vote of the BU members, and b) be reasonable.  MB may appeal to an independent panel to overrule a BU veto if he can demonstrate that all reasonable requirements (satisfying the “Purpose” above) have been met.

The “Purpose” is clear and overriding, and MB has confirmed that the intention is for there always to be meaningful engagement with the members of BU to enable fully informed decision-making.  To assist in clarifying what “reasonable” means we have agreed the following:

“A bona fide move to a new stadium will be deemed to satisfy all reasonable requirements of BFC where:

a)  the new stadium materially meets all the following requirements:

i.     it is a stadium authorised to host professional football with 15,000 (or greater) capacity of which 75% must be seated and all must be covered;

ii.   in one of the 3 local boroughs (Hounslow, Richmond or Ealing);

iii.  where the quality of facilities is, overall, as good as or better than the stadium being left, and

iv.   where the club have a freehold or long term (99 year plus) leasehold (at no more than nominal rent) ownership of the stadium;

b) BFC (and to the extent applicable, BU) have used all reasonable endeavours to procure that completion of the sale of the existing stadium is subject to a move to a new stadium, ready to play league football, without requiring an interim or ground share arrangement, both parties agreeing that the strongly preferred position is to complete such a move from the original stadium to a new stadium without requiring the use of a third intermediary stadium;

c) in the event that there is a need to move to another stadium on a temporary basis:

i.     reliable contractual arrangements for the move to the new stadium are in place at the time of completion of the sale of the existing stadium such that this shall be for a maximum of one season only; and

ii.   both parties are committed to use all reasonable endeavours to mitigate the effects of such an interim arrangement; and

d)the new stadium is protected by an equivalent golden share, which shall be held by BU.”

This wording follows substantial discussion between MB and BU to balance long term protection of the ground with reassurance (for MB) that a bona fide move will not be blocked unreasonably.

The Board of BU is satisfied that this will protect our right of veto of any sale of Griffin Park, unless we are trying to block a move for wholly unreasonable purposes. The golden share survives any future sale by MB and remains in existence under any future ownership structure, providing BFC remains solvent.

5

The deal will be voted on by the BU members, and if the vote goes against MB will be under no commitments for future investment.

This formalises that all parties agree that it is for the BU membership to decide on the deal, and if the vote goes against it ensures there is no legal confusion as to MB’s commitments.

6

&7

Transfer of Operational Control of BFC

If MB requires it, the Board of BFC will appoint MB’s nominees to executive positions within the Club.  Equally, MB can veto any executive appointment proposed by the Board.

This effectively gives Matthew the ability to control the executive management of BFC, although (see 20/21 below) some items are reserved for the Board.

8

Provision of Finance by MB

MB will subscribe a minimum of £1m (+RPI) of Preference Shares in BFC each year for 5 years.

This means MB is contractually obliged to invest £1m per year, plus RPI, as equity into the Club.  “Preference” shares have slightly different rights than ordinary shares – they entitle Matthew to a dividend in the unlikely event that BFC ever has more profits than historical losses, and he takes priority if the company is ever liquidated, but they hold no voting powers whatsoever.

9

MB will also provide a £200k rolling standby loan facility, and this and his recent loans will be secured.

This simply means that any cashflow “spikes” within a year can be managed.  If it is used it has to be repaid within the same year.

10

MB is not committed to invest any more than this, and BFC must budget on the basis of only using this investment and not borrowing more from elsewhere.

This prevents BFC from budgeting to run up any further debts for the next five years.

11

With the exception of 7HUK (Ian Jones), existing loans by Directors will be extended, interest free, to the end of the five year point.  If they are currently loans to BU they will be transferred so they are direct with BFC.

BU will continue its existing loans to BFC for as long as MB is involved, and will have a BFC Board position for as long as the debt remains.  BU will retain responsibility for repaying the Barclays and John Bowyer loans, and may require BFC to repay some of this debt if BU needs it to satisfy these obligations.

The current debt to MB will be rescheduled so that £2m is due at the end of the 5 years, and £2.5m is due 2 years later.

This means that all of the investment is truly “new money” for BFC, and not used to repay old debt.

It is better for all involved to have outstanding loans held by BFC to avoid BU becoming an unnecessary “middle-man” in the arrangements.

BU are very grateful to those Directors who have financially supported the Club to date, and who will continue to do so under this proposed arrangement.

This meets three objectives.  First it formalises BU’s long term presence on the BFC Board as long as BFC owes us money.  Second it ensures that the debts we have incurred continue to get repaid when due, and third, it gives us the protection of being able to call on some of the monies owed by BFC if we need to do so to meet these existing debt obligations.

This rescheduling extends the due date of some existing debt and brings some forwards.

12

The £200k loaned by 7HUK (Ian Jones) will be repaid on the point of the Shareholders Agreement becoming unconditional.

BU have secured the funds to repay the £200k to 7HUK (a company connected to Ian Jones).  Half of this arises from BU’s support to the Lionel Road project (thanks to Brian Burgess and Chris Gammon), and the other half from the monies accumulated from BU’s normal membership and fundraising. 

Upon repayment of the 7HUK loan, Ian Jones will resign his directorship.  BU are grateful to Ian for his financial support and personal contribution to BFC over recent years.

13

Options on Expiry of the Initial Term

BU may buy back all of MB’s shares (both ordinary and preference) for a price representing fair value, plus repayment of his loans.  The fair value is calculated on the basis of the amounts he has invested, plus 90% of any increase in value beyond that.  We must notify MB of our intent to exercise this option during October of the final year of the five year period.

This is a significant amount of money, and does mean that BU will have to arrange significant other financing if we are to exercise this option, but it does mean  that it is in our hands whether to take near-to-complete ownership of BFC or not.  MB has no right to block BU exercising this option.  The “value” is either to be agreed or to be determined by an expert.

14

If BU does not exercise its option, MB has the right to buy shares from BU to give him 75% of the shares in BFC, in return for converting all his loans into preference shares.  MB must notify BU of his intent to exercise this option by 31^st December of the final year of the five year period.

If BU does not exercise its option (above), MB can take a 75% ownership of BFC in return for converting £4.5m of debt into equity.  BU cannot block this happening other than by exercising its option (above).

The view of the BU Board is that this, should it happen, would significantly strengthen the balance sheet of BFC and thus further protects the long term future of BFC, despite a reduction in BU’s shareholding.

Although this section refers to 75% of shares, please note the next point which explains how this may increase to 90% if MB ever sells to someone else.

It should be noted that the agreement is silent regarding neither side exercising their option, so there is a third scenario whereby the initial shareholding structure remains in place with no further commitments on MB.

15

Thereafter, if Matthew wants to sell his 75% stake, BU must either give him 15% of shares to enable him to sell 90% of the club, or BU must pay MB the equivalent price for the 15%.

MB wanted to be able to sell 90% of BFC if he needed to, but BU wanted to maintain over 10% of the shares.  We therefore came up with this arrangement whereby Matthew effectively owns the “economic value” of 15%, although the actual shares are held by BU.  If MB ever wants to sell, BU either pays MB for that economic value (and keeps the shares) or we give them to him so he can sell 90% to the buyer he finds.

16

The deal also allows for the various other companies within BFC’s complex legal structure to be swept up in the same arrangements with ownership transferred to MB as appropriate.  John Herting will transfer his shares in Brentford Holdings Limited to BU on signature of the agreement to assist with this process.

The complex structure has arisen over time and this simply makes sure that no “loose ends” are left unresolved.

BU are grateful to John Herting for his agreement to transfer the shares to enable this consolidation.

17

Restrictions on BU

BU will not sell or transfer its shares or vote to remove any of MB’s representatives.

Self-explanatory

18

Restrictions on MB

Other than to his family, MB will not sell or transfer his shares during the five year period to anyone without requiring them to sign up to the terms of the Shareholders Agreement.

Self-explanatory

19

Rights of MB

MB will be given financial and other information, and will be required to approve key decisions (material financing transactions, changes to delegated authorities etc).

Self-explanatory

20

&21

Role of the BFC Board

This spells out the role of the BFC Board under the new arrangement, requiring their approval for key decisions (setting budgets, expenditure over £100k, anything to do with the ground – subject to the Golden Share detailed above, etc).

Given the partnership between BU and MB it is important we clarify the role of the BFC Board going forwards.  The BFC Board are the statutory Directors of the company and will therefore continue to exercise their fiduciary duties accordingly.

22

Other Provisions

BU & BFC will warrant the information provided to MB during the negotiation process.  If MB claims during the first ~18 months the potential liability to BU is up to £1m.

BU’s existing Golden Share in Lionel Road will be replaced with the main Golden Share once it transfers from Martin Lange to BU.

It is normal to include some “come back” if false information has been provided.  The Boards of BU and BFC have no reason to believe there is any potential for a valid claim.

Self-explanatory.

23-26

Term and Termination

There are various paragraphs covering what happens if MB dies or is incapacitated, or if either BU or MB breach the agreement.

Self-explanatory, and reasonable.

BU/BFC is considering insurance to protect the Club in this situation.

27

Exit Otherwise than on Termination

This paragraph covers the mechanics and timescales should MB exercise his option after the Five Year period and then decide to sell to a third party.

Self-explanatory, and reasonable.

28-

32

Confidentiality, Exclusivity, Law & Jurisdiction, Whole Agreement, and Assignment

Various paragraphs covering the usual contractual constraints you would expect, and which relate to both parties.

Self-explanatory, and reasonable.